Amarsaikhan Tsolmon, Plaintiff–Appellant, v. United States of America, Defendant–Appellee.
Gregory Romanovsky, Romanovsky Law Offices, Boston, MA, for Plaintiff–Appellant. Steve I. Frank, U.S. Department of Justice, Civil Division, Appellate Section, Washington, DC, Fred Turner Hinrichs, U.S. Attorney's Office, Houston, TX, for Defendant–Appellee.
Gregory Romanovsky, Romanovsky Law Offices, Boston, MA, for Plaintiff–Appellant.
Steve I. Frank, U.S. Department of Justice, Civil Division, Appellate Section, Washington, DC, Fred Turner Hinrichs, U.S. Attorney's Office, Houston, TX, for Defendant–Appellee.
Before KING, SMITH, and COSTA, Circuit Judges.
The Federal Tort Claims Act (FTCA) waives sovereign immunity for many torts committed by federal employees. The statute's “discretionary function” exception preserves the federal government's immunity, however, when an employee's acts involve the exercise of judgment or choice. United States v. Gaubert , 499 U.S. 315, 322, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991). We must decide whether an investigation into someone's immigration status is considered discretionary when that investigation culminates in a detainment mandated by agency policy.
Late one Friday evening, Amarsaikhan Tsolmon was riding on a Greyhound bus to visit his mother in northern Louisiana. The bus was stopped in Lake Charles, Louisiana by Customs and Border Protection (CBP) agents Robert Wilson and Michael Lewandowski, who boarded the bus to perform a routine check of the passengers' immigration status.
Given that this case was dismissed at the pleading stage, the recitation of facts is based on Tsolmon's allegations, which must be taken as true at this stage. The recitation is also supplemented with undisputed facts from the government's motion to dismiss.
When Wilson reached Tsolmon's seat, Tsolmon stated that he was a “Temporary Visitor.” This was correct, as Tsolmon is a Mongolian citizen lawfully in the United States on an H–1B temporary worker visa. But Tsolmon did not have a physical copy of his immigration papers, despite a law requiring registered aliens eighteen or over to carry identifying documents. 8 U.S.C. § 1304(e). Instead, he could only produce a Texas identification card.
After being unable to verify Tsolmon's status through CBP's New Orleans dispatch, Wilson escorted him off the bus to continue the investigation. While Wilson contacted CBP to run additional searches, Tsolmon called his roommate in Houston to try to get more identifying information on his immigration status. The roommate provided Wilson information over the phone and emailed Tsolmon a photo of his I–94 form and Mongolian passport. But for reasons disputed by the parties Wilson was still unable to verify Tsolmon's status. The records check from other CBP offices incorrectly indicated that Tsolmon was an F–2 visa overstay, with no mention of his H–1B temporary worker visa.
With no information validating Tsolmon's legal status, Wilson arrested Tsolmon, took him to the Lake Charles CBP station, and conducted further computer searches to find a record of Tsolmon's visa. Wilson also contacted his Supervisory Patrol Agent Daniel Stanley, who recommended continuing the computer searches and contacting Tsolmon's relatives to see if anyone had identifying numbers or documents on Tsolmon's status. Tsolmon and Wilson spoke on the phone with Tsolmon's mother, but Wilson was still unable to locate records verifying Tsolmon's claimed status. After several hours of searching, Wilson decided to process Tsolmon as a nonimmigrant overstay and issued him a Notice to Appear on the charge that Tsolmon was in violation of his F–2 visa—the only documentation Wilson uncovered through his record search at the time.
Tsolmon was taken to the Southwest Louisiana Correctional Center early Saturday morning, pursuant to CBP policy requiring the detainment of anyone who is issued a Notice to Appear. Tsolmon asserts that at the Correctional Center he was subjected to a medical exam and tuberculosis test, confined in an overcrowded cell without access to clean drinking water, not given access to a phone, and not given paperwork documenting his detainment.
On Sunday, Stanley arrived at the CBP station and conducted a more extensive search for all persons with the last name Tsolmon in a database that Wilson had previously searched. After a few hours, Stanley at last found a record verifying that Tsolmon held a valid H–1B visa. Later that evening, Tsolmon was taken to the Lake Charles CBP station to be released. Soon after, his brother arrived from Houston and drove him home.
Tsolmon filed an administrative claim with CBP alleging that the incident violated his Fourth Amendment rights and constituted false arrest, false imprisonment, intentional infliction of emotional distress, and negligent infliction of emotional distress. After CBP denied his claim, Tsolmon filed the present suit. He originally asserted FTCA claims against the government and Bivens claims against the individuals involved in his detention.
His amended complaint asserts only two causes of action against the United States under the FTCA. The first alleges false arrest and false imprisonment under Louisiana tort law based on his “forty-eight hour arrest, detention and imprisonment ... [that] was unlawful because it was done without a warrant and without probable cause” in violation of the Fourth Amendment and 8 U.S.C. § 1347(b). The second alleges negligence under Louisiana law, based on allegations that both Wilson and Stanley were “negligent in not verifying Plaintiff's immigration status for almost two days despite having the necessary information to do so.” The government moved to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction.
The district court granted the government's motion, concluding that (1) the alleged conduct falls within the discretionary function exception to the FTCA's waiver of sovereign immunity, 28 U.S.C. § 2680(a), and (2) that the law enforcement proviso, 28 U.S.C. § 2680(h), does not apply. Tsolmon appeals only the district court's decision that the discretionary function exception applies.
The law enforcement proviso extends the FTCA's waiver of sovereign immunity to claims against law enforcement officers “arising ... out of assault, battery, false imprisonment, false arrest, abuse of process, or malicious prosecution.” 28 U.S.C. § 2680(h).
We review de novo a dismissal for lack of subject matter jurisdiction. Ramming v. United States , 281 F.3d 158, 161 (5th Cir. 2001). In deciding such a motion, courts can consider: “(1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.” Id . The district court considered the well-pleaded fact from the amended complaint, undisputed facts in the record, and disputed facts viewed in the light most favorable to Tsolmon; it did not resolve disputed facts.
The FTCA is a limited waiver of sovereign immunity that allows plaintiffs to bring state law tort actions against the federal government. 28 U.S.C. § 2674. Courts consider whether the FTCA applies via a Rule 12(b)(1) motion, because whether the government has waived its sovereign immunity goes to the court's subject matter jurisdiction. Willoughby v. United States ex rel. U.S. Dep't of the Army , 730 F.3d 476, 479 (5th Cir. 2013) ; see also 28 U.S.C. § 1346(b)(1). Waiver of sovereign immunity is strictly construed, meaning uncertainty is decided in favor of the government. Willoughby , 730 F.3d at 480.
The discretionary function exception is one of several limitations on the FTCA's waiver. The exception preserves the government's sovereign immunity when the plaintiff's claim is based on an act by a government employee that falls within that employee's discretionary authority. 28 U.S.C. § 2680(a). Whether an official's actions fall within the exception involves two inquiries: (1) “the conduct must be a ‘matter of choice for the acting employee,’ ” Spotts v. United States , 613 F.3d 559, 567 (5th Cir. 2010) (quoting Berkovitz ex rel. Berkovitz v. United States , 486 U.S. 531, 536, 108 S.Ct. 1954, 100 L.Ed.2d 531 (1988) ); and (2) “the judgment [must be] of the kind that the discretionary function exception was designed to shield,' ” id. at 568 (quoting United States v. Gaubert , 499 U.S. 315, 322–23, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991) ). The plaintiff has the burden of establishing that the discretionary function exception does not apply. Spotts , 613 F.3d at 569.
Tsolmon appeals only the district court's determination that the challenged conduct involved judgment or choice. He invokes case law recognizing that if “a federal statute, regulation, or policy specifically prescribes a course of action for an employee to follow,” then the government employee does not truly have a choice (or at least a choice that the law will recognize as falling within the discretionary function exception). Berkovitz , 486 U.S. at 536, 108 S.Ct. 1954. One example a court has recognized is when a government agent lies or mischaracterizes evidence in a criminal complaint, as the Federal Rules of Criminal Procedure require allegations in a criminal complaint to be sworn as true. Camacho v. Cannella , 2012 WL 3719749, at *10 (W.D. Tex. Aug. 27, 2012) (citing FED. R. CRIM. P. 3 ). Tsolmon argues that his case also involves a mandate that eliminated the officer's discretion, citing the CBP policy requiring officers to detain all aliens issued a Notice to Appear. Although the allegedly negligent actions of the officers led to the issuance of the Notice to Appear, Tsolmon argues that the decision to detain him after that Notice was issued was nondiscretionary because CBP policy required it.
But the district court determined that the conduct at issue is “the conclusions the CBP agents drew from their investigation of Tsolmon's immigration status and the basis and timing of Agent Wilson's decision to issue [a Notice to Appear] charging Tsolmon with being an alien illegally present in the United States, which [ ] resulted in Tsolmon's arrest and [ ] incarceration.” The court based that conclusion largely on the amended complaint, which focuses on the steps the officers took to try to verify Tsolmon's immigration status.
The district court's framing of the relevant conduct is more consistent with Tsolmon's allegations. The amended complaint speaks at length about Wilson's investigation into Tsolmon's immigration status, but never mentions the CBP policy he now asserts is at issue. Nor did Tsolmon raise the CBP policy in his administrative complaint. See 28 U.S.C. § 2675 (requiring administrative exhaustion for FTCA claims). Tsolmon's false arrest claim also demonstrates the difficulty of his attempt to separate the policy from the investigative steps. The policy standing alone did not mandate Tsolmon's detention; the preliminary determination to issue a Notice to Appear was a crucial step in the chain of events. We thus evaluate the application of the discretionary function exception with respect to the conduct challenged in Tsolmon's amended complaint, not in the context of a challenge to the CBP policy on which he now focuses.
We thus do not decide whether detainment under the policy itself is an act of discretion. To frame that question, however, is to identify the unusual posture of this argument. Indeed, Tsolmon's argument is different from what is typically seen when an FTCA plaintiff invokes a regulation or statute in trying to avoid the discretionary function exception. Those cases involve the allegation that a government employee is violating the statute, not that she is following it. The difference seems to matter at least at the liability stage. Acting in contravention of a statute not only takes conduct outside the permissible scope of discretion, it also often establishes negligence per se. In contrast, acting pursuant to a statute is not likely to be negligent.
