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CARGO SHIPS EL YAM, LTD. v. STEARNS & FOSTER CO.

November 17, 1955

CARGO SHIPS EL YAM, Ltd., Plaintiff,
v.
The STEARS & FOSTER CO., Inc., Everest Shipping Corporation, James E. Stearns, Fricis V. Grauds and Harry Thomas Randle d/b/a Harry T. Randle & Co., Defendants



The opinion of the court was delivered by: DAWSON

This cause was tried by the Court without a jury, pursuant to stipulation of all the parties.

Findings of Fact

 The plaintiff is a corporation organized under the laws of Israel and was, at all material times, the owner of the SS Akko. On May 8, 1953, it executed a charter party providing for the chartering of the ship for a period of from three to five months. The charter party was signed on behalf of the plaintiff by Maritime Overseas Corporation, its duly authorized agent. The party chartering the ship was stated in the charter party to be Stearns and Foster Company of Lockwood and Cincinnati, Ohio, and the charter party purported to be signed on its behalf as follows: 'Everest Shipping Corporation, as agents for Stearns & Foster Company, F. V. Grauds, President'.

 The defendant, The Stearns & Foster Co., Inc. (hereinafter called 'Stearns & Foster') is an Ohio corporation engaged in the business of manufacturing and selling bedding and mattresses. It has never been in the shipping business. The evidence is clear, and the Court finds as a fact, that Stearns & Foster never authorized the execution of the aforesaid charter party.

 The circumstances which led up to this situation involve an unusual cast of characters. The first is the defendant James E. Stearns who, at the time of the execution of the charter party, was twenty-five years of age, a young man of engaging personality, but apparently devoid of both a sense of responsibility and an appreciation of ethics. Young Stearns was distantly related to certain officials of Stearns & Foster and is a descendant of one of the founders of this Company. He apparently had been well educated and was of average intelligence. After he was graduated from college, he served for a brief period in the Navy, and then took a job as a salesman in the New York office of Stearns & Foster. He held this job for about two years, leaving their employ in the early part of 1951. He then embarked, with a partner, upon the operation of a dance studio. This, however, did not continue for long. At the time of the incidents involved in this lawsuit, he was unemployed and living on the income of a trust fund which furnished him approximately $ 300 a month.

 During the latter part of April, 1953, young Stearns met William L. Spaniard who, at the time, was working as manager of the chartering department of the defendant Everest Shipping Corporation, a New York Corporation with only a few employees, which was engaged in the business of being a ship broker and of operating steamships. Young Stearns told Spaniard that he would like to get into the shipping business and asked his advice.

 Spaniard then arranged for a luncheon conference on or about May 4, 1953 between Stearns, himself, and George C. Kiskaddon, an employee of Harry T. Randle who, under the name of Harry T. Randle & Co., was engaged in the business of steamship broker. Kiskaddon was a man of many years experience in the shipping business.

 Stearns advised Kiskaddon and Spaniard of his connections with Stearns & Foster, giving them to believe that he was actively connected with it, and that he and his family controlled the Company. He repeated his desire to get into the shipping business. There was some discussion of the business procedures involved in chartering ships, securing cargos, etc. Stearns was advised by Kiskaddon at this luncheon that it would be practically impossible for him as an individual to engage in the business of chartering ships, but that if Stearns & Foster, an established and reputable corporation, wished to do so, this could be accomplished without too much difficulty.

 Shortly thereafter Stearns advised Spaniard and Kiskaddon that Stearns & Foster wished to go into the shipping business, that he was authorized to represent that corporation, and that a ship should be chartered.

 Thereupon, Kiskaddon, acting as an employee of the defendant Randle, and within the scope of his authority as such, communicated with Mr. Feder of Maritime Overseas Corporation, a firm of ship brokers who were acting as managing agents of the plaintiff, and asked if the plaintiff had a ship which it wished to charter to a company which was described as a first class charterer. Plaintiff's representative indicated that it did have such a ship, and on May 7, 1951, all of the significant terms of the charter were orally agreed upon between Kiskaddon and Feder, subject to plaintiff's approval of the proposed charterer. Kiskaddon then stated that the charter was to be taken by Stearns & Foster and that he was acting on their behalf.

 On May 8, 1951, plaintiff's agent, having ascertained from a Dunn & Bradstreet report that Stearns & Foster was a substantial and financially sound corporation, accepted that Company as the charterer and confirmed the terms of the charter in a letter to Harry T. Randle & Co.

 Thereafter, the office of Harry T. Randle prepared the charter party, had it executed on behalf of the plaintiff as the owner of the ship, and sent it to the Everest Shipping Corporation for execution on behalf of the charterer. Before Everest Shipping Corporation signed the charter party, Spaniard asked young Stearns for some authorization which would give them power to sign it on behalf of Stearns & Foster. Young Stearns thereupon personally dictated and signed a letter which was written on the letterhead of 'Freedman & Slater, Inc., International Freight Forwarders & Customs Brokers' at whose office he apparently was making his headquarters. This letter read as follows:

 'May 14, 1953

 'Everest Shipping Company

 25 Broadway

 New York, N.Y.

