06-002508 M.E. Stephens And Sons Fruit Company, Inc. vs. George Mason Citrus, Inc. And Western Surety Company, As Surety Status: Closed Recommended Order on Wednesday, August 22, 2007.

Summary: An ambiguous written agreement drafted by Petitioner must be construed against the drafter as a production contract, and the dealer is not permitted to withhold the cover cost from the amount due the seller.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

M. E. STEPHENS AND SONS FRUIT )

COMPANY, INC., )

)

Petitioner, )

)

vs. ) Case No. 06-2508

)

GEORGE MASON CITRUS, INC., AND )

WESTERN SURETY COMPANY, AS )

SURETY, )

)

Respondents. )

)

RECOMMENDED ORDER

The Administrative Law Judge (ALJ) assigned to this case by

the Division of Administrative Hearings (DOAH) conducted the

final hearing on April 10, 2007, in Sebring, Florida.

APPEARANCES

For Petitioner: Thomas V. Infantino, Esquire

Infantino & Berman

180 South Knowles Avenue, Suite 7

Winter Park, Florida 32789

For Respondent George Mason Citrus, Inc.:

Bert J. Harris, III, Esquire

Swaine, Harris, Sheehan & McClure, P.A.

401 Dal Hall Boulevard

Lake Placid, Florida 33852

For Respondent Western Surety Company:

(No appearance)

STATEMENT OF THE ISSUES

The issues presented are whether Respondent, George Mason

Citrus, Inc. (Mason), owes Petitioner $10,000 for citrus fruit

that Mason purchased from Petitioner and, if so, whether the

surety is liable for any deficiency in payment from Mason.

PRELIMINARY STATEMENT

On March 30, 2006, Petitioner filed a Dealer Complaint with

the Department of Agriculture and Consumer Services

(Department). On June 1, 2006, Petitioner filed an Amended

Dealer Complaint with the Department. By letter dated July 13,

2006, the Department referred the matter to DOAH to conduct an

administrative hearing.

After the Department referred the matter to DOAH,

Petitioner filed a Second Amended Dealer Complaint (the

Complaint). The issues presented in this case are framed in the

Complaint filed by Petitioner; the Answer, Amended Answer, and

Affirmative Defenses filed by Mason; and cross motions for

attorney's fees filed by Petitioner and Mason. The parties

agree that DOAH has no authority to award attorney's fees.

Respondent, Western Surety Company (Western), did not

appear at the hearing. Petitioner and Mason submitted nine

joint exhibits for admission into evidence. Petitioner

presented the testimony of one witness and either identified or

submitted three exhibits. Mason submitted 36 exhibits. The

identity of the witness and exhibits and any attendant rulings

are set forth in the Transcript of the hearing filed with DOAH

on June 19, 2007.

Petitioner timely filed its Proposed Recommended Order

(PRO) on July 10, 2007. Mason timely filed its PRO on July 13,

2007. Western did not file a PRO.

FINDINGS OF FACT

1. Petitioner is a Florida corporation licensed by the

Department as a “citrus fruit dealer,” within the meaning of

Subsection 601.03(8), Florida Statutes (2005) (dealer). 1 The

business address for Petitioner is 1103 Southeast Lakeview

Drive, Sebring, Florida 33870.

2. Mason is a Florida corporation licensed by the

Department as a citrus fruit dealer. The business address for

Mason is 140 Holmes Avenue, Lake Placid, Florida 33852.

3. Western is the surety for Mason pursuant to bond number

42292005 issued in the amount of $100,000 (the bond). The term

of the bond is August 1, 2004, through July 31, 2005.

4. Petitioner conducts business in Highlands County,

Florida, as a dealer and as a “broker” defined in Subsection

601.03(3). In relevant part, Petitioner purchases white

grapefruit (grapefruit) for resale to others, including Mason.

5. Mason conducts business in Highlands County as either

an “agent,” “broker,” or “handler” defined in Subsections

601.03(2), (3), and (23). On January 31, 2003, Mason contracted

with Petitioner to purchase grapefruit from Petitioner pursuant

to Fruit Contract number 03-307 (the contract).

6. Mason drafted the contract. The terms of the contract

require Petitioner to sell grapefruit to Mason for the 2003,

2004, and 2005 “crop years.” The 2003 crop year began in the

fall of 2002 and ended at the conclusion of the spring harvest

in 2003. The 2004 and 2005 crop years began in the fall of 2003

and 2004 and ended in the spring of 2004 and 2005, respectively.

Only the 2005 crop year is at issue in this proceeding.

7. The contract required Petitioner to deliver grapefruit

to a person designated by Mason. Mason designated Peace River

Citrus Products, Inc. (Peace River), in Arcadia, Florida, for

delivery of the grapefruit at issue.

