A telegraph company undertook to transmit a money order, the
contract providing that it should not be liable for damages for
delay or nonpayment, though due to negligence,
"beyond the sum of five hundred dollars, at which amount the
right to have this money order promptly and correctly transmitted
and promptly and fully paid is hereby valued."
Held, that the sum specified was not intended to
prescribe a definite liability (liquidated damages),
Page 309 U. S. 583
but is a limitation upon the maximum permissible recovery for
actual loss or damage properly alleged and shown by evidence. P.
309 U. S.
587.
106 F.2d 587 reversed.
Certiorari,
post, p. 643, to review the affirmance of a
judgment against a telegraph company in an action for breach of a
money order contract.
25 F. Supp.
478.
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
Respondents, Nester and Charles, are partners in mining
operations near Aramecina, Republic of Honduras. September 1, 1937
at Los Angeles, California, petitioner, the Telegraph Company, in
the ordinary course of business, received from Nester one hundred
and fifty dollars for transmission by unrepeated message and
delivery to Charles at Aramecina. It failed so to do.
In a "Complaint for damages for breach of duty" filed against
petitioner in the District Court, Southern District, California,
respondents claimed the failure to deliver resulted from gross
negligence, and that, as a direct consequence, they suffered
specified losses amounting to $7,600. For that sum they asked
judgment.
Petitioner denied liability, and, as an affirmative defense
alleged:
"The money order referred to in the plaintiff's complaint was
delivered to and accepted by the defendants subject to the terms of
the standard money order contract of The Western Union Telegraph
Company, a copy of which is hereto annexed. "
Page 309 U. S. 584
It is not now denied that this standard form had been duly filed
with the Federal Communications Commission, and was treated by the
parties as a statement of the contract between them. Certain of the
conditions contained therein are printed below.
309 U.
S. S. 585�
The point for determination here arises out of the following
condition:
"In any event, the company shall not be liable for damages for
delay, nonpayment, or underpayment of this money order, whether by
reason of negligence on the part of its agents or servants or
otherwise, beyond the sum of five hundred dollars, at which amount
the right to have this money order promptly and correctly
transmitted and promptly and fully paid is hereby valued, unless a
greater value is stated in writing on the face of this application
and an additional sum paid or agreed to be paid based on such value
equal to one-tenth of one percent thereof."
The cause was tried by the court without a jury upon the
pleadings and evidence.
25 F. Supp.
478, 481. It found as matter of fact:
"That it is not true that, by reason of the failure of the
defendant, Western Union Telegraph Company, to transmit and to
deliver and to pay promptly said money order as aforesaid, the
plaintiffs have suffered damages in the sum of Seventy-six hundred
($7,600.00) Dollar the court finds, however, that, by reason of
such failure, the plaintiffs have suffered and sustained damages,
loss, and injury in the sum of Five Hundred ($500.00) Dollars."
Evidently it was not intended by this finding to declare actual
damages had been shown, as respondents'
Page 309 U. S. 586
counsel suggest. After pointing out the lack of any evidence of
actual loss resulting from the alleged negligence, the court's
opinion asserts
"So that, assuming that the action is in tort, there is no
substantial proof of any of the special damages claimed. However,
the plaintiffs are not without redress."
The court found as matter of law
"That the condition on the application for the transmission of
the money order filed by The Western Union Telegraph Company with
the Federal Communications Commission limiting its liabilities to
five hundred ($500) dollars is a valid undertaking. That Paul
Nester and Juan Charles, copartners plaintiff are entitled to
recover the amount of five hundred dollars ($500.00) against the
Western Union Telegraph Company . . . without prejudice to their
right to sue for and recover the one hundred and fifty ($150)
dollars"
accepted for transmission.
The condition relative to liability for $500, quoted above, was
construed by the trial court as
"a provision for liquidated damages, which entitles the sender
to recovery of the minimum amount of five hundred dollars in the
absence of any proof or without any offer of proof."
