The opinion of the court was delivered by: GERRY
Because the soy wasn't bagged,
On this point the lawyers gagged:
Demurrage or dead freight?
Were that all that was involved,
I might avoid appellate censure.
Alas, also on me has devolved
The question of joint venture.
The defendants maintain that it was plaintiff, not defendants, who breached the liner note.
But, the defendants argue, even if they breached the booking note, their breach would at most give rise to a claim for demurrage; but no demurrage may even be collected due to the Hellenic Pride's haste in leaving the Port of Camden. Moreover, defendants state, no joint venture was ever created between the defendants, nor was an agency created. Therefore, the plaintiff has no claim against any party except Commodities International.
This matter was tried without a jury on June 25, 26, 27 and July 2, 1984. The following shall constitute the court's findings of fact and conclusions of law.
1. Plaintiff Hellenic Lines, Ltd. (hereinafter "Hellenic Lines") is a Greek corporation with headquarters in Piraeus, Greece, and was at all relevant times the owner of the vessel M/V Hellenic Pride.
2. Defendant Process Supply Co., Inc. ("Process Supply") is an export trading company located in Muncie, Indiana.
3. Defendant Melvin C. Fields ("Fields") was president of Process Supply at all times relevant to this action.
4. Defendant Edward M. Mezvinsky ("Mezvinsky") is an attorney licensed to practice law in Pennsylvania and is also active in various business and civic ventures. Mezvinsky is the owner of defendants Commodities Bagging & Shipping, Ltd. ("Commodities Bagging") and Sky Ventures, Ltd. ("Sky Ventures").
5. Commodities Bagging was a newly formed corporation at the time the transactions underlying this lawsuit took place, and its intended purpose was to bag commodities for shipment overseas.
6. The sole involvement of defendant Sky Ventures in this case was as the agent in New Jersey for Commodities Bagging; at the time of the events underlying this suit, Mezvinsky believed that Commodities Bagging itself had not yet obtained authority to do business in New Jersey.
7. Defendant Commodities International, Inc. ("Commodities") was at all relevant times an unincorporated business entity with a principal place of business in Des Moines, Iowa. Commodities became incorporated under the laws of Iowa on February 19, 1982, but is now apparently defunct. Commodities is in default in this lawsuit.
8. The owner and principal of Commodities was Harold Eugene Pietsch ("Pietsch"), who has not been named as a defendant in this action.
B. Process Supply's Egyptian Venture
10. Process Supply was to be paid for the December shipment by a letter of credit to be issued through the UBAF Arab American Bank. The initial beneficiary on the letter of credit was the Fortrado Trading Co.; but on October 27, 1981, the letter was partially transferred to Amerex. On November 6, 1981, the letter was transferred again, to Process Supply. However, the letter of credit came to Process Supply in nontransferable form; that is, Process Supply could not further assign its interest to any other party. Moreover, Process Supply believed that the letter of credit was only valid until December 11, 1981, by which date Process Supply would have to present an on board bill of lading for the soybean meal in order to receive payment.
C. Commodities International Enters the Picture
11. Process Supply had, by early October, therefore, a contract to ship bagged soybean meal; but at the time it entered the contract, it had neither soybean meal, nor bags, nor a means of getting the bagged meal to Alexandria. Process Supply initially contacted the firm of Central Soya of Fort Wayne, Indiana, to see if the latter could supply the bagged meal. Central Soya, as its name implies, had no shortage of soy meal, but it did not have bagging facilities. Central Soya suggested that Process Supply contact Mr. Pietsch of Commodities International. Central Soya apparently believed that Mr. Pietsch's company had some expertise in the bagging and export of agricultural commodities.
12. Process Supply heeded Central Soya's suggestion and contacted and solicited a bid from Commodities International. It would appear that for the price of $337 per ton, Pietsch was willing to supply the 2,000 metric tons of soy in bagged form and make all arrangements and bear all expenses for shipment to Alexandria from the Port of Camden. However, Pietsch's offer was contingent upon Process Supply's ability to assign to Pietsch a letter of credit. (Defendants' Exhibit B.) Process Supply accepted Pietsch's offer. At the time of the parties' agreement, October 20, 1981 (Defendants' Exhibit C), Process Supply did not yet know its letter of credit would be nontransferable; indeed the letter had not yet been transferred to Process Supply.
13. As this transaction stood on October 20, 1981, then, Process Supply was to make a profit of $3,000 on the December shipment ($340 minus $337, multiplied by 2,000, and divided 50/50). Fields testified that he expected profits to increase on future shipments or future ventures. Pietsch was to make as a profit the difference between $337 per ton and the cost of acquiring the soy, bagging it, and shipping it.
14. In theory, Process Supply's arrangement with Pietsch was designed to eliminate the need for any further participation by Process Supply other than that of supplying Pietsch with capital. All responsibility for bringing about the shipment was to rest with Pietsch and Commodities International. Shortly after the October 20, 1981 agreement, therefore, Pietsch traveled to Camden to inspect the port's facilities for the bagging and loading of grain. While there, Pietsch came into contact with Edward Mezvinsky through the latter's partners in Sky Ventures. Pietsch asked Mezvinsky if he (Mezvinsky) could assist in finding space at the port for Commodities International to bag the meal and in obtaining stevedoring services. Mezvinsky agreed to provide Pietsch with the requested assistance.
15. It would seem that Pietsch, because he had no experience in bagging and exporting on the east coast, had sought out someone who had contacts in the Port of Camden and was knowledgeable about its practices. That person, Pietsch was led to believe, was Mezvinsky.
