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CLERK OiOURT INTRESUPERIORCOURTOFGUAM
JOSEPH GUEVARA, SR. Superior Court Case No. CV02144$ Plaintiff
VS. DECISION AND ORDER RE THOMAS BABAUTA, PLAINTIFF’S RULE 12(b)(6) MOTION Defendant.
The Court here considers whether to dismiss, strike, or render summary judgment against
an alleged “failure to read” defense. Having considered the parties’ arguments and applicable
law and rules of civil procedure, the Court DENIES Plaintiff’s Joseph Guevara’s Rule 12(b)(6)
Motion.
I. FACTUAL AND PROCEDURAL BACKGROUND
The parties signed an agreement whereby Defendant Thomas Babauta would transfer Lot
2, Tract 63007, Yigo, Guam (“Lot 2”) to Guevara. Ans. and Counterclaim ¶4. The Department
of Land Management subsequently alerted Guevara that Babauta did not have title to Lot 2 prior
to the transfer. Guevara contacted Babauta about the title issues, and Babauta refused to take any
action to remedy the situation, claiming that there were mistakes in the written agreement and
that the agreement was supposed to be for the transfer of the property identified as Lot 5, Tract
63007, Yigo Guam (“Lot 5”) not Lot 2. Ans. and Counterclaim ¶ 11.
Guevara’s complaint alleges breach of contract, fraud in the inducement, actual fraud,
and oppressive conduct, and seeks the recession of the contract. Babauta responded, providing a CV0214-18 DECISION AND ORDER RE PLAiNTIFF’S RULE 12(b)(6) MOTION Page 2
series of affirmative defenses and counterclaiming that Guevara had only provided him with the
signature pages of the April 19 agreement, and therefore Guevara deceived or misled him into
signing the agreement for Lot 2 by claiming the agreement was for Lot 5. Ans. and Counterclaim
¶9.
Guevara filed a “Rule 12(b)(6) Motion,” alleging that the case was ripe for Rule 12(b)(6)
dismissal, or alternatively, summary judgment, as Babauta’s defense of ‘failure to read’ was not
viable. Babauta responded claiming that Guevara failed to allege, with any particularity, which of
the affirmative defenses he was attacking, and failed to provide any admissible evidence upon
which summary judgment could be granted.
At oral argument, Guevara noted that the main concern prompting the initial Rule
12(b)(6) motion was that Babauta would argue at trial that he did not read the agreement and a
jury would accept such reasoning as an acceptable defense, contrary to law.
IT. LAW AND DISCUSSION
The Plaintiff argues that dismissal under Rule 1 2(b)(6) is proper because, without
Babauta’s purported defense of not reading the agreement, the allegations in the counterclaim are
insufficient to state a claim upon which relief may be granted. Alternatively, Guevara argues that,
should the Court determine that a 12(b)(6) motion is not proper, and instead treat the motion as a
motion for summary judgment under Rule 56, summary judgment is proper because even in the
light most favorable to Babauta, there is no genuine issue of material fact and Guevara is entitled
to judgment as a matter of law. The Court will first address the Plaintiff’s argument that failure to
read is not a viable defense under the law, then whether dismissal under Rule 1 2(b)(6), 12(0, or
summary judgment under Rule 56 is proper. CV0214-18 41) (1’ DECISION AND ORDER RE PLAINTIFF’S RULE 12(b)(6) MOTION Page 3
A. Failure to Read is Not a Proper Defense
When a person enters into a written contract in which there is no “relation of a special
trust or confidence” between the parties, and the contents of the writing are “equally open to
both,” then a party cannot escape liability by claiming a failure to read the contract. Greve v. Taft
Realty Co., 101 Cal. App. 343 (1929). When alleged, the failure to read defense is usually
stricken. Cochran v. Carter, 132 S.E. 921, 922 (Ga. App. 1926).
