Compania De Astral, S. A. v. Boston Metals Co.

• Decision Date: 27 July 1954
• Docket Number: No. 150,150
• Citation: 107 A.2d 357,205 Md. 237
• Parties: , 49 A.L.R.2d 646 COMPANIA DE ASTRAL, S. A. v. BOSTON METALS CO.
• Court: Maryland Court of Appeals

Page 237

205 Md. 237

107 A.2d 357, 49 A.L.R.2d 646

COMPANIA DE ASTRAL, S. A. v. BOSTON METALS CO.

No. 150.

Court of Appeals of Maryland.

July 27, 1954.

Rehearing Denied Oct. 8, 1954.

William A. Grimes, Baltimore (Ober, Grimes & Stinson and Herbert F. Murray, Baltimore, on the brief), for appellant.

David P. Gordon and Eugene M. Feinblatt, Baltimore (Gordon & Feinblatt, Baltimore, on the brief), for appellee.

Before BRUNE, C. J., and DELAPLAINE, COLLINS, HENDERSON and HAMMOND, JJ.

BRUNE, Chief Judge.

Boston Metals Company (hereinafter called 'Boston'), a Maryland corporation, brought suit in the Baltimore City Court against Compania de Astral, S. A. (hereinafter called 'Astral'), a Panamanian corporation, for breach of a contract for the sale of three vessels. Astral appeared specially and moved to quash the summons and dismiss the suit. This motion was denied by Judge Warnken. After further pleadings the case went to trial before Judge Moser, without a jury, and resulted in a judgment for Boston for approximately $274,000. Astral's appeal brings up both the rulings on the motion and on the question of breach of contract. The latter question turns on the meaning of the contract, under which approval by the United States Government of the transfer of the vessels to the flag of Panama was required and Astral agreed to accept conditions to such approval relating to the 'future use and disposition' of the vessels.

The principal questions at issue are these: (1) Was the contract between Boston and Astral made in Maryland, so that Astral is amenable to suit thereon in this State under Code 1951, Article 23, Section 88(d); (2) if so, is that statute constitutional; and (3) were the conditions imposed by the Maritime Administration on the transfer of the vessels within the scope of those to which Astral assented under the terms of the contract?

There is little, if any, dispute about the facts, which are summarized below.

Boston, the plaintiff-appellee, is a Maryland corporation having its principal office and its yard in Baltimore, Maryland, and is there engaged in the business of buying, selling and scrapping ships. Astral is a Panamanian corporation having its principal place of business in the City and Republic of Panama, and is engaged in the business of exporting bananas from Ecuador to the United States and other countries. It has a selling agent in New Orleans, Louisiana, the Estrella Fruit Selling Corporation (hereinafter sometimes called 'Estrella'), but it has no office in the United States. Prior to the institution of this suit it was not 'doing business' in Maryland within the meaning of Code 1951, Article 23, Section 88. Its contacts with Maryland and its activities and transactions in this State pertained to the contract involved in this case and to the three vessels whose sale constituted the principal subject matter thereof.

In 1946 Boston bought three frigates from the United States Navy. They had been built in Canada during World War II and were relatively long, narrow, fast and of shallow draft. However useful they may have been in wartime, they were not well adapted for peacetime commercial use and would require considerable changes to convert them for such use. After Boston purchased them it thought they might be sold for use as commercial vessels, doubtless at a better price than would have been realized by scrapping them. In 1947 Boston advertised the frigates for sale, but up to January, 1952, it received no firm offer for them. The ships remained in the harbor of Baltimore from 1946 until they were finally scrapped there in 1953.

At some time prior to January 9, 1952, Astral became interested in the possibility of acquiring vessels of the frigate class and converting them for use as banana boats. On that date, Mr. Folke Anderson, of New York, who is described as 'foreign representative' for Astral, submitted an offer on behalf of Astral of $75,000 apiece for Boston's three frigates. This offer was made through a New York ship brokerage firm, W. R. Blackburn & Co., which had these craft on its list of available vessels. This offer was transmitted to Boston, but was rejected as inadequate. Further negotiations followed.

