STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RICHARD AND BARBARA PACETTI, ) d/b/a PACETTI FARMS, )

)

Petitioners, )

)

vs. ) CASE NO. 92-548A

) JACK RUBIN & SON, INC., and ) CONTINENTAL CASUALTY CO., )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause came on before P. Michael Ruff, duly- designated Hearing Officer of the Division of Administrative Hearings, on June 30, 1992, in St. Augustine, Florida.

APPEARANCES

For Petitioners: John Michael Traynor, Esquire

Charles E. Pellicer, Esquire

28 Cordova Street

St. Augustine, Florida 32084

For Respondents: C. Holt Smith, III, Esquire

3100 University Boulevard So. Suite 101

Jacksonville, FL 32016 STATEMENT OF THE ISSUES

The issues in this proceeding concern whether the Respondents are liable to the Petitioners for potatoes allegedly sold and delivered to the Respondents in May and June of 1991, for which the Petitioners assert $40,015.20 remains due and owing.

PRELIMINARY STATEMENT

This cause arose upon the filing of a complaint with the Florida Department of Agriculture by the above-named Petitioners alleging that the Respondents failed to pay $40,015.20 for potatoes purchased from the Petitioners, delivered to and received by the Respondents during May and June of 1991. Specifically, it is alleged that under a contract executed on December 22, 1990 between the parties, a certain quantity hundredweight (CWT) of atlantic chipping potatoes, at a price of $6.00 per CWT was delivered to the Respondent, Jack Rubin & Son, Inc. ("Rubin"), for which Rubin subsequently refused to pay, contrary to the terms of the parties' contract of December 22, 1990.

Rubin filed an answer admitting the purchase and receipt of the potatoes identified in the complaint, but claiming entitlement to a "setoff" of a price differential in the amount of $36,508.05, representing six loads of potatoes previously sold to, delivered to, and paid for by Rubin at a higher market price, and under a separate oral agreement. Rubin, therefore, maintains that it only owes the amount of $3,507.15, as a result of this setoff. Rubin's surety, Continental Casualty Co. ("Continental"), has also been named as a Respondent in this proceeding.

The matter was ultimately referred to the undersigned Hearing Officer and the hearing was conducted as noticed. The Petitioners presented the testimony of Marvin Rubin, President of Rubin; Richard A. Pacetti, one of the Petitioners; and Ronald W. Brown, who testified as an expert witness in agriculture and farming practices in the St. Johns County area, with particular regard to the potato growing, shipping, and sales business. The Petitioners offered seven (7) exhibits, which were admitted into evidence. The Respondents presented the testimony of Mr. Rubin, also, as well as Ms. Renee Kirker; Mr. Keith Kirker; and Ms. Diane Ross. The Respondents' two exhibits were received into evidence.

A transcript of the proceeding was ordered and filed, and proposed findings of fact and conclusions of law were timely filed by the parties. Those proposed findings of fact are treated in this Recommended Order and in the Appendix attached hereto and incorporated by reference herein.

FINDINGS OF FACT

1. The Petitioners own and operate a farm in St. Johns County, Florida. During the 1991 potato-growing season, they grew atlantic chipping potatoes on their 400-acre farm, as well as on approximately 30 acres leased from another party by their daughter and son-in-law. The Petitioners' business is known as Pacetti Farms.

   
   

2. Rubin is an Illinois corporation licensed to do business in Florida as a broker or dealer in agricultural products. Rubin customarily purchases potatoes from growers throughout the country at the appropriate season for resale, typically to various potato chip manufacturing companies. Mr. Rubin appeared at the hearing and testified on behalf of Rubin and as an adverse witness on behalf of the Petitioners.

   
   

3. Rubin is licensed and bonded with a surety bond from Continental in accordance with the statutory authority cited below, enforced and regulated by the Department of Agriculture and Consumer Services ("Department").

   
   

4. On December 22, 1990, the Petitioners and Rubin entered into a written contract for the sale and purchase of 50,000 CWT of Florida atlantic chipping potatoes. That contract is in evidence as Exhibit 3 and is also known as the "set price contract". The contract called for shipment of the potatoes at a stated price of $6.35 per CWT, although the parties have stipulated and agreed that the actual contract price was intended as $6.00 per CWT. That figure is not in dispute in this proceeding. Shipment was to be made during the harvesting season between the dates of April 27, 1991 and June 15, 1991. The contract contained an escape clause or exception for "acts of God", with an explanatory parenthetic clause indicating that that was intended to mean circumstances beyond the control of the parties, such as flood, freeze, hail, etc.

