MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 85
THE FRAUD EXCEPTION TO THE PAROL EVIDENCE RULE
Occasionally, I’ve used Mediation Messages to write about topics that can impact trial issues and thus the quality of cases at mediation. (See Mediation Message no. 77 concerning the work-product doctrine and no. 67 regarding the conclusive effect of statements in pleadings.) Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169, which re-examined the fraud exception to the parol evidence rule, is another such case.
Riverisland overruled Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258, which had held that the fraud exception to the parol evidence rule was limited to evidence that “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.” (Id. at p. 263.)
Notwithstanding the purpose of the parol evidence rule “to ensure that the parties’ final understanding, deliberately expressed in writing, is not subject to change” (Riverisland, supra, at p. 174), Code of Civil Procedure section 1856, subdivision (f) provides for a fraud exception to the rule. (Id. at pp. 1174-1175.) Riverisland found that Pendergrass’s limitation of the fraud exception was inconsistent with section 1856, which limitation was also out of step with established California law and leading authorities. “Pendergrass failed to account for the fundamental principle that fraud undermines the essential validity of the parties’ agreement. When fraud is proven, it cannot be maintained that the parties freely entered into an agreement reflecting a meeting of the minds.” (Id. at p. 1182.)
In overruling Pendergrass, Riverisland reaffirmed the maxim “’[I]t was never intended that the parol evidence rule should be used as a shield to prevent the proof of fraud.’” (Ibid.)
Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
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Los Angeles, California 90067
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Copyright Michael D. Marcus, March 2013
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