F. BUSINESS BROKERAGE, INC. and ) TITAN INDEMNITY COMPANY, as Surety, )
Respondent. )
Upon due notice, this cause came on for formal hearing on April 14, 1994 in Palatka, Florida, before Ella Jane P. Davis, a duly assigned hearing officer of the Division of Administrative Hearings.
For Petitioner: Donald E. Holmes, Esquire
For Respondent: Ronald A. Kievitt, Qualified Representative
Whether or not Petitioner (complainant) is entitled to recover $10,134.72 or any part thereof against Respondents dealer and surety company.
After appropriate inquiry and receipt by the hearing officer of faxed written authority (Hearing Officer Exhibit A) for him to represent Respondent
A.F. Business Brokerage, Ronald A. Kievitt was accepted as A.F. Business Brokerage's qualified representative, pursuant to Rule 60Q-2.008 F.A.C.
Respondent Titan Indemnity Company did not appear.
Petitioner, represented by Florida legal counsel, presented the oral testimony of Wayne D. Smith, John W. Stone, and George F. Snell and had five exhibits admitted in evidence.
Respondent A.F. Business Brokerage, Inc. presented the oral testimony of Wayne D. Smith. Its Exhibits 1-3 were not admitted in evidence over objection. See endnotes, infra.
A transcript was filed in due course. Petitioner's Proposed Recommended Order was filed by another, not by the qualified representative, but its findings of fact have been considered pursuant to the terms of the order entered herein on June 9, 1994. Upon the terms of that order, the items attached to Respondent's proposal have not been considered because they were outside the record. All timely filed proposed findings of fact have been ruled upon in the appendix to this recommended order, pursuant to Section 120.59(2) F.S.
This cause is governed by the four corners of the November 2, 1993 complaint. It involves only two loads out of twenty loads of potatoes.
Petitioners are growers of potatoes and qualify as "producers" under Section 604.15(5) F.S.
Respondent A.F. Business Brokerage is a broker-shipper of potatoes and qualifies as a "dealer" under Section 604.15(1) F.S.
A.F. Business Brokerage, Inc. is a corporation engaged in the business of brokering (purchasing and re-selling) potatoes and operates under one or more of the following names: A.F. Business Brokerage, Inc., Washburn Corp., and/or Ben Albert Farms.
The contract at issue herein listed the name of the broker as "Albert Farms d/b/a Washburn Corporation." Payments made by the Respondent broker to Petitioner for potatoes received under the terms of the contract were in the form of checks drawn on the account of A.F. Business Brokerage, Inc. For purposes of this litigation, "Albert Farms d/b/a Washburn Corporation," and "A.F. Business Brokerage, Inc." will be considered as describing the same party.
Although Titan Indemnity Company received notice of the filing of Petitioner's Complaint and failed to request a formal hearing pursuant to Section 120.57(1) F.S., no evidence or admission was presented at formal hearing which would permit a finding that Titan Indemnity Company was surety for Respondent A.F. Business Brokerage at all times material. That is not to say that Titan Indemnity is found not to be the surety for Respondent A.F. Business Brokerage. The foregoing finding only means that this case in the administrative forum cannot resolve the issue of indemnity as between Respondents because insufficient evidence on that issue has been presented, and it may be necessary for that issue to be litigated in Circuit Court pursuant to the surety contract/bond, if any.
On or about December 28, 1992, Petitioner and Respondent broker confirmed in writing the terms of a telephoned agreement, whereby Petitioner agreed to sell and the broker agreed to purchase twenty truckloads of potatoes.
The agreement/contract, prepared by Respondent broker was titled "Standard Confirmation of Sale". It specified in pertinent parts:
"Unless the seller or buyer makes immediate objection upon receipt of his copy of this Standard Confirmation of Sale, showing that contract was made contrary to authority given the Broker, he shall be conclusively presumed to agree that the terms of sale as set forth herein are fully and correctly stated.
Sale made (F.O.B. or Delivered): F.O.B.