Guevara complains that Babauta’s defense relies on his failure to read the contract and
that Babauta will argue to the jury that by not reading the agreement, he is not bound by its
contents. Babauta counters that a ‘failure to read’ is not one of his listed affirmative defenses and
that he does not intend to raise a ‘failure to read’ defense at trial. However, Babauta’s failure to
read the document may be relevant to his affirmative defenses or counterclaims of fraud or
mutual mistake.
In the event Babauta intends to present evidence that he failed to read the agreement to
support his affirmative defenses, the Court will instruct the jury that a failure to read a contract
does not allow a party to escape liability under said contract and will clarify to the jury as to the
limitations of such evidence. Prior to trial, the parties may introduce proposed jury instructions
on this issue.
B. The Plaintiff’s Rule 12(b)(6) Motion Should Either be Treated as a Rule 12(1) Motion or Converted into a Rule 56 Motion for Summary judgment.
Should a party fail to state a claim upon which relief can be granted, the opposing party
may move for dismissal under Guam Rule of Civil Procedure 1 2(b)(6). Dismissal for failure to
state a claim is only appropriate if “it appears beyond doubt that the [non-moving partyj can
prove no set of facts in support of his claim which would entitle him to relief.” See Taitano v. CV0214-l8 DECISION AND ORDER RE PLA1Th4TIFF’S RULE 12(b)(6) MOTION Page 4
Calvo Fin. Corp., 200$ Guam 12 ¶ 9 (citing Zimmerman v. City of Oakland, 255 F.3d 734, 737
(9th Cir. 2001)). However, in ruling on a 12(b)(6) motion, the Court’s consideration is limited to
the complaint, or in this instance, the Counterclaim. See Newby v. Gov’t of Guam, 2010 Guam 4 ¶
14. If a 12(b)(6) motion relies upon matters outside the scopc of the complaint or counterclaim,
then “the motion shall be treated as one for summary judgment and disposed of as provided in
Rule 56.” Guam R. Civ. P. 12(b).
Guevara’s 1 2(b)(6) motion attacks an underlying theory and defense that it attributes to
Babauta’s affirmative defenses and counterclaims, requesting that the Court “dismiss his
defenses based upon his alleged failure to read.” Pl.’s Rule 12(b)(6) Mot. Procedurally,
Guevara’s motion is not properly characterized as a 1 2(b)(6) motion because it is a motion to
‘dismiss defenses’ and therefore more akin to a 12(f) motion to strike a defense. Moreover,
Guevara’s motion relies on matters outside of the scope of the counterclaim, particularly that
Babauta had a reasonable opportunity to review the agreement prior to signing and case law
regarding a ‘duty to read’, and therefore would more properly be treated as a motion for
summary judgment to be disposed of under Rule 56. The Court therefore denies the Motion
seeking dismissal under Rule 12(b)(6).
C. The Defendant’s Motion to ‘Dismiss’ the Defendant’s Defense Would Not Prevail Under Rule 12(1’).
In oral argument, Guevara expressed that the crux of his position is that he believes that
Babauta is attempting to avoid liability by claiming that he never read the contract and that
Guevara would like for the Court to strike this defense. A motion to strike a defense is not
covered under Rule 1 2(b)(6), but rather Rule 12(1) which states that the Court may, “order
stricken from any pleading any insufficient defense.” CV0214-18 DECISION AND ORDER RE PLAINTIFF’S RULE 12(b)(6) MOTION Page 5
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5u In
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CLERK OiOURT INTRESUPERIORCOURTOFGUAM
JOSEPH GUEVARA, SR. Superior Court Case No. CV02144$ Plaintiff
VS. DECISION AND ORDER RE THOMAS BABAUTA, PLAINTIFF’S RULE 12(b)(6) MOTION Defendant.
The Court here considers whether to dismiss, strike, or render summary judgment against
an alleged “failure to read” defense. Having considered the parties’ arguments and applicable
law and rules of civil procedure, the Court DENIES Plaintiff’s Joseph Guevara’s Rule 12(b)(6)
Motion.
