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CHRISTMAN v. MARISTELLA COMPANIA NAVIERA

December 20, 1971

George V. CHRISTMAN et al., Plaintiff,
v.
MARISTELLA COMPANIA NAVIERA, Defendant, v. BOYD, WEIR & SEWELL, INC., Third-Party Defendant


Brieant, District Judge.


The opinion of the court was delivered by: BRIEANT

MEMORANDUM

BRIEANT, District Judge.

 Plaintiff ("Christman"), a New York partnership, engaged as a sugar dealer and broker, brought this action for breach of a charter party against defendant ("Maristella"), a Panamanian corporation, controlled by Greek shareholders and owning and operating the Greek flag, American built, Liberty ship, S.S. ERETREA. The Court has jurisdiction of this maritime contract. 28 U.S.C. § 1333.

 Defendant asserts a third-party complaint against a broker for negligence and for having acted in excess of its authority in the negotiation and execution of the charter party. Third-party defendant, Boyd, Weir & Sewell, Inc. ("Boyd") is a New York corporation. This Court has jurisdiction of the third-party complaint of Maristella against Boyd not by reason of admiralty or maritime jurisdiction, but rather by reason of diversity of citizenship, under 28 U.S.C. § 1332. A prior decision to this effect has been made by MacMahon, J., Christman v. Maristella Compania Naviera, D.C., 293 F. Supp. 442, in this action, and filed November 26, 1968.

 Plaintiff has made a cross-claim against Boyd for breach of expressed and implied warranties of authority as an agent to sign for defendant. Those claims are within the admiralty and maritime jurisdiction of this Court under 28 U.S.C. § 1333, as has here also been determined by MacMahon, J. in his aforesaid decision.

 In August, 1963, plaintiff was the owner of 10,000 tons of bagged raw sugar located in Indonesia (Java). On September 3, 1963, it sold the sugar to Farr, et al., for delivery in Chile, pursuant to a contract (Plaintiff's Exhibit 26) requiring shipment prior to November 15, 1963. Plaintiff retained the New York firm of Victor B. Benham, acting through the witness Rohrback, for the purpose of negotiating the charter of a ship to carry the sugar from Java to Chile. Benham at all times hereinafter referred to was the broker or agent of plaintiff, and represented the cargo in search of tonnage.

 On September 5, 1963, Benham telephoned to various New York firms engaged in the chartering of ships, offers in behalf of a "first-class New York sugar house", name withheld, to charter a ship for this carriage. Among those called was Boyd, a reputable ship and charter broker, long established in New York City. This corporation had been founded originally through the efforts of Howard Houlder & Partners, Ltd. of London ("Houlder"), and conducted all of Houlder's business in the New York market as cabling correspondents of Houlder. It also engaged in transactions for its own account with others than Houlder. Houlder's letterhead and published offering sheets made reference to Boyd as Houlder's "correspondents" in New York, and this relationship was generally known on the Baltic Exchange, and in the shipping industry. Houlder had for many years acted as what is known as a "London Cabling Broker" in negotiations to fix ships offered for charter on the Baltic Exchange in London for the carriage of cargo offered for transportation in New York. Houlder is one of a small number of London ship brokers, specializing in this field. Their market function is to act as intermediaries between ship owners or ship owners' brokers, or both, on the one hand, and American charterers through their chartering brokers, on the other hand. Such cabling brokers ordinarily work with an exclusive New York correspondent. Boyd was Houlder's correspondent and had been so for forty years.

 The customary procedure of Houlder and other such cabling brokers on fixing is to issue a fixture letter detailing the terms on which the vessel is fixed and ending with advice that the charter will be signed in New York and copies of the charter party issued as soon as received. As a matter of long standing custom in this regard, authority from London to fix is considered as including also the authority to sign the charter party in New York. The status and customary procedures of London cabling brokers in general and Houlder in particular as respects the foregoing procedures and insofar as concerns Boyd are well known and understood among brokers, ship owners and charterers engaged in transactions on the Baltic Exchange and the charter markets in New York.

 Boyd informed Houlder by cable of the desire to effect a charter at $7.50 per long ton freight, and Houlder listed the cargo as available in an offering sheet which it distributed once or twice a day on the Baltic Exchange and elsewhere in London.

