Quest bug? Can't progress?

I joined a party that was in the Ship Graveyard and then used a portal than one of the other players had set up.
When I entered the area I saw the Allflame quest item on the ground and I picked it up (I thought it was a Dex skill gem because it was spelt in green... I'm a new player, k? :P)
After some googling I found out it was for the Marooned Mariner quest. I hadn't started that quest yet but I couldn't get the Allflame out of my inventory so I decided to try and do it anyway.
I went back to the "normal" Ship Graveyard map and started looking around. I explored the entire map extensively on two separate occasions and couldn't find Captain Fairgreaves. I found a green square on the mini-map and I'm assuming that's where he SHOULD be but since I didn't speak to him to start the quest but rather started midway by picking up the Allflame then the quest might be broken for me.

I hope you guys can fix this soon or if I'm doing something wrong someone here can tell me what it is.
If the quest IS broken I think it would be a good idea to make quest items not appear to players who haven't started the relevant quest even if they are in a party with someone who has. Same with quest monsters, just make them not trigger their respective quest even if they're killed as long as the quest hasn't been properly started.

I tried finding Fairgreaves a second time during another game session but I still couldn't find him.
I guess I just missed him? Strange because I made sure I covered the entire area... Anyway, thanks for the help!