 'Gentlemen: Attention:

 Mr. William Spaniard

 'This is to advise you of the existence of an Agency on your part to act in the interests of the Stearns & Foster Company and myself, to the same degree and authority as if action were personally taken.

 'Exact transaction must at all times be authorized by this person; specific arrangements made at time of decision.

 'Very truly yours,

 '(s) James E. Stearns 'James E. Stearns, Chairman'

 Neither at the time of the writing of this letter, nor at any time thereafter, or heretofore, had young Stearns been Chairman of Stearns & Foster nor, apparently, of any other company. He had received no authorization from Stearns & Foster to represent them or to write the letter to Everest Shipping Company. He admitted personally composing and dictating the letter. He stated that he intended the letter to mean only that Everest Shipping Corporation could represent him personally and that it was given to them so that they would have some assurance that if Stearns & Foster later went into the shipping business, Everest Shipping Corporation would be protected. He, however, had no power to give them this assurance and the letter did not give such assurance, nor was it limited to any such assurance. For a young man with a colledge education and average intelligence to endeavor by this far-fetched explanation to explain away the authorization contained in this explicit letter makes him unworthy of belief.

 On May 15, 1953, Everest Shipping Corporation, having received the aforesaid letter from young Stearns, through its President, Fricis V. Grauds, and with the approval of young Stearns, signed the charter party in the name of Stearns & Foster and affixed their signature thereto as the agent for Stearns & Foster.

 Young Stearns thereupon orally authorized Everest Shipping Corporation to act as agent for Stearns & Foster in the management of the ship and authorized Kiskaddon to negotiate for charters for the ship. Kiskaddon testified that he was acting as the broker for Stearns & Foster.

 The SS Akko was tendered by the plaintiff to Everest Shipping Corporation, purporting to act as agent, pursuant to said charter party, at Norfolk, Virginia, at 7:30 A.M. on June 11, 1953, and was accepted and then departed for Brazil with a cargo of coal at 5:00 A.M. on June 12, 1953. Everest Shipping Corporation paid the first installment of rental out of its own funds. The cargo charter party had been negotiated by Kiskaddon of Harry T. Randle & Co. and the cargo charter party was executed by Everest Shipping Corporation as agent for Stearns & Foster.

 Thereafter, two other cargo charters involving the Akko were similarly executed by Everest Shipping Corporation, as agent for Stearns & Foster. When payments were received for charter parties by Everest Shipping Corporation, they deposited them in an agency account in their own name, with no indication of any interest of Stearns & Foster therein, and then paid out the sum of $ 2,500 therefrom for the personal account of young Stearns.

 Six other time charters on other vessels were also executed by Everest Shipping Corporation, purportedly as agent for Stearns & Foster, during the latter portion of the month of May and up through the latter part of June, 1953, without any authority to execute such charters from Stearns & Foster. A number of cargo charters were executed with respect to these vessels by Everest Shipping Corporation, either as agent for Stearns & Foster, but without authority to act for that Company, or as agent for Maryland Steamship Corporation, a Liberian corporation which young Stearns either intended to purchase or to organize, but which was never purchased or organized by him. These latter cargo charters were negotiated by Kiskaddon. Only the SS Akko is involved in this particular action.

 Neither Spaniard nor Kiskaddon communicated with Stearns & Foster to ascertain directly from that Company whether young Stearns had authority to represent it. However, an employee of the Frank B. Hall & Co., Inc., insurance brokers, wrote to Stearns & Foster in Cincinnati, Ohio, on June 1, 1953 seeking insurance business and stating in part:

 'It has come to our attention that you have chartered two or three ocean going vessels and we are wondering whether you have given consideration to insuring Time Charterers liabilities.'

 The Treasurer of Stearns & Foster replied to this letter, under date of June 3, 1953, as follows:

 'We have your letter of the 1st stating that it had come to your attention that we have chartered 2 or 3 ocean-going vessels. We do not understand this for as far as we know we have not chartered even so much as a rowboat. If whatever called your attention to this is available, we would like to see it as we can not understand how this misinformation could be circulated.'

 On June 10, 1953, Stearns & Foster received a second letter from Frank B. Hall & Co., Inc. which stated, in part, as follows:

 'We understand Mr. Stearns is presently in New York conferring with the Everest Shipping Company which is acting as Agents for the Maryland Steamship Co. This latter company we understand is an affiliate or subsidiary either of the Stearns & Foster Co. or another subsidiary known as Stearns Shipping Co. Either of the Stearn organizations time chartered a number of ships and we are informed sub-chartered these on identical terms for operation by Everest Shipping Co.

 'We have been asked to submit for consideration an annual Open Cover to protect the liabilities of all parties at interest and we expect that Mr. Stearns will make his decision in this regard during his present visit to New York.

 'We regret having disturbed you unnecessarily since at the time of writing our letter we had already been approached by your Agents in New York. At the time we were dealing with Everest Shipping Co. as principals so that the relationship with The Stearns & Foster Co. was not immediately apparent.'

 The Treasurer of Stearns & Foster replied to this letter, under date of June 11, 1953, as follows:

 'We appreciate very much your letter of June 8 with further reference to the ship leasing mystery. The daily developments have proven very interesting and it will not be long before someone in the business of chartering ships will be due for a rude awakening if they are banking on this company to stand behind their contract. We ...


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