08-005435 Vero Beach Land Company, Llc vs. Img Citrus, Inc., And Westchester Fire Insurance Company, As Surety Status: Closed Recommended Order on Wednesday, March 4, 2009.

Summary: The seller is entitled to recover the contract amount for his fruit as the buyer failed to establish that the fruit was damaged or otherwise unsuitable. The preponderance of the credible evidence supports the seller`s claim.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

VERO BEACH LAND COMPANY, LLC, )

)

Petitioner, )

)

vs. ) Case No. 08-5435

)

IMG CITRUS, INC., AND )

WESTCHESTER FIRE INSURANCE )

COMPANY, AS SURETY, )

)

Respondents. )

_________________________________)

RECOMMENDED ORDER

Pursuant to notice, a hearing was held in this case on

January 26, 2009, in Vero Beach, Florida, before J. D. Parrish,

a designated Administrative Law Judge of the Division of

Administrative Hearings.

APPEARANCES

For Petitioner: Larmarcus Hornbuckle, Owner

Rebecca Hornbuckle, Owner

Vero Beach Land Company, LLC

6160 First Street Southwest

Vero Beach, Florida 32968

For Respondent: Melanie Sallin Ressler, COO

IMG Citrus, Inc.

2600 45th Street

Vero Beach, Florida 32967

Michel Sallin, President

IMG Citrus, Inc.

2600 45th Street

Vero Beach, Florida 32967

For Respondent: Westchester Fire Insurance Company

No Appearance

STATEMENT OF THE ISSUE

Whether Respondent, IMG Citrus, Inc. (Respondent), owes

Petitioner, Vero Beach Land Company, LLC, (Petitioner) the sum

of $63,318.50 for citrus that was purchased but not harvested.

PRELIMINARY STATEMENT

On or about July 14, 2008, Petitioner filed a Complaint

Form with the Florida Department of Agriculture and Consumer

Services, Division of Fruit and Vegetables (Department) that

alleged Respondent had failed to comply with a written contract

resulting in damages to Petitioner in the amount of $63,318.50.

The citrus described in the contract pertained to a claim for

the season beginning December 2007 and ending April 2008.

According to the Complaint and the Amended Complaint later

filed, Respondent owed for fresh fruit that was to be harvested

and marketed by Respondent in accordance with a variety and

volume depicted on the purchase contract. Westchester Fire

Insurance Company was identified in the Complaint as the surety

for Respondent.

Thereafter, Respondent filed an answer to Petitioner’s

claim and maintained that the fruit was not merchantable for the

purpose of fresh fruit marketing due to the “presence of severe

rust mite damage.” Respondent denied it was indebted to

Petitioner for the fruit and claimed it had attempted to pack

and market the fruit but ceased harvesting when it determined

the fruit was unsuitable for the fresh market. The Department

determined that the Amended Complaint was timely filed and that

Respondent’s answer denying the claim was also timely filed.

Consequently, the Department referred the matter to the Division

of Administrative Hearings to conduct formal proceedings in

accordance with Section 601.66, Florida Statutes (2008).

Notice of the hearing was provided to all parties of

record. At the hearing, David Broadaway, Ralph Viamontes, Brian

Randolph, Melanie Sallin Ressler, and Larmarcus Hornbuckle

testified. Petitioner’s exhibit book, marked for identification

as Petitioner’s Composite 1, was received in evidence.

Respondent’s exhibits, marked for identification as Respondent’s

Composite 1, were also admitted into evidence.

At the close of the evidentiary portion of the hearing, the

undersigned announced on the record that proposed recommended

orders had to be filed within 10 days of the hearing or within

10 days of the filing of the transcript. The parties were

uncertain at that time as to whether a transcript would be

ordered. A transcript was not filed. Both parties timely filed

Proposed Recommended Orders that have been fully considered in

the preparation of this Recommended Order.

FINDINGS OF FACT

1. At all times material to the instant case, Petitioner

and Respondent were involved in the growing and marketing of

citrus fruit in the State of Florida. For purposes of this

Order, Petitioner is also described as "the seller"; Respondent

is described as "the buyer."

2. On October 26, 2007, Respondent agreed to purchase

fruit from Petitioner. The terms of their agreement were

reduced to writing. The “Fresh Fruit Purchase Agreement”

provided that Respondent would purchase from Petitioner all of

the citrus fruits of the varieties of merchantable quality as

delineated in the contract.

