STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FRANCIS A. OAKES and DANIEL ) HOLDER, d/b/a OAKES PRODUCE ) COMPANY, )

)

Petitioners, )

)

vs. ) Case No. 97-1664A

) THE HEIDRICH CORPORATION and ) AETNA CASUALTY & SURETY )

COMPANY, )

)

Respondents. )

)

RECOMMENDED ORDER

Robert E. Meale, Administrative Law Judge of the Division of Administrative Hearings, conducted the final hearing in Fort Myers, Florida, on May 22, 1997.

APPEARANCES

For Petitioners: Francis A. Oakes

Oakes Produce Company 2744 Edison Avenue

Fort Myers, Florida 33916 For Respondent The Heidrich Corporation:

Francis X. Heidrich, President The Heidrich Corporation

Post Office Box 151059

Altamonte Springs, Florida 32715-1059 STATEMENT OF THE ISSUE

The issue is whether Respondent The Heidrich Corporation owes Petitioner money for watermelons and, if so, how much.

PRELIMINARY STATEMENT

By Complaint dated October 16, 1996, Petitioners alleged that Respondent The Heidrich Corporation owes them a total of

$17,736.38 for watermelons that Petitioners sold Respondent. Respondent denied the allegations.

At the hearing, Petitioners called one witness and offered into evidence one exhibit. Respondent The Heidrich Corporation called one witness and offered into evidence two exhibits. All exhibits were admitted.

FINDINGS OF FACT

1. In June 1996, Petitioners, who are growers, sold watermelons to Respondent The Heidrich Corporation (Respondent), which is a broker. Respondent shipped the watermelons directly from Petitioners' fields to Canada for resale.

2. This case involves eight deliveries of watermelons from Petitioners to Respondent. Petitioners' invoice numbers and dates of sale are as follows: 1392 on June 14, 1393 on June 15, 4004 on June 18, 4005 on June 19, 4013 and 4015 on June 22, 4016 on June 23, and 4034 on June 25.

3. The understanding between Petitioners and Respondent relieved Respondent of the responsibility of paying for watermelons that were nonconforming when received by Respondent's customer. Nonconforming melons are melons that are decayed, undermature, overmature, destroyed for inspection, or otherwise

   reasonably unacceptable to Respondent's customer. However, nonconforming melons do not included melons that are unacceptable due to damage in transit; such damage would consist of cracking or bruising. The parties did not explicitly agree who would bear freight, inspection, and disposal expenses of nonconforming melons.

4. After deduction for nonconforming melons, the June 14 shipment comprised 40,102 pounds. The parties agreed to a price of 4.5 cents per pound for this shipment, so the amount due Petitioners is $1804.59.

5. Respondent paid freight of $92.31 attributable to decayed watermelons.

6. After deduction for nonconforming melons, the June 15 shipment comprised 45,181 pounds. The parties agreed to a price of 4.5 cents per pound for this shipment, so the amount due Petitioners is $2033.15.

7. Respondent paid freight of $33.75 attributable to decayed watermelons.

8. After deduction for nonconforming melons, the June 18 shipment comprised 35,963 pounds. The parties agreed to a price of five cents per pound for this shipment, so the amount due Petitioners is $1798.15.

9. Respondent paid freight of $226.16 attributable to decayed watermelons.

10. The June 19 shipment was substantially nonconforming. Sixty-eight percent of the watermelons were defective on receipt in Canada, possibly due to excessive rainfall and premature cutting. Respondent's customer rejected the entire load, rather than try to find the few salable melons.

11. For the purposes of the present case, the proper accounting for this shipment is to multiply the unloaded weight of 32,890 pounds by the percentage of conforming watermelons (32 percent). The result of 10,525 pounds represents the weight of conforming melons on receipt in Canada. The parties agreed to a price of five cents per pound, so the amount due Petitioners is

    $526.25.

    
    

12. Respondent did not separately state the freight attributable to the nonconforming fruit that was not the result of shipping. Expressed as percentages of the shipping weight (not unloaded weight), eight percent of the melons were decayed,

    38 percent were undermature, and five percent were overmature, for a total of 51 percent, or 20,981 pounds, of nonconforming melons. Freight on this shipment was 5.5 cents per pound, so the freight expenses for these nonconforming melons is $1153.96. Respondent also credited its customer with $700 to pay for the disposal of the melons.

13. There were two relevant shipments on June 22. The first is documented by Petitioners' invoice 4013. After deduction for nonconforming melons, this shipment comprised

    41,316 pounds. The parties agreed to a price of five cents per pound for this shipment, so the amount due Petitioners is

    $2065.80.

