STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ERNEST LECLERCQ d/b/a )

SUN COAST FARMS, )

)

Petitioner, )

)

vs. ) CASE NO. 86-1029A

) ORRIN H. COPE PRODUCE, INC., )

d/b/a SOUTH DADE PRODUCE and ) SENTRY INDEMNITY COMPANY, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, W. Matthew Stevenson, held a formal hearing in this case on June 4, 1986 in Miami, Florida. The following appearances were entered:

APPEARANCES

FOR PETITIONER: Vincent J. Fiorica

5856 West Flagler Street Miami, Florida 33144

FOR RESPONDENT: Steven F. Brines

48 Northeast 15th Street Homestead, Florida 33133

The issue for determination at the final hearing was whether the Respondents, Orrin H. Cope Produce, Inc., d/b/a South Dade Produce and Sentry Indemnity Company, were obligated to pay the Petitioner, Ernest LeClercq d/b/a, Sun Coast Farms, an additional $1,782.00 on a contract for the sale of squash.

PROCEDURAL BACKGROUND

On November 22, 1985, Petitioner filed a complaint with the Department of Agriculture and Consumer Services alleging that Respondents owed $1,782.00 on a contract for the sale of squash. Thereafter, on January 2, 1986, the Respondent filed its answer with the Department of Agriculture and Consumer Services denying the indebtedness and requesting a formal hearing.

This cause came on for final hearing on June 4, 1986. At the final hearing, the Petitioner presented the testimony of four witnesses. In addition, Petitioner's Exhibit 1 was duly offered and admitted into evidence. The Respondent presented the testimony of one witness. Respondent's Exhibits 1 and

2 were duly offered and admitted into evidence.

FINDINGS OF FACT

Based on my observation of the witnesses and their demeanor while testifying, the documentary evidence received and the entire record compiled herein, I hereby make the following findings of fact:

1. The Petitioner, Sun Coast Farms, is agent for Strano Farms of Florida City, Florida, a producer of agricultural products.

   
   

2. The Respondent, South Dade Produce, is a dealer in agricultural products and is located in Naranja, Florida.

   
   

3. On April 4, 1985, Mr. George Mason, salesman for Petitioner, received a call from Respondent proposing to buy some squash.

   
   

4. An agreement was reached for the sale of 400 crates of crookneck squash (#1 grade) at a price of $10.20 per unit "FOB Florida City, Florida." The agreed upon price for the full amount of the squash was $4,080.

   
   

5. The squash in question was grown and packed by Strano Farms in Florida City, Florida.

   
   

6. The 400 cases of squash were received by Respondent on April 4, 1985. During an inspection of the squash, Mr. Cope, owner of South Dade Produce, noticed that some of the squash had wind scar. Mr. Cope felt that the wind scar damage was minor and proceeded to dispose of the squash as planned. One hundred cases of the squash were sold and shipped without difficulty and are not a part of this action.

   
   

7. On April 4, 1985, the 300 cartons of squash in question were shipped to Texas in a refrigerator truck and delivered April 6, 1986 to Harrington Produce Company of Dallas, Texas, through Reaves Brokerage Company, also of Dallas. Harrington Produce Company planned to sell the squash to consumers through its own retail outlets.

   
   

8. Upon examination of the squash at destination, Harrington Produce Company represented to Reaves Brokerage Company that it believed a portion of the squash were spoiled and unmarketable. Reaves Brokerage Company notified the Respondent of this potential problem and requested instruction. That same day, April 6, 1985, having received notice of the problem in Dallas, the Respondent notified George Mason, a salesman for Petitioner. George Mason indicated that a "federal inspection certificate" (an inspection performed upon receipt to verify the condition of produce) was not required. Neither Petitioner nor Respondent requested a federal inspection to verify the condition of the squash.

   
   

9. In an accounting statement provided to Respondent on December 30, 1985 Harrington Produce stated that in order to render the squash sellable, it was necessary to run (sort and repack) the squash twice to assure that each carton contained only sound vegetables. Harrington Produce Company further asserted that the cost of sorting and repacking was $1.50 per finished carton per run or

   $540.00 for the 180 salvageable cartons which were kept and sold. Harrington Produce stated that it did not charge labor costs for unsellable cartons, but that 120 of the 300 cartons delivered were unsellable, which, at $10.35 per carton, meant an additional deduction of $1,242.00. Because of the foregoing, Harrington Produce Company deducted $1,782.00 as an adjustment to Respondent's bill.

10. Because Harrington Produce deducted $1,782 from Respondent's billing, Respondent deducted $1,782 from Petitioner's payment. The parties stipulated that the unpaid amount on the contract for the 400 units of squash was $1,782.

