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Steveco, Inc. v. Gainsborough International

April 6, 2007


The opinion of the court was delivered by: John S. Rhoades, Judge United States District Court


This case comes to the court in the context of an appeal of a decision of the Secretary of Agriculture. In the action before the Secretary, Steveco, Inc. ("Steveco") sued Gainsborough International, Inc. ("Gainsborough") for failing to pay the amount it agreed to pay Steveco for four shipments of grapes. Gainsborough counterclaimed, alleging it was damaged because Steveco breached the warranty of suitable shipping condition. The Secretary ruled in Gainsborough's favor and ordered Steveco to pay Gainsborough reparation. Steveco subsequently filed a petition and complaint challenging the Secretary's decision, and Gainsborough filed a counterclaim challenging the amount awarded. The court held a bench trial in this case. For the reasons set forth below, the decision and final order of the Secretary is affirmed.

Steveco Has Failed to Demonstrate the Shipment Terms Were California Inspection Final The Secretary concluded, and Steveco does not dispute, that Steveco has the burden of proving that the shipping terms were California inspection final. See Secretary's Decision and Order at 12; Tr. at 10:4-12. The Secretary concluded that Steveco did not meet this burden. The findings of fact in the Secretary's decision are prima-facie evidence of the facts stated therein. See 7 U.S.C. § 499g(c). This means "that they shall stand as the established facts until sufficient evidence is produced on the trial to overcome them." Spano v. Western Fruit Growers, Inc., 83 F.3d 150, 152 (10th Cir. 1936). The court concludes that the evidence presented at trial does not change the Secretary's factual conclusion that the parties did not agree that the shipping terms were California inspection final.

At trial, counsel presented the testimony of Mr. Anderholt and Mr. Gainsborough, who negotiated the parties' agreement. When asked by Steveco's counsel whether he and Mr. Gainsborough discussed whether or not the shipments were to be California inspection final or f.o.b., Mr. Anderson answered: "Well, yes. None of our export grapes were sold f.o.b. They were always sold California Inspection Final." Tr. 18:13-20. However, when Mr. Gainsborough was asked by his counsel whether there was any discussion between he and Mr. Anderholt regarding the terms of these shipments, Mr. Gainsborough testified that there was not. Tr. 217:12-21. Although based on Mr. Anderholt's entire testimony it is clear that Steveco intended that the shipping term be California inspection final, the court finds equivocal Mr. Anderholt's testimony regarding whether the parties actually discussed the shipping terms and chooses to believe Mr. Gainsborough's testimony that Mr. Anderson and Mr. Gainsborough did not discuss the shipping terms.

The parties were asked to brief the application of U.C.C. § 2207 to these facts. Cal.Comm. Code § 2207 provides in relevant part:

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon unless acceptance is expressly made conditional on assent to the additional or different terms.

(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) The offer expressly limits acceptance to the terms of the offer;

(b) They materially alter it; or

(c) Notification of objection to them has already been given or is given within a reasonable times after notice of them is received.

(emphasis added). The court concludes that application of § 2207 to the present facts does not alter the conclusion that Steveco has failed to demonstrate that the terms were California inspection final. Before the Secretary, Steveco relied on the invoices it sent Gainsborough after the grapes were shipped, which invoices contained the California inspection final term. As the Secretary noted, Gainsborough "arguably had no reason to take notice of the terms stated on the invoices because it had already confirmed the sales terms as it understood them prior to receipt of the invoices, and well before the grapes had been shipped." Secretary's Decision and Order at 13. Moreover, given the harshness of the California inspection final term, such an additional provision would certainly materially alter the parties' contract.*fn1 Thus, regardless of Gainsborough's failure to object to this term, by operation of § 2207(2)(b) this term did not become part of the parties' contract. . Not only does application of § 2207 not support the conclusion that the shipping terms were California inspection final, but application of § 2207 supports Gainsborough's position that the terms were f.o.b. Delano. It is undisputed that prior to the grapes being shipped, Gainsborough faxed Steveco sales memorandum that contained the additional term "f.o.b. Delano." Because f.o.b. is the shipping term implied by courts in the absence of an agreement between the parties, see Ocean Breeze Export, Inc. v. Rialto Distributing, Inc., 60 Agric. Dec. 840 (2001); Hunts Point Tomato Co., Inc. v. S&K Farms, Inc., 42 Agric Dec. 1224 (1983), such a term cannot be said to materially alter the parties' agreement. Accordingly, pursuant to § 2207, this additional term became a part of the contract in light of Steveco's failure to object within a reasonable time period.

Steveco Breached the Warranty of Suitable Shipping Condition

"In an f.o.b. sale, the buyer, upon acceptance of goods, is liable for the contract price, less damages due to any breach of warranty or contract by the seller." Hunts Point Tomato Co., Inc. v. S&K Farms, 42 Agric Dec. 1224, 1225 (1983); see also Secretary's Decision and Order at 14. "The burden is on the buyer to prove the breach and damages by a preponderance of the evidence." Id.; see also Borton & Sons, Inc. v. Firman Pinkerton Co., Inc., 51 Agric Dec. 905, 910 (1992); Secretary's Decision and Order at 14..

Because the grapes were to be shipped "f.o.b. Delano," Steveco had the duty to place the grapes free on board "in suitable shipping condition." See 7 C.F.R. § 46.43(i). "Suitable shipping condition" means that "the commodity, at time of billing, is in a condition which, if the shipment is handled under normal transportation service and conditions, will assure delivery without abnormal deterioration at the contract destination agreed upon between the parties." 7 C.F.R. § 46.43(j). In other words, Steveco "had a duty to load a product which, given normal ...

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