Quantum meruit

Quantum meruit is a Latin phrase meaning “as much as he has deserved”. In the context of contract law, it means something along the lines of “reasonable value of services”.

See also…

Quantum meruit

New York Appellate Division Reports (Court Case)

1-4-2007] 2007 NY Slip Op 00040 IIG Capital LLC,
Plaintiff-Appellant-Respondent, v. Archipelago, L.L.C., et
al., Defendants-Respondents-Appellants. 7949. Appellate
Division of the Supreme Court of New York, First
Department. Decided on January 4, 2007.


Reisman, Peirez & Reisman, L.L.P., Garden City (Joseph
Capobianco of counsel), for appellant-respondent.

Baker & McKenzie LLP, Chicago, IL (Patrick J. Ahern, of the
Illinois Bar, admitted pro hac vice, of counsel), for

Order, Supreme Court, New York County (Charles Edward
Ramos, J.), entered January 3, 2005, which granted
defendants’ CPLR 3211(a)(7) motion to the extent of
dismissing plaintiff’s causes of action based on quantum
meruit and unjust enrichment, and denied dismissal of the
breach of contract and account stated causes of action,
modified, on the law, the motion denied with respect to the
causes of action based on quantum meruit and unjust
enrichment and those causes of action reinstated, and
otherwise affirmed, without costs.

In this action by a factor to collect on accounts
receivable, the account debtors’ motion to dismiss the
causes of action for breach of contract and account stated
was properly denied. Where the parties submit extrinsic
evidence in connection with a CPLR 3211(a)(7) motion to
dismiss the complaint and the court declines to treat the
motion as one for summary judgment under CPLR 3211(c), the
appropriate standard of review ” is whether the proponent
of the pleading has a cause of action, not whether he has
stated one'” (Leon v Martinez, 84 NY2d 83, 88 [1994],
quoting Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]).

Under New York’s Uniform Commercial Code § 9-406(a),
an account debtor may discharge an obligation “by paying
the assignor until, but not after, the account debtor
receives a notification, authenticated by the assignor or
assignee, that the amount due or to become due has been
assigned and that payment is to be made to the assignee”
(see generally General Motors Acceptance Corp. v
Clifton-Fine Cent. School Dist., 85 NY2d 232 [1995]
[interpreting former UCC 9-318(3), predecessor to UCC
9-406(a)]). Here, plaintiff’s complaint alleges that in
August 2002, it notified defendants by letter that all of
assignor MarketXT’s accounts, which included defendants’
accounts, had been assigned to plaintiff and that
subsequent payments on the account should be made to
plaintiff at a specified address[fn1]. Accompanying
plaintiff’s letter were[*2]invoices that referenced these
accounts and were prominently stamped with a similar notice
of assignment and direction that payment be made to
plaintiff in the future. Defendants deny receipt of the
letter and invoices, and alternatively argue that such
notice, even if received, was insufficient under the
Uniform Commercial Code. We disagree.

Defendants’ denial of receipt does not afford a basis for
dismissal, given the clear factual dispute raised by the
affidavit of plaintiff’s comptroller stating that his
office mailed these specific documents to plaintiff’s
correct address, with Federal Express receipts offered as
proof of mailing. We also reject defendants’ argument that
the notice of assignment provided by plaintiff was
inadequate under UCC 9-406(a). Collectively, the letter and
the invoices reasonably identified the accounts assigned
and clearly instructed that payment on the invoices be
redirected to plaintiff (see Capital Factors v Caldor,
Inc., 182 AD2d 532 [1992]; Hamilton Group [Delaware] v
Ballard Spahr Andrews & Ingersoll, 1 AD3d 969 [2003]). Nor
was the notice rendered inadequate as a matter of law
because the August 2002 letter was not dated and was
addressed to “Ladies and Gentlemen.” The Federal Express
receipts submitted in opposition to the motion, while not
conclusively demonstrating delivery, suffice to support
plaintiff’s allegation that notice of the assignment was
provided to defendants on the specified dates. Defendant
Redibook also denies receiving notice on the ground that it
had already been merged into another company on the date of
the mailing. However, the Federal Express receipt shows
that the mailing was signed for by a representative of
Redibook, which strongly indicates that notice was
received. Moreover, if defendants or their employees had
any doubt as to the import of the assignment notices and
invoices they signed for, the UCC provides a mechanism
whereby the account debtor may require that the assignee
“furnish reasonable proof that the assignment has been
made” (UCC 9-406[c]). Defendants made no such request.

