MAGLIOCCO v. AMERICAN LOCKER COMPANY INC (1987)

On appellants Emil and Salvatore Magliocco's complaint for negligence and conversion, a jury found appellant American Locker Company, Inc. liable for $102,250— 25 percent of the total loss of $409,000.   The Maglioccos themselves were held liable for the remaining 75 percent of the damages under a comparative negligence theory.   Judgment was entered in accordance with this verdict and all post-trial motions were denied.

American Locker appeals, contending, among other things, that the trial court erred by giving incorrect instructions, allowing the jury to find that a bailment had been created when the Maglioccos used its locker;  and by refusing to admit a decal that disclaimed all liability.   The Maglioccos cross-appeal, contending that the trial court erred in denying them prejudgment interest.   As we reverse the judgment on the basis of the appeal, we need not reach the issue raised on cross-appeal.

I. FACTS

In 1981, appellant Salvatore Magliocco attempted several times to purchase gold from Richard George Whitehurst.   Whitehurst told Salvatore that the gold had been smuggled out of Vietnam by American soldiers who now sought to sell it.   Salvatore encouraged his brother, appellant Emil Magliocco, to participate in several transactions.   Salvatore knew that Whitehurst was accused of swindling people in a gold scheme, but he believed Whitehurst's exculpatory explanation of the incident and did not tell Emil about it.

In a two-week period, the brothers made three payments totaling $91,000 to Whitehurst's associates without ever receiving any gold.   After two more planned sales were aborted without any loss of funds, Emil, at Salvatore's urging, agreed to pay Whitehurst $500,000 as a down payment for 5000 ounces of gold in November 1981.   With credit for $91,000 that Whitehurst had already received from the brothers, the parties agreed that Emil need only provide an additional $409,000.

On November 10, 1981, Salvatore and Whitehurst's associate placed the $409,000 in a locked briefcase belonging to the Maglioccos and placed the case in a suitcase that the associate provided.   The suitcase had a combination lock, and the associate gave Salvatore the combination.   The two men then went to the Richmond Greyhound bus station, where Salvatore placed the suitcase containing the money in a coin-operated locker and kept the key.

An unidentified man told employees of the Richmond Greyhound station that he had lost his key to his locker.   One employee, Phillip Church, used a master key to open the locker, and released the suitcase inside it to the man when he was able to open the suitcase's combination lock.   Church did not obtain the man's name or seek identification.   The station manager and his employees were not aware of American Locker's lost key claim form and instructions for releasing items contained in lockers when someone claimed to have lost the locker key.

When Whitehurst did not contact Emil, as planned, to permit him to inspect and assay the gold, Emil tried to retrieve the money.   He contacted Atherton police, who asked for the assistance of the Richmond police.   By the time Richmond officers reached the bus station, the locker was empty.   None of the money was ever recovered.

The Maglioccos filed a complaint for negligence and conversion against Greyhound Lines, Inc., Richmond station manager Jack Bofinger, and appellant American Locker Company, Inc., the owners of the locker.   The jury was instructed that Church was Bofinger's agent and that Church's acts or omission were to be imputed to Bofinger.   In a special verdict, the jury found American Locker negligent and responsible for 25 percent of the total loss of $409,000;  the Maglioccos were liable for the remaining 75 percent of their loss, as they were also negligent.   The jury found that Greyhound was not negligent;  that Bofinger was negligent, but that his negligence was not a legal cause of the Maglioccos' loss;  and that Bofinger's acts did not constitute a conversion.   Judgment was entered accordingly.   American Locker's motion for new trial was not ruled on within the 60–day statutory period (see Code Civ.Proc., § 660) and was thus deemed denied.   The Maglioccos' motion for prejudgment interest was denied, as was a motion to reconsider this ruling.   American Locker filed a timely appeal from the judgment.  (See Cal.Rules of Court, rule 3(a).)

The Maglioccos filed a timely cross-appeal from the judgment, the October 9, 1984, order denying their motion for prejudgment interest and the November 15, 1984, order denying their motion for reconsideration of this issue.  (See Cal.Rules of Court, rule 3(c).) ¹

II. BAILMENT

American Locker contends that the trial court should not have instructed the jury on bailment, because it was not a bailee of the Maglioccos' suitcase.²  The locker company argues that a necessary element of bailment—that possession of the stored goods is given to the bailee—cannot be established in a case involving use of a coin-operated locker.   It argues that because there was no bailment, the trial judge's instructions incorrectly allowed the jury to shift the burden of proof of negligence from the Maglioccos to American Locker if it found a bailment was created, to the prejudice of the locker company.

