Mortgages. SCOVT has no jurisdiction over appeal from dismissal of collateral attack on final judgment of foreclosure.

Billewicz v. Estate of Fanelli, No. 2017-028 (Vt. Mar. 1, 2017) (mem.) 

Pursuant to stipulation, the superior court issued a judgment order and decree of foreclosure. More than one year after issuance of a writ of possession, plaintiff filed a complaint alleging that the defendant had fraudulently mispresented the fair market value of the property. The court entered summary judgment in favor of defendant, noting the foreclosure judgment was final, that plaintiff had failed to follow the procedures for appealing the judgment pursuant to V.R.C.P. 80.1(m), and that nothing in the complaint showed that plaintiff could not have challenged the earlier stipulated value during the foreclosure proceedings. We dismiss plaintiff’s appeal.

A request for relief pursuant to V.R.C.P. 60(b) cannot be used to circumvent the strong legislative policy favoring finality of foreclosure judgments. Woodbine Condo. Ass'n v. Lowe, 174 Vt. 457, 458 (2002) (mem.) Although structured as a collateral action, plaintiff's complaint is essentially a request for relief from the foreclosure judgment pursuant to Rule 60(b). Therefore the appeal must be dismissed for lack of jurisdiction.

SCOVT NOTE. The strong legislative policy favoring the finality of foreclosure judgments: See V.R.C.P. 80.1(m). (a party seeking to appeal a foreclosure judgment must seek permission to appeal within ten days "of the date of the entry of the judgment or order to be appealed from."); Mortg. Lenders Network, USA v. Sensenich, 2004 VT 107, ¶ 7, 177 Vt. 592, 873 A.2d 892 (mem.).( a foreclosure decree is a final judgment even if a right to redeem exists, and even if further proceedings ancillary to the foreclosure itself are contemplated.);Woodbine Condo. Ass'n v. Lowe, 174 Vt. 457, 458, 806 A.2d 1001, 1003 (2002) (mem.) (Rule 60(b) cannot be used to circumvent requirement of seeking permission to appeal foreclosure decree);.Citibank, N.A. v. Groshens, 171 Vt. 639, 640, 768 A.2d 1272, 1273 (2000) (mem.) (dismissing appeal from court's denial of motion to reopen foreclosure judgment because of legislative policy promoting finality of foreclosure judgments).

Foreclosure. Duress does not void mortgage unless it was signed under immediate threat of imminent physical harm, but mortgage may be voidable if, as a result of improper threat, signor had “no reasonable alternative.” Defense is available against assignee of mortgagge with constructive notice.

EverBank v. Marini, 2015 VT 131 [filed 10/16/2015]

EATON, J. This is an appeal from an order granting summary judgment in favor of defendant Caroline Marini on plaintiff EverBank’s complaint for foreclosure on grounds Caroline signed mortgage under the threat of physical violence. On appeal, EverBank argues 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, and that the trial court erred in concluding that the bona fide purchaser doctrine was not available to EverBank. We reverse 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. 

There are two forms of duress —duress by physical compulsion, which renders an agreement void, and duress by improper threat, which results in an agreement that is voidable by the victim. Under Vermont law, improper conduct sufficient to render a contract void, as opposed to voidable, must consist of either 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, or 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.

On the evening prior to Caroline signing the mortgage paperwork, Gary removed a pair of large scissors from the knife drawer and waved them back and forth. 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. When the notary asked Caroline if her signature was her free act and deed, she replied, “it is what it is.”

Nothing in the record reveals 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 in front of an independent person. Accordingly,we reverse the trial court’s decision that the mortgage was void. 

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. Construing the record in favor of EverBank as we must we also conclude that the undisputed facts do not establish as a matter of law that Caroline was without a reasonable alternative.  We therefore remand the matter of whether the mortgage is voidable to the trial court.

