Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Ass'n

The parol evidence rule protects the integrity of written contracts by making their terms the exclusive evidence of the parties’ agreement. However, an established exception to the rule allows a party to present extrinsic evidence to show that the agreement was tainted by fraud. Here, we consider the scope of the fraud exception to the parol evidence rule.

As we discuss below, the fraud exception is a long-standing one, and is usually stated in broad terms. However, in 1935 this court adopted a limitation on the fraud exception: evidence offered to prove fraud “must tend to establish some independent fact or representation, some fraud in the procurement of the instrument or some breach of confidence concerning its use, and not a promise directly at variance with the promise of the writing.” (Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258, 263 [ 48 P.2d 659 ] (Pendergrass).) The Pendergrass rule has been criticized but followed by California courts, for the most part, though some have narrowly construed it. The Court of Appeal in this case adopted such a narrow construction, deciding that evidence of an alleged oral misrepresentation of the written terms…