 A bailment is generally defined as the delivery of a thing to another for some special object or purpose, on a contract, express or implied, to conform to the objects or purposes of the delivery.  (People v. Cohen (1857) 8 Cal. 42, 43;  Windeler v. Scheers Jewelers (1970) 8 Cal.App.3d 844, 850, 88 Cal.Rptr. 39.)   The question of whether use of a coin-operated locker constitutes a common law bailment is one of first impression in California.   Other states considering this question have held that one who stores items in a coin-operated locker does not create a common law bailment.   These cases hold that no bailment exists because the user who retains a key to the locker never relinquishes primary physical control of the items stored, even if the person making the lockers available has a master key.  (See Marsh v. American Locker Co. (1950) 7 N.J.Super. 81, 72 A.2d 343, 344–346;  Cornelius v. Berinstein (1944) 183 Misc. 685, 686–689, 50 N.Y.S.2d 186, 187–189;  Lewis v. Aderholdt (D.C.1964) 203 A.2d 919, 921–922, cert. den. 382 U.S. 872, 86 S.Ct. 111, 15 L.Ed.2d 110.)   California law also requires that, in order to constitute a bailment, actual possession of the bailed item must be given or delivered to a bailee;  constructive possession is not sufficient.   (Garcia v. Halsett (1970) 3 Cal.App.3d 319, 324, 82 Cal.Rptr. 420 [use of coin-operated washing machine does not create bailment];  Porter v. Los Angeles T. Club (1940) 40 Cal.App.2d Supp. 840, 842, 105 P.2d 956.) ³  The out-of-state cases on coin-operated lockers are consistent with this aspect of California bailment law.   We are persuaded that, as a matter of law, under the facts of this case using a coin-operated locker did not create a common law bailment under California law.   Therefore, the trial court erred in instructing the jury that a bailment could have been created.

 Nevertheless, the Maglioccos argue that any error in the bailment instructions was necessarily harmless because the jury also found American Locker liable for conversion.   The jury did find that American Locker's acts constituted a conversion, but the only act that could have constituted a conversion was Church's delivery of the locker contents to one other than the keyholder.   The jury was instructed that the acts or omissions of Church, an agent of station manager Bofinger, were to be imputed to Bofinger.   However, the findings of the jury that Bofinger's acts did not constitute a conversion necessarily implies that Church's acts did not constitute a conversion.   As Church did not convert the locker contents, American Locker cannot lawfully be held to have converted them.   Therefore, the finding that American Locker converted the contents of the Maglioccos' locker was legally incorrect.

The jury instructions did not indicate that the shifting of the burden of proof to American Locker on the bailment theory did not apply to the conversion theory of recovery.   In effect, the trial court's erroneous bailment instruction allowed the jury to shift the burden of proof on both theories, tainting both verdicts.   The instructions were inherently prejudicial.⁴

III. DISCLAIMER OF LIABILITY

In its appeal, American Locker also contends that the trial court erred by refusing to admit a decal into evidence.   The decal appeared on two of the eight lockers, and stated that there was “no liability for perishable goods or cash.”   The trial court excluded evidence of the decal language, after hearing arguments that it was not probative and that it was contrary to public policy.   Although we must reverse on the bailment instruction error, for the benefit of the trial court on retrial of the negligence issue, we will address this question as well.

In a case of first impression, the locker company argues that its disclaimer of liability does not contravene the public policy of this state.  Civil Code section 1668 ⁵ provides that all contracts having as their purpose to exempt one from responsibility for his or her own fraud, willful injury to the property of another, or willful or negligent violation of law are against public policy.   Despite its broad language, section 1668 does not apply to every contract.  (Cregg v. Ministor Ventures (1983) 148 Cal.App.3d 1107, 1110–1111, 196 Cal.Rptr. 724;  Vilner v. Crocker National Bank (1979) 89 Cal.App.3d 732, 735, 152 Cal.Rptr. 850.)   The modern interpretation of this statute is that a contractual provision exempting liability is valid only when no public interest is involved and no statute expressly prohibits it.   (Gardner v. Downtown Porsche Audi (1986) 180 Cal.App.3d 713, 716, 225 Cal.Rptr. 757;  1 Witkin, Summary of Cal.Law (9th ed. 1987) Contracts, § 631, p. 569.)

