HISCHEMOELLER v. NATIONAL ICE AND COLD STORAGE COMPANY OF CALIFORNIA

Reset A A Font size: Print

District Court of Appeal, Second District, Division 3, California.

Herbert HISCHEMOELLER, doing business under the name and style of Hismoco (American Co.), a fictitious firm name, Plaintiff and Respondent, v. NATIONAL ICE AND COLD STORAGE COMPANY OF CALIFORNIA, a corporation, Defendant and Appellant.

Civ. 20595.

Decided: May 20, 1955

James D. Garibaldi, Los Angeles, Gavin McNab, Schmulowitz, Sommer & Wyman, by Nat Schmulowitz, Peter S. Sommer, Ronald P. Klein, San Francisco, for appellant. McBain & Morgan and Newell & Chester, by Robert M. Newell, Los Angeles, for respondent.

Plaintiff sues defendant warehouseman for damages for negligence in storage of certain dried chili peppers. The case was tried to a jury and verdict rendered for plaintiff in the sum of $23,112.30. Defendant has appealed. Recognizing a substantial conflict in the evidence on the subject of negligence counsel do not argue that point. Their principal contention is that defendant's liability was limited by its warehouse receipt to a valuation of $100 per short ton, or a total sum computed to be $4,866.35.

Defendant is a public warehouseman and as such a public utility. Public Utilities Code, §§ 216, 239. It is also governed by the Food Warehouseman Act, Public Utilities Code, §§ 2501–2574, which defines food warehousemen as public utilities, §§ 2502, 2507. Section 2551 requires the filing with the Public Utilities Commission (formerly Railroad Commission) of ‘schedules showing all rates and charges, which are in force for warehousing and storage services of every description, including sorting, handling, weighing, elevating, and packing charges, and all charges directly or indirectly connected with such services, together with all rules which in any manner affect or relate to rates or charges, and showing plainly when they became effective. The rates shall be uniform in their operation and shall apply with equal force and effect to all persons or corporations dealing with the food warehouseman.’ Section 2552: ‘Every food warehouseman doing business in the State shall print and keep open to public inspection at each building, structure, warehouse, elevator, or plant maintained by him in this State copies of the schedules filed with the commission pursuant to Section 2551.’

Defendant has filed, and kept open to public inspection as required schedules covering its rates and other charges. One of them is Cold Storage Warehouse Tariff No. 12, C.R.C. No. 87, which contains a rule 70–B reading as follows: ‘Limited Liability.—For the purpose of fixing storage rates and the maximum limit of the warehousemen's liability, the value of merchandise stored shall be conclusively deemed not to exceed, per ton of 2000 lbs.——

unless the person to whom the warehouse receipt is issuable declares, when such merchandise is offered for storage, that it is of greater value and such greater value is noted on the warehouse receipt by the warehouseman, in which case the value shall be conclusively presumed not to exceed that so declared. The specified tariff storage rates are minimum rates which apply where no value is so declared and noted, or where, if declared, it does not exceed the otherwise presumed limit; and where such declared value exceeds such otherwise presumed limit, an additional rate will be added and charged equivalent to one-quarter of one per cent of the amount of such excess for each month or part thereof. The warehouseman's liability is limited to and shall in no event exceed whichever is smaller of the actual value, or, as the case may be, such presumed or declared limit of value in respect of which the storage rate is so fixed and payable. Such presumed or declared value as an agreed limit, and likewise such limitation of liability, applies separately and proportionately on a weight basis to each part of the stored merchandise; and liability, if any, for any partial loss of or injury to any part thereof shall not exceed that portion of such limited liability with respect to such part, proportionate to the actual loss of or damage thereto.

‘The option of declaring such increased value rests with the customer and the warehouseman may not insist upon it.’ Cold Storage Warehouse Tariff No. 2–D, D.R.C. No. 86, also on file, provided a minimum storage rate of 25 cents per hundred pounds of chilies for the first month and 12 1/2 cents per month for each succeeding month, provided same were in lots of 10,000 pounds or over (as was the case here).

The peppers were originally stored in 1949 by Gonzales & Blanco, who declared no value, and then received two ‘Memorandum Acknowledgments' on which defendant acknowledged receipt from them of the peppers ‘To be placed in Cold Storage Subject To Limited Liability and other Terms and Conditions as Shown By Warehouse Receipt and/or Rules and Regulations on File with the Railroad Commission of the State of California.’ It seems a fair inference that conforming warehouse receipt was issued to Gonzales & Blanco. In January 1950 plaintiff, who had had considerable experience with certain types of warehousing, arranged for Security-First National Bank of Los Angeles to finance the deal and purchased the chilies, still in warehouse, from Gonzales & Blanco. Upon authorization from the sellers defendant issued to plaintiff two documents entitled ‘Transfer Momorandum’ which bore these words at the bottom: ‘This Merchandise is Stored Subject to Limited Liability and other Terms and Conditions as shown by Warehouse Receipt and/or Rules and Regulations on File in This Office and with the Railroad Commission of the State of California.’ At plaintiff's request defendant issued the warehouse receipts to ‘Security-First National Bank of Los Angeles as pledgee for Hismoco (American Co.).'2 The document certifies that defendant has received the goods ‘subject to all of the terms and conditions contained herein and on the reverse hereof.’ At the bottom of the face of the receipt is this: ‘* * * Note. Rates for storage, handling and other services are as fixed by law in Tariffs filed with the Railroad Commission of California and in our office, notwithstanding omission to state same here or erroneous statement thereof.’ Also: ‘THE PARTY ACCEPTING THIS RECEIPT THEREBY AGREES TO ITS CONDITIONS.'3 On the reserve side are ‘Standard Terms and Conditions' which include the following: ‘These goods are stored and handled subject to the rules, regulations, rates and charges as published in our warehouse schedules on file with the Railroad Commission of California and in our office, and such amendments thereto as may hereafter be filed.’ Also: ‘Rates are subject to limited liability as provided by the Tariffs on file with the Railroad Commission and in this office.’ Neither plaintiff nor the bank made any declaration of value of the peppers at any time.

