In re: James Donzil Roberts, Sr. and Deena Waldman Roberts, CC-17-1010-STaL

Debtor James D. Roberts solicited investment for a joint venture (California Organics LLC) by representing it was a going farming concern that would sell self-grown organic produce to retailers. Those representations were false.
Investor Michael Barnes lent Organics $822,000 (about $825,000 in findings) secured by substantial farm equipment owned by Manjar/ Martinez. Barnes was also named a “class B manager” in the operating agreement.
Organics in fact bought produce from third-party suppliers, incurred large unpaid PACA (Perishable Agricultural Commodities Act) debts, and concealed those facts from Barnes.
PACA suppliers sued; to avoid PACA exposure Barnes assigned his security interest in the farm-equipment collateral to PACA creditors as part of a settlement, and PACA creditors foreclosed on that collateral.
Bankruptcy court held Roberts’ misrepresentations caused Barnes’ $825,000 loss and entered a nondischargeability judgment under 11 U.S.C. § 523(a)(2)(A). Roberts appealed only arguing the court should have credited the equipment’s value against Barnes’ damages.

Issue	Plaintiff's Argument (Barnes)	Defendant's Argument (Roberts)	Held
Whether the bankruptcy court erred by failing to credit collateral value against Barnes’ fraud damages	The argument was forfeited because Roberts never raised disposition/value of collateral at trial; bankruptcy court found Barnes had to assign collateral to PACA creditors and thus lost it	Collateral was worth millions and should offset Barnes’ $825,000 loss; invoke Cal. Com. Code commercial-reasonableness/deficiency rules	Affirmed. Roberts forfeited the issue by not raising it below; bankruptcy court found collateral was assigned to PACA creditors and Barnes lost it; Commercial Code defenses not properly invoked and are factbound so not considered on appeal

Sunkist Growers v. Fisher, 104 F.3d 280 (9th Cir.) (PACA-trust principles and control-person liability)
Nickey Gregory Co. v. AgriCap, LLC, 597 F.3d 591 (4th Cir.) (general trust principles govern PACA trusts)
Weis-Buy Services, Inc. v. Paglia, 411 F.3d 415 (3d Cir.) (individual liability under PACA arises from common law breach of trust)
Turtle Rock Meadows Homeowners Ass'n v. Slyman (In re Slyman), 234 F.3d 1081 (9th Cir.) (elements for § 523(a)(2)(A) fraud/nondischargeability)
Scovis v. Henrichsen (In re Scovis), 249 F.3d 975 (9th Cir.) (issues not raised below are ordinarily forfeited on appeal)
Mano–Y & M, Ltd. v. Field (In re Mortgage Store, Inc.), 773 F.3d 990 (9th Cir.) (circumstances when appellate courts may consider new issues on appeal)