 To determine whether a contract affects public interest, courts consider six factors:  (1) whether the contract concerns business of a type generally thought suitable for public regulation;  (2) whether the party seeking exculpation performs a service of great public importance, often a matter of practical necessity for some members of the public;  (3) whether this party holds itself 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;  (4) whether, as a result of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks its services;  (5) whether, in exercising a superior bargaining power, the party confronts the public with a standardized adhesion contract of exculpation, making no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence;  and (6) whether, 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 its agent.  (Tunkl v. Regents of University of California (1963) 60 Cal.2d 92, 98–101, 32 Cal.Rptr. 33, 383 P.2d 441;  Hulsey v. Elsinore Parachute Center (1985) 168 Cal.App.3d 333, 342, 214 Cal.Rptr. 194.)

 Applying these six factors to the present case, we find that a contract to use a coin-operated locker is not a contract that affects the public interest.   First, no statutes regulate the use of coin-operated lockers.   Second, the provision of such lockers is not a business of great public importance.   Although the use of these lockers may be convenient, it is not a practical necessity.   Third, American Locker did not hold itself out as willing to provide locker service to persons who wished to store cash within its lockers;  to the contrary, it clearly stated it would not be responsible for cash placed in them.   Fourth, this is not an essential service within the meaning of Tunkl, such as the medical, legal, housing, transportation, or similar services that must necessarily be used by the general public.   (Hulsey v. Elsinore Parachute Center, supra, 168 Cal.App.3d at p. 343, 214 Cal.Rptr. 194.)   The locker company did not possess a decisive advantage of bargaining strength against Salvatore Magliocco who could have walked away from the transaction, unlike the hospital patient in Tunkl who “had little or no choice but to accept the terms offered” by the hospital.  (Ibid.)  Fifth, because the locker company did not enjoy this superior bargaining position, its statement of contract terms, though unalterable, does not necessarily create a contract of adhesion.  (See Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 711, 131 Cal.Rptr. 882, 552 P.2d 1178 [in adhesion contract, consumer must either adhere to standardized agreement or forego needed service].)   Finally, the Maglioccos never placed their money under the control of American Locker.   Salvatore Magliocco retained the key to the locker, never relinquishing primary physical control over its contents.  (See part II, ante.)   In light of the Tunkl factors, we hold that the exculpatory disclaimer of liability on the locker decal is not against the public interest so as to bring it within the prohibition of section 1668.   (Hulsey v. Elsinore Parachute Center, supra, 168 Cal.App.3d at p. 343, 214 Cal.Rptr. 194.)   Therefore, the trial court erred by not admitting the decal into evidence.   This error was prejudicial.   Whether a reasonable person would read and heed this warning before putting $409,000 in the locker could impact the percentage of comparative negligence.

On retrial, assuming a proper foundational showing, the decal must be admitted into evidence, if offered.   Whether or not Salvatore Magliocco saw any decal and whether or not he read it will clearly be relevant on retrial.

The judgment is reversed.   The Maglioccos shall pay all costs of the appeal;  each party shall bear its own costs on the cross-appeal.

I concur in the judgment of reversal but write separately because I do not reach the same conclusions as the lead opinion with respect to the admissibility and enforcement of the decal's pronouncements.

The decal speaks for itself:

For our purposes it attempts:  (1) to limit liability to ten dollars for any use of the locker (“LIABILITY:  Not over $10 for loss or damage”);  and (2) to avoid all liability if the locker is used to store perishable goods or cash (“No liability for perishable goods or cash”).

First examined is the attempt to place the ten dollar cap on any use of the locker. Here the rule is clear:  exculpatory clauses will not be enforced if they violate public interest.  (Tunkl v. Regents of University of California (1963) 60 Cal.2d 92, 98–101, 32 Cal.Rptr. 33, 383 P.2d 441.)   In making that evaluation six factors are to be considered.  (Hulsey v. Elsinore Parachute Center (1985) 168 Cal.App.3d 333, 342, 214 Cal.Rptr. 194, citing Tunkl v. Regents of University of California, supra, 60 Cal.2d at pp. 98–101, 32 Cal.Rptr. 33, 383 P.2d 441.)   The factors and their evaluation to this case are:

“(1) [Whether the contract] concerns a business of a type generally thought suitable for public regulation.”   There is no question in my mind that the business of storing chattels for hire is a type of business subject to public regulation.  (Cf. Civ.Code, §§ 1859–1860 [innkeepers], Civ.Code, § 1630 [parking lots and garages], Com.Code, § 7204, subd. (2) [warehousemen], Civ.Code, §§ 2176–2178 [common carriers].)

“(2) [Whether] 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.”   Ever get stuck in a bus station with a need to store your suitcase for a short period?   In an increasingly mobile society it is a matter of practical necessity to store items in public lockers.