They were inspected by plaintiff before his purchase in January 1950, and every two or three months during 1950 and found to be in good condition, at least as late as September. When withdrawn from storage in January and February, 1951 the chilies were moldy and damaged. They were sold for $5,131.10, resulting in a loss of $23,112.30, the amount of the verdict.

Defendant insisted throughout the trial that its liability was limited, as matter of law, to $100 per ton of 2,000 pounds, because no higher value was declared and no greater rate than 12 1/2 cents per hundred pounds was charged to or paid by plaintiff. Counsel for plaintiff, on the other hand, tried the case upon the theory that such a limitation of liability, based upon an agreed value, does not bind the bailor unless he voluntarily accepts a warehouse receipt so declaring and does it with full knowledge and understanding on his part. The trial judge accepted this thesis as correct and instructed the jury accordingly.

Appellant's basic contention is that the schedules, with their rates and regulations an limitation of liability, automatically become implied terms of any contract made between a public utility and its customer. And they find support for this view in the recent case of Gardner v. Basich Bros. Construction Co., 44 Cal.2d 191, 281 P.2d 521.

Plaintiff in that case was a highway carrier who had been paid for a certain trucking job on the basis of a prescribed hourly rate. He sued to recover the difference between the amount paid him and an amount which would be due under a higher ton-mileage rate. Both rates were fixed by a tariff issued by the Railroad Commission. It provided that hourly rates would apply ‘only when notice in writing is given to the carrier, before the transportation commences of the shipper's intention to ship under such rates.’ Defendants argued that plaintiff could not recover because it had waived any right to a ton-mileage rate. The court said in 44 Cal.2d at page 193, 281 P.2d at page 522: ‘However, as stated in Gardner v. Rich Mfg. Co., 68 Cal.App.2d 725, 730, 158 P.2d 23, 25, the prescribed rules and rate regulations ‘become a part of every contract between a highway contract carrier and the shipper.’' The court assumed, but did not decide the correctness of defendant's position on waiver, and proceeded to determine the applicable statute of limitations. In the course of that discussion it said in 44 Cal.2d at page 194, 281 P.2d at page 522: ‘The prescribed rate provisions and regulations are deemed a part of every such contract, and the parties are deemed to have contracted with such provisions in mind for otherwise the state's rate-making policy expressed in the Highway Carriers' Act would not be effectual. Gardner v. Rich Mfg. Co., supra, 68 Cal.App.2d 725, 729–730, 158 P.2d 23.’ Though this Supreme Court case does not actually decide the point raised at bar, it does clearly lend affirmative countenance to appellant's contention.

Gardner v. Rich Mfg. Co., supra, 68 Cal.App.2d 725, 158 P.2d 23 dealt also with highway carriers. It was an action by two trustees in bankrupcy to recover the difference between amounts actually collected by the bankrupt carriers and higher rates prescribed by the Railroad Commission. Plaintiffs prevailed and the judgments were affirmed, the court saying in 68 Cal.App.2d at page 730, 158 P.2d at page 25: ‘The schedule of minimum rates thereby established and prescribed and the rules and regulations governing the same became a part of every contract between a highway contract carrier and the shipper. Pittsburgh, C. C. & St. L. R. Co. v. Fink (1919), 250 U.S. 577, 40 S.Ct. 27, 63 L.Ed. 1151; Johnston v. L. B. Hartz Stores (1938), 202 Minn. 132, 277 N.W. 414. The tariff applicable, on the facts, to any particular shipment cannot be changed by an agreement between the parties (New York Cent. & H. R. R. Co. v. York & Whitney Co., 1921, 256 U.S. 406, 41 S.Ct. 509, 65 L.Ed. 1016), and the carrier or its assignee is entitled to collect the proper rate. 13 C.J.S., Carriers, sec. 393, pp. 873–875; see also note, 83 A.L.R. 245 et seq., and cases there cited. Otherwise, the statute would be ineffectual for the purpose for which it was enacted.’

