STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HENRY L. WATSON, PHILIP T. DEAN ) AND WILLIE BASS, JOHN T. ) BRANTLEY, JR. JESSE J. WILSON AND ) HUGH D. MARTIN )

)

Petitioners, )

and )

) FLORIDA DEPARTMENT OF AGRICULTURE ) AND CONSUMER SERVICES, )

)

Intervenor, )

)

vs. ) CASE NO. 81-1492A

) C & W SALES, INC. AND FLORIDA ) FARM BUREAU MUTUAL INSURANCE ) COMPANY, )

)

Respondents. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above- styled case on 28 August 1981 at Trenton, Florida.

APPEARANCES

For Petitioners: Henry L. Watson, Pro Se Mr. Watson Route 2, Box 485

Branford, Florida 32008

For Mr. Dean and Mitzi Austin, Esquire Mr. Bass: Post Office Drawer C

Gainesville, Florida 32602 For Jesse L. Wilson: Not represented

For Hugh D. Martin: Not represented

For Mr. Brantley: John T. Brantley, Jr., Pro Se

Star Route, Box 6 Clewiston, Florida 33440

For Intervenor: Robert A. Chastain, Esquire

Room 513, Mayo Building Tallahassee, Florida 32301

For Respondent: Arthur C. Beal, Jr., Esquire Florida Farm Post Office Drawer 229

Bureau Tallahassee, Florida 32302 For C & W Sales: Not represented

By letter dated May 6, 1981, the Florida Department of Agriculture and Consumer Services, Intervenor, notified Florida Farm Bureau Mutual Insurance Company (FFB), Respondent, that C & W Sales, licensed as a dealer in agricultural products, was in default on, claims amounting to $55,692.83 and that FFB was surety on C & W Sales agriculture dealer's bond in the amount of

$20,000 and should pay that sum to the department for distribution to the complaining parties. FFB requested a hearing to determine their liability under the bond. The issue here presented is whether FFB can deduct the portion of the

$20,000 that would go to Henry L. Watson in view of their claim against Watson, who signed as indemnitor on C & W Sales' agriculture bond.

Subsequent to the conclusion of these proceedings the Hearing Officer has been advised that FFB, Henry T. Watson and the Department of Agriculture and Consumer Services entered into a stipulation agreement whereby upon release from all liability under the indemnation agreement Watson waived his claim for a pro rata share of the surety's $20,000 obligation.

Two witnesses were called by Respondent FFB, Henry Watson testified in his own behalf and eight exhibits were admitted into evidence. The facts in this case are undisputed.

FINDINGS OF FACT

1. C & W Sales, Inc., was licensed as a dealer in agricultural products under license No. 1367 and was so licensed at all times here relevant.

   
   

2. At the time of the incorporation of C & W Sales, Inc., Henry T. Watson was listed as an officer (President) and director of the company. The company was run by Philip A. Roberts, the brother-in-law of Watson.

   
   

3. Roberts applied on behalf of C & W Sales, Inc., to FFB for an agriculture bond in the amount of $20,000 for the period 5/19/79 until 5/19/80 (Exhibit 1) . As a condition for issuing this bond FFB required and obtained a general agreement of indemnity from Roberts and Watson and their wives (Exhibit

   2) which was executed on 2 May 1979. In addition to agreeing to save Florida Farm Bureau harmless from all claims arising out of the bond paragraph 14 provided:

   
   

   That this indemnity is continuing and will apply to any and all bonds, as provided in the opening paragraph of this Agreement which the Company may have executed or procured the execution of from time to time, and over an indefinite period of years;

   however, any Indemnitor may by written notice to the Company at its Home Office, Gainesville, Florida disavow his liability as to bond(s) which may be executed by the Company subsequent to fifteen days after receipt by the Company of such notice.

4. Agriculture bond (Exhibit 4) was issued on 5/19/79 for one year and upon expiration on 5/19/80 the bond was renewed for an additional period of one year (Exhibit 5).