Early in February, 1952, Mr. Gustav E. Petterson, President of Estrella, who also acted as a representative of Astral, came to Baltimore and made a preliminary inspection of the vessels there. On February 6, 1952, Messrs. Petterson and Anderson, acting as representatives of Astral, conferred with officers of Boston and its counsel at Boston's office in Baltimore. A proposed contract was drafted at this conference which provided, among other things: (1) for the sale of the three vessels then in the harbor of Baltimore on an 'as is where is' basis, at the price of $400,000; (2) for for the purchaser to obtain approval of the transfer, with the co-operation of the vendor; (3) for the purchaser to deposit in escrow with a Trust Company in Baltimore a fund of $80,000; (4) for inspection of the frigates by the purchaser, with the right to reject any of them whose condition might be unsatisfactory, subject to the further provision that the rejection of any one of the three would operate as a rejection of all and would terminate the contract; (5) for the delivery of the vessels and bills of sale, and payment of the balance of the purchase price within fifteen days of the signing of the contract or upon obtaining Government approval of the transfer; (6) for returning the moneys remaining in the escrow fund if such approval was not obtainable; and (7) that if the purchaser defaulted in the payment of the purchase price, the amount of the deposit remaining in escrow should be paid to the vendor as liquidated damages. Other provisions dealt with the payment of towing, shifting and drydocking charges for inspection purposes, the payment of a commission to the brokers, the use to which the vessels were to be put, the law to govern the interpretation or construction of the contract, which was to be the law of Maryland, and the retention of title by the vendor and the right of resale in case of default by the purchaser. These latter provisions were either the same or not materially different from those dealing with the same subjects which were embodied in the agreements later executed, and for that reason are not further commented upon at this point.

On the next day, February 7th, Mr. Anderson, accompanied by Mr. Blackburn, conferred with Mr. Anderson's and Astral's counsel in New York at the latter's office. Several changes in the proposed contract were suggested, Boston was advised of them and a further conference was held on February 11, 1952, in New York at the office of Astral's counsel. This conference was attended by Mr. Blackburn, the broker, by counsel for Astral, counsel for Boston, an officer of Boston and Messrs. Anderson and Petterson, as representatives of Astral.

At this conference the proposed contract drafted on February 6th was revised; and, among other changes, it was split into two parts, one of which was dated February 18th and the other February 19, 1952. These two agreements (apart from a notification later referred to) constituted the contract between the parties. They were subsequently executed by Astral in Panama and apparently on the same date, which is not shown but which was prior to February 23, 1952. They were executed substantially simultaneously by Boston at its office in Baltimore on February 23, 1952.

The first agreement (dated February 18) provided for the sale by Boston and the purchase by Astral of 'one or more' of three named frigates then in the harbor of Baltimore on an 'as is, where is' basis, at the price of $400,000 if all three were purchased, $270,000 for two if only two were purchased, and $137,500 for one if only one were purchased. Subsequent provisions called for Astral to inspect the ships within twenty-one days after both parties signed the contract and required Astral to notify Boston within a time limit of its acceptance or rejection of one, two or three of the vessels. Astral had the right to inspect the vessels afloat or on drydock and to 'reject one or more of these frigates if the condition of such is unsatisfactory to the Purchaser.' There were further provisions with regard to the payment by Boston or Astral of the cost of towing, shifting and drydocking the vessels, depending upon the number of them which Astral might reject or accept.

Other provisions of the first agreement required Astral to deposit in escrow the sum of $80,000 with a Trust Company in Baltimore. This deposit was required to be made (and was made) on the signing of the contract by both parties. The fund was to be paid over to Boston, together with other funds to be furnished by Astral necessary to make up the purchase price of the vessel or vessels purchased, on delivery of proper bills of sale for the vessel or vessels purchased 'after Government permission for the transfer has been obtained.' If such permission was not obtained within thirty days of the signing of the contract by both parties, the escrow fund was to be paid over to Astral, less any towing, shifting or drydocking costs chargeable to and not already paid by Astral. The liquidated damages provision on the draft of February 6th was eliminated.

Paragraph 2 of the first agreement provided that 'Permission for change of flag of these frigates to Panama shall be obtained by the Vendor with the cooperation of the Purchaser,' thus reversing the corresponding provision of the February 6th draft.

Under Paragraph 9 Astral 'warrants that on completion of this purchase the vessels will be used by it for the transportation of passengers or property in foreign commerce.'

By other provisions title to the vessels was to remain in Boston until payment of the full purchase price in cash, and in case of failure of Astral to carry out the contract Boston might sell to others any one or all...