Both sides rely somewhat upon George v. Bekins Van & Storage Co., 33 Cal.2d 834, 205 P.2d 1037, which arose under the Uniform Warehouse Receipts Act (now comprising sections 1858.01 to 1858.85, Civil Code). It was an action to recover the value of certain furniture which was destroyed by fire while stored in defendant's warehouse. The warehouse receipt expressly limited liability to $10 per 100 pounds in the absence of a greater value declared in writing; and there was no such declaration. It appeared further that the storage was originally arranged by telegrams and that later the plaintiffs, upon receiving from defendant a warehouse receipt, signed and returned a written acceptance of same. The receipt stated in bold type and on its face the limitation of liability to $10 per 100 pounds. The court held the limitation to be valid and binding and reduced the judgment accordingly. Having held that this valuation clause was a proper permissive provision under section 3 of the Act, the court said, 33 Cal.2d at page 847, 205 P.2d at page 1046 that ‘The validity of such valuation clauses does not depend on the relationship between the actual value and the stipulated value, or on whether the carrier or bailee has knowledge that the actual value is greater than the stipulated value.’ At page 848 of 33 Cal.2d at page 1046 of 205 P.2d: ‘The question remains whether plaintiffs agreed to the stipulated value of their goods in this case. When goods are delivered to a warehouseman for storage and no warehouse receipt is issued at the time of delivery, an implied contract of storage arises containing those terms required by law. If this contract is to be superseded by the contract contained in the subsequently issued warehouse receipt, it is necessary that the bailor agree to the written contract as proposed by the bailee. Ordinarily such assent may be found in the acceptance and retention of the warehouse receipt by the bailor. Taussig v. Bode & Haslett, 134 Cal. 260, 266, 66 P. 259, 86 Am.St.Rep. 250, 54 L.R.A. 774; see, Wilson v. Crown Transfer etc. Co., 201 Cal. 701, 712–713, 258 P. 596; 1 Williston on Contracts [Rev.Ed.] § 90B, p. 266. It is not necessary, however, to decide in this case whether the mere retention of the warehouse receipt would bind plaintiffs to the terms therein. Plaintiffs signed and returned to defendant a written acceptance of the warehouse receipt and contract. By so doing they accepted defendant's offer to store the goods at a rate based on the value clearly stated on the face of the receipt.’ It was further held in 33 Cal.2d at page 848, 205 P.2d at page 1046, that ‘* * * it is immaterial on the facts in this case that neither [plaintiff] read the contract they accepted.’ And at page 849 of 33 Cal.2d, at page 1047 of 205 P.2d. ‘By issuing its warehouse receipt defendant proposed the terms to plaintiffs on which it would continue to store the goods. Plaintiffs accepted this offer, and defendant's continued performance of the contract as bailee was adequate consideration to support the limitation clause.’

Page 850 of 33 Cal.2d, at page 1047 of 205 P.2d: ‘In the present case, however, the rates were in fact determined by the declared value and had the declared value not been agreed to by plaintiffs the rates would have been increased in accord with the statement to that effect in the warehouse receipt. See Bassi v. Springfield Fire etc. Ins. Co., 57 Cal.App. 707, 712, 208 P. 154.’ The judgment was modified by reducing same from $3,126.15 to $501.40, a value based on $10 per 100 pounds. This case does not discuss the Public Utilities Act or any of the other statutes regulating warehouses as public utilities. It does stand for the proposition that one who accepts and retains a warehouse receipt without bothering to know its contents is bound by its terms. The case is in no respect inconsistent with appellant's contentions herein.

Although defendant is a public utility within sections 216 and 239 of the Public Utilities Code, and hence subject to all its applicable provisions, it is governed primarily by the Food Warehousemen Act, Public Utilities Code, §§ 2502, 2507, which, at any points of conflict prevails over the Public Utilities Act. Public Utilities Code, § 2506. Section 2551, above quoted, requires the filing of schedules showing all rates and charges of every kind, together with all rules which in any manner affect or relate to rates or charges and concludes as follows: ‘The rates shall be uniform in their operation and shall apply with equal force and effect to all persons or corporations dealing with the food warehouseman.’ The commission may make such changes therein as it deems proper. § 2553. And, unless it does so ‘* * * no change shall be made by any food warehouseman in any rate or charge’ except by permission of the commission. § 2554. Section 2556(b) provides that no such warehouseman shall ‘Demand, collect, or receive, directly or indirectly from any person or corporation, any different sum for warehousing or storage services than the rates and charges filed with the commission.’ But the sanctions of the statute apply not only to the warehouseman but also to the customer, the bailor. ‘No person, or corporation shall solicit, accept, receive, or attempt to obtain from any food warehouseman any rate or charge not filed with the commission.’ § 2557. Section 2531 forbids all forms of discrimination; section 2532 makes it ‘* * * unlawful for any person or corporation to solicit, accept, receive, or attempt to obtain from any food warehouseman any rebate, discount, deduction, concession, refund, or remittance, or to solicit, accept, receive, or attempt to obtain from any food warehouseman, any preference, or advantage, either in rates or charges, or in service or facilities afforded.’ And section 2534: ‘Every contract, expressed or implied, made by any person or corporation in violation of the provisions of this article or of Article 3 of this chapter, is illegal and utterly void and no recovery thereon shall be had.’ (Emphasis added.) Lastly, section 2574 declares it a misdemeanor to violate or procure, aid or abet any violation of the statute.

These statutory provisions seem to compel the conclusion that the principles announced in Gardner v. Rich Mfg. Co., supra, 68 Cal.App.2d 725, 158 P.2d 23 are controlling here. Respondent demurs to this on the ground, among others, that the George case, supra, holds that in the absence of delivery of a warehouse receipt at the time of receiving the goods ‘an implied contract of storage arises containing those terms required by law.’ And counsel say that this would not read an agreed valuation into the contract because its inclusion in the tariff was optional with the warehouseman. This overlooks the fact that that provision, once included in the schedule and not disapproved or changed by the commission, must be observed by bailor and bailee and no departure can be made from it unless or until a change is approved by the commission. Moreover, under section 2534 no contract may contain an express or implied term at variance with that or any other provision of the tariff. It was specifically held in Kings Laboratories v. Yucaipa Valley F. Co., 18 Cal.App.2d 47, 62 P.2d 1054 that a contract for storage of fruit at a rate less than that authorized by the commission violates the Food Warehousemen Act and is illegal and void.

