Attorneys for Appellant Attorneys for AppelleeS
Scott D. Himsel Karl L. Mulvaney
Brent D. Taylor Nana Quay-Smith
Jennifer K. Bowman Candace L. Sage
David K. Herzog Bingham McHale LLP
Baker & Daniels Indianapolis, IN
Indianapolis, IN
Irwin B. Levin
Richard E. Shevitz
Scott D. Gilchrist
Cohen & Malad, P.C.
Indianapolis, IN
____________________________________________________________________________
__
In the
Indiana Supreme Court
_________________________________
No. 49S02-0402-CV-47
Time Warner Entertainment
Company, L.P.,
Appellant (Defendant below),
v.
Kelly J. Whiteman and Jean Wilson
Appellees (Plaintiffs below).
_________________________________
Appeal from the Marion Superior Court,
Nos. 49D11-9803-CP-420, 49D06-9803-CP-423
The Honorable John L. Price, Judge
_________________________________
On Petition To Transfer from the Indiana Court of Appeals, No. 49A02-9910-
CV-719
_________________________________
February 3, 2004
Sullivan, Justice.
Two customers of a cable television company who paid the “late fees”
imposed on their bills sued to get back a portion of the money they had
paid, arguing that the fee imposed exceeded the cable company’s cost of
collection. The Court of Appeals held that they were not entitled to
recover because they had made the payments voluntarily. We hold that the
“voluntary payments doctrine” is not applicable here.
Background
Jean Wilson and Kelly Whiteman were both subscribers to the cable
television service of Time Warner Entertainment, L.P. Each signed a
contract with Time Warner that required her to pay for her cable service by
the due date listed on her monthly bill, and permitted Time Warner to
charge a late fee if she failed to do so. We will refer to Wilson and
Whiteman collectively in this opinion as the “Customers” although the
contracts each of them signed with Time Warner were materially different
from one another.
Wilson signed her contract on August 29, 1992. It read in pertinent
part:
TERMS AND CONDITIONS FOR SERVICE AND EQUIPMENT RENTAL AGREEMENT
1. Monthly service charges will be billed in advance and are payable
by Date Due printed on statement. If payment is not received by Date
Due, a handling charge called “Late Fee’ will be applied to delinquent
accounts.
(R. 360.)
Whiteman signed her contract on January 6, 1996. It read in pertinent
part:
TERMS AND CONDITONS FOR SERVICE AND EQUIPMENT RENTAL AGREEMENT
1. Customer agrees to pay for cable television services provided to
customer including charges for installation, equipment, tier service
(including basic tier), services provided on a per channel or per
program basis, or any other service provided by American Cablevision
of Indianapolis[[1]] (the “Company”) and all applicable local, state
or federal fees and taxes. Monthly service charges will be billed in
advance (except for per program charge) and are payable by date due
printed on statement for that billing period. If payment is not
received by Due Date an administrative charge called “Late Charge” of
$4.40 will be applied to customer’s account.
(R. 363.)
The material difference between these two contracts is, of course,
that Wilson’s contract did not set forth an explicit amount for the “Late
Charge”; Whiteman’s did.[2] Despite this difference, neither side in this
litigation contends that the difference matters.[3]
Time Warner did in fact impose upon both Customers a “late fee” of
$4.40 (before January, 1998) and $4.65 (after January, 1998) when payment
had not been received by the “Date Due.” In fact, Time Warner says that
such a fee was imposed on more than 20,000 of its 84,000 Indianapolis
subscribers each month.
The Customers originally filed separate lawsuits against Time Warner.
In broad terms, they sought to recover the late fees paid to Time Warner in
excess of Time Warner’s actual damages caused by late payment. Customers
also sought declaratory and injunctive relief to prevent Time Warner from
charging excessive late fees in the future.
For its part, Time Warner maintained that the late fee covered only a
portion of the costs it incurred as a result of subscribers’ late payments.
These costs include those of its “in-house collection department”
(consisting of customer service representatives who speak with delinquent
subscribers and lobby personnel who accept payments from late subscribers
who are late); field collectors who visit subscribers at their homes; and
contract collection agencies that pursue unpaid balances.
