In the
United States Court of Appeals
For the Seventh Circuit

No. 00-2915

FRANK P. RANDAZZO, as Trustee for
Frank P. Randazzo Declaration of Trust
Dated July 18, 1997,

Plaintiff-Appellant,

v.

HARRIS BANK PALATINE, N.A.,

Defendant-Appellee.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 6161--Ruben Castillo, Judge.

ARGUED JANUARY 25, 2001--DECIDED August 21, 2001



  Before COFFEY, RIPPLE and DIANE P. WOOD,
Circuit Judges.

  RIPPLE, Circuit Judge. Frank Randazzo,
as trustee under a declaration of trust
("FPR Trust"), entered into three
agreements with Harris Bank Palatine
("Harris") in April 1999 to establish a
$2.8 million revolving credit line. In
September 1999, Mr. Randazzo filed suit
against Harris, alleging breach of
contract and violations of the Illinois
Consumer Fraud and Deceptive Business
Practices Act, 815 ILCS sec. 505/1 et
seq. Harris moved for summary judgment,
and the district court granted the
motion. For the reasons set forth in the
following opinion, we affirm the judgment
of the district court.

I

BACKGROUND

A.   Facts

  Mr. Randazzo, a long-standing customer
of Harris, entered into three agreements
with the bank in April 1999 that
established a $2.8 million revolving
credit line for the FPR Trust. The line
was secured by Mr. Randazzo’s stock in
America Online ("AOL"), Cisco Systems,
and Sun Microsystems. Harris required Mr.
Randazzo to sign blank stock powers for
those securities, giving Harris the
authority to sell them.

  Mr. Randazzo did not read any of the
loan documents that established the
credit line. In fact, he indicated in his
deposition that in the past twenty-five
years he had not read any of the
paperwork accompanying his various loans.
See R.15, Def.’s Ex.2, Randazzo Dep. at
66 ("I’ve never read any loan documents
or any other documents ever put in front
of me by a bank."); see id. at 172 ("Why
would I read them then if I hadn’t read
them for the previous 25 years?"). Mr.
Randazzo explained that John Callahan,
the Harris loan officer servicing the
credit line, explained the key economic
terms of the credit line to him.

  Between April 7, 1999, and August 5,
1999, Mr. Randazzo and Callahan never
spoke concerning the Harris loan or its
underlying collateral. On August 6, 1999,
however, Callahan reviewed the credit
line and, using the bank’s loan-to-value
ratio, determined that Mr. Randazzo had
insufficient collateral to secure the
loan because the value of the AOL stock
had declined in the previous fifteen
months. Callahan thus telephoned Mr.
Randazzo and requested that he either
reduce the loan balance or provide
additional collateral. Callahan told Mr.
Randazzo that Harris was making a margin
call and that the bank would sell the
stock if Mr. Randazzo did not comply. Mr.
Randazzo responded that he was willing
and able to satisfy the request for more
collateral and offered a second lien on
his Florida residence. He also requested
that Callahan delay any action to permit
Mr. Randazzo to supply Harris with an
updated financial statement.

  On August 10, 1999, after reviewing the
updated financial statement that Mr.
Randazzo supplied and meeting with Harris
Bank President Thomas MacCarthy, Callahan
again telephoned Mr. Randazzo. In that
conversation, Callahan told Mr. Randazzo
that Harris would not accept the
additional collateral or the second lien
on Mr. Randazzo’s home. Callahan also
informed him that Harris would sell the
existing collateral to pay off the loan
if Mr. Randazzo did not reduce the loan
balance by $900,000 or provide other,
acceptable collateral.

  Mr. Randazzo was upset by Harris’
actions. In his deposition, he recounted
the ensuing conversation with Callahan as
follows:

I said, "John, how in the hell can you
sell me out when I’ve been a customer of
your bank for over 25 years, never been
late on one payment"--this is when I did
get offended--"never late in 25 years,
paid you millions of dollars? I have
collateral that I’m willing to give you.
. . ."

. . .

He [Callahan] just says that, "Frank,
you’re either going to sell out"--he
says, "Let me remind you that we’ve got
the stock; we’ve got the stock power." I
says, "John," I says, "I can’t believe
you’re doing this to me." I kept
repeating it because I literally could
not believe it.

