Barrer v. Women's National Bank
Plaintiff's $130,000 house was sold at a tax sale by the IRS for $16,000. Plaintiff owed the IRS $38,000, but he could redeem it for $17,000. Plaintiff went to defendant to get a loan to buy back his house and filled out a loan application, disclosing that he had a $65,000 mortgage on the house and the $38,000 in tax debt. The purchaser of plaintiff's house told defendant that plaintiff had further debts than he disclosed. Defendant ran a credit report and learned of five more debts they didn't know about:
- He was actually six months behind on his mortgage payments, not two like he said he "thought" he had.
- His mortgage was being foreclosed on.
- His company was $11,000 in debt, and he could have been liable.
- He had a contingent liability of a $5,300 debt by his wife's estate.
- He had $1,500 in unsatisfied judgments against him.
The district court granted defendant summary judgment.
Was the parties' contract voidable due to fraud from nondisclosure?
R2C § 161
- Defendant misunderstood how far behind on his mortgage payments he was as he believed they stopped once the house was sold in the tax sale.
- Defendant testified he did not know the house was being foreclosed on at the time.
- Defendant believed at least part of the $11,000 to be included in the $38,000 he disclosed. It may not have even been personally against him at the time.
- Although plaintiff asked the court to assign this liability to him, they did not and actually assigned it all to his wife, meaning that he was not liable at all.
- Plaintiff disclosed that he was a defendant in some lawsuits and that he owed some small amount of money as a result but that he expected his health insurance to cover most of them.
The facts do not justify a summary judgment that nondisclosures justified rescission. A jury trial must determine the facts. Reversed and remanded.