Gas House, Inc. v. Southern Bell Tel. & Tel. Co.

• Citation: 221 S.E.2d 499,289 N.C. 175
• Decision Date: 29 January 1976
• Docket Number: No. 74,74
• Court: United States State Supreme Court of North Carolina
• Parties: The GAS HOUSE, INCORPORATED v. SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY.

Page 499

221 S.E.2d 499

289 N.C. 175

The GAS HOUSE, INCORPORATED v. SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY.

No. 74.

Supreme Court of North Carolina.

Jan. 29, 1976.

Smith, Patterson, Follin, Curtis & James by Charles A. Lloyd, Greensboro, for plaintiff.

Brooks, Pierce, McLendon, Humphrey & Leonard by C. T. Leonard, Jr., and Edward C. Winslow, III, Greensboro, for defendant.

LAKE, Justice.

Two questions are presented for our consideration: (1) Upon this record is there a genuine issue of fact as to whether the Limitation of Liability Clause is part of the contract between the parties? (2) If such clause is part of such contract, is it contrary to public policy or so unreasonable as to make it invalid?

The plaintiff's application, accepted by the defendant, expressly states on its face that it is 'under the terms and conditions on reverse side hereof.' On the reverse side of this single sheet of paper in small but legible type under the caption 'TERMS AND CONDITIONS' appear seven short paragraphs, the sixth of which is the Limitation of Liability Clause. There also appears on the reverse side of the sheet a 'KEY TO ABBREVIATIONS USED' in the description on the front of the sheet of the requested advertising. Space limitations would not permit printing of the 'TERMS AND CONDITIONS' on the front of this single sheet. The reference on the front of the sheet to the terms on the reverse thereof appears in a single sentence immediately above the signature of the applicant.

The affidavit of the plaintiff's president, who signed the application for the advertising, states that for several years prior to the occasion in question he made all arrangements for the plaintiff's yellow page advertising in the telephone directory, that 'Paragraph 6 under 'TERMS AND CONDITIONS' contained on the back of the order forms supplied by Southern Bell' was never called to his attention and he was 'totally unaware of that paragraph.' It will be observed that this falls short of saying that he was unaware of the existence of the statement of 'TERMS AND CONDITIONS' on the reverse side of the document. Nothing whatever in the record suggests that he was prevented or distracted from an examination of these 'TERMS AND CONDITIONS,' or that they were misrepresented to him or that he was misled in any way concerning them by the defendant's representative in the year in question or in any previous year.

Unquestionably, the general rule concerning a party's failure to read a document before signing it is as stated in Harris v. Bingham, 246 N.C. 77, 97 S.E.2d 453, and in Williams v. Williams, 220 N.C. 806, 18 S.E.2d 364, where it is said:

'In this State it is held that one who signs a paper writing is under a duty to ascertain its contents, and in the absence of a showing that he was wilfully misled or misinformed by the defendant as to these contents, or that they were kept from him in fraudulent opposition to his request, he is held to have signed with full knowledge and assent as to what is therein contained.'

The plaintiff relies upon Gore v. Ball, Inc., 279 N.C. 192, 182 S.E.2d 389, wherein we refused to give effect to a provision purporting to limit the liability of a seller of seed who delivered to its customer the wrong variety of seed, thus causing the customer to experience a complete failure of the desired crop. In Gore v. Ball, Inc., supra, we noted that the alleged limitation of the amount of recovery for such breach of contract was 'dropped into' a paragraph somewhat obscurely captioned. While it appeared in small print, along with a substantial amount of other printed matter, upon the order blank taken by the customer from the seller's seed catalogue and used by him in placing the order, this provision did not appear immediately above the line for the customer's name or above the spaces provided for his use in listing the seed desired. It appeared over to the side of these portions of the order blank and nothing above these portions of the blank designed for the customer's use directed his attention to the alleged limitation. We said:

'It is not contended that this limitation of the damages recoverable was otherwise called to the attention of the plaintiff. Therefore, unless its location in and upon the above mentioned documents, the size or color of the type and other circumstances, were sufficient to call this statement to the attention of the plaintiff, as being part of the contract into which he was entering, the statement would not constitute a part of that contract.