Having identified the relevant allegations as Wilson's investigation into Tsolmon's immigration status and decision to issue the Notice to Appear, the remaining analysis is straightforward. “[D]ecisions on when, where, and how to investigate and whether to prosecute” have long been found to be core examples of discretionary conduct for which the United States maintains its immunity. Sutton v. United States , 819 F.2d 1289, 1294–95 (5th Cir. 1987). We have applied that not just to officials enforcing the criminal laws, but also to officials enforcing the immigration laws. Nguyen v. United States , 2003 WL 1922969, at *1–2 (5th Cir. Mar. 31, 2003). The investigation into Tsolmon's status demonstrates the numerous choices involved in conducting such an inquiry. Wilson had to decide: whether to further investigate Tsolmon after discovering he did not have his immigration papers; which searches to run in the CBP database; with whom to communicate to try to verify Tsolmon's status; and whether to ultimately issue a Notice to Appear when he was unable to verify Tsolmon's status.
Tsolmon relies on a statute to avoid a holding that the agents' conduct falls within the discretionary function exception. This time making an argument that is contained in his pleadings, he contends that the officers exceeded their authority under 8 U.S.C. § 1357(a)(2) when they detained him. That statute provides that to make an arrest without a warrant, an officer must: (1) have “reason to believe” that a person is in the United States in violation of immigration law or regulation and (2) think that the person “is likely to escape before a warrant can be obtained for his arrest.” Id . Tsolmon argues that Wilson did not have reason to believe that he was in violation of immigration law or likely to escape before a warrant could be issued.
Tsolmon is correct that the discretionary function exception does not protect officers who break the law or exceed their authority. Sutton , 819 F.2d at 1293. As the district court correctly noted, however, the exception fails to protect officers only when the statute governing the action “giv[es] specific direction as to any of these functions in a way that would make [the acts] nondiscretionary.” Guile v. United States , 422 F.3d 221, 231 (5th Cir. 2005). In other words, officers are unprotected only when they use their discretion to act in violation of a statute or policy that specifically directs them to act otherwise. See, e.g., Collins v. United States , 783 F.2d 1225, 1230–31 (5th Cir. 1986) (noting that a regulation at issue provided “no room for policy judgment or decision” once certain conditions were met). Section 1357(a)(2), with its judgment-laden “reasonable belief” standard, is not such a statute.
Tsolmon's allegations also do not establish that the agents violated section 1357(a)(2). Wilson was unable to confirm Tsolmon's legal status after multiple attempts to verify it. Tsolmon was arrested at a bus station while travelling between states, which could plausibly give rise to the fear that Tsolmon would not remain in the jurisdiction before a warrant could be obtained.


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This was an action brought in the circuit court of the United States for the western district of Michigan by Frederick Gardner, a citizen of the state of Indiana, against the Michigan Central Railroad Company, a corporation of the state of Michigan, to recover damages for injuries alleged to have been inflicted by reason of the negligence of the defendant in causing, and allowing to remain for some time prior to the accident complained of, a hole in the planking of the cross- [150 U.S. 349, 350] ing of a thoroughfare near its station house in Niles, Mich., known as 'Fifth Street,' contrary to its duty in that behalf, whereby the plaintiff was injured without negligence on his part; and also in ordering the plaintiff, who was a night switchman at that station, to do certain coupling and uncoupling of cars, out of the line of his employment as switchman, and more dangerous.
The evidence further tended to show that the yard master of the company had the control and management of the switches and of the work belonging to the 'making up trains;' that in 1881 he employed the plaintiff to tend switches at night; that prior to March, 1882, he had ordered [150 U.S. 349, 351] him not to engage in the work known as making up trains, which included coupling and uncoupling cars, and afterwards, and prior to May 16, 1882, the supply of help for making up trains in the morning not being equal to the demand, he required the plaintiff to assist in such making up, including coupling and uncoupling. It appeared that the yard at night was in charge of a yard foreman or assistant yard master, and the evidence tended to show that on the 16th of May the plaintiff, acting in obedience to the orders of such assistant yard master, attempted to uncouple cars just before he received his injury, the hole in question being hidden under the car being uncoupled; that there was a down grade sloping west at the place where the plaintiff was, and the cars, according to necessity and general usage, were in slight motion at the time; and that, as the plaintiff was stepping out from between the cars, one of his feet was firmly caught in the hole, and the injuries inflicted in consequence.
On the trial of the cause it appeared that the plaintiff had originally commenced suit in the circuit court for the county of Berrien, Mich, and that the cause had there been tried, and resulted in a verdict and judgment in favor of the plaintiff, whereupon the defendant brought error to the supreme court of the state, which reversed the judgment and granted a new trial, and counsel for defendant gave in evidence the printed record used in said supreme court, together with a copy of the opinion of that court in the premises, and also a certified copy of the judgment in the state circuit court, in obedience to the mandate of the supreme court; and it was agreed by the parties that, on the filing of its opinion, the supreme court entered judgment in the usual form, reversing the judgment of the court below, and granting a new trial in the suit. The judgment of the state circuit court recited that, upon the filing of a certified copy of the judgment of the supreme court reversing the prior judgment, and vacating the verdict of the jury, and the placing of the cause upon the calendar for trial, the plaintiff came by his counsel, and voluntarily withdrew his suit, and submitted to a nonsuit therein; wherefore, 'on motion of said plaintiff, by his said attorneys, it is [150 U.S. 349, 352] ordered by the court, now here, that the said plaintiff be, and is hereby, nonsuited, but not to prevent the right of the plaintiff to bring any suit in any court,' and for costs in favor of defendant. The opinion of the supreme court is reported in 58 Mich. 584, 26 N. W. 301.
'(1) A switchman, who had been strictly cautioned against having anything to do with coupling cars, tried to uncouple some while the train was moving, and had his foot caught where the planking had been for some time slightly broken, though the defect had not been seen by him as yard man and the railroad company had no notice of it. Held, that he could not recover for the injury resulting to him.
The case in the circuit court, having gone to the jury, resulted in a verdict in plaintiff's favor, and a motion for new trial was made by defendant, which was heard before the circuit and district judges. The circuit judge was of opinion that upon the record there was no negligence on the part of the company, and that the case should have been withdrawn from the jury, and a verdict directed for the defendant. The district judge thought otherwise, but a new trial was granted, and, the case being retried upon the same evidence, the district judge, accepting in that regard the views of the circuit judge, instructed the jury to find for the defendant, which was done, and, judment having been entered, the cause was brought to this court by writ of error.
Ashley Pond, for defendant in error.
Consel for plaintiff in error does not contend that the judgment of the supreme court of Michigan operated as a bar to this action, but he insists that that judgment precluded 'the plaintiff from successfully maintaining a new action against the defendant, upon evidence tending to prove only the same state of facts which the evidence before the supreme court of the state tended to prove.' This assumes a final adjudication on matter of law, binding between the parties, and, treating the judgment reversing and remanding the cause as final, applies it as an estoppel, notwithstanding the fact that a nonsuit was subsequently taken. We cannot concur in this view, and are of opinion that the circuit court was not obliged to give any such effect to the proceedings in the state court, nor [150 U.S. 349, 356] do we think that the supreme court of Michigan committed itself to the definitive rulings supposed.
In Bucher v. Railroad Co., 125 U.S. 555, 578 , 8 S. Sup. Ct. 974, the plaintiff had sued in the state court and recovered judgment, and the highest appellate court of the state, reviewing the case, decided the points of law involved in it against the plaintiff, set aside the judgment, and sent the case back for a new trial. The plaintiff then became nonsuit, and brought suit in the United States court on the same cause of action, and it was held that he was not estopped. The action was one for damages for personal injuries inflicted by reason of the defendant's negligence, and one of the defenses was that plaintiff was traveling on Sunday, in violation of statute. The circuit court refused to submit to the jury the evidence upon the question of whether or not his act of traveling on the Lord's Day was a work of necessity or charity, under the statute of Massachusetts in that behalf, and this court sustained the ruling, for the reasons given by Mr. Justice Miller, who said: 'It is not a matter of estoppel which bound the parties in the court below, because there was no judgment entered in the case in which the ruling of the state court was made, and we do not place the correctness of the determination of the circuit court in refusing to permit this question to go to the jury upon the ground that it was a point decided between the parties, and therefore res judicata as between them in the present action, but upon the ground that the supreme court of the state, in its decision, had given such a construction to the meaning of the words 'charity' and 'necessity' in the statute as to clearly show that the evidence offered upon that subject was not sufficient to prove that the plaintiff was traveling for either of those purposes.' This court felt itself constrained to follow the decision of the supreme judicial court of Massachusetts, in accordance with the rule that the decisions of state courts relating to laws of a local character, which may have become established by those courts, or had always been a part of the law of the state, are usually conclusive, and always entitled to the highest respect of the federal courts. [150 U.S. 349, 358] But in the present case only the responsibility of a railroad company to its employes was involved, and it is settled that that question is matter of general law, and that, in the absence of statutory regulations by the state in which the cause of action arises, this court is not required to follow the decisions of the state courts. Railroad Co. v. Lockwood, 17 Wall. 357; Hough v. Railway Co., 100 U.S. 213 ; Myrick v. Railroad Co., 107 U.S. 102 , 1 Sup. Ct. 425; Railroad Co. v. Prentice, 147 U.S. 101 , 13 Sup. Ct. 261; Railroad Co. v. Baugh, 149 U.S. 368 , 13 Sup. Ct. 914.
Apart from this, while it is true that it was apparently ruled in the opinion of the supreme court of Michigan, not only that upon the record, as it was before that court, plaintiff was guilty of contributory negligence, but also that the defendant was free from negligence, since that of which plaintiff complained was the negligence of a fellow servant, yet an analysis of the language used satisfies us of the correctness of the statement in the principal opinion in Van Dusen v. Letellier, 78 Mich. 492, 505, 44 N. W. 572, that the case was really decided 'upon the ground that the plaintiff was injured in going into a place and at work in violation of orders not to do so,' which might or might not appear to be so upon a retrial, and upon which the evidence in the circuit court was far from being undisputed. We therefore conclude that the opinion of the state supreme court should be given only such weight as its reasoning and the respectability of the source from whence it proceeds entitles it to receive.