On Time Warner’s motion, the two lawsuits were consolidated for
purpose of discovery and pre-trail proceedings. Time Warner subsequently
filed a Motion to Dismiss and for Summary Judgment on the basis that
Indiana’s “voluntary payment doctrine” prohibits recovery of funds
voluntarily paid under the payor’s mistaken belief as to the legal
obligation of the payment. Time Warner also contended that none of the
customers’ claims for money damages states a cognizable claim under Indiana
law because the late payment provisions of the contracts constituted valid
and enforceable liquidated damage clauses.
The trial court initially granted Time Warner’s Motion to Dismiss and
Motion for Summary Judgment, concluding that the Customers’ claims for
money damages were barred by the voluntary payment doctrine and that Time
Warner’s late fee was a valid liquidated damage assessment. But following
a hearing on the Customers’ motion to correct error, the trial court
vacated its earlier ruling and permitted the action to proceed on the
merits.
The Court of Appeals affirmed in part and reversed in part. Time
Warner Entertainment Co. v. Whiteman, 741 N.E.2d 1265, 1275 (Ind. Ct. App.
2001). It concluded that genuine issues of material fact existed with
respect to the cost basis for Time Warner’s late payment charges, and
affirmed the trial court’s decision to reinstate the Customers’ claims for
injunctive and declaratory relief.[4] However, the Court also determined
that the Customers’ claims for money damages were barred by the voluntary
payment doctrine as a matter of law, and concluded that the trial court
abused its discretion by granting the Customers’ motion to correct error as
to this claim.
Discussion
I
Time Warner argues, and the Court of Appeals held, that the Customers
are not entitled to the repayment of any of the late fees paid because they
paid those amounts voluntarily. This argument invokes Indiana’s “voluntary
payment doctrine” which has analogs in many other states.
Hornbook law sets forth three propositions in this regard:
As a general rule, money voluntarily paid with a full knowledge of all
the facts, and without any fraud or imposition on the payor, cannot be
recovered back, although it was not legally due.
Generally a voluntary payment made under a mistake or in ignorance of
law, but with a full knowledge of all the facts, and not induced by
any fraud or improper conduct on the part of the payee, cannot be
recovered back.
In general money paid under a mistake of fact, and which the payor was
under no legal obligation to make, may be recovered back,
notwithstanding a failure to employ the means of knowledge which would
disclose a mistake.
23 I.L.E., Payment §§ 41, 42-43 (1970). See also C.J.S. §§ 113-114 (1987).
Our court resolved a number of 19th century disputes using these
principles. Three are representative.
In Bond v. Coats, 16 Ind. 202 (Ind. 1861), Coats sued Bond. Coats had
rented a mule from Bond to work on a ferry-boat. While Coats had the mule,
it died through no fault of Coats. Coats nevertheless paid Bond for the
mule, thinking he was legally obligated to do so. When Coats discovered
that he was not legally obligated to pay for the mule, he sued to get his
money back. We held Coats unable to recover the amount paid. “He had full
knowledge of [the facts]; but alleges he was mistaken as to his rights, in
a matter in which he had constituted himself a judge in his own cause, and
decided against himself. We are of opinion that the weight of authority is
that he can not be now heard to reverse his own judgment.” Id. at 203.
In Downs v. Donnelly, 5 Ind. 496 (1854), Donnelly sued Downs.
Donnelly had paid Downs the amount of a debt owed to Downs by the estate of
a man named Ross. Ross was Donnelly’s wife’s deceased former husband and
Downs had threatened to sue Donnelly for the amount of the debt. Thinking
he was legally obligated to pay the debt and not wanting to be sued,
Donnelly paid Downs. When Donnelly discovered that he was not legally
obligated to pay the estate’s debt, he sued to get his money back. We held
Donnelly unable to recover the amount paid. “His right of recovery is
exclusively based upon an alleged mistake. If that was a mistake of law,
it is fully settled that proof of such misapprehension will not enable the
party to recover back money voluntarily paid under a claim of right. The
construction of law is open to both parties and each is presumed to know
it." Id. at 505.
