## Facts

- L. Gillarde Company (seller) sold Joseph Martinelli & Company, Inc. (buyer), a PACA-licensed dealer, a carload of cantaloupes for $1,843.25.
- The contract terms were F.O.B. shipping point (Yuma, Arizona) and “rolling acceptance final.”
- At the time of sale, the cantaloupes were represented as U.S. Grade No. 1 at shipping point, and they were inspected and graded U.S. No. 1 at shipment.
- Because of railroad delay, the shipment arrived at the buyer’s location nearly two weeks after shipment.
- Upon arrival, the buyer notified the seller that it was rejecting the cantaloupes as overripe and moldy.
- A Department of Agriculture inspection at destination found extensive decay, averaging about 85% (primarily Cladosporium mold), with some samples showing total decay.
- The buyer abandoned the shipment, and the railroad sold it for salvage.
- Without involving the buyer, the seller pursued a claim against the railroad for transit-related loss and settled for approximately one-half of the invoice-cost claim, net of collection costs.
- The buyer paid none of the invoice price.
- The seller filed a reparation complaint with the U.S. Department of Agriculture under the Perishable Agricultural Commodities Act (PACA), seeking the contract price with appropriate credits for amounts received from salvage and the railroad settlement.
- The buyer argued it had a right to reject because the extreme decay showed the cantaloupes could not have been U.S. No. 1 at shipping point, and also argued the seller’s railroad settlement barred further recovery from the buyer.

## Issues

1. Under an F.O.B. shipping point contract on “rolling acceptance final” terms, may the buyer reject the shipment at destination due to severe deterioration after delayed transit?
2. Does severe decay shown by a destination inspection, standing alone, establish that the cantaloupes failed to meet U.S. No. 1 grade at shipping point despite a shipping-point inspection?
3. Does the seller’s separate settlement with the railroad carrier bar a PACA reparation award against the buyer, and if not, how should salvage and settlement proceeds affect the amount awarded?

## Decision

- The USDA reparation decision treated “rolling acceptance final” as making acceptance effectively final once the produce met the contract grade at shipping point, leaving no right to reject at destination for condition attributable to transit.
- The shipping-point inspection showing U.S. No. 1 grade supported the seller’s proof of contractual compliance at shipment; the destination decay, in light of the transportation delay, did not justify destination rejection under the contract term.
- The buyer’s rejection and nonpayment were found wrongful under PACA’s standards governing fair dealing in produce transactions.
- The seller’s railroad settlement did not bar the reparation claim against the buyer, but amounts obtained through salvage and the railroad claim were treated as credits to prevent duplicate recovery.
- Reparation was awarded to the seller for the net amount due on the contract price after credits (with interest from the date specified in the reparation order).

## Legal Principles

- Under PACA trading-term usage, “F.O.B. shipping point, rolling acceptance final” allocates to the buyer the risk of post-shipment deterioration and limits the buyer’s remedies at destination; rejection at destination is not available when the product met contract grade at shipment.
- A USDA shipping-point inspection certificate is strong evidence of grade at shipment; a later destination inspection showing decay does not, by itself, prove the product was off-grade at shipping point, especially where abnormal transit delay is shown.
- A PACA dealer’s unjustified rejection and refusal to pay can constitute an unfair practice, supporting a reparation award for the unpaid invoice amount, subject to credits.
- A seller’s recovery from a carrier for transportation-related loss does not automatically preclude reparation against the buyer; any carrier proceeds and salvage value must be credited so the seller does not collect more than the contract loss.

## Conclusion

In this USDA PACA reparation matter, the “rolling acceptance final” F.O.B. shipping point term barred the buyer from rejecting cantaloupes at destination based on heavy decay after delayed transit where the shipment was inspected as U.S. No. 1 at the shipping point; the seller was entitled to the contract price with deductions for salvage and the seller’s railroad-settlement proceeds to avoid duplicate recovery.


L. Gillarde Co. v. Joseph Martinelli & Co., Inc., 5 AD 555 (1946)