And here reference may properly be made to the fact that considerable differences appear to exist between the evidence on the trial under review and that exhibited in the record before the state court,-differences bearing chiefly upon the question of contributory negligence. But, assuming the evidence as to the other branch of the case to have been unchanged, we are not prepared to concede that the decision of the supreme court of Michigan proceeded upon the proposition that defendant must necessarily be absolved from negligence because all its employes, including plaintiff, were, as matter of law, fellow servants with those who should have [150 U.S. 349, 359] kept the planking in good condition, as that proposition is untenable.
In Hough v. Railway Co., 100 U.S. 213 , where the injury was the result of defective appliances, it was held that to the general rule exempting the common master from liability to a servant for injuries caused by the negligence of fellow servants there are well-defined exceptions; one of which arises from the obligation of the master not to expose the servants, when conducting his business, to perils from which they may be guarded by proper diligence on his part. While it is implied in the contract between the parties that the servant risks the dangers which ordinarily attend or are incident to the business in which he voluntarily engages for compensation, among which are the carelessness of his fellow servants, with whose habits, conduct, and capacity he has, in the course of his duty, an opportunity to become acquainted, and against whose neglect and incompetency he may himself take precautions, it is equally implied in the same contract that the master shall supply the physical means and agencies for the conduct of his business, and that he shall not be wanting in proper care in selecting such means. The master is not to be held as guarantying or warranting the absolute safety under all circumstances, or the perfection of the machinery or apparatus which may be provided for the use of employes, but he is bound to exercise the care which the exigency reasonably demands in furnishing such as is adequate and suitable, and in keeping and maintaining it in such condition as to be reasonably safe for use.
These principles are reiterated in very many authorities, and among them in Snow v. Railroad Co., 8 Allen, 441, referred to with approval by the supreme court of Michigan in this case, and much in point. It was there ruled that a railroad company many be held liable for an injury to one of its servants which is caused by want of repair in the roadbed of the railroad, and that if it is the duty of a servant to uncouple the cars of a train, and this cannot be easily done while the train is still, and he endeavors to uncouple them while the train is in motion, and steps between the cars, and meets with [150 U.S. 349, 360] an injury, which is caused by want of repair to the roadbed, the court cannot rule, as a matter of law, that he is careless, but should submit the case to the jury, although he continued in the employment of the company after he knew of the defect. The proximate cause of the injury was a hole in one of the planks laid down between the rails of the defendant's railroad where it crossed the highway, which had existed for more than two months, to the knowledge of the plaintiff, who had complained of it to the repairer of the tracks of the railroad. The supreme judicial court of Massachusetts held that the defendant was not relieved of its liability to the plaintiff by reason of any relation which subsisted between him and it at the time of the accident arising out of the employment in which he was engaged, because, among other reasons, it did not appear that the defect in the road was the result of any such negligence in the servant as to excuse the defendant, but was caused by a want of repair in the superstructure between the tracks of the defendant's road, which defendant was bound to keep in a suitable and safe condition, so that plaintiff could pass over it without incurring the risk of injury. The liability was rested on the implied obligation of the master, under his contract with those whom he employs, to use due care in supplying and maintaining suitable instrumentalities for the performance of the work or duty which he requires of them, and renders him liable for damages occasioned by a neglect or omission to fulfill this obligation, whether it arises from his own want of care or that of his agents to whom he intrusts the duty.
We regarded this doctrine as so well settled that in Railway Co. v. Cox, 145 U.S. 593, 607 , 12 S. Sup. Ct. 905, we contented ourselves, without discussion, with a reference to some of the cases in this court upon the subject. The decisions in the state of Michigan are to the same effect. Van Dusen v. Letellier, 78 Mich. 492, 44 N. W. 572; Sadowski v. Car Co., 84 Mich. 100, 47 N. W. 598; Roux v. Lumber Co., 85 Mich. 519, 48 N. W. 1092; Ashman v. Railroad Co., 90 Mich. 567, 51 N. W. 645. Upon the whole, we see no ground for excepting this case from the rules governing other cases involving questions of fact. [150 U.S. 349, 361] The question of negligence is one of law for the court only where the facts are such that all reasonable men must draw the same conclusion from them, or, in other words, a case should not be withdrawn from the jury unless the conclusion follows as matter of law that no recovery can be had upon any view which can be properly taken of the facts the evidence tends to establish. Railway Co. v. Ives, 144 U.S. 408, 417 , 12 S. Sup. Ct. 679; Railway Co. v. Cox, 145 U.S. 593, 606 , 12 S. Sup. Ct. 905; Pailroad Co. v. Miller, 25 Mich. 274; Sadowski v. Car Co., 84 Mich. 100, 47 N. W. 598.
Tested by this rule, we are of opinion that the case should have been left to the jury under proper instructions, inasmuch as an examination of the record discloses that there was evidence tending to show that the crossing was in an unsafe condition; that the injury happened in consequence; that the defect was occasioned under such circumstances, and was such in itself, that its existence must have been known to defendant; the sufficient time for repairs had elapsed; and that the plaintiff was acting in obedience to orders in uncoupling at the place and time, and as he was; was ignorant of the special peril; and was in the exercise of due care.
The judgment is reversed, and the cause remanded, with a direction to grant a new trial.

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Linda FITZPATRICK a/k/a Linda J. Fitzpatrick, “John Doe 1-10”, said names being fictitious and unknown to plaintiff, the persons or parties intended being the tenants, occupants, persons or corporations, if any, having or claiming an interest in or lien upon the premises described in the complaint, Defendants.
Deutsch & Schneider, LLP Glendale, for Plaintiff.Nassau/Suffolk Law Services Islandia, for Defendant Fitzpatrick.
It is ORDERED that this motion by the plaintiff for an order pursuant to CPLR 3212 granting summary judgment in its favor and striking the answer of the defendant Linda Fitzpatrick a/k/a Linda J. Fitzpatrick (Fitzpatrick); appointing a referee to ascertain and compute the amount due; amending the caption of this action by substituting Haley Lanzafame for John Doe # 1 and striking out John Doe # 2-# 10; and striking the notice for discovery and inspection of the defendant Fitzpatrick pursuant to CPLR 3124(b) is denied.
This is an action to foreclose a mortgage on property known as 1 Forest Drive, East Northport, New York. The defendant Fitzpatrick obtained a loan in the amount of $210,000.00 at a yearly fixed rate of interest of 11.125 percent from the plaintiff and executed a note and said mortgage, both dated April 9, 2008, in favor of the plaintiff. The note indicated monthly mortgage payments to be $2019 .74. The defendant Fitzpatrick defaulted on the monthly loan payment due on September 1, 2008 and those due thereafter. Subsequently, the plaintiff declared the entire amount due.
The plaintiff commenced the instant mortgage foreclosure action on March 25, 2009 alleging that upon information and belief the subject loan is a “sub-prime/high cost” loan and that the plaintiff is the holder and owner of the subject mortgage and note and has complied with Banking Law §§ 595-a and 6-l or 6-m, if applicable, and RPAPL § 1304.
The defendant Fitzpatrick answered asserting a first affirmative defense that the loan was substantively unconscionable because the monthly mortgage payments of principal, interest and taxes of $2,753 .88 were in excess of the defendant’s fixed monthly income of $2,671.00; the plaintiff knew or should have known at the time that the loan agreement was made that the defendant Fitzpatrick’s income was insufficient to cover the monthly payments due under the note; and the plaintiff failed to verify or to even inquire into the defendant Fitzpatrick’s income, which is fixed and easily verifiable, and disregarded income in determining the loan terms to extend to her. In addition, the first affirmative defense alleged that the loan was procedurally unconscionable due to the unequal bargaining power and imbalance of the knowledge and understanding of the parties.
As a second affirmative defense, the defendant Fitzpatrick asserted that the plaintiff engaged in unfair and deceptive practices in the extension of said loan in violation of General Business Law § 349. The second affirmative defense alleged in effect that the conduct of the plaintiff of extending the subject loan to the defendant Fitzpatrick without determining her ability to repay when a reasonable person would expect such an established bank as the plaintiff to offer a loan that he or she could afford was materially misleading. In addition, the defense alleged that said conduct had the potential to affect similarly-situated financially vulnerable consumers and alleged damages in the form of the loss of the defendant Fitzpatrick’s home of 22 years to foreclosure. The defendant Fitzpatrick pointed out in her answer that the mortgage payments she made for June, July and August 2008 prior to her default were paid out of the loan proceeds.
The plaintiff now moves for summary judgment on the complaint on the grounds that the defendant Fitzpatrick defaulted on her loan payments, the plaintiff served the defendant Fitzpatrick with the required notices of default, and the defendant Fitzpatrick failed to cure her default resulting in the acceleration of her loan. In support of the motion, the plaintiff submits a copy of the note and mortgage; the affidavit of facts of the plaintiff’s assistant treasurer; the 90-day notice pursuant to RPAPL § 1304 dated October 29, 2008 and addressed to the defendant Fitzpatrick; the default notice pursuant to paragraph 22 of the mortgage; the “Help for Homeowners in Foreclosure” notice pursuant to RPAPL § 1303; the Fair Debt Collections Practices Act notice; the summons with the “You Are In Danger of Losing Your Home” notice of RPAPL § 1320; the complaint; the answer of the defendant Fitzpatrick; and the affidavits of service. The plaintiff also submits an affirmation regarding “sub-prime” status stating that upon information and belief this is an action to foreclose a residential mortgage loan which is a “subprime home loan” as defined in RPAPL § 1304 or a “high cost” home loan as defined in Banking Law § 6-l (see, CPLR 3408).
