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

E. B. ACKERMAN IMPORTING CO., a California corporation, et al., Plaintiffs and Appellants, v. The CITY OF LOS ANGELES, a municipal corporation, Defendant and Respondent.

Civ. 26391.

Decided: August 21, 1963

McCutchen, Black, Harnagel & Shea, Philip K. Verleger and Howard J. Privett, Los Angeles, for appellants. Roger Arnebergh, City Atty., Arthur W. Nordstrom, asst. City Atty., Walter C. Foster, Deputy City Atty., Trippet, Yoakum & Ballantyne and F. B. Yoakum, Jr., Los Angeles, for respondent.

The plaintiffs have appealed from a summary judgment in favor of the defendant in an action to recover damages claimed to have been sustained because of the alleged negligence of the defendant.

The motion for summary judgment was made on the ground that recovery could not be had because of an exculpatory provision contained in the Port of Los Angeles Tariff No. 3, and on the further ground that there had been no breach of duty owed to the plaintiffs by the City of Los Angeles. It was stipulated that the motion could be based on designated documents. Reference will be made to factual matters set forth in such documents to the extent necessary for the proper resolution of the questions presented on this appeal.

On March 12, 1956, and for many years prior thereto, the City of Los Angeles owned and maintained a transit shed at Berth 59, Pier 1, in Los Angeles Harbor. The shed was used to house cargo awaiting shipment from the port as well as cargo which had been discharged from vessels which had entered the port. In 1956 and for many years prior thereto the Harbor Department of the City of Los Angeles maintained an eight-inch water main from which two eight-inch pipes extended to the transit shed at Berth 59. By this means water was supplied to the overhead automatic fire sprinkler system and the fire hoses in the transit shed.

On March 12, 1956, the goods of the various plaintiffs were in the transit shed at Berth 59 either for the purpose of being exported on vessels of Grace Line, Inc., or for the purpose of delivery to consignees after discharge from vessels of that carrier. During the early morning hours of that day a water pipe beneath the loading dock of the transit shed failed because of graphitic corrosion. Water flooded the floor of the transit shed and damaged goods stored therein, including those of the plaintiffs.

On March 12, 1956, and at all times since about November 23, 1946, there was in effect Preferential Berth Assignment No. 105, which had been executed by the Harbor Department and Grace Line, Inc. Thereunder Grace Line, Inc., had the nonexclusive right to use the wharf premises at Berth 59 to dock its vessels for the loading unloading, assembly and distribution of cargoes. The Harbor Department operated the facilities in accordance with the provisions of the Port of Los Angeles Tariff No. 3 which was embodied in City Ordinance No. 97629. Thereunder, charges for wharfage and wharf demurrage were assessed against the cargo and paid by the owner of the cargo. Under Tariff No. 3, Grace Lines, Inc., was required to collect such charges from the owner of the cargo and remit them to the City of Los Angeles.

Item 535(b) of Tariff No. 3 was as follows: ‘Neither the Board [of Harbor Commissioners] nor the City shall be responsible or liable in any manner or degree for any loss or damage to any merchandise or other property of any description stored, handled, used, kept or placed upon, over, in, through, or under any wharf or other structure or property owned, controlled or operated by the Board of the City occasioned by or on account of pilferage, rodents, insects, natural shrinkage, wastage, decay, seepage, leaky containers, heating, evaporation, fire, leakage or discharge from sprinkler system, rain, floods, or the elements, collapse of a wharf or other structure, war, riots, strikes, or from any cause whatsoever, except to the extent that responsibility and liability shall be, regardless of the above limitations, absolutely imposed by operation of law.’

In its brief the City of Los Angeles recognizes that the subject of the city's liability for negligence is not a municipal affair upon which the city may legislate. But, it is asserted, there is no reason why a city may not by contract ‘exonerate * * * [itself] from liability for passive negligence.’ Further argument is expressed as follows: ‘If the City has the power to contract, it has the power to decide the terms upon which it will do so. * * * Here, the legislature has not specified the means by which a city may contract to relieve itself from passive negligence. Hence, it is submitted that the charter provision to the effect that it may contract by ordinance is definitive of the problem and establishes the propriety of the procedure here followed.’

The city also calls attention to paragraph 4 of the Preferential Berth Assignment which was as follows: ‘That this assignment and privileges hereby granted shall at all times be subject to the charter of the City of Los Angeles and to the orders, rules and regulations of the Board of Harbor Commissioners and the ordinances of said city adopted in pursuance of said charter.’ Item 600 of Tariff No. 3 contained the following provision: ‘All berth assignments shall be held by the assignees subject to the provisions of this Tariff, to the charges, rates, rules and regulations applicable thereto, and to all of the terms, conditions and provisions contained in any such assignment.’ Finally, the city's position is stated to be that if the plaintiffs' ‘use of the shed was with the consent of the City, the use was authorized only because of and in accordance with the terms of the Berth Assignment and Tariff No. 3.’

