05-003540 Betty H. Shinn, D/B/A Shinn Groves vs. H And R Packing And Sales Company And Old Republic Surety Company Status: Closed Recommended Order on Tuesday, December 13, 2005.

Summary: Respondent citrus fruit dealer must pay grower the full contract price for citrus fruit that dealer accepted upon tender despite knowing the goods were nonconforming, where the dealer failed timely to notify the grower of a breach with respect thereto.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BETTY H. SHINN, d/b/a SHINN )

GROVES, )

)

Petitioner, )

)

vs. ) Case No. 05 - 3540

)

H AND R PACKING AND SALES )

COMPANY AND OLD REPUBLIC SURETY )

COMPANY, )

)

Respondent s . )

)

RECOMMENDED ORDER

This case came before Administrative Law Judge John G.

Van Laningham for final hearing by telephone conference on

November 9, 2005.

APPEARANCES

For Petitioner: Betty Shinn, pro se

Shinn Groves

Post Office Box 937

Lake Alfred, Florida 33850

For Resp ondent: H & R Packing & Sales Company , LLC:

Robert J. Hamilton, III, pro se

H & R Packing & Sales Co mpany , LLC

3034 North Kings Highway

Fort Pierce, Florida 34951

For Respondent Old Republic Surety Company:

No appearance

STATEMENT OF THE ISSUE

The issue in this case is whether Respondent H & R Packing

& Sales Compa ny , LLC , must pay Petitioner the full contract

price for citrus fruit that said Respondent accepted upon tender

despite know ing that the goods were nonconforming.

PRELIMINARY STATEMENT

On April 21 , 200 5 , Petitioner Betty H. Shinn, d/b/a Shinn

Grove s, file d a Complaint with the Department of Agr iculture and

Consumer Services in which she alleged that Respondent H & R

Packing & Sales Company , LLC , had failed to pay for 790 field

boxes of oranges that said Respondent had harvested from

Petitioner's grove purs uant to a contract between the parties.

Petitioner alleged that the amount due was $6,320.00 .

Respondent Old Republic Surety Company was named in the

Complaint as surety.

In a letter to the agency dated September 14, 2005,

Robert J. Hamilton, III, on be half of Respondents, denied

Petitioner's allegations and requested a hearing. Shortly

thereafter, the agency forwarded the matter to the Division of

Administrative Hearings.

At the final hearing on November 9, 2005 , Petitioner

testified on her own beha l f , and she called her son, Charles M.

Shinn, III, as a rebuttal witness. Additionally, Petitioner

offered Petitioner's Exhibits 1 through 6, which were received

in evidence. On behalf of Respondent H & R Packing & Sales

Company , LLC , appeared Robert J. H amilton, III , and Miguel E.

Rubio, who are partners in the venture . As well, t his

Respondent offered one exhibit, which was admitted into evidence

as Respondent's Exhibit 1.

Although a court reporter recorded the proceeding, none of

the parties ordered a transcript. Each side submitted proposed

findings of fact before the deadline established at hearing,

which was November 21, 2005.

Unless otherwise indicated, citations to the Florida

Statutes refer to the 2005 Florida Statutes.

FINDINGS OF FACT

1. Peti tioner Betty H. Shinn, d/b/a Shinn Groves

("Shinn") , is in the business of growing citrus fruit and hence

is a "producer" within the regulatory jurisdiction of the

Department of Agriculture and Consumer Services ("Department").

2. Respondent H & R Packing & Sales Company , LLC ("HRPS") ,

is a "citrus fruit dealer" operating within the Department's

jurisdiction.

3. On November 3, 2004, Shinn and HRPS entered into a

contract (the "Contract") whereby HRPS agreed to harvest "fresh

fruit quality" navel oranges from a particular section of

Shinn's grove, which oranges Shinn agreed to sell to HRPS for

the price of $8.00 per field box.

4. The Contract provided, in pertinent part, as follows:

The SELLER [that is, Shinn] shall take all

reasonable and normal precautions to

maintain fresh fruit quality during the life

of this agreement. Failure to exercise

close control to mites and other pests shall

constitute a violation of this agreement.

Further, the BUYER [ i.e. HRPS] may at his

option cancel this contract or renego tiate

the price to be paid and the conditions of

sale.