3. More specifically, Respondent was entitled to purchase

the following described citrus from Petitioner:

Block V a r i e t y E s t P r i c e U n i t o f R i s e M o v e m e n t

Name Field Measure Date

Boxes

Pepper Red 1 6 , 0 0 0 $ 4 . 5 0 F B ½ R i s e March

Grove Grapefruit Floor to 15th,

Grower 2008

Pepper White 2 0 , 0 0 0 $ 2 . 0 0 F B A l l March

Grove Grapefruit Floor Rise to 15th,

G r o w e r 2 0 0 8

Pepper N a v e l s 2 , 5 0 0 $ 5 . 0 0 F B A l l January

Grove Floor Rise to 1, 2008

Grower

4. The contract recognized that “only that fruit produced

as the result of normal seasonal bloom” and not late maturing or

out of season bloom would be included. Additionally, all of the

fruit was to be for fresh shipment. Citrus intended for the

fresh market must be visually appealing as well as having other

attributes associated with the fresh fruit market.

Discolorations or damage to the fruit makes it unsuitable for

the fresh fruit market.

5. In anticipation of the crop the buyer expected to

harvest, Respondent advanced to Petitioner the sum of

$34,500.00.

6. Additional payments were to be made to Petitioner as

described in paragraph 2 of the contract.

7. Critical to this matter, however, were the terms of the

contract set forth in paragraph 3. That paragraph provided:

Merchantability of Fruit: Seller represents

to Buyer that all fruit sold under this

Agreement shall be sound and merchantable,

in conformance with industry standards, and

fit for their intended purpose of fresh

packing and marketing. Grower shall keep

said fruit sprayed sufficiently to keep the

fruit bright and free from rust mite,

disease and insect damage and shall not

fertilize or cultivate the grove upon which

the fruit is grown, during the term of this

Agreement, in anyway that will deteriorate

the quality of the fruit. In the event such

fruit is rendered not merchantable by virtue

of damage from cultivation, fertilization,

re-greening, cold, hail, fire, windstorm, or

other hazard, the Buyer shall have the right

to terminate this Agreement and the Seller

shall refund to the Buyer the advance

payment this day made, or that portion

thereof not applied in the payment for fruit

picked prior to termination. The buyer

shall have four weeks from the occurrence of

such cold, hail, fire, windstorm or other

hazard within which to notify Seller that

the fruit has been rendered non merchantable

and of the termination of this agreement.

Seller shall reimburse the Buyer for all

deposits and advances made on unpicked fruit

within thirty (30) days of notification by

Buyer.

8. Paragraph 6 of the parties’ Fresh Fruit Purchase

Agreement provided:

Default: Should the Buyer, without lawful

excuse, fail or refuse to pick and remove

the fruit subject to this Agreement within

the time specified or any extension thereof,

the Seller hereby accepts and agrees to

retain the deposit this day made less

portion thereof applied and deducted as

aforesaid, as his liquidated damages for

such failure without any other claim for

damage against the Buyer.

In the event of any sale or attempted sale

of the crop to a third party or other

unexcused failure to deliver, Buyer shall be

entitled to avail itself of all available

legal and equitable remedied [sic] including

injunctive relief.

If either party fails to materially comply

with the provisions of the agreement, the

other party must give written notice of non-

compliance, stating the nature of the

violation or non-compliance and giving the

other party thirty (30) days to bring

themselves into compliance. If a

disagreement exists regarding the

interpretation of this Agreement, the

parties agree to discuss the issues and

negotiate in good faith to resolve the

dispute. No waiver of any breach, right or

remedy, shall constitute a continuing

waiver, nor shall it be construed as a

waiver of any other breach, right or remedy.

9. Paragraph 7 of the contract provided, in pertinent

part, that the agreement could be “supplemented or modified only

by written agreement between the parties.” The parties did not

provide any written supplements or modifications to their

agreement.

10. Petitioner wanted to have his fruit removed in a

timely manner as he did not want the fruit left to potentially

interfere with the next year's crop. It was Petitioner's desire

to have the fruit picked as early and as quickly as possible.

Nevertheless, the contract provided for a pick or "movement

date." With regard to the navel oranges, the movement date was

January 1, 2008. The movement date for the grapefruit was

March 15, 2008. Presumably, these dates were negotiated and

agreed to by the parties. Had Petitioner wanted earlier

movement dates, that was within a contractual option available

at the time of contract negotiations.

11. The "Pepper Grove" that is described in the parties'

agreement is a 120 acre grove sectioned into four blocks. The

white grapefruit are located on two interior blocks with the red

grapefruit on the two outer blocks. The navels were located on

a portion of one of the outer blocks adjacent to the roadway.

