Barrer v. Women's National Bank

761 F.2d 752 (D.C. Cir. 1985)


P's home was sold at a tax sale by the IRS. The Internal Revenue Code provides for the redemption of real property within 120 days of a tax sale. P could redeem his home by delivering $17,400, in cash or its equivalent, to the IRS or the buyer at auction on or before October 22, 1981. P went to D for a personal loan. P had approached one other bank but was told it was not possible to process an application for a loan in such a short period of time. P got a loan application completed and returned it to D the next day, October 21, along with supporting documents, including those concerning the tax sale and his efforts to sell his business. P told D that his house was worth approximately $130,000 and that Columbia First Federal Savings and Loan Association ('Columbia') held a $65,000 mortgage on it. P claimed he was two months behind loan payments on the house. P was six months behind. Columbia had begun foreclosure proceedings which P did not disclose to D. P also failed to disclose the $11,000 in employment taxes owed by his corporation which had not, at that time, been asserted against him personally. P did not list a $5,300 debt owed by his wife's estate to IBM. 

P did not indicate on the loan application that he had approximately $1,500 in unsatisfied judgments pending against him. D indicated that, in order to grant the loan, the IRS would have to agree to subordinate its claim to the house. On October 22, 1981, the last redemption day, P obtained the subordination agreement from the IRS and delivered it to D. P executed a collateral note for $17,400, payable in 90 days at 15 percent interest, which gave D the right to a security interest in his house. D gave P a cashier's check, payable to him, for the loan amount. Prior to granting the loan, D never obtained a credit report or phoned Columbia about the status of the mortgage. Curtis, the buyer from the IRS, phoned D and set them straight. Once D learned everything, they rescinded the loan. P sued D. A district court magistrate gave D summary judgment, in that P failed to disclose five material facts. D appealed.