In opposition to the motion, the defendant Fitzpatrick contends that the plaintiff’s act of extending said loan was unconscionable as evidenced by the parties’ unequal appreciation of the undertaking and the clearly ascertainable inability of the defendant Fitzpatrick to repay the loan according to its terms such that the plaintiff knew or should have known prior to closing that it would be impossible for the defendant Fitzpatrick to make loan payments. The defendant Fitzpatrick’s attorney states in her affirmation that upon information and belief, the subject loan is the first mortgage that the defendant Fitzpatrick has ever had and that compared to the plaintiff, a large lending institution with extensive knowledge of loans, mortgages and extension of credit, the defendant Fitzpatrick is a homeowner with very limited knowledge of loan terms and the lending process. The defendant Fitzpatrick’s attorney contends in effect that a review of her client’s easily verifiable income would have immediately alerted the plaintiff that the defendant Fitzpatrick could not afford the loan that was extended to her. She further contends that the extension of the subject loan implies an intent by the plaintiff to seize the defendant Fitzpatrick’s home upon her almost inevitable default.
It is well settled that the proponent of a summary judgment motion bears the initial burden of making a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient proof to demonstrate the absence of any material issues of fact (Norwest Bank Minnesota, N.A. v. Sabloff, 297 A.D.2d 722, 747 N.Y.S.2d 559 [2d Dept 2002] ). Failure to make such a prima facie showing requires a denial of the motion regardless of the sufficiency of the opposition papers (De Santis v. Romeo, 177 A.D.2d 616, 576 N.Y.S.2d 323 [2d Dept 1991] ).
In order to establish prima facie entitlement to summary judgment in a foreclosure action, a plaintiff must submit the mortgage and unpaid note, along with evidence of default (see, Capstone Business Credit, LLC v. Imperia Family Realty, LLC, 70 AD3d 882, 883, 895 N.Y.S.2d 199, 201 [2d Dept 2010]; U.S. Bank Natl. Assn. TR U/S 6/01/98 [Home Equity Loan Trust 1998-2] v. Alvarez, 49 AD3d 711, 711, 854 N.Y.S.2d 171 [2d Dept 2008]; Hoffman v. Kraus, 260 A.D.2d 435, 436, 688 N.Y.S.2d 575 [2d Dept 1999] ). The plaintiff’s motion for summary judgment should prove the allegations of the complaint (2-21 Bergman, New York Mortgage Foreclosures § 21.05). Chapter 472 of the Laws of 2008 (known as the Subprime Residential Loan and Foreclosure Law) provides additional protections, including protections against predatory lending practices, to homeowners facing foreclosure whose home loans meet certain standards. The plaintiff seeking to foreclose a home loan that meets said standards must also submit evidence of compliance with the statutes pertaining to that specific type of home loan in order to demonstrate entitlement to summary judgment. If the loan is a high-cost home loan as defined in Banking Law § 6-l or a subprime home loan as defined in Banking Law § 6-m, the plaintiff seeking to meet its initial burden on a summary judgment motion must establish that it is the owner and holder of the subject mortgage and note or has been delegated the authority to commence a mortgage foreclosure action by the owner and holder and has complied with all of the provisions of Banking Law § 595-a and any rules and regulations promulgated thereunder as well as Banking Law § 6-l or § 6-m and RPAPL § 1304 (see, RPAPL § 1302).
The burden then shifts to the defendant to demonstrate “the existence of a triable issue of fact as to a bona fide defense to the action, such as waiver, estoppel, bad faith, fraud, or oppressive or unconscionable conduct on the part of the plaintiff” (Capstone Bus. Credit, LLC v. Imperia Family Realty, LLC, 70 AD3d at 883 quoting Mahopac Natl. Bank v. Baisley, 244 A.D.2d 466, 467, 664 N.Y.S.2d 345 [2d Dept 1997]; see, Nassau Trust Co. v. Montrose Concrete Prods. Corp., 56 N.Y.2d 175, 183, 451 N.Y.S.2d 663  ). If the loan is a high-cost home loan as defined in Banking Law § 6-l or a subprime home loan as defined in Banking Law § 6-m, it is a defense in a mortgage foreclosure action that the terms of the home loan or the actions of the lender violate any provision of Banking Law § 6-l or § 6-m or RPAPL § 1304 (see, RPAPL § 1302).
Here, the plaintiff has failed to demonstrate through the submission of proof from someone with personal knowledge that the subject loan is either a high-cost home loan as defined in Banking Law § 6-l or a subprime home loan as defined in Banking Law § 6-m and RPAPL § 1304(5)(c) and that the plaintiff has complied with all of the provisions of Banking Law § 595-a, and any rules and regulations promulgated thereunder, as well as Banking Law § 6-l or § 6-m and RPAPL § 1304, as alleged in the complaint. Nowhere in the attorney’s affirmation of regularity or the affidavit of the plaintiff’s assistant treasurer is there any mention or specification or explanation of the subject loan’s exact loan type as either a high cost home loan or a subprime home loan. The Court notes that the plaintiff has submitted a 90-day default notice which is required for a high-cost home loan as defined in Banking Law § 6-l or a subprime home loan as defined in Banking Law § 6-m (see, RPAPL § 1304). If the subject loan is a high cost home loan, then the plaintiff has failed to submit proof that it complied with Banking Law § 6-l (2-a)(a) inasmuch as the subject mortgage lacks a legend on top in twelve-point type stating that the mortgage is a high-cost home loan subject to Banking Law § 6-l (see, Banking Law § 6-l [2-a][a] ). Therefore, the plaintiff’s motion for summary judgment on the complaint is denied inasmuch as the plaintiff failed to meet its initial burden of establishing its prima facie entitlement to judgment as a matter of law (see, Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324, 508 N.Y.S.2d 923 ; Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853, 487 N.Y.S.2d 316 ; Tyson v. Tower Ins. Co. of New York, 68 AD3d 977, 891 N.Y.S.2d 143[2d Dept 2009] ).
In any event, when a plaintiff moves for summary judgment, it is proper for the court to look beyond the defendant’s answer and deny summary judgment if facts are alleged in opposition to the motion which, if true, constitute a meritorious defense (see, Nassau Trust Co. v. Montrose Concrete Prods. Corp., 56 N.Y.2d at 182). Here, the defendant Fitzpatrick’s opposition to the motion also raises allegations of a violation of Banking Law § 6-l (2)(k) if the subject loan is actually a high cost home loan in that it was made without “due regard to repayment ability ? as verified by detailed documentation of all sources of income and corroborated by independent verification” and a violation of Banking Law § 6-m (4) if the subject loan is actually a subprime home loan (see, Banking Law §§ 6-l [k], 6-m  ). Consistent with the rule referred to above, the Court considers not only the defenses pleaded but also alleged violations of Banking Law § 6-l (2)(k) and § 6-m (4) (see, id. at 183).
The plaintiff also moves for dismissal of the affirmative defenses of the defendant Fitzpatrick on the grounds that the loan documents that were signed and presumably read and assented to by the defendant Fitzpatrick fully disclosed the amount of monthly loan payments and income required to meet the obligations of the subject asset based loan, that the plaintiff expressly relied on her sworn representations of her ability to repay the loan, and that there was no predatory lending involved inasmuch as it was the defendant Fitzpatrick who approached the plaintiff for a loan so as to avoid tax foreclosure.
When moving to dismiss an affirmative defense, the plaintiff bears the burden of demonstrating that the affirmative defense is “without merit as a matter of law” (see, CPLR 3211[b]; Vita v. New York Waste Services, LLC, 34 AD3d 559, 559, 824 N.Y.S.2d 177 [2d Dept 2006] ). In reviewing a motion to dismiss an affirmative defense, this court must liberally construe the pleadings in favor of the party asserting the defense and give that party the benefit of every reasonable inference (see, Fireman’s Fund Ins. Co. v. Farrell, 57 AD3d 721, 723, 869 N.Y.S.2d 597 [2d Dept 2008] ). Moreover, if there is any doubt as to the availability of a defense, it should not be dismissed (see, id.).
A party is under an obligation to read a document before he or she signs it, and a party cannot generally avoid the effect of a document on the ground that he or she did not read it or know its contents (Cash v. Titan Fin. Services, Inc., 58 AD3d 785, 788, 873 N.Y.S.2d 642 [2d Dept 2009][internal quotations and citations omitted] ). There are situations where an instrument will be deemed void because the signer was unaware of the nature of the instrument he or she was signing, such as where the signer is illiterate, or blind, or ignorant of the alien language of the writing, and the contents thereof are misread or misrepresented to him by the other party, or even by a stranger (Id. at 788 [internal quotations and citations omitted] ).
Whether a contract or clause is unconscionable is to be decided by the court against the background of the contract’s commercial setting, purpose and effect (see, Wilson Trading Corp. v. David Ferguson, Ltd., 23 N.Y.2d 398, 403, 297 N.Y.S.2d 108  ). An unconscionable contract is one which is so grossly unreasonable or unconscionable in the light of the mores and business practices of the time and place as to be unenforceable according to its literal terms (Gillman v. Chase Manhattan Bank, 73 N.Y.2d 1, 10, 537 N.Y.S.2d 787 [internal quotations and citations omitted] ). A determination of unconscionability generally requires a showing that the contract was both procedurally and substantively unconscionable when made, for example, some showing of an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party (Id. [internal quotations and citations omitted] ). The procedural element of unconscionability requires an examination of the contract formation process and the alleged lack of meaningful choice with a focus on such matters as the size and commercial setting of the transaction, whether deceptive or high-pressured tactics were employed, the use of fine print in the contract, the experience and education of the party claiming unconscionability, and whether there was disparity in bargaining power (Id. at 10-11). The substantive element of unconscionability entails an analysis of the substance of the bargain to determine whether the terms were unreasonably favorable to the party against whom unconscionability is urged (Id.).
With respect to the first affirmative defense that the loan was unconscionable, the plaintiff’s attorney points out in his affirmation that the defendant Fitzpatrick signed a “Resource Letter” on April 9, 2008, which is submitted with the motion papers, indicating that she understood and confirmed her ability to make the initial monthly mortgage payments of approximately $2,754.00 on a timely basis; that she had regular and dependable income from which to make her scheduled monthly payments; that under the standard loan program her annual regular and dependable income would need to be $100,163.00 and that if it was projected to be lower than said sum, she must have additional resources available to fund her monthly payments. In addition, the plaintiff’s attorney points out that the defendant Fitzpatrick received a similar copy of this letter at the time that her loan was approved prior to closing and that she acknowledged that the loan was being made in reliance on said confirmation of her ability to repay. The plaintiff’s attorney also indicates that since the loan was an asset based loan, in which the plaintiff considered the value of the home, and not an income/net worth based loan, the plaintiff was not required to verify the defendant Fitzpatrick’s statements as to income. He further indicates that the defendant Fitzpatrick was therefore required to sign a High Equity Loan Certificate, also submitted with the motion papers, acknowledging that the plaintiff may not have made any independent determination of her ability to repay the loan other than as represented by the defendant Fitzpatrick in the loan application and that the plaintiff may be relying on her said representations.