“(3) [Whether] 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.”   Anyone with two quarters.

“(4) [Whether] as a result of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services.”   Given the physical location of most bus terminals a cafeteria of safe choices is usually not available.

“(5) [Whether] in exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence.”   For fifty cents one gets twenty-four hours of use with a ten dollar cap on liability.   Period.

“(6) [Whether] 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 agent.”   That seems to inhere in the very essence of such lock boxes.

Thus in my judgment the attempt to limit liability to ten dollars for all uses of the locker violates public policy.   To indicate otherwise is to turn the Tunkl factors on their heads and transmute the public locker business into the greatest business on earth:  exclusive territory, low upkeep, high rental income and essentially no liability. In this respect the decal is a textbook example of an adhesion contract.

The same is true of the attempt to disclaim all liability for the storage of cash or perishables.   As inappropriate as these uses of the lockers might be, because such uses are authorized by the locker box contract ¹ , the Tunkl rationale prohibits enforcement of the disclaimer of all liability therefore.

For these reasons I would uphold the trial court's decision to exclude the decal at trial and find its admission on retrial prohibited by Tunkl.   In all other respects, however, I agree with the majority opinion.

FOOTNOTES

1.   The appeal from the order denying the Maglioccos' motion for prejudgment interest is appealable as a post-judgment order.  (See Code Civ.Proc., § 904.1, subd. (b).)  As such, we need not determine whether the order denying the motion to reconsider is an appealable order.

2.   The trial court gave these instructions on bailment:  “17. [¶]  If a bailor alleges and proves the deposit of property with the bailee and a demand therefor and the failure of the bailee to redeliver, the burden of proof rests upon the bailee to explain his failure.  [¶]  Burden of proof means that if a bailee who was under the duty of exercising ordinary care is unable to redeliver the subject of the bailment, it is not enough for him to show that the property was lost or stolen.   If he relies upon theft or loss to excuse his failure, he must go further and show that the loss occurred without negligence on his part or that the loss occurred due to negligence of the plaintiffs or either of them.“․“32. [¶]  The use of a public coin-operated locker will constitute a bailment at law if the following conditions are met:  [¶] 1.   Property is placed in a locker.  [¶] 2.   The purpose for using the locker is safekeeping.  [¶] 3.   A payment is deposited for the purpose of said safekeeping and accepted by the locker apparatus.  [¶] 4.   During the time that the property is in the locker, the locker company is in control of and has dominion over the property.“33. [¶]  A bailee who stores property in exchange for compensation is also known as a depository for hire.   If you find the four conditions set forth in ․ [instruction 32] are met, then you are instructed further that a depository for hire must use at least ordinary care for the preservation of the property deposited.”

3.   The Maglioccos rely on Clark v. Burns Hammam Baths (1925) 71 Cal.App. 571, 236 P. 152, in support of their claim that use of a coin-operated locker constitutes a bailment.   In Clark, the plaintiff was a patron of a bathhouse operated by the defendant.   Clark deposited money and jewelry in a box provided by the bathhouse for that purpose;  the box was locked and Clark retained the key.   When the key was later lost and Clark went to retrieve his possessions, he learned that someone else had already presented the key and retrieved them.   The Clark court found that the bathhouse was a bailee.  (Id., at pp. 572–573, 236 P. 152.)   However, in Clark, one fact existed that is not present in the Maglioccos' case:  a bathhouse employee actually received the property from Clark, in order to give him a list of the articles in the locked box.   (Id., at pp. 572–573, 236 P. 152.)   This human contact constituted the actual transfer of possession of the bailed items from Clark to the bathhouse.   The Maglioccos never transferred possession of their money to any representative of American Locker;  thus, no bailment was created.

4.   The Maglioccos also argue that a second bailment was created when Church opened the locker and removed its contents.   However, the jury's finding that Bofinger, Church's principal, was negligent but that this negligence was not the cause of the Maglioccos' loss implies that the jury must have rejected this argument.In light of our reversal of the judgment, we need not address the other instructional issues and the challenge to the denial of the motion for new trial raised in the appeal, nor the prejudgment interest issue raised in the cross-appeal.

5.   All statutory references are to the Civil Code, unless otherwise indicated.

1.   With proper drafting owners of locker boxes may restrict inappropriate uses of their property such as for the storage of cash or ice cream.   But such a prohibition is not accomplished by using the term, No liability for cash or perishables.   That term only reflects an attempt to disclaim liability;  it is not a contractual prohibition against a particular use.

CHANNELL, Associate Justice.

ANDERSON, P.J., concurs.