5. On or about February 15, 1991, severe cold weather struck the potato- growing area of St. Johns County, Florida. Temperatures ranged from 25 degrees to 19 degrees on that day, with a high wind blowing and very dry conditions. This resulted in soil being blown away from the newly-set potatoes under very cold temperatures. Because of this, the Petitioners had to work with tractors and cultivators far into the night to turn the blown-away soil back into the potato "sets". The Petitioners feared that this would cause some "dry eyes" and, therefore, lowered potato plant and potato production. In fact, however, upon observing the maturing plants during April of 1991, it appeared that the Petitioners would have a healthy, normal crop. The prior year the Petitioners had grown 133,000 CWT of potatoes on their 400 acres (excluding the Kirkers' 30 acres). With this background of an apparently-healthy crop in mind, the Petitioners were approached by Rubin on April 25, 1991 and negotiations ensued which resulted in the sale and purchase from Petitioners to Rubin of six additional loads of potatoes at the open market price of $19.50 per CWT. The six additional loads were in addition to the 50,000 CWT of potatoes agreed upon in the main contract entered into on December 22, 1990. This separate oral agreement for the six loads of potatoes at the market price of $19.50 per CWT was entered into prior to the Petitioners initiating delivery under the terms of the written contract of December 22, 1990. The parties thus agreed for the sale and purchase of six loads of potatoes at that market price to be delivered on Monday, Tuesday, and Wednesday of the following week, April 29th, April 30th, and May 1, 1991. Part of the consideration for that oral contract was the Petitioners' ability to furnish the six truckloads of potatoes on short notice, on the dates that Rubin required them. In other words, Rubin needed them in a hurry; and it was apparently worth $19.50 per CWT for him to get the potatoes delivered immediately on the dates requested. In the process of negotiating this oral contract, the Petitioners assured Rubin that he would have sufficient potatoes to meet his 50,000 CWT obligation under the written contract of December 22, 1990. This was not a misrepresentation on the part of the Petitioners, at this time, because the Petitioners, in good faith, believed they would be able to meet the 50,000 CWT set price contract and the oral contract for six additional truckloads, because of their belief concerning their crop estimate. This belief was based upon their observance of an apparently healthy crop and their knowledge that on their 400 acres, the year before, they had grown 133,000 CWT, as well as upon their knowledge that a normal crop estimate for the entire 430 acres at this location, under all of the prevailing circumstances, was 120,400 CWT. In fact, the Petitioners only contracted for 116,650 CWT of potatoes which, based upon a reasonable and appropriate crop estimate for this site and circumstances, would have allowed them to meet all their contracts, including the 50,000 CWT contract between the Petitioners and Rubin, although not all of the market sales for the Kirkers.

   
   

6. After having thus assured Mr. Rubin that they could meet the contract of December 22, 1990 and still perform the oral contract for the six truckloads at market price, the Petitioners proceeded to carry out that oral agreement. It was a separate and distinct contract from the written contract dated December 22, 1990. Under the separate oral contract, they delivered the six truckloads of potatoes requested by Rubin. Rubin received them and paid $19.50 per CWT for them.

   
   

7. On May 2, 1990, the Petitioners began delivering potatoes to Rubin under the terms and conditions of the written contract of December 22, 1990 and continued the deliveries throughout the remainder of the harvesting season. The first was shipped from Pacetti Farms on May 2, 1991 and the last load delivered to Rubin on that contract was shipped on June 1, 1991.

8. During the 1991 growing and harvesting season, the area, including St. Johns County, experienced substantial crop damage due to excessive frost, rain, hail, and wind, which occurred during February of 1991 and then after April 25, 1991, with particular regard to excessive rainfall in May of 1991. This resulted in the area being declared an agricultural disaster area by the United States Department of Agriculture for that growing season. The Petitioners suffered damage to their crop as a result of these elements in February of 1991, as described above, and by excessive rainfall during May of 1991. Excessive rainfall caused root damage to their crop, which resulted in a lowered yield even though the plants viewed above ground appeared to be normal. This was aggravated by the fact that the Petitioners and other growers were legally unable to use the pesticide "Temik", for control of nematodes, during that growing season. Because of the nature of the crop involved, which grows underground, the potato yield is difficult to estimate at any given point in harvesting. The exact nature and extent of damage caused by weather conditions to a single crop is hard to estimate in advance. This difficulty is further compounded by differing soil types and climate conditions present within a particular growing area, especially with regard to farmers such as the Petitioners, who have their crops spread over multiple fields and farms.

   
   

9. In mid-May of 1991, the Petitioners realized that there would be a crop shortage. The crop was damaged due to the weather-related factors mentioned above. The Petitioners notified Rubin that they expected their potato crop to fall short of expectations and that they would probably be unable to completely fill the contract with Rubin for the entire 50,000 CWT contracted for on December 22, 1990.