Id. at 250-51.

  Callahan then presented Mr. Randazzo
with a choice; he told him that either he
had to sell the stock or that the bank
would do so. Because Mr. Randazzo
remembered that Harris’ parent company
once had charged him what he considered
an exorbitant commission to sell stock,
he asked Callahan what Harris would
charge him for the sale. Callahan replied
that he did not know. Mr. Randazzo then
found a broker willing to sell the 23,000
shares for less than $2,000. Mr. Randazzo
called Callahan; Callahan told him that
he had not obtained commission fee
information from any brokers. Mr.
Randazzo then elected to sell the stock
himself. He later explained that he saw
no alternative and wanted, at a minimum,
to avoid the inflated commission that he
expected Harris would have charged for
the sale of his securities. Mr. Randazzo
never questioned Harris’ purported right
to sell the existing collateral and pay
off the loan. According to Mr. Randazzo,
"I never argue with a banker. . . .
[W]hatever bankers want is what I give
them all the time." Id. at 218, 135. He
explained that, if he had "read the
document beforehand, I would have told
Mr. Callahan to stick it right up." Id.
at 277.
  The sale’s proceeds were wired to Harris
and deposited to close out Mr. Randazzo’s
credit line. Three days later, on August
15, 1999, Mr. Randazzo faxed Callahan to
inform him that the stocks that Mr.
Randazzo had sold had increased in value
during the three-day period. He claimed
that, as a result of the sale, he had
lost over $400,000.

B.   District Court Proceedings

  Mr. Randazzo filed this diversity action
against Harris in September 1999,
alleging breach of contract and
violations of the Illinois Consumer Fraud
and Deceptive Business Practices Act, 815
ILCS sec. 505/1 et seq. ("Consumer Fraud
Act" or "the Act"). In essence, Mr.
Randazzo alleged that Harris forced him
to sell the stock although it had no
right to do so because he was not in
default under his agreement with the
bank. Harris moved for summary judgment,
and the district court granted the
motion.

  In the district court’s view, the
voluntary payment doctrine was
dispositive of Mr. Randazzo’s claims.
Under this doctrine, a plaintiff who
voluntarily pays money in reply to an
incorrect or illegal claim of right
cannot recover that payment unless he can
show fraud, coercion, or mistake of fact.
See Smith v. Prime Cable of Chicago, 658
N.E.2d 1325, 1329-30 (Ill. App. Ct.
1995); Jursich v. Arlington Heights Fed.
Sav. & Loan Ass’n, 441 N.E.2d 864, 866
(Ill. App. Ct. 1982). The district court
determined that this doctrine applied
here: Harris claimed that the loan
agreement gave it the right to sell Mr.
Randazzo’s stock held as collateral, and,
because of that representation, Mr.
Randazzo paid the bank.

  The district court refused to permit Mr.
Randazzo to escape the strictures of the
voluntary payment doctrine by claiming
fraud or mistake of fact. Although these
factors can provide protection from the
application of the doctrine, neither is
available when a party to a contract
relies on the interpretation of another
party as to the meaning of the terms of
the contract. "This is true," the
district court explained, "because a
party who has access to a written
instrument cannot reasonably rely on
representations of other contracting
parties respecting the effect of the
written instrument." R.23 at 4.
Consequently, the court held, Mr.
Randazzo cannot assert fraud or mistake
of fact because he chose to rely on
Harris’ representations regarding
thecontract rather than reading the loan
documents himself.

  The district court also recognized that
coercion can render the voluntary payment
doctrine inoperative. Under Illinois law,
a payment is considered coerced when it
is made to avoid the loss of a necessity
or to prevent an injury to a person,
business, or property that is different
from and disproportionately greater than
the unlawful demand. In the district
court’s view, there was no coercion
because the sale of Mr. Randazzo’s stock
did not involve the loss of a necessity.
Moreover, Mr. Randazzo did not produce
any evidence that the loss that he
claimed he suffered from his sale of the
stock was legally different from or
disproportionately greater than what the
loss would have been under Harris’
allegedly unlawful demand.
  In the end, the district court held that
this case was controlled by the
fundamental principle that a mistake of
law does not excuse a voluntary payment.
Mr. Randazzo did not read the loan
documents and instead relied on Harris’
statement that it had a legal right under
the contract to sell the collateral. This
mistake of law, the court concluded,
prevented Mr. Randazzo from recovering
the monies paid.

