Physical Threats in Contract Signing Do Not Necessarily Make Contract Void as a Matter of Law

In EverBank v. Marini and Marini, 2015 VT 131 (October 16, 2015), the Vermont Supreme Court clarified that non-imminent threats of violence in order to coerce someone to sign a contract do not necessarily make the contract void as a matter of law.

Issue: Defendant husband applied for a loan with a mortgage on the marital home, over co-defendant wife’s objections and numerous statements that she would refuse to sign the mortgage paperwork. The evening before the signing was to occur, husband became very angry and threatened wife and children with scissors, so wife agreed to sign paperwork the next day. When husband defaulted and bank tried to foreclose, wife asserted defense of duress. Subsequently, another bank, Plaintiff, bought an interest in the mortgage. Trial court found that wife was entitled to judgment as a matter of law on foreclosure complaint because the threat of physical violence rendered the mortgage void as to her. Plaintiff appealed, and also appealed denial of its motion to reconsider.

Holding: The Court engaged in a lengthy analysis of the contractual defense of duress, in which it examined the difference between contracts that are void due to physical compulsion (a person physically manipulating another person’s limbs, or making them sign under the threat of imminent bodily harm) and those that are merely voidable because the signature was obtained by improper threat. Ultimately, the Court reversed the trial court’s grant of summary judgment to wife because it found that the threat was not imminent at the time she signed the mortgage documents, so she was not subject to physical compulsion, and the contract was not void as a matter of law. It remanded for a determination of whether the contract was voidable, and whether wife ratified the contract so as to negate her duress defense. It also found that, if wife were successful in proving duress, since Plaintiff bank could not avail itself of the bona fide purchaser doctrine because it bought the mortgage several months after wife had asserted her claim of duress. Finally, the Court held that the trial court did not abuse its discretion in denying Plaintiff’s motion to reconsider, but that in light of its vacating the lower court’s judgment, Plaintiff could be permitted to re-raise its arguments on remand.