Special Agreement, if any: Potatoes shipped are for potato chipping and must cook on arrival to be subject to this agreement.
This confirmation is issued and accepted in agreement with, and subject to the rules and regulations and definitions of terms as recognized and approved by the U.S. Secretary of Agriculture under the Perishable Agriculture Commodities Act.
*4 Truckloads chipping potatoes, April $7.75 FOB
16 Truckloads chipping potatoes, May, June $7.00 FOB
*Loads not shipped by seller in April apply to May, June portions of agreement." (Petitioner's Exhibit 1)
Under Section 672.319 F.S., The Uniform Commercial Code, the abbreviation "F.O.B." means "free on board" and is interpreted differently, dependent upon what words follow the abbreviation. Regardless of what words follow the abbreviation, the term "F.O.B." places shipping responsibility and shipping costs upon a "seller" as opposed to the one accepting delivery, the ultimate buyer. Testimony and arguments by the parties at formal hearing and in their respective proposals suggest that if "F.O.B." had been used by itself, in place of the word "delivered," and without more, the contract would have signified that sale herein occurred at the time of pickup in the field by the broker/shipper, and that title to the produce would have transferred from the producer to the broker/shipper at that point in time as opposed to title transferring at the time the broker/shipper delivered the produce to its ultimate destination. However, here, the Respondent broker elected the term "F.O.B." and rejected the term "Delivered," and also added the requirement that the potatoes cook to chips at their destination.
Petitioner made potatoes available for pick up by the broker at Petitioner's fields beginning in May, 1993 in accord with the contract and the price specified therein. Without incident, the broker picked up and accepted the first eighteen loads of potatoes which it had agreed to purchase.
All arrangements for shipment of the potatoes at issue were controlled and paid for by the Respondent broker. These arrangements made and controlled by the Respondent broker included the method of transportation, the exact date when the potatoes would be picked-up from Petitioner's fields, the place to which the potatoes ultimately would be transported, and the time during which the potatoes would remain "in transit". This unilateral control by the broker suggests that the parties were treating the potatoes as if title thereto had passed to Respondent broker when it picked them up in Petitioner's field and clearly shows that the broker had control over what condition the potatoes were in when they reached the retailer at their ultimate destination.
As of the time Petitioner began to honor the contract by making potatoes available for pick up by the broker, Petitioner could have sold potatoes on the "open market" for $25.00 per hundred-weight instead of the $7.00 per hundred-weight called for under the terms of the contract. Nonetheless, Petitioner honored its contract with Respondent broker by making potatoes available to the Respondent broker and by reserving a sufficient amount of Petitioner's crop so as to fulfill the entire contract with Respondent broker.
As of the time the Respondent broker made arrangements for pick up of the last two loads of potatoes, potatoes on the open market were selling for
$1.75 per hundred-weight, meaning that the broker was paying Petitioner more for potatoes under the terms of their contract than the broker would have had to pay to purchase similar potatoes on the "open market". Respondent broker contacted Petitioner immediately prior to June 17, 1993 and asked that Petitioner cancel the contract between them because of the reduced price potatoes were yielding on the open market. Petitioner rejected the proposal. This strongly suggests that the Respondent broker felt bound by the contract to pay Petitioner at the rate agreed under the contract regardless of what rate the broker sold the potatoes for upon delivery and also suggests that the parties were treating the potatoes as if title to the potatoes passed to the Respondent broker when the broker picked up the potatoes in Petitioner's field.
The date selected by the Respondent broker for pick up of the last two loads of potatoes was unusual. The broker picked up the last two loads of potatoes on Thursday, June 17, 1993. However, the Respondent broker's standard practice was not to pick up potatoes in St. Johns County, Florida on Thursdays because of the increased risk that potatoes loaded in the fields on Thursdays would reach the ultimate retail destination assigned by this particular broker at a time when processing plants in that locale would be closed for the weekend, thereby increasing the time the loaded potatoes would remain enclosed in the transport truck and accordingly increasing the risk of spoilage.