In addition, the parties agreed that HRPS would pick the fruit

no later than January 1, 2005, and pay for the oranges "within

45 days of the week of the harvest."

5. An agent of HRPS's named Frederi ck Gaines inspected the

crop identified to the Contract on a couple of occasions in

November and December 2004. At some point he notified Shinn

that the oranges were being damaged by rust mites. Shinn

arranged to have the crop sprayed with Thiolux (a mit icide),

which was done around December 6, 2004.

6. HRPS harvested the crop on January 3, 2005. (HRPS's

performance in this regard was nonconforming, because the

oranges were to be picked no later than January 1, 2005. By

allowing HRPS to proceed after t he deadline, however, Shinn

waived HRPS's untimely performance.)

7. At or about the time of the harvest, Mr. Gaines orally

notified Charles Shinn (who is the son —— and an agent —— of

Petitioner Betty Shinn) that the oranges had been damaged by

rust mites a nd consequently were not fresh fruit quality. Mr.

Shinn suggested that the oranges be "run through" the packing

house (where the fruit would be graded on its quality), after

which the parties could renegotiate the price, if necessary, to

adjust for any ma terial deficiencies in the quality of the crop.

This proposal was evidently acceptable to HRPS, for it proceeded

to harvest the oranges with knowledge that the crop was (or

might not be) fresh fruit quality.

8. HRPS picked 790 field boxes of oranges from Shinn's

grove pursuant to the Contract. When these oranges were graded

at the packing house, an unusually small percentage

(approximately 34%) could be "packed out," that is, packaged and

delivered for sale as fresh fruit. i The rest "graded out," i.e.

f ailed to meet the standards for sale as fresh fruit, and were

sold, at a loss, to juice processors.

9. HRPS was obligated under the Contract to pay Shinn for

the oranges on or before February 22, 2005, but HRPS let the

deadline pass without either payin g for the oranges or notifying

Shinn of a breach with respect thereto.

10. By letter dated March 17, 2005, Shinn demanded that

HRPS pay the full contact price of $6,320 for the fruit

harvested under the Contract. ii

11. H RPS responded to Shinn's demand - let ter via

correspondence dated March 24, 2005. In this letter, HRPS

acknowledged the Contract's existence but disclaimed the duty to

pay in full due to the fruit's generally poor quality. HRPS

expressed some willingness to resolve the matter amicably but

o ffered no payment. Shinn was not satisfied and initiated this

administrative proceeding .

Ultimate Factual Determinations

1 2 . HRPS harvested and hauled away the oranges identified

to the C ontract. This performance constituted acceptance of the

goods, and such acceptance was made with knowledge of a

(possible) nonconformity, namely that the oranges were not fresh

fruit quality due to rust mite damage.

13. Th e apparent nonconformity was made manifest to HRPS

shortly after the harvest, when an unusually s mall percentage of

the pertinent crop was "packed out." HRPS failed, however, to

notify Shinn of the breach within a reasonable time after

confirming the nonconformity. Consequently, HRPS is barred from

any remedy for breach.

14. HRPS's failure to pay f or the oranges at the Contract

rate constituted a breach of the Contract entitling Shinn to

recover the full price, together with pre - award interest.

15 . Accordingly, HRPS is obligated to pay Shinn the

principal amount of $6,320.00, together with statut ory interest

of $378.20 ( for the period 0 2/ 22 /0 5 - 12/31/0 5 ) . Interest will

continue to accrue on the outstanding balance of $ 6 ,3 20 . 00 in

the amount of $1. 56 per day from January 1, 200 6 , until the date

of the final order.

CONCLUSIONS OF LAW

16 . The Divi sion of Administrative Hearings has personal

and subject matter jurisdiction in this proceeding pursuant to

Sections 120.569 and 120.57(1), Florida Statutes.

17 . Chapter 601, Florida Statutes, is known as "The

Florida Citrus Code of 1949." See § 601.01, Fla. Stat . "Citrus

fruit" is defined in Section 601.03(7), Florida Statutes, as

all varieties and regulated hybrids of

citrus fruit and also means processed citrus

products containing 20 percent or more

citrus fruit or citrus fruit juice, but, for

the pur poses of this chapter, shall not mean

limes, lemons, marmalade, jellies,

preserves, candies, or citrus hybrids for

which no specific standards have been

established by the Department of Citrus.

