Elias Siegelman, Individually, and as Administrator of the Estate of Eva Siegelman, Deceased v. Cunard White Star Limited

(dissenting).

This case presents an important question relative to the rights of American passengers travelling from American ports on English vessels. Here a ticket, covering a voyage from New York to Cherbourg, was purchased by an American in New York. (As I think its very form and appearance important, I have attached a facsimile of the ticket as an Appendix to this opinion.) The injury to the passenger occurred on the high seas on September 24, 1949. This suit was brought on December 14, 1951. The statute of limitations had not then run. But the district court granted a summary judgment, dismissing the suit, on the ground that clause 10 of the passenger’s ticket provided that no suit should be commenced except within one year. The plaintiff’s undisputed affidavit showed that, in New York, on August 31, 1949, about three weeks before the year expired, defendant’s claim agent, in connection with an offer of settlement made by him to the passenger, told the latter’s lawyer that it would not be necessary to file suit within the year.1 On January 4, 1951, after the year had elapsed, defendant withdrew the settlement offer.

1. The first question is as to the legal effect of the claim agent’s conduct as a waiver or estoppel with reference to the one-year period of limitations contained in clause 10. As the ticket was a contract made in New York, it may be that this question is to be solved by reference to New York “law.” 2 On the other hand, as it was to be primarily performed on the high seas, it may be that “maritime law” governs. Since, however, there appear to be no decisions concerning “maritime law” on this subject, I think we may assume that pertinent federal decisions, dealing with cases of intra-mural waiver or estoppel, will tell us the “maritime law.” (It is to be noted that my colleagues, who apply “English law” do not cite English decisions relative to “maritime law.”)

Disregarding for the moment clause 20 of the ticket (referring to “English law”), I think it clear that, under federal and New York decisions, the defendant waived (or is estopped to assert) the one-year provision (clause 10) and thereby completely abandoned it.

I begin with Semmes v. Hartford Ins. Co., 13 Wall. 158, 20 L.Ed. 490. There an insurance contract contained a provision barring suit after twelve months. Because of war, the insured could not bring suit until after that period. The Court, rejecting the argument that this contractual limitation was merely suspended and not wholly avoided, said: “[W]e are of opinion that the period of twelve months which the contract allowed the plaintiff for bringing his suit does not open and expand itself so as to receive within it three or four years of legal disability created by the war and then close together at each end of that period so as to complete itself, as though the war had never occurred. It is true that, in regard to the limitation imposed by statute, this court has held that the' time may be so computed, but there the law imposes the limitation and the law imposes the disability. It is nothing, therefore, but a necessary legal logic that the one period should be taken from the other. If the law did not, by a necessary implication, take this time out„ of that prescribed by the statute, one of two things would happen: either the plaintiff would lose his right of suit by a judicial construction of law which deprived him of the right to sue yet permitted the statute to run until it became a complete bar, or else, holding the statute under the circumstances to be no bar, the defendant would be left, after the war was over, without the protection of any limitation whatever. It was therefore necessary to adopt the time provided by the statute as limiting the *200right to sue, and deduct from that time the period of disability. Such is not the case as regards this contract. The defendant has made its own special and hard provision on that subject. * * * The condition is that no suit or action shall be sustainable unless commenced within the time of twelve months next after the loss shall occur, and in case such action shall be commenced after the expiration of twelve months next after such loss, the lapse of time shall be taken and deemed as conclusive evidence against the validity of the claim. Now, this contract relates to the twelve months next succeeding the occurrence of the loss, and the court has no right, as in the case of a statute, to construe it into a number of days equal to twelve months, to be made up of the days in a period of five years in which the plaintiff could lawfully have commenced his suit. So also if the plaintiff shows any reason which in law rebuts the presumption, which, on the failure to sue within twelve months, is, by the contract, made conclusive against the validity of the claim, that presumption is not revived again by the contract. It would seem that when once rebutted fully nothing but a presumption of law or presumption of fact could again revive it. There is nothing in the contract which does it, and we know of no such presumptions of law. Nor does the same evil consequence follow from removing absolutely the bar bf the contract that would from removing absolutely the bar of the statute, for when the bar of the contract is removed there still remains the bar of the statute, and though the plaintiff may show by his disability to sue a sufficient answer to the twelve months provided by the contract, he must still bring his suit within the reasonable time fixed by the legislative authority, that is, by the statute of limitations.”

