Riverisland Ruling Gives Calif. Fraud Victims Fairer Shake

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Law360, New York (January 23, 2013, 3:08 PM ET) ‐‐ In a decision that will have a dramatic effect on contract and lender liability litigation, the California Supreme Court decided in Riverisland Cold Storage Inc. v. Fresno‐Madera Production Credit Association, Case No. S190581, that the parol evidence rule does not bar the introduction of evidence of fraud, even if the misrepresentations directly contradict the terms of a written contract. In so ruling, the Court directly overturned its decision in Bank of America etc. Assn. v. Pendergrass, which has been the law in California, albeit reluctantly, for over 75 years.[1]

Importantly, the court left open the question of whether the borrower could establish justifiable reliance of the misrepresentations at issue, given the fact that the borrowers admitted to not reading the document. This will certainly be an issue on which future litigation will focus.

[1] 4 Cal. 2d 258, 263 (Cal. 1935).

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