   
   

5. Subsequent to the expiration of the 1979-80 bond (Exhibit 4) and reissuance of the 1980-81 bond (Exhibit 5) but within the prescribed time for submitting a claim against the agriculture dealer and his bond, John T. Brantley, Jr., filed a claim against C & W Sales in the amount of $8,317.05 for payment owed on a transaction which occurred during the 1979-80 period. When C & W Sales failed to pay or respond to the Commissioner of Agriculture's demands for payment, claim was made on the 1979-80 bond and FFB remitted to the Commissioner of Agriculture a check for the Brantley claim (Exhibit 6).

   
   

6. Around February 1980 Watson became disenchanted with Roberts' running of C & W Sales, Inc. and wanted out. He told Roberts to get someone to buy his (Watson) stock and to get his name out of the company. Roberts said he would. Watson never advised FFB that he would no longer be an indemnitor under the bond.

   
   

7. During the period covered by the bond year beginning 5/19/80 claims against C & W Sales, Inc., were submitted to the Commissioner of Agriculture by Henry L. Watson in the amount of $32,326.50; Hugh D. Martin in the amount of

   $1,932.80; Jesse J. Wilson in the amount of $1,490.00; John T. Brantley, Jr., in the amount of $15,024.40; and Philip Dean and Willie Bass in the amount of

   $4,919.13, for a total of $55,692.83. The Commissioner of Agriculture notified C & W Sales of these claims and advised them of the opportunity to contest the validity of the claims. No response was received from C & W Sales and Roberts appears to have departed the area to parts unknown. An order demanding payment was submitted to C & W Sales and when payment of these claims was not made, FFB, as surety on the bond, was notified by the department of its surety on the bond, was notified by the department of its obligation under the bond and a demand for payment of $20,000 to the department was made.

   
   

8. There is no dispute regarding the accuracy or validly of the claims against C & W Sales contained in Finding 7 above. Nor does FFB contest its liability under the agriculture bond it issued for the 1980-81 bond year. However, FFB claimed an equitable setoff for the percentage of the $20,000 that would go to Watson. This setoff is claimed by virtue of Watson's indemnity agreement. By the stipulation the parties have agreed that the FFB is entitled to the pro rata share of the $20,000 to Watson.

   
   

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction 'over the parties to, and the subject matter of, these proceedings. Section 604.21, Florida Statutes, provides for the handling of complaints by persons claiming losses resulting from dealings with an agricultural products dealer and subparagraph (8) thereof provides:

   
   

   Upon failure by a dealer to comply with an order of the department directing payment, the department shall call upon the surety company to pay over to the department,

   out of the bond posted by the surety for such dealer, the amount called for in the department's order, not exceeding the amount of the bond. If the bond is insufficient to

   pay in full the amount due each complainant as set forth in the department's order, the department shall distribute the proceeds of the bond pro rata among such Petitioners.

   All proceeds from such bond shall be paid over by the surety company directly to the department to be distributed by it to successful Petitioners. Such funds shall be considered trust funds in the hands of the department for the exclusive purpose of satisfying duly established complaints.

   Payment made by a surety to the department pursuant to this section shall be considered payment made upon demand and shall not be considered voluntary payment.

   
   

10. A contract of indemnity is an original undertaking by which the promisor agrees to protect the promisee against loss or damage in and by reason of liability to another person. 12 Fla. Jur. 2d s9 Contributions, Indemnity and Subrogation. Here Watson agreed to indemnify FFB for all claims the latter had to pay under the bond issued to C & W Sales.

    
    

11. It is a well-settled principle that where a person is responsible over to another, either by operation of law or by express contract, and he is duly notified of the pendency of the suit against the person to whom he is liable over, and full opportunity is afforded him to defend the action, the judgment, if obtained without fraud or collusion, will be conclusive against him, whether he appeared or not. Id. s16.