In Lafayette & I. R. Co. v. Pattison, 41 Ind. 312 (Ind. 1872),
Pattison sued a railway. Pattison had paid shippers freight charges on
cattle shipped from Chicago to Indianapolis. He then sued the shippers to
recover alleged overcharges. We held that Pattison was entitled to pursue
recovery because his payments were not voluntary. “[W]here one person was
in possession of the goods or property of another, and refused to deliver
the same up to that other, unless the latter paid him a sum of money which
he had no right to receive, and the latter, in order to obtain possession
of his property, paid that sum, the money so paid was a payment by
compulsion, and may have been recovered back.” Id. at 327, 328. See also
Chicago, St. L. & P.R. Co. v. Wolcott, 142 Ind. 267, 39 N.E. 451 (1895)
(also holding alleged railway overcharges could be recovered).
To these interesting older cases, we add the one discussed by the
Court of Appeals, City of Evansville v. Walker, 162 Ind. App. 121, 318
N.E.2d 388, 389 (1974). The plaintiffs had paid fines to the city for
parking violations committed on federal property. When the plaintiffs
discovered that the city had no legal authority to impose fines for parking
violations on federal property, they sued to get their money back. The
court held the plaintiffs unable to recover, having chosen not to contest
the legality of the fines and voluntarily pay them instead. Id. at 123,
318 N.E.2d at 390.
It is clear that cable customers throughout the country (and, dare we
say, their lawyers) have been aggressive in bringing claims similar to
those asserted in this case against cable television operators. For their
part, the cable operators (and their lawyers) have been successful in
deploying the voluntary payment doctrine to block these claims. Indeed, it
appears that the “weight of authority from other jurisdictions” strongly
influenced the Court of Appeals to apply the voluntary payment doctrine in
behalf of Time Warner here. Time Warner, 741 N.E.2d at 1271-1272 (citing
cases). We note that since the decision of the Court of Appeals, our
colleagues in Wisconsin have also decided this issue in favor of the cable
operators. Putnam v. Time Warner Cable of Southeastern Wis., L.P., 649
N.W.2d 626 (Wis. 2002).
While we acknowledge the “weight of authority” favoring Time Warner’s
position, we decline to follow it.
First, looking to our own precedents, we think the Customers make a
good argument that they are far more like the plaintiffs in Pattison and
Wolcott than the plaintiffs in the other cases described. The Pattison and
Wolcott plaintiffs were put in the position by the respective railroad
defendants of having to pay in order to receive their property; the
customers allege they were put in the position by Time Warner of having to
pay in order to continue to receive cable service. The plaintiffs against
whom the voluntary payment doctrine was enforced faced no immediate
deprivation of goods or services if they did not pay.
Second, we are sympathetic to contemporary scholarly opinion that
suggests the distinction between a mistake of law and a mistake of fact is
artificial. While the American Law Institute’s 1937 Restatement of
Restitution is frequently cited for the distinction,[5] the current
tentative draft of a new Restatement of Restitution & Unjust Enrichment
(Third) eliminates it.[6] The tentative draft – correctly, we think,
limits application of the voluntary payment doctrine to situations where a
party has voluntarily paid a disputed amount:
Voluntary payment. The restitution claim to recover a payment in
excess of an underlying liability -- a claim that is frequently
described in terms of mistaken payment -- meets an important
limitation in the so-called voluntary-payment rule. The rule appears
in frequent judicial statements to the effect that "money voluntarily
paid with knowledge of the facts cannot be recovered back." Statements
of this kind must be treated with caution. In a business setting, it
is at least paradoxical to suppose that the overpayment of an asserted
(or any payment of a non-existent) liability could ever be
"voluntary," and it is important to bear in mind that the proper
operation of the voluntary-payment rule must be realistic rather than
artificial. The rule does not, for example, impute knowledge of
relevant circumstances of which the payor is not in fact aware,
describing as "voluntary" a payment that was actually the consequence
of negligence or inadvertence. When properly employed, a reference to
"voluntary payment" is judicial shorthand for a truth of common
experience: that a person must often choose to act on the basis of
imperfect knowledge, accepting the risk that further information
(acquired with the benefit of hindsight) may reveal the choice to have
been less than optimal. A more appropriate statement of the voluntary-
payment rule, therefore, is 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.