And it said,
"Hence, although we are unable to award to the plaintiffs the
special damages they ask, they are entitled, under the facts
alleged and proved, to the sum stipulated as liquidated damages in
the contract. . . . Here, the plaintiffs, under the facts alleged
in the complaint and proved at the trial, have shown themselves
entitled to recovery even though they were unable to prove the
damages they sought."
The judgment against petitioner was affirmed by the Circuit
Court of Appeals. 106 F.2d 587, 589. The opinion there
declares:
"Appellant contends that the provision in the money order blank
was a part of the tariff filed with the Interstate Commerce
Commission, and, as such, limited the
Page 309 U. S. 587
damages recoverable to the actual damage, not exceeding $500,
and that, without actual damage, there could be no recovery. The
question presented is one of interpretation of the provision, not
of validity thereof."
Also:
"Here, the provision in question has a limitation of liability
clause -- 'the company shall not be liable for damages . . . beyond
the sum of five hundred dollars.' The provision also contained a
clause by which it was agreed that 'the right to have this money
order promptly and correctly transmitted and promptly and fully
paid is hereby valued' at $500. Although appellant contends that
the clause means that such right is valued at not 'beyond the sum
of' $500, the clause does not so state. It states that such right
is valued at $500."
"When Nester delivered the $150 to appellant, he had the right
to have the money transmitted without unreasonable delay.
(
Western U. Teleg. Co. v. Crovo, 220 U. S.
364) and delivered to Charles.
Moore v. New York
Cotton Exchange, 270 U. S. 593. Because of
appellant's acts, that right was destroyed, and Nester is entitled
to recover its value, which the parties agreed was $500."
By its petition for certiorari, the Telegraph Company presents a
single question:
"Does the limitation of liability provision in petitioner's
money order tariff -- which is substantially the same as that in
its telegraph tariff -- constitute a liquidated damage provision
which would automatically make petitioner liable for damages in the
fixed sum of $500 in case of default in service, regardless of
whether or not the sender had sustained any actual damage, or is
the provision rather one which fixes a maximum limit within which
damages may be proved?"
We think the provision in question was not intended to prescribe
a definite liability (liquidated damages), but is a limitation upon
the maximum permissible recovery for
Page 309 U. S. 588
actual loss or damage properly alleged and shown by evidence.
The courts below erred in ruling otherwise.
Considering what has been ruled in
Western Union Telegraph
Co. v. Esteve Bros. & Co., 256 U.
S. 566;
Western Union Telegraph Co. v. Czizek,
264 U. S. 281;
Western Union Telegraph Co. v. Priester, 276 U.
S. 252, the validity of the condition before us is not
open to serious doubt, and, viewed in the light of its history and
evident purpose, it must be interpreted as imposing a limitation
upon the amount which may be recovered.
See Unrepeated
Message Case, 44 I.C.C. 670, 675, and Limitations of Liability in
Transmitting Telegrams, 61 I.C.C. 541, 550.
The interpretation of the condition approved below would permit
a recovery of five hundred dollars irrespective of the sum
deposited for transmission, and without requiring the sender to
show any loss whatsoever. A mere failure to transmit a small sum
deposited with the company might impose a heavy and utterly
unreasonable burden upon the common carrier although the patron had
suffered no loss. This does not harmonize with the declared purpose
of the statute to impose just and reasonable rates.
The precise question here involved has been ruled upon by two
intermediate courts.