The rule is firmly established that, absent any sharp or unfair dealing on the part of the public utility, the terms and provisions of its tariffs, rules and regulations on file with the regulatory body enter as implied terms into any contract made with that utility and that absence of actual knowledge of those terms on the part of the customer is legally inconsequential.

John Breuner Co. v. Western Union Tel. Co., 108 Cal.App. 243, 291 P. 445 so holds. As its title suggests it involved the liability of a telegraph company. At page 250 of 108 Cal.App., at page 448 of 291 P., the court said: ‘Under the authorities hereinafter cited, it is our conclusion that the rules of service are an inseparable part of the public service regulated and to be rendered, and that when one contacts or contracts with such public service the rules governing necessarily become a part of the contract from which neither of the parties may deviate. Rates of public service must be uniform, and it must follow that to secure uniformity of rate there must be included within the rate a uniformity of service.

‘Respondent argues that, admitting the service to be regulated and controlled by the rules, nevertheless one dealing with the telegraph company is not presumed to know the rules and is not chargeable with any knowledge thereof. This contention is likewise fully answered in the cited cases and to the contrary of the claim made by respondent. It would tend rather to cripple and render useless the public need and service if the matter of regulation were made a personal element of contract in each transaction. And if we were to engage in presumption in each individual case, the harm resulting would affect all parties. * * * And to put the public service dependent upon the proof of actual knowledge of every rule properly adopted as regulatory of the service would eventually narrow and restrict the utility to limitations seriously hampering its efficiency. Western Union Tel. Co. v. Esteve Bros. & Co., supra, 256 U.S. 566, 41 S.Ct. 584, 65 L.Ed. 1094; Cultra v. Western Union Tel. Co., 44 I.C.C. 670, Id., 61 I.C.C. 541; Davis v. Henderson, 266 U.S. 92, 45 S.Ct. 24, 69 L.Ed. 182; Davis v. Cornwell, 264 U.S. 560, 44 S.Ct. 410, 68 L.Ed. 848.

‘From the foregoing it is manifestly our conclusion that when plaintiff delivered for transfer the funds in question, it did so mindful of the rules of service adopted by the defendant telegraph company and that these rules entered into and became an integral part of the contract.’

Home Ins. Co. v. Los Angeles Warehouse Co., 16 Cal.App.2d 737, 61 P.2d 510, 511 was an action to recover for damage to stored sugar, caused by fire. The warehouse receipt incorporated by reference the ‘rules, regulations, rates and charges' published and filed with the commission. One of them was a requirement that any claim for damages must be made in writing within 30 days after delivery of the goods. Held, this became a binding term of the contract and no recovery could be had without compliance.

Riaboff v. Pacific T. & T. Co., 39 Cal.App.2d Supp., 775, 778, 102 P.2d 465, 466. Action for damages for negligent misspelling of plaintiff's name in telephone directory. Defendant relied upon a rule or regulation of its filed tariff which limited the amount of its liability for such errors or omissions. Same was incorporated by reference in plaintiff's application for service. Held, it became part of the contract, which could not ‘be varied or departed from’ and represented' ‘the whole duty and the whole liability of (appellant).”

Cole v. Pacific Tel. & Tel. Co., 112 Cal.App.2d 416, 246 P.2d 686 was an action for damages for failure to include plaintiff's advertisement in defendant's telephone directory. Defendant relied upon a limitation of liability under its rules and regulations filed with the Public Utilities Commission. Held that the rule was a part of the contract binding both parties. After reviewing pertinent cases, the court summarized the matter in 112 Cal.App.2d at page 419, 246 P.2d at page 688: ‘The theory underlying these decisions is that a public utility, being strictly regulated in all operations with considerable curtailment of its rights and privileges shall likewise be regulated and limited as to its liabilities. In consideration of its being peculiarly the subject of state control, ‘its liability is and should be defined and limited.’ Correll v. Ohio Bell Tel. Co., supra, [63 Ohio App. 491, 27 N.E.2d 173]. There is nothing harsh or inequitable in upholding such a limitation of liability when it is thus considered that the rates as fixed by the commission are established with the rule of limitation in mind. Reasonable rates are in part dependent upon such a rule.'

Butler v. Bell Oil & Refining Co., 70 Cal.App.2d 728, 161 P.2d 559. Plaintiff, a highway contract carrier, sought to recover from the shipper the amount of a certain undercharge. Defendant claimed this could not be done because the rate actually paid was “solemnly agreed to and accepted by it at the time the service was rendered.” 70 Cal.App.2d at page 730, 161 P.2d at page 560. This division of this court adopted the language of Gardner v. Rich Mfg. Co., supra, 68 Cal.App.2d 725, 158 P.2d 23, to the effect that the filed tariff becomes an implied term of the contract and then addressed itself to the argument that ‘the Act does not and was not intended to regulate the conduct of the shipper’; rejecting this view it said in 70 Cal.App.2d at pages 730 and 731, 161 P.2d at page 560: ‘The collection of undercharges, however, is simply a step toward making the authorized regulation of highway carriers more effective. It is in furtherance of the purposes of the Act, among which are the establishment of just and reasonable rates and the prevention of discrimination. * * * The fact that the shipper has to pay the difference between a legally established rate (appellant does not dispute the legality of the tariff here involved), and a lesser rate for which he was able to bargain privately, does not mean that the shipper is being regulated. It is merely an incident in aid of the effective enforcement of the Railroad Commission's order.’ Judgment for plaintiff was affirmed.