Here, the plaintiff has failed to demonstrate that the first affirmative defense lacks merit. The High Equity Loan Certificate explains that the subject loan is a High Equity Plus Loan which is a “no income-documentation mortgage loan” and the Resource Letter indicates that it is a loan program that does not enable the bank to independently verify the borrower’s ability to make their scheduled loan payments to repay the loan. Said submissions raise an issue of fact as to whether the mere extension of an asset based secured loan, a type of loan used almost exclusively in commercial business lending to provide working capital, to the defendant Fitzpatrick as a residential home loan was grossly unreasonable or unconscionable (see e.g., Gartenberg v. Wells Fargo Bus. Credit, 1985 U.S. Dist LEXIS 20133 [SDNY 1985]; see also, 2-11 N.Y. Practice Guide: Business and Commercial § 11.03). In addition, the defendant Fitzpatrick’s allegation that the loan agreement was unreasonably favorable to the plaintiff because the plaintiff knew or should have known that she could not afford the terms of the agreement sufficiently states a claim for substantive unconscionability (see, Williams v. Aries Fin., LLC, 2009 WL 3851675 [EDNY 2009] ). Moreover, if the subject loan is actually a high cost home loan, the plaintiff has clearly failed through its submissions to demonstrate compliance with Banking Law § 6-l (2)(k), that the loan was made with “due regard to repayment ability, based upon consideration of the resident borrower or borrowers’ current and expected income, current obligations, employment status, and other financial resources (other than the borrower’s equity in the dwelling which secures repayment of the loan), as verified by detailed documentation of all sources of income and corroborated by independent verification” (see, Banking Law § 6-l [k] ). Likewise, if said loan is actually a subprime home loan, the plaintiff has failed to establish compliance with Banking Law § 6-m (4) (see, Banking Law § 6-m  ). Therefore, the request for dismissal of the first affirmative defense is denied.
Regarding the defense of unfair and deceptive practices in violation of General Business Law § 349, the plaintiff asserts that the subject loan transaction did not involve any deceptive practice of fraudulent inducement inasmuch as the defendant Fitzpatrick had significant tax arrears when she approached the plaintiff and sought a mortgage to prevent a tax foreclosure. The plaintiff points to the U.S. Department of Housing and Urban Development (HUD) settlement statement in support of the assertion that the defendant Fitzpatrick obtained in excess of $123,000.00 cash at the closing of which approximately $44,058.12 was used to pay the defendant’s real estate tax arrears.
An affirmative defense or a cause of action under General Business Law § 349(a) must allege that (1) the challenged conduct was consumer-oriented, (2) the conduct or statement was materially misleading, and (3) damages (see, Stutman v. Chemical Bank, 95 N.Y.2d 24, 29, 709 N.Y.S.2d 892 ; Lum v. New Century Mtge. Corp., 19 AD3d 558, 559, 800 N.Y.S.2d 408 [2d Dept 2005], lv denied 6 NY3d 706, 812 N.Y.S.2d 35  ).
Here, the plaintiff has also failed to demonstrate that the second affirmative defense lacks merit. The plaintiff’s proffered proof raises an issue of fact as to whether the act of offering an asset based loan under the plaintiff’s High Equity Plus Program to the defendant Fitzpatrick and other homeowners in similarly financially vulnerable or desperate situations who approached the plaintiff for a loan was materially misleading in violation of General Business Law § 349 (see generally, Aurora Loan Services, LLC v. Thomas, 53 AD3d 561, 862 N.Y.S.2d 89 [2d Dept 2008]; Popular Fin. Services, LLC v. Williams, 50 AD3d 660, 855 N.Y.S.2d 581 [2d Dept 2008] ). Therefore, the request for dismissal of the second affirmative defense is denied.
The plaintiff’s remaining requests for relief are denied.


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Physical health, it is on the mind of every one of us.
We hate the belly bulge, the saggy arms and the bulging hips. Our outward appearance is important to us and how others see us (in the physical sense). We desire to look good on the outside and feel good physically. We all know that a good diet of the proper food nourishes and rejuvenates the body as God intended. A proper diet will help the body remain strong when it is fighting off invading virus and bacteria, and along with regular exercise we can do our best to remain healthy.
In the very same way, a daily steady diet of the Word of God and exercise in prayer, bible study and fellowship with our sister's in Christ, is vital to spiritual well-being. Along with these we must not forget witnessing (telling others about Christ) to have a growing and strengthening relationship with God.
Dear friends, we must work at it. When we mention dieting, in the physical sense, we are often tempted to put it off, create excuses and give up on losing those extra pounds when we realize that there is dedicated work involved in getting in physical shape. "I will start next week. I will have one slice of chocolate cake. I will start walking when it is warmer."
We want to be physically healthier, but we want to continue doing the things that hinder that. We plan purposely for vacation, cruises, material items, yet we often never plan to keep our body in shape. If we desire a healthier body and the ability to feel more vibrant, we must be willing to work at it daily and intentionally.
Well dear heart, the same is true of our spiritual health. We must work at it. We must be motivated to stay in shape spiritually. This health is even more vital than our physical health. When a person is spiritually healthy, we can arm ourselves to defend ourselves against the wiles of evil in this earthly life. We can wear the armor of God...the belt of truth, breastplate of righteousness, shoes of gospel, shield of faith, helmet of salvation, sword of the spirit.
But along with these 4 habits, we must understand that spiritual growth is more than just simply reading a quick Bible passage or an email devotional - it is an attitude that we have as we approach His Word. It is like a hungry woman who is offered a warm Crispy Creme doughnut (ask a southern woman)!
Don't just read the words. Let every word sink in, think about what you read throughout the day, consume it. When you consume the Word of God, you gain a new perspective on life and His desire for your walk. At the same time, you are feeding yourself spiritually just as you do your body with physical food.
There are several habits that are written in Psalm 116 that I would like to share with you.
When we are spiritually healthy, we come to God with an open heart, for we are able to offer ourselves to Him in His service as He desire.
v. 2 HE listens. You can tell Him your fears - He knows your heart.
v. 8 Our heartache, our tears are known to Him.
v. 9 I can walk confidently in my daily life. He is the Shepherd and we are His sheep.
v. 13 He has cleansed and made me His! I can call upon Him at all times.
v. 16 I will serve Him with my life.
v. 17 I will thank Him for each new day and the many daily blessings He gives me.
v. 18–19 I will live for Christ. From this day forward, I will let Him guide my life. talk about His blessings, spend time with Him getting in spiritual shape.
Time alone with God in His Word, is the great necessity of our spiritual health.
As believers in Christ, we are commanded to spiritually grow. (2 Peter 3:18).
Just as I need to move and exercise for my physical health, I need to walk the path He desires and talk of Him to others - without fear.
Spiritual health means joining together with your "Sister's In Christ."
Women of faith need need the support and encouragement of other women of faith.
Sure, I cherish my alone time with God and my time dwelling on His Word and what He desires to show "me." But I also know that I must bond with other like-minded faith-filled women to share, to encourage me, and to pray with.
Can I get an "Amen" on this? We are not islands. We need each other. I wish I could share the emails I receive from women who NEED to hear from, pray with and be with other women of faith. We need each other.
Paul wrote in Colossians 3:16, "Let the word of Christ dwell in you richly in all wisdom; teaching and admonishing one another in psalms and hymns and spiritual songs, singing with grace in your hearts to the Lord."
He told the Hebrews in 10:25, "Not forsaking the assembling of ourselves together, as the manner of some is; but exhorting one another: and so much the more, as ye see the day approaching."
Good spiritual health requires that faith-filled women gather with other Christian women. It's the support structure that contributes to our spiritual well being. Worship at church, praising in song together and gathering at His House of worship is important, but along with that I know how important it is for women to share life and faith with each other.
More joy in His service, More freedom in prayer.
Ask the Spirit to reveal to you anything or anyone (yes, there can be someone in your life), that is obstructing your spiritual growth. Then ask the Great Physician to fill you and guide you in your spiritual growth.
Ask God to place a woman of faith in your life who will "be there" for you - He will!
Draw close to Him in His Word, and be nourished with the pure milk of the Gospel. Like newborn infants, long for the pure spiritual milk, that by it you may grow up into salvation. 1 Peter 2:2 Yes indeed, you will grow dear sister in Christ, you will grow.

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Copylaw: Publishing Attorney | Entertainment Lawyer: Who Controls eBook Rights?
In its complaint for copyright infringement, HarperCollins argues that its contract for Julie of the Wolves, a book first published in 1972, gives it the sole right to publish George’s novel in eBook form. It bases its argument on its interpretation of the term “in book form,” which it argues encompasses eBook rights.
By filing its complaint, HarperCollins follows a well-established pattern in the entertainment industry. Cases addressing whether older entertainment industry contracts granted rights for new uses such player piano rolls, radio, motion pictures, television and videocassettes are plentiful. Like HarperCollins, motion picture studios once claimed that they already had the right to exhibit films on television, and to distribute them as home videos.
When a contract is ambiguous, the job of ascertaining the parties’ intent is left to the courts. To determine the parties’ intent, a court will consider the precise language of the grant (e.g., the existence of any “future technologies” clause, the inclusion or exclusion of a “reserved rights” clause), whether the parties contemplated “new uses” when the contract was entered into, and the sophistication of the parties. Since contracts are not drafted in a vacuum, courts may also look at industry practice. What this case makes very clear is that a contract is a private body of law between two parties. Ideally, a contract between an author and publisher anticipates potential problems by clearly setting down in writing both parties' rights and obligations. If done properly, future readers of that contract will be able to discern what was intended.
