In fact, as far as ordinary negligence is concerned, the rule at common law has been abrogated by our Code (section 2174) to the extent that the shipper and carrier may now contract for the purpose of limiting the liability of the latter therefor. The prohibition of the common law against a carrier limiting his liability from any kind of negligence is declared in this state by section 2175 only to apply to the limitation for gross negligence. But, in so declaring, our statute has added nothing to the restrictive force of the common-law rule. Declaring the same rule as it existed at common law, and nothing more, the section should not be construed as restricting the right of contract to any narrower compass than the common law restricted it. In fact, section 2175, as it is but a declaration of that rule, as far as it applies to contracts limiting liability for gross negligence, should not be interpreted as restricting the right of contract as to an agreed valuation of property for the purpose of fixing responsibility any further than it was restricted under the common-law rule. At common law such agreed valuation was not considered a limitation of liability for either ordinary or gross negligence. In jurisdictions in this country where the common-law rule obtains, it is the prevailing doctrine that there is a wide distinction between a contract by a carrier providing for exemption from liability for its negligence and a contract, fairly entered into, whereby, in consideration of a reduced rate of compensation for the transportation, the shipper and carrier agree upon a fixed valuation therefor under which the responsibility of the carrier in case of loss shall be measured. In his work on Carriers, Hutchinson, at section 250, notes the distinction, where, after discussing cases involving the question of contracts providing for total exemption of carriers in cases of negligence, he says: "To be distinguished from these cases, however though the distinction is not always observed-are those cases, obviously different, in which, for the purpose of determining the shipper's liability for freight and the carrier's responsibility for damages, the value of the property is agreed upon."

The leading case marking this distinction is that of Hart v. Pennsylvania R. R. Co., 112 U. S. 331, 5 Sup. Ct. 151, 28 L. Ed. 717. The distinction is further pointed out and approved in many of the state courts; most of them, like the Supreme Court of the United States, holding that agreements such as are involved here do not constitute contracts limiting liability on the part of the carrier, and all holding that in any view the shipper is estopped from questioning the value as represented by him and agreed on. In the Hart Case, where the provision of the contract under consideration was that "the carrier assumes liability on the stock [horses] to the extent of the following valuation," the court said relative to it "that where the contract of the kind signed by the shipper is fairly made, agreeing on the

valuation of the property carried, with the rate of freight based on the condition that the carrier assumes liability only to the extent of the agreed valuation, even in case of loss or damage by the negligence of the carrier, the contract will be upheld as a proper and lawful mode of securing a due proportion between the amount for which the carrier may be responsible and the freight he receives, and of protecting himself against extravagant and fanciful valuation. * ** There is no justice in allowing the shipper to be paid a large value for an article which he has induced the carrier to take at a low rate of freight on the assertion and agreement that its value is a less sum than that claimed after a loss. It is just to hold the shipper to his agreement fairly made as to value, even where the loss or injury has occurred through the negligence of the carrier. The effect of the agreement is to cheapen the freight and secure the carriage if there is no loss, and the effect of disregarding the agreement after a loss is to expose the carrier to a greater risk than the parties intended he should assume.

** The limitation as to the value has no tendency to exempt from liability for negligence. It does not induce want of care. It exacts from the carrier the measure of care due

to the value agreed on. The carrier is bound to respond in that value for negligence. The compensation for carriage is based on that value. The shipper is estopped from saying that the value is greater. The articles have no greater value for the purpose of the contract of transportation between the parties to that contract. The carrier must respond for negligence up to that value. It is just and reasonable that such a contract, fairly entered into and where there is no deceit practiced on the shipper, should be upheld. There is no violation of public policy. On the contrary, it would be unjust and unreasonable, and would be repugnant to the soundest principles of fair dealing and of the freedom of contract, and thus in conflict with public policy, if a shipper should be allowed to reap the benefit of the contract if there is no loss, and to repudiate it in case of loss.

** The distinct ground of our decision in the case at bar is that where a contract of the kind, signed by the shipper, is fairly made, agreeing on the valuation of the property carried, with the rate of freight based on the condition that the carrier assumes liability only to the extent of the agreed valuation, even in case of loss or damage by the negligence of the carrier, the contract will be upheld as a proper and lawful mode of securing a due proportion between the amount for which the carrier may be responsible and the freight he receives and of protecting himself against extravagant and fanciful valuations."

