Everbank, Successor by Assignment to Bank of America, N.A. , 200 Vt. 490 ( 2015 )

NOTICE: This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal
revision before publication in the Vermont Reports. Readers are requested to notify the Reporter
of Decisions by email at: JUD.Reporter@state.vt.us or by mail at: Vermont Supreme Court, 109
State Street, Montpelier, Vermont 05609-0801, of any errors in order that corrections may be
made before this opinion goes to press.
2015 VT 131No. 2014-301
EverBank, Successor by Assignment to Supreme Court
Bank of America, N.A.
On Appeal from
v. Superior Court, Addison Unit,
Civil Division
Gary Marini and Caroline Marini
February Term, 2015
Robert A. Mello, J.
Steven J. Kantor of Doremus Kantor & Zullo, Burlington, and Richard E. Briansky of
McCarter & English LLP, Boston, Massachusetts, for Plaintiff-Appellant.
Lisa Chalidze, Fair Haven, for Defendant-Appellee Caroline Marini.
Gary P. Marini, Pro Se, Middlebury, Defendant-Appellee.
PRESENT: Reiber, C.J., Dooley, Skoglund, Robinson and Eaton, JJ.
¶ 1. EATON, J. This appeal stems from a decision of the Addison Superior Court,
Civil Division, granting summary judgment in favor of defendant Caroline Marini on plaintiff
EverBank’s complaint for foreclosure on a mortgage that Caroline signed in 2009 together with
her co-defendant and then-husband Gary Marini.1 In ruling on cross-motions for summary
judgment, following a hearing, the trial court concluded that Caroline was entitled to judgment as
1
For ease of reference, we refer to the Marinis by their respective first names throughout
this opinion.
a matter of law on EverBank’s foreclosure complaint because the undisputed material facts
established that Caroline signed the mortgage under the threat of physical violence from Gary
and thus the mortgage was void as to her. The trial court also concluded that regardless of
whether the mortgage was void as to Caroline, EverBank was not a bona fide purchaser.
EverBank subsequently moved to alter or amend the judgment, pursuant to Vermont Rule of
Civil Procedure 59(e), on the ground that the grant of summary judgment as to Caroline unjustly
enriched her. The trial court denied the motion, explaining that EverBank had not raised the
issue of unjust enrichment in response to Caroline’s cross-motion for summary judgment.
EverBank appeals both decisions. We reverse the decision granting summary judgment in favor
of Caroline on the issue of whether the mortgage is void, and direct the trial court to enter
judgment for EverBank on that issue. We remand for trial the issues of whether the mortgage is
voidable and, if so, whether it is enforceable because it was ratified by Caroline, but affirm the
trial court’s decision that the bona fide purchaser doctrine is not available to EverBank. Further,
although we conclude that the trial court did not abuse its discretion in denying EverBank’s rule
59(e) motion, as a result of vacating the underlying judgment, we conclude that the matter is no
longer germane.
¶ 2. The record developed before the civil division reveals the following facts. In June
2005, Caroline and Gary Marini purchased a family home in the Town of Middlebury, secured
by a mortgage, and properly recorded the deed with the Middlebury town clerk’s office. Several
years later, in early 2009, Gary began contemplating borrowing money against the Middlebury
home. Caroline, however, believed that borrowing more money against their home was
“financially unhealthy” for their family, and opposed the idea.
2
¶ 3. Several months later, in early-March 2009, Caroline became aware that Gary had
been communicating with Quicken Loans Inc. about the possibility of additional loans. Caroline
contacted the person at Quicken with whom Gary had been communicating and informed him
that their “debt to income ratio was impossible and that another loan was not in [her] best
interest.” The Marinis did not secure a loan with Quicken.
¶ 4. Around the same time, Caroline and Gary spoke with an attorney about the
possibility of debt restructuring. Gary, however, was “adamantly opposed” to the idea of
bankruptcy, and following the meeting with the attorney, “was highly emotional and upset,” and
“expressed thoughts of suicide repeatedly over the following days and weeks.” At some point
thereafter, Gary told Caroline that he would mortgage the family home “whether [she] liked it or
not,” and regardless of whether she agreed.
¶ 5. Shortly thereafter, in mid-March 2009, Gary again sought to apply for an
additional loan, this time through LendingTree Loans. When Caroline found out that Gary was
once again attempting to secure a loan against the family home, she contacted LendingTree and
informed a loan officer there that 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 LendingTree loan
officer advised Caroline not to sign the mortgage documents, and stated that she would stop the
process if the mortgage was not in Caroline’s best interests. Notwithstanding these initial
conversations, the loan officer subsequently informed Caroline that the loan application had
already entered underwriting and that she was unable to stop it at that point.
