Sometimes being kind and accommodating can sink you legally. In suits or controversies regarding whether money should be paid — e.g., breach of contract, creditor-debtor disputes, payments on account, etc. — the voluntary payment doctrine can nullify any claim you have in Court about whether the money should be paid or is even owed.
Voluntary payment is the legal rule that “money voluntarily paid under a claim of right to the payment, and with knowledge of the facts by the person making the payment cannot be recovered back on the ground that the claim was illegal, or that there was no liability to pay in the first instance.” Eisel v. Midwest Bankcentre, 230 S.W.3d 335, 339 (Mo. 2007). It is similar to waiver and consent because payments made with full knowledge of all the facts constitute voluntary payments. Id.; Delmar Bank of University City v. Douglas, 366 S.W.2d 80, 82 (Mo. Ct. App. 1963). Therefore, if money has been voluntarily paid with full knowledge of the facts, it cannot be recovered, even if the payment was made under mistake of law. American Motorists Ins. Co. v. Shrock, 447 S.W.2d 809, 811-12 (Mo. Ct. App. 1969). An exception to this would be if the payment was made under fraud or duress. Id. at 812.
The practical consequence to the voluntary payment doctrine is that a person who disputes the validity of a demand for money/payment must voice his/her objection before making payment — not after. It flows from the policy that the law wants the person demanding payment to be put on notice about the dispute, rather than accept payment and later learn that the payment is being contested. Although the voluntary payment doctrine is an old, long-standing legal principle, and there has been a recent push by parties to minimize its applicability to modern transactions, Courts have shown a reluctance to do so. See, e.g., Hassen v. MediaOne of Greater Florida, Inc., 751 So. 2d 1289, 1290 (Fla. App. 1 Dist. 2000) (voluntary payment doctrine barred cable television subscribers’ unlawful suit to recover late fees billed and paid); Harris v. ChartOne, 841 N.E.2d 1028, 1032-33 (Ill. App. 5. Dist. 2005) (voluntary payment barred patients’ class action lawsuit on multiple common law and statutory theories to recover excess charges billed and paid for medical records).
Contact us with questions relating to voluntary payment and other concerns pertaining to disputed funds/payments.