Lead Opinion
OPINION OF THE COURT
This аction is the legacy of events which occurred at a real estate title closing at which the seller unwillingly complied with the mortgage lender’s demand that he pay a recently imposed mortgage recording tax. He now seeks recovery of the $61 paid over, punitive damages and certification of the suit as a class action on behalf of all sellers who were compelled or induced to pay the new mortgage tax by the same lender. The appeal is by the lender who seeks to reverse an order of Special Term which denied its motion to dismiss the complaint and which granted class action certification. The issues are significant.
I
In October, 1978 the plaintiff contracted to sell his one-family home subject to the purchasers obtaining a mortgage loan commitment. The commitment subsequently was issued by the defendant Vanguard Holding Corporation (Vanguard), but during the interim between the execution of
In disbursing the mortgage proceeds at the title closing held at its office, Vanguard charged the plaintiff with payment of the additional mortgage tax by deducting the sum of $122 from the amount payable to him. According to the plaintiff, Vanguard responded to his objections by representing that the provisions of the Tax Law required that the tax be paid by the seller. When plaintiff persisted in his refusal to accept the deduction, Vanguard refused to close the mortgage loan. With the buyers’ belongings already in his house and the sale about to disintegrate, plaintiff agreed to pay half the tax, the real estate broker paid the balance.
Plaintiff then commenced this action asserting three causes of action. In the first, recovery of the $61 is sought on the ground that at the time plaintiff paid the money he was: “under economic duress tantamount to extortion and would have suffered considerable economic injury in an amount greater than the tax if the closing had not taken place, or would have been in the situation of litigation, the fees of which would have been greater than the tax, all of which was known by defendant.”
The second cause of action avers that Vanguard’s acts
Upon receipt of the answer, plaintiff moved pursuant to CPLB, 902 for class action certification and Vanguard сountered with a cross motion, inter alia, to dismiss the complaint for failure to state a cause of action. Special Term denied the cross motion on the grounds that the allegations of economic duress and malice were sufficiently pleaded and granted class action certification. On this appeal, Vanguard contests the legal validity of plaintiff’s claim for recovery of his $61, his right to plead a separate cause of action for punitive damages, and argues that the requisite class action criteria have not been met.
II
In debating the merits of the first cause of action, the parties focus upon the doctrine of “economic duress” as expounded in Austin Instrument v Loral Corp. (
In Austin Instrument (supra), Chief Judge Fuld described economic duress or business compulsion as stem
Our inquiry is not thus concluded, however, unless we believe that the Austin Instrument formulation, has abolished the right to resort to common-law quasi-contractual or restitutive remedies to recover for duress or coercion. To find as Vanguard demands would be to violate the precept that redress may be sought for every substantial wrong (see Battalla v State of New York,
The doctrine of quasi contract embraces a wide spectrum of legal actions resting “upon the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense of another * * * [I] t is not a contract or promise at all * * * [but] an obligation which the law creates, in the absence of any agreement, when and because the acts оf the parties or others have placed in the possession of one person money, or its equivalent, under such circumstances that in equity and good conscience he ought not to retain * * * and which ex aequo et bono belongs to another. Duty, and not a promise or agreement or intention of the person sought to be charged, defines it. It is fictitiously deemed contractual, in order to fit the cause of action to the contractual remedy” (Miller v Schloss, 218
Although restitutive remedies originally were not available in some areas of the law due to lack of precedent or perceived principle, abolition of the ancient forms of action freed the courts to apply such remedies (Perillo, Restitution in a Contractual Context, 73 Col L Rev 1208, 1222; see, also, Dobbs, Handbook on the Law of Remedies [1973], p 239). Quasi contract then became the vehicle through which the courts developed “a fairly detailed system of awarding restitution in cases where neither tort nor contract necessarily existed” (Dobbs, Handbook on the Law of Remedies, p 235).