¶ 6. Around April 3, 2009, Gary informed Caroline that a notary would come to the
house that weekend to witness her signature on the mortgage documents. Caroline told Gary that
she would not sign. On April 5, 2009, the LendingTree notary called the Marini household to
3
confirm the appointment. Caroline answered the call and told the notary that she disagreed with
the loan and that she would not sign. The LendingTree notary did not come to the Marini house.
¶ 7. In the evening of April 5, 2009, LendingTree sent Gary an email, informing him
that it had “just received confirmation from [its] notary service that [Caroline] has cancelled this
transaction. Please advise. Under VT state laws, she would have needed to sign documents as
well and she is refusing to at this point.” Upon receipt of the email, Gary became “extremely
angry.” Gary brought Caroline and two of their children, ages eight and nineteen, into the
kitchen and made them sit at the kitchen table while he berated Caroline, repeatedly stating that
she was not a competent adult, that the children were no longer to consider her an adult, and that
he was going to divorce her. Gary then removed a pair of large scissors from the knife drawer
and waved them back and forth while repeating that Caroline was incompetent. Caroline was
frightened for her and her children’s physical safety, and told Gary that she would sign the
mortgage documents if he would leave the children alone.
¶ 8. The following evening, a LendingTree notary came to the Marini home to witness
Caroline’s signature on the mortgage documentation. When the notary asked Caroline if her
signature was her free act and deed, she replied, “it is what it is.” At some point on that same
day, Gary also executed a note payable to the order of “Home Loan Center, Inc., dba
LendingTree Loans, a California Corporation” in the principal amount of $311,200.00. The
mortgage granted Mortgage Electronic Registration System, Inc. (MERS), as nominee for
LendingTree, a security interest in the Marini’s Middlebury home and was recorded with the
Middlebury town clerk’s office on April 15, 2009. Although Caroline signed the mortgage
paperwork, she did not sign the note; however, the mortgage names both Caroline and Gary as
“borrowers” with LendingTree as the “lender,” and MERS acting as the nominee for
4
LendingTree. A portion of these loan proceeds were used to refinance the existing debt on the
Marinis’ Middlebury home and discharge the underlying mortgage, approximately $40,000 went
to paying off some of Gary’s Bank of America credit card debt, and another portion stayed with
Gary in cash.
¶ 9. Almost immediately after the Marinis signed the loan and mortgage paperwork
with LendingTree in April 2009, LendingTree assigned the rights to both instruments to Bank of
America, N.A., successor by merger to Countrywide Home Loans, Inc. Around the end of
November 2009, Caroline became aware of the assignment, and contacted Bank of America in
an attempt to explain that she had “disagreed with the loan” and to “register [her] position that
the loan was not what [she] wanted and what they had done was wrong.” The representative
from Bank of America with whom she spoke informed her that only Gary was listed on the loan
documents and therefore the representative could not talk to Caroline about it.
¶ 10. Thereafter, around April or May 2011, the Marinis stopped making monthly
payments on the loan and defaulted. In anticipation of the impending foreclosure, MERS
assigned the mortgage to Bank of America, which initiated the foreclosure action in the Addison
Superior Court, Civil Division on December 3, 2012. On December 31, 2012, Caroline filed a
verified answer; Gary did not answer until May 13, 2013. In her verified answer, Caroline
asserted the affirmative defense of duress, contending that the mortgage was void as to her
because 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.” Additionally, Caroline
argued that the mortgage was voidable as to her, alleging duress 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.”
5
Caroline also filed a counterclaim, alleging that the loan had been “negligently underwritten and
secured, directly, proximately and foreseeably causing depletion of [Caroline’s] resources” and
that her financial woes had been exacerbated by this negligence.
¶ 11. On May 21, 2013, more than five months after Caroline answered, Bank of
America moved for summary judgment against Caroline, and judgment for foreclosure by sale.2
Bank of America’s motion for summary judgment did not address Caroline’s counterclaim or
affirmative defense of duress, nor did it indicate there were any factual disputes regarding
Caroline’s filings. In early July 2013,3 Caroline opposed Bank of America’s motion and cross-
moved for summary judgment in her favor, arguing that she was entitled to judgment as a matter
of law because the undisputed material facts showed that she signed the mortgage under the
threat of violence and thus it was void as to her. The trial court set the pending motions for
hearing on December 6, 2013. During this interval, Bank of America neither filed an opposition
to Caroline’s cross motion nor filed a statement of disputed material facts. On November 13,
2013, Bank of America moved to substitute EverBank as a party, as both the mortgage and the
note had been assigned to EverBank on July 15, 2013.