In Thompson v. Phenix Insurance Co., 136 U.S. 287, 10 S.Ct. 1019, 1023, 34 L.Ed. 408, the insurance contract contained a clause, similar to clause 10 of the ticket here, limiting the time for bringing suit within twelve months from the date of the fire. Suit was not brought within that time. The Court said (per Harlan, J.) : “While the validity of such a stipulation cannot be disputed (Riddlesbarger v. Hartford Ins. Co., 7 Wall. 386, 389, [19 L.Ed. 257],) we do not doubt that it may be waived by the company. And such waiver need not be in writing. It may arise from such a course of conduct upon its part as will equitably estop it from pleading the prescribed limitation in bar of a suit by the insured.” Citing an Iowa case, Mr. Justice Harlan said further: “In the case last cited, it was properly said that it would be contrary to justice for the insurance company to hold out the hope of an amicable adjustment of the loss, and thus delay the action of the insured, and then be permitted to plead this very delay, caused by its course of conduct, as a defense to the action when brought.”

In Lynchburg Cotton Mill Company v. Travelers’ Insurance Company, 4 Cir., 149 F. 954, 956-957, 9 L.R.A.,N.S., 654, the policy contained a short period of limitations, but the defendant company, within that period, had engaged with the plaintiff in negotiations for a settlement. The court said: “Clause 14 was a limitation prescribed by the contracting parties in the interest of the insurer, and which should be construed most favorably for the insured. Steel v. Phenix Ins. Co., 9 Cir., 51 F. 715, 2 C.C.A. 463, 7 U.S.App. 325; Cotten v. Fidelity & Casualty Co., 5 Cir., 41 F. 506; 2 May on Insurance (3d Ed.) Sec. 478; 2 Wood on Fire Insurance (2d Ed.) 120. The insurer had the right to insist on the enforcement of this special limitation, but upon departing therefrom, certainly in the absence of express stipulation to the contrary, what was done operated, not as a suspension of the clause, but a waiver thereof, and after such waiver the general statute of limitations of the state, and not the special time named in the contract, governed the parties in the enforcement of the same. The reason for this is apparent, and this case is a striking illustration of what would be *201the ill effect of a contrary doctrine. No one would ever know when, as to such contracts, the statute of limitations began or ceased to run. It would not be determinable from an examination of the contract, nor from the state statute, but would depend upon an uncertain and indefinite state of facts, as to which persons might think differently, and bring about a chaotic condition, which would be exceedingly undesirable. * * * The insurer knowing his rights under the general law could afford to waive the clause in question, in order to effect an adjustment, and the assured likewise to make or entertain such a proposition, realizing that by so doing he would forfeit nothing, and upon failure proceed by suit within the statutory period to enforce his claim. The contrary view would result in making practically impossible any effort at compromise between the parties, certainly so far as the assured is concerned.” The court cited Thompson v. Phenix Insurance Co., 136 U.S. 287, 10 S.Ct. 1019, 34 L.Ed. 408, and Semmes v. Hartford Insurance Company, 13 Wall. 158, 20 L.Ed. 490. See also Philadelphia Casualty Company v. Tha-cher, 1 Cir., 236 F. 869, 872.

