Farmer Fresh Produce International, LLC v. PGD Properties, LLC et al
Order, granting plaintiff's 45 motion to amend complaint. Bench trial held 6/20 and 21, 2011. Count One of Farmer Fresh's complaint is GRANTED. Counts Two, Three and Four of Farmer Fresh's complaint are DENIED. Counts One and Three of PGD's counterclaim are DENIED. Count Two of the counterclaim is GRANTED IN PART as set forth in order. Signed by Judge Callie V. S. Granade on 8/13/2012. (mab)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
FARMER FRESH PRODUCE
Plaintiff – Counter Defendant,
PGD PROPERTIES, LLC, et al,
Defendants – Counter Claimants. )
CIVIL NO. 10-00269-CG-B
This matter came before the court on June 20 and 21, 2011, for a bench trial,
and on July 5, 2011, on the motion of the plaintiff, Farmer Fresh Produce
International, LLC (“Farmer Fresh” or “the plaintiff”) for leave to amend its
complaint to add an additional fraud count (“Count Four”). (Doc. 45-1).
ORDER ON PLAINTIFF’S MOTION FOR LEAVE TO AMEND THE
Farmer Fresh’s complaint alleges two counts of breach of contract and one
count of fraud, all stemming from a dispute over a written contract titled the
“Working Agreement.” See Doc. 1. The new Count Four would add an additional
fraud count by alleging the following: (1) that in the course of negotiating the
Working Agreement, Farmer Fresh refused to sign it unless the defendants, PGD
Properties, LLC (“PGD”), Jeff Parr, Leonard Gilbert, and Warren Day (“PGD”, or
“the defendants”) agreed to personally guarantee the repayment of a $225,000 loan
from Farmer Fresh to the defendants; (2) that the defendants drafted a Working
Agreement that contained such a personal guaranty and presented it to the
plaintiff; (3) that Farmer Fresh signed the Working Agreement in reliance on the
personal guaranty; (4) that the defendants understood the nature and effect of a
personal guaranty but never intended to be bound by it; (5) that the defendants
knowingly made false representations to Farmer Fresh regarding the personal
guaranty; and (6) that Farmer Fresh suffered damages as a proximate cause of
these false representations.
There is a strong policy embodied in the Federal Rules of Civil Procedure,
and Rule 15 particularly, favoring the liberality of amendment. Borden, Inc. v.
Florida E. Coast Ry. Co., 772 F.2d 750, 757-58 (11th Cir. 1985) (citing Wallin v.
Fuller, 476 F.2d 1204, 1209 (5th Cir. 1973); United States v. Stephen Brothers Line,
384 F.2d 118, 124-25 (5th Cir. 1967)). Rule 15(b) of the Federal Rules of Civil
Procedure states in part:
When issues not raised by the pleadings are tried by express or
implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings. Such
amendment of the pleadings as may be necessary to cause them
to conform to the evidence and to raise these issues may be
made upon motion of any party at any time, even after
judgment; but failure so to amend does not affect the result of
the trial of these issues.
Allowing an amendment to the pleadings at the close of trial to conform to
the evidence presented is within the trial court's discretion. See, e.g., Borden (citing
Save Lake Washington v. Frank, 641 F.2d 1330, 1340 (9th Cir. 1981); Fisher v.
Indiana Lumbermens Mutual Insurance Co., 456 F.2d 1396, 1398-99 (5th Cir.
1972)). When issues outside the pleadings are tried by the express or implied
consent of the parties, however, Rule 15(b) requires that the amendment be
allowed. Wallin, 476 F.2d at 1210.
Here, the issue of fraud as it pertained to the personal guaranty contained in
Section 1.D. of the Working Agreement falls outside of the Court’s Pretrial Order
(Doc. 40). Nevertheless, defendants Gilbert, Parr, and Day testified at length
during the trial about whether they intended to be bound by the personal guaranty.
Defense counsel did not object to this line of questioning, and therefore
impliedly consented to the trial of this issue despite the fact that it was outside of
the Pretrial Order. Accordingly, the plaintiff’s motion is GRANTED.
ORDER ON BENCH TRIAL
The court has considered the testimony of the witnesses, the exhibits
introduced into evidence, and the arguments of counsel. The court makes the
FINDINGS OF FACT
Farmer Fresh is a Mississippi limited liability company involved in the food
distribution business. The owner and president of Farmer Fresh is Carl Boyanton.
PGD is a Florida limited liability company doing business in Mobile, Alabama.
Defendants Jeff Parr, Leonard Gilbert, and Warren Day, are the three members of
PGD. At all relevant times, PGD owned a warehouse located at 600 Fisher Street
in Mobile (the “warehouse”). The warehouse contained space for refrigerated,
frozen, and dry storage. PGD had been operating a food storage and distribution
service out of the warehouse, and for a time also operated a small store there. In
the summer of 2008, after losing some business, PGD shut down both the
warehouse and the store. By late 2008, PGD was having difficulty making
mortgage and other payments related to the warehouse. PGD had been advised by
First Bank & Trust of Mississippi (“FB&T”) that if an arrearage payment of nearly
$124,000.00 was not made by December 31, 2008, then the bank would begin
foreclosure proceedings on the property.
The members of PGD learned that Boyanton might be looking for warehouse
space in Mobile, and approached him about becoming a member of PGD or perhaps
buying the warehouse from them in order to prevent a default under the mortgage.
On December 10, 2008, Boyanton and the three members of PGD drafted and
signed a letter indicating that the parties were in the process of negotiating a sale
or lease of the property. A copy of the letter was sent to FB&T.