Notwithstanding Bartsch, which can be limited to its facts (a film producer's expectations are different than a book publisher's or author's expectations), when a contract is susceptible to two reasonable interpretations, with each party knowing or having reason to know of the other party's understanding of the term, courts, as a policy matter, will often construe the agreement against the party that drafted the contract. The Restatement (Second) of Contracts states that an agreement susceptible to more than one interpretation should be construed against the party who drafted the language.5 Here, since, HarperCollins was in a stronger bargaining position, the the burden of negotiating new ways to exploit their exclusive rights, should have fallen on them.6 If the court follows the Restatement, as opposed to the Bartsch line of cases, it would appear, then, that unless the author's representative had an equal hand in drafting the agreement, which is almost never the case, the contract should be interpreted in the light most favorable to Ms. George, and, in turn, Open Road.
In Cohen v. Paramount Pictures Corp, the 9th Circuit Court of Appeals, held that “television viewing” and “videocassette viewing” were not “coextensive” terms.8 And, that a license which included the right to exhibit a film on TV did not include the right to distribute the film on home video. In resolving this “old wine in a new bottle” dilemma , the court placed primary emphasis on the fact that videocassette recorders were not invented when the license was signed. Focusing on the means by which videocassettes were viewed and distributed (i.e., by sale or rental), the court emphasized that exhibition of a film on television differed fundamentally from the exhibition by a videocassette record/player.9 A similar argument – persuasive or not – can be made for printed books sold in bookstores, and eBooks downloaded and displayed on a screen. eBooks were neither invented nor reasonably foreseeable when the HarperCollins contract was signed.
Where things get interesting, is the impact of HarperCollin’s “future technologies” or “now known or hereinafter” clause. Here the book publisher’s claim seems stronger, although, not all courts have enforced these provisions. For example, in Tele-Pac, Inc. v. Grainger, the court held that the license to distribute films for “broadcasting by television or any similar device now known or hereinafter to be made known” did not encompass videocassette rights.10 The Appellate Division of the New York Supreme Court, rejecting the lower court’s attempt to equate broadcasting with the grant of videocassette rights, held that distribution of a film by videocassettes was not analogous to broadcasting by television.
If the Southern District of New York adopts the Tele-Pac analysis, it could determine that “in book form” does not encompass eBooks. Just as broadcasting by television is not analogous to the sale of videocassettes, distribution of physical books is not analogous to the sale of downloadable eBooks. That is, a plausible argument can be made to suggest eBooks and bound books are two distinct media. Whereas a book is a book, an eBook -- whether downloadable or accessible from a cloud -- is a community. If the batteries run low on your Kindle, Nook, or smart phone, the screen goes black, and your ability to link beyond the book is lost. Unlike an ad supported Kindle, or Nook you can synch with various electronic devices, bound books are low tech, and can survive fire and ice. Run an iPad below 32 degrees, or above 95, and it's likely to shut down, whereas, legible writing on papyrus over two thousand years old has been rescued from the fiery ruins of Pompeii. When it comes to fire and ice, tree-based books trump plastic and silicon-based readers. And, have you ever tried to read an iPad in the sunlight?
There are other arguments – some favor HarperCollins' interpretation while others would support Open Road. Richard Curtis, for example, in an excellent piece on his eReads blog, addresses the significance of the phrase “Computer Storage and Retrieval” found in many legacy contracts. It’s a solid piece of reporting and legal analysis.
Open Road’s unlawful exploitation of those rights is directly competitive with sales of the Work in paper format and HarperCollins’ own plans to publish June of the Wolves as an e-book. Open Road is understandably content to allow HarperCollins to have made its considerable investments in the Work, only now to reap where Open Road has not sown, by seeking to divert sales of the Work from HarperCollins in the rapidly expanding e-books market.
Because many in the book trade were not thinking about future technologies that would enable readers to license or purchase digital books, old contracts are being dusted off and ambiguous language scrutinized by lawyers like myself to answer the question, “Who controls eBook rights?” In the case of pre-Internet contracts, author and publisher often ascribe different meanings to the phrase “in book form.” Where the grant of rights can be interpreted in more than one way, it can lead to disputes, and, in the case of Jane Friedman’s Open Road, expensive and distracting litigation.
Depending upon how the case brought by HarperCollins is decided, or resolved, the big six New York-based, publishers (and their cousin to the north, Harlequin) could either score a copyright and unfair competition protection windfall, or meet their digital Waterloo. Only time will tell.
Update: On March 14, 2014 a New York federal judge handed HarperCollins a decisive victory, holding Open Road infringed HarperCollins's exclusive right to publish Ms. George's Julie of the Wolves in eBook form. What distinguished this case from the Rosette Books' decision was the wording of the contract. Here, the grant of rights ("the exclusive right to publish . . . in book form") was a broader grant than that found in the Random House contract ("to print, publish and sell"). What further distinguished the HarperCollins' agreement from the Random House agreements, was non-boilerplate language inserted by Ms. George's forward thinking literary agent which afforded the author approval over the licensing and sub-licensing of, among things rights by "electronic means now known or hereafter invented."
Anything to the contrary herein notwithstanding, the Publisher shall grant no license without the prior written consent of the Author with respect to the following rights in the work: use thereof in storage and retrieval and information systems, and/or whether through computer, computer-stored, mechanical or other electronic means now known or hereafter invented and ephemeral screen flashing or reproduction thereof, whether by print-out, phot[o] reproduction or photo copy, including punch cards, microfilm, magnetic tapes or like processes attaining similar results, and net proceeds thereof shall be divided 50% to the Author and 50% to the Publisher. However, such license shall not be deemed keeping the work in print once the work has gone out of print in all editions."
While the contract contained an author-friendly reserved rights clause ("[a]ll rights in the Work now existing, or which may hereafter come into existence, not specifically herein granted" are reserved to the author), it was the language Ms. George's literary agency negotiated that swayed the court in HarperCollins' direction. Citing a rule of contract interpretation that states "contract provisions are generally to be construed against the drafter," the court pointed out that the above amendment was "inserted verbatim into the contract at the request of Ms. George's agent." Because the suit was filed against Open Road, technically, I can't say that Ms. George was hoisted by her own petard, but, you get the point.
Relying on the pro-publisher "new use" Bartsch case discussed above, applying so-called "neutral principles of contract interpretation," the court reasoned that "[i]f the contract is more reasonably read to convey one meaning, the party benefitted by that reading should be able to rely on it; the party seeking exception or deviation from the meaning reasonably conveyed by the words of the contract should bear the burden of negotiating for language that would express the limitation or deviation." That, plus a forward looking "future technologies" clause - and specific references to exploitation by "electronic means" -- cinched it for HarperCollins.
Additional take aways: Reserved rights clauses are not all they are cracked up to be - especially if there's a grant of electronic rights to be found elsewhere in the contract. Absent an express grant of eBook rights in the main granting clause, a grant of electronic rights found in the subsidiary rights section should not be considered surplusage or useless language. Further, if you wish to argue "that foreseeability at the time of the grant is required to extend a copyright to a new use," you can't turn a blind eye to the future technology clause lurking within. Also, there's a plausible argument that electronic publishing has been contemplated by both authors and publisher for well over one hundred years. Ironically, in 1900, Harper Brothers, HarperCollins' predecessor-in-interest, offered Mark Twain a handwritten contract which was anticipated books sold or displayed by electronic means. The contract, for his autobiography, which was to be published "100 years hence." specified that the book would be issued by Harper Brothers "in whatever modes should then be prevalent, that is by printing as at present or by use of phonographic cylinders, or by electrical methods, or by any other other method which may be in use." So, 114+ years ago, Mark Twain signed a letter agreement granting Harper Bros. the right to publish his memoirs in electronic book form. Foreseeable? You decide.
Do Publishers Control eBook Rights to their Legacy Titles?
Is Your Publishing Contract Enhanced eBook and iPad Ready?
1See Dolch v. Garrard Publishing Company, 289 F.Supp. 687 (S.D.N.Y. 1968) (exclusive right of publication of books” held to encompass right to publish in paperback form). But see, Field v. True Comics, 89 F. Supp. 611, 614 (S.D.N.Y. 1950) (“the sole and exclusive right to publish, print and market in book form” did not include the right to publish the work in “comic book” form).
2 Bartsch v. Metro-Goldwyn Mayer, Inc., 391 F.2d 150 (2d Cir.1968), cert. denied, 393 U.S. 826 (1968).
5 RESTATEMENT (SECOND) OF CONTRACTS § 206 (1981).
6 See, e.g., US Naval Inst. v. Charter Communications, Inc., 875 F.2d 1044,1050,1051 (2d Cir. 1989) (interpreting ambiguous copyright grant against party preparing agreement); See, also, Rey v. Lafferty, 990 F.2d 1379, 1390 (1st Cir.) (ambiguity should be construed against drafter-grantee, especially given relative expertise of parties), 67 Wall Street Co. v. Franklin National Bank, 37 N.Y.2d at 249, 333 N.E.2d at 187, 371 N.Y.S.2d at 918; Rentways, Inc. v. O'Neill Milk & Cream Co., 308 N.Y. at 348, 126 N.E.2d at 273-74.
7 Cohen v. Paramount Pictures Corp., 845 F.2d 851,854 (9th Cir. 1988).
10 Tele-Pac, Inc. v. Grainger, 168 A.D.2d 11,13, 570 N.Y.S.2d 521, 522 (1st Dep’t 1991), appeal dismissed, 79 N.Y.2d 822, 588 N.E.2d 99 (1991).
11 Van Valkenburgh v. Hayden Pub. Co., 30 N.Y.2d 34, 281 N.E.2d 142, cert. denied, 409 U.S. 875 (1972).
12 See Wolf v. Illustrated World Encyclopedia, 34 N.Y.2d 834, 316 N.E.2d 342, 359 N.Y.S.2d 59 (1974) (author can license same illustration to another publisher absent a contractual prohibition against doing so).
Great reporting and analysis. I hope you will continue to follow this case.
Does the impact on the purchaser (i.e. buying a physical object -- book -- vs. the clear statement when "purchasing" an ebook that the purchaser is only licensing the right [usually] to download and read on one or more devices) have any bearing on how the courts might view the relationship between a physical book and an ebook?
