Menacing Mortgages and Marital Distress: A Bona Fide Mismatch

EverBank v. Marini, 2015 VT 131

By Thomas M. Kester

If someone makes you an offer “you can't refuse,” you probably should take it unless you want something bad to happen (what ever happened to that Jimmy Hoffa guy by the way?). While most people have distress about their mortgages, they enter into them because houses are wicked expensive and it's not like houses grow on trees—well, not entirely at least.

Anyway, it’s one thing to sweat about your mortgage payments every month and another to make someone sweat about entering into a mortgage. The law doesn’t like it when one party uses high-pressure tactics on the other party when contracting (however, it brings in the ratings for The Bachelor, like when Chris ultimately chose Whitney over Becca—or so I’ve heard from a friend). However, duress can be raised as an affirmative defense to the enforcement of a contract if one party was coerced into contracting (kind of like annulling a “shotgun marriage” over the “shotgun” aspect).

In this case, Caroline (wife) was not interested in refinancing their home while Gary (husband) was all about it. Caroline believed it is was “financially unhealthy” and refused to sign any documents to that effect. Gary told Caroline that “he would mortgage the family home ‘whether [she] liked it or not,’ and regardless of whether she agreed,” and started the paperwork with LendingTree Loans in mid-March 2009. Caroline contacted LendingTree Loans and told them “she did not want the loan, that she and [Gary] were in marital counseling, and that the mortgage was ‘a very bad thing for [them].’” The loan officer advised Caroline not to sign anything but that the loan officer couldn’t do anything to stop Gary’s loan application.


On April 3, 2009, Gary arranged for a notary to witness her signature and Caroline subsequently called LendingTree Loans on April 5 and told them she wasn’t going to sign anything. The notary did not come to the house on April 5. So Gary learned of Caroline’s action via an email from LendingTree Loans, “became “extremely angry,’” and “berated [Caroline], repeatedly stating that she was not a competent adult, that the children [who were present for this exchange] were no longer to consider her an adult, and that he was going to divorce her.” He then “removed a pair of large scissors from the knife drawer and waved them back and forth while repeating that [Caroline] was incompetent.” Being “frightened for her and her children’s physical safety” Caroline agreed to sign the necessary documents “if he would leave the children alone.”

When the LendingTree notary came to the home, they “asked Caroline if her signature was her free act and deed, she replied, ‘it is what it is.’” I felt the same way when I signed my student loan paperwork, but for different reasons (the silver lining is that I learned a little bit about how bankruptcy works if the need ever arises). Concurrently, Gary executed a note to LendingTree Loans for a principal of $311,200.00. A little snafu—“Although Caroline signed the mortgage paperwork, she did not sign the note,” and that mortgage listed both Gary and Caroline “as ‘borrowers’ and LendingTree as the ‘lender.’” 

Thereafter, LendingTree assigned the rights to both the mortgage and loan to Bank of America (BoA). Caroline, upon learning this, complained about the coercion to BoA but the person she spoke with stated “that only [Gary] was listed on the loan documents and therefore the representative could not talk to [Caroline] about it.” Around April/May 2011, the couple stopped making monthly payments and BoA initiated the foreclosure action in the Addison Superior Court.

Caroline filed an answer and asserted the affirmative defense of duress, stating that “she had ‘signed the Mortgage Deed under duress, namely, implicit threat by [Gary] of physical harm with a sharp object in the presence of her children’” and “arising from her ‘desire to protect her children from further exposure to parental disagreement, to protect herself from further humiliation, and continuing verbal pressure to burden the house with further debt.’” She also counterclaimed. BoA moved for summary judgment against Caroline and judgment for foreclosure but did not address any of Caroline’s affirmative defenses or contentions. Caroline filed a motion in opposition and cross-moved for summary judgment based on her unopposed defense of duress. BoA also moved to substitute EverBank as a party, to both the mortgage and note.

Trial-time: the BoA counsel did not address Caroline’s contentions but stated that the couple had missed payment and were in default. Caroline’s counsel stated that Caroline was coerced into signing the mortgage and, at least to her, the mortgage was void. Of note, “both [Caroline’s counsel and the trial court] noted that neither Gary nor Bank of America had disputed Caroline’s version of the facts or responded to her cross motion for summary judgment.” The trial court judge questioned Gary and asked, “so you forced her to sign it?” to which Gary responded, “I guess I did from that standpoint because I was very angry. I didn’t physical[ly] put her hand on the paper, but I was very angry.”