Restatement (Third) of Restitution & Unjust Enrichment § 6 cmt. e
(Tentative Draft No. 1, 2001) (emphasis in original). We think it clear
that at minimum there is a genuine issue of material fact as to whether
Customers voluntarily paid the late fees in the face of a recognized
uncertainty as to the existence or extent of an obligation to Time Warner.
Third, while the weight of authority does favor Time Warner, it is not
unanimous. TCI Cablevision of Dallas v. Owens, 8 S.W.3d 837 (Tex. Ct. App.
2000), discussed by the Court of Appeals, goes the other way. So does the
dissent of Justice Bablitch, joined by Chief Justice Abrahamson, of the
Wisconsin Supreme Court in Putnam. Justice Bablitch makes several
interesting points. He argues that, “as a general proposition, customers
in a government created monopoly [i.e., cable] deserve special protection”
because they have nowhere else to go for cable services.” Putnam, 649
N.W.2d at 642. He accurately observes that, “for purposes of this case at
this time in the proceedings, we must assume the truthfulness of all the
[customer’s] allegations.” Id. at 643. The same is true in our case. And
he rightly asks, “Why should a customer protest the payment of a fee if it
has no reason at the time of payment to believe that it is unreasonable
and/or unconscionable? If that is the law, and the majority says it is,
then all payees of all late fees pursuant to prior agreements regarding
late fee payments, whether to banks, credit cards, bills for services, and
the like, must automatically protest at the time of payment or lose the
right to contest it. That is, of course, absurd." Id.
Fourth, the principal policy justifications for applying the voluntary
payment doctrine do not seem to us to line up very well in this situation.
These justifications were aptly set forth by Justice Prosser for the
majority in the Wisconsin case:
There are two primary reasons why courts have adopted the voluntary
payment doctrine. First, the doctrine allows entities that receive
payment for services to rely upon these funds and to use them
unfettered in future activities. Second, the doctrine operates as a
means to settle disputes without litigation by requiring the party
contesting the payment to notify the payee of its concerns. After such
notification, a payee who has acted wrongfully can react to rectify
the situation.
Id. at 633 (citations omitted).
As to the first of these justifications, we do not believe that it is
appropriate as a matter of policy for us to favor a private enterprise over
private individuals in this respect. We believe the principle cited here
was derived from cases like City of Evansville where the payee is a unit of
government and presumably makes the “unfettered” use of the funds on behalf
of all of the citizens of its jurisdiction. The same rationale does not
apply to a private business. Judge Schudson of the Wisconsin Court of
Appeals made this point with some force:
[I]t is undisputed that if the late fee (or a portion thereof) is
unlawful, Time Warner never should have charged it. Why, then, should
Time Warner be allowed to take financial advantage of its own
wrongdoing? If the [reliance on funds received] rationale applies, the
answer is clear, and Time Warner is in the clear. If, however, the
[reliance on funds received] rationale (explaining why government is
insulated against such a claim) does not apply to a private enterprise
that, in our free-market economy, perhaps should be expected to suffer
the consequences of its wrongdoing, then the customers' claim
survives, notwithstanding the voluntary payment doctrine.
See Putnam v. Time Warner Cable of Southeastern Wis., L.P., 633 N.W.2d 254,
270 (Wis. Ct. App. 2001) (Schudson, J., concurring and dissenting), aff’d,
649 N.W.2d 626.
As to the second rationale – that the doctrine operates as a dispute
resolution mechanism – we believe the comment set forth supra from the
tentative draft of the new Restatement of Restitution properly limits the
scope of this rationale to situations where money has been “voluntarily
paid in the face of a recognized uncertainty as to the existence or extent
of the payor's obligation to the recipient.” Restatement (Third) of
Restitution & Unjust Enrichment § 6 cmt. e (Tentative Draft No. 1, 2001).
We hold that the voluntary payment doctrine does not bar Customers’
claims.