8. Mason was required by the terms of a Participation

Agreement with Peace River to deliver 30,000 boxes of grapefruit

to Peace River during the 2005 crop year. In an effort to

satisfy its obligation to Peace River, Mason entered into the

contract with Petitioner for an amount of grapefruit described

in the contract as an “Approximate Number of Boxes” that ranged

between 12,000 and 14,000.

9. Petitioner delivered only 2,128 boxes of grapefruit to

Peace River. The production of grapefruit was significantly

decreased by three hurricanes that impacted the area during the

2005 crop year.

10. The parties agree that Mason owed Petitioner

$19,070.03 for the delivered boxes of grapefruit. The amount

due included a portion of the rise in value over the base

purchase price in the contract caused by increases due to market

conditions and participation pay out after the parties executed

the contract (the rise). 2

11. On or about October 26, 2005, Mason mailed Petitioner

a check for $9,070.03. The transmittal letter for the check

explained the difference between the payment of $9,070.03 and

the amount due of $19,070.03.

12. Mason deducted $10,000 from the $19,070.03 due

Petitioner, in part, to cover the cost of grapefruit Mason

purchased from other dealers or growers to make up the

deficiency in grapefruit delivered by Petitioner (cover). The

$10,000 sum also includes interest Mason claims for the cost of

cover and Mason's claim for lost profits.

13. Petitioner claims that Mason is not entitled to deduct

lost profits and interest from the amount due Petitioner. If

Mason were entitled to deduct interest, Petitioner alleges that

Mason calculated the interest incorrectly.

14. The larger issue between the parties is whether Mason

is entitled to deduct cover charges from the amount due

Petitioner. If Mason were not entitled to cover the deficiency

in delivered boxes of grapefruit, Mason would not be entitled to

interest on the cost of cover and lost profits attributable to

the deficiency.

15. The parties agree that resolution of the issue of

whether Mason is entitled to cover the deficiency in delivered

boxes of grapefruit turns on a determination of whether the

contract was a box contract or a production contract. A box

contract generally requires a selling dealer such as Petitioner

to deliver a specific number of boxes, regardless of the source

of grapefruit, and industry practice permits the purchasing

dealer to cover any deficiency. A production contract generally

requires the selling dealer to deliver an amount of grapefruit

produced by a specific source, and industry practice does not

permit the purchasing dealer to cover any deficiency.

16. The contract is an ambiguous written agreement. The

contract expressly provides that it is a "Fruit Purchase

Contract" and a "delivered in" contract but contains no

provision that it is either a box or production contract. The

contract is silent with respect to the right to cover.

17. Relevant terms in the contract evidence both a box

contract and a production contract. Like the typical box

contract, the contract between Mason and Petitioner prescribes a

number of boxes, specifically no less than 12,000, that are to

be delivered pursuant to the contract. However, the typical box

contract does not identify the number of boxes to be delivered

as "Approximate No. of Boxes" that ranges between 12,000 and

14,000 boxes.

18. Unlike a production contract, the contract does not

identify a specific grove as the source of the required

grapefruit. Best practice in the industry calls for a

production contract to designate the grove by name as well as

the number of acres and blocks. However, industry practice does

not require a production contract to identify a specific grove

as the source of grapefruit. In practice, Mason treated another

contract that Mason drafted with a party other than Petitioner

as a production contract even though the contract did not

identify a specific grove as the source of grapefruit.

19. The absence of a force majure clause in the contract

may evidence either type of contract. 3 A box contract typically

requires the selling dealer to deliver the agreed boxes of

grapefruit regardless of weather events, unless stated otherwise

in the contract. However, the absence of such a clause may also

be consistent with a production contract because "acts of God"

are inherent in a production contract. Such acts, including

hurricanes, necessarily limit grapefruit production, and a

production contract obligates the selling dealer to deliver only

the amount of grapefruit produced.

20. The contract between Petitioner and Mason did not

contain a penalty provision for failure to deliver the

prescribed boxes of grapefruit (box penalty). The absence of a

box penalty in the contract evidences a production contract.

21. The contract identifies Petitioner as the "Grower." A

grower typically enters into a production contract.

22. A box contract does not limit the source of grapefruit

to be delivered, and the selling dealer in a box contract may

obtain grapefruit from anywhere in the state. The contract

between Petitioner and Mason limits the source of grapefruit to

grapefruit grown in Highlands County, Florida.

23. Mason knew that Petitioner sold only grapefruit from

groves in Highlands County, Florida, identified in the record as

the Clagget Taylor groves. During the 2003 and 2004 crop years,

Petitioner sold only grapefruit from the Clagget Taylor groves.

Mason received trip tickets and other documentation related to

the delivery of no less than 24,000 boxes of grapefruit, all

from the Clagget Taylor groves.

24. The boxes of grapefruit delivered during the 2005 crop

year came only from the Clagget Taylor groves. Mason received

documentation showing the grapefruit came from the Clagget

Taylor groves.

