The Voluntary Payment

If a co-op shareholder pays late fees without a protest, may the shareholder seek to recover the fees on the ground that such payments were not required? The answer, in Robinson v Mansfield Gardens Inc., was a clear “no.”

In this case, the plaintiff, the owner of three cooperative apartments, began an action seeking restitution alleging that she paid the co-op $4,000 in improper late charges. The co-op moved for summary judgment dismissing the complaint, claiming that the “voluntary payment” doctrine bars the action and also that the action was started against the wrong party. Plaintiff cross-moved to amend the summons and complaint to name the co-op as the proper party defendant.

In support of its motion for summary judgment, the co-op submitted an affidavit of Juan Sinnreich, the president of the company that serves as the managing agent for the co-op. He stated that the co-op was a cooperative housing corporation that owned a development located at 3410-3320 Avenue H in Brooklyn. He further stated that plaintiff owned three co-op units in the development and that the late charges at issue were properly assessed against the plaintiff because of her history of paying certain lease charges late. He went on to state that plaintiff never served the co-op with any written notice objecting to the charges and never wrote “under protest” or “without prejudice” on any of the money orders tendered as payment for the charges. Copies of the money orders were annexed to Sinnreich’s affidavit.

In opposition to the co-op’s motion and in support of her cross-motion, plaintiff submitted her own affidavit stating that the payments were not “voluntary,” as alleged. Plaintiff stated that she challenged the charges, but did not state when and to whom these so-called challenges were made. She also stated that she paid the charges only because the co-op threatened to evict her and sell her cooperative shares at a non-judicial foreclosure sale. She did not state when and by whom these threats were made.

Finally, plaintiff stated that due to provisions in the proprietary leases and the co-op’s security interest in her shares, she would not have been able to challenge an eviction proceeding and a forced sale of her shares in a court of law. Plaintiff did not submit copies of the proprietary leases nor did she cite any authority supporting the above claims. Most significantly, said the court, plaintiff did not address in her affidavit why the late charges were improper.

The court said that the common law doctrine of “voluntary payment” bars recovery of payments voluntarily made with full knowledge of the facts and in the absence of fraud or mistake of a material fact or law. This rule is premised on the common sense notion that “[w]hen a party intends to resort to litigation in order to resist paying an unjust demand, that party should take its position at the time of the demand, and litigate the issue before, rather than after, payment is made.”

It has also been said that the underlying principle involved was one of accord and satisfaction between the parties. Thus, when a lessee’s payments of disputed charges are made voluntarily, without protest, and neither mistake of fact or fraud was involved, the lessee is not entitled to restitution of those payments.

The co-op established its prima facie entitlement to summary judgment dismissing the complaint by submitting admissible proof that plaintiff voluntarily paid the late charges and that neither fraud nor mistake of fact was at issue. The burden thus shifted to the plaintiff to come forward with admissible proof creating a triable issue of fact.

In the court’s view, plaintiff’s conclusory assertions that she paid the late charges under duress were unavailing. Duress is established when the party making the claim proves that he or she was forced to act by means of a wrongful threat precluding the exercise of his or her free will. The court noted that the “[t]hreatened exercise of a legal right cannot constitute duress under any circumstances.” According to the court, plaintiff did not submit any proof demonstrating that the late charges were improper or that defendant acted unlawfully in threatening to evict her and sell her shares if payment was not forthcoming.

Finally, one does not act under duress “where there is available adequate legal remedy to redress the threatened coercion.” Plaintiff’s concluding assertion that she had no legal remedy to thwart an eviction or a forced sale of her shares was unconvincing to the court. Certainly, plaintiff did not demonstrate that she would have been unable to obtain an injunction enjoining the co-op from performing these acts if the late charges were improper as she alleged. In sum, plaintiff’s submission failed to create a triable issue of fact. Accordingly, the complaint was dismissed.

Comment: Most co-op shareholders do not pay late fees until there is a resolution of the non-payment issue which invariably gave rise to the late fees. If, however, a shareholder decides to pay late fees before there is a resolution of the arrears issue, the payment should be marked “paid under protest.” This reservation should preserve the shareholder’s claim to recover such fees when there is a settlement.