The method of transport selected by the Respondent broker for the potatoes loaded June 17, 1993 was also unusual and destined to increase the risk of spoilage. On that occasion, the broker sent "pigs" a/k/a "piggy-back rail cars" rather than conventional trucks or refrigerated trucks.
On June 17, 1993, Petitioner also loaded two trucks for H.C. Schmieding Produce, a broker not involved in this litigation. Petitioner's potatoes loaded upon Schmieding's trucks and the potatoes loaded on Respondent broker's trucks came from the same fields and "lot" of potatoes. One of Schmieding's trucks was loaded before Respondent broker's trucks, and one of Schmieding's trucks was loaded after Respondent broker's trucks. The potatoes purchased and loaded by Schmieding on June 17, 1993 were received in good
condition in Illinois and Tennessee, respectively, and Petitioner received full payment for them. Respondent broker's loads were ultimately refused in Massachusetts.
June 21-23, 1993 were all weekdays, and presumably "work days." The best date that can be reconstructed for the date that the potatoes in question were dumped by the Respondent broker is June 22 or 23, 1993, so their "arrival" in Massachusetts must have preceded dumping.
By undated letter postmarked June 28, 1994, the Respondent broker notified Petitioner of the rejection of the two loads of potatoes picked up by the Respondent broker from Petitioner on June 17, 1993. The letter also informed Petitioner of the broker's intent to assess charges for inspection and dumping of the potatoes and of the broker's intention not to pay Petitioner for the potatoes. This letter was the first notice received by Petitioner advising of the rejection of the two loads of potatoes in question, 1/ and contained a copy of a U. S. Department of Agriculture Inspection Report dated June 22, 1993 showing 60-100 percent soft rot. 2/
Petitioner's principal had left his home and place of business on June 24, 1993, a date clearly 24 to 48 hours after dumping had already occurred and probably much longer after arrival of the potatoes in Massachusetts. Petitioner did not learn of the Respondent broker's June 28, 1993 letter or the Inspection until July 4, 1993. By July 4, 1993 Petitioner had terminated all harvest operations and was not able to tender two replacement loads of potatoes to the broker.
As of the time that Petitioner received the June 28, 1994 notice that the two loads in question were being rejected, the Respondent broker had already disposed of the potatoes. Consequently, Petitioner had no opportunity to avail itself of any alternative or other option regarding disposition of the potatoes. Prompt notification of the broker's rejection of the two loads of potatoes might have allowed Petitioner to negate its losses by marketing the potatoes at a reduced price to other processing plants in Massachusetts or to tender two replacement loads of potatoes to the Respondent broker.
After all deductions and calculations, the rejected two loads of potatoes resulted in damages of $10,135.47 to Petitioner producer.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this cause, pursuant to Section 120.57(1), F.S.
Respondent relied upon the requirement in the contract that "potatoes shipped are for potato chipping and must cook on arrival to be subject to this agreement," to modify the usual understanding as to the meaning of "F.O.B.," and contended that the plain and clear intent of the contract language was that the broker was not required to pay the Petitioner producer for potatoes which were not suitable for the intended use (potato chipping) upon delivery of the potatoes in Massachusetts.
Petitioner producer contended that Petitioner had complied with the terms of the contract by tendering at the producer's farm in St. John's County, Florida, all potatoes called for under the terms of the contract and that the Respondent broker had breached the contract by refusing to pay for two truck loads of good potatoes upon which the broker accepted delivery at the producer's farm but which the broker later claimed to be defective due to soft rot.
Petitioner bears the duty to go forward in this type of proceeding and has the burden of proving, by a preponderance of the evidence, that the Respondent defaulted on its agreement and is indebted to the Petitioner in a specific amount. Petitioner has met that burden in this case. Any liability of the alleged surety is dependent upon proof establishing the liability of its principal (Respondent broker), the identity of the surety, and the existence and amount of a bonding agreement between the surety and its principal. That burden has not been met.