¶ 12. On December 6, 2013, the trial court held a hearing on the pending cross motions
for summary judgment, at which counsel for Bank of America, Caroline with her counsel, and
Gary appeared. At the start of the hearing, the trial court heard first from counsel for Bank of
America, who set forth that the bank was “simply seeking a judgment for foreclosure,” noting
2
On May 21, 2013, Bank of America also moved for default judgment against Gary;
however, because Gary had filed his answer on May 13, 2013, the trial court denied the motion
for default judgment. Thereafter, on July 1, 2013, Bank of America moved for summary
judgment against Gary, which the trial court granted in its May 5, 2014 decision and order. Gary
has not appealed that decision, and it is not before us on this appeal.
3
At a status conference on June 14, 2013, the trial court extended Caroline’s time to
respond to Bank of America’s motion for summary judgment.
6
that it had provided the requisite documentation and that there had been a default and no
payments for some time. Counsel for Caroline spoke next, setting forth her position that
Caroline signed the mortgage under duress from Gary and thus the mortgage was void as to her.
Counsel for Caroline and the trial court both 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.
Counsel for Caroline offered, however, to allow Bank of America additional time to respond to
her cross motion. When the trial court inquired with Gary whether he agreed with Caroline’s
recitation of the facts, he responded:
Yes. Quite frankly, I was very surprised that the notary accepted
it based on the statement of saying “it is what it is.” There was
clearly no desire to sign that mortgage. And, in all honesty, that
was probably the basis of our subsequent divorce over this issue.
You know, clearly, she was not a willing signer to this mortgage.
Upon the trial court inquiring as to whether Gary “forced her to sign” the mortgage documents,
the following exchange occurred:
[Gary]: I—yeah, I’m not a violent person, but I can’t speak for
how she perceived—I was very angry, you know, on what was
going on at the time.
[Judge]: So you forced her to sign it?
[Gary]: 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.
At this point, the trial court asked counsel for Bank of America what he wanted to do, to which
he responded that Gary’s statement was “obviously an interesting admission” and that he had
misunderstood Caroline’s filings to be simply an opposition to Bank of America’s motion for
summary judgment. With no objection from Caroline, the trial court granted Bank of America
additional time to respond. Thereafter, Bank of America filed its opposition in February 2014 to
which Caroline responded with a supplemental affidavit in support of her cross motion.
7
¶ 13. In an order dated May 5, 2014, the trial court granted Bank of America’s motion
to substitute EverBank as a party and granted Caroline’s cross motion for summary judgment.
The trial court concluded that the undisputed facts showed that Caroline had been subjected to
duress such that the mortgage was void and was therefore entitled to judgment as a matter of law.
The trial court also concluded that “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” for two reasons. First, EverBank had offered no evidence that the
mortgage had been ratified by Caroline. Second, EverBank was on constructive, if not actual
notice of Caroline’s duress claim, first raised in December 2012, when it acquired its interest in
the mortgage from Bank of America in July 2013 and therefore was not a bona fide purchaser
such that the recent assignment to EverBank would not preclude the defense of duress.
EverBank subsequently filed a Rule 59(e) motion to alter or amend, contending the trial court did
not consider the issue of unjust enrichment. The trial court denied the motion, noting that
EverBank had not raised the issue of unjust enrichment in response to Caroline’s filings and that
it would not “address issues not raised prior to the entry of judgment.” This appeal followed.
¶ 14. On appeal, EverBank raises four claims of error: (1) the trial court erred in
concluding that the mortgage was void as to Caroline because she was not physically compelled
to sign the mortgage documentation; (2) the trial court erred in concluding that Caroline could
avoid the mortgage even though she accepted its benefits; (3) the trial court erred in concluding
that the bona fide purchaser doctrine was not available to EverBank; and (4) the trial court
abused its discretion in denying EverBank’s Rule 59(e) motion to alter or amend the judgment.
¶ 15. “We review summary judgment rulings de novo, using the same standard as the
trial court.” Gauthier v. Keurig Green Mountain, Inc., 2015 VT 108, ¶ 14, ___ Vt. ___,
8
___ A.3d ___. “Summary judgment is appropriate only where, accepting the allegations of the
nonmoving party as true, there exist no genuine issues of material fact and the moving party is
entitled to judgment as a matter of law.” Farnham v. Inland Sea Resort Props., Inc., 2003 VT 23,
¶ 6, 175 Vt. 500, 824 A.2d 554 (mem.); see also V.R.C.P. 56(a). “In examining the record, the
nonmoving party receives the benefit of all reasonable doubts and inferences.” Gauthier,
2015 VT 108, ¶ 14 (quotation omitted).
¶ 16. We first address EverBank’s argument that the civil division erred in concluding
that the mortgage was void as to Caroline as a matter of law. Given our posture in reviewing a
decision on summary judgment, the question for our resolution is whether the undisputed
material facts, based on the record as developed before the civil division and with all reasonable
inferences and doubts resolved in favor of EverBank, compels a conclusion as a matter of law
that the mortgage was void as to Caroline. For the reasons that follow, we conclude they do not.