II
Time Warner asserts a second reason why the Customers’ complaints
should be dismissed: that the late fee provisions of both contracts
constituted valid “liquidated damage” clauses pursuant to which Time Warner
and the Customers agreed on what would happen if the Customers did not pay
their bills on time.
The term “liquidated damages” applies to a specific sum of money that
has been expressly stipulated by the parties to a contract as the amount of
damages to be recovered by one party for a breach of the agreement by the
other, whether it exceeds or falls short of actual damages. Merrillville
Conservancy Dist. v. Atlas Excavating, 764 N.E.2d 718, 724 (Ind. Ct. App.
2002) (citing George B. Swift Co. v. Dolle, 39 Ind.App. 653, 80 N.E. 678,
681 (1907)); Black’s Law Dictionary 395 (7th ed. 1999). “A typical
liquidated damages provision provides for the forfeiture of a stated sum of
money upon breach without proof of damages.” Gershin v. Demming, 685 N.E.2d
1125, 1127 (Ind. Ct. App. 1997).
The history of litigation of liquidated damage clauses suggests that
their enforceability turned on whether the nature of the parties’ agreement
was such that in the event of a breach, the damages resulting from the
breach would have been difficult to ascertain. If actual damages could be
readily calculated and the amount stipulated exceeded actual damages, then
the contract provision was treated as a “penalty” and only actual damages
awarded.
Here is a sort of classic statement of the issue:
Where the sum named is declared to be fixed as liquidated damages, is
not greatly disproportionate to the loss that may result from a
breach, and the damages are not measurable by any exact pecuniary
standard, the sum designated will be deemed to be stipulated damages.
Jaqua v. Headington, 114 Ind. 309, 310, 16 N.E. 527, 528 (1888). Nearly a
half century later, we relied on Jaqua to hold a stipulated sum to be a
penalty and not enforceable. Sterne v. Fletcher American Co., 204 Ind. 35,
181 N.E. 37 (Ind. 1932). Indeed, in that case we said that a “stipulated
sum will not be allowed as liquidated damages unless it may fairly be
allowed as compensation for the breach.” Id. at 49-50, 181 N.E. at 43.
This policy of skepticism toward the enforceability of liquidated
damage clauses was grounded in equitable notions of equity and natural law:
“It is the application, in a court of law, of that principle long
recognized in courts of equity, which, disregarding the penalty of the
bond, gives only the damages actually sustained.”
Id., 204 Ind. at 50, 181 N.E. at 43, (quoting Jaquith v. Hudson, 5 Mich.
123, 133 (1858)).
Even as we turn from the 20th to the 21st century, when codification
of commercial law have greatly reduced the role of equity in resolving
business disputes, our case law maintains this skepticism. Recently, the
Court of Appeals held a stipulated damages provision in a contract to be an
unenforceable penalty. Its explication of the relevant law reflects much
of current jurisprudence:
"In determining whether a stipulated sum payable on a breach of
contract constitutes liquidated damages or a penalty, the facts, the
intention of the parties and the reasonableness of the stipulation
under the circumstances of the case are all to be considered."
[Gershin v. Demming, 685 N.E.2d 1125, 1127 (Ind. Ct. App. 1997).] If
the sum sought by a liquidated damages clause is grossly
disproportionate to the loss that may result from a breach of
contract, we should treat the sum as a penalty rather than liquidated
damages. Rogers v. Lockard, 767 N.E.2d 982, 991 (Ind. Ct. App. 2002).
"Liquidated damages provisions are generally enforceable where the
nature of the agreement is such that when a breach occurs the
resulting damages would be uncertain and difficult to ascertain."
Gershin, 685 N.E.2d at 1127. However, to be enforceable the stipulated
sum must fairly be allowed as compensation for the breach. Id. at 1127-
28. Additionally, we construe any contract ambiguity against the party
who drafted it. Rogers, 767 N.E.2d at 990. If there is uncertainty as
to the meaning of a liquidated damages clause, classification as a
penalty is favored. Id. at 992.