I think a court would certainly take that into consideration.
Lloyd, how would you compare this case to the Random House vs. RosettaBooks case from the turn of the century? Random House rather hastily settled that case after the court said (in response to its request for a preliminary injunction) that it was "not likely to succeed on the merits of its copyright infringement claim”.
From my own limited research, it seems to me that case also turned on the question of what qualified as a "book".
The problem with any claim that the grant of a license to sell a work "in book form" encompasses the grant of a license to "sell" the work in ebook form is that ebooks aren't "sold".
The end user license for Kindle Editions and most (if nor all) other major ebooks makes clear that it is not a sale of the work but a limited license grant, and does not include essential elements of a "sale" such as first-sale rights of re-sale.
The clear distinction made in the license terms between the *sale* of a work in book form and the limited *license* (not a sale) of certain rights to an ebook provides a clear basis for distinguishing ebooks -- unless they are licensed on terms clearly constituting a "sale", which they almost never are -- from any contract provisions relatin to "sale" of the work.
This has implications both for the scope of the grant and, where ebooks are included in the grant, the applicable royalty: Since an ebook license is not a sale, the applicable royalty percentage is the (typically much higher) percentage provided by the contract for licenses of (subsidiary) rights, not the (lower) percentage applicable to any sort of "sale".
Edward -- You make an excellent argument. Digital downloads are licenses, not sales, and should be accounted for as such. Of course, each contract stands on its own. Recording artists -- not authors -- are at the forefront of the "license vs sale" battle. I blogged about the issue last year in the context of the Eminem case. The pro-artist decision was a major blow to record label. See, http://www.copylaw.org/2010/09/copyright-alert-music-publishing.html.
"When the facts of this case are viewed through the lens of federal copyright law, it is all the more clear that Afterrmath’s agreements with the third-party download vendors are “licensed” to use the Eminem master recordings for specific purposes authorized thereby — i.e., to create and distribute permanent downloads . . . — in exchange for periodic payments based on the volume of downloads, without any transfer in title of Aftermath’s copyrights to the recordings. Thus, federal copyright law supports and reinforces our conclusion that Aftermath’s agreements permitting third parties to use its sound recordings to produce and sell permanent downloads . . . are licenses."
Chris, unlike the Rosetta Books case, which involved multiple titles, it looks like this case (if not settled on the courthouse steps) will turn on the interplay of the "future technologies" and approval clauses. Otherwise, it looks like another old contract / new technologies case.


EDWIN F. LINGSCH et al., Plaintiffs and Appellants, v. GEORGE SAVAGE, Defendant and Respondent.
Raymond H. Levy for Plaintiffs and Appellants.
James C. Travis and Carl W. Svenson for Defendant and Respondent.
In this action for damages for fraud brought against the sellers of certain real property and the real estate broker representing them, plaintiffs appeal from a judgment for the defendant broker entered after the sustaining of his demurrer without leave to amend.
The complaint filed February 13, 1962, alleges in substance as follows: That plaintiffs are and, at all times since July 10, 1961, were the owners of certain real property located in San Francisco; that prior to plaintiffs' acquisition thereof the defendants Nicholas Kotoff, Nell Kotoff and certain fictitious defendants were the owners, and the defendant Savage, a real estate broker, represented said owners; and that "said defendants entered into a uniform agreement of sale and deposit receipt, a copy of which is hereto attached as Exhibit 1, on the dates therein referred to, and that the consideration as indicated therein was fully paid."
It is further alleged: that at the time of the sale, the [213 Cal. App. 2d 733] "defendants and each of them specifically knew that the building was in a state of disrepair, and that units contained therein were illegal and that the building had been placed for condemnation by the proper officials" of San Francisco; that the plaintiffs did not know the foregoing matters and did not discover them until November 1961; that "the defendants and each of them wilfully and fraudulently failed to reveal said information" to the plaintiffs; that the plaintiffs purchased the property "justifiably relying on said defendants' non-disclosure, as aforesaid, and in the belief that said property was in legal tenantable and properly repaired condition, as required by law"; that the defendants "knew that plaintiffs relied on their non- disclosure ... and intended that they should so rely, and that said non- disclosure was in fact and law misrepresentation of a material fact"; and that the actual market value of the property was $5,000 less than what it would have been in the condition as represented. The complaint sought $5,000 general and $10,000 punitive damages.
The Exhibit 1 attached to the complaint is a printed form of "Uniform Agreement of Sale and Deposit Receipt" commonly available at local title companies. So far as is pertinent to the problem before us, the agreement acknowledges receipt from the plaintiffs of $1,000 on account of $21,000, the purchase price of the property in question "in its present state and condition." (Italics added.) Among the terms and conditions of sale is the following provision: "No representations, guaranties or warranties of any kind or character have been made by any party hereto, or their representatives which are not herein expressed." The first part of the document then concludes with a statement that the "undersigned purchaser hereby agrees to purchase the herein described property for the price and according to the conditions herein specified, ..." (Italics added.) Immediately below appear the signatures of both plaintiffs as purchasers and the signature of the defendant George Savage as "Agent for The Seller." The second part of the document is an approval of the contract signed by both sellers.
Defendant George Savage filed a demurrer fn. 1 asserting that the complaint failed to state facts sufficient to constitute a cause of action and that it was ambiguous, unintelligible [213 Cal. App. 2d 734] and uncertain in various particulars. In a separate paragraph, the demurrer also attacked the legal sufficiency of the facts pleaded on the ground that, as shown by the exhibit attached to the complaint, the plaintiffs offered to purchase the property "in its present state and condition" and expressly agreed, according to the provision set forth by us above, that there were no representations, guaranties, or warranties which were not expressed in the document. The court below sustained the demurrer without leave to amend.
We first dispose of a preliminary matter. Respondent suggests somewhat obliquely that the plaintiffs declined to amend their complaint. The instant case is not one where the court sustained the demurrer with leave to amend and the plaintiffs thereafter elected not to file an amended pleading. It is clear that the court sustained the demurrer without leave to amend and that the question of whether or not the court abused its discretion in so doing is open on this appeal. (Code Civ. Proc., § 472c.) Respondent's above suggestion presumably refers to a colloquy between the court and appellants' counsel at the conclusion of the hearing on the demurrer. We have examined the transcript of the proceedings and are of the view that nothing therein contained precludes the appellants from raising the issues now before us. We therefore proceed to determine whether the complaint states a cause of action for fraud.
An examination of the pleading under attack persuades us that the only kind of fraud or deceit which it purports to assert is one based on concealment or nondisclosure. We find no allegations which can reasonably be construed as asserting fraud predicated upon intentional and affirmative misrepresentations, negligent misrepresentations or false promises. (Civil Code, §§ 1572, subds. 1, 2 and 4; 1710, subds. 1, 2 and 4.) We should further point out that the concealment which is here the essence of the alleged deceit does not involve, in the light of the allegations before us, any affirmative acts on the part of the defendants in hiding, concealing, or covering up the matters complained of. Nor do any allegations purport to set forth a confidential relationship subsisting between the plaintiffs on the one hand and all or any of the defendants on the other. We are therefore presented with an instance of mere nondisclosure, rather than active concealment, occurring between parties not in a confidential relationship. The foregoing observations, [213 Cal. App. 2d 735] in our view, also correctly reflect the position here taken by appellants.
 The principle is fundamental that "[d]eceit may be negative as well as affirmative; it may consist of suppression of that which it is one's duty to declare as well as of the declaration of that which is false." (23 Cal.Jur.2d, Fraud and Deceit, § 45, p. 106; Barder v. McClung (1949) 93 Cal. App. 2d 692, 697 [209 P.2d 808].)  Thus section 1709 of the Civil Code provides: "One who wilfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers." Section 1710 of the Civil Code in relevant part provides: "A deceit, within the meaning of the last section, is either: ... 3. The suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact; ..." In order to fasten liability under the above code sections on the person charged with the concealment or nondisclosure of certain facts, it is necessary to establish that he was under a legal duty to disclose them. (See generally 23 Cal.Jur.2d, § 46, pp. 111-114.) While such duty may arise from a fiduciary or other confidential relationship (cf. Hobart v. Hobart Estate Co. (1945) 26 Cal. 2d 412 [159 P.2d 958]), no such relationship obtains in the case at bench and the duty of disclosure must therefore arise from other circumstances.
 The real estate agent or broker representing the seller is a party to the business transaction. In most instances he has a personal interest in it and derives a profit from it. fn. 2 Where such agent or broker possesses, along with the seller, the requisite knowledge according to the foregoing decisions, whether he acquires it from, or independently of, his principal, he is under the same duty of disclosure. He is a party connected with the fraud and if no disclosure is made at all to the buyer by the other parties to the transaction, such agent or broker becomes jointly and severally liable with the seller for the full amount of the damages. (Crawford v. Nastos, supra, 182 Cal. App. 2d 659, 665.) fn. 3  It is not necessary that there be a contractual relationship between the agent or broker and the buyer. (Gill v. Johnson (1932) 125 Cal. App. 296, 300 [13 P.2d 857, 14 P.2d 1017].) As this court said in Nathanson v. Murphy (1955) 132 Cal. App. 2d 363, 368 [282 P.2d 174] "[a]n action for deceit does not require privity of contract."  No difficulty is encountered in imposing liability on an agent or broker for an affirmative and intentional misrepresentation on his part. (See, e.g., Rothstein v. Janss Investment Corp., supra, 45 Cal. App. 2d 64; Crawford v. Nastos, supra, 182 Cal. App. 2d 659.) Similarly, no difficulty should be found in imposing liability on him for mere nondisclosure since his conduct in the transaction amounts to a representation of the nonexistence of the facts which he has failed to disclose (cf. Rest., Torts, § 551). His fraud is of a different type; it is "negative" [213 Cal. App. 2d 737] rather than "affirmative" (Barder v. McClung, supra, 93 Cal.App.2d 692); but it is fraud nonetheless.