  The court also held that Mr. Randazzo
failed to state a claim under the
Illinois Consumer Fraud Act for two
reasons. First, Harris did not make a
misrepresentation of fact, as is required
under the Act. Also, Mr. Randazzo failed
to produce evidence of a deceptive
practice, another requirement.

II

DISCUSSION

A.   Voluntary Payment Doctrine

1.

  Illinois has recognized the ancient,
common-law roots of the voluntary payment
doctrine. Accordingly, we begin our
analysis by recalling briefly the origins
and development of that doctrine.

  Although the principle that "ignorance
of the law is no excuse" has been
unquestioned in Anglo-American criminal
jurisprudence, the development of an
analogous principle in civil matters
always has been subject to more
limitations because of the development of
equitable principles in chancery
practice. See generally Stephen L. Camp,
Note, The Voluntary-Payment Doctrine in
Georgia, 16 Ga. L. Rev. 893 (1982).
Indeed, English law at one time
recognized in its chancery courts the
general rule that relief would be granted
for both mistakes of fact or law. See id.
at 895 (citing various cases in which the
English courts granted relief for
mistakes without distinguishing between
mistakes of fact and mistakes of law). In
the early nineteenth century, however,
the English courts and, soon thereafter,
American tribunals began to acknowledge
that recovery ought not be premised on a
mistake of law made with full knowledge
of the facts. See id. at 895-98. The
voluntary payment doctrine is a corollary
to the mistake of law doctrine and, in
its general formulation, holds that a
person who voluntarily pays another with
full knowledge of the facts will not be
entitled to restitution. See id. at 899;
see also Restatement (3rd) of Restitution
and Unjust Enrichment sec. 6 (2000). Its
ties to the mistake of law doctrine have
remained clear, as demonstrated by the
fact that most jurisdictions that have
rejected the mistake of law doctrine also
have rejected the voluntary payment
doctrine. See Camp, supra, at 899.
Nevertheless, equitable principles of
restitution have continued to exert a
strong influence on the application of
the doctrine. Consequently, most courts,
and, when statutory formulations have
been utilized, legislatures have made
exceptions to the voluntary payment
doctrine to recognize the policy concerns
that animate the basic restitutionary
principle that "[a] person who is
unjustly enriched at the expense of
another is liable in restitution to the
other." Restatement (3rd) of Restitution
and Unjust Enrichment sec. 1; see also
Camp, supra, at 907-13.
2.

  The voluntary payment doctrine in
Illinois reflects the common-law history
of the doctrine, including its roots in
the mistake of law doctrine and the
countervailing restitutionary principles.
Not too long ago, an Illinois appellate
court succinctly stated the general rule:
"Absent fraud, coercion or mistake of
fact, monies paid under a claim of right
to payment but under a mistake of law are
not recoverable." Smith, 658 N.E.2d at
1330.

  The reason for the rule, the court
explained, is:

quite obvious when applied to a case of
payment on a mere demand of money
unaccompanied with any power or authority
to enforce such demand, except by a suit
at law. In such case, if the party would
resist an unjust demand, he must do so at
the threshold. The parties treat . . .
each other on equal terms, and if
litigation is intended by the one of whom
the money is demanded, it should precede
payment. When the person making the
payment can only be reached by a
proceeding at law, he is bound to make
his defense in the first instance, and he
cannot postpone the litigation by paying
the demand in silence or under a
reservation of right to litigate the
claim, and afterward sue to recover the
amount paid.

Id. (quoting 66 Am. Jur. 2d Restitution &
Implied Contracts sec. 94, at 1035-36
(1973)).

  Two considerations are clear from the
Illinois court’s discussion. First, the
voluntary payment doctrine retains its
affinity to the mistake of law doctrine.
Second, the voluntary payment rule
ensures that those who desire to assert a
legal right do so at the first possible
opportunity; this way, all interested
parties are aware of that position and
have the opportunity to tailor their own
conduct accordingly.

