Rozeboom v. Northwestern Bell Telephone Co.

• Decision Date: 25 March 1983
• Docket Number: No. 13858,13858
• Citation: 358 N.W.2d 241
• Parties: , 53 USLW 2291 Marion ROZEBOOM, individually, and d/b/a Rozy's Electric, Plaintiff and Appellant, v. NORTHWESTERN BELL TELEPHONE COMPANY, Defendant and Appellee. . Considered on Briefs
• Court: South Dakota Supreme Court

Page 241

358 N.W.2d 241

47 A.L.R.4th 869, 53 USLW 2291

Marion ROZEBOOM, individually, and d/b/a Rozy's Electric Plaintiff and Appellant, v. NORTHWESTERN BELL TELEPHONE COMPANY, Defendant and Appellee.

No. 13858.

Supreme Court of South Dakota.

Considered on Briefs March 25, 1983.

Decided Nov. 14, 1984.

Robert L. Jones, Sioux Falls, for plaintiff and appellant.

Thomas J. Welk of Boyce, Murphy, McDowell & Greenfield, Sioux Falls, for defendant and appellee.

HENDERSON, Justice (on reassignment).

For purposes of convenience and clarity, plaintiff-appellant (Marion Rozeboom, individually, and d/b/a Rozy's Electric) shall be designated Citizen or Rozy and defendant-appellee (Northwestern Bell Telephone Company) shall be referred to as Bell.

Citizen Rozy brought this action to recover $25,000.00 in damages when Bell failed to publish Rozy's business listing in the yellow pages of Bell's May 1980 directory. Citizen Rozy is an electrical contractor doing business under the name of Rozy's Electric. For several years he was listed in Bell's telephone directory, both for his business and as an individual; also, he was listed in the classified directory or yellow pages under his business name of Rozy's Electric. Rozy operates his business from his home located at 6081 Valley View Road in Sioux Falls, South Dakota, but does own a warehouse at 6412 West 12th in Sioux Falls. The directory published in May 1980 failed to include "Rozy's Electric" in the yellow pages, though Rozy was actively solicited with regard to its insertion and relied thereupon. Interrogatories, answers thereto, depositions, and affidavits of Bell's employees were filed. At the hearing on the motion for summary judgment, the trial court requested a dollar difference in cost of a private telephone and a business telephone from the parties, and thereupon announced that it was going to enter judgment for Rozy in the amount of such difference ($187.79). Bell's motion for summary judgment was thereafter granted and the trial court limited Rozy's recovery to $187.79. This computation was for the time that Rozy's yellow page advertising was omitted from the yellow pages in the telephone directory. We reverse and remand for a trial on damages holding the contract entered into between Rozy and Bell is a contract of adhesion.

We are presented with this issue: Is the following limitation of liability clause in Bell's directory listing contract, with its subscribers, unconscionable and thus unenforceable:

If the Telephone Company shall omit said advertisement or any additional advertising from any issue of its directory, in whole or in part, or shall make errors therein, its liability therefor shall in no event exceed the amount of the charges for the advertising which was omitted or in which the error occurred in such directory issue.

It is obvious that Bell solicits businesses, such as Rozy's, to make money. Rozy, conversely, wants his business name known by advertising in the yellow pages so he can make money. Rozy gets something of value or he would not so advertise. Hence it appears he loses something of value (sold to him) when his advertising is negligently omitted. Bell, by advertising the use of its yellow pages, accustomed the public to extensive use of its yellow pages. It proclaims, nationwide, the effectiveness of yellow page advertising.

The terms of the agreement between Bell, a monopoly, and Citizen were substantively unreasonable. Bell, a public utility, foisted upon the private Citizen a contract form prepared by it with an exculpatory clause on a "take it or leave it" basis. Private Citizen could obtain yellow page advertising from only one source and to limit recovery to the amount of the charges for the advertising is unconscionable. This contract of adhesion should not be enforced as a matter of public policy. This was not a matter of Citizen unwisely entering into a contract. Citizen did not have equal bargaining power with the monopoly. Citizen has the right to sue in damages and to be afforded an opportunity to prove up damages for detriment caused to him. Citizen had his name listed in Bell's telephone directory for many years in the classified directory or the yellow pages under his business name of Rozy's Electric and had a right to reasonably rely upon the proclaimed efficiency of this public utility monopoly. If not totally vital to his business, it was certainly beneficial and the parties mutually so intended such a benefit. Rozy should therefore be afforded an opportunity to prove up damages. Be mindful that a summary judgment was granted against Rozy based upon the trial court's determination of the contract's validity and the showings to the trial court. Hence was Rozy dismissed for, essentially, no suit in law and no issue of material fact. In Nemec v. Deering, 350 N.W.2d 53, 55 (S.D.1984), we stated:

[T]his Court follows the guidelines set out in Wilson v. Great Northern Ry. Co., 83 S.D. 207, 157 N.W.2d 19 (1968).

(1) Evidence must be viewed most favorable to the nonmoving party;

(2) The burden of proof is on the movant to show clearly that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law;

(3) Summary judgment is not a substitute for a court trial or for trial by jury where any genuine issue of material fact exists;

(4) Surmise that a party will not prevail upon trial is not sufficient basis to grant summary judgment on issues which are not shown to be sham, frivolous, or so unsubstantial that it is obvious that it would be futile to try them;

(5) Summary judgment is an extreme remedy which should be awarded only when the truth is clear and reasonable doubts touching the existence of a genuine issue as to material fact should be resolved against movant;

(6) When no genuine issue of fact exists, summary judgment is looked upon with favor and is particularly adaptable to expose sham claims and defenses.

"Summary judgment proceedings are not a substitute for trial when the claims asserted are not a sham or frivolous. The remedy is authorized only when the movant is entitled to judgment as a matter of law because there are no issues of material fact." Caneva v. Miners & Merchants Bank, 335 N.W.2d 339, 341 (S.D.1983).

This Court deems that this case was not one in which summary judgment should have been granted as it was granted based upon a limitation of liability by contract which contract we hold is unconscionable. This contract of adhesion is foursquare before us in the record and our determination of unconscionability is contrary to the holding of the trial court.

Contracts of adhesion birthed from the requirement that one party must "adhere," i.e., inequality of bargaining power. Such denotation arose from the French civil law. The term "adhesion" was early recognized in international law. See Patterson, The Delivery of a Life-Insurance Policy, 33 Harv.L.Rev. 198, 222 (1919), for a 1919 recognition of the concept of adhesion. Throughout law schools and legal seminars in this Nation, this subject has grown rapidly in interest and vitality. There can be no doubt that there is a trend to establish its validity in civil litigation.

In 5A Corbin, Corbin on Contracts Sec. 1164, at 221-23 (1964), it is provided:

Harshness, oppression, unconscionableness exist in varying degrees and always depend upon facts some of which may be doubtful. Therefore, here is a field in which it is often said that the court has discretion. The question of harshness and oppression cannot be considered wholly apart from that of inadequacy of consideration, mistake, fraud, duress, or undue influence.

The attitude of the Chancellors toward "unconscionable" contracts could not help but influence the courts of purely common law jurisdiction also. This is especially true now when almost all of our judges are also Chancellors, although they say repeatedly that they will not "make a new contract for the parties" merely because it has turned out badly for one of them. They refuse to enforce contractual penalties and forfeitures by any remedy, not merely by equitable remedies. See the discussion and the citations in Sec. 128 herein. Unconscionability exists in greatly varying degrees; and not even the most "hard boiled" judge has a stomach for the worst.

The Uniform Commercial Code, Sales, Section 2-302, provides: "(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result." This has already been enacted as law in many States and is well on its way to general adoption. Wherever this section is made applicable to contracts for the sale of goods, no court should fail to make it applicable to all other contracts; for the policy that it adopts is applicable to all alike. In all cases alike, it puts upon the court the responsibility of determining the degree of unconscionability and the requirements of "justice".

In South Dakota, the unconscionability section of the U.C.C. is SDCL 57A-2-302. ^* SDCL 57A-2-302(1) is identical to U.C.C. Sec. 2-302(1), supra; SDCL 57A-2-302(2) provides:

When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.

In South Dakota, we have not been presented with the precise question involved in this case. However, we have very recently spoken against contract provisions which are "one-sided" and declared that they are, in effect, against public policy and should be declared unconscionable. Justice Dunn, writing for the Court, in Durham v. Ciba-Geigy...