The trial court also concluded that EverBank was not a bona fide purchaser. We agree. It is undisputed that EverBank acquired its interest in the mortgage seven months after Caroline raised the duress claim in her 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). We affirm the trial court’s conclusion and he that the bona-fide-purchaser doctrine is not available to EverBank should Caroline prove her duress claim. 

Homestead rights. Moving into husband-owned vacation home and filing for divorce did not give wife a “homestead” that precluded husband from refinancing mortgage.

Brattleboro Savings and Loan Association v. Hardie, 2014 VT 26 (21-Mar-2014)

DOOLEY, J. Plaintiff Brattleboro Savings and Loan Association appeals a superior court decision ruling that Mangini holds title to a property, free and clear of a mortgage to plaintiff. The superior court ruled that the mortgage was inoperative because Mangini’s husband, defendant Richard Hardie, mortgaged the property without the participation of Mangini in violation of 27 V.S.A. § 141(a). We reverse.

“A homestead or an interest therein shall not be conveyed by the owner thereof, if married, except by way of mortgage for the purchase money thereof given at the time of such purchase, unless the wife or husband joins in the execution ” 27 V.S.A. § 141(a).  The parties agree that § 141(a) would apply only if Mangini had a homestead exemption at the time that the new mortgage was created.

In 2002, Hardie borrowed $209,000 from Brattleboro Savings in order to purchase a vacation home. Hardie was married to Mangini at the time, but was the sole owner of the property, and Mangini did not sign either the promissory note or the mortgage. In April 2007, Mangini left the couple’s New Jersey home and moved into the vacation home. In February 2008, Mangini filed for divorce and claimed that the property had become her primary residence as of May 2007. The family court’s interim domestic order forbade either spouse to “remove, sell, assign, transfer, dispose of, lend, dissipate, mortgage or encumber any marital property. In April 2008, while Mangini was occupying the property and the divorce was pending, Hardie refinanced the mortgage on the property. The 2008 refinancing was completed without Mangini’s participation.

In January 2011, Brattleboro Savings commenced a foreclosure action on the property, naming only Hardie as a defendant. Mangini filed an answer asserting an affirmative defense that she had established a homestead interest in the property prior to the 2008 mortgage, and that therefore the 2008 mortgage was “inoperative to convey” her homestead interest. The court granted summary judgment in favor of Mangini, declaring the entire 2008 mortgage on the property unenforceable against Mangini.

The court reasoned that Mangini acquired an equitable interest in the property when she filed for divorce, thus fulfilling the dual requirement for establishing a homestead interest—occupancy and equitable title—as set out in Soter, 26 B.R. at 841 (holding that equitable or legal title is required to establish homestead exemption)

The issue is whether Mangini had an sufficient “equitable interest” at the time of the refinancing because the family court exercised jurisdiction over all of the marital property and she stood to be awarded any or all of it, regardless of which of the spouses held legal title.

We agree with Brattleboro Savings that Mangini did not acquire equitable title to the property by filing for divorce. Because Mangini did not acquire equitable title, she is not entitled to a homestead exemption from the 2008 mortgage, and the security created by the 2008 mortgage is valid against her.

27 V.S.A. § 101 requires that the property claimed as a homestead must be “owned” by the person claiming the exemption, and our precedents recognizing equitable-title interests must be viewed in that context. Equitable title is defined as “title that indicates a beneficial interest in property and that gives the holder the right to acquire formal legal title.” This is a rigorous definition—one that requires not just a possibility of acquiring title, but a concrete right. The jurisdictional statute on which the court relied, s 15 V.S.A. § 751, does not establish title or ownership in either party to a divorce. Its purpose is to give the court jurisdiction over all the property of the parties. Section 751 did not give Mangini equitable title to the property. Nor do we find that the family court’s injunction give either party a right to any item of property.

The trial court should have granted Brattleboro Savings’s motion for summary judgment with respect to Mangini’s claim of a homestead exemption, and denied Mangini’s motion.

BURGESS, J., concurring. I concur with the majority’s mandate as well as its underlying reasoning, but I also concur with Judge Bent’s opinion as an alternative basis for reversing the superior court summary judgment decisions.