  Illinois recognizes the traditional
defenses to the voluntary payment
doctrine--fraud and mistake of fact--
defenses designed to identify instances
in which the countervailing policies of
traditional restitutionary principles
should prevail. See, e.g., Smith, 658
N.E.2d at 1329-30; Jursich, 441 N.E.2d at
866. Illinois also has recognized the
defense of coercion and, like many
jurisdictions, has expanded this defense
to cover not only cases of actual
physical duress but also of business
necessity. See Ill. Merchants’ Trust Co.
v. Harvey, 167 N.E. 69, 71 (Ill. 1929),
overruled in part, Kanter & Eisenberg v.
Madison Assocs., 508 N.E.2d 1053, 1055-56
(Ill. 1987). The Illinois Supreme Court
explained in Illinois Merchants’ Trust
that:

At the common law duress meant duress
only of person, and nothing short of a
reasonable apprehension of imminent
danger to life, limb, or liberty sufficed
as a basis for an action to recover money
paid. The doctrine became gradually
extended, however, to recognize duress of
property as a sort of moral duress,
which, equally with duress of person,
entitled one to recover money paid under
its influence. Today the ancient doctrine
of duress of person (later of goods) has
been relaxed, and extended so as to admit
of compulsion of business and
circumstances.

167 N.E. at 71./1

3.

  The district court correctly set out the
controlling principle of law as found in
the decisions of the Illinois courts. It
further recognized the exceptions to the
prevailing rules-- exceptions designed,
as we have noted, to foster the
restitutionary principles that have long
stood in tension with the voluntary
payment rule. The district court properly
acknowledged that Mr. Randazzo could not
make out a case for fraud or mistake of
fact. To the extent that Mr. Randazzo was
ignorant of his rights under the loan
agreement, it was because he refused to
apprise himself of those rights by
reading the appropriate documents.
Illinois courts have made clear that, if
a party signs a contract without reading
it, he must bear the consequences. See
Jursich, 441 N.E.2d at 868; see also Pace
Communications, Inc. v. Moonlight Design,
Inc., 31 F.3d 587, 592 (7th Cir. 1994);
Northwestern Nat’l Ins. Co. v. Donovan,
916 F.2d 372, 378 (7th Cir. 1990).
  Mr. Randazzo cannot, moreover, make out
a case that his compliance with Harris’
demand was based on necessity or was
intended to prevent an injury to person
or property. Indeed, even if we were to
conclude that Mr. Randazzo acted to
prevent an injury, we point out again
that he found himself in that position
simply because he had elected not to
become knowledgeable about the nature of
his legal rights and, correspondingly,
had failed to assert them. His own
testimony makes clear that he never
apprised himself of his legal rights
under the contract and never asserted
those rights.

  Although Illinois recognizes protest as
particularly good evidence of duress, see
Smith, 658 N.E.2d at 1331; Arra v. First
State Bank & Trust Co., 621 N.E.2d 128,
131 (Ill. App. Ct. 1993), Mr. Randazzo’s
"protest" was not the assertion of a
legal right but simply an appeal to
Harris’ business judgment. Instead of
protesting the stock sale as contrary to
a specific provision in the loan
documents, Mr. Randazzo merely
complained, asking Callahan, for example,
"how . . . can you sell me out when I’ve
been a customer of your bank for over 25
years." R.15, Def.’s Ex.2, Randazzo Dep.
at 250. Faced with a demand for a payment
by a party with whom he had a contractual
arrangement, Mr. Randazzo, rather than
assert his rights under the contract in a
timely and forthright manner, chose to
accept the other party’s interpretation
of his legal rights. Indeed, this
behavior is precisely the sort of conduct
that the voluntary payment doctrine was
designed to discourage.

  Under these circumstances, the district
court correctly decided that the
voluntary payment doctrine was
applicable. Mr. Randazzo, therefore,
cannot recoup his payment to Harris./2

B.   Consumer Fraud Act

  Mr. Randazzo also alleges that Harris
violated the Illinois Consumer Fraud and
Deceptive Business Practices Act, 815
ILCS sec. 505/1 et seq., when it asserted
a nonexistent legal right to sell his
collateral. The district court found that
Mr. Randazzo had failed to state a claim
cognizable under the Act because Harris’
alleged misrepresentations were of law,
not of fact. Mr. Randazzo contends on
appeal that an assertion of legal rights
in violation of a contract is actionable.
We cannot accept this view.

