ECI FINANCIAL CORPORATION v. RESURRECTION TEMPLE OF OUR LORD INC (2023)

DECISION & ORDER

In an action to foreclose a mortgage, the defendant Resurrection Temple of Our Lord, Inc., appeals from an order of the Supreme Court, Kings County (Lawrence Knipel, J.), dated January 10, 2020.  The order, insofar as appealed from, denied that branch of that defendant's motion which was for reimbursement of the legal fees that defendant paid to the plaintiff in connection with the sale of the subject property to a nonparty purchaser.

ORDERED that the order is affirmed insofar as appealed from, with costs.

The defendant Resurrection Temple of Our Lord, Inc. (hereinafter the defendant), was the mortgagor on a mortgage loan that was foreclosed by the mortgagee, the plaintiff, pursuant to a judgment of foreclosure and sale dated November 16, 2015.  Insofar as relevant here, in the judgment of foreclosure and sale, the Supreme Court awarded the plaintiff “reasonable legal fees” in the sum of $27,500.  In October 2016, in connection with the defendant's exercise of its right of redemption, the plaintiff sent the defendant a payoff letter demanding the total payoff sum of $1,207,025.09, which included a demand for $130,754.51 in legal fees (hereinafter the subject legal fees), among other things.  The defendant paid the full payoff sum demanded, including the subject legal fees, without raising an objection at the time of payment.

In May 2019, the defendant moved, inter alia, for reimbursement of the subject legal fees, contending that the legal fees demanded by the plaintiff were far in excess of the legal fees awarded by the Supreme Court in the judgment of foreclosure and sale.  The court, among other things, denied that branch of the defendant's motion, and the defendant appeals.

“ ‘[T]he voluntary payment doctrine ․ bars recovery of payments voluntarily made with full knowledge of the facts, and in the absence of fraud or mistake of material fact or law’ ” (Overbay, LLC v. Berkman, Henoch, Peterson, Peddy & Fenchel, P.C., 185 A.D.3d 707, 709, 128 N.Y.S.3d 56, quoting Dillon v. U–A Columbia Cablevision of Westchester, Inc., 100 N.Y.2d 525, 526, 760 N.Y.S.2d 726, 790 N.E.2d 1155;  see Daldan, Inc. v. Deutsche Bank Natl. Trust Co., 188 A.D.3d 989, 992, 137 N.Y.S.3d 407).  “There is a presumption that payments are voluntary” (Overbay, LLC v. Berkman, Henoch, Peterson, Peddy & Fenchel, P.C., 185 A.D.3d at 709, 128 N.Y.S.3d 56).  “Additionally, in order for a protest of payment to be characterized as appropriate, it must be in writing and made at the time of payment” (Overbay, LLC v. Berkman, Henoch, Peterson, Peddy & Fenchel, P.C., 185 A.D.3d at 709, 128 N.Y.S.3d 56, citing Neuner v. Newburgh City School Dist., 92 A.D.2d 888, 888, 459 N.Y.S.2d 874).

Here, the defendant does not claim that the plaintiff engaged in fraud, that there was a mistake of law or fact, or that it levied a protest, in writing or otherwise, at any time prior to making its motion, inter alia, for reimbursement of the subject legal fees.  Thus, the voluntary payment doctrine bars the defendant's recovery of payments it voluntarily made in connection with the plaintiff's payoff demand (see Overbay, LLC v. Berkman, Henoch, Peterson, Peddy & Fenchel, P.C., 185 A.D.3d at 709, 128 N.Y.S.3d 56).

“ ‘The existence of economic duress is demonstrated by proof that one party to a contract has threatened to breach the agreement by withholding performance unless the other party agrees to some further demand’ ” (id., quoting Trustco Bank N.Y. v. M.M.E. Power Enters., Inc., 223 A.D.2d 587, 589, 636 N.Y.S.2d 831).  “However, there is no actionable duress where the alleged menace was to exercise a legal right” (Overbay, LLC v. Berkman, Henoch, Peterson, Peddy & Fenchel, P.C., 185 A.D.3d at 709, 128 N.Y.S.3d 56;  see Madey v. Carman, 51 A.D.3d 985, 987, 858 N.Y.S.2d 784;  Precision Mech., Inc. v. Dormitory Auth. of State of N.Y., 5 A.D.3d 653, 654, 774 N.Y.S.2d 734).

Here, to the extent the plaintiff allegedly threatened to execute on the judgment of foreclosure and sale and sell the subject property in the event the defendant failed to meet its payoff demand, “the alleged menace was to exercise a legal right,” and thus, any such threat did not amount to actionable economic duress (Overbay, LLC v. Berkman, Henoch, Peterson, Peddy & Fenchel, P.C., 185 A.D.3d at 709, 128 N.Y.S.3d 56).

The parties’ remaining contentions are either without merit or not properly before this Court.

Accordingly, the Supreme Court properly denied that branch of the defendant's motion which was for reimbursement of the subject legal fees.

DILLON, J.P., BARROS, GENOVESI and TAYLOR, JJ., concur.