I. FACTUAL AND PROCEDURAL BACKGROUND
The parties signed an agreement whereby Defendant Thomas Babauta would transfer Lot
2, Tract 63007, Yigo, Guam (“Lot 2”) to Guevara. Ans. and Counterclaim ¶4. The Department
of Land Management subsequently alerted Guevara that Babauta did not have title to Lot 2 prior
to the transfer. Guevara contacted Babauta about the title issues, and Babauta refused to take any
action to remedy the situation, claiming that there were mistakes in the written agreement and
that the agreement was supposed to be for the transfer of the property identified as Lot 5, Tract
63007, Yigo Guam (“Lot 5”) not Lot 2. Ans. and Counterclaim ¶ 11.
Guevara’s complaint alleges breach of contract, fraud in the inducement, actual fraud,
and oppressive conduct, and seeks the recession of the contract. Babauta responded, providing a CV0214-18 DECISION AND ORDER RE PLAiNTIFF’S RULE 12(b)(6) MOTION Page 2
series of affirmative defenses and counterclaiming that Guevara had only provided him with the
signature pages of the April 19 agreement, and therefore Guevara deceived or misled him into
signing the agreement for Lot 2 by claiming the agreement was for Lot 5. Ans. and Counterclaim
¶9.
Guevara filed a “Rule 12(b)(6) Motion,” alleging that the case was ripe for Rule 12(b)(6)
dismissal, or alternatively, summary judgment, as Babauta’s defense of ‘failure to read’ was not
viable. Babauta responded claiming that Guevara failed to allege, with any particularity, which of
the affirmative defenses he was attacking, and failed to provide any admissible evidence upon
which summary judgment could be granted.
At oral argument, Guevara noted that the main concern prompting the initial Rule
12(b)(6) motion was that Babauta would argue at trial that he did not read the agreement and a
jury would accept such reasoning as an acceptable defense, contrary to law.
IT. LAW AND DISCUSSION
The Plaintiff argues that dismissal under Rule 1 2(b)(6) is proper because, without
Babauta’s purported defense of not reading the agreement, the allegations in the counterclaim are
insufficient to state a claim upon which relief may be granted. Alternatively, Guevara argues that,
should the Court determine that a 12(b)(6) motion is not proper, and instead treat the motion as a
motion for summary judgment under Rule 56, summary judgment is proper because even in the
light most favorable to Babauta, there is no genuine issue of material fact and Guevara is entitled
to judgment as a matter of law. The Court will first address the Plaintiff’s argument that failure to
read is not a viable defense under the law, then whether dismissal under Rule 1 2(b)(6), 12(0, or
summary judgment under Rule 56 is proper. CV0214-18 41) (1’ DECISION AND ORDER RE PLAINTIFF’S RULE 12(b)(6) MOTION Page 3
A. Failure to Read is Not a Proper Defense
When a person enters into a written contract in which there is no “relation of a special
trust or confidence” between the parties, and the contents of the writing are “equally open to
both,” then a party cannot escape liability by claiming a failure to read the contract. Greve v. Taft
Realty Co., 101 Cal. App. 343 (1929). When alleged, the failure to read defense is usually
stricken. Cochran v. Carter, 132 S.E. 921, 922 (Ga. App. 1926).
Guevara complains that Babauta’s defense relies on his failure to read the contract and
that Babauta will argue to the jury that by not reading the agreement, he is not bound by its
contents. Babauta counters that a ‘failure to read’ is not one of his listed affirmative defenses and
that he does not intend to raise a ‘failure to read’ defense at trial. However, Babauta’s failure to
read the document may be relevant to his affirmative defenses or counterclaims of fraud or
mutual mistake.
In the event Babauta intends to present evidence that he failed to read the agreement to
support his affirmative defenses, the Court will instruct the jury that a failure to read a contract
does not allow a party to escape liability under said contract and will clarify to the jury as to the
limitations of such evidence. Prior to trial, the parties may introduce proposed jury instructions
on this issue.
B. The Plaintiff’s Rule 12(b)(6) Motion Should Either be Treated as a Rule 12(1) Motion or Converted into a Rule 56 Motion for Summary judgment.