On December 31, 2008, Boyanton paid the sum of $123,902.37 to FB&T in
order to prevent the bank from foreclosing on the mortgage. The parties then began
drafting a working agreement between PGD and Farmer Fresh (the “Working
Agreement”). Various drafts of the Working Agreement were prepared by Day and
submitted to Boyanton for approval. Boyanton would then respond to Day with his
desired changes to the draft. The early drafts of the Working Agreement did not
contain any language pertaining to a personal guaranty. Boyanton demanded that
the Working Agreement include the personal guaranties of Parr, Gilbert, and Day
for any amount that he loaned.
The parties signed the final draft of the Working Agreement on January 19,
2009. It provided that Boyanton would loan PGD the total sum of $225,000.00.
This amount specifically included the $123,902.37 that Boyanton had previously
paid to FB&T on December 31, 2008, and required Boyanton to pay the remaining
$101,097.63 to PGD on January 20, 2009, which he did. Paragraph 3 of the
Working Agreement provided that:
The basis for this agreement is a working partnership between
Carl Boyanton, Jeff Parr, Leonard Gilbert and Warren Day,
whereby each of the individuals work together to help grow the
business of Farmer Fresh Produce Int. LLC. The incremental
increase in business brought to Farmer Fresh Produce Int. LLC
will be applied to the $225,000 debt owed by Jeff Parr, Leonard
Gilbert and Warren Day.
The Working Agreement further provided that Farmer Fresh would lease the
warehouse from PGD pursuant to a signed lease agreement (the “Lease”) which was
attached to the Working Agreement. The term of the Lease was 24 months
beginning January 1, 2009, with an automatic extension of 12 months unless one
party provided 60 days advance notice of its intent to decline the extension. The
Working Agreement also provided at paragraph 1.C that “[t]he 225,000 total,
without interest, to be repaid solely from all cold storage fees and the gross profit on
sales.” It also states at paragraph 1.D. that “Jeff Parr, Leonard Gilbert and
Warren Day agree to personally guaranty the repayment of any portion of the
$225,000 not paid by all cold storage fees and the gross profit on sales.” Gilbert
stated that the members of PGD did not intend to be bound by the personal
guaranty language in the Working Agreement, and actually changed the wording of
those paragraphs in an attempt to avoid personal liability. Parr and Gilbert
testified that they had no intention to personally guaranty the repayment of the
$225,000.00 at the time they signed the Working Agreement. They both said that
their intention was to sign a personal guaranty at some point in the future provided
there was a deficit between the original loan amount and the amount generated by
cold storage fees and gross profit on sales. On the other hand, Day testified that he
intended to be bound by the personal guaranty.
The Working Agreement gave Boyanton the option, during the Lease term, of
buying into, or buying all of, PGD. The Working Agreement and Lease both state
that Boyanton and Farmer Fresh accept the warehouse in its “as-is” and “where-is”
condition. However, the Lease provided at 14.(a) that “[t]enant shall renovate and
repair the existing building as agreed between the parties and deemed appropriate
in order to conduct its business.” After signing the Working Agreement and Lease,
Boyanton proceeded to make repairs to the warehouse, including cleaning, painting,
repairing roof leaks, and repairing the building’s refrigeration and freezer systems,
as well as the electrical system. It was Boyanton’s understanding of the Lease that
Farmer Fresh was obligated to bring the building up to a standard whereby the
company could use it as a produce and frozen food warehouse.
The Working Agreement does not contain any term regarding its duration.
Parr testified that he believed that the parties would have longer than the two year
initial lease term to generate an increase in the gross profit of Farmer Fresh as well
as cold storage fees in order to recover the initial $225,000.00 loan.
Neither party conducted an inventory of the warehouse contents before
Farmer Fresh’s lease commenced. However, the parties agree that prior to its
occupation by Farmer Fresh, the warehouse had been vandalized, and copper
tubing for those refrigeration and freezer systems had been cut and stolen.
Electrical wiring was also taken. Because this damage was covered under PGD’s
property insurance, Farmer Fresh and PGD agreed orally that Farmer Fresh would
pursue the claim on behalf of PGD and that PGD would reimburse Farmer Fresh
for the cost of those repairs out of the insurance proceeds. PGD was paid a total of
$80,403.57 on the insurance claim negotiated by Boyanton. Of that amount, PGD
paid over to Farmer Fresh $13,060.11 which was the amount of the first insurance
check received by PGD under the claim.
Farmer Fresh made all required lease payments from January through
September 2009. It then withheld three monthly payments, due for October
through December 2009, in an attempt to recoup the vandalism repair costs not
reimbursed by PGD. A total of $30,522.45 in rent was withheld. Beginning in
January 2010, Farmer Fresh resumed making monthly lease payments again,
which payments were accepted by PGD. The total rent paid by Farmer Fresh was
$178,227.45. This amount is in addition to the $225,000.00 loan from Farmer Fresh
On June 17, 2009, an appraisal of the warehouse property was prepared. The
appraisal indicated that the value of the property was $1,263,000.00. The appraisal
notably did not include a value for the refrigeration equipment on the property.
PGD produced at trial an undated appraisal estimating the value of this equipment
at $112,100.00.1 Thereafter, Boyanton made an offer to PGD to purchase the
property for $1,250,000.00. PGD either rejected or failed to respond to the offer.
North 30 Food Sales (“North 30”) is or was a company owned by Parr. North
30 stored frozen food products at the warehouse during the lease and paid storage
fees of $2,500 per month to do this.
W.D. Foods, a company owned by Day, also stored refrigerated foods at the
warehouse. These foods included bulk sausage. During this time, Greer’s Market, a
grocery store chain that bought food from W.D. Foods, complained on several
occasions of moldy sausage. As a result, Greer’s ceased buying sausage products
from W.D. Foods. Boyanton testified that he believed the mold problem was caused
when the sausage was stored near fresh produce generating excess moisture.
