Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Ass'n
55 Cal. 4th 1169
Cal.2013Background
- Plaintiffs allege fraud-related misrepresentations surrounding a restructuring agreement with a farm-credit association.
- The agreement dated March 26, 2007 secured eight parcels as collateral and forbearance for three months; forbearance was contingent on specified payments.
- Workmans signed the agreement without reading it; they claim a pre-signing oral assurance extended the loan for two years with two ranches as extra collateral.
- Credit Association moved for summary judgment arguing parol evidence barred contradictory extrinsic evidence.
- Court below allowed introduction of fraud evidence under the fraud exception; Court of Appeal reversed, adopting a broader view of the fraud exception.
- California Supreme Court overrules Pendergrass and reaffirms that fraud can invalidate an otherwise written instrument when proven by extrinsic evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of the fraud exception to the parol evidence rule | Pendergrass limits fraud evidence to promissory fraud. | Pendergrass should control and bar contradictions of written terms. | Overruled; fraud exception covers evidence challenging validity of the instrument. |
| Whether Pendergrass should be overruled given policy and statutory alignment | Pendergrass is inconsistent with the statute and Restatements. | Pendergrass provides necessary protection against fraud. | Pendergrass overruled; adopt broader fraud-exception approach. |
| Reliance and reading of contract in fraudulent inducement | Failure to read contract does not bar fraud claim if misrepresentations affected contract terms. | Negligent failure to read may preclude justifiable reliance. | Not decided at this stage; issue reserved for trial. |
Key Cases Cited
- Bank of America etc. Assn. v. Pendergrass, 4 Cal.2d 258 (1935) (fraud exception limited to independent fraud, not promises directly contrary to writing)
- Ferguson v. Koch, 204 Cal. 342 (1928) (parol evidence rule should not shield fraud)
- Tenzer v. Superscope, Inc., 39 Cal.3d 195 (1985) (affirms policy-based reform aligning with Restatement theory on fraud)
- Coast Bank v. Holmes, 19 Cal.App.3d 581 (1971) (criticizes Pendergrass and supports broader fraud admissibility)
- Pacific State Bank v. Greene, 110 Cal.App.4th 375 (2003) (discusses limits of the false promise/misrepresentation distinction)