After allowing BoA to respond to Caroline’s asserted defenses, the trial court granted Caroline’s motion for summary judgment and allowed the substitution of EverBank. The trial court went further and stated “‘the outcome in this case would not change even if the Court were to conclude that [Caroline’s] coerced signature on the Mortgage Deed rendered the Mortgage only voidable,’” citing that Caroline had not ratified the mortgage and EverBank was not a bona fide purchaser as to preclude a duress defense. After fishing out my legal dictionary (which currently doubles as a monitor stand), “bona fide purchaser” is one who “acquires apparent title in property in good faith for valuable consideration and without notice of a third person’s claim.” The trial court also denied EverBank’s motion to alter or amend the judgment based on “unjust enrichment” (you get the benefits of something without paying for it and, in the eyes of equity, you should pay) based on them not raising it at trial.

EverBank appeals.

First issue: whether the mortgage was void as to Caroline as a matter of law. 

Before getting to the answer the SCOV needs to examine the affirmative defense of “duress.” Under contract law, “duress, operates to undermine a party’s manifestation of assent and thus undermines one of the foundational cores of any agreement,” to the extent that the parties don’t have a “meeting of the minds” or mutual assent to contract. 

Allow me to present a scenario to better illustrate this point: I walk into a barbershop, sit down on the chair, and say to the barber “take ½ inch off the top.” The barber says “that will cost $12.00” and I say “sounds good.” The barber nods his head and proceeds to cut my hair. We both mutually agreed to contract: him to cut my hair ½ inch off the top for $12.00 and me to provide consideration ($12.00) for his services (cutting ½ inch off the top).

There is another caveat that we have to address as well: the difference between “void” and “voidable” contracts. Under the affirmative defense of duress, a contract may be ratified if it is voidable but not if it is void. Now the parties agree that duress caused by physical compulsion renders a contract void. The distinction is important because transferring title to property (i.e., BoA's transfer to EverBank) may not be “good title” if the alleged good-faith purchaser (EverBank) purchases the property from one who obtained void title by duress but it can still be good title if it is a voidable title.

EverBank “contends that only where one person physically compels another to give apparent consent, such as by manually forcing the victim to sign a document” renders an agreement void—but only that scenario. Caroline argues that physical compulsion encompasses “the threat of application of immediate physical force sufficient to place a person in the position of the signer in actual, reasonable, and imminent fear of death, serious personal injury, or actual imprisonment,” and that scissors being waved around are enough to cause this contract to be void.

The SCOV reasons this is a case of first impression, and looks to the Restatement on Contracts (2nd Ed.) (which is written by wicked smart legal people at the American Law Institute and is the go-to source when you need to create law/understand contracts). 

There are two types of duress—physical compulsion and improper threat. The former is when I grab your hand and make you write your name on a contract; the latter is when I threaten you if you don’t sign and you sign the contract based on my threat. Furthermore, there is a test that can be used for improper threat: (1) whether there is an improper threat and (2) whether the victim has no reasonable alternative but to do as they are told. The threat is improper is a crime or tort (i.e., “I will beat you if you don’t sign”). Threatening someone with “the Red Sox will not win another World Series if you don’t sign this paper” probably won't make the cut (go Sox). 

The question of whether the victim has a reasonable alternative “a practical one under which the exigencies in which the victim finds” themselves is examined. So armed with this legal knowhow, the SCOV must still examine the factual situation to see which duress is present. Looking at some other cases from other jurisdictions, the SCOV concludes that a contract is deemed void when the duress is not only physical compulsion (e.g., grabbing the hand) but “threat of immediate application of physical force sufficient to place a person in the position of the signer in actual, reasonable, and imminent fear of death or serious personal injury.” 

Applying the law to the facts, the SCOV finds that the record doesn’t show “that Gary overpowered Caroline and manually manipulated her hand to appear to assent” or that there was a “threat of imminent physical violence upon Caroline such that she reasonably feared loss of life or serious physical injury at the time she signed the document, which was the day following the incident with the scissors.” 

Although the SCOV sees the scissor waiving event as a “tense situation” it “was removed in time and context” when Caroline signed the document the next day. Further, Caroline had a reasonable alternative as there was no indication “in the record at all that the threat was so persistent that it continued through that time nor is there any indication at all that Caroline was without ability to exfiltrate herself from Gary’s control.” The SCOV remands the issue to the trial court to determine whether the contract is voidable to Caroline. The SCOV also kicks back the issue of ratification and whether ratification can trump Caroline’s claim of duress.

As to whether or not EverBank is a “bona fide purchaser,” the SCOV concludes that EverBank’s acquisition of the mortgage seven months after Caroline raised duress cannot allow it to be a bona fide purchaser “when it had constructive, if not actual, notice of this defect.” This is because a bona fide purchaser takes “without notice of defects” and there is a potential defect here—Caroline’s duress claim. The Court remands to the trial court to [re]determine whether Caroline’s duress claim has merit.