James Crenshaw, Farmer Fresh’s general manager through the middle of 2009,
opined that this problem was caused by the failure of Farmer Fresh employees to
properly rotate the products in stock.
Parr testified that on occasion North 30 would utilize a Farmer Fresh truck
to deliver frozen products. He said that if his company had to deliver to more than
one location, the products would begin breaking down and would be unmarketable.
There was also testimony about an occasion on a Friday when Day discovered
The appraisal is part of Defendants’ Exhibit 6 and includes values for other
equipment as well. The $112,100 figure represents the values for the motor house,
compressors and freezer and medium temperature storage units.
that the temperature in the warehouse freezer had risen to 28 or 29 degrees. Had
that condition continued to exist, the freezer temperature would have been well
above freezing by the following Monday and the food in the freezer would have been
ruined. Day testified that there were two additional times in which he discovered
high temperatures in the freezer.
There was testimony received regarding the operations of Farmer Fresh
during the term of the lease. Eddie Etheridge, the general manager of Farmer
Fresh from October 2009 to December 2010, said that Farmer Fresh had serious
difficulties in delivering frozen products to customers. This was because the
company’s trucks could not maintain a proper temperature for frozen goods. In
Etheridge’s opinion, Farmer Fresh did not have the ability to handle frozen foods in
a safe and professional manner. He said that during his time with the company,
Farmer Fresh lost approximately 50% of its customers due to refrigeration and
delivery issues, along with quality and payment problems. Nevertheless, on July
30, 2009, Farmer Fresh and the warehouse were inspected by PrimusLabs.com, a
food safety inspection. Farmer Fresh received a score of 98% which corresponds to a
rating of “superior.”
On August 31, 2010, Farmer Fresh shut down the freezer it had been using to
store frozen foods. As a result, North 30 had to find a new facility to store its frozen
product. According to Boyanton, he did this because, with North 30 as the only
paying frozen food customer, Farmer Fresh was operating the freezer at a loss of
approximately $3,000.00 a month. Prior to the shut down, North 30 offered to
increase its monthly payments from $2,500 to $3,500 per month.
The initial 24 month lease term expired on December 31, 2010. In January
2011, Farmer Fresh moved out of the warehouse and into a facility in Baldwin
County. After the departure of Farmer Fresh, the warehouse was again vandalized.
According to the business records of Farmer Fresh, the company generated a
gross profit of $902,202.16 in 2009. In 2010, the figure fell to $881,360.87. For both
years, Farmer Fresh operated at a net loss. Boyanton testified that “gross profit” as
used in the working agreement was calculated by taking the income from sales and
subtracting the cost of products sold plus delivery costs. The PGD defendants, on
the other hand defined the figure without the delivery deduction.
PGD claimed that when it retook possession of the warehouse at the end of
the Lease term, it discovered that the property had sustained damage during the
tenancy of Farmer Fresh. Specifically, it claimed that the two load levelers used at
the warehouse dock to facilitate the loading of delivery trucks were no longer in
working condition. PGD also claimed that the dock pads used to provide a buffer
between the loading dock and delivery trucks had been destroyed, as had an electric
door. Other damage to the warehouse claimed by PGD included a lost compressor,
inoperable roll up doors, potholes in the parking lot, plumbing problems, damage to
steel posts outside of the warehouse, and damage to the fence surrounding the
property as well as the rolling gate that granted access. See Defendants’ Ex. #14.
PGD also asserted that some of its equipment utilized in the operation of the
warehouse was missing at the end of the lease. Most significantly, PGD claimed
that some of the metal racking used to store pallets of frozen goods had been
removed from the property by Farmer Fresh. Additionally, a ladder, manual pallet
jack, and dock ramp could also not be located. Day testified that he saw those items
in the warehouse during the time Farmer Fresh was in the process of moving out.
Finally, incandescent lighting had been removed. Eddie Etheridge, former general
manager for Farmer Fresh, testified that he had delivered this lighting from the
warehouse to Farmer Fresh’s new facility in Baldwin County.
CONCLUSIONS OF LAW
FARMER FRESH’S COMPLAINT
Breach of Contract (Personal Guaranty)
Count One of Farmer Fresh’s complaint alleges that Parr, Gilbert, and Day
breached the Working Agreement by failing to honor the personal guaranty
contained in Paragraph 1.D. (Doc. 1, p. 5).
Under Alabama law, the elements of a breach of contract claim are (1) a valid
contract binding the parties; (2) the plaintiff’s performance under the contract; (3)
the defendant’s nonperformance; and (4) resulting damages. Reynolds Metals Co. v.
Hill, 825 So.2d 100, 105 (Ala. 2002) (citing State Farm Fire & Cas. Co. v. Slade, 747
So.2d 293, 303 (Ala. 1999). As to the first element, the court finds that the personal
guaranty is valid and enforceable. Regardless of the subjective intent of the
individual defendants, the unambiguous language of the Working Agreement
indicates that these defendants are bound by their agreement to “personally
guaranty the repayment of any portion of the $225,000 not paid by all cold storage
fees and the gross profit on sales.” See Plaintiff’s Ex. # 4, p. 1, ¶ 1.D. The
defendants argue that they only signed the Working Agreement, and hence the
guaranty, solely as members of PGD, and therefore cannot be held personally liable
for the $225,000. (Doc. 44, p. 5). In making this argument, however, the
defendants did not cite any case law in support. See id. This is a glaring omission,
and one which is compounded by case law stating the opposite point, namely, that
“guarantors cannot defeat the plain terms of the agreement by saying that they did
not intend to obligate themselves to the provisions of the written guaranty
agreement.” Williams v. Bank of Oxford, 523 So.2d 367, 371 (Ala. 1988).