Should a party fail to state a claim upon which relief can be granted, the opposing party
may move for dismissal under Guam Rule of Civil Procedure 1 2(b)(6). Dismissal for failure to
state a claim is only appropriate if “it appears beyond doubt that the [non-moving partyj can
prove no set of facts in support of his claim which would entitle him to relief.” See Taitano v. CV0214-l8 DECISION AND ORDER RE PLA1Th4TIFF’S RULE 12(b)(6) MOTION Page 4
Calvo Fin. Corp., 200$ Guam 12 ¶ 9 (citing Zimmerman v. City of Oakland, 255 F.3d 734, 737
(9th Cir. 2001)). However, in ruling on a 12(b)(6) motion, the Court’s consideration is limited to
the complaint, or in this instance, the Counterclaim. See Newby v. Gov’t of Guam, 2010 Guam 4 ¶
14. If a 12(b)(6) motion relies upon matters outside the scopc of the complaint or counterclaim,
then “the motion shall be treated as one for summary judgment and disposed of as provided in
Rule 56.” Guam R. Civ. P. 12(b).
Guevara’s 1 2(b)(6) motion attacks an underlying theory and defense that it attributes to
Babauta’s affirmative defenses and counterclaims, requesting that the Court “dismiss his
defenses based upon his alleged failure to read.” Pl.’s Rule 12(b)(6) Mot. Procedurally,
Guevara’s motion is not properly characterized as a 1 2(b)(6) motion because it is a motion to
‘dismiss defenses’ and therefore more akin to a 12(f) motion to strike a defense. Moreover,
Guevara’s motion relies on matters outside of the scope of the counterclaim, particularly that
Babauta had a reasonable opportunity to review the agreement prior to signing and case law
regarding a ‘duty to read’, and therefore would more properly be treated as a motion for
summary judgment to be disposed of under Rule 56. The Court therefore denies the Motion
seeking dismissal under Rule 12(b)(6).
C. The Defendant’s Motion to ‘Dismiss’ the Defendant’s Defense Would Not Prevail Under Rule 12(1’).
In oral argument, Guevara expressed that the crux of his position is that he believes that
Babauta is attempting to avoid liability by claiming that he never read the contract and that
Guevara would like for the Court to strike this defense. A motion to strike a defense is not
covered under Rule 1 2(b)(6), but rather Rule 12(1) which states that the Court may, “order
stricken from any pleading any insufficient defense.” CV0214-18 DECISION AND ORDER RE PLAINTIFF’S RULE 12(b)(6) MOTION Page 5
However, there is no ‘failure to read’ defense listed in the affirmative defenses of the
Answer and Counterclaim, nor has this defense been argued by Babauta, who instead appears to
be arguing either fraud or mutual mistake in his counterclaim. The ‘failure to read’ defense is the
underlying theory that Guevara is attributing to Babauta’s defense and, therefore, is not an
affirmative defense that the Court can strike from the pleadings.
Nonetheless, the Court believes its above decision to disallow arguments or testimony at
trial that advance a ‘failure to read’ defense and allow arguments and testimony on Babauta’s
failure to read that establish an element of one of Babauta’s affirmative defenses or
counterclaims, adequately addresses Guevara’s concerns.
D. Summary Judgment is Not Proper Because there is a Genuine Issue of Material Fact Regarding the which Lot Guevara Agreed to Purchase from Babauta.
Summary judgment is appropriate if the pleadings, depositions, interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that, taken in the light most favorable to the non-movant, the moving party
is entitled to judgment as a matter of law. See Izuka Corp. v. Kawasho International, (Guam),
Inc., 1997 Guam 10 ¶7, 8; Guam R. Civ. P. 56. A party seeking summary judgment bears the
initial responsibility of providing the basis for its motion and identifying the portions of “the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any,” which demonstrates the absence of a genuine issue of material fact. Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). Only if the movant’s burden has been met must the
nonmoving party “set forth, by affidavit or as otherwise provided in Rule 56, ‘specific facts
showing that there is a genuine is sue for trial.’ T W Elec. Service Inc., v. Pacflc Etec.