BENT, Supr., J., Specially Assigned, concurring. I concur with the majority’s mandate because Mangini cannot rely upon 27 V.S.A. § 141(a) to avoid an existing mortgage that merely refinanced a debt on the homestead that existed before she established the homestead. I am concerned, however, with the implication in the majority’s opinion that spouses generally may not rely upon § 141(a) to avoid the consequences of a unilateral spousal conveyance unless they can prove an equitable interest equivalent to a contractual right to marital property owned solely by the conveying spouse. I believe that a more fundamental basis for rejecting Mangini’s reliance upon § 141(a) in the present circumstances is simply that the 2008 mortgage did not increase the debt existing at the time Mangini established a homestead in the Vermont property and thus may not be deemed inoperative under § 141(a).

Mortgage assignment, pooling and servicing agreement; standing. Consumer protection: no standing to sue where alleged deceptive act did not induce purchase, and no showing of injury or damages / declaratory judgment not an available private remedy.

Dernier v. Mortgage Network, Inc., 2013 VT 96 (18-Oct-2013)

 DOOLEY, J.   Plaintiffs Peter and Nicole Dernier appeal the dismissal for failure to state a claim, of their action for (1) a declaratory judgment that defendant U.S. Bank National Association cannot enforce the mortgage and promissory note for the debt associated with plaintiffs’ purchase of their house based on irregularities and fraud in the transfer of both instruments, (2) a declaration that U.S. Bank has violated Vermont’s Consumer Fraud Act (CFA) by asserting its right to enforce the mortgage and note, and (3) attorney’s fees and costs under the CFA.   We affirm in part and reverse in part.

We hold that plaintiffs do not have standing to challenge the assignments of the note and mortgage based on the perceived violations of the pooling and servicing agreement (PSA) governing the pool into which the mortgage had been assigned, because any such violations would render the assignments voidable rather than void. However the complaint also alleges that the note was fraudulently acquired by defendant, based on a fraudulent endorsement with a forged endorsement signature, that was created by defendant.  These allegations are sufficient to give plaintiffs standing.  The court erred in dismissing Counts 1 and 2 of the amended complaint for lack of standing, to the extent that these counts alleged irregularities in the transfer of the note and mortgage unconnected to the pooling and servicing agreement.

Next, we turn to plaintiffs’ consumer fraud claim.   Here, plaintiffs allege that the violation was based on the letter under which defendant stated its legal position that, as a holder of the note and mortgage, it had the right to enforce. The section of the statute providing for a private right of action is § 2461(b), which requires a “consumer” to show either (1) reliance on a deceptive act in contracting for goods or services or (2) damages or injury from an unfair or deceptive act.  If a plaintiff, in bringing a consumer fraud action, either fails to allege facts that meet the definitions of an unfair or deceptive act under 9 V.S.A. § 2453 or fails to demonstrate the prerequisites to a private action, as we have itemized above under 9 V.S.A. § 2461(b), the case is properly dismissed.    We focus on the prerequisites for a private action under 9 V.S.A. § 2461(b), and find that plaintiffs do not meet these requirements,.  Specifically, we look at the second prong of § 2461(b), because plaintiffs cannot have relied on this letter to contract for goods or services, as it was sent long after the purchase.  Our only question thus becomes: assuming that defendant’s statement regarding its belief that it had the right to enforce the mortgage and note was indeed deceptive, did plaintiffs suffer damages or injury from this act?   Plaintiffs do not offer an explanation as to what injury or damages the letter caused, as they do not address the requirements of § 2461(b) at all.  Indeed, the complaint seeks neither damages nor an injunction, the remedies authorized by § 2461(b).  Instead it seeks a declaratory judgment that defendant “violated Vermont Consumer Fraud Law.”  We read the complaint as seeking a declaratory judgment that defendant violated § 2453, without having to prove entitlement to a private remedy under § 2461(b).     Plaintiffs have not established an injury for the purposes of standing under 9 V.S.A. § 2461(b).  

