Legal Question in Real Estate Law in California

Re: line of credit modification

The answer to this question is moderately technical. In general, when a contract is intentionally replaced with a new contract, the new contract is called a "novation," and it replaces the old contract IF that is what the parties intended. However, there is some case law, old but probably still valid, stating that the contract which is replaced must itself have been valid, and if not, the supposed novation (new replacement contract) is also invalid.

Under this line of reasoning, you could still sue the other party for fraud connected with the underlying (original) agreement.

If, however, the underlying agreement was valid, even though tained with fraud, the old agreement would be supplanted by the new agreement. The validity or invalidity may depend on the type of fraud involved.

So, my guess is that overall your ability to sue successfully will ultimately depend upon the technical nature of the fraud you can prove tainted the underlying (original) contract.

In closing, I must say that I recall seeing cases that hold that a compromise settlement of a dispute where one claims fraud and the other has a bona fide defense will be upheld, which seems to be a contrary outcome, at least in some aspects.

If the amount at stake is significant, you should retain an attorney to review the specifics of your situation and do a little research before you decide which approach to take.