 It should be pointed out that whether the matter not disclosed by the seller or his agent is of sufficient materiality to affect the value or desirability of the property, and thus make operative the rule announced by the foregoing authorities, depends on the facts of the particular case. Some idea can be obtained of the reach of the foregoing rule and of the vitiating character of the particular nondisclosure from the holding of some of the cases cited above. Thus nondisclosure of the fact that a lot was filled with debris thereafter covered over (Clauser v. Taylor, supra, 44 Cal.App.2d 453) or that a lot contained filled ground to a substantial depth (Rothstein v. Janss Investment Corp., supra, 45 Cal.App.2d 64) or that the house sold was constructed on filled land (Burkett v. J. A. Thompson & Son, supra, 150 Cal.App.2d 523) or that improvements were added without a building permit and in violation of zoning regulations (Barder v. McClung, supra, 93 Cal.App.2d 692) or in violation of building codes (Curran v. Heslop, supra, 115 Cal.App.2d 476) has been held to be of sufficient substantiality to cause the duty of disclosure to arise.
Respondent cites a number of cases in support of the proposition that where parties deal at arm's length the rule of caveat emptor applies. We see no need of discussing the cases separately. [3b] As the court pointed out in Dyke v. Zaiser, supra, 80 Cal. App. 2d 639, 653, undoubtedly there have been many cases fn. 4 "where it has been held that a man is not necessarily required to state everything he knows about the property involved. The present tendency, however, is to class concealment as actual fraud in those cases where the seller knows of facts which materially affect the desirability of the property which he knows are unknown to the buyer," citing Clauser and Rothstein. Respondent's contention that caveat emptor applies was made and rejected in Kallgren v. Steele, supra, 131 Cal. App. 2d 43, 46, where the court held such rule inapplicable in a situation involving a seller's fraud. Nor can respondent find any support for his present position in Milmoe v. Dixon (1950) 101 Cal. App. 2d 257 [225 P.2d 273] or Mesmer v. White (1953) 121 Cal. App. 2d 665 [264 P.2d 60]. Indeed, the Milmoe case is [213 Cal. App. 2d 738] squarely opposed to respondent's position and makes us wonder why respondent cited it at all. In Milmoe, the court upheld a judgment of damages for fraudulent nondisclosure relying not only on Rothstein and Clauser but on Dyke as well. The Mesmer case did not involve a sale of property, let alone the problem of the seller's exclusive knowledge of material facts in connection therewith. It does not stand for the proposition, as respondent would have it, that whenever parties are dealing at arm's length there can be no duty of disclosure. It held on its particular facts, bearing no similarity to those here involved, that no misrepresentations had been made, that the party allegedly defrauded had the opportunity to ascertain the true facts but neglected to do so, and that, in the absence of a confidential relationship, no duty to make a disclosure existed as a basis for actionable fraud.
Are all of these elements properly alleged in the pleading under attack?  At the outset we observe that plaintiffs allege nondisclosure in respect to three specific matters: (a) "that the building was in a state of disrepair"; (b) "that the units contained therein were illegal"; and (c) "that the building had been placed for condemnation by the proper officials. ..." All of these allegations appear to be deficient either in form or substance. Obviously the bare allegation of a state of disrepair is at once inadequate to show the materiality of such nondisclosed fact within the rules announced above and to establish that the nature and characteristics of the condition of the premises not disclosed were such that it was beyond the reach of, and not observable by, the buyers. The second specified nondisclosure is presented in allegations that are conclusionary and [213 Cal. App. 2d 739] nonfactual. The last alleged nondisclosure is at least uncertain and ambiguous. One may speculate whether the pleading has reference to a proceeding in eminent domain or for the abatement of a nuisance. If the latter is intended, it is clear that no allegations aver that the condition of the property was such as to be not observable by the plaintiffs.
We come next to scienter: The complaint alleges that the "defendants and each of them specifically knew" and that "plaintiffs did not know" the foregoing matters. However, there is no allegation that the defendants knew that such matters were unknown to the plaintiffs, thus setting forth the exclusiveness of defendants' knowledge. The third element involves the defendants' intention to induce action: We think this element is substantially pleaded, although expressed in terms of "reliance" rather than "inducement". The plaintiffs have alleged that they relied on the defendants' nondisclosure and that the defendants intended them to do so. fn. 5 The pleading also attempts to set forth the element of causation in terms of reliance rather than of inducement: "That plaintiffs purchased said property justifiably relying on said defendants' nondisclosure, as aforesaid, and in the belief that said property was in legal tenantable and properly repaired condition as required by law." Obviously the word "justifiably" adds nothing to the allegation in the absence of allegations of facts showing that the actual inducement of plaintiffs to enter into the sale was justifiable or reasonable. (See 2 Witkin, California Procedure, Pleading, § 364, pp. 1344 et. seq.; 2 California Pleading, Chadbourn, Grossman, Van Alstyne, p. 95 fn. 6.) We think therefore that the deficiency in the last allegation is something inherently transmitted to it by the paucity of factual averments necessary to set forth the fundamental element of disclosure.
This brings us to the heart of the controversy. It is respondent's contention here, as it was below, that two provisions in the written contract of sale attached to the complaint and allegedly incapable of being cured by amendment, preclude plaintiffs from stating a cause of action for actionable fraud. From our examination of the proceedings had on argument of the demurrer, it would appear that the trial court rested its action principally if not entirely on the first of these provisions.
The allegations pertinent to the making of the agreement of sale point up plaintiffs' nonobservance of a simple and convenient ritual. We overlook their shortcomings and consider the agreement as properly incorporated by reference.  As we said in Byrne v. Harvey (1962) 211 Cal. App. 2d 92, 103 [27 Cal. Rptr. 110] "[i]n such event it becomes as much a part of the pleading as if incorporated bodily therein [citation], may be examined to ascertain the contract of the parties [citation] and as Witkin states (2 Witkin, Cal. Procedure, p. 1177) 'its recitals may serve as a substitute for direct allegations ordinarily essential to the pleading,' ..."  In addition, we note that provisions of an agreement bearing upon the right of either party to recover may thereby generate a defect or defense apparent on the face of the complaint, defeating recovery by the plaintiff and making the complaint subject to a general demurrer. (See Harper v. Goldschmidt (1909) 156 Cal. 245 [104 P. 451, 134 Am.St.Rep. 124, 28 L.R.A. N.S. 689]; Burki v. Pleasanton School Dist. (1912) 18 Cal. App. 493, 498 [123 P. 546]; cf. La Com v. Pacific Gas & Electric Co. (1955) 132 Cal. App. 2d 114, 117 [281 P.2d 894, 48 A.L.R.2d 1455].) It is from this basis that defendant launches his attack.
The same rule has been applied where such a provision has been included in a contract for the sale of real property. (Smith v. Richards (1839) 38 U.S. (13 Pet.) 26 [10 L. Ed. 42]; Wolford v. Freeman (1948) 150 Neb. 537 [35 N.W.2d 98]; Cockburn v. Mercantile Petroleum, Inc. (Tex. Civ. App. 1956) 296 S.W.2d 316.) In the early case of Smith v. Richards, supra, rescission of a contract for the sale of a gold mine was upheld on the ground of the seller's fraudulent misrepresentations despite a provision in which the seller stated: "I, however, sell it for what it is, gold or snow-balls; and I leave it to you to decide, whether you will take it at my price, or not." (38 U.S. (13 Pet.) 39.) In Wolford v. Freeman, supra, the buyer sought rescission of a contract for the sale of a dwelling house for the fraud of the seller's agent in failing to disclose that the house had been constructed on filled ground. Repaired cracks in the walls and foundation were visible. There was testimony that the buyer asked the cause of the cracks and the agent said that he did not know. There was other evidence that the agent stated that he had been instructed by the seller to inform prospective purchasers that the damage had been corrected. Included in the contract of sale was the following provision: "Purchaser acknowledges that he has been advised as to the settling of structure and is buying same as is." (35 N.W.2d at p. 101.) The Nebraska court held that the foregoing provision did not relieve the seller from fraud based on nondisclosure and upheld a decree of rescission on principles enunciating the seller's duty to disclose under such facts, citing inter alia the California cases of Clauser v. Taylor, supra, 44 Cal. App. 2d 453 and Rothstein v. Janss Investment Corp., supra, 45 Cal. App. 2d 64. Finally, in Cockburn v. Mercantile Petroleum, Inc., supra, the buyer of five gas wells "as is" recovered damages for the seller's fraud in misrepresenting that the wells were producing wells. The court's rationale was that the "as is" clause was based on the knowledge which [213 Cal. App. 2d 742] the buyer had at the time "which knowledge was based on the false representation that there were five producing wells. ..." (296 S.W.2d 326.) The "as is" agreement was executed in reliance upon such representations.
[15, 16] It is also contended that the demurrer was properly sustained without leave to amend because of the inclusion of the following clause in the agreement at hand: "No representations, guaranties or warranties of any kind or character have been made by any party hereto, or their representatives which are not herein expressed."
The present complaint is drawn on the theory that all defendants therein named were under a duty to make a disclosure. In essence, the foregoing statute and authorities prevent a party from contracting against his own fraud. If the sellers cannot escape liability, it is obvious that the defendant Savage, who is not even a party to the agreement, cannot do so.
The judgment is reversed with directions to the trial court to grant the plaintiffs a reasonable time within which to prepare, serve, and file a further complaint amended in such particulars as they may be advised.
Bray, P. J., and Molinari, J., concurred.
FN 1. The demurrer is by Savage alone. The record does not disclose the status of the action in respect to the other defendants.
FN 2. The record shows that in the instant case the defendant Savage was to receive $1,000 from the sellers as his commission.
FN 4. See for example the early decision of this court in Bacon v. Soule (1912) 19 Cal. App. 428 [126 P. 384].
FN 5. Chadbourn, Grossman and Van Alstyne, op. cit. p. 95 point out that in concealment cases this element is usually expressed in terms of "inducement" whereas in intentional misrepresentation cases, it is expressed in terms of reliance, citing Sanfran Co. v. Rees Blow Pipe Mfg. Co. (1959) 168 Cal. App. 2d 191 [335 P.2d 995].
FN 6. This authority states: "A general allegation of inducement or reliance would thus seem to be sufficient, provided the complaint also sets forth enough facts to show that plaintiff's conduct was consistent with normal prudence and reasonableness under the circumstances."