In the leading New York case on the subject, Syracuse Lighting Co. v. Maryland Casualty Co., 226 N.Y. 25, 33-36, 122 N.E. 723, the court, citing Lynch-burg Cotton Mills Co. v. Travelers Ins. Co., supra, reached the same conclusion on facts substantially similar to those here. See also George Colon & Co. v. Commercial Casualty Ins. Co., 226 App.Div. 525, 234 N.Y.S. 631; Graham Bros. Aktiebolag v. St. Paul Fire & Marine Ins. Co., 127 Misc. 403, 216 N.Y.S. 346; Rego Building Corp. v. Maryland Casualty Co., 151 Misc. 801, 272 N.Y.S. 410 3

In citing insurance-contract cases, I follow the lead of my colleagues who, in discussing “English law” concerning waiver, cite and rely on Yorkshire Ins. Co. v. Craine [1922] A.C. 541.

2. My colleagues, in holding that there was no waiver or estoppel, rely principally on that English decision and on clause 20 which reads: “All questions arising on this contract ticket shall be decided according to English Law with reference to which this contract is made.”

1 think this clause does not import “English law” concerning a waiver after the injury occurred. For, at best, as my colleagues apparently concede, the words “on this contract” are ambiguous, i. e., do not (to say the least) unambiguously cover the post-injury conduct, in New York, of defendant’s claim agent.

Because the contract was made in New York, for a journey beginning in New York,3a the usual rule 3b is that its provisions must be interpreted according to New York “law,” 3c or by the “maritime law” which, as previously noted, must (absent decisions on the subject) be learned from federal “law” as to internal transactions. What, then, of a provision, clause 20, which ambiguously refers to “English law?” Surely, in interpreting that ambiguous provision, we should not look to English decisions. Thus to consult “English law,” in interpreting an American contract ambiguously referring to “English law,” would indeed be a pulling-yourself-up-by-your-own-bootstraps device.3d Especially is *202this true here, since the interpretation of a clause in a contract like this involves an important internal public policy. For, since the document was a fixed printed form prepared by defendant and tendered to the passenger, clause 20, under New York and federal decisions, must be construed most strongly against defendant. (Verbius fortuis accipuntur contra proferentum.) See, e. g., Aschenbrenner v. U. S. Fidelity & Guaranty Co., 292 U.S. 80, 84-85, 54 S.Ct. 590, 78 L.Ed. 1137; Graee v. American Central Ins. Co., 109 U.S. 278, 282, 3 S.Ct. 207, 27 L.Ed. 932, per Harlan, J.; Thompson v. Phoenix Ins. Co., 136 U.S. 287, 297, 10 S.Ct. 1019, 34 L.Ed. 408, per Harlan, J.; Gaunt v. John Hancock Mutual Life Ins. Co., 2 Cir., 160 F.2d 599, 602; Phoenix Mutual Life Ins. Co. of Hartford, Conn. v. Flynn, 83 U.S.App.D.C. 381, 171 F.2d 982, 984-985; Kenyon v. Knights Templar & Masonic Mutual Aid Association, 122 N.Y. 247, 25 N.E. 299; Lachs v. Fidelity & Casualty Co., 306 N.Y. 357, 118 N.E.2d 555; Moran v. Standard Oil Company, 211 N.Y. 187, 105 N.E. 217; Restatement of Contracts, Section 236(d); 3 Corbin, Contracts (1951) Section 599.4

This rule is given special emphasis when, as here, the contract contains a multitude of complicated provisions relative to a subject matter with which the tendering party is peculiarly familiar and the other party is not. See, e. g., Gaunt v. John Hancock Life Ins. Co., supra; cf. point 6 infra. There is an added fact, not here controlling but surely not to be ignored: The provisions of the ticket are printed in small type and in a crowded way.5 While they are not wholly illegible, they are difficult to read, as any one will discover who tries, reading them. (One can be sure that the steamship company does not thus print its advertisements addressed to prospective passengers.)