   
   

10. In the meantime, before the 1991 planting season began, the Petitioners and Renee and Keith Kirker had entered into an agreement, whereby the Kirkers initiated their own farming operation on 30 acres of potato-growing land. The Kirkers leased that acreage from Diane Ross and received operating assistance from the Petitioners in the form of advances of all their operating costs, pursuant to an agreement between the Petitioners and the Kirkers, whereby the Petitioners would be repaid the estimated production costs for that 30-acre crop in the amount of $1,776.85 per acre, upon the sale of those 30 acres of potatoes.

    
    

11. Potatoes are planted and harvested in the same sequence. Since the Petitioners assisted the Kirkers in planting their potatoes prior to the planting and completion of their own fields, the Petitioners borrowed some of the Kirkers' potatoes to fill their own contracts because those potatoes matured earlier, with the understanding that the Kirkers would be repaid in kind from the Petitioners' own fields during the remainder of the harvesting season. This is a common practice according to Ronald Brown, who testified for the Petitioners as an expert witness on farming practices. However, after the heavy rains in May of 1991, the Petitioners discovered that it would be necessary, in their view, to retain a portion of their last acreage in order to have potatoes to pay back the Kirkers for the potatoes borrowed. These potatoes would be sold by the Petitioners at market price, as agreed with the Kirkers.

    
    

12. Upon discovering that their crop would not meet their contract obligations, the Petitioners attempted to prorate their remaining potatoes between their remaining contract customers in what they considered a fair and reasonable manner.

    
    

13. On behalf of the Kirkers, the potatoes allocated for repayment to them were offered to Rubin, who, through its President, Mr. Rubin, declined to

    purchase them at the market price at which they were offered (higher than the contract price).

    
    

14. The Petitioners' expert, Ronald Brown, established that, based upon accepted growers practices and his experience in the Hastings area, the Petitioners should have anticipated the yield for their 1991 crop at no more than 280 CWT per acre for the Petitioners' 430 acres (30 acres of which was the Kirkers' land). It is customary farming practice in the area, according to Brown, to enter into contracts for no more than 80% of the maximum anticipated yield of potatoes. The anticipated yield on the entire 430 acres of the Petitioners' and the Kirkers' land was, therefore, 120,400 CWT of potatoes. The principle of contracting no more than 80% of a maximum anticipated yield is designed to protect contracting parties in the event a smaller than anticipated yield occurs. A 280 CWT per acre yield is the generally-accepted yield amount under good growing conditions, according to Mr. Brown. The year before, the Petitioners had produced a total yield of 133,000 CWT on only 400 acres.

    
    

15. The Petitioners entered into a total of six separate contracts for delivery of a total of 116,650 CWT of potatoes out of a reasonably anticipated maximum yield for the 430 acres of only 120,400 CWT. Thus, the Petitioners contracted 97% of the customary, accepted, anticipated maximum yield for the 430 acres for 1991. Thirty (30) of those acres, however, represent the potatoes which the Petitioners were obligated to the Kirkers to sell on their behalf at market price, rather than contract price.

    
    

16. In spite of the fact that the Petitioners contracted 97% of the accepted, projected crop yield for 430 acres, the Petitioners, in fact, produced 117,000 CWT (approximate) on those 430 acres. Therefore, had they not diverted a certain amount of the crop to open market sales, they could have met their 116,650 CWT contractual obligations to the six contracting parties, including Rubin. It is also true, however, that that 117,000 CWT actual yield included the 30 acres of potatoes which the Petitioners were separately obligated to sell at open market price to repay the Kirkers. Notwithstanding the fact that the Petitioners had contracted 97% of the commonly-accepted, projected maximum yield, the Petitioners diverted 10,301.6 CWT of the 1991 crop on the entire 430 acres from contract sales to open market sales at much higher prices. Of those open market sales, 2,789.5 CWT were sold at market price after the last contract sales were made to Rubin. Had the Petitioners sold the entire 10,301.6 CWT of potatoes on contract, instead of at open market, all of the Petitioners' contractual requirements could have been met, including the contract with Rubin, although they would not then have been able to meet their obligations to the Kirkers.

    
    

17. Based upon the above Findings of Fact supported by competent evidence, it is found that the preponderant evidence in this case does not support the Petitioners' contention that the Petitioners were unable to fulfill their contract obligation to Rubin due to an act of God. Although it is true that the Petitioners established that poor weather conditions, coupled with the absence of the ability to use the pesticide "Temik", had a deleterious effect on their crop production. The record shows that in spite of this, the Petitioners had the ability to fulfill their contract with Rubin if only approximately 5,000 CWT of the 10,301.6 CWT of potatoes sold on the open market had instead been allocated to the Petitioners' contract with Rubin to fill out the difference between the approximately 45,000 CWT honored under the contract and the contractual obligation to supply 50,000 CWT.