As to the second element, the court finds that Farmer Fresh performed its
obligations under Paragraph 1 of the Working Agreement when it loaned PGD the
$225,000.00. The court heard trial testimony from Boyanton, Gilbert and Day, each
of whom stated that Boyanton paid $123,902.37 to FB&T on December 31, 2008.
Boyanton also testified, and the defendants do not dispute, that he made a second
payment of $101,097.63, as required by Paragraph 1 of the Working Agreement.
See Plaintiff’s Ex. #2, ¶2.
As to the third element, the court finds that the defendants did not perform
their obligations under the Working Agreement because they failed to repay the
$225,000.00 loan. Arriving at this conclusion was complicated by the fact that the
operative provisions at issue here, Paragraphs 1.C and 1.D, are vague and poorly
drafted. While the parties agreed that the $225,000.00 loan would be repaid “from
all cold storage fees and the gross profit on sales,” the parties neglected to define the
parameters of “gross profit on sales.” In their post-trial brief, the defendants
attempt to exploit this oversight by arguing that “the gross profits for [Farmer
Fresh] greatly exceeded the sum of $250,000.00 … during the term of the Working
Agreement,” and claim that “there are no additional amounts that remain to be paid
such that the ‘personal guaranty’ would be operational.” (Doc. 44, p. 5). The
defendants cited no record evidence for this assertion, but presumably are referring
to the fact that Farmer Fresh saw gross profits of $902,202.16 and $881,360.17 in
2009 and 2010, respectively, which “greatly exceed[s]” $250,000. See id.
This argument must fail because the defendants cited no portion of the
Working Agreement, nor any record evidence, to establish their interpretation of
the term “gross profits on sales” (i.e., Farmer Fresh’s gross profits from across all of
its business activities rather than just the warehouse) to be the intent of the
parties. See Doc. 44, p. 5. In fact, the court’s reading of the Working Agreement
suggests the opposite. The Working Agreement, despite its flaws, does clearly
express that the parties intended to enter into a contractual relationship that was
centered upon the warehouse at 600 Fisher Street, and the Working Agreement
contains no reference to gross profits generated through ventures other than the
warehouse. See, e.g., Plaintiff’s Ex. #1; Defendant’s Ex. #2, p. 3; Plaintiff’s Ex. #4.
It is a cardinal rule of contractual interpretation that the parties’ language will be
deemed conclusively indicative of their intentions where it is reasonably susceptible
of only one interpretation. 1 Richard A. Lord, Williston on Contracts, § 32:2 (4th ed.
1999). Here, the court finds that the exclusive reference to gross profits in the
context of the operation of the warehouse renders the Working Agreement
susceptible of only one interpretation – that the parties intended for the
$225,000.00 loan to be repaid from profits generated by the warehouse alone, and
not by Farmer Fresh’s other operations.
The defendants argue separately that Farmer Fresh cannot establish their
nonperformance because the Working Agreement provides for no specific duration
or term. (Doc. 44, p. 5). This argument fails, as well. Where a contractual
obligation to perform exists and no time is prescribed in the contract for
performance, the law requires the obligated party to perform within a “reasonable
time.” Lemon v. Golf Terrace Owners Ass'n, 611 So.2d 263, 265 (Ala. 1992). “What
is a reasonable time depends on the nature of the act to be done and all of the
circumstances relating to that act.” Id. As an integral part of the Working
Agreement, Farmer Fresh was obligated to rent the warehouse from PGD according
to the terms of the attached Lease. See Plaintiff’s Ex. #4. The term of the Lease
was for two years, with a provision for a 12 month extension if neither party
rejected the extension. See Defendants’ Ex. #4, ¶3. Under these circumstances, the
court finds that a reasonable time for the performance of the Working Agreement is
the two year term of the Lease, meaning that the defendants had until January 19,
2011 to perform under the Working Agreement.
This brings the inquiry to the fourth element of Farmer Fresh’s breach of
contract claim, damages. There is no dispute that neither Parr, Gilbert, nor Day
has paid Farmer Fresh anything pursuant to the personal guaranty. Therefore, the
question becomes whether or not Farmer Fresh proved at trial what, if anything,
was due under the guaranty. Boyanton testified at trial that he did not recoup any
of the $225,000 loan. He then undercut this testimony somewhat when he stated
that Parr’s company, North 30, paid Farmer Fresh $2,500 per month in cold storage
fees until Boyanton “shut the freezer down” in August of 2010 due to high utility
expenses. Boyanton thereby admitted that he prevented North 30 from storing
product at the warehouse and paying additional cold storage fees for the months of
September through December 2010 -- the last four months of the two-year term of
the Lease. Boyanton also testified that neither Farmer Fresh nor the defendants
were successful in generating any additional cold storage fees. Finally, Boyanton
testified that there was no gross profit generated on any sales from the warehouse,
and that in fact the sales of product from the warehouse generated losses.
Farmer Fresh has entered into evidence a check register indicating that
North 30 paid $32,194.04 in cold storage fees from August 2009 until August 2010.
See Plaintiff’s Ex. #12. Furthermore, Boyanton’s own testimony establishes that
Farmer Fresh would have continued to receive $2,500 per month in cold storage fees
from North 30 for four more months if Boyanton had not closed the warehouse to
cold storage. Thus, Farmer Fresh refused $10,000.00 in cold storage fees that
North 30 was willing to pay. The court finds that these amounts, totaling
$42,194.04 should be deducted from the $225,000.00 owed under the personal
In their post-trial brief, the defendants urge the court to apply the doctrine of
unclean hands and rule that Farmer Fresh is not entitled to any relief on Count
One because “Farmer Fresh was never able to handle frozen products correctly and
… without product contamination occurring.” (Doc. 44, p. 6). The thrust of
defendants argument appears to be that the failure of the parties to generate gross
profits on sales was a result of Farmer Fresh’s poor handling of frozen products.