In the case of Graves v. L. S. & M. S. R. R. Co., 137 Mass. 33, 50 Am. Rep. 282, where the valuation was contained in a bill of lading in which it was stipulated that the goods were

of opinion that it does not cover the case before us, which must be governed by other considerations. The defendant has not attempted to exempt itself from liability for the negligence of its servants. It has made no contract for that purpose, but admits its responsibility. *** The care to be exercised in transporting property and the reasonable compensation for its carriage depend largely on its nature and value.

It is just and reasonable that a carrier should base his rate of compensation to some extent upon the value of the goods carried. This measures, and is an important element in fixing. his compensation. If a person voluntarily represents and agrees that the goods delivered to a carrier are of a certain value, and the carrier is thereby induced to grant him a reduced rate of compensation for the carriage, such person ought to be barred by his representations and agreement. Otherwise, he imposes upon the carrier the obligations of a contract different from that into which he has entered. * * * We are of opinion that the plaintiffs are estopped to show that 'the property shipped' was of greater value than was represented. The plaintiffs cannot recover a larger sum without violating their own agreement. Although one of the indirect efforts of such a contract is to limit the extent of the responsibility of the carrier for the negligence of its servants. this was not the purpose of the contract. We cannot see that any consideration of a sound public policy requires that such contracts should be held invalid, or that a person who in such contract fixes a value upon his goods, which he intrusts to the carrier. should not be bound by his valuation."

In two cases in this court, while the particular section of our Code as to contracts limiting liability for gross negligence was not directly involved, still, discussing the effect of an agréed valuation in a contract between a shipper and carrier, the court expressed itself in approval of the rule laid down in the Hart Case. Said this court: "There is a wide distinction between a contract for exemption from liability in case of negligence, which is usually held in derogation of public policy, tending to encourage negligence, and a contract fairly made whereby, in consideration, of a lower freightage, the parties agree upon a fixed or determinate value to be placed upon the article to be shipped. in case of its loss." Pierce v. S. P. Co., 120 Cal. 156, 166, 47 Pac. 874. 52 Pac. 302, 40 L. R. A. 350. Also: "It would be unreasonable for a shipper to expect his packages to be carried for a compensation based upon an agreed valuation much less than the actual value, and then, in case of loss, recover the full value. ** Where the shipper agrees to a certain value, he should not be heard,

in case of loss, to claim a greater value. Such a contract is fair and reasonable, and is not contrary to public policy. It is not a contract that relieves the carrier from responsibility for his own misbehavior. He is liable in case of loss for the value of the packages as agreed to by the shipper, and upon which value he pays a reduced compensation for the carriage. Limitation as to value does not excuse negligence." Michalitschke v. W. F. & Co., 118 Cal. 683, 688, 50 Pac. 847.

We content ourselves with thus quoting at length from these authorities. They discuss the matter fully, and declare principles which should govern in construing contracts of this nature. To the same effect are St. Louis, etc., Ry. Co. v. Weakly, 50 Ark. 397, 8 S. W. 134, 7 Am. St. Rep. 104: Zimmer v. N. Y. ('. &. II. R. R. R. Co., 137 N. Y. 460, 33 N. E. 642: Jennings v. Smith, 106 Fed. 139, 45 C. C. A. 249 Bermel v. N. Y., N. H. & II. R. R. R. Co.. 172 N. Y. 639, 65 N. E. 1113; Hill v. N. P. Ry. Co.. 74 Pac. 1054, 33 Wash. 697; O'Malley v. Great Northern Ry., 86 Minn. 380. 90 N. W. 974; Railway v. Sowell, 90 Tenn. 17. 15 S. W. 837: Normile v. O. R. & N. Co. 41 Or. 177, 69 Pac. 928. It is true that there are some authorities holding to a contrary doctrine, as there are those which sustain contracts exempting carriers from all liability for negligence; but the weight of American authority is in support of the doctrine announced in the Hart and other cases cited. While the authorities referred to discuss the effect of such contracts arising in cases where only ordinary negligence was involved, that can make no difference in the application of the principle to cases involving gross negligence. It is obvious that in principle it can make no difference what the character of the negligence may be. As it is pertinently said in Calderon v. Atlas S. S. Co., 69 Fed. 574, 578, 16 C. C. A. 332: "Such a valuation would necessarily, in the absence of fraud. conclude both the shipper and the carrier upon any inquiry as to the amount of damages arising from a loss, and the contract would therefore extend to any kind of a liability." It will be observed in the authorities quoted that they speak of a contract which is reasonable and freely made between the parties. In the case at bar there can be no question of the reasonableness of the contract. It was based upon a consideration of a rate of transportation much lower than it would have been had the valuation been higher, or if the carrier assumed all the risk which the shipper now seeks to charge it with. The impracticability of establishing one rate for the transportation of stock of different values is universally recognized. Rates for transportation are based upon the value of the property, and it is only natural that the amount of care which is to be exercised by the carrier in the protection of the property will be largely determined by its value. In the case at bar, following the general rule, defendant established freight rates under these

special contracts of shipment which were proportional to the value of the property shipped --an increase of 10 per cent. in the freight charges for a rise of 100 per cent. in the value of horses to be transported, which cannot be said to be an unreasonable charge.

