## Facts

- The IRS sold Lester A. Barrer’s residence at a tax sale to satisfy tax liabilities assessed against him; he had 120 days to redeem the property by paying roughly $17,400 by October 22, 1981.
- Two days before the deadline, Barrer applied to Women’s National Bank (WNB) for a personal loan to fund the redemption, disclosing the tax sale, an approximate $38,000 IRS debt, an estimated $65,000 mortgage, and a higher asserted home value.
- WNB’s president initially approved the loan based largely on Barrer’s representations, without first obtaining a credit report or contacting the mortgagee.
- After the tax-sale purchaser contacted WNB and the bank obtained a credit report, WNB withdrew its approval before closing, and Barrer failed to redeem the home by the deadline.
- In ensuing litigation, the magistrate found five “material” inaccuracies or nondisclosures connected to the application: extent of mortgage delinquency, foreclosure status, additional IRS exposure, a debt associated with Barrer’s late wife’s estate, and unsatisfied judgments.
- WNB argued the loan agreement was voidable due to innocent but material misrepresentations and obtained summary judgment.

## Issues

1. What legal standard governs whether an innocent but material misrepresentation or nondisclosure permits unilateral rescission of a loan agreement.
2. Whether genuine disputes of material fact existed as to the nature of the alleged misrepresentations/nondisclosures, their materiality, and WNB’s justifiable reliance, making summary judgment improper.

## Decision

- The D.C. Circuit reversed the grant of summary judgment for WNB and remanded.
- The court held the magistrate applied an incorrect, overly broad approach that treated inaccuracy plus “materiality” as automatically sufficient for rescission.
- The court held the record contained material factual disputes regarding Barrer’s knowledge and good faith, the circumstances and significance of the alleged nondisclosures, and whether WNB actually and justifiably relied on the disputed information when it first approved the loan and later withdrew it.

## Legal Principles

- An innocent misrepresentation can render a contract voidable only under a context-dependent inquiry that includes materiality and justifiable reliance, not a strict rule triggered by any inaccurate statement labeled “material.”
- Nondisclosure constitutes misrepresentation only in limited circumstances, such as when a duty to disclose exists or when silence makes a prior assertion misleading.
- Summary judgment is inappropriate where reasonable factfinders could differ on what was known, what was said or implied, whether information was materially misleading in context, and whether reliance was justified.

## Conclusion

The court required application of a Restatement-consistent rescission analysis—focused on materiality and justifiable reliance in context—and held that disputed facts about Barrer’s disclosures and the bank’s reliance and decision-making precluded summary judgment.


Barrer v. Women’s Nat’l Bank, 761 F.2d 752 (D.C. Cir. 1985)