The rule that the authorized tariff automatically becomes a part of the contract with the utility, regardless of actual knowledge on the part of the shipper or other customer, is a well-established principle in the Federal Courts. American Railway Express Co. v. Daniel, 269 U.S. 40, 46, S.Ct. 15, 70 L.Ed. 154; Western Union Telegraph Co. v. Esteve Brothers & Co., 256 U.S. 566, 41 S.Ct. 584, 65 L.Ed. 1094, Galveston, H. & S. A. R. Co. v. Woodbury, 254 U.S. 357, 41 S.Ct. 114, 65 L.Ed. 301; Southeastern Exp. Co. v. Pastime A. Co., 299 U.S. 28, 57 S.Ct. 73, 81 L.Ed. 20; American Railway Express Co. v. Lindenburg, 260 U.S. 584, 591, 43 S.Ct. 206, 67 L.Ed. 414, 419; Midland Realty Co. v. Kansas City P. & L. Co., 300 U.S. 109, 114, 57 S.Ct. 345, 81 L.Ed 540, 544; McTighe v. New England Telephone & Telegraph Co., 2 Cir., 216 F.2d 26, 30; Feinberg v. Railway Express Agency, 7 Cir., 163 F.2d 998.

Respondent claimed that he never had personal knowledge of the terms of the transfer memoranda or the warehouse receipts. And his counsel take the position that a bailor is bound by the rates, rules and regulations of the warehouseman, especially those relating to agreed valuation and liability graduated according to declared value, only if he freely makes a contract with full knowledge and understanding of same. To this end they rely upon Scott's Valley Fruit Exchange v. Growers Refrigeration Co., 81 Cal.App.2d 437, 184 P.2d 183; McQueen v. Tyler, 61 Cal.App.2d 263, 142 P.2d 466; Fitch v. Carpenter, 70 Cal.App.2d 827, 161 P.2d 824; and George v. Bekins Van & Storage Co., supra, 33 Cal.2d 834, 205 P.2d 1037. That the George case does not support this contention appears from the previous discussion of that opinion. The other cited cases do lend apparent support to appellant's position but they actually are not in conflict with the cases already reviewed. All of them deal with situations in which an enforcement of the claimed limitation would assist the defendant in furthering some form of unfair dealing.

Scott's case grew out of the warehousing of certain pears; defendant claimed its liability for negligence was limited to $25 unless the true value of the property was stated in the warehouse receipt. Upon each deposit of pears defendant delivered a ‘hand receipt’ which purported to incorporate the terms of a warehouse receipt which had a declared value clause; but plaintiff never received an original or copy of that receipt nor was he informed of its contents; defendant knew this as well as the fact that ‘plaintiff believed that the rate charged for the storage was based on the full value of the pears.’ ‘Defendant makes no contention that the storage charges assessed by it and paid by Hunt4 were anything less than it would have charged had the ‘true value’ of the pears been expressly declared.' 81 Cal.App.2d at page 447, 184 P.2d at page 189. It was held that the receipt and its terms were not effectively incorporated by reference into the ‘hand receipts' and that plaintiff was not bound by the declared value limitation. To this point the discussion proceeded as if there were no Public Utility Act involved. Then, at pages 449–450, of 81 Cal.App.2d, at page 190 of 184 P.2d, the question of its effect was disposed of, in this language: ‘It is next urged that the effect of the judgment here under review is to grant to plaintiff a preference over other depositors in violation of section 19 of the Public Utilities Act [Stats.1915, P. 115;] 2 Deering's Gen. Laws, Act 6386, prohibiting a public utility from granting preferences. This argument is necessarily grounded upon the assumption that all of the terms of the warehouse receipt are binding on plaintiff. In addition to the fact that there is no evidence that plaintiff was in fact granted a preferential rate, the argument under consideration necessarily falls with the holding that the trial court was justified in finding that the terms of the warehouse receipt were not part of the contract of bailment.’ It seems to us that this assumes the whole question presented in the case at bar; no application for hearing in the Supreme Court was made; and this decision cannot be considered as authoritatively disposing of cases above reviewed, such as Gardner v. Basich Bros. Construction Co., supra, 44 Cal.2d 191, 281 P.2d 521; Gardner v. Rich Mfg. Co., supra, 68 Cal.App.2d 725, 158 P.2d 23; George v. Bekins Van & Storage Co., supra, 33 Cal.2d 834, 205 P.2d 1037; John Breuner Co. v. Western Union Tel. Co., supra, 108 Cal.App. 243, 291 P. 445; Butler v. Bell Oil & Refining Co., supra, 70 Cal.App.2d 728, 161 P.2d 559.