All of the blocks border 122nd Avenue. Presumably, as the four

blocks adjoin one another it would be fairly easy to move from

one block to the next to complete picking the crop.

12. The contract specified that Respondent would purchase

2,500 boxes of navels. Respondent picked 2,928 boxes of navels

from Petitioner's grove. This fruit was harvested between

December 6, 2007 and January 10, 2008. Respondent did not meet

the "movement date" specified in the contract and Petitioner

apparently did not complain, in writing, regarding this

technical violation. Moreover, the buyer did not allege that

the navels were not acceptable quality or merchantable. This

fruit was in the same block as the grapefruit. The contract

price for the navels was $5.00 with 100 percent of the rise to

go to the seller.

13. On or about December 19, 2007, Petitioner inquired as

to whether Respondent wanted to be released from the contract.

This request was not reduced to writing and Respondent did not

accept the verbal offer.

14. On or about December 22, 2007, Respondent started

harvesting the Pepper Grove grapefruit. In total Respondent

harvested 4,266 boxes of the white grapefruit.

15. Respondent harvested 5,400 boxes of red grapefruit

from the Pepper Grove. In total, Petitioner's Pepper Grove

produced 13,077 boxes (out of the contract volume of 16,000) of

red grapefruit.

16. In total, Petitioner's Pepper Grove produced 19,289

boxes (out of the contract volume of 20,000) of white

grapefruit.

17. Based upon the volumes produced by the Pepper Grove

and the contract prices with the rise going to Petitioner for

the navels, Respondent owed Petitioner $25,034.40 for the navels

harvested, $24,300 for the red grapefruit, and $8,532.00 for the

white grapefruit. These amounts total $57,866.40. As of the

date of the hearing, Respondent had paid Petitioner $59,126.48.

18. Of the unpicked fruit left on the trees by Respondent,

Petitioner was able to market 15,023 boxes of white grapefruit

that went to the cannery and yielded $7,965.46. The red

grapefruit that went to the cannery yielded $4,162.21. Red

grapefruit that was harvested by Minton yielded 1,056 boxes, but

only $168.96. Thus, Petitioner recovered only $12,296.63 for

the 22,700 boxes of fruit that Respondent left on the Pepper

Grove.

19. Respondent maintained that it did not pick

Petitioner's fruit because it was damaged by rust mite. If

true, Respondent claimed that the fruit would not meet fresh

fruit standards. Although Petitioner acknowledged that some of

the fruit did have damage, Mr. Hornbuckle maintained that he

offered fruit from another grove to make-up the difference in

volume. None of the conversations that allegedly occurred

regarding the rust mite issue were reduced to writing at the

time. Petitioner maintains he had more than sufficient fruit to

meet the amounts due under the parties' agreement.

20. On March 6, 2008, Respondent issued a letter to

Petitioner that provided, in part:

We are very sorry however we are unable to

continue to harvest the grapefruit from your

groves due to the lack of merchantability of

the fruit for the fresh market. Due to the

disease and insect damage present on the

fruit, the return on the fruit is unable to

cover harvesting and packing charges for the

fresh channel.

21. On March 11, 2008, Petitioner wrote back to Respondent

and stated, in part:

Please be advised that refusal to harvest

any additional fruit constitutes a breach of

the contract, which requires IMG Citrus to

harvest all of the red and white grapefruit

no later than March 15, 2008. All of the

navel fruit was to have been harvested by

January 1, 2008.

Contrary to your letter, the fruit is

merchantable, and does not have disease or

insect damage which unreasonably reduces the

merchantability of the crop.

22. At the time of the allegations of rust mite or other

damage, Petitioner took pictures of his crop to demonstrate that

it appeared to be healthy fruit. Respondent did not have

pictures to demonstrate its claim that the fruit was not

merchantable. Moreover, Respondent did not formally document

that the fruit was unacceptable until March 6, 2008. Under the

terms of the contract, the harvesting of the grapefruit was to

be completed March 15, 2008.

23. Respondent's claim that it purchased fruit from Duda

Products, Inc. (Duda) to demonstrate the market price for

grapefruit is not persuasive. The contract with Duda named a

variety of "Ruby Reds." There is no evidence that the "Ruby

Red" variety is comparable to the whites and reds depicted on

Petitioner's contract.

24. Respondent claims that the packout percentage for

Petitioner's fruit did not support the harvesting of the crop.