 Matthews Wrightson Burbidge, Ltd. ("Matthews") is also a reputable and established ship and charter broker, active on the Baltic Exchange in London. It was, in September, 1963, acting for the vessel S.S. ERETREA in some capacities at the instance and request of the ERETREA's London managing agent, Morland Navigation Co. (London) Ltd. ("Morland"), a concern of which the witness, Captain Michael M. Maris, is director. The principal shareholder and director of defendant Maristella was a Greek national referred to as "Papanicolaou", who at all relevant times was traveling in Switzerland or elsewhere, although in general communication by telephone with Captain Maris.

 The Houlder offering sheet listing the cargo (Plaintiff's Exhibit 33) came to the attention of Captain Maris at a time when the S.S. ERETREA was bound to Kaohsiung, Taiwan (Formosa), to discharge and terminate a current time charter which Captain Maris expected to complete on October 2, 1963 and which was finally completed on October 10th, due to delay in discharging cargo in Formosa. Captain Maris thought that the cargo listed by Houlder would be advantageous for the S.S. ERETREA. He viewed it as a "ballasting" cargo which would allow the ship to earn some revenue and in the course of the carriage to place herself on the west coast of South America where, hopefully, highly profitable cargoes, including, but not limited to fishmeal, could be obtained, and he believed that the ship would thereby benefit by taking such a voyage at a competitive price and limited profit.

 He consulted with defendant's controlling stockholder or director in Switzerland, and then authorized Matthews to negotiate through Houlder for this charter.

 Thereafter, negotiations concerning the charter proceeded on a route which may be summarized as follows: Benham's employee Mr. Rohrback, spoke by telephone or in person to Boyd's employee, Mr. Thayer, who cabled Houlder's Mr. Clark, (since deceased) who spoke with Matthews' Mr. Neville, who in turn spoke with Captain Maris, who referred the results of his discussions, in most instances, to the controlling shareholder of Maristella, hereinafter "Owner", sojourning in continental Europe.

 This procedure was an open invitation to misunderstanding and the creation of variances, and the negotiations must now be reconstructed to determine the liabilities and responsibilities of the parties, in view of what took place in the course of fixing the S.S. ERETREA.

 Houlder, Matthews, and Maris, are all members of the Baltic Exchange in London. As such, they are bound by its rules, customs and traditions, and persons dealing with and through the Baltic Exchange are to be deemed familiar with its methods of work and its rules and regulations. Under the rules and customs of the Baltic, negotiation is done by brokers acting by cable or telex, by telephone, by brief handwritten notes, and by face to face conversations of which they make pencil memoranda. There is no "Statute of Frauds", and no requirement for any writing in order to make a firm contract binding on all parties. A "fixture", or firm agreement with respect to the chartering of a vessel, binding on the charterer and the owner, arises when a broker, dealing on the Baltic, says, either by a nod of the head or in words or substance, that the vessel is fixed, with reference to the most recent offer or counter-offer of the other party to the negotiation. Speed is essential, and any matter not specifically traded is to be determined with reference to the customs and usage of the particular trade, in this case, the sugar trade, and the forms of charter party used in that trade.

 As a result of instructions which Captain Maris gave to Matthews and which were in turn communicated to Houlder, Houlder advised Boyd that the S.S. ERETREA was interested in the Benham cargo. On September 17, 1963, Mr. Rohrback telephoned Mr. Thayer and made a firm offer to charter the S.S. ERETREA for this Java sugar voyage and set forth terms, including the proposed freight rate of $8.00 per long ton. Terms not specified to Thayer were expressly stated to be those of the printed "Cuba-Europe 1925" form of charter used in the sugar trade. The offer was transmitted by cable to Houlder and from Houlder to Matthews and from Matthews to Morland and rejected, because the freight rate offered was unsatisfactory. Morland countered along the same channels of communication with an offer to carry for $9.50 per long ton and named certain other conditions. This counter-offer advised an unwillingness to discuss detailed terms of the charter party until agreement had been reached on the freight rate.