The restitutory remedy applicable to the instant facts is an action for moneys had and received. Although originally an action for recovery of a debt, “it * * * gradually expanded as a medium for recovery upon every form of quasi-contractual obligation in which the duty to pay money is imposed by law, independently of contract, express or implied in fact * * * Its use to recover upon rights equitable in nature to avoid unjust enrichment by the defendant at the expense of the plaintiff, and its control in every case by equitable principles, established by Lord Mansfield in Moses v Macferlan
The broad flexibility of Lord Mansfield’s formulation has long been recognized and followed in this State (Bradkin v Leverton,
Although the remedy is one at law, actions for moneys had and received are based upon equitable principles (Federal Ins. Co. v Groveland State Bank,
While at first blush the doctrine of “economic duress” enunciated in Austin Instrument (
Read liberally in the light of these principles, plaintiff’s first cause of action does make out a claim for moneys had and received. Faced with Vanguard’s threat to abort the
Plaintiff’s second cause, however, must be dismissed with leave to amend the prayer for relief. A claim for punitive damages, standing alone, does not properly constitute a separate cause of action (see, e.g., Schwed v Turoff, 73 AD2d 615; Knibbs v Wagner,
III
Finally, there is the issue of class action certification. The order granting that relief defines the class as composed of “all sellers of property * * * [who were] charged and did pay the tax to defendant at the closing as a result of mistake, misrepresentation, economic duress or other reason”. It is apparent that the phrase “or other reason” should be deleted since its broad sweep would subvert the rationale of a class action grounded on the theory of moneys had and received. The rationale of the class claims against Vanguard must be that “it is against good conscience for [it] to keep the money” (see Federal Ins. Co. v Groveland State Bank, 37 NY2d 252, 258, supra).
We disagree, however, with the view expressed by our dissenting colleague that class action status was erroneously granted because some of the criteria of CPLR 901 (subd a) for such status went unmet. CPLR 901 (subd a) authorizes a class action if: (1) the class is so numerous that joinder of all members is imрracticable; (2) questions of law or fact common to the class predominate over any question affecting only individual members;
Article 9 was enacted to “infuse the pertinent law with a measure of practical flexibility and to accommodate pressing needs for an effective yet ‘balanced group remedy in vital areas of social cоncern’ ” (see The Survey of New York Practice, Article 9—Class Actions, 50 St John’s L Rev 189, 190, quoting with approval the memorandum of Assemblyman Stanley Fink in support of NY Senate Bill No. 1309-B, NY Assembly Bill No. 1252-B, at p 1, 198th Session [1975]; see, also, Twelfth Ann Report of NY Judicial Conference to the Legislature on the CPLR, Twentieth Ann Report of NY Judicial Conference, 1975, pp 204-211). Nevertheless, despite that much heralded flexibility and the functional terms contained in the article (see McLaughlin, An Overview, McKinney’s Cons Laws of
The relatively minor results flowing from article 9 have been viewed by commentators as resulting from judicial fаilure to give the statute its intended effect (Class Actions in New York: Recovery for Personal Injury in Mass Tort Cases, 30 Syr L Rev 1187, 1209) and from the “cautious if not hostile” approach to the article (Siegel, New York Practice, 1979-1980 Pocket Part, p 29). Our own research reveals that class action status has been denied in 75% of the reported cases construing article 9 since its enactment in 1975.
Since CPLR article 9 is modeled upon rule 23 of the Federal Rules of Civil Procedure (in US Code, tit 18, Appendix) (see O’Hara v Del Bello,
The policy of rule 23 is to favor the maintenance of class actions and liberal interpretation (King v Kansas City So. Inds., 519 F2d 20, 25-26; Lewis v Capital Mtge. Invs., 78 FRD 295; Alameda Oil Co. v Ideal Basic Inds.,
The due process view is founded on the notion that the class action mechanism affords many individuals a quasi-constitutional right to litigate—to participate meaningfully
As the Supreme Court has noted: “Rule 23 of the Federal Rules of Civil Procedure provides for class actiоns that may enhance the efficacy of private actions by permitting citizens to combine their limited resources to achieve a more powerful litigation posture.” (Hawaii v Standard Oil Co.,
Whether New York’s restrictive attitude toward class actions derives from the difficulty in accommodating the structure of the State judicial system to the activist role required for the conduct of class actions is not clear. Although the class action Trial Judge has been described as “manager” of the case (Matter of Nissan Motor Corp. Antitrust Litigation, 552 F2d 1088, 1102; Matter of Air Crash Disaster at Fla. Everglades on Dec. 29,1972, 549 F2d 1006; see, generally, 7A Wright & Miller, Federal Practice and Procedure, § 1791, p 193; Fed Rules Civ Pro, rule 23, subds [c], [d], [e]), the wide discretion granted by rule 23 in conducting and moving forward the suit is not as clearly duplicated in article 9. Whatever the reason, however, it is apparent that the State’s palpable tilt away from broad use of the remedy has been significantly influenced by narrow interpretations of article 9 (see, e.g., Suffolk Housing Servs. v Town of Brookhaven,
IV
It is with these considerations in mind that analysis of the specific criteria of CPLR 901 (subd a) applicable to this case must be undertaken. There is no “mechanical test” to determine whether the first requirement—numerosity— has been met (Kelley v Norfolk & Western Ry. Co., 584 F2d 34, 35), nor is there a set rule for the number of prospective class members which must exist before a class is certified (Cypress v Newport News Gen. & Nonsectarian Hosp. Assn., 375 F2d 648). Each case depends upon the particular circumstances surrounding the proposed class (Chmieleski v City Prods. Corp., 71 FRD 118) and the court should consider the reasonable inferences and commonsense assumptions from the facts before it (Gay v Waiters’ & Dairy Lunchmen’s Union, 549 F2d 1330; Brady v LAC, Inc., 72 FRD 22; Hawk Inds. v Bausch & Lomb, 59 FRD 619; see, also, Westcott v Califano,
Here the plaintiff alleges the existence of a class of at least 300 sellеrs, the purchase of whose properties was financed by Vanguard. While not disputing this number, the defendant admits that the additional mortgage tax was “passed on” to sellers or brokers as part of its business policy. Where allegations of a prospective class of 300 or more are not specifically challenged by a defendant despite the fact that information as to the size of the class is within the defendant’s control, the numerosity requirement is satisfied (see Mills v Roanoke Ind. Loan & Thrift, 70 FRD 448, 452).