Olcott Int'l & Co. v. Micro Data Base Sys., 793 N.E.2d 1063, 1077 (Ind. Ct.
App. 2003), transfer denied,2003 Ind. LEXIS 1094.
Unlike our colleagues on the Court of Appeals, we have not had much
opportunity to wrestle with these issues in recent years. But some of our
most important cases have been consistent with the principles enunciated in
Olcott. Compare Raymundo v. Hammond Clinic Assn., 449 N.E.2d 276, 284
(Ind. 1983) (holding valid as liquidated damages payment of $25,000 for
violation of a restrictive covenant not to compete, largely because of the
uncertainty in determining the amount of actual damages) with Skendzel v.
Marshall, 261 Ind. 226, 233-234, 301 N.E.2d 641, 645-646 (Ind. 1973)
(holding invalid as a penalty a land contract vendees’ forfeiture of $
21,000, “well over one-half the original contract price”).
Despite the longstanding principles represented by these cases of ours
and the Court of Appeals, we are left with some unease over any decision
where what appears to be the freely bargained agreements of the parties are
set aside. Fixing the respective rights and expectations of the parties as
to damages makes economic and commercial sense. Enforcing such provisions
would seem to conform to this Court’s longstanding recognition of the
freedom of parties to enter into contracts and our presumption that
contracts represent the freely bargained agreement of the parties. Fresh
Cut, Inc. v. Fazli, 650 N.E.2d 1126, 1129 (Ind. 1995). However, both sides
in this lawsuit seem quite content to litigate this issue based on these
principles as set forth and so we will decide it on this basis.
III
As noted under Background, supra, Wilson signed a contract with Time
Warner in which she agreed to pay “a handling charge called ‘Late Fee’” if
her monthly payments were not received by the due date. The amount of the
“late fee” was not specified in the Wilson contract. Whiteman, on the
other hand, agreed to pay a “‘Late Charge’ of $4.40” if her monthly
payments were not received by the due date.
As noted under part II, supra, Time Warner asserted that the late fee
provisions of both contracts constituted valid and enforceable “liquidated
damage” clauses because the “undisputed facts” established that amount of
the late fees were “less than the estimated average cost that Time Warner
incurs because of late payment.”[7] (Br. of Appellant at 24.) Time Warner
said it was entitled to summary judgment because these “undisputed facts”
showed that its late fees met the relevant legal standard of not being
“grossly proportionate” to its losses due to late payments. (Id. at 26.)
Summary judgment is appropriate where the evidence shows there is no
genuine issue of material fact and the moving party is entitled to a
judgment as a matter of law. Butler v. City of Peru, 733 N.E.2d 912, 915
(Ind. 2000); see Ind. Trial Rule 56(C); Shell Oil Co. v. Lovold Co., 705
N.E.2d 981, 983-84 (Ind. 1998). But the burden here is on Time Warner as
the party seeking summary judgment to negate the existence of any genuine
issue of material fact. Winkler v. V.G. Reed & Sons, 638 N.E.2d 1228, 1235
(Ind. 1994). And all facts and reasonable inferences drawn from those
facts are construed in favor of the nonmoving party. Butler, 733 N.E.2d at
915.
The Customers responded that the late fees they were charged were
indeed grossly disproportionate to the damages actually suffered by Time
Warner when the Customers did not pay their bills on time. They offered as
evidence affidavits of two experts that dispute the methodology used by
Time Warner in the cost study.
Andrea C. Crane, described as a regulatory rate-setting consultant and
former Ratepayer Advocate for the State of New Jersey, reviewed Time
Warner’s cost study and testified that the methodology employed was flawed
because it “included many costs in excess of those incremental costs
directly related to collection of late payments.” For example, she found
that (1) costs included in the study for non-collection were not properly
attributable to customers who simply pay late, (2) costs for salary and
wage categories included in the study are not incrementally related to late
payments and Time Warner would not experienced lower costs for these
positions all customers made timely payments, and (3) costs included in the
study such as general insurance, utilities, property taxes, and
appreciation should not be included in a late fee since the level of such
costs does not change as a result of late payments.
