The narrator describes how walking along the docks aside the man-of-wars (ships), one might see a group of sailors flanking one superior figure among them – namely, the "Handsome Sailor," our protagonist, Mr. Billy Budd (1.1).
He then cuts to Liverpool, where he talks about seeing an enormous African sailor surrounded by a motley and diverse crew of men, and he notices that the men seem extremely proud to be associated with him.
The narrator goes back to talking about Billy (yes, he's a little scatter-brained), and begins praising his physical strength in laudatory terms. He adds that Billy was a moral man, and was extremely admired by the men around him.
On the day of interest, a man named Lieutenant Ratcliffe (the boarding officer) is selecting sailors for the outward bound ship the H.M.S. Bellipotent. Of all the men lined up, he immediately chooses Billy, and only Billy.
The shipmaster is named Captain Graveling. Like everyone else, he gets a long introduction glowing with praise, emphasizing his intelligence, his humanity, and how seriously he takes his job.
While Billy is preparing his stuff to hop on board the ship, the Bellipotent's lieutenant comes into the cabin of Billy's old shipmaster and grabs a bottle of liquor.
The lieutenant is in a bummer mood. The old shipmaster politely refuses to drink with him.
The shipmaster begins to tell the lieutenant about Billy's effect on his shipmen. He explains that he simply radiates goodness, that the one man who disliked him eventually became his biggest fan, and that he's worried about how the men will be able to get on without him. In short, Billy is one charming nice guy, a bright and shining star.
The lieutenant of the Bellipotent is amused by the old shipmaster's sentimentality. He tells him to cheer up because the King will be impressed that he forfeited his best sailor.
When Billy shows up with a large bag to hop aboard the Bellipotent, the lieutenant teases him and tells him that no one takes that much aboard a man-of-war.
Billy hops up on the bow of his old ship, the Rights-of-Man, and says good-bye to his old shipmates. The lieutenant calls at him to get down because this is a total breach of macho ship-man etiquette, but the point is that Billy can get away with it because he's just that cool. Everybody likes him.
Though Billy's a bit bummed to leave his old crew, he's amped for a new adventure. The thing is that Billy is completely honest and sincere and a total optimist. He's lacking that mental fold that allows for lies and duplicity, and thus is almost as loyal as a dog.
Or, in the words of my boy Melville, "Like the animals, though no philosopher, he was, without knowing it, practically a fatalist" (1.16).
The ship departs, and Billy quickly ingratiates himself with the crew. Most of the guys are much more sullen than he is, but the narrator charitably notes that perhaps it's because they're all alone in this world, while Billy has an entire family back home of whom he is the pride and joy.