Affirmed as to dismissal of Counts 3 and 4 of plaintiffs’ proposed amended complaint; Reversed and remanded with respect to dismissal of Counts 1 and 2 of plaintiffs’ proposed amended complaint for further proceedings not inconsistent with this decision

Real estate agreement was contract for deed, not lease option. Though a contract for deed is treated as a mortgage, foreclosure remedy is not available under Rule 54(c) without notice, and appeal is not barred by Rule 80.1(m) requiring permission.

Prue v. Royer, 2013 VT 12 (Dooley, J.) 

The parties in this case entered into a real estate agreement which the trial court held to be contract for deed giving the purchasers an equitable interest in the property in question. The court initiated a foreclosure on that interest, even though it had not been pled. Plaintiffs, the purchasers as found by the trial court, appeal from the foreclosure. Defendant, the seller as found by the court, appeals from the court’s conclusions that the contract was an enforceable contract for deed. We affirm the trial court’s rulings that the agreement was a contract for deed, that its modifications were enforceable under the Statute of Frauds, that plaintiffs had an equitable interest in the property, and that they did not abandon that interest. We also hold that this matter is properly before us, despite noncompliance with 12 V.S.A. § 4601, and affirm the conditional award for damages for waste. Because the court’s foreclosure ruling awarded a remedy that was not pled or fully litigated, however, we reverse the foreclosure decree as premature and remand for a new foreclosure proceeding.

This case arises out of the lack of clarity in the parties’ agreements. The primary agreement is completed on a realtor pre-printed contract entitled “Purchase and Sale Contract,” but “Lease-Option to Purchase” is handwritten below that title. A separate page is entitled “Financing Property Agreement.” Plaintiffs characterized the agreement as a contract for deed, such that they acquired equitable title subject to a mortgage. Defendant, in contrast, characterized the agreement as a lease-option contract, such that plaintiffs were only leaseholders until they paid the purchase price.

Unlike a contract for deed, a lease-option to purchase is a unilateral contract; its acceptance rests wholly in the discretion of the leasee -optionee. The other main way in which a lease option is distinguished from a contract for deed is that the lease payments are not applied on the purchase price. Because we find that the contract represented a bilateral agreement to purchase the property, and that the payments went towards the purchase price of the property, we affirm the finding of the trial court that the agreement was a contract for deed, rather than a lease-option agreement. The consequence of this conclusion is that defendant’s interest is as an equitable mortgagee, not as a landlord or optionor.

Vermont has consistently treated a contract for deed as an equitable mortgage. It has been one of only a small minority of states to do so, however, a trend has developed consistent with the Vermont view. Thus, the Restatement (Third) of Property: Mortgages § 3.4(b) (1997) provides that “[a] contract for deed creates a mortgage.”

Defendant argues that plaintiffs failed to seek permission to appeal within ten days as required by Rule 80.1(m). Rule 80.1(m) applies only where “the permission to appeal [is] required by law.” 12 V.S.A. § 4601 provides, “When a judgment is for the foreclosure of a mortgage, permission of the court shall be required for review.” The issue is controlled by Herrick v. Teachout, 74 Vt. 196, 202, 52 A. 432, 434 (1902) (statute applies only to mortgages which are such upon their face, or recognized as such by the parties, and not to cases where the character of the instrument is in issue.) This is not a run-of-the-mill foreclosure action, and permission was not required by law.

Vermont Rule of Civil Procedure 54(c) states “every final judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if the party has not demanded such relief in the party’s pleadings.” Despite the breadth of the language of the rule, it is overriden by considerations of “substantial justice” here, where Plaintiffs were prejudiced by the court’s sua sponte introduction of foreclosure into the case.

Guaranty of securitized mortgage can be enforced by holder of note without proof of chain of assignments or proof of separate assignment of the guaranty.

Wells Fargo Bank Minnesota, N.A. v. Rouleau, 2012 VT 19 (Burgess, J.)

