697 F.2d 1 (1st Cir. 1982), 82-1336, Oxford Shipping Co., Ltd. v. New Hampshire Trading Corp.

Docket Nº:82-1336, 82-1381.
Citation:697 F.2d 1
Party Name:OXFORD SHIPPING CO., LTD., Plaintiff, Appellant, v. NEW HAMPSHIRE TRADING CORP., et al., Defendants, Appellees. OXFORD SHIPPING CO., LTD., Plaintiff, Appellee, v. NEW HAMPSHIRE TRADING CORP., et al., Defendants, Appellees. Avon Trading Corp., Defendant, Appellant.
Case Date:December 28, 1982
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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697 F.2d 1 (1st Cir. 1982)

OXFORD SHIPPING CO., LTD., Plaintiff, Appellant,

v.

NEW HAMPSHIRE TRADING CORP., et al., Defendants, Appellees.

OXFORD SHIPPING CO., LTD., Plaintiff, Appellee,

v.

NEW HAMPSHIRE TRADING CORP., et al., Defendants, Appellees.

Avon Trading Corp., Defendant, Appellant.

Nos. 82-1336, 82-1381.

United States Court of Appeals, First Circuit

December 28, 1982

Argued Oct. 7, 1982.

Rehearings Denied Jan. 20, 1983.

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Frank H. Handy, Jr., Boston, Mass., with whom Kneeland, Kydd & Handy, Boston, Mass., was on brief, for Oxford Shipping Co., Ltd.

John P. Griffith, Nashua, N.H., with whom Hamblett & Kerrigan, Nashua, N.H., was on brief, for appellant Avon Trading Corp.

George J. Basbanes, Lowell, Mass., for New Hampshire Trading Corp. and Frederick W. Gendron.

Richard A. Dempsey, Boston, Mass., with whom Leo F. Glynn and Glynn & Dempsey, Boston, Mass., were on brief, for appellee Tager S.S. Agency.

Before PECK, [*] Senior Circuit Judge, CAMPBELL and BREYER, Circuit Judges.

BREYER, Circuit Judge.

Oxford Shipping Co., Ltd. ("Oxford"), is a subsidiary of a large Hong Kong commercial firm. Oxford's assets consist principally of one cargo ship, the "Eastern Saga." Oxford claims that it was hurt when its ship was seized by South Korean authorities as a result of a scheme to cheat a Korean firm, Yulsan. Yulsan had bought about 20,000 tons of scrap metal, which applicable bills of lading represented to be aboard the "Eastern Saga," but the ship actually contained only about 17,000 tons of metal.

Oxford brought suit to recover damages in New Hampshire federal district court. It sued Avon Trading Corporation ("Avon"), the shipper that used the "Eastern Saga" to transport the metal; New Hampshire Trading Corp. ("NHT"), a scrap dealer that sold scrap to Avon; Frederic Gendron, the president of NHT; and Tager Steamship Agency ("Tager"), an agent retained to issue bills of lading and perform other tasks associated with loading and shipping the scrap.

Since Oxford itself seems to have been innocent of wrongdoing (although the captain and crew of its ship may have known of the plot), while several of the defendants seem to have been guilty of conduct ranging from simple breach of fiduciary duty to what approaches criminal behavior, one might believe at first glance that it would be fairly easy for Oxford (the company and its shareholders) to recover for the harms suffered. The record reveals, however, a highly complicated set of legalistic arguments, made by the defendants' lawyers and by Oxford's lawyers in response, that led the district court to conclude that the defendants were entitled to judgment on all counts. Oxford appeals. Our review of the case convinces us that the law should, and does, correspond with one's elementary sense of justice: namely, as between Oxford and most of these defendants, the defendants rather than Oxford and its shareholders should pay for the damage caused.

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I

The complex set of facts underlying this litigation can be simplified as follows. Avon contracted in 1978 to sell roughly 20,000 tons of scrap metal to Yulsan. Avon subchartered the "Eastern Saga" from Transamerica Steamship Corp., which had previously subchartered the vessel from several other firms which in turn had chartered it from Oxford. The evidence before the district court indicated that Avon tried to cheat Yulsan by only loading some 17,000 tons of scrap on board. In particular, after buying an initial quantity of scrap elsewhere, Avon purchased roughly 7,000 tons of scrap from NHT, but represented the amount as over 10,000 tons. Avon used various false documents to conceal the fraud, including bills of lading issued by Tager that overstated the weight of the scrap by several thousand tons. In issuing the bills of lading, Tager relied upon a letter signed by NHT's Gendron concerning the scrap weight, but Gendron testified at trial that the letter was written by Avon officials and signed by him at their behest, and that he was not aware that it misrepresented the amount of scrap sold by NHT to Avon.

The captain and first officer of the "Eastern Saga," who were agents of Oxford, probably knew that the ship was carrying too little scrap, for they were approached by Avon officials at several points with schemes to cover up the shortfall by taking on water ballast and dumping it in South Korea while the ship was being unloaded. They refused to go along with the plot, but they do not appear to have informed either their superiors at Oxford or Yulsan itself of what was going on. When the ship reached South Korea the short-weighting was quickly discovered, and Yulsan had the "Eastern Saga" seized by South Korean port authorities. The fact that Yulsan had accepted the bills of lading, however, apparently triggered automatic payment through letters of credit, so Yulsan appears to have had to pay for the missing metal. Yulsan began litigation in South Korea against Oxford and other parties to recover the value of the shortfall, and Oxford was able to extract its ship in the interim only by posting a security bond worth approximately $200,000.

Oxford began its suit in federal district court to recover for various losses incurred by the seizure of its ship and for the potential liability created by Yulsan's claims against it. Oxford sought to recover from Avon, NHT, Gendron, and Tager for breach of contract, negligence, and fraudulent misrepresentation in connection with Avon's attempted fraud against Yulsan. After a four-day bench trial, the district court entered judgment against Oxford on every claim.

II

Claims against Avon

Oxford's claims against Avon rest primarily upon its contention that, in providing false information for the bills of lading, Avon breached its contractual obligations to Oxford. We believe...

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