In a case that does not involve personal property finance, but which could have far reaching implications in personal property sales and finance litigation, the California Supreme Court held in Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn., 2013 DAR 561 (2013), that parol evidence is admissible to prove promissory fraud, whether or not the promise directly contradicts the parties’ later written agreement. Nevertheless, the court stressed that the intent element of promissory fraud entails more than proof of an unkept promise or mere failure of performance. Also promissory fraud, like all forms of fraud, requires a showing of justifiable reliance on the defendant’s misrepresentation.
Accordingly, we conclude that Pendergrass was an aberration. It purported to follow section 1856 ( Pendergrass, supra, 4 Cal.2d at p. 264), but its restriction on the fraud exception was inconsistent with the terms of the statute, and with settled case law as well. 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. Moreover, Pendergrass has led to instability in the law, as courts have strained to avoid abuses of the parol evidence rule. The Pendergrass court sought to “ ‘prevent frauds and perjuries’ “ (id. at p. 263), but ignored California law protecting against promissory fraud. The fraud exception has been part of the parol evidence rule since the earliest days of our jurisprudence, and the Pendergrass opinion did not justify the abridgment it imposed. For these reasons, we overrule Pendergrass and its progeny, and reaffirm the venerable maxim stated in Ferguson v. Koch, supra, 204 Cal. at page 347: “[I]t was never intended that the parol evidence rule should be used as a shield to pre-vent the proof of fraud.” ¶ . . .Here, as in Tenzer, we stress that the intent element of promissory fraud entails more than proof of an unkept promise or mere failure of performance. We note also that promissory fraud, like all forms of fraud, requires a showing of justifiable reliance on the defendant’s misrepresentation. ( Lazar v. Superior Court, supra, 12 Cal.4th at p. 638.) The Credit Association contends the Workmans failed to present evidence sufficient to raise a triable issue on the element of reliance, given their admitted failure to read the con-tract. However, we decline to decide this question in the first instance. The trial court did not reach the issue of reliance in the summary judgment proceedings below, nor did the Court of Appeal address it.