Ever sign a stack of legal or financial documents without reading them, only to discover later that the documents say something different than how they were explained to you?
Whether you are buying a home or taking out a loan, it happens, and a recent case shows that you are not necessarily held to the terms of the written document that you signed.
A large, national bank was willing to finance a young couple’s purchase of a home, but they didn’t have an established credit history enabling them to get financing themselves. The bank was willing to extend the financing if the young man’s mother co-signed the loan. The woman wanted to help, but she had terrific credit and didn’t want to agree to a long-term, open-ended commitment and she explained that to the bank’s loan officer. He told her that she would be liable on the debt for the first 12 months’ only and that after the young couple had made 12 consecutive payments, they would have built up enough credit to release her from the debt. When she asked the loan officer if she needed to sign any papers to make that happen, he assured her that her name would “drop off” the loan automatically after 12 months. With that assurance in mind, the woman co-signed the loan.
The problem was that the loan documents did not match what the loan officer said. According to the documents, the woman was on the hook no matter what.
Years later the young couple defaulted on the loan and the bank filed a collection case against the mother. She claimed fraud and came forward with written statements from witnesses who were at the bank and heard what the loan officer said. The Bank argued that the documents were more important than what was said.
The judge ruled against the Bank and in favor of the woman, dismissing the Bank’s collection case. In ruling as it did, the Court said that it could consider statements made by the people who were present and that it was not limited by what the loan documents said.
The case offers two lessons. First, have an attorney review important legal and financial documents before you sign them. Second, even if you don’t, it’s possible to invalidate written documents that result from fraud.
Michael Gildner obtained this result for his client. He would be happy reviewing your documents before you sign them or representing you when challenging those documents.