  To state a cause of action under the
Consumer Fraud Act, a plaintiff must
plead (1) the misrepresentation or
concealment of a material fact; (2) an
intent by the defendant that the
plaintiff rely on that misrepresentation
or concealment; and (3) that the
deception occurred in the course of
conduct involving trade or commerce. See
Notaro Homes, Inc. v. Chicago Title Ins.
Co., 722 N.E.2d 208, 217 (Ill. App. Ct.
1999). As the prima facie case indicates,
the Act requires a misrepresentation of
fact. See 815 ILCS sec. 505/2
(prohibiting the "use or employment of
any deception, fraud, false pretense,
false promise, misrepresentation or the
concealment,suppression or omission of
any material fact, with intent that
others rely upon the concealment,
suppression or omission of such material
fact"); see also Mack v. Plaza Dewitt
Ltd. P’ship, 484 N.E.2d 900, 906 (Ill.
App. Ct. 1985) (explaining that the Act
requires a misrepresentation of a
material fact).

  The district court was correct in
finding that Mr. Randazzo did not state a
cognizable claim. Harris’ alleged
misrepresentations were not of facts,
thus removing them from the Act’s ambit.
Taking a position on the interpretation
of legal documents, even if erroneous, is
not a deceptive trade practice or act.
See Notaro Homes, 722 N.E.2d at 217 ("[A]
deceptive representation or omission of
law does not constitute a violation of
the Act because both parties are presumed
to be equally capable of knowing and
interpreting the law.")./3

Conclusion

  The voluntary payment doctrine precludes
Mr. Randazzo from recouping his payment
to Harris. Further, he has not stated a
cognizable claim under the Consumer Fraud
Act. Accordingly, we affirm the judgment
of the district court.

AFFIRMED

FOOTNOTES
/1 Although the issue of duress is generally one of
fact, to be judged in light of all the circum-
stances surrounding a given transaction, see
Schlossberg v. E.L. Trendel & Assocs., Inc., 380
N.E.2d 950, 953 (Ill. App. Ct. 1978), Illinois
courts have pinpointed several circumstances in
which duress is commonly found. For example, the
payment of money under pressure of a "disastrous
effect to business" is considered involuntary.
Ross v. City of Geneva, 357 N.E.2d 829, 836 (Ill.
App. Ct. 1976) (citation and quotation marks
omitted); see also Best Buy Co. v. The Harlem-
Irving Cos., 51 F. Supp.2d 889, 898 (N.D. Ill.
1999) (company’s payment of disputed rent charges
sufficient evidence of duress to withstand summa-
ry judgment where landlord threatened to pursue
all remedies under the lease, including eviction,
if the payments were not made); Kanter & Eisen-
berg v. Madison Assocs., 508 N.E.2d 1053, 1056-57
(Ill. 1987) (payment of disputed rent made under
duress where nonpayment would result in the
"termination of a valuable leasehold on which
[the plaintiffs] had apparently spent a million
dollars in improvements"); Ill. Glass Co. v.
Chicago Tel. Co., 85 N.E. 200, 201-02 (Ill. 1908)
(although not finding duress, noting that the
"telephone has become an instrument of such
necessity in business houses that a denial of its
advantages would amount to a destruction of the
business").