The court declines to apply the doctrine of unclean hands to this count
because Alabama precedent indicates that “the maxim refers to willful misconduct
rather than merely negligent misconduct and must be morally reprehensible as to
known facts.” Weaver v. Pool, 249 Ala. 644, 648 (1947). Here, the defendants have
alleged that Farmer Fresh “was never able to handle frozen products,” (Doc. 44, p.
6), but did not allege that Farmer Fresh willfully mishandled them. Nor does the
inability to handle frozen products qualify as “morally reprehensible” under the
court’s understanding of the term. Although the defendants do make a vague
passing allegation of perjury on Boyanton’s part, id., they do not specify what
statement or representation he made in his testimony that was false, and provide
no evidence of a falsehood. Thus, doctrine of unclean hands is inapplicable.
Accordingly, the court finds for Farmer Fresh on Count One. Under the
terms of the Working Agreement, the defendants owe Farmer Fresh $182,805.96,
representing $225,000.00 minus cold storage fees of $42,194.04.
COUNT TWO: Breach of Contract (Purchase Offer)
The complaint also alleges that PGD breached the working agreement when
it refused Farmer Fresh’s offer to buy the warehouse property. Paragraph 5 of the
Working Agreement states that Boyanton has the option, during the term of the
lease, to buy into PGD or to buy all of the company. The parties agree that PGD is
the warehouse property, such that buying all of PGD means buying the warehouse.
Paragraph 5 goes on to say that the sale price of the warehouse would “be based on
a current certified appraisal of the property at [sic] time of purchase, less the
amount of initial capital improvements, but no less than the total amount of the
current debt to the First Bank & Trust of Mississippi.” Boyanton offered to buy the
warehouse property for $1,250,000.00 in the summer of 2009. This offer was not
accepted by PGD. No reason for the rejection was given at trial.
The court finds that Farmer Fresh has failed to prove a breach of this term of
the Working Agreement. First, there was no evidence presented as to the value of
capital improvements to the property, if any, claimed by Boyanton. Without such
information, it is impossible to determine what was to be deducted from the
appraisal amount to arrive at a sale price. Secondly, Farmer Fresh presented no
evidence regarding the balance of PGD’s mortgage with FB&T. Without that
number, this court cannot make a determination as to whether Boyanton’s offer
exceeded the balance. Finally the property appraisal did not attribute any value to
the refrigeration equipment on site, and is not therefore an accurate appraisal. For
these reasons, Count Two must fail, and is hereby DENIED.2
Even were the court to find that Boyanton’s offer complied with the Working
Agreement, Count Two still fails because Farmer Fresh presented no evidence as to
any damages flowing from a breach of this term. Farmer Fresh asked only for
monetary damages in this count, but failed to connect any monetary losses to its
failure to purchase the property at $1,250,000.00. No specific performance was
COUNT THREE: Fraud (Insurance Claim)
Farmer Fresh accuses PGD of fraud in Count Three of its complaint, arising
from the repairs it made to the warehouse. (Doc. 1, p. 6). Specifically, Farmer
Fresh claims that it was defrauded when defendants told Farmer Fresh that they
would reimburse it for repairs made to the electrical and refrigeration systems
necessitated by vandalism to the building. Relying on this promise, Farmer Fresh
says it spent $74,540.23 in renovating and repairing these systems, see Plaintiff’s
Ex. # 5, but was only reimbursed $13,000.00. In addition to recovery of the
unreimbursed costs of repairs, Farmer Fresh asks for punitive damages because it
asserts that the fraud was intentional.
The elements of fraud are: (1) a false representation (2) of a material existing
fact (3) relied upon by the plaintiff (4) who was damaged as a proximate result of
the misrepresentation. Robinson v. Sovran Acquisition Ltd. P’ship, 2011 WL
480032 *4 (Ala.Civ.App. Feb. 11, 2011) (citing Coastal Concrete Co. v. Patterson,
503 So.2d 824, 826 (Ala. 1987). If, as here, the fraud is based upon a promise to
perform or abstain from performing in the future, two additional elements must be
proved: (1) the defendant's intention, at the time of the alleged misrepresentation,
not to do the act promised, coupled with (2) an intent to deceive. Id. “In promissory
fraud, the material existing fact that is misrepresented is the defendant's state of
mind, when the defendant represents that he intends to perform some act although
he does not in fact intend to perform it.” Id. (quoting Spring Hill Lighting & Supply
Co. v. Square D Co., 662 So.2d 1141, 1149 (Ala. 1995)).
This fraud count fails for lack of proof. Farmer Fresh presented no evidence
as to the intent of any of the defendants at the time the agreement to make repairs
was made. Under Alabama law, the simple fact that the defendants may not have
performed according to the agreement may be proof of a breach of contract, but
without more, cannot support a promissory fraud claim. Brown-Marx Assocs., Ltd.
v. Emigrant Sav. Bank, 703 F.2d 1361, 1370 (11th Cir. 1983) (“[f]ailure to perform a
promise is not of itself adequate evidence of intent to support an action for fraud”).
Glenn Const. Co., LLC v. Bell Aerospace Servs., Inc., 2011 WL 1899330 *12 (M.D.
Ala. May 19, 2011) (citing Scott v. United of Omaha Life Ins. Co., 749 F.Supp. 1089,
1093 (M.D. Ala. 1990) (the mere failure to fulfill the promise is insufficient to
establish an intent to deceive). Accordingly, Count Three is DENIED.