Miazza v. Western Union Telegraph
Co., 50 Ga.App. 521, 178 S.E. 764, and
Wernick v. Western
Union Telegraph Co., 290 Ill.App. 569, 573, 574, 9 N.E.2d 72,
74. In the first, the Court of Appeals of Georgia sustained a
demurrer to a complaint which definitely sought to recover five
hundred dollars as liquidated damages for failure properly to
transmit a message. The opinion in the second cause well said:
"Although this particular clause has been a part of the rules,
regulations, classifications, and tariffs of the telegraph
Page 309 U. S. 589
company since 1921, it has never been interpreted as a
liquidated damage provision, and no cases are cited which would
justify such an interpretation. Reading the agreement as a whole,
as it must be read under the fundamental rules of construction, and
taking into consideration the historical reasons for changing the
legal relationship between telegraph companies and their patrons
through federal legislation, and the effect thereof as stated by
the Court in
Western Union Telegraph Co. v. Esteve Bros. &
Co. and the
Priester case,
supra, we think
the court was unwarranted in interpreting the language employed as
a liquidated damage clause. In so doing, it evidently failed to
consider the intent, purpose, and meaning of the entire clause, and
considered only the words 'at which amount the right . . . is
hereby valued.' The fair interpretation of the provision as a whole
must necessarily give effect to the plainly expressed clauses which
precede and follow the so-called liquidated damage provision,
stating that,"
"
in any event, the Company shall not be liable for
damages for delay, nonpayment, or underpayment of this money
order, whether by reason of negligence on the part of its agents,
servants, or otherwise,
beyond the sum of $500 . . .
unless a greater value is stated in writing on the face of this
application and an additional sum paid or agreed to be paid, based
on such value, equal to one-tenth of 1 percent thereof."
"The provision, when read in its entirety, was clearly intended
to fix not a definite liability, but a maximum liability or agreed
valuation upon which the rate to be paid for the shipment or
carriage is to be collected."
The challenged judgment must be reversed. The cause will be
remanded to the District Court for further proceedings in harmony
with this opinion.
Reversed.
|
309
U.S. 582|
*
"Money Orders Are Subject to the Following Conditions:"
"Domestic orders will be cancelled and refund made to the sender
if payment cannot be effected within 72 hours after receipt at
paying office (Ellis Island, N.Y. excepted). Orders payable at
Ellis Island will be cancelled after the expiration of five
days."
"In the case of a Foreign Order, the Foreign equivalent of the
sum named in the order will be paid at the rate of exchange
established by the Company or its agents on the date of the
transfer."
"In the case of a Foreign Order the equivalent, in the currency
of the country of payment, of the sum named will be purchased
promptly, and if for any reason payment cannot be effected, refund
will be made by the Company and will be accepted by the depositor
on the basis of the market value of such foreign currency in
American funds at New York on the date when notice of cancellation
is received there by the Company from abroad."
"When the Company has no office at destination authorized to pay
money, it shall not be liable for any default beyond its own lines,
but shall be the agent of the sender, without liability, and
without further notice, to contract on the sender's behalf with any
other telegraph or cable line, bank, or other medium for the
further transmission and final payment of this order."
"In any event, the company shall not be liable for damages for
delay, nonpayment, or underpayment of this money order, whether by
reason of negligence on the part of its agents or servants or
otherwise, beyond the sum of five hundred dollars, at which amount
the right to have this money order promptly and correctly
transmitted and promptly and fully paid is hereby valued, unless a
greater value is stated in writing on the face of this application
and an additional sum paid or agreed to be paid based on such value
equal to one-tenth of one percent thereof."
"In the event that the company accepts a check, draft, or other
negotiable instrument tendered in payment of a money order, its
obligation to effect payment of the money order shall be
conditional and shall cease and determine in case such check,
draft, or other negotiable instrument shall for any reason become
uncollectible, and, in any event, the sender of this money order
hereby agrees to hold the telegraph company harmless from any loss
or damage incurred by reason or on account of its having so
accepted any check, draft, or negotiable instrument tendered in
payment of this order."
"All messages included in money orders are subject to the
following terms --"
The company shall not be liable for mistakes or delays in the
transmission or delivery, or for nondelivery, of any message
received for transmission at the unrepeated message rate beyond the
sum of five hundred dollars; nor for mistakes or delays in the
transmission or delivery, or for nondelivery, of any message
received for transmission at the repeated message rate beyond the
sum of five thousand dollars, unless specially valued; nor in any
case for delays arising from unavoidable interruption in the
working of its lines; nor for errors in cipher or obscure
messages.