As to the contract being freely and fairly made: Delaney had shipped these horses over the road of the defendant before, and on just such a contract, containing the same valuations as appear in the one in question here. Before this latter contract was entered into, he had discussed with the agent of the defendant the shipment and the rate of shipment of these horses. He was not required to ship them under the contract. If he did not consider the rates thereunder reasonable, he was not required to take them. IIe could have shipped them under an ordinary bill of lading, though at a higher rate of freight, and in case of loss could have recovered whatever they were worth. Even under the contract he was not required to place the valuation on them that he did. He fixed the valuation on them himself. The defendant had nothing to do with it. And he knew. when he signed the contract, that it provided that the liability of defendant was limited by its terms to the value of $20 for each horse, as he had valued them. As we have said, these special contracts provided for freight rates proportionate to the value of the horses shipped. Delaney could have put Delaney could have put their valuation at any higher rate than $20 which he deemed they were worth. There was nothing to prevent him from doing so. It was solely a matter of choice with him. and in fixing the valuation he did he could have been prompted only by a desire to obtain a low freight rate based on this low valuation. Nor, in determining whether such a contract is fair or reasonable, can there be taken into consideration the fact whether the agreed value of the property reasonably approximated its real value. That question was presented in some of the cases cited. In Hill v. N. P. Ry. Co., supra, in reply to a contention of counsel for appellant urging that it should, the court said: "An examination of the cases cited we do not think sustains this contention, and, even where there has been an attempt to make this distinction, it has been in principle a failure. The contract establishing the released valuation must be construed to embrace the real valuation." In the Hart Case, supra, which was a suit relative to the value as here of race horses, the court dismisses that contention as without merit, saying: "Although the horses, being race horses, may, aside from the bill of lading, have been of greater value than that specified in it, whatever passed between the parties before the bill of lading was signed was merged in the valuation it fixed. *" In Steers v. L. N. Y. & P. S. S. Co., 57 N. Y. 1, 15 Am. Rep. 453, the agreed valuation of the trunk in question was $50, whereas it was shown that the value

of its contents exceeded $1,000. In Zimmer v. N. Y. C. & H. R. R. R. Co., supra, the agreed valuation was $100, though the value thereof found by the jury was over $3,000. And in all the other cases cited sustaining such special contracts, necessarily the actual valuation must have exceeded the agreed valuation, and the question whether it did or not must have been held to be immaterial. We do not think that this matter requires any further discussion. Under the authorities the special contract entered into between plaintiffs and defendant cannot be held invalid as one exempting the defendant from liability for gross negligence. It does not do so, nor pretend to do so, but, on the contrary, must be sustained as a reasonable contract freely entered into by the shipper and under which the defendant assumed full responsibility for the actual value of the property as such value was fixed by the parties, and defendant cannot be made responsible for loss in an amount exceeding that agreed val

uation.

The court erred in refusing to instruct the jury that they could not return a verdict exceeding the agreed valuation in each case -$20-and for that reason the judgment is reversed, and a new trial ordered.

We concur: BEATTY, C. J.; McFARLAND, J.; HENSHAW, J.; ANGELLOTTI, J.; SLOSS, J.

SHAW, J. (dissenting). In the absence of a special contract on the subject, when goods under shipment are destroyed by the gross negligence of the carrier, the extent of the liability of the carrier in damages is the actual value of the goods. If a carrier makes an agreement in advance that its liability for such destruction by its own gross negligence shall not be the actual value of the goods, $1,000 for instance, but a smaller amount, which the carrier and the shipper agree shall be considered, for the purposes of the shipment, the value of the goods, $100 for instance, I am unable to perceive why such a contract does not exonerate the carrier from liability for its gross negligence to the extent of $900. And, if a contract has that effect, I cannot see why the fact that the effect desired is not directly contracted for in express terms, makes it any the less a violation of section 2175 of the Civil Code, which prohibits the making of such contracts. The exemption from liability to the extent of the difference between the actual value and the stated value is expressly contracted for in the agreement in question here, however. If we hold that this contract is not forbidden by the provision of the Code, then that provision is practically annulled. Theoretically no person is compelled to avail himself of the services of common carriers, for he may walk, or hire his own conveyance; but practically the thing is compulsory, and the terms must be those fixed by the car