COUNT FOUR: Fraud (Personal Guaranty)
In Count Four of the complaint, Farmer Fresh alleges that the individual
defendants committed fraud by signing the Working Agreement with the specific
intent not to honor the personal guaranty contained in Paragraph 1.D, pointing to
Parr’s and Gilbert’s testimony as evidence of an intent to deceive. (Doc. 45).
Indeed, Parr and Gilbert both testified that they had no intent to be
personally bound by the guaranty and stated that their actual intent was to execute
a personal guaranty at some future point, provided that Farmer Fresh came to
them and showed them that there was a balance remaining between the original
$225,000.00 loan and the amount recovered by Farmer Fresh from cold storage fees
and gross profits on sales. Ordinarily, this testimony would constitute evidence of
an intent to deceive. However, the problem here is that the court simply does not
believe Parr and Gilbert. The notion that each man really thought he was agreeing
to enter into a further agreement at some future point is not credible on its face,
given the plain language of Paragraph 1.D. Rather, it is the determination of this
court, acting as the sole fact-finder, that Parr and Gilbert were lying about their
true intent in order to avoid admitting to their nonperformance on the personal
guaranty, and thereby admitting to a breach of contract. Accordingly, the court
finds that this testimony does not comprise credible evidence of fraud.
The court also notes that Day, who actually drafted the Working Agreement,
testified that he knew that it contained a personal guaranty when he signed it in
January 2009 and intended to be bound by it. Farmer Fresh was unable to counter
this testimony. Therefore, there is no indication that Day committed fraud.
Accordingly, based upon the foregoing facts and conclusions of law, Count
Four is DENIED.
COUNT ONE: Breach of Contract (Working Agreement)
The defendants claim that Farmer Fresh breached the Working Agreement
by (1) failing to have the proper vehicles available to professionally deliver products
to customers; (2) not having a sufficient and adequate sales staff; and (3) failing to
make a proper accounting of its gross profits to enable a determination to be made
of the portion of the $225,000.00 loan that remained outstanding. (Doc. 23, pp. 2-3).
As stated, supra, under Alabama law, the elements of a breach of contract
claim are (1) a valid contract binding the parties; (2) the plaintiff’s performance
under the contract; (3) the defendant’s nonperformance; and (4) resulting damages.
Reynolds Metals Co. v. Hill, 825 So.2d 100, 105 (Ala. 2002) (citing State Farm Fire
& Cas. Co. v. Slade, 747 So.2d 293, 303 (Ala. 1999).
As to the first element of defendant’s breach of contract claim, the court finds
that Paragraph 3 of the Working Agreement was a valid contractual provision
binding Farmer Fresh and the defendants.
As to the second and third elements, performance and nonperformance, the
court has divided the defendants’ claim into three distinct allegations (as reflected
in the counterclaim, see Doc. 23 at 3):
Alleged Failure To Have Proper Delivery Vehicles
Farmer Fresh did not contest PGD’s performance under Paragraph 3.D in its
post-trial brief. See Doc. 43. The court declines to sift through the trial transcript
in order to make such an argument for Farmer Fresh. See Carolina Acquisition,
LLC v. Double Billed, LLC, 627 F.Supp.2d 1337, 1340 (S.D. Fla. 2009) (“Federal
Judges are not archaeologists.”) (quoting DeSilva v. DiLeonardi, 181 F.3d 865, 867
(7th Cir. 1999). Accordingly, the court finds that the second element, performance
by the counter-plaintiff, is satisfied by virtue of Farmer Fresh’s silence on the
As to the nonperformance element of PGD’s claim, the court finds that
Farmer Fresh did breach the Working Agreement by not providing adequate
delivery trucks to professionally service its customers. The testimony at trial
established that much of the difficulty experienced by Farmer Fresh in its
performance of the Working Agreement was due to delivery problems. Those
problems, in significant part, were caused by using delivery trucks that simply were
not up to the job of delivering frozen foods. Farmer Fresh agreed in the working
agreement to “deliver all products in a safe and professional manner . . . .”
Plaintiff’s Ex. #4, ¶ 3.D. This it did not do, and such failure constitutes
nonperformance by Farmer Fresh in breach of the Working Agreement.
Alleged Failure To Have An Adequate Sales Force
On the other hand, the court finds that the defendants failed to prove their
allegation that Farmer Fresh did not have an adequate sales force in place to
perform under the Working Agreement. The facts adduced at trial indicate that all
parties made efforts to develop business for Farmer Fresh. Most potential
customers simply did not want to work with Farmer Fresh as a supplier, either
because they did not want to change their current supplier, or because they had had
a previous negative experience with Farmer Fresh. In addition, there was no
testimony about what a sufficient and adequate sales force should look like, or the
efforts such a force should undertake.
Alleged Failure to Account For Gross Profits
Also, the defendants’ allegation that Farmer Fresh did not adequately
account for its gross profits must also fail, because the Working Agreement does not
contain an affirmative obligation on the part of Farmer Fresh to do so. The
defendants were free to include such a term in the Working Agreement, but did not.
The most straightforward interpretation of the Working Agreement would be that it
requires some kind of accounting of Farmer Fresh’s gross profits only as a condition
precedent to making a claim for the balance of the $225,000.00 loan by Farmer
Fresh, and not as an independent contractual obligation. Therefore, the allegation,
even if true, does not constitute nonperformance, and accordingly cannot support a
claim for breach of contract.
As this court has found that Farmer Fresh breached at least one term of the
working agreement, it must determine what damages, if any are recoverable by the
defendants. In their counterclaim, the defendants seek damages in the form of “the
loss of income that could have been generated from the sales of fresh and frozen
products had the Plaintiff not breached the Working Agreement.” (Doc. 23, p. 3). At
trial, however, there was absolutely no evidence that even mentioned loss of income,
much less quantified any such losses. The same can be said for the defendants’
claim for damage to their reputations. The defendants simply chose not to present
any evidence that would relate to reputation injury, or how such damage should be
The defendants also seek attorney’s fees as part of their damages. In
Alabama and most other jurisdictions, the general rule is that attorney's fees and
expenses of litigation are not recoverable as damages, in the absence of a
contractual or statutory duty, other than by a few recognized equity principles.