25. Ambiguous written agreements are required by judicial

decisions discussed in the Conclusions of Law to be construed

against the person who drafted the agreement. Mason drafted an

ambiguous agreement with Petitioner. The agreement must be

construed against Mason as a production contract.

26. Mason owes Petitioner $10,000 for the delivered

grapefruit during the 2005 crop year. The terms of the bond

make Western liable for any deficiency in payment from Mason.

CONCLUSIONS OF LAW

27. DOAH has jurisdiction over the parties to and the

subject matter of this proceeding. §§ 120.569 and 120.57(1).

DOAH provided the parties with adequate notice of the hearing.

Western did not appear at the hearing.

28. The burden of proof is on Petitioner. Florida

Department of Transportation v. J.W.C. Company, Inc. , 396 So. 2d

778 (Fla. 2d DCA 1981). Petitioner must show by a preponderance

of the evidence that Petitioner is entitled to the remedy

claimed in the Complaint.

29. Petitioner satisfied its burden of proof. Petitioner

showed that the contract Mason drafted is an ambiguous written

agreement that should be construed against Mason as a production

contract and that Petitioner satisfied the requirements of the

production contract.

30. The contract between Petitioner and Mason is an

ambiguous written agreement drawn by Mason. An ambiguous

written agreement must be construed against the party that drew

the contractavelers Insurance Company v. Bartoszewicz , 404

So. 2d 1053, 1054 (Fla. 1981). See also Terminix International

Company, LP, v. Palmer Ranch Limited Partnership , 432 F. 3d

1327, 1329 (11th Cir. 2005); City of Homestead v. Johnson ,

760 So. 2d 80, 84 (Fla. 2000).

31. The parties agree that Florida's Uniform Commercial

Code applies in this proceeding. In relevant part, Subsection

671.205(4), Florida Statutes (2003 through 2005), provides that

the express terms of an agreement should be construed in a

manner that is consistent with a course of dealing whenever such

a construction is reasonable.

32. It is reasonable to construe the terms of the contract

at issue in a manner that is consistent with the course of

dealing between Petitioner and Mason over the three-year term of

the contract. During the three crop years covered by the term

of the contract, Petitioner delivered grapefruit to Mason solely

from the Clagget Taylor groves. That course of dealing may be

fairly regarded as a common basis of understanding for

interpreting the expressions of Petitioner and Mason in their

contract. See § 671.205(1) (defining a "course of dealing" as

previous conduct between the parties which is fairly to be

regarded as establishing a common basis of understanding for

their expressions).

33. A course of dealing between parties also supplements

or qualifies the terms of an agreement. § 671.205(3). The

course of dealing over three crop years, in which Petitioner

delivered grapefruit solely from Clagget Taylor groves located

in Highlands County, Florida, supplemented and qualified the

terms of the contract.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that the Department enter a final order

directing Mason to pay $10,000 to Petitioner, and, in accordance

with Subsections 601.61 and 601.65, requiring Western to pay

over to the Department any deficiency in payment by Mason.

DONE AND ENTERED this 22nd day of August, 2007, in

Tallahassee, Leon County, Florida.

S

DANIEL MANRY

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 22nd day of August, 2007.

ENDNOTES

1/ All subsection, section, and chapter references are to

Florida Statutes (2006), unless otherwise stated.

2/ The amount of rise to which Mason was entitled is unclear

from the terms of the contract. One part of the contract

provides that the “Dealer and Buyer will split” the first nickel

in rise based on the Peace River participation payoff. Mason's

Exhibit 2 at 1. Another part of the contract provides that the,

"Grower gets all the rise less the first $.05 based on Peace

River Citrus Products, Inc. final . . . payout." Mason's

Exhibit 2 at 2. The pre-hearing stipulation states that Mason

was entitled to keep the first nickel of the rise. See Joint

Exhibit 9, para. 4.19 at 9.

3/ The contract includes a unilateral force majure clause that

entitles only Mason to cancel the contract.

COPIES FURNISHED :

Christopher E. Green, Chief

Bureau of License and Bond

Division of Marketing

Department of Agriculture and

Consumer Services

407 South Calhoun Street, MS 38

Tallahassee, Florida 32399-0800

Bert J. Harris, III, Esquire

Swaine, Harris, Sheehan & McClure, P.A.

401 Dal Hall Boulevard

Lake Placid, Florida 33852

Robert Sobraske

Western Surety Company

101 South Phillips Avenue

Sioux Falls, South Dakota 57104

Thomas V. Infantino, Esquire

Infantino & Berman

180 South Knowles Avenue, Suite 7

Winter Park, Florida 32789

Richard Ditschler, General Counsel

Department of Agriculture and

Consumer Services

407 South Calhoun Street, Suite 520

Tallahassee, 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

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 should be filed with the agency that

will issue the Final Order in this case.