McQueen v. Tyler, supra, 61 Cal.App.2d 263, 142 P.2d 466, 467, was an action to recover against a highway carrier for damages for loss of household goods. Defendant relied on a provision in its ‘freight bill’ limiting liability to 10 cents per pound per article lost. A jury, in answer to a special interrogatory, said that the freight bill did not “constitute a contract between the parties, limiting such liability and entered into fairly between the parties.” And the court said in 61 Cal.App.2d at page 265, 142 P.2d 468, the only question was the sufficiency of the evidence to support that finding. It appeared that plaintiff had signed the freight bill in the dark when he could not read it and under misrepresentation as to its contents,—with no knowledge of the 10 cent limitation. The case was decided primarily upon the basis of section 2176, Civil Code, which applies only to carriers, see Riaboff v. Pacific T. & T. Co., 39 Cal.App.2d Supp. 775, 777, 102 P.2d 465, and, so far as pertinent, provides that a consignor, by accepting a bill of lading or written contract for carriage, with a knowledge of its terms, assents to the rate of hire and also to a limitation stated therein upon the amount of the carrier's liability in case property carried in packages, trunks, or boxes, is lost or injured, when the value of such property is not named. The court held that a contract limiting liability ‘must not only be reasonable, but must be freely and fairly made between the parties', 61 Cal.App.2d at page 267, 142 P.2d at page 469 and that knowledge of its terms would be a necessary condition to the shipper's assent to the limitation; that those conditions were not present and therefore the limitation was not binding on plaintiff. Then the court said, concerning the effect of the tariff on file with the Railroad Commission, 61 Cal.App.2d at page 268, 142 P.2d at page 469: ‘Nor does the fact that the contract limiting the carrier's liability was required by the rules and regulations of the Railroad Commission and was in the exact form prescribed by such rules, take the case out of the operation of the code sections hereinabove referred to and make the contract binding on McQueen, in view of the uncontradicted evidence and the jury's finding thereon that McQueen's assent to the contract was not fairly obtained. Furthermore, the rules of said commission require a higher rate to be charged where the valuation of the property is placed by the shipper at more than 10¢ per pound per article, and it does not appear that plaintiffs would not have been willing to pay whatever rate would have been necessary to carry the property at its true valuation. On the contrary, the evidence positively shows that McQueen would not have signed the freight bill if he had been aware of the purported limitation of value contained therein.’ Essentially this is a holding that section 2176 complements the Public Utilities Act and modifies pro tanto as to carriers the rule that such tariffs enter automatically into the contract for carriage. At bar we do not deal with a carrier or with section 2176. This distinction was drawn in Taussig v. Bode & Haslett, 134 Cal. 260, 266, 66 P. 259, 261, 54 L.R.A. 774: ‘Their acceptance of the receipt and storage of the goods with knowledge of this condition made it binding upon them as one of the terms of the contract. The cases cited by counsel in which it has been held that notices printed or stamped on bills of lading, but not signed by the consignors, do not exempt common carriers from their common-law liability, are not in point.’

Fitch v. Carpenter, supra, 70 Cal.App.2d 827, 161 P.2d 824, another carrier case, involved a bill of lading which was signed by plaintiffs' son, without authority and without knowledge on plaintiffs' part. They did not ratify the boy's act; they did ask for a copy of the ‘receipt’ but never got one and never knew the contents of the bill of lading. It was held first that a purported limitation of liability contained in the bill was not operative because the document was not signed by the shipper as required by the last sentence of Civil Code section 2176, viz.: ‘But his assent to any other modification of the carrier's obligations contained in such instrument can be manifested only by his signature to the same.’ Secondly, it was held that the fact the rate conformed to the filed tariff made no difference. ‘That is a matter of contract and is governed by section 2176 of the Civil Code.’ 70 Cal.App.2d at page 832, 161 P.2d at page 826. Finally it was ruled that the argument that a preferential rate would result from the rejection of limited liability could not prevail because plaintiffs had no knowledge that they were receiving a preference or that there was a higher rate applicable to a declared value. Also that there was no election by plaintiffs to ship at a lower rate based on a ten cent valuation; that they had no opportunity to make any election. This case was decided by this same division only 14 days after Butler v. Bell Oil & Refining Co., supra, 70 Cal.App.2d 728, 161 P.2d 559 had held that the tariff rate automatically enters into the shipping contract as an implied term. It was not intended to impinge upon that rule by indirection; the Bell case is not mentioned. The Fitch decision proceeds upon the implied predicate that section 2176 constitutes a complement to the Public Utilities Act and upon the further consideration voiced in New York, N. H. & H. R. Co. v. Nothnagle, 346 U.S. 128, 135, 73 S.Ct. 986, 990, 97 L.Ed. 1500, 1507: ‘* * * only by granting its customers a fair opportunity to choose between higher or lower liability by paying a correspondingly greater or lesser charge can a carrier lawfully limit recovery to an amount less than the actual loss sustained. * * * Binding respondent by a limitation which she had no reasonable opportunity to discover would effectively deprive her of the requisite choice; such an arrangement would amount to a forbidden attempt to exonerate a carrier from the consequences of its own negligent acts.’ The quoted rule applies to such instruments as red caps' checks, baggage checks, invoices, and similar papers that do not indicate to the ordinary mind any attempt to create a contract. The general rule is set forth in 13 C.J.S., Carriers, § 94, p. 182 as follows: ‘In considering whether a shipper had an opportunity to choose between the common-law rate and the limited liability rate, it is held, the question is not what the contract recites in respect to the matter, but whether he had in fact a chance to choose between his common-law rate and a lower rate with limited liability. It is not essential that the alternative should be actually presented to the shipper, however; nor is it material that he did not know of the choice if such choice existed; it is sufficient if it would have been given had he demanded it.’ See, also, annotation to White v. Southern R. Co., 208 S.C. 319, 38 S.E.2d 111, 165 A.L.R. 988, 1005, 1022.

