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“But the court, in an opinion by Justice Carol Corrigan, said the 1935 ruling was poorly reasoned, had been rejected by other states and “may actually provide a shield for fraudulent conduct.”


Oral promises can be used in fraud case

Borrowers facing default on a loan can try to prove that the lender orally promised them an extension that didn’t appear in the written contract, the state Supreme Court ruled Monday while overturning a 1935 decision that restricted evidence of fraud in contract disputes.

A lawyer for the borrowers, a Fresno County couple, called the unanimous ruling a victory for consumers. The lender’s lawyer said the court had eliminated important protections for written contracts.

The couple, Lance and Pamela Workman, fell behind on repaying a $776,000 loan from the Fresno-Madera Production Credit Association and signed an agreement in March 2007 pledging eight properties as security in return for a three-month extension.

The lender sought foreclosure after the Workmans failed to meet the three-month deadline. But the couple said the credit association’s vice president had told them two weeks before the agreement was signed, and repeated at the time of signing, that they would actually have two years to make the payments and would have to put up only two ranches as security.

The Workmans later repaid the loan – selling the eight properties at a loss, according to their lawyer, Steven Paganetti – and then sued the lender for fraud for allegedly misleading them about the terms of the loan.

More here…

Copy of the ruling below…



Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Association

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