 At some later point in the negotiations, at the request of defendant, it was agreed that the THORA DAN charter, a charter agreement between strangers, executed through Boyd's office on a modified Cuba-Europe sugar form, would be the basis for the charter as to all matters not specifically traded, but "delete inapplicables". I find that the THORA DAN charter referred to is the original THORA DAN charter, which is in evidence as Plaintiff's Exhibit 4. It is claimed that during the trading Captain Maris may have had in his possession a different, incomplete and altered instrument, purporting to be the THORA DAN charter, which was marked as Defendant's Exhibit F for identification, but I find that there is no explanation in the record as to how he happened to be in possession of an incomplete or different copy. Having selected the THORA DAN as a trading basis or model, defendant and its agent were under a duty to have a complete and correct copy, rather than an altered photostat and there was no way by which plaintiff or its agent could have known that defendant's agent was negotiating with respect to an incomplete or improper copy. I find that defendants contracted with reference to the actual THORA DAN charter, plaintiff's Exhibit 4, whether or not they were in possession of an accurate or complete copy, and subject to their further proviso "delete inapplicables".

 At the conclusion of approximately eight days of negotiations, a conference was held on the Baltic Exchange in London, starting at about noon on September 25, 1963 and thereafter adjourned to a nearby pub. Attending the conference were Captain Maris of Morland, Mr. Clark, since deceased, of Houlder, and Mr. Neville of Matthews. The purpose of the meeting was to clarify the terms upon which the owner would charter. At this meeting Captain Maris authorized Houlder to fix the S.S. ERETREA on terms discussed at the meeting and to negotiate respecting modification of charterer's last offer as to freight, and to fix the vessel upon reaching agreement. Immediately following the conference in London on September 25th, Houlder sent Boyd a cable accepting the previous offer of the plaintiff as transmitted by Boyd from Benham to Houlder, subject, however, to exceptions. In that message, the expression "OTHERWISE THORA DAN . . . ALSO DELETE INAPPLICABLES THORA DAN" was used (Third-party Defendant's Exhibit 19).

 Plaintiff, through Benham, to Boyd, responded to Houlder for transmission to Matthews and thence to Morland with additional terms that would make lighthouse and hospital dues payable for owner's and not charterer's account and suggesting a rate, if only one loading and discharging port were used, of $9.75 per long ton rather than $10.00 as demanded by owner.

 Thereafter, Morland agreed to the change respecting lighthouse and hospital dues but insisted on the $10.00 basic rate for freight. Charterer, again following the same channels of communications which were used throughout the negotiations, finally agreed to the $10.00 rate. Mr. Clark of Houlder sent a cable received at 6:50 P.M. in New York City on September 25th, confirming these negotiations and confirming that a fixture had been made at the $10.00 freight rate.

 On the following day, Mr. Thayer of Boyd met with Mr. Rohrback of Benham in New York City and went over the terms of the fixture from their respective notes, and in accordance with custom of the ship brokering industry, Rohrback prepared a charter party. At the same time, Houlder sent a letter to Matthews confirming the fixture and listing the terms of the charter party. This letter is referred to as the "fixture letter" and is dated September 26, 1963 (Defendant's Exhibit A). No copy was received by Boyd until October 3, 1963. See Exhibit 30. The fixture letter, Exhibit A, states, in closing:

 
"Charterparty will be signed in the States by our New York friends on Owners' behalf and copies handed to you on receipt."

 Reference to "our New York friends" means, and was known to Matthews and Maris to mean Boyd.

 On October 1, 1963, the charter party prepared by Benham was signed by the witness Langben, President of Boyd, "for and on behalf of Maristella Compania Naviera of Piraeus by cable authority from Howard Houlder & Partners, Ltd., Boyd, Weir & Sewell, Inc., brokers". Much controversy arose on the trial of this action as to whether or not Langben, acting for Boyd, had the authority to sign the charter party in New York for the owner. On all the facts, I find that Houlder, acting through Boyd, had authority to perform all the acts and make all ancillary agreements customarily performed by it in its capacity as a broker or intermediary pursuant to usual custom and practice. As stated in Argersinger v. MacNaughton, 114 N.Y. 535, 21 N.E. 1022 "the general rule is that an agent employed to do an act is deemed authorized to do it in the manner in which the business intrusted to him is usually done". The Argersinger doctrine has been followed ...


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