Defendants’ assertions that plaintiff’s complaint failed to
allege an outright purchase or assignment of defendants’
accounts, or that plaintiff’s allegation of such purchase
is flatly contradicted by the subject factoring agreement,
are without merit. Plaintiff’s complaint included the
express allegation that “[i]n accordance with the Factoring
Agreement, MarketXT assigned all of its rights, title and
interest in and to its accounts with defendants to IIG.” In
addition, plaintiff’s comptroller expressly alleged a
purchase of defendants’ accounts in an affidavit submitted
in opposition to the motion. Such allegations were more
than sufficient to allege a purchase.

Although defendants correctly note that the factoring
agreement does not require the purchase of all of
MarketXT’s accounts, but only those listed on a schedule of
accounts, no such schedule has been provided by either
party[fn2]. In light of this circumstance, we find that
defendants have failed to meet their burden of producing
evidence that clearly refutes plaintiff’s allegation that
defendants’ accounts were purchased by plaintiff pursuant
to the factoring[*3]agreement (see Leon, 84 NY2d at 87-88;
see also Guggenheimer, 43 NY2d at 275 [“unless it has been
shown that a material fact as claimed by the pleader to be
one is not a fact at all and unless it can be said that no
significant dispute exists regarding it, . . . dismissal
should not eventuate”]; cf. Griffin v Anslow, 17 AD3d 889,
892-893 [2005] [conclusory allegation of attorney-client
relationship in malpractice action did not defeat
attorney’s conclusive documentary evidence showing absence
of privity]).

That defendants reached a $3.1 million settlement in 2003
with MarketXT regarding these same accounts does not
warrant a different result. If, as alleged, defendants’
accounts with MarketXT were assigned to plaintiff pursuant
to the factoring agreement, and proper notice was given,
defendants’ payment in settlement to MarketXT would not be
a defense to an action by plaintiff to collect on the
accounts (cf. General Motors Acceptance Corp., 85 NY2d at
236 [“after the account debtor receives notification that
the right has been assigned and the assignee is to be paid,
and it continues to pay the assignor, the account debtor is
liable to the assignee and the fact that payment was made
to the assignor is not a defense in an action brought by
the assignee”]).

We reject, however, plaintiff’s alternative claim that it
is authorized to collect on defendants’ accounts by virtue
of the security interest granted to it under the factoring
agreement. Paragraph 8.1(b) of the agreement provides that
plaintiff’s right to collect on the collateral is expressly
conditioned on an event of default, and no such default is
alleged in the complaint.

Plaintiff also argues that a secured party with a security
interest is the equivalent of an assignee for purposes of
UCC 9-406. However, the cases plaintiff cites for this
proposition do not support it. The cited cases deal with a
distinct section of the UCC (former UCC 9-318[1]), which
provided that unless otherwise agreed, the rights of an
assignee are subject to the terms of the original contract
between the account debtor and assignor, including any
defenses authorized therein (see e.g. Bank of Waunakee v
Rochester Cheese Sales, Inc., 906 F2d 1185, 1189-1190 [7th
Cir 1990]; Fleet Capital Corp. v Yamaha Motor Corp, U.S.A.,
2002 US Dist LEXIS 18115, at *94-96 [SDNY 2002]; PHD, Inc.
v Coast Bus. Credit, 147 F Supp 2d 809, 814, 818 [ND Ohio
2001]). While these cases treat assignees and holders of
security interests similarly for purposes of holding them
subject to defenses available to the original account
debtors, they provide no authority to treat plaintiff’s
security interest as an assignment for collection purposes
under UCC 9-406.