Contractors Ass ‘n, 809 f.2d 626, 630 (9th Cit 1987) (citing Fed. R. Civ. P. 56(e)). CV0214-18 . DECISION A1’fl) ORDER RE PLAINTIFF’S RULE 12(b)(6) MOTION Page 6
Babauta claims that Guevara failed to meet his initial responsibility of providing the basis
for the motion for summary judgment, as Guevara sought to dismiss the “Defendant’s proffered
defense” of “failure to read” thereby leaving no question of material fact. Not only did Babuata
claim several affirmative defenses, but none of them mention a failure to read the contract or
agreement. See Ans. and Counterclaim. Based upon Guevara’s failure to provide a basis for his
motion that comports with the pleadings in the case, the Court agrees with Babauta that the
motion for summary judgment should be dismissed.
Nonetheless, the Court also fmds that there is a genuine issue of material fact such that
summary judgment is not proper. In order to defeat a motion for summary judgment, all that is
required is sufficient evidence supporting the claimed factual dispute that requires a jury or judge
to resolve the parties’ differing versions of the truth at trial. T W Elec. Service Inc., $09 F.2d at
630. Therefore, at summary judgment, conflicting evidence is not weighed. Id. Furthermore, in
reviewing evidence submitted at summary judgment, “[c]redibility determinations are jury
functions, not those of a judge,” and “[tJhe evidence of the non-movant is to be believed.”
McLaughlin v. Liii, 849 F.2d 1205, 1207 (9th Cir. 198$).
In this instance, there is a clear factual dispute that requires a jury or judge to resolve the
parties’ differing versions of the truth at trial. It is undisputed that the parties met and executed
an agreement whereby Babauta was to transfer Lot 2 to Guevara and that Babauta did not have
title to Lot 2 at the time of the agreement. What is in dispute is which lot the parties met upon
and orally agreed to transfer, as well as the facts surrounding the execution of the agreement.
Guevara claims that he and Babauta met on Lot 2, and Babauta agreed to sell him Lot 2.
Babauta claims that he and Guevara met on Lot 5, that he agreed to sell Lot 5 to Guevara, and
that either due to mutual mistake or fraud committed by Guevara, the agreement ultimately CV0214-18 DECISION AND ORDER RE PLAINTIFF’S RULE 12(b)(6) MOTION Page 7
stated that it was for the sale of Lot 2. Ans. and Counterclaim ¶ 8-9. Babauta also claims that he
was only provided the signature pages of the agreement, and signed them under the assumption
that the agreement was for the sale of Lot 5, as he claims the parties agreed upon. Ans. and
Counterclaim ¶ 9.
Therefore, when taking the pleadings, depositions, interrogatories, and admissions on
file, together with any affidavits, in the light most favorable to Babauta, there is a genuine issue
of material fact such that the Court cannot grant Guevara judgment as a matter of law. There is a
genuine issue of material fact as to whether the parties met on, and agreed to the sale of, Lot 2 or
Lot 5, as well as whether Babauta signed the agreement for the sale of Lot 2 due to fraud, or the
mutual mistake of both parties.
Due to these factual disputes, the Court finds that Babauta could prevail on an affirmative
defense or counterclaim, and therefore Guevara is not entitled to judgment as a mailer of law.
Accordingly, the Court denies Guevara’s motion for summary judgment.
III. CONCLUSION
Based on the foregoing arguments, the Court DENIES the Motion to Dismiss under
Rules 12(b)(6), 12(f), and 56.
SO ORDERED this 8th day of March 2019.
/ that a tOpi at t/5 0— 1 / 1 to was p[taed In Hi HON LYZE M IRIARTE Judge, Superior Court of Guam
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Appearing Attorneys: Gary W.F. Gumataotao, Gumataotao & Pole, P.C., for Plaintiff Mark E. Williams, Law Offices of Mark E. Williams, P.C., for Defendant