Opinion ID: 1201719
Heading Depth: 2
Heading Rank: 1

Heading: The Voluntary-Payment Doctrine

Text: Under Indiana law, which we must apply in this diversity action, Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), the voluntary-payment doctrine holds that money voluntarily paid in the face of a recognized uncertainty as to the existence or extent of the payor's obligation to the recipient may not be recovered, on the ground of `mistake,' merely because the payment is subsequently revealed to have exceeded the true amount of the underlying obligation. Time Warner Ent. Co. v. Whiteman, 802 N.E.2d 886, 892 (2004) (quoting Restatement (Third) of Restitution & Unjust Enrichment § 6 cmt. e (Tentative Draft No. 1, 2001)) (emphasis in original); see also Randazzo v. Harris Bank Palatine, N.A., 262 F.3d 663, 667-68 (7th Cir.2001) (discussing the doctrine's application in Illinois). The district court held that the voluntary-payment doctrine barred recovery by CSX because it paid ARS in the face of a recognized uncertainty, the amount of liability owed. As the district court read the record, if there had been certainty as to the amount of liability, CSX would have simply sent ARS a check rather than asking ARS the value of the damaged railcars. The district court's argument is somewhat attractive, but ultimately it is flawed; just because one party must ask another for a piece of information does not mean that that information is uncertain. For the voluntary-payment doctrine to apply there must be a recognized uncertainty as to the existence or extent of liability, but read in the light most favorable to CSX, the record suggests that neither party recognized any uncertainty. They both believed that CSX was liable and never disagreed as to the extent of that liability. The point of the voluntary-payment doctrine is to prevent recovery when a transfer was made pursuant to an agreement of the parties that allocated between them the risk of any later-discovered mistake. Restatement (Third) of Restitution & Unjust Enrichment § 6 cmt. d (Tentative Draft No. 1, 2001). But when the mistake relates to a contingency not contemplated by the parties at the time of the voluntary payment, a claim for restitution exists. Id. cmt. e. Thus, the voluntary-payment rule has no application to the payment of a claim that neither party regards as doubtful. Id. What the district court called a negotiated settlement between CSX and ARS may have placed upon CSX the risk that ARS set the value of its railcars too high, but it seems unlikely that CSX's payment took into account the possibility that the derailment actually occurred on track that CSX did not own. Since there is no evidence that CSX or ARS regarded CSX's responsibility for the derailment as doubtful, whether the payment embodied the possibility that CSX did not own the track is, at best, a fact question that precludes summary judgment on the basis of the voluntary-payment doctrine.