## Facts

- L. Gillarde Company (seller) sold Joseph Martinelli & Company, Inc. (buyer) a carload of “U.S. No. 1 Jo Jo” cantaloupes for \$1,843.25, plus \$20 for precooling, for shipment “f.o.b. Yuma, Arizona” on a “rolling acceptance final” basis.
- The agreement was confirmed through a series of telegrams.
- The cantaloupes were inspected at the shipping point on June 20, 1943, and were graded U.S. No. 1.
- The car arrived in Springfield, Massachusetts on July 3, 1943; July 4 was a holiday.
- On July 5, 1943, the buyer wired the seller that it rejected the shipment after observing moldy, deteriorated fruit.
- A USDA inspection at destination on July 6 found many overripe and soft melons and decay ranging from 35% to 100% in sampled units, averaging about 85%, mostly Cladosporium rot.
- The shipment was abandoned to the railroad and sold for about \$300.
- The seller, without consulting the buyer, filed and settled a claim against the railroad for transit problems; the claim was settled at 50% of invoice cost, and after collection costs the seller received \$703.80.
- The seller filed a reparation complaint under the Perishable Agricultural Commodities Act (PACA). The Secretary of Agriculture concluded the buyer had no right to reject because the sale was “f.o.b., rolling acceptance final,” and ordered the buyer to pay \$1,139.45 plus interest.
- The buyer brought a civil action in the District of Massachusetts under 7 U.S.C. § 499g(c) to set aside the reparation order. At trial, the buyer presented testimony (including a food-chemistry witness) that Cladosporium rot can be latent and not visible at early stages, making the shipping-point grade misleading.

## Issues

1. Whether the telegrams constituted a sufficient written memorandum to satisfy the statute of frauds for the sale of goods.
2. In a PACA action under 7 U.S.C. § 499g(c), how the court should treat the Secretary of Agriculture’s findings (prima facie effect versus independent factfinding).
3. Whether the cantaloupes conformed to the contract description “U.S. No. 1” at the time of shipment, and whether latent disease present at shipment permitted rejection notwithstanding “f.o.b., rolling acceptance final.”
4. Whether the seller’s unilateral railroad claim and settlement affected the seller’s right to recover from the buyer (including any estoppel argument).

## Decision

- The court treated the PACA case as a trial de novo, with the Secretary’s findings and order serving only as prima facie evidence.
- The court concluded the telegrams were sufficient writings to evidence the sale contract.
- Considering the destination condition and the buyer’s scientific evidence about latent rot, the court found the cantaloupes did not meet the warranted description and quality (U.S. No. 1) at shipment.
- The court held the buyer was justified under the Uniform Sales Act in rejecting the shipment despite the “rolling acceptance final” term.
- The court set aside the Secretary of Agriculture’s reparation order and entered judgment for the buyer, Martinelli.

## Legal Principles

- Under 7 U.S.C. § 499g(c), an action to review a PACA reparation order proceeds like an ordinary civil damages suit; the Secretary’s findings are prima facie evidence, but they may be overcome by contrary proof and the court may make its own findings.
- A series of related writings, including telegrams, may satisfy the statute of frauds if they identify the transaction and its material terms.
- A sale by description and grade carries a warranty that the goods will conform to the stated description/grade at the time of shipment; latent defects or disease present at shipment can constitute a breach even if a shipping-point inspection certificate states the grade.
- “F.O.B.” and “rolling acceptance final” terms may allocate ordinary transit risk, but they do not deprive a buyer of the right to reject for a material nonconformity that existed at shipment (including latent disease that becomes apparent shortly after arrival).
- A buyer’s rejection is evaluated for reasonableness and timeliness in light of the goods’ perishable nature and the circumstances surrounding delivery and inspection.

## Conclusion

The district court, conducting a de novo PACA review with the Secretary’s order treated as prima facie evidence only, found that the cantaloupes were not truly U.S. No. 1 at shipment because of latent Cladosporium rot and held the buyer’s rejection was justified under the Uniform Sales Act notwithstanding the “f.o.b., rolling acceptance final” language; the court therefore vacated the reparation award and entered judgment for the buyer.


Joseph Martinelli & Co. v. L. Gillarde Co., 73 F. Supp. 293 (1947)