EverBank v. Marini

Supreme Court of Vermont
134 A. 3d 189 (2015)

ELI5:

Rule of Law:

Duress renders a contract void if a party's assent is procured by the actual application of physical force or by a threat of imminent physical violence sufficient to cause a reasonable person to fear death or serious injury. Duress renders a contract merely voidable if assent is induced by an improper threat that leaves the victim no reasonable alternative.

Facts:

In early 2009, Gary Marini sought to borrow money against the family home he owned with his wife, Caroline Marini, but Caroline opposed the idea as financially unwise.
Caroline actively attempted to prevent the loans by contacting potential lenders, including Quicken Loans and LendingTree, to inform them of her opposition and their poor financial situation.
On April 5, 2009, after learning that Caroline had canceled a notary appointment for the loan signing, Gary became extremely angry.
That evening, Gary gathered Caroline and two of their children in the kitchen, berated Caroline, and waved a pair of large scissors while calling her incompetent.
Fearing for her and her children's safety, Caroline told Gary she would sign the mortgage documents if he would leave the children alone.
The following evening, April 6, 2009, a notary came to the Marini home, and Caroline signed the mortgage documents.
The loan proceeds were used to refinance the existing mortgage, pay approximately $40,000 of Gary's credit card debt, and provide cash to Gary.
Around April or May 2011, the Marinis defaulted on the loan by ceasing payments.

Procedural Posture:

Bank of America initiated a foreclosure action against Caroline and Gary Marini in the Addison Superior Court, Civil Division (trial court).
Caroline Marini filed a verified answer asserting the affirmative defense that the mortgage was void or voidable due to duress.
Bank of America moved for summary judgment on its foreclosure claim.
Caroline Marini opposed Bank of America's motion and filed a cross-motion for summary judgment, arguing the mortgage was void as a matter of law.
During the proceedings, the mortgage was assigned to EverBank, which was substituted as the plaintiff.
The trial court granted Caroline's cross-motion for summary judgment, concluding the mortgage was void as to her due to duress.
EverBank filed a motion to alter or amend the judgment under Rule 59(e), which the trial court denied.
EverBank (appellant) appealed the trial court's summary judgment ruling to the Supreme Court of Vermont.

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Issue:

Does duress render a mortgage void when a husband, on the night before the signing, threatens his wife with scissors and berates her, but does not physically compel her signature or threaten imminent serious harm at the time of signing?

Opinions:

Majority - Eaton, J.

No, such duress does not render the mortgage void. For duress to render a contract void, the victim's conduct must be compelled by actual physical force or a threat of imminent physical violence that would cause a reasonable person to fear death or serious injury. Here, Gary's threatening actions occurred the night before the signing and were removed in time and context from the actual signing, which took place before a notary. While the conduct constituted an improper threat that could potentially render the mortgage voidable (if Caroline had no reasonable alternative), it did not meet the higher standard of immediacy and severity required to render the contract void from its inception. The court adopts the framework from the Restatement (Second) of Contracts, distinguishing between duress by physical compulsion which renders a contract void, and duress by improper threat which renders it voidable. It expands the definition of 'physical compulsion' to include not just physical manipulation but also threats of imminent, life-threatening harm. Because the threat against Caroline was not imminent at the time of signing, the mortgage was not void. The case is remanded to determine if the mortgage is voidable and, if so, whether Caroline ratified it. The court affirmed that EverBank was not a bona fide purchaser because it acquired the mortgage with notice of Caroline's duress defense, which she had already raised in court filings.

Analysis:

This decision formally adopts and clarifies the doctrine of duress in Vermont by embracing the Restatement (Second) of Contracts' distinction between void and voidable contracts. The court's key contribution is expanding the definition of void-creating duress beyond mere physical manipulation to include threats of imminent, severe bodily harm, aligning with the 'gun to the head' scenario. However, the ruling emphasizes that the imminence of the threat at the moment of assent is the critical factor. This holding provides a clearer framework for future cases, underscoring that while most improper threats make a contract voidable (subject to defenses like ratification or a bona fide purchaser), only the most extreme and immediate coercion renders an agreement a complete legal nullity.

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