18 . The term "citrus fruit dealer" is defined in

Section 601 .03(8), Florida Statutes, to mean:

any consignor, commission merchant,

consignment shipper, cash buyer, broker,

association, cooperative association,

express or gift fruit shipper, or person who

in any manner makes or attempts to make

money or other thing of value on citrus

fruit in any manner whatsoever, other than

of growing or producing citrus fruit, but

the term shall not include retail

establishments whose sales are direct to

consumers and not for resale or persons or

firms trading solely in citrus fut ures

contracts on a regulated commodity exchange.

HRPS is a citrus fruit dealer under this definition.

19 . Citrus fruit dealers are required to be licensed by

the Department in order to transact business in Florida. See

§ 601.55(1), Fla. Stat . As a con dition of obtaining a license,

such dealers are required to provide a cash bond or a

certificate of deposit or a surety bond in an amount to be

determined by the Department "for the use and benefit of every

producer and of every citrus fruit dealer with wh om the dealer

deals in the purchase, handling, sale, and accounting of

purchases and sales of citrus fruit." § 601.61(3), Fla. Stat .

20 . Section 601.65, Florida Statutes, provides that "[i]f

any licensed citrus fruit dealer violates any provision of thi s

chapter, such dealer shall be liable to the person allegedly

injured thereby for the full amount of damages sustained in

consequence of such violation." This liability may be

adjudicated in an administrative action brought before the

Department or in a "judicial suit at law in a court of competent

jurisdiction." Id.

2 1 . Section 601.64(4), Florida Statutes, defines as an

"unlawful act" by a citrus fruit dealer the failure to pay

promptly and fully, as promised, for any citrus fruit which is

the subject of a transaction relating to the purchase and sale

of such goods.

22 . Any person may file a complaint with the Department

alleging a violation of the provisions of Chapter 601, Florida

Statutes, by a citrus fruit dealer. See § 601.66(1), Fla. Stat .

Th e Department is charged with the responsibilities of

determining whether the allegations of the complaint have been

established and adjudicating the amount of indebtedness or

damages owed by the citrus fruit dealer. See § 601.66(5), Fla.

Stat . The Depart ment shall "fix a reasonable time within which

said indebtedness shall be paid by the [citrus fruit] dealer,"

and, if the dealer does not pay within the time specified by the

Department, the Department shall obtain payment of the damages

from the dealer's surety company, up to the amount of the bond.

See § 601.66(5) and (6), Fla. Stat .

2 3. The Contract between Shinn and HRPS was for the sale

of goods. Thus , in addition to being subject to the provisions

of Chapter 601, Florida Statutes, the transaction a t issue is

governed by Florida's Uniform Commercial Code ("UCC"). See

§ 672.102, Fla. Stat . (describing scope of UCC's Article II on

"sales"); § 672.105(1), Fla. Stat . (defining "goods").

2 4. Shinn bore the burden of proving the allegations in

her Com plaint against HRPS by a preponderance of the evidence.

See Florida Dept . of Transp . v. J.W.C. Co., Inc. , 396 So. 2d

778, 788 (Fla. 1st DCA 1981); Florida Dept . of Health and

Rehabilitative Services v. Career Service Commission , 289 So. 2d

412, 415 (Fla. 4th DCA 1974); § 120.57(1)(j), Fla. Stat . HRPS ,

however, had the burden to establish any breach with respect to

goods accepted. See § 672.607(4), Fla. Stat .

25. Section 672.60 6 , Florida Statutes, defines

"acceptance" as f oll ows:

( 1) Acceptance of goo ds occurs when the

buyer:

( a) After a reasonable opportunity to

inspect the goods signifies to the seller

that the goods are conforming or that the

buyer will take or retain them in spite of

their nonconformity ; or

( b) Fails to make an effective reject ion

(s. 672.602(1)), but such acceptance does

not occur until the buyer has had a

reasonable opportunity to inspect them; or

( c) Does any act inconsistent with the

seller's ownership; but if such act is

wrongful as against the seller it is an

acceptance only if ratified by her or him.

( 2) Acceptance of a part of any commercial

unit is acceptance of that entire unit.

(Emphasis added.) As found above, HRPS in fact accepted the

oranges that Shinn tendered pursuant to the Contract , despite

their nonconfor mity .