18. The Petitioners produced on their own 400 acres 108,000 CWT. The remainder of the 117,582.5 CWT of potatoes from the total crop represented the potatoes grown on the Kirkers' 30 acres. Thus, the Kirkers' land produced approximately 8,600 CWT. The Petitioners supplied approximately 3,000 CWT under the separate, oral contract at market price and which were delivered to Rubin on April 29th, 30th, and May 1st (six loads at approximately 500 CWT per load). Then, the Petitioners sold the remainder of the total of 10,301.6 CWT of the entire Pacetti/Kirker crop or approximately 7,301.6 CWT on open market sales to others. The remainder of the 108,000 CWT grown on the Petitioners' own 400 acres, not sold to Rubin under the contract of December 22, 1990 or under the oral contract of April 25, 1991 (the six loads at market), were contracted out to other buyers. The ultimate effect of these contracts was that the Petitioners had contracted for 116,650 CWT. Thus, the Petitioners had imprudently contracted approximately 97% of the accepted, projected crop yield of 120,400 CWT, knowing that they were obligated to sell the Kirkers 8,600 or so CWT at market price and not on contract. Thus, the Petitioners clearly over- contracted the crop yield which they reasonably should have expected on the total 430 acres under the generally-accepted method of calculation of crop yield, under good growing conditions, of 280 CWT per acre, established by expert witness, Brown. This over-contracting practice, together with selling an excess amount of potatoes at market price (over and above those sold at market by the separate, oral contract with Rubin at the initial part of the harvesting season), is what actually prevented the Petitioners from fulfilling Rubin's contract of 50,000 CWT, rather than an act of God, predetermined condition for claiming impossibility of performance on that contract due to the above- described weather conditions.

    
    

19. Even though the Petitioners were obligated to sell the Kirkers' entire

    30 acres of yield, approximately 8,600 CWT, at market price, the Petitioners would still have had enough potatoes, even with their less-than-expected yield of 108,000 CWT represented by their own 400 acres, to have filled out the Rubin contract if they had not contracted out so many potatoes to other contracting buyers and had not sold as many potatoes at market price off contract as, indeed, they sold. Since the act of God condition is not what prevented the Petitioners from filling the written contract with Rubin for 50,000 CWT, it is clear that the Petitioners thus breached that contract. In this connection, it should be pointed out that the written contract with Rubin was entered into before any of the other contracts for the potato crop in question. The two contracts with Rubin are, however, separate contracts. The Petitioners established that there was a separate oral agreement entered into on April 25th between the Petitioners and Rubin and that the consideration flowing from the Petitioners to Mr. Rubin was that he needed the six loads of potatoes on short notice delivered on specific dates, April 29th, 30th, and May 1st, for which he was willing, therefore, to pay the $19.50 market price, knowing that it was for other potatoes that he contracted at $6.00. The Petitioners performed by providing the loads of potatoes when he wanted them and he paid for them in full. Thus, that contract was executed by consideration passing from each party to the other, and the contract was completed.

    
    

20. The written contract with Rubin dated December 22, 1990 for the 50,000 CWT was the contract which the Petitioners breached for the above-found reasons. Rubin would, therefore, be entitled to damages for that breach based upon the facts proven in this case. There is no counterclaim or other action pending in this forum by Rubin against the Petitioners, however. Consequently, any damages proven by the breach of the written contract can only, at best, be applied against the amount due and owing the Petitioners for the billed, but unpaid, loads; that is, against the amount in controversy of $40,015.20. Rubin,

    however, has not produced any evidence to show what his damages might be. The record establishes, as found above, that, of the 48,361 CWT of potatoes delivered to Rubin, approximately 3,000 of which were delivered under the separate oral contract for six loads, Rubin only received approximately 45,000 CWT under the 50,000 CWT written contract. Thus, Rubin would appear to be entitled to damages caused by failing to get the last approximately 5,000 CWT of potatoes. The record, however, does not establish what those damages might be because it is not established whether Rubin had to purchase potatoes from another source at a higher price to meet the remainder of the 50,000 CWT amount, or, conversely, whether Rubin was able to purchase them from another source at a lower price than the $6.00 per CWT contract price, so that Rubin would actually benefit by the Petitioners' breach of that contract. Neither does the record reflect another possible scenario whereby Rubin might have simply accepted the approximate 5,000 CWT shortage and simply lost customers and potential profits represented by that amount of potatoes, or, finally, whether he simply did not purchase the shortage of 5,000 CWT from another source and had no missed sales for that amount of potatoes anyway and, therefore, no loss and no damage. The record simply does not reflect what Rubin's damages might have been because of the shortage under the written contract deliveries.