When considering the evidence in the light most favorable to Caroline, we conclude that
EverBank is entitled to judgment in its favor on the void-mortgage issue and that its motion for
summary judgment should have been granted to that extent.
¶ 17. Resolution of this question requires us first to examine the defense of duress to
the formation of a contract. “It is, of course, a basic tenet of the law of contracts that in any
agreement . . . there must be mutual manifestations of assent or a ‘meeting of the minds’ on all
essential particulars.” Evarts v. Forte, 135 Vt. 306, 309, 376 A.2d 766, 768 (1977); see
Restatement (Second) of Contracts § 17(1) (1981) (setting forth, in relevant part, basic principle
in contract law that “the formation of a contract requires a bargain in which there is a
manifestation of mutual assent to the exchange”). In other words, “[t]he parties must agree to the
same thing in the same sense.” Evarts, 135 Vt. at 309, 376 A.2d at 768.
9
¶ 18. Generally speaking, improper pressure during the bargaining process, i.e., duress,
operates to undermine a party’s manifestation of assent and thus undermines one of the
foundational cores of any agreement. See Restatement (Second) of Contracts ch. 7, topic 2,
intro. note; 28 Williston on Contracts § 71:8 (4th ed., 2015) (“Duress, like . . . other invalidating
causes, may completely prevent the mutual assent necessary for the formation of a contract . . . ,
or, as is more frequently the case, may be merely a ground for allowing the avoidance of a
bargain by its victim, whose expression of mutual assent was improperly obtained.”). The
specific question for our resolution on appeal is when that improper pressure is of such a quality
that it makes an agreement “void,” which is to say there effectively never was an agreement at
all, and when it makes an agreement merely “voidable,” which allows a victim of duress to
subsequently repudiate and thus avoid the consequences of the agreement. The distinction
between a “void” contract and a “voidable” contract is not simply a theoretical exercise; indeed,
it has important potential consequences because, “[f]or example, a victim of duress may be held
to have ratified the contract if it is voidable, but not if it is void” and “a good faith purchaser may
acquire good title to property if he takes it from one who obtained voidable title by duress but not
if he takes it from one who obtained void title by duress.” Restatement (Second) of Contracts
§ 174 cmt. b.
¶ 19. The parties agree, in essence, to this basic formulation—that duress can take two
forms and that the impact on the validity of the underlying agreement varies depending on which
applies. The parties also agree that duress by “physical compulsion” renders an agreement
“void.” The parties disagree, however, as to precisely what constitutes “physical compulsion.”
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, is there no true expression
10
of assent such that the purported agreement is void. Anything short of that, EverBank argues,
does not prevent the victim from forming actual intent to be bound to the agreement, albeit an
intent induced by improper means, although the circumstances of the agreement may create an
inequity such that the agreement is later voidable by the victim. To this end, EverBank appears
to concede that the civil division’s alternative conclusion was correct that, even if the mortgage
was not void, it was voidable by Caroline.
¶ 20. Caroline argues that EverBank’s formulation of “physical compulsion” is
underinclusive. She asserts that in addition to “actual physical compulsion,” i.e., manually
forcing the victim to sign, 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, is sufficient to render an agreement void from the start.
See United States ex rel. Trane Co. v. Bond, 586 A.2d 734, 740 (Md. 1991) (finding in addition
to physical force, duress sufficient to render contract void consists of “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.”). To
that end, Caroline suggests that the lethal force inherent in items such as guns, knives, scissors,
baseball bats, fireplace pokers, or poison darts are all “sufficient to render the frightened victim
‘a mere mechanical instrument’ ” and thus render a contract void for lack of mutual assent.
¶ 21. This Court has not yet been called upon to define the precise parameters of the
defense of duress. The closest we came was in Quazzo v. Quazzo, 136 Vt. 107, 386 A.2d 638(1978). In that case, the facts of which are similar to the case at bar, the trial court found that
because the wife had signed a note and a mortgage due to her husband’s threats, conduct, and
misrepresentations, she had executed the documents under duress and the documents were
11
therefore unenforceable. Id. at 113, 386 A.2d at 642. The opinion in Quazzo, however, sheds
little light on the distinction between void and voidable agreements because the Quazzo Court
expressly noted it did not need to reach the issue because the party seeking to enforce the
documents against the wife was not a holder in due course. Therefore, the defense of duress was
not cut off even if the alleged conduct was found to be merely voidable. Id. at 112-13, 386 A.2d
at 641. The only question for the Quazzo Court’s review was whether the trial court’s finding of
duress was supported by the evidence. On examination of the record, the Court concluded that it
was because the husband had threatened to “drop [his wife] out the window, to smash her face,
and to terminate the marriage” unless she signed the documents and that only “after a weekend
of this constant haranguing and in an effort solely to preserve [their] marriage for [their]
children’s sake” did the wife sign. Id. at 113, 386 A.2d at 642 (quotation omitted). Because the
finding of duress was not clearly erroneous, the Court affirmed it, noting “it is clearly duress, as
a wrongful act compelling assent to a transaction without the volition of the actor.” Id. at 113-
14, 386 A.2d at 642 (citing Restatement (First) of Contracts § 492(a) (1932)).