That is to say, that the percentage of fruit meeting a fresh

fruit quality did not justify the harvesting and packing expense

associated with Petitioner's fruit. If the fruit were not

marketable in the fresh market, the fruit had no value to

Respondent. The parties' agreement did not, however, specify

what would be an acceptable packout percentage to support a

notion that the fruit was merchantable. Taken to extreme,

Respondent could claim any percentage short of 100 percent

demonstrated fruit that was not merchantable. No evidence of an

industry standard for an acceptable packout percentage was

presented.

CONCLUSIONS OF LAW

25. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

proceeding. §§ 120.57, 120.60, Fla. Stat. (2008).

26. Chapter 601, Florida Statutes (2008), is known as the

"The Florida Citrus Code of 1949" (the Code).

27. The Code, among other things, regulates the activities

of "citrus fruit dealers."

28. "Citrus fruit," as that term is used in the Code, is

defined in Section 601.03(7), Florida Statutes (2008), as

follows:

"Citrus fruit" means 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 purposes 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[.]

The grapefruit and oranges referenced in the parties’ agreement

are "citrus fruit," as defined in Section 601.03(7), Florida

Statutes.

29. A "citrus fruit dealer," as that term is used in the

Code, is defined in Section 601.03(8), Florida Statutes (2008),

as follows:

"Citrus fruit dealer" means 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 futures contracts on a regulated

commodity exchange[.]

Respondent is a “citrus fruit dealer” as that term is defined.

30. Pursuant to Section 601.55(1), Florida

Statutes,(2008), a "citrus fruit dealer," as defined in Section

601.03(8), Florida Statutes, (2008), must be licensed by the

Department of Citrus to transact business in the State of

Florida. At all times material to the instant case, Respondent

was licensed as required by Section 601.55(1), Florida Statutes

(2008).

31. With certain exceptions not applicable to the instant

case, "prior to the approval of a citrus fruit dealer's license,

the applicant therefor must deliver to the Department of

Agriculture and Consumer Services a good and sufficient cash

bond, appropriate certificate of deposit, or a surety bond

executed by the applicant as principal and by a surety company

qualified to do business in this state as surety, in an amount

as determined by the Department of Citrus." See § 601.61(1),

Fla. Stat. (2008).

32. "Said bond shall be to the Department of Agriculture

[and Consumer Services], for the use and benefit of every

producer and of every citrus fruit dealer with whom the dealer

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

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

(2008).

33. Section 601.64, Florida Statutes (2008), describes

"unlawful acts" in which "citrus fruit dealers" may not engage

"in connection with, any transaction relative to the purchase,

handling, sale, and accounting of sales of citrus fruit." Among

these "unlawful acts" is the failure to "make full payment

promptly in respect of any such transaction in any such citrus

fruit to the person with whom such transaction is had."

34. "Any person may complain of any violation of any of

the provisions of [the Code] by any citrus fruit dealer during

any shipping season, by filing of a written complaint with the

Department of Agriculture and Consumer Services at any time

prior to May 1 of the year immediately following the end of such

shipping season." § 601.66(1), Fla. Stat. (2008).

35. A hearing held in accordance with Section 120.57(1),

Florida Statutes, on the complaint must be conducted if there

are disputed issues of material fact. The complainant has the

burden of proving the allegations of the complaint by a

preponderance of the evidence. See Department of Banking and

Finance, Division of Securities and Investor Protection v.

Osborne Stern and Company , 670 So. 2d 932, 935 (Fla. 1996)("'The

general rule is that a party asserting the affirmative of an

issue has the burden of presenting evidence as to that issue'");

Florida Department of Transportation v. J.W.C. Company, Inc .,

396 So. 2d 778, 788 (Fla. 1st DCA 1981).

36. If the Department determines that the complainant has

met its burden of proof, the Department must "make its findings

of fact accordingly and thereupon adjudicate the amount of

indebtedness or damages due to be paid by the dealer to the

complainant. The administrative order [must] fix a reasonable

time within which said indebtedness shall be paid by the

dealer." See § 601.66(5), Fla. Stat. (2008).