  Duress need not, however, reach the level of
disaster to preclude application of the voluntary
payment doctrine. In Schlossberg, 380 N.E.2d 950,
for example, the buyer of a parcel of land had in
turn agreed to resell the property to a third
party. After tender of the purchase price, the
seller demanded an additional $30,000. See id. at
951. Because the buyer was already obligated to
sell the property to the third party and would be
in default if he could not obtain the deed, the
buyer had no choice but to pay the additional
funds and then sue for recovery of them. The
court determined that the buyer’s complaint
contained "sufficient factual allegations to
warrant an evidentiary hearing on the issue of
business duress." Id. at 954; see also Pemberton
v. Williams, 1877 WL 9790, at *2, 87 Ill. 15
(Ill. 1877) (duress question for jury when a
buyer had paid nearly all the contract price for
a parcel of land, had also contracted to resell
the property to a third party, and the original
seller demanded as a condition of the delivery of
the deed a sum larger than was set forth in the
contract); Ball v. Vill. of Streamwood, 665
N.E.2d 311, 318 (Ill. App. Ct. 1996) (duress
excused plaintiffs’ payment of a tax where their
homes were subject to contracts to sell to third
parties, and the village code provided civil
penalties and fines for failure to pay the tax);
DeBruyn v. Elrod, 418 N.E.2d 413, 417 (Ill. App.
Ct. 1981) (duress found when the plaintiffs "were
confronted with the choice of payment of the
sheriff’s fees or his refusal to effect the
requested sale, execution or redemption"); Ross,
357 N.E.2d at 836 (duress found where utility the
sole provider of electricity to the class mem-
bers’ commercial enterprises; there was evidence
that it was the utility’s policy to terminate,
and it had terminated, the supply of electricity
to users for nonpayment of imposed charges);
Peterson v. O’Neill, 1930 WL 2964, at *1-*2, 255
Ill. App. 400 (Ill. App. Ct. 1930) (money paid
under duress when plaintiff had contracted for
the resale of property, the defendant was obli-
gated to furnish the deed, and the defendant
demanded that the plaintiff pay for the deed,
knowing that the plaintiff had contracted for the
sale of the property).

  Illinois law also provides for the recoupment
of payments made under duress for items deemed to
be necessities. Specifically, to determine wheth-
er duress motivated the payment of a demanded
sum, attention must be given to the nature of the
asset involved and the consequences of nonpay-
ment. See Arra v. First State Bank & Trust Co.,
621 N.E.2d 128, 132 (Ill. App. Ct. 1993). If the
asset is a necessity and the consequences of
nonpayment would adversely affect the asset, a
case might be made for duress as a motivating
factor in payment. See id. at 132 (enough evi-
dence of duress to overturn grant of summary
judgment in case involving the plaintiffs’ home,
"which was certainly a necessity"); see also
Geary v. Dominick’s Finer Foods, Inc., 544 N.E.2d
344, 348-53 (Ill. 1989) (because tampons and
sanitary napkins were necessities that could not
be purchased without paying the tax imposed, the
plaintiffs sufficiently pled duress); Getto v.
City of Chicago, 426 N.E.2d 844, 850 (Ill. 1981)
(payment under duress when made to avoid real
threat of loss of telephone service; telephone a
necessity such that "implicit" and "real threat"
that phone service would be terminated amounted
to duress); Ross, 357 N.E.2d at 836 (payment
under duress where termination of electrical
services was threatened, there was evidence that
it was the defendant’s policy to terminate ser-
vices for nonpayment, and no formal protest
mechanism existed that would precede the termina-
tion). But see Smith v. Prime Cable of Chicago,
658 N.E.2d 1325, 1332-33 (Ill. App. Ct. 1995)
(payment for cable service not under duress;
plaintiffs’ allegations of threatened loss were
"wholly speculative" and cable service not a
necessity such that the loss or threatened loss
thereof could furnish a motive for payment);
Dreyfus v. Ameritech Mobile Communications, Inc.,
700 N.E.2d 162, 167 (Ill. App. Ct. 1998) (same
for cellular telephones); Lusinski v. Dominick’s
Finer Foods, Inc., 483 N.E.2d 587, 591 (Ill. App.
Ct. 1985) (plaintiff’s inability to use a dis-
count coupon did not rise to the level of du-
ress); Isberian v. Vill. of Gurnee, 452 N.E.2d
10, 14 (Ill. App. Ct. 1983) ("potential disap-
pointment" of the plaintiff’s child if prohibited
from attending an amusement park insufficient to
warrant a finding that the plaintiff purchased
the ticket under duress).

/2 Because we are   deciding this case under the
voluntary payment   doctrine, we need not address
Harris’ remaining   defense that Mr. Randazzo
breached the loan   agreement.

/3 Mr. Randazzo also claims that Harris violated the
Consumer Fraud Act by subjecting him to threats
and economic coercion. Specifically, he contends
that Harris forced him to sell his stock by
threatening to sell the stock, and charge higher
commissions, if he did not sell it himself.
Harris’ reliance upon its perception of its legal
rights under the contract is insufficient to form
the basis of a violation of the Act.