¶ 22. Since our decision in Quazzo in 1978, the second edition of the Restatement of
Contracts was published in 1981. The Restatement (Second) of Contracts, chapter 7, topic 2,
addresses the concept of “duress and undue influence” and discusses at length the two forms of
duress noted above—duress by physical compulsion, which renders an agreement void, see id.
§ 174, and duress by improper threat, which results in an agreement that is voidable by the
victim, see id. §§ 175, 176. The introductory note explains the basic distinction between the two
as follows:
In one, a person physically compels conduct that appears to be a
manifestation of assent by a party who has no intention of
engaging in that conduct. The result of this type of duress is that
the conduct is not effective to create a contract. In the other, a
12
person makes an improper threat that induces a party who has no
reasonable alternative to manifesting his assent. The result of this
type of duress is that the contract that is created is voidable by the
victim. This latter type of duress is in practice the more common
and more important.
Id. ch. 7, topic 2, intro. note.
¶ 23. As to duress by physical compulsion, the Restatement provides the general
formulation: “If conduct that appears to be a manifestation of assent by a party who does not
intend to engage in that conduct is physically compelled by duress, the conduct is not effective as
a manifestation of assent.” Id. § 174. In other words, this section
involves an application of [the principle that a party’s conduct is
not effective as a manifestation of the party’s assent if the party
does not intend to engage in it] to those relatively rare situations in
which actual physical force has been used to compel a party to
appear to assent to a contract.
Id. cmt. a (emphasis added). “The essence of this type of duress is that a party is compelled by
physical force to do an act” that the party has no intention of doing; the party is therefore “a mere
mechanical instrument” with the result being that “there is no contract at all, or a ‘void contract’
as distinguished from a voidable one.” Id. The following illustration is provided:
1. A presents to B, who is physically weaker than A, a written
contract prepared for B’s signature and demands that B sign it. B
refuses. A grasps B’s hand and compels B by physical force to
write his name. B’s signature is not effective as a manifestation of
his assent, and there is no contract.
Id. cmt. a, illus. 1.
¶ 24. As to duress by improper threat, the Restatement provides a two-prong test: “[i]f a
party’s manifestation of assent is induced by an improper threat by the other party that leaves the
victim no reasonable alternative, the contract is voidable by the victim.” Id. § 175(1). Thus,
there must be both an inducement by an “improper threat” and the victim must have no
“reasonable alternative” but to succumb. A threat is improper if “what is threatened is a crime or
13
a tort.” Id. § 176(1)(a); id. cmt. b (“A threat is improper if the threatened act is a crime or a tort,
as in the traditional examples of threats of physical violence and of wrongful seizure or retention
of goods. Where physical violence is threatened, it need not be to the recipient of the threat, nor
even to a person related to him, if the threat in fact induces the recipient to manifest his assent.”).
Such a threat “may be expressed in words or it may be inferred from words or other conduct.
Past events often import a threat.” Id. § 175 cmt. a. Improper threats do not constitute duress,
however, “if the victim has a reasonable alternative to succumbing and fails to take advantage of
it.” Id. cmt. b. This standard does not require that “the threat must arouse such fear as precludes
a party from exercising free will and judgment or that it must be such as would induce assent on
the part of a brave man or a man of ordinary firmness”; rather, “[t]he rule stated in this Section
omits any such requirement because of its vagueness and impracticability” and “[i]t is enough if
the threat actually induces assent on the part of one who has no reasonable alternative.” Id.
“The standard is a practical one under which account must be taken of the exigencies in which
the victim finds himself.” Id. The Restatement provides the following relevant illustrations:
1. A is a good faith purchaser for value of a valuable painting
stolen from B. When B demands the return of the painting, A
threatens to poison B unless he releases all rights to the painting
for $1,000. B, having no reasonable alternative, is induced by A’s
threat to sign the release, and A pays him $1,000. The threatened
act is both a crime and a tort, and the release is voidable by B.
2. A threatens B that he will kill C, an employee of B, unless B
makes a contract to sell A a tract of land that B owns. B, having
no reasonable alternative, is induced by A’s threat to make the
contract. The threatened act is both a crime and a tort, and the
contract is voidable by B.
Id. § 176, cmt. B, illus. 1, 2.