At bar we deal with an ordinary business transcation between business men; no suggestion of sharp dealing or unfair practices on either side; plaintiff bought what he paid for and paid for what he bought. There is present no good reason for denying defendant the benefit of the limitation of liability set forth in the contract.

But this conclusion does not sustain appellant's claim that it was entitled to a nonsuit, or a directed verdict, or a judgment non obstante. Appellant's counsel assume and assert, without citing supporting authority, that the sale of the chilies for $5,131.10, a sum in excess of the agreed value ($4,866.35), spells absence of any right of recovery by plaintiff.

The verdict establishes an actual loss of $23,112.30, which was caused by defendant's negligence. This is the net loss after deducting the sum of $5,131.10 for which the peppers were sold in their damaged condition. The tariff, above quoted, says: ‘The warehouseman's liability is limited to and shall in no event exceed whichever is smaller of—the actual value, or, as the case may be, such presumed or declared limit of value in respect of which the storage rate is so fixed and payable. * * *’ If this is construed to mean that defendant escapes all liability the limitation becomes void as an attempt to exempt the bailee from liability for ordinary negligence. See Franklin v. Southern Pac. Co., 203 Cal. 680, 686–688, 265 P. 936, 59 A.L.R. 118 and cases cited infra.

In The Ansaldo San Giorgio I v. Rheinstrom Bros. Co., 294 U.S. 494, 55 S.Ct. 483, 79 L.Ed. 1016, 1019, the carrier's bill of lading contained this clause: “In the event of claims for loss, damage or short delivery the same shall be adjusted on the basis of the invoice value of the entire shipment adding expenses necessarily incurred.' The proof was that, owing to favorable market conditions existing at destination, the market value of all the merchandise which remained, sound as well as damaged, exceeded the values stated in the invoices, plus freight.' The court held in 294 U.S. 498, 55 S.Ct. 485, 79 L.ed. at page 1021, that the quoted clause ‘* * * would be unreasonable and contrary to public policy even if supported by a valid consideration, and cannot estop the respondent to claim damages measured according to the general rule’, and contined: ‘The contract plaintiff requires that if, after deduction of all loss and damage, the remaining cargo, in its then condition is worth more at destination than the whole cargo at place and time of shipment, the carrier shall be wholly exonerated. As pointed out by the court below if there were a short delivery of fifty cases out of a shipment of one hundred cases, but the market value of the goods delivered at the port of destination were equal to the invoice value of the hundred cases, plus freight, the carrier would pay nothing for negligent loss of half the shipment. Such an agreement is against public policy as its effect is to relieve the carrier from the consequences of its negligence.’

In discussing the forms of valuation clauses frequently used the court said concerning the type involved in our case in 294 U.S. 497, 55 S.Ct. 484, 79 L.Ed. at page 1020: ‘The damages are computed in the usual way without reference to the stipulation, but, if when so computed they exceed the agreed limit of value, no recovery of the excess may be had.’

13 C.J.S., Carriers, § 113, p. 223: ‘Under the general rule, the carrier is not free from liability because the goods in their injured condition are worth more than the agreed valuation; * * *.’ The following cases are to the same effect; indeed there seem to be none to the contrary: Lewis v. Chicago & Northwestern Railway Co., 199 Ill.App. 438, 440; Christensen v. Chicago, Milwaukee & St. P. Ry. Co., 194 Ill.App. 562; United States Express Co. v. Joyce, 36 Ind.App. 1, 69 N.E. 1015, 1016–1017; Greening v. Chicago & N. W. Ry. Co., MoApp., 183 S.W. 1121, 1122; Atchison, T. & S. F. Ry. Co. v. Smyth, Tex.Civ.App., 189 S.W. 70, 75; Chesapeake & O. Ry. Co. v. Rebman & Clark, 120 Va. 71, 90 S.E. 629, 630; Norfolk & W. Ry. Co. v. A. J. Steele & Son, 117 Va. 788, 86 S.E. 124, 125–126; Baird v. Denver & R. G. R. Co., 49 Utah 58, 162 P. 79, 81; Starnes v. Louisville & N. R. Co., 91 Tenn. 516, 19 S.W. 675; Brown v. Cunard S.S. Co., 147 Mass. 58, 16 N.E. 717, 719.

The verdict is manifestly excessive, but that fact alone might not warrant a reversal, for appellant has at all times in the trial court and here insisted that it had no liability and has never raised the point just discussed. But counsel have preserved and presented good grounds for reversal with respect to certain instructions given by the court and refusal of defendant's proffered instructions on agreed value and limited liability.