    
    

21. In any event, the record evidence establishes that the oral contract was fully performed, with consideration flowing to each of the parties and that those potatoes were fully paid for at the market price. Then, the Petitioners delivered the written contract loads at $6.00 per CWT to Rubin represented by the claimed $40,015.00. That remains unpaid by Rubin. Rubin is obligated to pay that amount because Rubin was obligated to, and received those potatoes at the $6.00 contract price. Rubin would then appear to be entitled to claim damages if, indeed, any were suffered, for the breach of that written contract by the Petitioners' failure to supply the last (approximate) 5,000 CWT due Rubin under that contract. That resolution of their dispute, however, cannot be performed in this forum because of insufficient evidence, as delineated above, and remains to be resolved by another action by Rubin in another forum.

    
    

    CONCLUSIONS OF LAW

    
    

22. The Division of Administrative Hearings has jurisdiction of the subject matter of and the parties to this proceeding. Subsection 120.57(1), Florida Statutes (1991).

    
    

23. In order to conduct business in Florida, a dealer in agriculture products, such as Rubin, must deliver a bond "conditioned to secure the faithful accounting for and payment to producers...of the proceeds of all agricultural products handled or purchased by such dealer". Subsection 604.20(1), Florida Statutes (1991). When a person claims to be damaged by any breach of conditions of a bond, he may file with the Department a complaint within six months after the date of the sale of the products involved. Subsection 604.21(1), Florida Statutes (1991). The Petitioners timely filed a complaint with the Department, which was ultimately the subject of this proceeding before the undersigned Hearing Officer.

    
    

24. The Petitioners bear the burden of showing their entitlement to the requested money by a preponderance of the evidence because they are claiming a breach of the conditions of the bond. See, e.g., Pine Island Farms, Inc. v. Five Brothers Produce, Inc. and Florida Farm Bureau of Mutual Insurance Company, Case No. 90-6460A (Department of ACS, June 4, 1991); Florida Department of Transportation v. J.W.C. Company, Inc., 397 So.2d 778, 787 (Fla. 1st DCA 1981).

25. The preponderant evidence of record culminating in the above Findings of Fact shows that the Petitioners and Rubin entered into two (2) separate and distinct contracts for the purchase of potatoes. The first contract was the "set price contract" entered into on December 22, 1990 and committed to writing. That contract called for the purchase of 50,000 CWT of potatoes at a price of

    $6.35 per CWT (later agreed to be $6.00 per CWT), with delivery to be made commencing on April 27, 1991 and running through June 15, 1991. Rubin provided the trucks, and deliveries on the contract were made upon Rubin's request.

    
    

26. The second contract, also known as the "open market contract" or "verbal contract" was entered into on April 25, 1991 between the Petitioners and Rubin. That contract called for the delivery of six truckloads of potatoes at the market price then prevailing of $19.50 per CWT for immediate delivery on specified days. The delivery dates were April 29th, April 30th, and May 1, 1991; and the deliveries were timely made and payment was timely received by the Petitioners from Rubin.

    
    

27. Rubin is claiming that the separate open market contract which he verbally negotiated with the Petitioners was actually a part of the set price contract. The preponderant evidence shows otherwise, however. Ronald W. Brown, the Petitioners' expert witness, established that it is customary practice in the potato growing industry for brokers to enter into separate open market contracts with growers to take advantage of fluctuations in the market. These contracts are typically, and by custom, entered into near the time for harvest, and they are generally negotiated at or near the then current market price. The contracts are considered, by custom and practice, to be separate and apart from the set price contracts negotiated earlier in the year, well before the planting or harvesting season starts. Mr. Rubin testified that prior to April 27, 1991, he contacted the Petitioners and offered to purchase potatoes at the then market price of $19.50 per CWT. The quantity agreed upon between the parties was "six loads", with delivery to be made immediately and specifically on the dates of April 29th, April 30th, and May 1st. That open market contract has all of the elements of a valid contract. There was an offer by the purchaser and an acceptance by the sellers, the Petitioners. The agreement was definite as to quantity, quality and price. Part of the consideration flowing from the Petitioners, the sellers, to the buyer was the ability to make immediate delivery on short notice on specified dates, which the Petitioners accomplished, and for which they were paid by Rubin. There was no written memorandum of the open market contract, but there was delivery of the agreed quantity of potatoes by the Petitioners when delivery was requested and acceptance of that delivery by Rubin. Full payment was then promptly made by Rubin and thus a contract came into being and was completed. See, J.R. Sales, Inc. v. Dicks, 521 So.2d 366, 369 (Fla. 2d DCA 1988).

    
    

28. Rubin has not claimed that there was any fraud in the open market contract nor that it was breached in any way. Rather, Rubin is now stating that the open market contract was not really a separate contract but the potatoes delivered under it were actually a part of the set price contract quantity of potatoes Rubin was to receive. Rubin thus pleads that it should be allowed to claim an offset for potatoes received under the set price contract, for which it has not yet paid the Petitioners. In order to prevail on the claim for an "offset", Rubin must show that the open market contract was actually simply an installment of potatoes to be shipped under the set price written contract.

