Source: https://caselaw.findlaw.com/us-supreme-court/306/444.html
Timestamp: 2019-04-23 17:21:40+00:00

Document:
[306 U.S. 444, 445] Mr. Charles R. Hickox, of New York City, for Smith et al.
Messrs. George Whitefield Betts, Jr., of New York City, and George Forbes, of Baltimore, Md., for The Ferncliff et al.
'No lower rate was offered the shipper for the service rendered because of this provision; and no choice of rates with and without the valuation clause was afforded him. The record shows that no value was declared by the shipper on the shipment in question. [306 U.S. 444, 446] 'The invoice cost of the fish meal was $32.50 per ton. The value of the damaged portion of the shipment upon arrival at the ports of destination was $25.00 per ton. The market value of undamaged fish meal at the ports of destination at the time of the arrival of the shipment was $ 36.00 per ton.
'The court below held the valuation clause valid and computed the damages on the basis of the difference between the invoice cost ($32.50 per ton) and the value of the damaged fish meal at the time and place of delivery ($25.00 per ton). 22 F.Supp. 728, 741-742.
'1. Is an invoice cost valuation clause, such as that here involved, inserted in a marine bill of lading without offering a choice of rates to a shipper, valid and binding upon the parties?
'2. If so, should damages to a shipment be ascertained, under such a valuation clause, by deducting the value of the damaged goods in their damaged condition at the time and place of delivery from the invoice cost valuation as fixed by such clause?
'3. Or, should the percentage of loss of the damaged goods, based on difference between sound value and damaged value, be ascertained and the percentage applied to the invoice value for the purpose of ascertaining the damage?' [306 U.S. 444, 448] The Ansaldo San Giorgio I v. Rheinstrom Bros. Co., 294 U.S. 494 , 55 S. Ct. 483, considered and held invalid, because against sound public policy, the following limitation agreement in a maritime bill of lading: '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 opinion did not adjudicate the validity or effect of a clause, such as the one now before us, where the parties adopted 'an agreed value as a measure of recovery for loss or damage to goods not delivered by the carrier or damaged in transit', and it does not control the questions here involved.
The clause in question prescribes a measure of recovery rather than limits the amount which may be recovered when loss or damage occurs. For a long time, in the absence of a controlling statute, fraud or imposition, such provisions in bills of lading have been recognized as valid by this and other federal courts. Also by many-perhaps a majority-of the state courts. Hart v. Pennsylvania Railroad Co., 112 U.S. 331 , 337-340, 5 S.Ct. 151, 154, 155; Phoenix Insurance Co. v. Erie & Western Transportation Co., 117 U.S. 312, 322 , 6 S.Ct. 750, 754; Pennsylvania Railroad Co. v. Olivit Brothers, 243 U.S. 574, 586 , 37 S.Ct. 468, 472; Gulf, Colorado & Santa Fe Railway Co. v. Texas Packing Co. et al., 244 U.S. 31, 37 , 37 S.Ct. 487, 489; The Ellerdale, 2 Cir., 10 F.2d 53; The Asuarca, D.C., 13 F.2d 222, 223; The Merauke, 2 Cir., 31 F.2d 974; Kilthau v. International Mercantile Marine Co., 245 N.Y. 361, 365, 157 N.E. 267; Coleman v. New York, New Haven, & Hartford Railroad Co., 215 Mass. 45, 49, 102 N.E. 92, 7 A.L.R. 1366; Shaffer & Co. v. Chicago, Rock Island & Pacific Ry. Co., 21 I.C.C. 8; In the Matter of Bills of Lading, 52 I.C.C. 671, 710; Note L.R.A.1918B, 720, where the pertinent cases are collected.
The clause was declared inoperative because forbidden by the Cummins Amendment, which did not extend to ocean carriers. Union Pac. R.R. Co. v. Burke, 255 U.S. 317, 322 , 41 S.Ct. 283, 284.
'The clause we are here dealing with does not appear to operate in that way (i.e., 'to relieve the carrier from the consequences of its negligence'). ... The clause is gratified by determining the amount of the whole tonnage damaged, and multiplying by the damage per ton. ... In operation the clause only eliminates prospective profit, and limits the damage to the owner's actual loss in the transaction. It may even operate to his advantage if the market value at destination is less than the invoice value. In my opinion the clause is therefore different in its operation and effect from that condemned in the Ansaldo Case. ( 294 U.S. 494 , 55 S.Ct. 483.) [306 U.S. 444, 450] 'In the Ansaldo Case two general types of valuation clauses were considered, one described as a 'true limitation agreement' and the other as a 'true valuation clause.' The one involved in this case would seem to fall in the latter category. ... I take the view after reading the cases specially cited in the opinion and other consideration of the subject, that the clause as here worded is not against public policy and should be given effect. ... The general rule of our law is freedom of contract, subject only to statute and considerations of the public interest. Where a contract stipulation is not clearly opposed to public policy it should be upheld, as it is the agreement of the parties. The particular question is not likely to again arise as the subject is now regulated by the Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).
'Assuming the validity of the bill of lading clause that claims against the carrier shall be adjusted and settled on the net invoice cost plus disbursements ... it is now contended that the proper method of calculation is to first determine what was the percentage of damage or loss, and then apply this percentage to the invoice value.
We think the District Court reached the correct conclusion in respect of the mooted clause upon adequate authority and reasoning.
To the first certified question, we reply, Yes where there has been no fraud or imposition; to the second the answer is, Yes; to the third, No.

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