Tolar Const., LLC v. Kean Elec. Co., Inc., 944 So.2d 138, 152 (Ala. 2006) (citing Ex
parte Burnham, Klinefelter, Halsey, Jones & Cater, P.C., 674 So.2d 1287, 1290 (Ala.
1995)). The Working Agreement contains no such provision regarding attorney’s
fees. And the defendants have not directed this court’s attention to any statute or
equitable principle which would permit the imposition of attorney’s fees in this case.
Accordingly, the court finds that the defendants have not proven damages
and, therefore, Count One of their counterclaim is DENIED.
COUNT TWO: Breach of Contract (Lease)
Next, the defendants allege that Farmer Fresh breached the warehouse lease
by failing to make three lease payments, and by not properly maintaining the
property. (Doc. 23 at 4). The court will address these two allegations separately,
but as an initial matter, the court finds that the first element of Count Two has
been satisfied because the Lease constitutes a valid and enforceable contract
between Farmer Fresh and PGD. See Defendants’ Ex. #4.
Failure to Make Timely Payments
Both the performance and nonperformance elements of PGD’s breach of
contract counterclaim have also been met. Farmer Fresh does not dispute that PGD
performed under the Lease by turning the warehouse over for its use and quiet
enjoyment. See Doc. 43 at 12. It is also undisputed that Farmer Fresh did not
make the rent payments required by the Lease for October, November, and
December 2009, as PGD alleges. Boyanton testified at trial to this fact, stating that
he withheld three lease payments because the defendants did not perform on their
promise to reimburse him for repairing damage to the warehouse caused by
vandalism. In other words, Farmer Fresh admits to breaching the Lease in
response to, and to recover damages for, PGD’s alleged breach of a separate and
independent agreement to reimburse repair costs with insurance proceeds. Yet
Farmer Fresh has cited no legal rule or precedent that permits it to do this, and the
court is neither obligated nor inclined to construct arguments that Farmer Fresh
has failed to raise and that are not reasonably presented in the court file. See
Resolution Trust Corp. v. Dunmar Corp., 43 F.3d 587, 599 (11th Cir. 1995) (“There
is no burden upon the district court to distill every potential argument that could be
made based upon the materials before it ....”); see also Bowden ex rel. Bowden v.
Wal-Mart Stores, Inc., 124 F.Supp.2d 1228, 1236 (M.D. Ala. 2000) (“It is not for the
court to manufacture arguments on Plaintiff's behalf.”). Moreover, even if PGD had
breached a term of the Lease (as opposed to a separate agreement on
reimbursement for repairs), Farmer Fresh was not entitled withhold rent – it was
entitled to terminate the Lease, upon written notice and an opportunity to cure.
Defendants’ Ex. 4, p. 4, ¶15(a). Failing that, its only option was to sue for damages.
Finally, as to the damages element, the defendants have established their
damages through trial testimony which showed that Farmer Fresh withheld three
Lease payments in October, November, and December 2009. The amount of the
withheld Lease payments is specified in “Attachment B” of the Lease as $10,174.15
per month, plus a 5% late charge for each unpaid installment, which is specified in
Paragraph 4.A of the Lease. Defendants’ Ex. #4. This amounts to $32,048.57 in
damages to PGD as a result of Farmer Fresh’s failure to make rent payments on the
Alleged Failure to Properly Maintain the Warehouse
PGD also claims that Farmer Fresh breached the Lease by not making
repairs to the warehouse roof, and by ignoring preventative maintenance as
required under the Lease to the point that the warehouse is so deteriorated that
PGD cannot rent it to interested Lessees. PGD also claims that Farmer Fresh took
certain warehouse fixtures belonging to PGD when it moved out of the warehouse in
With regard to the roof, PGD argues that “[Farmer Fresh] agreed to make
repairs necessary to bring the warehouse up to standards that would be suitable for
the storing of fresh and frozen products, including but not limited to, necessary
repairs to the roof.” (Doc. 44, p. 9). This wording actually puts some gloss on the
actual language contained in the Lease, which states that “[Farmer Fresh] shall
renovate and repair the existing building as agreed between the parties and deemed
appropriate in order to conduct its business … [and] shall maintain and make
necessary repairs to the interior elements and exterior of the Premises …”
Defendants’ Ex. #4, ¶ 14.
Paragraph 14 of the Lease is vaguely drafted and does not specify that there
was a problem with the roof, what the problem with the roof was, what repairs were
necessary, or what was meant by “renovation.” Nevertheless, the plain meaning of
the phrase “make necessary repairs to the interior elements and exterior of the
Premises” logically implies that Farmer Fresh was obligated to at least make some
repairs to the roof if it leaked. Both Parr and Day testified that the warehouse roof
leaked, with Day suggesting at trial that some repairs were in fact performed, i.e.,
Day testified that Boyanton “didn’t fix the roof, he put a Band Aid over it so to
Against this backdrop, the court finds that PGD has not met its burden of
proving Farmer Fresh’s nonperformance, i.e., that the repairs were not “as agreed
between the parties” and cannot be “deemed appropriate in order to conduct
business” as the Lease states. Although Gilbert, Parr, and Day all testified that the
roof was a necessary renovation, they provided no documentary evidence
establishing the extent of repairs that were required, nor any documentary evidence
that any of the parties were unable to conduct business out of the warehouse
altogether. The court also finds no evidence of an obligation on the part of Farmer
Fresh to pay for a total replacement of the roof. . In fact, Day and Gilbert both
admitted on cross-examination that no demand or promise was made in writing to
replace the roof or to make a significant capital expenditure on roof repairs.