    That has not been proven, however. The price was different for each contract. The open market contract was for the purchase of "six loads". The set price contract, however, was for a determined amount of CWT bags. There were separate and definite negotiations for both contracts. The open market verbal contract

    also required delivery on an immediate basis on dates certain. The evidence shows that the negotiations for the open market contract were initiated by Rubin. Rubin asked for the six loads of potatoes at market price knowing that the market price was $19.50, and not $6.00 or $6.35, and yet Rubin made the offer to purchase from the Petitioners on that basis. The Petitioners did nothing more than assent to the terms offered by Rubin. There is no testimony to show that the Petitioners coerced the Respondent or misled it in any way or that they agreed in any way to modify the terms and conditions of the set price contract. The Respondent maintains that it would not have entered into the open market contract if it had known that the Petitioners could not fulfill the 50,000 CWT set price written contract. That is doubtless the case, if Rubin had known that in advance; but contrary to the contention of Rubin, it has not been proven that the Petitioners made any intentional misrepresentation about the expected yield of their crop being sufficient to fulfill the open market verbal contract, as well as the set price 50,000 CWT contract. At the time the open market contract was entered into, the Petitioners believed in good faith that they had sufficient quantities of potatoes in their crop to fulfill both contracts and all contracts. This was before they realized the effects of the adverse weather conditions described in the above Findings of Fact, coupled with the inability to employ the pesticide "Temik" to protect their potatoes. There was no fraud in the inducement for the open market contract.

    
    

29. The "offset" claimed by Rubin against the open market contract with regard to the potatoes received under the set price contract for which Rubin has been billed, but for which Rubin has not yet paid the Petitioners, is contrary to Florida law. Section 672.717, Florida Statutes (Uniform Commercial Code), allows the deduction of damages from the unpaid portion of the same contract when deliveries are not completed. That provision states, in pertinent part, as follows:

    
    

    The buyer on notifying the seller of his intention to do so may deduct all or any part of the damages resulting from any breach of the contract from any part of the price still due under the same contract.

    (emphasis supplied).

    
    

    This statutory provision thus does not allow a person to claim an "offset" for damages incurred in one contract against an amount paid on a separate and distinct contract. Shreve Land Company, Inc. v. J&D Financial Corporation, 421 So.2d 722, 724 (Fla. 3d DCA 1982).

    
    

30. The record does not indicate why Rubin approached the Petitioners and sought to enter into the open market contract for the purchase of potatoes at

    $19.50 per CWT when Rubin already knew that it was contracting for 50,000 CWT under the written contract at $6.00 per CWT. Be that as it may, at the time Rubin entered into the open market contract with the Petitioners, it was already aware that it had the existing set price contract for the purchase of the Petitioners' potatoes. Therefore, if Rubin had wished to draw on the quantities under the set price contract, it could easily have done so. Rubin chose, however, to request and enter into a separate open market contract.

    
    

31. Rubin claims that there was no consideration for the open market contract because the Petitioners were actually merely delivering potatoes which they were already obligated to deliver to Rubin under the set price contract. Thus, Rubin contends that the open market contract was actually a part of the set price contract. Consideration did flow between the parties to the open

    market contract, however, because the potatoes were requested and delivered and they were requested to be delivered on a short notice, date-certain basis at an agreed upon price. They were delivered timely, and the agreed upon price was paid. Therefore, the contract was completed and consideration flowed between the parties. Thus, the Respondent's claim that there was no consideration for the open market contract and that it really paid too much for the six initial loads of potatoes was not supported by the preponderant evidence of record.

    Rubin must establish that there was only one contract in effect because otherwise it cannot claim a setoff since the above statutory provision only allows setoffs for undelivered goods, against the remaining price due under such a contract, as to the same contract. It is difficult to conceive that Rubin would voluntarily agree to pay $19.50 per CWT for potatoes if it believed that it already had a contract on the same potatoes for $6.00 per CWT. The only reasonable explanation and the explanation supported by the preponderant evidence of record is that there were two separate and distinct contracts, the written set price contract and the verbal open market contract.

    
    

32. Rubin's offset claim against the open market contract was raised because of the fact that the Petitioners were not able to complete delivery on the set price contract. The Petitioners' crop yield was insufficient to meet their 116,650 CWT contractual obligations under six separate contracts ("set price contracts") and their sales of 10,301.6 CWT of potatoes on the open market.

    
    

33. The Petitioners were able to produce only 108,000 CWT of potatoes on their own 400 acres. The remaining 9,582.5 CWT of potatoes were grown on the Kirkers' 30 acres. The Petitioners were obligated to the Kirkers to sell those potatoes at market price, having no contracts for those potatoes. This left the Petitioners with 108,000 CWT of their own potatoes with which to fulfill 116,650 CWT of potato contracts.