The predominance requirement—that “questions of law or fact common to the class * * * predominate over any questions affecting only individual members” (CPLR 901, subd a, par 2)—unquestionably is the most troublesome one in the section and the dissenter eloquently reasons that predominance has nоt been established here. Considering the dearth of New York case law interpreting the requirement, Federal jurisprudence is helpful (see Siegel, New York Practice, p 178). In the Federal system, the “predomi
The gravamen of the instant class action claim against Vanguard is its allegedly wrongful imposition upon sellers of its own obligation to pay the additional mortgage recording tax despite the Legislature’s declaration that the tax was to be paid by the lender (see Tax Law, § 253, subd 1-a, par [a]). Vanguard has admitted that this practice was part of its business policy despite the fact that the Attorney-General had informed it that the practice was “an unwarranted attempt to circumvent the clear statutory directive”.
As we have earlier observed, the offer from Vanguard realistically broached no refusal. Either plaintiff paid the mortgage tax that the. law obligated Vanguard to pay or the title closing would be terminated without the seller re
The paramount issue, then, is the propriety of Vanguard’s conduct at the closing. The fact that there may have been differences in the manner in which Vanguard exacted money from sellers at each closing does not mean that individual questions predominate: the rule requires predominance, not identity or unanimity, among class members (Cohen v Uniroyal, Inc., 77 FRD 685). Similarly, the fact that questions peculiar to each individual may remain after resolution of the common questions is not fatal to the class action (Matter of Caesars Palace Securities Litigation,
The remaining criteria are somewhat more easily disposed of. As to typicality (CPLR 901, subd a, par 3), plaintiff’s claim derives from the same practice or course of conduct that gave rise to the remaining claims of other class members and is based upon the same legal theory; therefore, that requirement is satisfied (see Morgan v Laborers Pension Trust Fund for Northern Cal., 81 FRD 669). Since adequacy of representation of the class interests by plaintiff (see CPLR 901, subd a, par 4) is not in issue, there remains the superiority requirement—whether “a class action is superior to other available methods for the fair and efficient adjudication of the controversy” (see CPLR 901, subd a, par 5). Our dissenting collleague declares that since no other aggrieved sellers are “ ‘already in existence’ ” it is neither fair nor efficient to permit the action to proceed as a class action. It is just as likely that failure to come forward “means only that there is a gеneral lack of knowledge of the lawsuit, that others lack the resources to initiate communication in this regard, or that other members of the class, knowing of this suit, do not object to plaintiffs’ representation” (Lamb v United Security Life Co., 59 FRD 25, 32, supra). The superiority requirement is identical with its counterpart in rule 23 (subd [b], par [3]) of the Federal Rules of Civil Procedure and has been interpreted as requiring the court to examine other adjudicative possibilities and compare them to the class action (see, e.g., Katz v Carte Blanche Corp., 496 F2d 747, cert den
Although we thus conclude that Special Term was correct in granting class action status, we observe that one of the strengths of CPLR article 9 is its flexibility. A decision granting class action status is not immutable and if later events indicate that the decision should be reversed, altered or amended, requisite relief is authorized. The Trial Judge has discretion to sever certain issues for class determination (CPLR 906, subd 1), to divide the class into subclasses (CPLR 906, subd 2), to decertify the class (CPLR 902) and to make any appropriate order dealing with procedural matters concerning the conduct of the litigation (CPLR 907, subd 6). In view of the purposes to be served by the class action device and the ability to reverse or revise the status, we agree that “the interests of justice require that in a doubtful case * * * any error, if there is to be one, should be committed in favor of allowing the class action” (Esplin v Hirschi, 402 F2d 94, 101, supra).