    
    

11. No "federal dump certificate" (a certification of spoilage done at the time that unmarketable produce is discarded) was performed on the 120 cartons of squash which were supposedly dumped by Harrington Produce Company. It is standard practice in the industry that an independent, third-party assessment of produce be performed prior to "dumping". Ordinarily, "certification" of the condition of produce by the ultimate purchaser himself is unacceptable. Where a "federal dump certificate" is unavailable, some other independent assessment of the produce is required. It is standard practice in the industry that the buyer receiving the problematic goods request the necessary inspections.

    
    

12. It was the understanding of the parties, who had undertaken similar transactions previously, that adjustments to the price of the goods when subsequently resold could be passed back to the producer. However, it is normal and customary practice in the industry to have an independent entity, be it state, federal or private, inspect agricultural products before they are "dumped" or thrown away as unmarketable.

    
    

13. On April 5, 1985, Petitioner invoiced Respondent $4,080 for the full amount of the squash. In May 1985, Respondent remitted to Petitioner the sum of

    $2,298, leaving a balance due of $1,782.

    
    

14. On June 21, 1985, Petitioner requested an accounting from Respondent for the sale of the Dallas squash. On August 1, 1985, Petitioner again requested an accounting from Respondent. On January 2, 1986, Respondent submitted a letter from Harrington Produce, dated December 30, 1985, accounting for the disposition of the 300 units of squash.

    
    

15. On April 4, 1985, 1,800 units of squash harvested from the same field as the squash in question, were packaged by Strano Farms and sold without any complaints or returns.

    
    

    CONCLUSIONS OF LAW

    
    

16. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of these proceedings. Section 120.57(1), Florida Statutes.

    
    

17. Section 604.21, Florida Statutes provides that any person who claims to be damaged by a breach of the conditions of an agreement given by a licensed dealer in agricultural products may file a complaint seeking redress. Petitioner, a "producer" of agricultural products as defined by Section 604.15(5), Florida Statutes, has availed himself of that right and seeks an additional $1,782.00 from Respondent for the shipment of 400 cases of crookneck squash on April 4, 1985.

    
    

18. In Administrative proceedings, as in court proceedings, the burden of proof is upon the party asserting the affirmative. Balino v. Department of HRS,

    348 So.2d 349 (Fla. 1st DCA 1977). Accordingly, Petitioner has the burden of proving by a preponderance of the evidence, that Respondent defaulted on its agreement and is indebted to Petitioner in the amount of $1,782.00. This burden, the Petitioner has met.

19. The Respondent is a "dealer" in agricultural products as defined by Section 604.15(1), Florida Statutes. The question has arisen as to whether the Respondent's role in the instant case was that of "purchasing, receiving, or soliciting agricultural products from the producer (the Respondents) for resale or processing for sale" or "acting as a negotiating broker between the producer or his agent or representative and the buyer." Section 604.15(1), Florida Statutes. The Respondent's role in the instant transaction does not fit neatly into any of the categories defined in Section 604.15(1), Florida Statutes. The price of the squash was fixed by the contract instead of floating with the market. However, by understanding of the parties, based on prior transactions, adjustments to the price of the squash caused by its condition when subsequently resold, could in some circumstances, be passed back to Petitioner for reduction of the amount due on the contract.

    
    

20. The preponderance of the evidence, especially evidence regarding the parties' understanding of the transaction, indicates that Respondent was not acting as a "middle man" broker but indeed "purchased" the squash from Petitioner for resale with the condition that adjustments could be made to the purchase price based on the quality of the squash at time of re-sale. The squash was shipped directly to Respondent, where the cases were inspected and reshipped. The Respondent purchased the squash for a set price and there were no percentages or commissions involved. Therefore, when the Respondent received the shipment and inspected the contents, the sale became complete -- the Petitioner had fulfilled its terms and Respondent was obligated to fulfill his end of the bargain. Although the Respondent noted that there was some "wind scar" on the squash, the Respondent considered the problem to be minor. The squash was accepted and resold.

    
    

21. The Respondent suggests that it should be relieved of liability for full payment of its obligations under the contract because the product, although accepted at the time of receipt, was later found to be unsuitable for the purposes intended--sale to consumers on the retail market. The transaction between the parties in this case is generally governed by the "Uniform Commercial Code-Sales" in Florida. Chapter 672, Florida Statutes. Chapter 672 provides in pertinent part as follows:

    
    

    "672.314 Implied Warranty; Merchantability; Usage of Trade -

    A warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.

    2) goods to be merchantable must be at least such as:

    1. Pass without objection in the trade under the contract description; and

    2. in the case of fundable goods, are

       of fair average quality within the description; and

    3. are fit for the ordinary purposes for which such goods are used; and

    4. run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved . . .

    * * *

22. To the extent that Respondent asserts that the Petitioner breached the implied warranty of merchantability, the burden shifts to Respondent. The evidence does not support a conclusion that the squash was unsuitable for ordinary purposes or were not of fair and average quality. Further, substantial evidence was not presented showing that the squash would not "pass without objection in the trade." It is standard practice or "usage of trade" in the industry that prior to dumping1 an independent or third-party inspection or verification be done indicating that the product is no good. When the lack of certification of dumping is viewed with all of the circumstances herein -- the squash was visually inspected and accepted upon initial receipt on April 4, 1986; the grower and original packer testified that there was no wind scarring on the squash at the time of packing and described the squash as being in "super candy condition"; 1,800 units of squash from the same field were packed and sold on the same day without any complaints or returns; and, Harrington Produce Company's accounting for the disposition of the squash was not submitted until approximately 9 months after the sale-- the weight of the evidence does not support the finding that the squash was indeed and in fact, not merchantable.

    
    

23. Thus, whether analyzed under the precise requirements of the Uniform Commercial Code or the parties' understanding regarding adjustments to the contract price, the result would be the same. Under the contract, the Respondent has closest contact to the ultimate buyer and bears the burden of showing that the condition of the squash at the time of resale justifies an adjustment in the contract price. The evidence that the squash was spoiled and required dumping was weak at best and did not comport with the substantiation required by standard practice in the industry.

    
    

24. The Respondent further asserts that Petitioner "waived" any entitlement to substantiation of the squash's condition in Dallas when George Mason, salesman for Petitioner, indicated that no federal inspection certificate was required. This contention is without merit. Firstly, the record is devoid of any substantial evidence which would indicate that George Mason had the authority, express or implied, real or apparent, to waive a federal inspection certificate on Petitioner's behalf. Secondly, a "federal inspection certificate" is completed at the time that problematic goods are received and a "federal dump certificate" is completed at the time of discard. The two inspections are separate and distinct and a waiver of the first does not necessarily entail a waiver of the second. Further, it is the customary practice in the industry for the person receiving and/or discarding problematic goods to request the necessary inspections.

From the foregoing, it is concluded that Petitioner has established by a preponderance of the evidence that Respondent is indebted to Petitioner in the amount of $1,782.00.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be issued finding that Respondent is

indebted to, and required to pay, the amount of $1,782.00 to the Petitioner.

DONE and ORDERED this 1st day of July, 1986 in Tallahassee, Leon County, Florida.

W. MATTHEW STEVENSON Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 1st day of July, 1986.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 86-1029A

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties to this case.

Rulings on Proposed Findings of Fact Submitted by the Petitioner

1. Adopted in Finding of Fact 1.

2. Adopted in Finding of Fact 3.

3. Adopted in Finding of Fact 6.

4. Adopted in Finding of Fact 13.

5. Adopted in Finding of Fact 7.

6. Adopted in Findings of Fact 13 and 14.

7. Adopted in Finding of Fact 15.

Rulings on Proposed Findings

of Fact Submitted by the Respondent

1. Partially adopted in Findings of Fact 3, 5 and 12. Matters not contained therein are rejected as subordinate and/or not supported by competent, substantial evidence.

2. Rejected as recitation of testimony.

3. Adopted in Finding of Fact 7.

4. Partially adopted in Finding of Fact 8. Matters not contained therein are rejected as subordinate and/or not supported by competent, substantial evidence.

5. Adopted in Finding of Fact 10. Matters not contained therein are rejected as subordinate.

6. Partially adopted in Finding of Fact 9. Matters not contained therein are rejected as subordinate.

7. Rejected as a recitation of testimony.

8. Partially adopted in Finding of Fact 11. Matters not contained therein are rejected as a recitation of testimony and/or subordinate.

9. Rejected as unnecessary and subordinate.

10. Addressed in procedural background section of R.O.

11. Addressed in procedural background section of R.O.

COPIES FURNISHED:

Vincent J. Fiorica

5856 West Flagler Street Miami, Florida 33144

Steven F. Brines

48 Northeast 15th Street Homestead, Florida 33133

Hon. Doyle Conner Commissioner of Agriculture The Capitol

Tallahassee, Florida 32301

Robert Chastain, Esquire General Counsel Department of Agriculture Mayo Building, Room 513

Tallahassee, Florida 32301

Mr. Joe W. Kight Bureau of Lic. & Bond

Department of Agriculture Mayo Building

Tallahassee, Florida 32301

F. J. Manuel, Jr., Esquire Welbaum, Zook, Jones & Williams Post Office Box 3626

Orlando, Florida 32802

Docket for Case No: 86-001029

Orders for Case No: 86-001029