3. Although I think the foregoing sufficient to render “English law” inapplicable to the issue before us, the following factors are also pertinent:

(a) The New York and federal courts, in holding that there is a waiver in circumstances like those here, rest their decisions on the ground that “it would be contrary to justice” (or the like) to rule otherwise. Accordingly, we have here an important public policy of the forum which, I think, precludes the application of contrary English decisions.6 In short, I do not agree with my colleagues’ statement that, if the English “law” concerning waiver is as they report it,7 it is not “oppressive to passengers.”

(b) Consider a suit brought in this country on a contract made in England to be performed in England, and where a breach of the contract happened in England. Under the usual “conflict” rule, English “law” would be ordinarily decisive as to the interpretation of the contract.7a That “law” would not gov*203ern, I think, with reference to acts, in New York, asserted to be a discharge— by way of release, rescission, accord and satisfaction, or an account stated; see Restatement of Conflict of Laws, Section 373, Comments a and b.8 Accordingly, I think “American law” governs the legal effect, as a waiver, of the New York conduct of defendant after the injury occurred.

4. Although, again, I think it unnecessary to support my conclusion, I note the following: My colleagues say that clause 20 must be read as referring not to “English law” as a “whole” but only to English intra-mural law, assigning as a reason for this interpretation that the major purpose of including the provision “was to assure Cunard a uniform result in any litigation no matter where the ticket was issued or where litigation arose, and this result might not obtain if the ‘whole’ law of England were referred to.” But that argument runs into difficulties: In Mason v. Rose, 2 Cir., 176 F.2d 486, we hold that where English “law” is the “proper law,” we must apply that “law” including its conflict rules. So that, even assuming, arguendo, that both parties here in clause 20 explicitly “chose” English “law” as applicable to the issue of waiver, they must be deemed to have intended that an American court, if litigation there arose, should decide the case just as if it were an English court. It is significant that Vita Products, Inc. v. Unus Shipping Company, [1939] A.C. 277 — cited by my colleagues • — construed a clause in a bill of lading providing, “This contract shall be governed by English law,” to require the application of English conflict rules to such a contract, made and to be performed in another country; patently, the Privy Council did not consider that, because of the parties’ explicit “choice” of “English law,” the application of the “proper law,” other than England’s, should be disregarded in the interest of assuring “a uniform result.”

5. My colleagues seem to concede that, on the motion for summary judgment, it must be assumed that the defendant’s claim agent had actual or implied authority to waive the time limitation in clause 10. As, however, I may, in this respect, misunderstand my colleagues, I think it well to discuss the effect of clause 11 of the ticket. It reads: “The price of passage hereunder has been fixed partly with reference to the.liability assumed by the company as defined by this contract, and no agreement, alteration or amendment creating any other or different liability shall be valid unless made in writing and signed for the Company by; its Chief Agent at the point of embarkation.” Defendant contends that this clause precluded any waiver or estoppel, by acts of defendant’s claim agent, of the time limitation in clause 10.

I cannot agree. Once more t refer to the rule of strict construction, against defendant, of any ambiguity in such a printed form prepared by defendant. Now it will be noted that clause 11 relates solely to “liability.” The ticket contains five clauses each of which specifically states circumstances in which the defendant shall have “no liability” or shall not be “held liable.”9 In other *204words, in those five clauses we find what clause 11 means when it refers to written modification by the Chief Agent of “the liability assumed by the Company as defined by this contract.” Significantly, clause 10, fixing the one-year time-limit for bringing suit, makes no mention of “liability.” It reads, so far as pertinent: “No suit, action or proceeding against the Company or the ship, or the Agents of either, shall be maintainable for * * bodily injury to any passenger; unless * * (b) the suit, action or proceeding is commenced within one year from the day when the * * * injury occurred.”