* * *

* * *

'Under these circumstances, we cannot way that, as a matter of law, the 'LIMITATION OF WARRANTY' became part of the contract of sale so as to justify a directed verdict for the defendant.'

We further held that the provision purporting to limit the liability of the seller of the seed was 'contrary to the public policy of this State so declared in the North Carolina Seed Law' and, even if it be deemed a part of the contract, did not bar the plaintiff from recovery of the full damages to which he would otherwise be entitled.

The above noted difference in the circumstances distinguishes this case from Gore v. Ball, Inc., supra. The present record indicates that the defendant used reasonable means to call to the attention of the plaintiff the Limitation of Liability Clause upon which it relies. No controversy as to the facts with reference to this question appears upon the record, and nothing is shown which will exempt the plaintiff from the application of the general rule. Consequently, in the present case, we find no error in the treatment of the Limitation of Liability Clause as part of the contract between the parties.

The majority of the Court of Appeals was, however, in error in holding that the Limitation of Liability Clause is contrary to public policy, patently unreasonable and, therefore invalid. The decision of the Intermediate Court of Appeals of Michigan in Allen v. Michigan Bell Telephone Co., 18 Mich.App. 632, 171 N.W.2d 689, supports the position of the majority of the Court of Appeals, but with virtual, if not complete, unanimity, the remaining courts which have considered the matter have reached the opposite conclusion. McTighe v. New England Telephone & Telegraph Co., 216 F.2d 26 (2d Cir.); Robinson, Insurance & Real Estate, Inc. v. Southwestern Bell Telephone Co., 366 F.Supp. 307 (W.D.Ark.); Wheeler Stuckey, Inc. v. Southwestern Bell Telephone Co., 279 F.Supp. 712 (W.D.Okl.); Georges v. Pacific Tel. & Tel. Co., 184 F.Supp. 571 (D.C.Or.); Wilson v. Southern Bell Tel. & Tel. Co. (La.Ct.App.), 194 So.2d 739; Baird v. Chesapeake & Potomac Telephone Co. (Md.Ct.App.), 208 Md. 245, 117 A.2d 873; Mitchell v. Southwestern Bell Telephone Co. (Mo.Ct.App.), 298 S.W.2d 520; State of Montana ex rel. Mountain States Tel. & Tel. Co. v. District Court, 160 Mont. 443, 503 P.2d 526; Federal Building Service v. Mountain States Tel. & Tel. Co., 76 N.M. 524, 417 P.2d 24; Hamilton Employment Service v. New York Telephone Co., 253 N.Y. 468, 171 N.E. 710; Cunha v. Ohio Bell Telephone Co., 26 Ohio Misc. 267, 271 N.E.2d 321; Pride v. Southern Bell Tel. & Tel. Co., 244 S.C. 615, 138 S.E.2d 155; Smith v. Southern Bell Tel. & Tel. Co., 51 Tenn.App. 146, 364 S.W.2d 952; Wade v. Southwestern Bell Telephone Co. (Texas Civ.App.), 352 S.W.2d 460, 92 A.L.R.2d 913; Annot., 92 A.L.R.2d 917, 935.

The general principle governing the validity of contracts against the charge that they are unreasonable is thus stated in 14 Williston on Contracts, 3d Ed., § 1632:

"People should be entitled to contract on their own terms without the indulgence of paternalism by courts in the alleviation of one side or another from the effects of a bad bargain. Also, they should be permitted to enter into contracts that actually may be unreasonable or which may lead to hardship on one side. It is only where it turns out that one side or the other is to be penalized by the enforcement of the terms of a contract so unconscionable that no decent, fairminded person would view the ensuing result without being possessed of a propound sense of injustice, that equity will deny the use of its good...