    
    

12. A surety has been defined as one bound with his principal for the payment of a sum of money or for the performance of some duty or promise, and one who is entitled to be indemnified, in the event the surety is compelled to discharge the obligation, by the person who ought to have discharged it. Anderson v. Trueman, 130 So. 12 (Fla. 1930) Here FFB was the surety for sums owed by the dealer, C & W percent Sales, to the producers of agricultural products they delivered to C & W Sales. Watson agreed to indemnify the surety from any losses it might suffer by reason of its surety bond to C & W Sales.

    
    

13. It is clear that FFB has a claim against Watson for the $20,000 it is obligated to pay under the surety bond. It is further clear that Watson's claim against C & W constitutes 58 percent (32326.50 + 55692.83) of the total

    $55,692.83 claimed by the five Petitioners in this proceeding, or (58 percent of

    $20,000).

    
    

14. The principles here involved are equitable principles McAtee v. United States Fidelity & Guarantee Company, 401 F. Supp 11 (DC Fla. 1975) it was held that a surety on a payment bond given by a contractor to the owner was entitled to are reimbursement by equitable subrogation, for completing the contract upon the contractor's default and for paying debts of the contractor for labor and materials, from funds otherwise due the contractor but withheld by the owner as a result of the contractor's default. This was so despite the fact the contractor had become bankrupt and the owner had turned the withheld funds over to the contractor's trustee in bankruptcy.

15. In Western World Ins. Co. v. Traveller's Indemnity Co., 358 So.2d 602 (Fla. 1st DCA 1978) it was held that a surety on a performance bond, who paid a judgment against its principal, which judgment would have been paid by the principal's liability insurance carrier, was entitled to be subrogated to any rights which the principal had against the insurance carrier.

    
    

16. Under equitable principles FFB should have an offset of that part of the $20,000 it owes as surety which is payable to Watson, namely 58 percent or

    $11,608.85. The only issue is whether the wording of Section 604.21(8) above quoted requires the surety to pay the entire $20,000 to tie Commissioner of Agriculture who will then return $11,608.85 to FFB as Watson's pro rata share of the proceeds of the surety bond.

    
    

17. One purpose of Chapter 604 is to provide an expeditious and inexpensive forum in which disputes between dealers, producers and sureties can be resolved. Although Section 604.21(8) says all proceeds of such bonds shall be turned over to the department for distribution to successful Petitioners, those are words applicable to the general situation. To comply with the intent of Chapter 604 and to do equity to all parties FFB should be allowed to deduct from the $20,000 bond Watson's pro rata share of the $20,000 and remit the balance of the surety bond to the department. Any other procedure would be a useless gesture.

    
    

18. From the foregoing it is concluded that Florida Farm Bureau Mutual Insurance Company should, under the facts of this case and the stipulation entered into, remit to the Commissioner of Agriculture $8,391.15 in full settlement of the claims against the agricultural dealer bond it issued C & W Sales, and release Henry T. Watson from all liability under the indemnity agreement. It is, therefore,

RECOMMENDED that the department accept payment from Florida Farm Bureau Mutual Insurance Company of $8,391.15 for redistribution to Philip T. Dean and Willie Bass, John T. Brantley, Jr., Jesse J. Wilson and Hugh D. Martin.

ENTERED this 23rd day of September, 1981, in Tallahassee, Florida.

K. N. AYERS Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 23rd day of September, 1981.

COPIES FURNISHED:

Henry L. Watson L. Earl Peterson, Chief

Route 2, Box 485 Bureau of License and Bond Branford, Florida 32008 Department of Agriculture and

Consumer Services

Mitzi Austin, Esquire Room 416, Mayo Building Post Office Drawer C Tallahassee, Florida 32301 Gainesville, Florida 32602

Hugh D. Martin John T. Brantley, Jr.

Martin Farms Star Route, Box 65

Post Office Box 145 Clewiston, Florida 33440 Bell, Florida 32619

Robert A. Chastain, Esquire Arthur C. Beal, Jr. Esquire Room 513, Mayo Building Post Office Drawer 229 Tallahassee, Florida 32301 Tallahassee, Florida 32302

Docket for Case No: 81-001492

Orders for Case No: 81-001492