Mezvinsky's motivations for initially dealing with Pietsch are less clear. Mezvinsky testified that he was very much interested in promoting the east coast generally and Camden particularly as a viable situs for the export of grains. He stated that he believed exporters typically bypassed the ports of the east coast in favor of those in the Gulf of Mexico. Mezvinsky believed that by successfully assisting Pietsch he might send a message to other shippers.
Mezvinsky stood personally to gain from heightened activity in Camden since his companies, which were set up to bag commodities, were in a start-up phase. Although the court has no reason to doubt Mezvinsky's wider ambitions for the port and his companies, neither can the court rule out that, for Mezvinsky, Pietsch from the outset represented a potential source of business and profit for his bagging operations.
16. Also in late October 1981, Pietsch began looking for an overseas vessel to carry the soy meal. He contacted Gary Campbell, a shipbroker in Montreal, Canada, and asked Campbell to locate a ship ready to sail by December 10. Mr. Campbell then contacted Henning Isbrandtsen, a shipbroker in New York, informed him of the type of cargo Pietsch sought to ship and authorized Mr. Isbrandtsen to seek a vessel able to sail by December 10. Isbrandtsen advertised the cargo on the TNT News Service.
Isbrandtsen was contacted by Hellenic Lines, the plaintiff, and told that Hellenic Lines was interested in carrying the bagged soy meal. Negotiations ensued between Hellenic Lines and Pietsch, with Isbrandtsen and Campbell acting as middlemen and doing all of the talking, at least up until the final agreement (the liner booking note). The negotiations appear to have occupied several weeks. The product of these negotiations (the November 25, 1981 liner note) will be discussed in more detail below.
F. The Best Laid Plans . . . I
17. On November 6, 1981, Mr. Fields realized that Process Supply's letter of credit was nontransferable. Since Process Supply's agreement with Pietsch was contingent on the assignment of letter of credit proceeds to Pietsch, the letter of credit's nontransferability presented the parties with a problem. Pietsch made it clear to Fields that he did not have the capital to finance the purchase of soy meal from Central Soya, and that Central Soya would not ship without surer financing. At that point, Fields could have cancelled his arrangement with Pietsch, but he did not. Fields explained that, having committed himself to provide Pietsch with a source of capital and a business opportunity, he felt obligated to go through with the deal. Equally important to Fields was the fact that Pietsch had already obtained a price commitment from Central Soya on the 2,000 metric tons of meal. Rather than deal anew with Central Soya and risk the possibility of a rise in the commodity's price, Fields decided to stick with Pietsch and Commodities International, if a new means of financing could be worked out.
19. On November 23, 1983, Pietsch, Fields and Mezvinsky met once again, this time at the offices of Process Supply in Muncie, Indiana. The parties telephoned Central Soya, which agreed to ship the meal upon the receipt of a cash advance of $150,000, with the balance of approximately $250,000 to be paid from the proceeds of Process Supply's letter of credit. Pietsch, Fields and Mezvinsky were each to advance $50,000 toward the initial cash payment, and each was to personally guarantee one-third of the balance owed. When it became apparent that Pietsch could not come up with his cash share, Central Soya agreed to ship the grain upon receipt of $100,000, representing $50,000 shares from Fields and Mezvinsky only.
20. Pietsch testified, and the court finds, that at the Muncie meeting the parties also discussed the possibility of future shipments for the remaining eleven months of Process Supply's Egyptian contract.
21. On November 23, Fields wrote a $50,000 check to the order of Central Soya (Defendants' Exhibit F). Mezvinsky returned to Philadelphia, and, on November 24 or November 25, he met with William Hawkins, Assistant Vice President of the Continental Bank. Following their discussions, the bank agreed to loan Mezvinsky $50,000 at the prime rate plus 1/2%, with the loan repayable in 33 days. An internal memorandum signed by Hawkins (Plaintiff's Exhibit 26) characterized the loan as one to be used by Mezvinsky "in order to make a business investment." In his testimony, unfortunately, Hawkins was unable to recollect what, if anything, Mezvinsky had said about the "investment." On November 25, 1981, a wire transfer of $50,000 was made by the Continental Bank, and Central Soya's account in Fort Wayne, Indiana, was credited in this amount. (Plaintiff's Exhibit 23.)
22. On November 23, 1981, Central Soya prepared two sales contracts, each covering 1,000 metric tons of soy meal. The contracts list the "Buyer" of the commodity as follows:
Commodities Bagging & Shipping, Ltd.
Commodities International, Inc.
Process Supply Company, Inc.
Michael C. Fields, personally
Eugene H. Pietsch, personally
Edward M. Mezvinsky, personally.
The contracts are signed for the "Buyer" by Mr. Fields and further provide that the goods are to be shipped to Commodities Bagging at the Broadway Terminal, Port of Camden. (Defendants' Exhibits G and H.) Invoices executed by Central Soya on November 25, the date the soy meal was loaded for rail transport to Camden, name the consignee as Process Supply Company and also make reference to Commodities Bagging. (Defendants' Exhibits K and L.)
23. It was anticipated that once the soy meal arrived in Camden, Pietsch would meet it and begin the bagging operation.
G. The Liner Booking Note
24. Meanwhile, throughout November 1981, negotiations progressed for the ocean passage of the bagged soy meal. At some point, the treasurer for Hellenic Lines made a rather perfunctory check into the financial status of Commodities International, with which Hellenic had never before dealt. The treasurer called Sam McHose, a financial officer of Pietsch's bank in Iowa, the Nevada National. McHose apparently said little but gave a vaguely positive reference regarding Pietsch's company.