John F. Lehman, described as a certified public accountant and former
partner with the accounting firm of Deloitte & Touche who has testified
against at least 15 cable television providers in “late fee” litigation,
also reviewed Time Warner’s cost study and also identified what he
described as a number of fundamental flaws in the basic methodology. His
findings were quite similar to Ms. Crane’s. In addition, he estimated that
the maximum damage caused to Time Warner by a customer who pays late is no
more than 36 cents.
We think the Crane and Lehman affidavits are sufficient to create a
genuine issue of material fact as to whether the late fee provisions were
valid and enforceable liquidated damage clauses. We hold that Time
Warner’s motion for summary judgment was properly denied.
Conclusion
We grant transfer pursuant to Ind. App. R. 58(A) and affirm the
judgment of the trial court.
Shepard, C.J., and Dickson, Boehm, and Rucker, JJ., concur.
-----------------------
[1] American Cablevision of Indianapolis is apparently a predecessor in
interest to Time Warner.
[2] The bills actually received by both Wilson and Whiteman did prominently
set forth the specific amount of the “Late Charge” that would be imposed if
their payments were not received by the due date.
[3] We repeat our observation made in the text that while Wilson’s contract
did not set forth an explicit amount for the “Late Charge” and Whiteman’s
did, neither side in this litigation contends that the difference matters.
Were Wilson litigating this case alone, we might have expected her to
argue that summary judgment was inappropriate because, in the absence of a
specific dollar amount, the contract was ambiguous as to whether she was to
pay actual damages or liquidated damages in the event of a late payment.
See Fresh Cut v. Fazli, 650 N.E.2d 1126, 1133 (Ind. 1995) (where contract
was ambiguous, summary judgment was inappropriate). But because Whiteman’s
contract contained a specific dollar amount, the Customers together could
not make this argument with respect to Customers in Whiteman’s situation.
On the other hand, were Whiteman litigating this case alone, we might
have expected Time Warner to argue for summary judgment on the
straightforward proposition that Whiteman agreed to pay a specific amount
in the event her payment was late and the freely bargained agreement of the
parties should not be set aside. Trimble v. Ameritech Publ'g, 700 N.E.2d
1128, 1129 (Ind. 1998) (“Courts in Indiana have long recognized the freedom
of parties to enter into contracts and have presumed that contracts
represent the freely bargained agreement of the parties.”). But because of
the ambiguity of Wilson’s contract, Time Warner could not make this
argument with respect to Customers in Wilson’s situation.
None of these arguments have been advanced. Instead, as will be
discussed infra, the parties debate whether the “voluntary payment
doctrine” was applicable and whether the late fees constituted liquidated
damages or penalties. We limit our review to the contentions raised by the
parties.
[4] We summarily affirm the Court of Appeals as to this issue. Ind. App.
R. 58(A)(2).
[5] Restatement of Restitution § 45 (1937) provides in relevant part that
“a person who, induced thereto solely by a mistake of law, has conferred a
benefit upon another to satisfy in whole or in part an honest claim of the
other to the performance given, is not entitled to restitution.”
[6] Restatement (Third) of Restitution & Unjust Enrichment § 6(2)
(Tentative Draft No. 1, 2001) provides that “[p]ayment of money resulting
from a mistake by the payor as to the existence or extent of the payor's
obligation to an intended recipient gives the payor a claim in restitution
against the recipient to the extent the payment was not due.” Comment c
points out that “[r]elief is available … without regard to whether the
mistake might be characterized as … a mistake of fact or a mistake of law.”
[7] A study by Time Warner of “the costs it incurred from January through
October 1997 due to the fact that some of its subscribers did not pay their
bills when due” (Br. of Appellant at 7) concluded that amount of the late
fees were “less than the estimated average cost that Time Warner incurs
because of late payment” (Id. at 24). Time Warner characterizes these
conclusions as “undisputed facts.” As discussed under Background, supra,
the costs include those of its “in-house collection department” (consisting
of customer service representatives who speak with delinquent subscribers
and lobby personnel who accept payments from late subscribers who are
late); field collectors who visit subscribers at their homes; and contract
collection agencies that pursue unpaid balances.