Metropolitan News-Enterprise


Tuesday, June 11, 2013


Page 3


C.A. Upholds Parol Evidence Ruling in Suit Over Historic Restaurant


By a MetNews Staff Writer


The First District Court of Appeal yesterday upheld a verdict in favor of the purchasers of an historic San Francisco restaurant, who claimed the prior owner defrauded them in connection with the sale and accompanying lease of the site.

Justice Robert Dondero, writing for Div. One, said the trial judge properly allowed plaintiffs Charles Stinson and John Bonjean to introduce evidence that James Frederick Payne falsely told them that the equipment at Julius’ Castle on Telegraph Hill was in good working order, and that Payne would have taken responsibility for all repairs necessary to get the 1920s restaurant—which was closed for about a year—reopened. 

Payne’s lawyers argued that the evidence should have been excluded under Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258, which limited the scope of the statutory fraud exception to the parol evidence rule. Dondero cited a recent case, decided while Payne’s appeal was pending, which overruled Pendergrass.

Jurors awarded Stinson and Bonjean $205,000—after 30 percent comparative fault was taken into consideration—on their fraud claim, but awarded $75,000 to Payne for breach of contract. San Francisco Superior Court Judge Tomar Mason awarded more than $150,000 in attorney fees.

Dondero said the case was controlled by Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169.

The court in that case called Pendergrass an “aberration,” saying  limitations on extrinsic evidence of fraud run counter to both statutory and case law.

Dondero cited Code of Civil Procedure Sec. 1856(f)’s broad exception to the operation of the parol evidence rule:

“Where the validity of the agreement is the fact in dispute, this section does not exclude evidence relevant to that issue.”

 The Pendergrass limitation, that extrinsic evidence “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,” was unsupported by the statutory language and inconsistent with the law in other jurisdictions, the Riverisland court held.

Dondero yesterday rejected the argument that Riverisland ought not apply to an action between sophisticated contracting parties. The Court of Appeal could not, he said, “carve out an exception to the Riverisland holding that the court itself did not endorse.”

The case is Julius Castle Restaurant Inc. v. Payne, 13 S.O.S. 2935.


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