A property owner arranged a loan modification agreement with a lender holding a trust deed on his property. The lender prepared a written loan modification agreement which extended the property owner’s loan term in exchange for additional security in the form of other real estate belonging to the property owner. The property owner did not read the agreement. The lender orally represented to the owner the terms and conditions of the written loan agreement and the property owner entered into the loan agreement in reliance upon the lender’s explanation of its content. The terms represented to the property owner were different from the terms contained in the modification agreement. The property owner did not comply with the terms of the written agreement. The lender foreclosed, selling the property which was security for the loan under the trust deed and inflicting a loss on the owner. The property owner sought to recover his losses claiming the lender misrepresented the terms and conditions of the written agreement, a fraud on the owner, since the lender orally represented that the agreement contained terms substantially different from those in the written agreement. The lender claimed he was not liable for the property owner’s misunderstanding of the written loan modification agreement since any oral conversation differing from the content of the written loan agreement was not part of the contract and the property owner failed to perform under the terms of the written agreement. A California court of appeals held a lender is liable for a property owner’s losses due to the loan officer’s misrepresentation of the loan terms since the lender’s oral misrepresentation of the document’s content induced the property owner to enter into the written loan modification agreement. [Riverisland Cold Storage, Inc v. Fresno-Madera Production Credit Association (2011) 250 CA4th 180]