¶ 25. In sum, under the Restatement, the fundamental distinction between the two
varieties of improper conduct hinges on whether an actual manifestation of assent to enter a
14
binding agreement existed at the time the victim signed or entered the agreement. Both varieties
recognize that the manifestation of assent is flawed, but in the “voidable” context, the assent
itself is compelled by circumstances that remove any reasonable alternative; in the “void”
situation, there is but a shell of a manifestation of assent to enter an agreement as the victim was
the conduit through which the hand of the wrongdoer acted. We generally agree with these
distinctions and this approach. We have often relied upon and adopted various provisions within
the Restatement (Second) of Contracts, see, e.g., Record v. Kempe, 2007 VT 39, ¶¶ 15-20,
182 Vt. 17, 928 A.2d 1199; LoPresti v. Rutland Reg’l Health Servs., Inc., 2004 VT 105, ¶¶ 35-
36, 177 Vt. 316, 865 A.2d 1102; Remes v. Nordic Grp., Inc., 169 Vt. 37, 41, 726 A.2d 77, 80
(1999), and we do so again here. We agree that the Restatement (Second) of Contracts sets out
an appropriate general framework to differentiate between the two varieties of improper conduct
and their attendant impacts on and consequences for the bargaining process and, except as is
discussed below with respect to physical compulsion, we adopt the legal standards of duress as
set forth in §§ 174-176.4 Thus, in general, where one party is but a conduit through which an
4
Numerous other states have also either relied upon or expressly adopted the legal
standards of duress as set forth in the Restatement (Second) of Contracts. See, e.g., Int’l Paper
Co. v. Whilden, 469 So. 2d 560, 562-63 (Ala. 1985) (relying upon Restatement (Second) of
Contracts in discussion of what constitutes “economic duress”); Vail/Arrowhead, Inc. v. Dist. Ct.
for Fifth Judicial Dist., Eagle Cnty., 954 P.2d 608, 612-13 (Colo. 1998) (en banc) (expressly
adopting relevant portions of Restatement (Second) of Contracts in analyzing “whether a
unilateral act such as a disclaimer of interest is voidable on the grounds of duress”); Balogh v.
Balogh, 332 P.3d 631, 646 (Haw. 2014) (“It is well established that an agreement is voidable due
to duress when a party’s manifestation of assent is induced by an improper threat by the other
party that leaves the victim no reasonable alternative.” (quotation omitted)); City of Asbury v.
Iowa City Dev. Bd., 723 N.W.2d 188, 200 (Iowa 2006) (“We follow the Restatement’s rule
concerning the effect of duress on the enforceability of a contract . . . .”); Trane, 586 A.2d at
738-40 (adopting Restatement (Second) of Contracts § 174 as to what renders agreement void,
but modified such that “duress sufficient to render a contract void consists of the actual
application of physical force that is sufficient to, and does, cause the person unwillingly to
execute the document; as well as 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,
15
individual physically compels a victim to appear to manifest assent, one of the fundamental
pillars of contract formation is fatally flawed and the agreement is void. On the other hand,
where a party’s manifestation of assent is unwillingly made but is induced by improper means
without the victim having a reasonable means of avoidance, the agreement is subsequently
voidable by the victim.
¶ 26. But this does not end our inquiry as it does not address whether the meaning of
“physical compulsion” encompasses the sort of conduct Caroline argues that it should. As is
clear from the above, the Restatement draws a seemingly clear line between a person manually
manipulating a victim to appear to endorse an agreement and a person cajoling a victim through
tortious or criminal behavior to actually endorse the same. What the Restatement does not
explicitly address is the sort of immediately present lethal tortious or criminal behavior that
Caroline argues effectively creates the same result as a situation involving the manual
manipulation of a victim’s hand. That is, according to Caroline, there is no meaningful
distinction between a person with a gun to her head or a knife to her throat and a person of
weaker physical ability who has her hand physically manipulated by a stronger person. To the
extent that the Restatement does address this sort of potentially lethal conduct, it appears to
consider it within the realm of conduct that would render an agreement voidable, but not void.
See Restatement (Second) of Contracts § 176 cmt. b illus. 2.
¶ 27. In Trane, the case cited by both the trial court and Caroline in support of the
conclusion that Gary’s actions resulted in a void contract as a matter of law, the Maryland Court
of Appeals adopted, in part, the Restatement (Second) of Contracts’ formulation of the defense
serious personal injury, or actual imprisonment”); Andreini v. Hultgren, 860 P.2d 916, 920-21
(Utah 1993) (expressly adopting Restatement (Second) of Contracts’ standards of duress).