    
    

34. This situation really resulted because of the Petitioners violating the standard, accepted growers' practice in the area, established by expert witness, Brown, of only contracting 80% of the maximum, customary anticipated yield. The Petitioners contracted 97% of the customarily accepted anticipated yield of all 430 acres for 1991. At most, the Petitioners should have only contracted 80% of the anticipated 120,400 CWT of potatoes to be harvested from the entire 430 acres or 96,000 CWT of potatoes. Strictly speaking, since the Petitioners knew that they had to sell the Kirkers 30 acres of potatoes at market price and should have known that the maximum anticipated yield under customary practices for their 400 acres would be only 112,000 CWT, they should have only contracted 80% of that amount or 88,000 CWT.

    
    

35. Although the Petitioners had grown approximately 130,000 to 133,000 CWT on their 400-acre tract the year before they were not justified in anticipating such a yield in 1991 since they knew that the extreme cold and wind conditions may have harmed the crop somewhat. Thus, there was substantial incentive for them to estimate the crop certainly at no more than the customary accepted anticipated yield of 280 CWT per acre for 400 acres, or 112,000 CWT (for contracting purposes). (120,400 CWT for the entire 430 acres, including the Kirkers' land). Although it developed that the adverse weather conditions referenced above substantially cut the yield of the Petitioners' crop, that was not the essential cause preventing the Petitioners from completing delivery on Rubin's set price and the other contracts. There was a substantial intervening cause, as concluded above, which was the Petitioners contracting for delivery of more potatoes than they reasonably should have anticipated their crop yield producing.

36. When the Petitioners realized that they would not be able to complete delivery on the set price contract with Rubin and the other contracts, in accordance with Section 672.615(2), Florida Statutes, the Petitioners allocated the remaining portion of their crop amongst their customers. Rubin received some of this allocation. The Petitioners, however, filled the entire contractual obligations with the Mitchum, Schneider and Terry contracts, or 36,250 CWT. These contracts were entered into after the contract between the Petitioners and Rubin, entered into on December 22, 1990, which was the first in time of any of the set price contracts. Later contracts should not have been fulfilled without fulfilling Rubin's contract.

    
    

37. In any event, due to the Petitioners contracting for delivery of more contract potatoes than the customary, maximum, anticipated crop yield could foretell, coupled with the fact that the Petitioners could not sell most of the 10,301.6 CWT of open market potatoes to the contracting purchasers because they were obligated to the Kirkers to sell approximately 8,600 CWT at open market price, the Petitioners were unable to fulfill the contracts for these intervening causes and not simply due to an act of God reducing the yield. If the Petitioners' crop yield reduction due to bad weather conditions were the only cause of the failure to fulfill the contracts, then under Section 672.625(1), Florida Statutes (Uniform Commercial Code), the nonperformance could be excused by the failure of a presupposed condition (the act of God condition mentioned in the set price contract). Here, however, the real cause of the failure to fulfill the contracts was bad judgment on the part of the Petitioners in contracting more than 80% of what they should have reasonably anticipated the yield on 400 acres would be. Instead, the Petitioners contracted for more than 100% of what the customary anticipated yield should be per acre (112,000 CWT) for their own 400 acres. Thus, it is apparent that the Petitioners breached the set price, written contract of December 22, 1990 between the Petitioners and Rubin.

    
    

38. Rubin, however, has filed no independent claim for breach of that set price contract against the Petitioners. As stated above, Rubin is instead claiming a "setoff" against the separate open market contract on the theory that it is really not a separate contract. That theory has been disproved, and it clearly is a separate distinct contract against which the above statutory provision and case law precludes setting off against amounts owed on a different contract.

    
    

39. The Petitioners testified that upon their determination that they would not be able to fulfill Rubin's contracts and other contracts, they reasonably notified all customers and allocated the remaining crops equitably among the various entities, pursuant to Section 672.615(2)(3), Florida Statutes.

1. Where a buyer receives notification of an allocation justified under the Uniform Commercial Code provision based upon excuse caused by failure of presupposed conditions, the buyer, in writing, may either terminate the contract as to any unexecuted portion of it, or he may modify the contract by agreeing to take his available quota in substitution. He must act within thirty (30) days after receipt of notification of the shortage from the seller based upon a presupposed condition, because if he does not so act within thirty (30) days and choose one of the two options, the contract will lapse. Section 672.616, Florida Statutes.

   
   

2. Under the Uniform Commercial Code, if the buyer objects to the notification of the seller or otherwise believes that the seller has breached

   the contract, then there are general remedies under the Uniform Commercial Code available to the buyer, as embodied in Section 672.711, Florida Statutes.

   Rubin, however, has not sought to avail itself of those contract remedies at this time.