The fallacy in the argument of the City of Los Angeles is that even if the nature of the relationship between it and each of the plaintiffs was determined by the terms of the Preferential Berth Assignment and Tariff No. 3, the exculpatory clause could not validly protect the city from such liability for negligence, if any, as would otherwise be imposed upon it by law. In view of the dominant bargaining position of the city with respect to those who, because of the nature of their business, must make use of harbor facilities of the kind here involved, the conclusion stated appears to be compelled by the reasoning of Tunkl v. Regents of the University of California, 60 Cal.2d 92, 32 Cal.Rptr. 33, 383 P.2d 441. The Supreme Court held that an agreement between a hospital and an entering patient affects the public interest and that, in consequence, an exculpatory provision included within it must be invalid under section 1668 of the Civil Code.1 The court stated (60 Cal.2d at page 98) 32 Cal.Rptr. 33, 36, 383 P.2d 441, 444: ‘If, then, the exculpatory clause which affects the public interest cannot stand, we must ascertain those factors or characteristics which constitute the public interest. The social forces that have led to such characterization are volatile and dynamic. No definition of the concept of public interest can be contained within the four corners of a formula. The concept, always the subject of great debate, has ranged over the whole course of the common law; rather than attempt to prescribe its nature, we can only designate the situations in which it has been applied. We can determine whether the instant contract does or does not manifest the characteristics which have been held to stamp a contract as one affected with a public interest.

‘In placing particular contracts within or without the category of those affected with a public interest, the courts have revealed a rough outline of that type of transaction in which exculpatory provisions will be held invalid. Thus the attempted but invalid exemption involves a transaction which exhibits some or all of the following characteristics. It concerns a business of a type generally thought suitable for public regulation. The party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public. The party holds himself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within certain established standards. As a in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength result of the essential nature of the service, against any member of the public who seeks his services. In exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of excupation, and makes no rpovision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence. Finally, as a result of the transaction, the person or property of the purchaser is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents.

‘While obviously no public policy opposes private, voluntary transactions in which one party, for a consideration, agrees to shoulder a risk which the law would otherwise have placed upon the other party, the above circumstances pose a different situation. In this situation the releasing party does not really acquiesce voluntarily in the contractual shifting of the risk, nor can we be reasonably certain that he receives an adequate consideration for the transfer. Since the service is one which each member of the public, presently or potentially, may find essential to him, he faces, despite his economic inability to do so, the prospect of a compulsory assumption of the risk of another's negligence. The public policy of this state has been, in substance, to posit the risk of negligence upon the actor; in instances in which this policy has been abandoned, it has generally been to allow or require that the risk shift to another party better or equally able to bear it, not to shift the risk to the weak bargainer. * * * To meet that test [of whether an agreement affects the public interest], the agreement need only fulfill some of the characteristics above outlined; * * *.’

The frankness of counsel for the city in stating the nature of the second ground of the motion for summary judgment renders unnecessary extensive discussion of that ground. The city's position is that if the plaintiffs were not using the shed pursuant to the terms of Preferential Berth Assignment and Tariff No. 3, ‘their use thereof was unlawful and they were either trespassers or licensees and the City would owe them no duty except to abstain from wilful injury.’ It is obvious that the presence of the plaintiffs' goods in the transit shed was not in violation of law. Consequently, the motion could not properly be granted on the ground of lack of duty as so narrowly defined by counsel for the city.

Finally, the City of Los Angeles contends that the Federal Maritime Commission has ‘exclusive primary jurisdiction’ to determine th reasonableness and propriety of Tariff No. 3. But no alleged violation of the Shipping Act (46 U.S.C. § 801 et seq.)2 is involved. The validity of the exculpatory provision is a question of general law within the jurisdiction of the courts of this state. (See Prince Line v. American Paper Exports, 2 Cir., 55 F.2d 1053, 1056.)

The judgment is reversed.


1.  Section 1668 of the Civil Code is as follows: ‘All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the perown fraud, or willful injury to the person or property of another, or volation of law, whether willful or negligent, are against the policy of the law.’

2.  The Shipping Act is in part as follows (46 U.S.C. § 816, second paragraph): ‘Every such carrier [common carrier by water in foreign commerce] and every other person subject to this chapter shall establish, observe, and enforce just and reasonable regulations and practices relating to or connected with the receiving, handling, storing, or delivering of property. Whenever the Board finds that any such regulation or practice is unjust or unreasonable it may determine, prescribe, and order enforced a just and reasonable regulation or practice.’

FORD, Justice.

SHINN, P. J., and FILES, J., concur.

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