37. If the dealer fails to comply with the order, the

Department must:

. . . call upon the surety company to pay

over to the Department of Agriculture and

Consumer Services, out of the bond

theretofore posted by the surety for such

dealer, the amount of damages sustained but

not exceeding the amount of the bond. The

proceeds to the Department of Agriculture

and Consumer Services by the surety company

shall, in the discretion of the Department

of Agriculture and Consumer Services, be

either paid to the original complainant or

held by the Department of Agriculture and

Consumer Services for later disbursement,

depending upon the time during the shipping

season when the complaint was made, when

liability was admitted by the dealer, when

the proceeds were so paid by the surety

company to the Department of Agriculture and

Consumer Services, the amount of other

claims then pending against the same dealer,

the amount of other claims already

adjudicated against the dealer, and such

other pertinent facts as the Department of

Agriculture and Consumer Services in its

discretion may consider material.

See § 601.66(6), Fla. Stat. (2008).

38. If the surety company fails to comply with the

Department's demand for payment, the Department must "within a

reasonable time file in the Circuit Court in and for Polk

County, an original petition or complaint setting forth the

administrative proceedings before the Department of Agriculture

[and Consumer Services] and ask for final order of the court

directing the surety company to pay the proceeds of the said

bond to the Department of Agriculture for distribution to the

claimants." § 601.66(7), Fla. Stat. (2008).

39. In the instant case, Petitioner timely filed a

Complaint against Respondent.

40. At the hearing, Petitioner met its burden of proof to

establish that Respondent failed or refused to harvest the fruit

from the Pepper Grove and to remit the funds as contemplated by

the parties' written agreement. Additionally, Petitioner has

demonstrated that the return on the fruit he was able to harvest

after Respondent abandoned the contract was significantly less

than the price provided for in the parties' agreement. It is

concluded that Petitioner is entitled to recover as noted below:

A. For red grapefruit--based upon the quantity of 13,077

boxes less the volume harvested by Respondent (5,400), a volume

of 7,677 boxes at $4.50 per box equals $34,546.50.

B. For white grapefruit--based upon the quantity of 19,289

boxes less the volume harvested by Respondent (4,266), a volume

of 15,023 boxes at $2.00 per box equals $30,046.00.

C. Petitioner did receive payment for the fruit harvested

from the Pepper Grove. That amount, $12,296.63, must be

subtracted from the amount owed by Respondent. Accordingly,

$34,546.50 plus $30,046.00 less $12,296.63 results in an amount

due from Respondent equal to $52,295.87.

D. From the $52,295.87 the overpayment amount ($1,274.00)

for the fruit harvested by Respondent should also be subtracted.

Therefore, the final amount due to Petitioner is $51,021.87.

41. Respondent maintains that, as matter of law,

Petitioner may not recover under the provision of their

agreement that addresses the default of the buyer. That

provision, paragraph 6 of the contract, does not apply to the

facts of this case. Liquidated damages for a breach are

available when the damages resulting from a breach are not

readily ascertainable and when "the sum stipulated to be

forfeited must not be so grossly disproportionate to any damages

that might reasonably be expected to follow from a breach as to

show that the parties could have intended only to induce full

performance, rather than to liquidate their damages." See

LeFemine v. Baron , 573 So. 2d 326 (Fla. 1991). In this case,

the so-called liquidated damages were only available had

Respondent not harvested any fruit. Once Respondent harvested

more than $34,500 worth of fruit, the provision was meaningless

to Petitioner. The provision was intended to benefit the seller

for the buyer's breach. In this case the actual damages have

been calculated.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is hereby

RECOMMENDED that the Department enter a final order

approving Petitioner's complaint against Respondent in the

amount of $51,021.87.

DONE AND ENTERED this 4th day of March, 2009, in

Tallahassee, Leon County, Florida.

J. D. PARRISH

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 4th day of March, 2009.

COPIES FURNISHED :

Robert B. Collins

Westchester Fire Insurance Company

436 Walnut Street, Routing WA10A

Philadelphia, Pennsylvania 19106

Christopher E. Green, Esquire

Department of Agriculture and

Consumer Services

Office of Citrus License and Bond

Mayo Building, M-38

Tallahassee, Florida 32399-0800

Melanie Sallin Ressler, COO

IMG Citrus, Inc.

2600 45th Street

Vero Beach, Florida 32967

Michel Sallin

IMG Citrus, Inc.

7836 Cherry Lake Road

Groveland, Florida 34736

Larmarcus E. Hornbuckle

Rebecca Hornbuckle

Vero Beach Land Company, LLC

6160 1st Street Southwest

Vero Beach, Florida 32968

Richard Ditschler, General Counsel

Department of Agriculture and

Consumer Services

407 South Calhoun Street, Suite 520

Tallahassee, Florida 32399-0800

Honorable Charles H. Bronson

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.