Accordingly, the order must be modified to the extent set forth, and otherwise affirmed.
Notes
. “The tax imposed by this subdivision shall in cases of real property improved by a structure containing six residential dwelling units or less with separate cooking facilities be paid by the party making the loan secured by such mortgage, and such tax shall not be paid or payable, directly or indirectly by the borrower except as otherwise provided in sections two hundred fifty-eight and two hundred fifty-nine of this article. In all other cases, such tax shall bе paid by the mortgagor except that the tax shall be paid by the mortgagee where the mortgagor is an exempt organization described in paragraph (b) of this subdivision. All of the provisions of this article shall apply with respect to the additional tax imposed by this subdivision to the same extent as if it were imposed by said subdivision one of this section, except as otherwise expressly provided in this article.”
, The action for moneys had and received “lies for money paid by mistake, or upon a consideration which happens to fail, or for money got through imposition, (express, or implied,) or extortion, or oppression, or an undue advantage taken of the plaintiff’s situation, contrary to laws made for the protection of persons undеr those circumstances * * * [T]he gist of this kind of action is that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money.” (Moses v Macferlan, 2 Burr 1005, 1012, 1 Wm B1 219, 97 Eng Rep 676 [Mansfield, J.])
. In the five years since the enactment of article 9, class action status was granted in the following 12 reported cases: King v Club Med,
. Class action status was denied in the following cases: Svendsen v Smith’s Moving & Trucking Co.,
Concurrence in Part
While I am in accord with the conclusion of the majority in all other respects, I cannot agree that the prerequisites of CPLR 901 (subd a) have been met on the record of this case. Accordingly, I vote to modify the order appealed from not only to the extent directed by the majority, but also by
Assuming, arguendo, that a class action is otherwise appropriate here, the definition of the class approved by the court is so broad that the claim of the plaintiff is not “typical of the claims * * * of the class”, a prerequisite to the maintenance of a class action under CPLR 901 (subd a, par 3). The order of Special Term defines the class as comprised of: “all sellers of property, subsequent to January 1, 1979, who attended at a closing pursuant to a mortgage commitment issued by defendant, wherein the seller sold real property containing six residential units or less, containing separate cooking facilities, wherein the seller had not contracted to pay the tax required by Tax Law Section 253, Subdivision 1-a, effective January 1, 1979, but was charged and did pay the tax to defendant at the closing as a result of mistake, misrepresentation, economic duress or other reason”. The complaint and motion papers establish that plaintiff’s claim is that he effectively paid a portion of the tax in question as a result of “economic duress”, not “mistake, misrepresentation” or any “other reason”. There is not a single allegation in the record that plaintiff paid the tax as a result of mistake or any “other reason”. Although the complaint does contain a reference to an obviоus misrepresentation by defendant as to the requirements of the statute in question, it also states that, after the misrepresentation was made, plaintiff “still refused to pay” the tax, and paid a portion thereof only after defendant refused to close the loan until the tax was paid. I note further that, even if there was a legally sufficient causal relation between defandant’s alleged misrepresentation and plaintiff’s having paid the tax, it appears that plaintiff, like most other sellers of real property, was represented at the closing by an attorney. Thus, the truth or falsity of defendant’s representation could have been easily ascertained by plaintiff and he could not have reasonably relied on the alleged misrepresentаtion of defendant. (See Cudemo v Al & Lou Constr. Co.,
Concededly, plaintiff’s claim is typical of persons who paid the tax as a result of their having been subjected to “economic duress” of a degree and nature sufficient to be actionable in an action for moneys had and received. However, the nature of such a claim and the defenses which can be asserted against it are likely to engender “questions affecting only individual members” of the class of such magnitude that they are not subordinate to “questions of law or fact common to the class” as required by CPLR 901 (subd a, par 2). To establish their claims of “economic duress” class members will be required to show that they were forced to pay the tax “by means of a wrongful threat precluding the exercise of [their] free will” (see Austin Instrument v Loral Corp.,
Consequently, I perceive no advantage to be gained from permitting the action to proceed as a class action since the proceeding is very likely to “ ‘splinter into individual trials’ ” - (see Strauss v Long Is. Sports,
Finally, in my view, there has not been a sufficient demonstration that “a class action is superior to other avail
Hopkins, J.P., and O’Connor, J., concur with Lazer, J.; Hargett, J., concurs in part and dissents in part, in an opinion.
Order of the Supreme Court, Nassau County, dated' October 24, 1979, modified, on the law, (1) by deleting from the third decretal paragraph thereof the words “or other reason” and (2) by adding to the eleventh decretal paragraph thereof, immediately after the provision denying defendant’s cross motion, the following: “except that the second cause of action, seeking punitive damages, is dis