With respect to plaintiff’s appeal from the same order, we
modify to reinstate plaintiff’s causes of action for
quantum meruit and unjust enrichment. “While the existence
of a valid and enforceable contract governing a particular
subject matter ordinarily precludes recovery in
quasi-contract for events arising out of the same subject
matter (Clark-Fitzpatrick, Inc. v Long Is. RR. Co., 70 NY2d
382, 388 [1987]), where there is a bona fide dispute as to
the existence of a contract or where the contract does not
cover the dispute in issue, plaintiff may proceed upon a
theory of quantum meruit and will not be required to elect
his or her remedies (Joseph Sternberg, Inc. v Walber 36th
St. Assoc., 187 AD2d 225, 228 [1993])” (American Tel. &
Util. Consultants v Beth Israel Med. Ctr., 307 AD2d 834,
835 [2003]).

Given the existing, unresolved dispute regarding whether
defendants’ accounts were among those assigned to plaintiff
pursuant to the factoring agreement, and thus, whether the
express factoring agreement covers the dispute in issue,
dismissal of the quasi-contract causes of action at this
juncture was premature (see id.).

We reject the motion court’s implicit finding that, with
regard to the viability of the[*4]quasi-contract claims,
the only relevant express contract is that between MarketXT
and defendants. Because plaintiff’s right to recover in
this action depends not only on that contract but also the
factoring agreement between plaintiff and MarketXT, the
ambiguity regarding whether the factoring agreement covers
the dispute in issue is a sufficient basis to deny
dismissal of the quasi-contract claims.

The dissent’s argument that plaintiff has abandoned its
allegation that it purchased defendants’ accounts is
incorrect. Plaintiff alleged a purchase of those accounts
in its complaint, its comptroller swore under oath that
such accounts were purchased, and the purchase allegation
was repeated by plaintiff in its opening brief on this
appeal. That plaintiff failed to reiterate or highlight
this argument in its reply brief on this appeal does not,
contrary to the dissent’s view, constitute an abandonment
of the argument. Rather, given the unequivocal allegations
of purchase in plaintiff’s complaint and the comptroller’s
affidavit, it is more likely that plaintiff’s counsel
utilized his reply brief to address the more tenable
arguments raised in defendants’ brief.

All concur except McGuire, J. who dissents in a memorandum
as follows:

[fn1] The letter, signed by plaintiff’s managing director,
specifically instructed: “To the extent that you are now
indebted or may in the future become indebted to [MarketXT]
on an account or general intangible, payment thereof is to
be made payable to us and not the client or any other
entity. Payment in any other way will not discharge this

[fn2] Although defendants submitted a list of MarketXT
accounts which identifies their own accounts with MarketXT
as “Non-Factor,” they do not argue that this list is the
“Schedule of Accounts” referred to in the factoring
agreement between plaintiff and MarketXT.

McGUIRE, J. (dissenting)

I respectfully dissent, as I disagree with the majority in
two respects. First, in my view plaintiff IIG Capital LLC
(IIG) has abandoned on these cross appeals the conclusory
allegation in its complaint that it “purchased” from
nonparty MarketXT, Inc. (MarketXT) the debts (the
Archipelago accounts) owed to MarketXT by defendants
Archipelago, L.L.C. and Archipelago Securities, L.L.C.
(collectively, Archipelago). Given IIG’s tacit but
unmistakable concession in the reply brief it filed with
this Court that it did not “purchase” the Archipelago
accounts, the only remaining question on Archipelago’s
appeal is whether IIG, by virtue of the security interest it
obtained in the accounts receivable of MarketXT, is
entitled to collect on the accounts from Archipelago. Here,
I agree with the majority that, despite IIG’s claim that as
a secured party it is an assignee of MarketXT, IIG is not
entitled to collect on the Archipelago accounts. As the
majority correctly recognizes, under the factoring
agreement IIG’s “right to collect on the collateral is
expressly conditioned on an event of default, and no such
default is alleged in the complaint.” For this reason, and
because IIG has abandoned the only other allegation that
could sustain its first, second, fifth and sixth causes of
action, Archipelago’s motion to dismiss those causes of
action should have been granted[fn3]. Second, I disagree
with the majority’s determination[*5]to reinstate the other
causes of action for quantum meruit and unjust enrichment.
In my view, IIG’s inability to allege anything more than a
security interest in the Archipelago accounts of MarketXT is
equally fatal to these causes of action.

In paragraph 10 of its complaint, IIG alleged as follows:

10. On or about July 16, 2002, MarketXT and IIG entered
into a Factoring and Security Agreement dated July 16,
2002, as amended by First Amendment of Factoring and
Security Agreement, whereby IIG purchased the Accounts of
MarketXT (“Factoring Agreement”). A copy of the Factoring
Agreement is annexed hereto as Exhibit 1.