rier. If the provision were made solely, or chiefly, for the benefit of the shipper or passenger, the theory that he might waive his right, or that he might be estopped to assert it by his conduct or by his contract freely made, would be perfectly sound and reasonable. But the law is not made for the benefit of the shipper or passenger alone. It is founded on public policy, having for its object the safety of human beings from death or injury and the prevention of the destruction of property. Where a course of conduct is required by law in furtherance of such public policy, it is not within the province of the individual immediately interested to dispense with an obedience to its provisions by any agreement, or to obviate its effects by his conduct making it inequitable, as between himself and the other party, to enforce it. The law in such cases makes use of his interest as a means of enforcing the pro

visions adopted for the purpose of securing the safety of the traveling public and preventing the negligent destruction of property. He is to that extent a public agent, and as such he should not be permitted to divest himself of the right and power to act.

In those jurisdictions where this policy exists solely by virtue of the common law, which is the creature of the judicial power, I concede that the same power is competent to qualify it, or limit its application, although the modification may render the policy practically fruitless. But in this state the policy is the creature of the legislative power. It has been established by legislative act, which in such matters is superior to the judiciary, and I do not believe that it should be within the power of the courts to declare that the parties immediately concerned may, by their previous conduct or by agreements made in advance, defeat the purpose of the law.

(151 Cal. 746)

IVERSON v. METROPOLITAN LIFE INS. CO. (L. A. 1,902.)

(Supreme Court of California. Aug. 20, 1907.) 1. INSURANCE-APPLICATIONS FOR LIFE POLICIES-WARRANTIES-WAIVER.

Where the insurer, with knowledge that any representations of the insured are untrue, consummates the contract of insurance by issuing a policy, it waives the right to subsequently assert the falsity of the representations and avoid liability.

[Ed. Note.--For cases in point, see Cent. Dig. vol. 28, Insurance, §§ 966-997.] 2. SAME.

Where a soliciting agent of an insurer has neither actual nor ostensible authority to waive the falsity of statements in an application for a life policy, his knowledge of the falsity of statements therein, not communicated to the insurer, is not knowledge of the insurer.

[Ed. Note.--For cases in point, see Cent. Dig. vol. 28, Insurance, § 969.]

3. SAME-AUTHORITY OF SOLICITING AGENT.

An application for a life policy stipulated that the answers of the applicant were true, and that they were the basis of the contract of insurance, and, if untrue, that the policy should

91 P.-39

be void; that only officers at the home office of the insurer had authority to determine whether a policy should issue; and that no statements made to the soliciting agent should be binding on the insurer, unless reduced to writing and presented to the officers of the insurer at the home office. Held, that the soliciting agent had no authority to waive misrepresentations in the application.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 28. Insurance, § 969.]

4. SAME WARRANTIES - MISREPRESENTA

TIONS-WAIVER.

The applicant for insurance stated that he had never had paralysis, while as a matter of fact he had had partial paralysis, which fact was known to the soliciting agent, who did not communicate the knowledge to the insurer. Held, that the insurer, by issuing a policy on the application, did not waive its right to rely on the falsity of the statement to defeat liability.

In Bank. Appeal from Superior Court, Los Angeles County; Charles Monroe, Judge.

Metropolitan Life Insurance Company. From Action by Annie P. Iverson against the a judgment for defendant, plaintiff appeals. Affirmed.

Porter, Sutton & Cruickshank, for appellant. Seward A. Simons, for respondent.

LORIGAN, J. This action was brought by plaintiff as beneficiary to recover upon two policies of life insurance issued by defendant in favor of James E. Iverson, her husband. The case was tried by the court and from a judgment in favor of defendant. plaintiff appeals; the appeal being presented on the judgment roll.

The applications for both policies of insurance, which were made and signed by the assured, contained the following: the following: “(2) I have never had any of the following complaints or diseases: Apoplexy, asthma, bronchitis, * * * hemorrhage, insanity,

paralysis, pneumonia, rheumatism. (12) I agree that this application has been made, prepared, and written by myself, or my own proper agent, and that inasmuch as only the officers at the home office of the company in the city of New York have authority to determine whether or not a policy shall issue upon any application, and as they act on the written statements, answers, warranties, and agreements herein made, no statements, promises, or information made or given by or to the person soliciting or taking this application for a policy, or by or to any person, shall be binding on the company or in any manner affect its rights, unless such statements, promises, or information be reduced to writing and presented to the officers of the company at the home office. And I further declare, warrant, and agree that the representations and answers made above are strictly correct and wholly true, that they shall form the basis and become part of the contract of insurance, if one be issued, and that any untrue answer will render the policy null and void, and that said contract shall not be binding upon the company unless upon

its date and delivery the insured be alive and in sound health." The policies issued were based on these applications and contain the following provision: "This policy is void if any of the statements or warranties in the application for this policy be not true."