I think, then, we must interpret clause 11 as having no application to clause 10. The former was obviously designed to cover no more than pre-voyage alterations of the company’s “liability,” since it provides for dealing with the Chief Agent “at the point of embarkation.” 10

Moreover, the federal and New York cases hold that, when such a contract provides that no change of liability shall be valid unless in writing and signed by a designated official, such a provision may be waived by acts, similar to those of the claim agent here, of agents of the obligor other than the official designated in the provision.11 It has also been held that such clauses do not relate to the waiver of conditions to be performed after loss.12 In Scheibel v. Agwilines, Inc., 2 Cir., 156 F.2d 636, as we there noted, the asserted waiver occurred after the expiration of the contractual time-for-bringing-suit.

6. I call attention to another factor which, while unnecessary to my conclusion, I think supports it: The ticket is what has been called a “contract of adhesion” or a “take-it-or-leave-it” contract. In such a standardized or mass-production agreement, with one-sided control of its terms, when the one party has no real bargaining power, the usual contract rules, based on the idea of “freedom of contract,” cannot be applied rationally. For such a contract is “sold not bought.” The one party dictates its provisions ; the other has no more choice in fixing those terms than he has about the weather. The insurance policy cases are outstanding examples, but there are many others.13 Our courts, in particular contexts, have, in effect, nullified many provisions of such agreements, if unfair to the weaker party who must take-or-leave. Often our courts have done so by rather strained constructions of seemingly unambiguous language or by other indirect or “back-door” methods.14 Referring to *205such decisions, several brilliant commentators 15 have suggested that the courts forthrightly adopt a general doctrine which calls for refusal to enforce directly —i. e., without recourse to such indirect devices — highly unfair provisions of all so-called “contracts of adhesion” where there was no possibility of real bargaining. These writers urge that some decisions, in cases where this point of view was not presented to, or considered by, the courts should not now be deemed controlling. Their position is that of Holmes16 and Corbin,17 i. e., that the courts will do justice better by forthrightly, not obliquely, articulating important doctrines of public policy. The commentators on “adhesion” contracts do not at all suggest that all standardized contracts be stricken down, for they recognize that such contracts often serve a highly useful purpose where the parties are not markedly unequal in bargaining power (as in many “commercial” contracts).18

So far as I can discover, there is but one instance in which an American court has explicitly referred to this “adhesion” doctrine. See Bekken v. Equitable Life Assurance Society, 70 N.D. 122, 293 N.W. 200, 212: “It has been said that ‘life-insurance contracts are contracts of “adhesion.” The contract is drawn up by the insurer and the insured, who merely “adheres” to it, has little choice as to its terms.’ 33 Harvard L. R. p. 222. Both the applicant and the insurance company are bound by the applicable laws and valid regulations promulgated pursuant thereto; but, except as so limited, the contract is prepared by the insurance company. The applicant may choose whether he will apply for insurance, * * * and which one of the several types of policies he prefers; but, his choice virtually ends with the right to apply for one or more of the contracts the insurance company has to offer.” That aptly describes the position of the passenger here.

An ordinary contract has been called a sort of private statute, mutually made by the parties and governing their relations.19 But in a take-it-or-leave-it con*206tract, absent actual freedom to contract, the parties do not “legislate” by mutual agreement; the dominant party “legislates” for both. Salleilles, who in France in 1901, coined the phrase “contract of adhesion,” used it to describe contracts “in which one predominant unilateral will dictate its law to an undetermined multiple rather than to an individual * * *, as in all contracts which, as the Romans said, resemble a law more than the meeting of the minds.” 20

All this has special pertinence here: A party, like the passenger here, having no real choice about the matter, cannot in fairness be said to have joined in a “choice of law” merely because the carrier has inserted a provision that some particular foreign “law” shall govern; therefore it would seem that that party should not be bound by such a provision. I shall not elaborate this point, since it is amply discussed in a recent excellent article, Ehrenzweig, “Adhesion Contracts in The Conflict of Laws,” 53 Col.L.Rev. (1953) 1072, where most of the authorities are cited and considered.21

