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Voluntary Payment Doctrine Precluded Lawsuit

The First Department, over a dissent, determined plaintiff’s (Klein’s) complaint alleging  breach of contract, fraud, violation of General Business Law, etc., was properly dismissed pursuant to the voluntary payment doctrine. Klein procured a loan from defendant. After paying interest and fees to defendant in order to refinance with another lender, Klein sued defendant alleging the fees were excessive and were paid under duress. The majority concluded the voluntary payment doctrine warranted dismissal of the complaint. The dissent argued plaintiff had stated a cause of action alleging the payment was made under duress, and, therefore, was not voluntary:

The voluntary payment doctrine bars recovery of payments voluntarily made with full knowledge of the facts, in the absence of fraud or mistake of material fact or law … . The onus is on a party that receives what it perceives as an improper demand for money to “take its position at the time of the demand, and litigate the issue before, rather than after, payment is made” … . Here, there is no claim of fraud or mistake. Defendant was entirely aboveboard about the amount of money it expected to be paid to settle the loan. Nevertheless, Klein made the calculated decision to schedule the closing and to pay off the entire amount demanded. Nor, as discussed below, did Klein “take [his] position at the time of the demand.”

Plaintiffs argue that the voluntary doctrine should not apply because Klein was deprived of a meaningful choice as to whether to pay off the loan on defendant’s terms. They further claim that Klein protested the demand and that this shielded plaintiffs from any application of the doctrine. Nothing in plaintiffs’ complaint or papers in opposition to the motion suggests that these are viable positions. It is assumed, of course, that plaintiffs’ factual allegations are true, both in the complaint and in opposition to the motion … . However, conclusory allegations will not serve to defeat a motion to dismiss … . Nothing in the complaint or the affidavit alleges any reason why Klein had no choice but to go through with the closing; indeed, he was able to put off the closing the first time he received from defendant what he considered an unreasonable payoff demand. DRMAK Realty LLC v Progressive Credit Union, 2015 NY Slip Op 08044, 1st Dept 11-5-15

 

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