Friday, November 20, 2015

Menacing Mortgages and Marital Distress: A Bona Fide Mismatch

EverBank v. Marini2015 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.


  1. This case is not about a refinance nor duress.
    The case is ongoing & needs removal from its feature as marital distress.
    Shouts out to a super frugal, dignified and community-oriented family! [Mother]reticent to bring this Counter-Claim to the Court for this; the slander; you "lampoon" them.
    The rape victim is being jeered here.
    Let's get the facts straight: this family fully paid for their retirement home.
    They do know how expensive houses are.
    The "unjust" portion of the enrichment is any money paid at all to Bank of America, and seven years watching this sweet woman suffer.
    The Unjust portion of this case is the whole family suffered in [mother's] attempts for seven-eight years to get this company to leave her home alone!!!
    The only one who saw what was going on appears to have been that Civil Court Judge who called it right from the start.
    Of course Bank Of America just hired a bigger Law Firm, after switching in Everbank to hit for them.That was no real deal appeal.That was their game.Ignore this woman's Claims at Civil 'cause we haven't got a chance.Supremes have to like us better as the nonmoving party on the appeal.
    New Law Firm sorely misrepresented what BOA has done. BOA has probably not even told them.
    This family had a lifetime of savings and retirement.Thier house was paid off.[Mother]was excited to begin to sell as an artist after she settled the large family into their new state.
    When the Mr. ran into troubles from precursory rumblings before the 2008 Recession, he began tapping into the family resources.
    Always a hard worker, he figured he'd rebuild the family assets and Mrs. would be none the wiser.
    The Recession came along and guess what didn't happen?

    Enter Countrywide/Bank of America, to a Full Equity House.

    See one now completely desperate homeowner and one stable, disagreeing homeowner.

    Guess who wasn't repeatedly allowed to reject Bank of America's Advances?
    I think if you pull out your book from under the monitor you'll see something at 69.1 (a) which translates they have to listen to rejection. They didn't.

    No little snafu leaving the Disagreeing Co-owner off the Prommisory note.

    You've heard of the HSSL. This is called SDCKOP.
    Silence Disagreeing Co-owner by Keeping off Promissory.

    What better way to shut someone up?

    Bank of America didn't count on Mr.'s Cancer and his remorse and conversion.

    With her family 100% behind her, this woman fights an unscrupulous Bank of America for what must be getting close to a decade now.

    That first Judge called it right.

    This is a case about outragious Bank of America, their various related parties, and one woman's incredibly couragious battle for unbelievable years against a BOA which still wants to silence her!
    I know from inside experience that a small local bank would NEVER process a loan with even the slightest hint of disagreement from a homeowner.
    Look at Supremes' Order 2015-131, page 4, paragraphs 7-8.
    These notaries were not of the "..independent person.." variety.
    The "it is what it is" is not an acceptable validation to any notarization I know.( You might have felt that way about your student loans but that cannot have been your affirmation. Plus you got something. Sweet Caroline didn"t.) This invalid notarization occurred within 24 hours at the very kitchen table at which Mrs. M. sat and, via phone, had told that last notary the scoop.
    This inadequate notarization was not so "removed in context" as Decision 2015-131 at page 19, paragraph 30 reads.

    This case with its provocative picture should be removed, again, from your writeup. It is not a resolved case at all.

    Caroline-Sweet Caroline- has not been given Due Process on her Claims against this Crook.

    See your own paragraph seven. " She also counterclaimed".

    That is the real meat of this case against Bank of America.
    The Bank of America has not even addressed those claims.
    Bank of America should be put down completely.

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