Plaintiff tried the case throughout upon the theory that it was incumbent upon defendant to prove that he had actual knowledge of the clauses in the ‘transfer memoranda’, standard form of receipt, and tariffs on file and kept open to inspection. And the judge adopted this theory and instructed the jury accordingly. Authorities above cited and discussed establish the incorrectness of this view. The case was actually tried upon a false issue. The only instruction given upon agreed valuation or limitation of liability was the following given on plaintiff's request: ‘While a contract of storage between a warehouseman and the owner of the property being stored may, under proper circumstances, contract to limit the amount which the owner may recover from the warehouseman in the event the latter should be liable for loss or damage to the property, such special contract of limitation must be freely and fairly made between the parties and it must appear that the owner of the property accepted the contract with knowledge of its terms, such knowledge being a necessary condition to the owner's assent to the limitation.

‘It follows that with respect to any special contract limiting liability on which the defendant in this action may rely, the defendant has the burden of proving that the plaintiff accepted such special contract limiting liability with knowledge of its terms. Should defendant fail in this burden, then its defense based upon such special contract must also fail.’ It was erroneous because it required actual knowledge by plaintiff of the terms of the warehouse receipt, etc., and placed the burden on defendant to prove the fact. This was markedly prejudicial at bar, because there was present no element of unfair dealing or of anything departing from the ordinary course of business conducted by business men.

Plaintiff did not make the original deposit of the chiles. He bought them from Gonzales & Blanco, who had warehoused them at the minimum rate, he paid the minimum amount, made no inquiry about the storage charge or any other phase of the existing bailment, requested issuance of new receipts to his pledgee after receiving a ‘transfer memorandum’ expressly referring to limited liability; made no examination of any pertinent document; received the warehouse receipts from the bank when he paid off the loan in September, 1950; held the same until January 31, 1951, making periodic inspections of the peppers, but paying no attention whatever to the terms of his contract. If he was ignorant at all these times as to the terms of the documents it was a case of conscious ignorance, for which he can blame no one but himself or his own agents.

The court gave instructions set forth in the margin which plainly told the jurors that actual knowledge and understanding on plaintiff's part of the clauses limiting liability were essential to any such limitation; they were plainly erroneous.5

The court refused defendant's request to give the following instructions: ‘If you find that when the non-negotiable warehouse receipt (Plaintiff's Exhibit 1) was received by the plaintiff from the Security-First National Bank of Los Angeles, the circumstances werw such that a prudent man could and would have read the limitation of liability on the document, then you are instructed that in law the plaintiff had notice of the limitation of liability. * * *

‘If you find that when the non-negotiable warehouse receipts (Plaintiff's Exhibit 1) and the transfer memorandum (Defendant's Exhibit A) were received by plaintiff's agents acting for him the circumstances were such that a prudent man could and would have read the limitation of liability on these documents, then you are instructed that in law the plaintiff had notice of the limitation of liability.’ They were correct statements of law covering defendant's secondary theory of the case, see Merrill v. Pacific Transfer Co., 131 Cal. 582, 587, 63 P. 915; Curtis v. United Transfer Co., 167 Cal. 112, 114, 138 P. 726, and should have been given.

The errors above discussed were prejudicial. Judgment is reversed.

FOOTNOTES

2.  This was plaintiff's trade name.

3.  This is printed in small caps; all other matters quoted from the transfer memorandum randum and the receipt are in small type.

4.  Hunt was a commission merchant who negotiated the contract of bailment for plaintiff.

5.  ‘In order that the terms of another document can be incorporated by reference into a contract so as to bind the parties to that contract, the reference to said other document must be called to the attention of the party to be charged therewith and such party must consent thereto and the terms of the incorporated document must be known to or easily available to the contracting parties. ‘While a contract of storage between a warehouseman and the owner of the property being stored may, under proper circumstances, contract to limit the amount which the owner may recover from the warehouseman in the event the latter should be liable for loss or damage to the property, such special contract of limitation must be freely and fairly made between the parties and it must appear that the owner of the paroperty accepted the contract with knowledge of its terms, such knowledge being a necessary condition to the owner's assent to the limitation. ‘It follows that with respect to any special contract limiting liability on which the defendant in this action may rely, the defendant has the burden of proving that the plaintiff accepted such special contract limiting liability with knowledge of its terms. Should defendant fail in this burden, then its defense based upon such special contract must also fail. * * * ‘Did the defendant's breach of contract proximately cause any loss or damage to the plaintiff? ‘If you answer that question in the negative, the plaintiff would still be entitled to a verdict but would not be entitled to any compensatory damages. It you answer the last question in the affirmative, you will then find what loss or damage the defendant's breach of contract caused the plaintiff and return a verdict in his favor for the amount thereof. * * * ‘Was that negligence the proximate cause of damage to the plaintiff's goods? ‘If you answer that question in the negative, plaintiff is not entitled to recover on that issue, but if you answer it in the affirmative, you then will find what damage plaintiff thus has been caused to suffer and return a verdict in his favor for the amount thereof. * * * ‘If under these circumstances you should find that the plaintiff is entitled to a verdict, it will then be your duty to award plaintiff such amount of damages as will compensate him for the loss or damage suffered by him as a proximate result of the defendant's breach of contract or negligence, if any. ‘The measure of such loss in the case at bar is the difference between the reasonable market value of the plaintiff's chilies as of February 1, 1951, and the reasonable net salvage value of the chilies to the plaintiff. ‘In determining the reasonable net salvage value of the chilies, you should deduct from the reasonable gross valvage the reasonable costs actually incurred by the plaintiff, if any, in reconditioning the chilies.’

ASHBURN, Justice pro tem.

SHINN, P. J., and PARKER WOOD, J., concur.