7. I grant that, in this context, I am stressing the need to do justice in particular instances. I do so unashamedly. For it is generally agreed that the decisions of conflict-of-laws cases by mechanized rules, without regard to particularized justice, cannot be defended on the ground that they have promoted certainty and uniformity, since such results have not been thus achieved.22 Several wise commentators have urged that the element of justice should have a dominating influence.23

8. Finally, I am by no means sure that, even if English intramural “law” applied to the waiver, the result would be that which my colleagues report:

(a) I think that Yorkshire Insurance Company, Ltd. v. Craine [1922] 2 A.C. 541 does not bear out the interpretation my colleagues give it. There the plaintiff was the insured under two identical fire insurance policies issued by the two defendant companies. Each policy provided that the insured must deliver to the company a written claim containing as particular an account as is reasonably practicable of all property damaged or destroyed, and that the claim be delivered within fifteen days after the loss or damage or within such further time as the Company may in writing allow. Each *207policy further provided that the insurance company could take possession of the building within which the loss or damage occurred or of any property within the building at the time of the loss or damage, so long as the claim was not adjusted.

The plaintiff, having suffered a fire damage, filed particulars of the damage after the prescribed period. At the trial, there was evidence of negotiations between plaintiff and the defendants at the expiration date of the fifteen-day period and thereafter. The judge instructed the jury to find whether or not the defendants had represented to the plaintiff that they did not intend to rely on his tardiness in filing the claims. The jury found that they so represented, and had therefore waived their defenses. Nevertheless, the trial judge gave a verdict for defendants. The High Court of Australia reversed and entered judgment for plaintiff. The Privy Council, in affirming the High Court of Australia, did so on the ground that the insurer’s conduct, in taking possession of the goods in question, constituted estoppel by conduct. The Privy Council did not pass on the question whether the defendant’s conduct constituted an estoppel by representation, but said: “It has been well established by a long line of authority that in order to support a plea of estoppel by representation, the representation must be a representation of an existing fact, a promise or a representation of an intention to do something in the future is entirely insufficient, and this, though Lord Bowen said in Edging-ton v. Fitzmaurice that the state of a man’s mind was as much a fact as the state of his digestion. In their Lordship’s view it is impossible to say with any confidence whether the representation found by the jury to have been made —namely, that the defendants did not intend to rely upon the claims having been put in late — is a representation of an existing fact, a present existing resolve, or a promise or representation of an intention to do something in the future. Under those circumstances their Lordships think it more desirable to dispose of the appeal on the ground of estoppel by conduct in going into possession, if that course be under the circumstances permissible, which they think it is.” This passage, on which my colleagues rely, does not, I think, justify them in concluding that an English court would hold that the claim agent’s statement in the instant case would not be a waiver or estoppel. And see Toronto Railway Company v. National British Millers Insurance Company, 3 Law Times 555, 563 (1914) in which the Court of Appeals said: “Conditions precedent may be waived by a course of conduct inconsistent with their continued validity, even though the contracting party does not intend his conduct to have that result.” See also Wing v. Harvey, 5 De G.M. & G. 267, in which the court held that a clause of the insurance policy was waived by the acts of two local insurance agents, although the policy specified that only the directors of the company might waive it. Jones v. Oceanic Steam Navigation Co., Ltd., [1924] 2 K.B. 730, was a trial-court decision holding that a purser had no authority to waive a contractual provision, limiting the time for filing notice of claims, and that his representations therefore did not constitute a waiver of this provision; a purser’s apparent authority in that respect is wholly unlike that of the claim agent here.

(b) My colleagues take, as an analogy, the English cases on the tolling or suspension of statutes of limitation. They cite no English cases using that analogy. The American cases, cited and discussed in point 1 of this opinion, have expressly rejected that analogy in situations involving a waiver, through settlement negotiations, of a contractual, as distinguished from a statutory, time limitation ; they hold that the waiver operates to eliminate, not merely to suspend, the contractual provision. Absent English decisions, contra, I think we should assume that the English courts will so hold.

Appendix.

The following is a facsimile of the ticket:

*208