Farmers in split decision over fraudulent equipment lease

Tuesday, November 08, 2005

(Associated Press) LITTLE ROCK - A federal court should not have granted a farm-equipment company's credit arm a complete victory in a dispute with farmers whose signatures were forged on purchase agreements and credit card applications, an appeals court says.

While an Arkansas federal judge ruled properly that a local farm equipment dealer wasn't an agent for the Racine, Wis.-based Case Credit Corp., limiting Case's liability on a fraud claim, the judge should not have rewritten the forged contracts in an attempt to settle the dispute, according to the decision handed down Monday.

The 8th Circuit Court of Appeals in St. Louis sent the case back for more proceedings.

Six farmers sued Case Credit Corp., alleging they had oral agreements with a Case International Harvester dealer in Arkansas to purchase or lease equipment between 1996 and 1998. Written agreements, prepared later, did not match the oral agreements, the court said.

According to the court, the dealer inflated prices, forged signatures and obtained thousands of dollars in overpayments. The dealer also forged signatures on credit card accounts to cover repairs and warranty work he had agreed to provide under the oral agreements.

Case discovered the fraud and asked the farmers to sign 'Account Verification' forms to show which equipment they were using. The farmers refused to sign, saying the documents had overstated price figures. Case said the forms would be used only to affirm possession of the equipment, but later tried to use the documents to enforce the forged agreements.

The farmers offered to meet the terms of their oral agreements with the deal, but Case refused, prompting the court fight. The farmers said Case was trying to use the verification forms to accomplish what the dealer's false documents could not - and that that was a claim that the court must consider further.

The 8th Circuit agreed with Case that it shouldn't be held liable for the dealer's alleged fraud because the dealer wasn't authorized to enter contracts on Case's behalf.

The court did, however, say Case couldn't enforce any provision of the forged contracts - even after the lower court modified them - because forged documents, under the law, are void from their inception as though they never existed.

'The district court could no more reform the nonexistent written contracts than Case could seek to enforce them,' the court wrote."