Titan Indemnity Company received notice of the filing of Petitioner's Complaint and failed to request a formal hearing pursuant to Section 120.57(1)
F.S. However, no evidence or admission was presented in formal hearing which would permit a finding that Titan Indemnity Company was surety at any material time for Respondent A.F. Business Brokerage, operating under any name. That is not to say that Titan Indemnity is not surety for Respondent A.F. Business Brokerage, operating under any name. It only means that this case in the administrative forum cannot resolve the issue of Titan Indeminity's obligation, if any, to the Respondent broker because insufficient evidence has been presented. It may be necessary for that issue to be litigated in Circuit Court between A.F. Business Brokerage and Titan Indemnity pursuant to the terms of the surety contract/bond, if any.
The contract between Petitioner and Respondent broker was upon terms established therein, i.e., "terms recognized and approved by the U.S. Secretary of Agriculture under the Perishable Agricultural Commodities Act." Upon those terms, Petitioner should prevail.
The broker's failure to give the producer notice of rejection within a "reasonable" period of time is deemed "acceptance". See, Perishable Agricultural Commodities Act, 1930, cited at 7 CFR Part 46, Section 46.2 (dd) (3).
"Reasonable time" with respect to rail shipments of fresh fruits and vegetables is defined as "not to exceed 24 hours after notice of arrival and the car has been placed in a location where produce is made accessible for inspection; and with respect to truck shipments, not to exceed 8 hours after the receiver or a responsible representative is given notice of arrival and the produce is made accessible for inspection". See, 7 CFR Part 46, Section 46.2 (cc) (2).
The terms of the contract ("F.O.B."), meant that the "buyer assumed all risk of damage and delay in transit not caused by the seller irrespective of how the shipment was billed". See, 7 CFR Part 46 Section 46.43 (i).
Even though the contract contained other language with regard to "for potato chipping and must cook on arrival," which language modified the specific categorization of the sale within the contract as "F.O.B.," the conduct of the parties supports the classification of the sale as "F.O.B.," rather than "Delivered," i.e. the Respondent broker selected the term, "F.O.B." over the
term, "Delivered," controlled pick-up and delivery dates; method of transportation; time in transit, and initially paid "up front" for all transportation.
Assuming arguendo, but not finding or concluding, that Respondent broker had obtained a timely and valid U.S. Department of Agriculture inspection showing that the potatoes were not suitable for cooking into potato chips when they arrived in Massachusetts, the notice given to Petitioner of the retailer's rejection of the potatoes was still not timely, nor was it established that the Petitioner prevented Respondent from notifying Petitioner in a timely manner.
/3
Likewise, since the broker had unilateral control of the means of transport and selected a means of transportation (unrefrigerated "pigs") which clearly could have contributed to excessive spoilage, it is the buyer/broker who must bear the loss herein.
Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Florida Department of Agriculture enter a final order
RECOMMENDED this 19th day of July, 1994, at Tallahassee, Florida.
ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The DeSoto Building
Filed with the Clerk of the Division of Administrative Hearings this 19th day of July, 1994.
1/ Testimony and documents to the effect that someone at Respondent broker's home base telephoned Petitioner on June 21, 1993 with the same information but that that representative of Respondent broker had not been able to speak with anyone at Petitioner's place of business was not admitted in evidence upon objection as inadmissible hearsay.
2/ Petitioner's evidence herein is insufficient due to its hearsay nature to prove conclusively that an inspection showing 60-100 percent soft rot occurred, so that issue has been addressed only arguendo. (Respondents Exhibits 1-3 were not admitted in evidence over objection, but Petitioner's Exhibit 4, which also contains the Inspection Report was admitted).
3/ See notes 1 and 2, above.
The following constitute specific rulings, pursuant to S120.59(2), F.S., upon the parties' respective proposed findings of fact (PFOF).
1-2 Covered in preliminary matters.