The court found that at the date of the policies Iverson was alive and in sound health, and that he and plaintiff had complied with all the terms and conditions of the policy to be performed by them, except as further stated in the findings, and in that regard the court made the following finding: "(3) The defendant issued the said policies of insurance, induced by the warranties and agreements made in the application, a copy of which is attached to the said policies. * * * (7) The statement made by said James E. Iverson in his application that he had never had any of the following complaints or diseases, to wit: Apoplexy, asthma. bronchitis, * hemorrhage, insanity, paralysis, pneumonia, rheumatism * *'-was untrue, in this: that he had had a partial paralysis in August, 1900, and was seriously ill at that time from said stroke of partial paralysis, and was attended by Dr. C. A. Briggs." The court further found: "(8) That Harvey L. Clark was the agent who solicited the said James E. Iverson to take an insurance policy with the defendant company, and that he was an agent for the purpose of soliciting insurance only; that he had known James E. Iverson for more than two years, and at the time he solicited said insurance, and at the time of making said application, he knew that James E. Iverson had had said stroke of partial paralysis. and communicated said fact to his immediate superior, who was a soliciting agent of the defendant in charge of the other soliciting agents in Pasadena, but who was under the general agent in Los Angeles, to whom he reported; but the fact that said James E. Iverson had had a partial stroke of paralysis as aforesaid was not communicated to said general agent at Los Angeles, or to any other agent or officers of the defendant company." As a conclusion of law the court held "that the said policies of insurance were null and void by reason of the statement of said James E. Iverson in his application that he had had no paralysis."

There can be no question but that the written answers in the application for insurance, made by the insured in response to the questions asked him relative to whether he had ever had any of the diseases specifically mentioned in the questions, were material to the risk assumed by the respondent; that the contract of insurance was based on them, and on the agreement of the insured that if any answer was untrue the policy to be issued thereon should be void. As the insured stated in response to an inquiry on the subject in his application that he had not had paralysis, and this statement was untrue, the con

clusion of the court that the policy was void was proper, unless the contention made by appellant is to be sustained. That contention involves the legal effect to be given to the finding of the trial court that Clark, the soliciting agent of the defendant, who solicited the insured to apply for the policy, knew, when the insured made his application to the company in which he stated that he had not had paralysis, that that applicant had in fact suffered a stroke of paralysis. The position of appellant relative to this finding is that this knowledge of the soliciting agent, Clark, was knowledge of the company, and that the company, having issued the policy with knowledge that the statement of the insured in his application that he had not had paralysis was untrue, must be deemed to have waived the warranty with respect to it, and cannot be heard to insist upon the falsity of the statement to avoid the policy. Undoubtedly, if the company did have such knowledge, the issuance of the policy after possession of it would amount to a waiver. Warranties in an application of insurance are for the benefit of the insurer, in order that it may determine whether it will accept the risk, and if, with knowledge that any representations or statements made therein are untrue, it consummates the contract of insurance, it is deemed to have thereby waived the right to subsequently assert their falsity to avoid liability. But the question always is, did the company have knowledge? and that is the question here. It is not pretended that any knowledge possessed by Clark was in fact communicated to any general agent of the defendant, or that it was communicated to the officers of the company at the home office in New York. The claim is, however, that the relation of Clark to the defendant as soliciting agent was such that, whether the knowledge was imparted to these agents or officers or not, this knowledge was in contemplation of law the knowledge of the company, because. Clark had it, and binds it as effectively as if it was communicated. this effect on the defendant of knowledge possessed by Clark would not follow from the fact simply that Clark was the soliciting agent. It could only follow if, as such soliciting agent of the company, he had either actual or ostensible authority from it to waive the truthfulness of statements, or the warranties accompanying them in the application for the policy. If he had neither actual nor ostensible authority to do so, mere knowledge on his part, uncommunicated to the officers of the company having conceded power to waive conditions or warranties, would not be binding on the company, because knowledge of the agent is only knowledge to the principal in matters which are within the scope of the agent's authority to act. Westerfield v. New York Life Insurance Co., 129 Cal. 68, 79, 58 Pac. 92, 61 Pac. 667. And that Clark, as soliciting agent, had neither actual nor ostensible authority to act so as to waive