However, even if PGD could establish nonperformance by Farmer Fresh, the
court finds that PGD did not establish its damages. While there is no general
requirement under Alabama law that proof of damages be in a particular form, the
party seeking to prove damages must produce “sufficient evidence to allow the
factfinder to calculate damages without basing its award on guesswork.” Kearns v.
Sealy, 496 F.Supp.2d 1306, 1321 (S.D. Ala. 2007) (quoting Livingston v. Tapscott,
585 So.2d 839, 841 (Ala. 1991)). Here, the only evidence introduced by PGD on this
point is a self-serving list of alleged damages suffered between December 31, 2008
through February 8, 2011, which lists $215,937 for “Repair & Replacement Roof.”
Defendant’s Ex. #14. PGD made no attempt to explain this amount, nor relate it to
Farmer Fresh’s alleged shortcomings in repairing the roof.
For this same reason, the court finds that PGD has failed to prove its
damages with regard to warehouse maintenance and the allegedly missing fixtures.
The court is not inclined to credit the testimony of Parr, Gilbert, and Day without
additional documentary evidence which would establish that these dollar amounts
are more than just arbitrary and self-serving estimates. PGD declined to submit
anything remotely along these lines, such as invoices, receipts, inspection reports,
photographs, or expert testimony about the condition of the property. Additionally,
PGD offered no evidence regarding its efforts at finding a new tenant for the
warehouse. Without this documentation, the list of damages contained in
Defendants’ Exhibit #14 and the testimony of the PGD principals does not meet the
burden required for a party to prove the damages element of a breach of contract
claim. See Nat Harrison Associates, Inc. v. Gulf StatesUtilities Co., 491 F.2d 578,
587 (5th Cir. 1974) (“the evidence must furnish data for a reasonably accurate
estimate of the amount of damages.”) (quotations and citations omitted).
One exception to PGD’s failure to prove damages concerns the metal racking
that PGD alleges Farmer Fresh took from the warehouse. See Doc. 44 at 10-11.
Not only did Parr, Gilbert, and Day each testify that Farmer Fresh took metal
racking from the warehouse upon vacating the premises, but PGD offered into
evidence a January 20, 2011, email from Jim Nelson of Trammel Equipment
Company, Inc. Defendants’ Ex. #10. In his email and in his testimony at trial,
Nelson stated that in 2005 he sold to PGD blue metal pallet racks and installed
them at the warehouse. He further testified that he inspected the warehouse after
Farmer Fresh moved out and saw that an entire row of the metal racks was
missing, as were every steel support beam that he previously had installed. Id.
Nelson also stated that he subsequently went to the Farmer Fresh warehouse in
Baldwin County, and saw the identical metal pallet racks installed there. Nelson
was able to confirm that these racks were the same by comparing stamps on the
metal frames in Baldwin County with the racks that were previously installed in
PGD’s warehouse in Mobile. Nelson also stated that the fact that the metal racks
were blue indicated to him that the racks in Baldwin County were the same ones
that he sold to PGD because he could not recall ever having seen other blue racks in
his 30 years’ experience selling warehouse equipment. Finally, Nelson testified that
the cost to replace and reinstall the metal racks in PGD’s warehouse was
Accordingly, Count Two of PGD’s counterclaim is GRANTED IN PART with
respect to Farmer Fresh’s failure to make timely lease payments for the months of
October, November, and December, 2009. Thus, PGD is entitled to recover from
Farmer Fresh the sum of $32,048.57, representing the three missed rent payments,
plus the 5% late fee called for in the Lease. Count Two of PGD’s counterclaim is
also GRANTED IN PART with regard to the missing metal pallet racks. PGD is
therefore entitled to recover $14,185.00 from Farmer Fresh. Count Two is
DENIED as to all other allegations.
COUNT THREE – Fraud
Lastly, the defendants claim that Farmer Fresh fraudulently induced them to
sign the Working Agreement by representing to them that it could store and deliver
food products in a safe and professional manner. This count fails for the same
reason as Count Three of Farmer Fresh’s Complaint. The fact that Farmer Fresh
did not perform in accordance with the terms of the Working Agreement is not, by
itself, sufficient evidence of a fraudulent intent. There was no evidence presented
by the defendants that, at the time the Working Agreement was signed, Farmer
Fresh had no intent to fully perform all of its obligations. Without such evidence,
the defendants are not entitled to relief under this count. Accordingly, Count Three
of PGD’s counterclaim is DENIED.
Count One of Farmer Fresh’s complaint is GRANTED; however, the court
finds that the $32,194.04 in cold storage fees paid to Farmer Fresh by North 30
Food Sales should be deducted from the original $225,000 loan amount, as should
the $10,000 in cold storage fees that North 30 Food Sales would have paid to
Farmer Fresh from September through December 2010 had Boyanton not shut
down the freezer. Accordingly, Farmer Fresh’s damages under Count One are
reduced to $182,805.96. Counts Two, Three, and Four of Farmer Fresh’s complaint
Counts One and Three of PGD’s counterclaim are DENIED. Count Two of
the counterclaim is GRANTED IN PART. PGD is due to recover $32,048.57,
representing three months of rental payments on the warehouse covering October,
November, and December 2009, plus a 5% late charge as set forth in the Lease.
Additionally, PGD is due to recover $14,185.00 for metal racks that Farmer Fresh
took from the warehouse.
Accordingly, Farmer Fresh is due to recover damages of $136,572.39 from
DONE and ORDERED this 13th day of August, 2012.
/s/ Callie V. S. Granade
UNITED STATES DISTRICT JUDGE
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