However, as Archipelago stressed in its opening brief filed
with this Court, the factoring agreement makes clear that
IIG did not purchase any of MarketXT accounts receivable
merely by executing the agreement. To the contrary, the
agreement specified that MarketXT (denominated the

“shall submit for sale to Purchaser [IIG] as absolute
owner, all of Seller’s Accounts as listed from time to
time on Schedules of Accounts. Upon purchase, Purchaser
will assume the risk of non-payment . . .” (emphasis

Furthermore, the factoring agreement defines the term
“Schedule of Accounts” as “a form supplied by Purchaser
from time to time wherein Seller lists such of its Accounts
as it requests that Purchaser purchase under the terms of
this Agreement” (emphasis added).

That the factoring agreement provided a mechanism by which
IIG could purchase accounts of MarketXT but did not itself
effect the purchase of any of MarketXT’s accounts
receivable is hammered home by other provisions of the
factoring agreement. Thus, the agreement stipulates that
“Purchaser may purchase in its sole discretion from Seller
such Accounts as Purchaser determines to be Eligible
Accounts” (emphasis added), and defines the term “Eligible
Account” as one “which is acceptable for purchase as
determined by Purchaser in the exercise of its reasonable
sole credit or business judgment” (emphasis added).

As Archipelago also stressed in its opening brief, by
annexing the factoring agreement to its complaint, IIG
“made the contract a part of its pleading for all purposes”
(805 Third Ave. Co. v M.W. Realty Assoc., 58 NY2d 447, 451
[1983] [citations omitted]). Moreover, the “provisions [of
the contract] establish the rights of the parties and
prevail over conclusory allegations of the complaint” (id.
[citations omitted]). In addition, Archipelago stressed as
well that IIG did not allege in its complaint that the
Archipelago accounts were contained in or listed on a
“Schedule of Accounts” as the factoring agreement required
when accounts of MarketXT were to be purchased by IIG. The
absence of such an allegation also is significant (id. at
452 [affirming grant of defendant’s motion to dismiss under
CPLR 3211(a)(7) and observing that although plaintiff’s
contractual rights were conditioned on its having performed
certain acts, “[p]laintiff does not contend, nor has it
pleaded, that it did any of these things”]).

The majority concludes that Archipelago has failed to meet
its burden of producing evidence that “clearly refutes” the
allegation of the complaint that “[Archipelago’s] accounts
were purchased by [IIG] pursuant to the factoring
agreement.” The complaint, however, does not[*6]make any
allegation about the purchase of Archipelago’s or any other
entity’s accounts with MarketXT “pursuant to” the factoring
agreement. Rather, the complaint alleges that “MarketXT and
IIG entered into a Factoring Agreement . . . whereby IIG
purchased the Accounts of MarketXT” (emphasis added).

Thus, the complaint alleges a legal conclusion about the
factoring agreement, namely, that by virtue of the
execution of the factoring agreement IIG purchased the
accounts of MarketXT. That allegation is clearly refuted by
the terms of the factoring agreement, which establish that
none of MarketXT’s accounts were purchased by the mere
execution of the agreement. Here, as in 805 Third Ave. Co.,
the “provisions [of the contract] . . . prevail over
conclusory allegations of the complaint” (58 NY2d at 451);
IIG has not pleaded matters essential to its recovery under
the contract — i.e., that the Archipelago accounts
were listed on a “Schedule of Accounts” submitted to it by
MarketXT — (id. at 452); “this action is controlled
by the contract annexed to the complaint” (id. at 453); and
“[t]here is no dispute about the facts, only a dispute of
law concerning the interpretation of the instrument”

In any event, IIG’s abandonment on appeal of the lone and
conclusory allegation of paragraph 10 of the complaint that
it “purchased” the accounts of MarketXT by entering into
the factoring agreement is an independent reason to
disregard it. In its reply brief, IIG did not take issue
with Archipelago’s contention that this allegation had to
be disregarded because it was a conclusory allegation that
was contradicted by the terms of the very factoring
agreement IIG had annexed to its complaint. Indeed, IIG did
not discuss 805 Third Ave. Co. or any of the other cases
cited by Archipelago in support of its position that the
allegation had to be disregarded.