   
   

3. In summary, the Petitioners fully performed under the market price contract or verbal contract but breached the set price contract of December 22, 1990. Rubin received and was invoiced or billed for the loads representing loads received under that set price contract in the amount of $40,015.20. Rubin owes that amount of money to the Petitioners. In turn, Rubin is due any damages caused by the breach of the set price contract by the Petitioners, which resulted in the failure to deliver the entire 50,000 CWT under that contract.

In fact, when one deducts the six loads of potatoes (approximately 3,000 CWT) from the 48,361 CWT of potatoes received by Rubin from the Petitioners in 1991, it can be seen that under the set price contract, breached by the Petitioners, Rubin only received approximately 45,000 CWT of the potatoes due under the set price contract, instead of the 50,000 CWT. Consequently, instead of a setoff against the market price which Rubin paid for the first six loads of potatoes under the separate oral market price contract, Rubin must recover by establishing any damages suffered by the Petitioners' breach of the written set price contract involving the failure to deliver approximately 5,000 CWT of potatoes under that contract. Rubin would be entitled to recover for any damages it could prove under that circumstance. Rubin, however, has not offered such proof in this proceeding because of reliance on the above "one contract- setoff theory". That being the case, it can only be concluded herein that the Petitioners are entitled to payment of the claimed amount of $40,015.20 representing the loads delivered to Rubin under the set price contract which were not paid for as yet. It is up to Rubin to seek a remedy in the appropriate forum for any damages suffered because of the Petitioners' breach of the set price contract.

RECOMMENDATION

Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is therefore,

RECOMMENDED that the Respondents, Jack Rubin & Son, Inc. and Continental Casualty Co., Inc. be found jointly and severally liable for payment of

$40,015.20 to the Petitioners for potatoes delivered to the Respondent, Jack Rubin & Son, Inc., for which payment has not yet been made.

DONE AND ENTERED this 20th day of November, 1992, in Tallahassee, Leon County, Florida.

P. MICHAEL RUFF Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 23rd day of November, 1992.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 92-548A

Petitioners' Proposed Findings of Fact 1-16. Accepted.

Respondent's Proposed Findings of Fact

1. Accepted, in part, but subordinate to the Hearing Officer's findings of fact on this subject matter because the evidence establishes that 30 acres of potatoes belonged to the Kirkers even though Pacetti Farms was responsible for all operations with regard to planting and harvesting those 30 acres, furnishing costs, operational expertise, equipment and labor as an advance against the Kirkers' crop sale.

2-5. Accepted, except that it is not found that the entire 430 acres of potatoes were the Petitioners' potatoes. 30 acres of potatoes belonged to the Kirkers.

1. Rejected, as not entirely in accordance with the preponderant weight of the evidence and subordinate to the Hearing Officer's findings of fact on this subject matter.

2. Rejected, as subordinate to the Hearing Officer's findings of fact on this subject matter and not entirely in accordance with the preponderant weight of the evidence, to the extent that the 97% of the accepted projected crop yield contracted for by the Petitioners represents an inclusion of the 30 acres of the Kirkers' potatoes in that percentage of crop yield projection. This is erroneous because the 30 acres were the Kirkers' potatoes which the Petitioners were handling for them.

3. Accepted in concept, but subordinate to the Hearing Officer's findings of fact on this subject matter.

4. Rejected, as subordinate to the Hearing Officer's findings of fact on this subject matter and not entirely in accordance with the preponderant evidence of record.

5. Rejected, as subordinate to the Hearing Officer's findings of fact on this subject matter.

6. Rejected, as not entirely in accordance with the preponderant weight of the evidence and as subordinate to the Hearing Officer's findings of fact on this subject matter.

COPIES FURNISHED:

Honorable Bob Crawford Commissioner of Agriculture Department of Agriculture

and Consumer Services The Capitol, PL-10 Tallahassee, FL 32399-0810

Richard Tritschler, Esq. General Counsel Department of Agriculture

and Consumer Services The Capitol, PL-10 Tallahassee, FL 32399-0810

John Michael Traynor, Esquire Charles E. Pellicer, Esquire

28 Cordova Street

St. Augustine, Florida 32084

C. Holt Smith, III, Esquire 3100 University Boulevard So. Suite 101

Jacksonville, FL 32016

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

ALL PARTIES HAVE THE RIGHT TO SUBMIT TO THE AGENCY WRITTEN EXCEPTIONS TO THIS RECOMMENDED ORDER. ALL AGENCIES ALLOW EACH PARTY AT LEAST TEN DAYS IN WHICH TO SUBMIT WRITTEN EXCEPTIONS. SOME AGENCIES ALLOW A LARGER PERIOD WITHIN WHICH TO SUBMIT WRITTEN EXCEPTIONS. YOU SHOULD CONSULT WITH THE AGENCY CONCERNING ITS RULES ON THE DEADLINE FOR FILING EXCEPTIONS TO THIS RECOMMENDED ORDER.

Docket for Case No: 92-000548

Orders for Case No: 92-000548