    
    

14. Respondent paid freight of $231.20 attributable to decayed watermelons.

15. The second June 22 shipment is documented by Petitioners' invoice 4015. The deduction for nonconforming melons requires two calculations. On arrival in Canada, prior to governmental inspection, Respondent's customer reasonably rejected 13,572 pounds out of 47,270 shipped pounds; 12,612 pounds were nonconforming (the remaining 960 pounds were bruised).

16. Of the remaining 33,698 pounds, 15 percent, or 5055 pounds, were also nonconforming, as reflected in an ensuing governmental inspection. This means that 18,627 pounds of the original shipment were nonconforming, leaving 28,643 pounds of conforming melons. The parties agreed on five cents per pound for this shipment, so the amount due Petitioners is $1432.15.

17. Respondent paid freight of $931.35 attributable to the nonconforming melons.

18. Respondent's customer reasonably rejected 68 percent of the June 23 shipment of 44,120 pounds. However, 19 percent of the rejected melons were bruised, so the net deduction for nonconforming melons in the June 23 shipment is 20,736 pounds, leaving conforming melons of 23,384 pounds. The parties agreed

    to a price of five cents per pound for this shipment, so the amount due Petitioners is $1169.20.

19. Respondent paid freight of $1036.80 35 attributable to the nonconforming melons. Respondent also paid its customer $850 for dumping and inspection fees.

20. The final shipment, which took place on June 25, was by bins, rather than loose watermelons. There were no nonconforming melons in this shipment. The parties agreed that Respondent would pay $1272.55 for this shipment.

    CONCLUSIONS OF LAW

    
    

21. The Division of Administrative Hearings has jurisdiction over the subject matter. Sections 120.57(1) 604.21(6), Florida Statutes. (All references to Sections are to Florida Statutes.)

22. Petitioners have the burden of proving that they sold to Respondent agricultural products, for which Petitioners have not been paid.

23. Respondent may claim setoffs against the amounts claimed, subject to certain limits. For instance, barring a contrary provision in the parties' agreement, the broker may show that it received the agricultural products, but, due to their condition or type, they did not conform to the goods specified to be sold in the agreement.

24. On the other hand, the consequential damages occasioned by the grower's sale of nonconforming goods is not normally, if

    ever, a proper subject of this type of administrative proceeding. It is possible that Petitioners' nonconforming melons cost Respondent valuable business with its Canadian customers, but an administrative proceeding could not provide Respondent with such relief, even in the form of a setoff.

25. The record does not disclose the policy of the Department of Agriculture and Consumer Services as to the scope of permissible setoffs under the applicable law. The parties have not chosen to allocate these risks in their agreement.

26. The administrative proceeding is not a circuit court action in which the court has the jurisdiction to adjudicate a broad range of factual and legal issues. Under all of the circumstances, the simplest and fairest approach is to allow the broker a credit for nonconforming melons, but nothing else.

27. Therefore, Respondent must pay Petitioners for all watermelons that, upon their receipt in Canada, were in satisfactory condition or were in unsatisfactory condition due to bruising and cracking, which are incidental to shipping and largely out of the grower's control. Respondent should not receive an offset for freight attributable to nonconforming melons or any inspection or disposal expenses, even for nonconforming melons.

28. Under this approach, the grower retains the risk as to nonconforming melons, and the broker retains all other risks. The broker is better able to control these risks, and a contrary

    result might invite irresponsibility by the broker in dealing with perishable commodities that are outside the control of the grower.

29. Based on these conclusions of law, Respondent owes Petitioners $12,101.84.

RECOMMENDATION

It is

RECOMMENDED that the Department of Agriculture and Consumer Services enter a final order determining that Respondent owes Petitioners the sum of $12,101.84.

DONE AND ENTERED this 7th day of July, 1997, in Tallahassee, Leon County, Florida.

ROBERT E. MEALE

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(904) 488-9675 SUNCOM 278-9675

Fax Filing (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 7th day of July, 1997.

COPIES FURNISHED:

Brenda Hyatt, Chief

Bureau of Licensing and Bond Department of Agriculture

and Consumer Services

508 Mayo Building

Tallahassee, Florida 32399-0800

Francis A. Oakes Oakes Produce Company 2744 Edison Avenue

Fort Myers, Florida 33916

Francis X. Heidrich, President The Heidrich Corporation

Post Office Box 151059

Altamonte Springs, Florida 32715-1059

Aetna Casualty & Surety Company

151 Farmington Avenue Hartford, Connecticut 06156

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of this recommended order. Any exceptions to this recommended order must be filed with the agency that will issue the final order in this case.

Docket for Case No: 97-001664

Orders for Case No: 97-001664