Florida Dept. of Health & Rehabilitative Services v. Southern Energy, Ltd., BK-309

• Decision Date: 09 September 1986
• Docket Number: No. BK-309,BK-309
• Citation: 493 So.2d 1082,11 Fla. L. Weekly 1919
• Parties: 11 Fla. L. Weekly 1919 FLORIDA DEPARTMENT OF HEALTH & REHABILITATIVE SERVICES, Appellant, v. SOUTHERN ENERGY, LTD., a Florida Limited Partnership, Appellee.
• Court: Florida District Court of Appeals

Page 1082

493 So.2d 1082

11 Fla. L. Weekly 1919

FLORIDA DEPARTMENT OF HEALTH & REHABILITATIVE SERVICES, Appellant, v.SOUTHERN ENERGY, LTD., a Florida Limited Partnership, Appellee.

No. BK-309.

District Court of Appeal of Florida First District.

Sept. 9, 1986.

Rehearing Denied Oct. 2, 1986.

Jim Smith, Atty. Gen., Gerald B. Curington, Chief, Gen. Civil Litigation, James A. Peters, Asst. Atty. Gen., for appellant.

DuBose Ausley, Kenneth R. Hart, and Emily S. Waugh, of Ausley, McMullen, McGehee, Carothers & Proctor, Tallahassee, for appellee.

WENTWORTH, Judge.

Appellant seeks review of a December 1985 final judgment which found liability for breach of a 1982 contract, and awarded 7.95 million dollars in damages.

Appellant contends the lower court erred in invoking equity to circumvent a "subject to appropriation" clause in the contract.¹We reverse for entry of judgment for appellant insofar as the award represents purchases not funded by legislative appropriation, because no equitable issue is properly presented upon the record before us.The stipulations and exhibits establish that the contract was bid, executed and amended with the cited explicit condition precedent, making the purchases for future years contingent on appropriation; that such condition did not occur for two of the years in question; ² and that the Department did not contribute to the lapse.To the extent, however, that the claim arises in part from a difference between the contract unit price and the rate referenced by the appropriation act, we conclude that the "subject to appropriation" clause does not foreclose liability otherwise accruing under the contract for purchase of materials for which appropriation was made at a rate different from that previously agreed by the parties.Clearly that claim presents more complex issues which have not been treated in the judgment before us, are not addressed with any specificity in the briefs on appeal, and which require consideration on remand, subject also to our disposition infra of a discovery issue argued by appellant.

Guaranty Fuels, Inc. in March 1982 entered into a contract with the Florida Department of Health and Rehabilitative Services(HRS), agreeing to supply wood pellet fuel for an alternative energy project at Florida State Hospital(FSH).The contract was bid, executed, and amended "subject to appropriation" by the Florida Legislature for the future five-year period contemplated.Under the contract, Guaranty was to supply 50,000 tons of wood pellets per year.The Department of General Services(DGS), as contracting agent acting on behalf of HRS and FSH, was to pay $63.36 per ton to Guaranty.The Florida Legislature in 1980, in anticipation of the project, appropriated $2 million to convert Florida State Hospital boilers to burn wood pellets.

After entering into the contract, Guaranty constructed an $8.5 million plant in Florida to manufacture wood pellets.Guaranty then assigned all its right, title and interest in the contract to appelleeSouthern Energy, Ltd.(SEL), in which Guaranty was a general partner.

The legislature fully funded the purchase of 50,000 tons annually in 1982-83 and 1983-84.Problems plagued the boiler conversion efforts at FSH throughout 1982 and 1983, however, and the hospital refused to take delivery of or pay for the specified amount of wood pellets.Under an amended agreement among the parties, DGS and HRS were to begin payment in April 1984 for weekly deliveries of wood pellets at a $65.53 per ton price.

The legislature underfunded the project in 1984-85, appropriating $855,360 less than the $3,168,000 annual amount contemplated in the 1982 contract as amended.A proviso ³ attached to the 1984-85 Appropriation Act prohibited HRS from funding the wood pellet project from other sources, and directed DGS to develop an "economically viable option" or alternative to the contract, to be reported to the Governor and legislative committees by December 1984.

SEL advised DGS that it rejected the altered contract terms dictated by the appropriation act.From July 1984 until January 1985, FSH made reduced payments to SEL pursuant to the 1984-85 appropriations act.In November 1984, a fire and explosion destroyed one of the FSH converted boilers, but FSH continued to take delivery of the pellets and make weekly payments to SEL until January 1985.

SEL filed suit against HRS and DGS, claiming breach of contract, anticipatory breach of contract, impairment of contract, and breach of duty to seek appropriations.DGS was dismissed from the suit.SEL subsequently dismissed all counts except for breach of contract and anticipatory breach of contract.

Following oral argument, the trial court entered an order by which it found that "the letter of the law favors ... the Florida Department of Health and Rehabilitative Services," but equity should be invoked because neither HRS nor the legislature had demonstrated exigent financial conditions to justify the under-appropriation.A jury trial was scheduled, but never held, on the damages issue.The parties stipulated to damages of $7.95 million, and the trial court entered a judgment awarding SEL $7.95 million in damages.

Under Art. II, sec. 3, Florida Constitution, the separation of powers provision, the legislature alone has power to appropriate funds.Brown v. Firestone, 382 So.2d 654(Fla.1980).Article VII, sec. 1(c), Florida Constitution, provides that no money shall be drawn from the state treasury except pursuant to appropriations made by law.As a corollary to that provision, section 216.311, Florida Statutes, provides that no agency may contract in excess of funds appropriated to it.Under section 287.042, Florida Statutes, the Department of General Services has authority to enter into contracts for the purchase of commodities on behalf of other state agencies within the confines of the cited constitutional and statutory framework.

The contract in this case was bid, negotiated and executed "subject to appropriation" by the legislature.The appropriation clause was part of every document, including the invitation to bid the contract and two subsequent agreements, involved in the contract process among DGS, HRS and SEL.DGS advised bidders in writing that the contract was subject to cancellation for nonappropriation of funds, that the legislature would not fund the contract for its full five years in one...