26. Section 672.607, Florida Statutes, explains the

consequences of acceptance, as follows:

(1) The buyer must pay at the contract rate

for any goods accepted.

(2) Acceptance of goods by the buyer

precludes rejection of the goods accepted

and if made with knowledge of a

nonconformity cannot be revoked because of

it unless the acceptance was on the

reasonable assumption that the nonconformity

would be seasonably cured but acceptance

does not of itself impair any other remedy

provided by this chapte r for nonconformity.

(Emphasis added.) When HRPS accepted the oranges, it likely

assumed, reasonably, that any nonconformity would be seasonably

cured through an adjustment of the price. Therefore, HRPS could

have revoked its acceptance of the goods wi thout breaching the

Contract —— but it failed timely to do so. See § 672.608, Fla.

Stat. (describing manner of proper revocation).

27. Having accepted the oranges despite their

nonconformity, the burden was on HRPS to establish breach with

respect to the goods accepted . But before seek ing relief for

breach, HRPS first needed to notify Shinn about the problem, as

provided in Section 672.607, Florida Statutes, which states in

relevant part:

(3) Where a tender has been accepted:

(a) The buyer must within a reasonable time

after he or she discovers or should have

discovered any breach notify the seller of

breach or be barred from any remedy [.]

As it happened, HRPS failed , in fact, tim ely to notify Shinn of

the breach after discovery thereof , with the resu lt that HRPS is

barred, in law, from any remedy. iii

28. Shinn carried its burden of proving that HRPS failed

to pay for the citrus fruit when the price became due.

Therefore, Shinn is entitled to recover the price for the goods.

See § 627.709, Fla. Stat.

29 . Shinn is also entitled to recover simple interest on

the outstanding balance at the statutory rate of seven percent

per annum until December 31, 200 5 , and at the rate of nine

percent per year beginning January 1, 200 6 . See § 687.01, Fla.

Stat. ; § 55 .03, Fla. Stat. ;

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Services Automobile Ass'n v. Smith , 527 So. 2d 281, 283 - 84 (Fla.

1st DCA 1988)(improper to award compound statutory interest).

RECOMMENDATION

Based on the foregoing Findings of Fa ct and Conclusions of

Law, it is RECOMMENDED that the Department enter a final order

awarding Shinn the sum of $ 6,320.00 , together with pre - award

interest in the amount of $ 378.20 (through December 31 , 200 5 ),

plus additional interest from January 1 200 6 , u ntil the date of

the final order, which will accrue in the amount of $ 1.56 per

day.

DONE AND ENTERED this 13th day of December , 200 5 , in

Tallahassee, Leon County, Florida.

S

JOHN G. VAN LANINGHAM

Administrative La w Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 13th day of December, 2005.

ENDNOTES

i / Fresh fruit quality oranges purchased at $8.00 per field box

should yield a "pack out percentage" of ar ound 80 - 85%.

ii / The price was arrived at by multiplying the number of field

boxes hauled from the grove (790) times the price per box

($8. 00) as agreed in the Contract .

iii / The undersigned believes that the "reasonable time" for

notifying Shinn of a bre ach extended no farther than February

22, 2005, which was the date by which payment under the Contract

was to have been made.

COPIES FURNISHED :

Betty Shinn

Shinn Groves

Post Office Box 937

Lake Alfred, Florida 33850

R obert J. Hamilton, II I

H & R Packing & Sales Company , LLC

3034 North Kings Highway

Fort Pierce, Florida 3 4951

Kim Hansen

Old Republic Surety Company

Post Office Box 1635

Milwaukee, Wisconsin 53201

Brenda D. Hyatt, Bureau Chief

Department of Agriculture and

Consumer Services

Bureau of License and Bond

407 South Calhoun Street, Mayo Building

Talla hassee, Florida 32399 - 0800

Honorable Charles H. Bronson

Commissioner of Agriculture

Department of Agriculture and

Consumer Services

The Capitol, Plaza Level 10

Tallahassee, Florida 32399 - 0810

Richard Ditschler, General Counsel

Department of Agri culture and

Consumer Services

The Capitol, Plaza Level 10

Tallahassee, Florida 32399 - 0810

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 except ions

to this recommended order should be filed with the agency that

will issue the final order in this case.