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of duress. The court concluded, nonetheless, after a review of relevant Maryland case law on the
question presented, that under Maryland law:
[A] contract may be held void where, in addition to actual physical
compulsion, a threat of imminent physical violence is exerted upon
the victim of such magnitude as to cause a reasonable person, in
the circumstances, to fear loss of life, or serious physical injury, or
actual imprisonment for refusal to sign the document. In other
words, duress sufficient to render a contract void consists of the
actual application of physical force that is sufficient to, and does,
cause the person unwillingly to execute the document; as well as
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.
Trane, 586 A.2d at 740. Other commentators have noted that situations involving the immediate
application of lethal force, such as the proverbial gun to the head, have no meaningful distinction
from a situation where a stronger individual grabs a victim’s hand and physically compels the
victim to appear to manifest assent. As is explained in Williston on Contracts, in discussing the
sort of improper behavior that would render a contract void under the Restatement (Second) of
Contracts:
A similar outcome should occur where the physical force or
compulsion is somewhat more remote, though no less compelling,
as where the victim is forced to sign a document reflecting a
bargain at gunpoint; here, too, although the act appears to be that
of the victim, it is no more voluntary or intentional than where the
coercing party actually manipulates the victim’s arm.
28 Williston on Contracts, supra, § 71:1. We agree with this reasoning. Thus, we conclude that
in addition to “actual physical compulsion” as discussed in the Restatement, i.e., grabbing the
hand of the victim and forcing the victim to appear to manifest assent, a contract may also be
held void where “a threat of imminent physical violence is exerted upon the victim of such
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magnitude as to cause a reasonable person, in the circumstances, to fear loss of life, or serious
physical injury . . . for refusal to sign the document.” Trane, 586 A.2d at 740.5
¶ 28. We therefore conclude that under Vermont law, improper conduct sufficient to
render a contract void, as opposed to voidable, consists of the actual application of physical force
that is sufficient to, and does, cause a victim to appear to assent to the execution of a document,
as well as the 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.
In the absence of the application of physical force, it is the immediacy of the threat of the
application of the significant physical force which leaves the signer with no reasonable choice
except to sign the document. We recognize, of course, that there is an overlap between what the
Restatement deems to be conduct rendering an agreement voidable and conduct that we hold
today renders a contract void. “Necessarily, the determination of duress is dependent upon the
circumstances of each individual case,” id., and we have no doubt that our courts are capable of
distinguishing between the varieties of improper conduct.
¶ 29. In this case, the undisputed facts before the trial court on the parties’ cross
motions for summary judgment reveal that, leading up to Caroline’s signing of the mortgage,
Gary and Caroline’s financial situation had been tenuous, and it was taking a tremendous toll on
them individually and as a couple. Gary had made repeated attempts at securing a loan, mostly
arranged without Caroline’s involvement or knowledge, and Caroline, upon discovery, had
routinely thwarted his attempts by, for example, contacting would-be lenders directly to get them
to stop the loans and by telling the notary from LendingTree not to come. Gary had also
5
Because it was not argued nor briefed, and it is unnecessary for resolution of the instant
appeal, we do not address the other situation discussed in Trane, that of fear of “actual
imprisonment.”
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threatened to mortgage the family home “whether [Caroline] liked it or not,” and regardless of
whether she agreed. Finally, on the evening prior to Caroline signing the mortgage paperwork,
and after Caroline had again intervened to stop Gary’s attempt at securing a loan, Gary had
brought Caroline and their two children into the kitchen and made them sit at the kitchen table
while he berated Caroline, repeatedly stating that she was not a competent adult, that the children
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. This scared Caroline and, in an attempt to protect her children, she
told Gary that she would sign the mortgage documents if he would leave the children alone,
which she did the following day in front of a notary public.
¶ 30. Even under this expanded definition of “physical compulsion,” the mortgage is
not void as to Caroline as a matter of law. Nothing in the record indicates, nor does Caroline
argue, that Gary overpowered Caroline and manually manipulated her hand to appear to assent.
Nor does the record reveal any evidence of 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 facts
present a tense situation the night prior to Caroline signing, Gary’s conduct in waving the
scissors and threatening to divorce Caroline if she would not sign, while obviously threatening
and dangerous to some degree at the time of the conduct, was removed in time and context from
Caroline’s signing of the mortgage paperwork itself the next day in front of an independent
person. Accordingly, the civil division erred in concluding that the undisputed material facts
compelled the conclusion that the mortgage was void as a matter of law as to Caroline. We
therefore reverse the trial court’s decision that the mortgage was void.
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¶ 31. Although EverBank appears to accept that the record establishes that Gary’s
conduct around the time Caroline signed the mortgage renders the mortgage voidable, and thus
argues that the civil division erred in its ratification analysis, our review of the record leads us to
a different conclusion. For summary judgment purposes, the record is insufficient to compel a
conclusion as a matter of law that the mortgage was voidable by Caroline for improper threat.