Defendant Randy J. Rouleau appeals a decision holding that Wells Fargo Bank Minnesota, N.A., as Trustee for the registered holders of Credit Suisse First Boston Mortgage Security Corp., Commercial Mortgage Pass-Through Certificates, Series 2001-CF2 (Wells Fargo), is entitled to enforce defendant’s personal guaranty of a promissory note secured by mortgages on five mobile home parks. The court concluded that Wells Fargo could enforce the guaranty as the holder of the note under 9A V.S.A. § 3-301(i). Defendant argues that the court erred in ruling that Wells Fargo has standing to enforce the guaranty because Wells Fargo cannot prove the chain of assignments from the original lender to itself and therefore that Wells Fargo, and not some third party, is the assignee of the guaranty. Defendant also argues that the court erred in treating assignment of the note as sufficient to show assignment of the guaranty because the guaranty, in contrast to the note, is a separate contract that must be expressly assigned. Finally, defendant argues that because Wells Fargo lacks standing to enforce the guaranty, the court lacked jurisdiction over the enforcement action. We affirm. Under § 3-301(i), the holder of the note and mortgage can enforce the guaranty. Because the court did not err in finding that Wells Fargo was the holder of the note and mortgage, we hold that Wells Fargo can enforce the guaranty without separate proof of assignment.

The court correctly concluded that “assignment of the note and mortgage results in the assignment of the personal guaranty as a matter of law—even without an express assignment of the guaranty.” Under contract law, “an assignment agreement must clearly reflect an intent to assign the right in question.” Desrochers v. Desrochers, 173 Vt. 312, 316, 795 A.2d 1171, 1174 (2002); see also Restatement (Second) of Contracts § 324 (1981) (providing that assignment of contractual right requires obligee to “manifest an intention to transfer the right to another person”). Personal guaranties are secondary obligations, however, and because of a guaranty’s link to the principal obligation it follows that an obligee’s assignment of the principal obligation is sufficient to manifest the requisite intent to assign the guaranty. We hold that proof of the assignment of a promissory note and mortgage is sufficient as a matter of law to establish assignment of a personal guaranty. Thus whether Wells Fargo was assigned the guaranty in this case depended on whether it was assigned the note and mortgage.

We reject defendant’s main argument that Wells Fargo lacks standing because it a chain of title to show that it was assigned the note and mortgage. The applicable statute provides that a person is entitled to enforce an “instrument” if the person is “the holder of the instrument.” 9A V.S.A. § 3-301(i). “ ‘Holder’ means . . . the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” 9A V.S.A § 1-201(21)(A). To enforce a promissory note or mortgage under § 3-301(i), therefore, a person must be in possession of the instrument at the time that the enforcement action is filed and the instrument must be made payable to the person or to the order of the person. See Kimball, 2011 VT 81, ¶ 14 (outlining standing requirements in home foreclosure context); V.R.C.P. 80.1(b)(1) (plaintiff shall plead in its complaint that the originals are in the possession and control of the plaintiff). We hold that a plaintiff to whom a promissory note or mortgage was not originally issued need not prove chain of title to enforce a personal guaranty of these principal obligations. Rather, a plaintiff in an enforcement action establishes its standing if it is in possession of the original note and mortgage at the time the complaint is filed and the instruments are made payable to the plaintiff.

Defendant does not challenge that Wells Fargo is in possession of the original note and assignment of mortgage, which Wells Fargo produced at trial. The final question, therefore, is whether Wells Fargo made the requisite showing that it had been assigned the note and mortgage prior to the filing of the enforcement action. The evidence on this question came primarily from the testimony of Tommy Floyd, an employ ee of the loan’s special servicer, Berkadia. At trial, Mr. Floyd was the authority on the way the securitization process works generally and, based on his in-court examination of the loan documentshe also testified as to how the securitization process worked in this case. The record in this case supports the finding that Wells Fargo had been assigned the note and the mortgage prior to the filing of the enforcement action.