In fact, in its reply brief, IIG did not even mention this
allegation of paragraph 10. Nor did it mention the equally
conclusory allegation that IIG had “purchased” the accounts
of MarketXT made by its comptroller in opposing
Archipelago’s motion to dismiss. In fact, it all but
expressly disavowed the comptroller’s allegation[fn5].
Rather than make any attempt to defend[*7]the allegation
that it had “purchased” the Archipelago accounts, IIG
placed all its eggs in a different basket by contending
that it was an assignee of MarketXT’s accounts, including
the Archipelago accounts, by virtue of the factoring

Understandably, in the reply brief that Archipelago
submitted on its appeal after IIG’s reply brief on its
appeal, Archipelago urges that IIG admitted in its reply
brief that it never purchased the Archipelago accounts.
Regardless of whether IIG actually made such an admission,
it is clear that on this appeal IIG is not standing behind
the allegation of paragraph 10 that it purchased the
Archipelago accounts. Accordingly, this Court should not
stand behind it either.[fn6]

For essentially the same reason, that is, IIG has alleged
only that it has a security interest in the Archipelago
accounts, IIG’s causes of action for quantum meruit and
unjust enrichment, the third, fourth, seventh and eighth
causes of action, also should be dismissed. With these
causes of action, IIG seeks to stand in the shoes of
MarketXT, the creditor of Archipelago. The factoring
agreement, however, authorizes IIG to stand in the shoes of
MarketXT only in the event of a default. Because no such
default is alleged, IIG has no standing to assert quantum
meruit and unjust enrichment claims — or, for that
matter, account stated claims — against Archipelago.
IIG, of course, did not deal or trade with Archipelago. In
other words, IIG is essentially a stranger to the very
relationships between MarketXT and Archipelago that might
permit MarketXT to bring quasi-contract claims against

Accordingly, I would modify the order of Supreme Court by
granting the motion to dismiss the breach of contract and
account stated causes of action.


[fn3] The first and fifth causes of action allege breaches
by, respectively, Archipelago, L.L.C. and Archipelago
Securities, L.L.C., of obligations to pay MarketXT for
services it provided to each entity. The second and sixth
causes of action, for accounts stated, allege that
Archipelago, L.L.C. and Archipelago Securities, L.L.C.
received and accepted without objection statements of
account rendered by MarketXT.

[fn4] The majority notes that no schedule of accounts
listing the Archipelago accounts “has been provided by
either party,” and concludes that this “circumstance”
supports its position that Archipelago failed to meet its
burden on its motion to dismiss. The majority, however,
offers no factual basis for its unstated assumption that
Archipelago, for some reason, would have copies of any such
schedules that may have been exchanged between IIG and

[fn5] In his affidavit, the comptroller makes reference to
the allegations of paragraph 15 of the complaint that “[i]n
accordance with the factoring agreement, MarketXT assigned
all of its rights, title and interest in and for its
Accounts with defendants to IIG.” The comptroller
immediately went on to assert that “[t]he Accounts referred
in this paragraph [15] include, as defined in the Factoring
Agreement, Defendants’ Accounts which were purchased by
IIG” (emphasis in original). In its reply brief, however,
IIG pointed only to the comptroller’s reliance on the
allegation of paragraph 15 of an assignment and to the
comptroller’s assertion that the referenced accounts
include the Archipelago accounts. IIG’s failure to mention
the comptroller’s assertion in the same sentence that such
accounts had been “purchased” by IIG is certainly not an

[fn6] Apart from citing to the allegation by IIG’s
comptroller that IIG all but expressly disavowed —
that it had “purchased” the accounts of MarketXT —
the majority cites the allegation of paragraph 15 that
“[i]n accordance with the Factoring Agreement, MarketXT
assigned all of its rights, title and interest in and to
its Accounts with defendants to IIG.” This allegation by
IIG that it is the assignee of MarketXT, however, is
nothing more than a legal conclusion by IIG that as the
holder of a security interest in MarketXT’s accounts it is
an assignee for purposes of UCC 9-406. That the majority
would cite to it is curious. After all, as the majority
correctly recognizes, that conclusion is not defensible.