As noted above, to constitute improper conduct such that an agreement can be held voidable,
there must be both an inducement by an “improper threat” and the victim must have no
“reasonable alternative” but to succumb. In this case, even though Gary’s scissor waving the
night prior to Caroline signing the mortgage constitutes an improper threat as contemplated by
the Restatement, see Restatement (Second) of Contracts § 176 (defining “when a threat is
improper”), the record is devoid of any evidence that Caroline was without a reasonable
alternative but to succumb. In this case, the improper threat occurred the night before Caroline
actually signed her name to the mortgage document, and there is 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. Construing the
record in favor of EverBank as we must, see Gauthier, 2015 VT 108, ¶ 14 (stating that
nonmoving party receives benefit of all reasonable doubts and inferences), we cannot conclude
that the undisputed facts establish as a matter of law that Caroline was subjected to an improper
threat for which she had no reasonable alternative but to succumb. We therefore remand the
matter of whether the mortgage is voidable to the trial court. See Lakeside Equip. Corp. v. Town
of Chester, 173 Vt. 317, 326, 795 A.2d 1174, 1182 (2002) (reversing and remanding superior
court’s decision on summary judgment based on finding of insufficient evidence).
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¶ 32. EverBank argues that ratification or their status as a bona fide purchaser defeat
Caroline’s duress claim, should she succeed in showing that the mortgage is voidable. As to the
former, EverBank argues that Caroline cannot avoid the mortgage after ratification by accepting
its benefits, but the summary judgment is insufficient for us to determine this issue. As noted by
the trial court, it is EverBank as the proponent of the issue of ratification that bears the burden of
its proof. Adams v. Barcomb, 125 Vt. 380, 383, 216 A.2d 648, 650 (1966) (“The burden of
proof was upon the defendant to prove a subsequent ratification by the plaintiff of the original
transaction.”). EverBank moved for summary judgment solely on the basis of non-payment;
neither its motion nor its supporting material addressed ratification. EverBank points to
Caroline’s failure to address ratification, but she moved for summary judgment solely that the
mortgage was void, and did not address whether it was voidable. Thus, neither motion for
summary judgment addressed ratification, and it was not before the trial court. For this reason,
we also remand for further evidence on the issue of ratification and for a determination of
whether ratification defeats Caroline’s duress claim, should she show that the mortgage is
voidable.
¶ 33. Second, whether Caroline can avoid a voidable mortgage against a bona fide
purchaser depends on whether EverBank is, in fact, a bona fide purchaser. It is undisputed that
EverBank acquired its interest in the mortgage in July 2013, seven months after Caroline raised
the duress claim in her December 2012 answer. EverBank cannot now argue that was a bona
fide purchaser when it had constructive, if not actual, notice of this defect. See 9A V.S.A. § 3-
305(a)(1) (holder of a negotiable instrument is not “holder in due course” where holder took
instrument with notice that party had duress defense); cf. Julian v. Buonassissi, 997 A.2d 104,
118 (Md. 2010) (“A bona fide purchaser, in the case of a foreclosure sale, is a purchaser who
21
takes the property without notice of defects in the foreclosure sale.” (quotations omitted)). We
affirm the trial court’s conclusion that the bona-fide-purchaser doctrine is not available to
EverBank should Caroline prove her duress claim.
¶ 34. Finally, we address EverBank’s argument that the trial court abused its discretion
in refusing to consider the equitable arguments raised for the first time in EverBank’s Rule 59(e)
motion. Rule 59(e) gives the trial court broad power to reconsider issues previously before it. In
re Robinson/Keir P’ship, 154 Vt. 50, 54, 573 A.2d 1188, 1190 (1990) (quotation omitted). It
was therefore within the trial court’s discretion to deny consideration of discrete issues not raised
prior to entry of judgment. See No. Sec. Ins. Co. v. Mitec Elect., Ltd., 2008 VT 96, ¶ 44, 184 Vt.
303, 965 A.2d 447 (denying Rule 59(e) motion involving additional claim for relief that could
have been raised prior to entry of judgment but were not). Regardless of this finding, because
the trial court’s judgment has been vacated, its decision on the Rule 59(e) motion, while within
its discretion when made, is no longer germane. EverBank may raise the arguments it previously
sought to raise in the Rule 59 motion if the trial court permits an amended answer pursuant to
Rule 15(a) on remand.
The civil division’s decision on summary judgment in favor of Caroline Marini as to
whether the mortgage is void is reversed and vacated; judgment on the matter shall issue to
EverBank. Whether the mortgage is voidable and whether Caroline ratified the mortgage are
remanded for further proceedings consistent with this opinion. The civil division’s decision as to
whether the bona fide purchaser doctrine is available to EverBank is affirmed.
FOR THE COURT:
Associate Justice
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