White Management Corp., North Country Chicken Corp., M & W Foods, Inc., and M & W Foods II, LLC v. Mountain Mart 105, LLC, and Mountain Mart 106, LLC
Attorneys and Parties
Brief Summary
Commercial leasing and construction/remodel disputes involving Dunkin' Donuts and KFC build-outs, the effect of no-oral-modification and merger clauses, and availability of quasi-contract remedies.
Granted defendants' motion to dismiss in part, dismissing the third cause of action (breach of the December 2020 oral agreement), and the sixth through tenth causes of action (account stated, unjust enrichment, quantum meruit); granted plaintiffs' cross-motion in part.
The appellate court reinstated the third cause of action to the extent White Management Corp. alleged breach of the December 2020 oral agreement regarding remodeling of Dunkin' Donuts stores and common-area improvements, and reinstated the seventh through tenth causes of action for unjust enrichment and quantum meruit.
Under CPLR 3211(a)(7) [rule allowing dismissal for failure to state a cause of action] and CPLR 3211(a)(1) [rule allowing dismissal when documentary evidence conclusively establishes a defense], White Management plausibly alleged a separate oral agreement that did not modify the Dunkin' leases; the Dunkin' leases' no-oral-modification provisions and General Obligations Law § 15-301 [statute barring oral modifications where a contract requires written modifications] did not bar that separate agreement. However, the KFC leases' merger clauses and the parol evidence rule barred reliance on the prior oral agreement for the KFC build-outs, so that portion remained dismissed. The account-stated claim was properly dismissed because documentary submissions showed a live dispute over the balance due. Given disputes over the existence and scope of the oral agreement and whether the leases covered the work, plaintiffs could plead unjust enrichment and quantum meruit in the alternative.
Background
Mountain Mart 105, LLC (Massena) and Mountain Mart 106, LLC (Canton) owned shopping center properties with Dunkin' Donuts stores leased since 2003/2004 by M & W Foods entities. In December 2020, defendants allegedly entered an oral Remodel/Drive-Through Agreement with White Management Corp. under which defendants would (1) remodel existing Dunkin' stores and improve common areas, and (2) construct drive-throughs and deliver a Vanilla Box at each site for future KFC restaurants to be leased and operated by North Country Chicken Corp. White Management would manage the work and be reimbursed. In June 2021, North Country executed KFC leases with defendants, which included merger clauses and obligated defendants to deliver a Vanilla Box by removing existing infrastructure. Plaintiffs alleged defendants partially reimbursed White Management but then refused further payment. Plaintiffs sued for breach of the Dunkin' and KFC leases, breach of the oral agreement, account stated, unjust enrichment, and quantum meruit. Defendants moved to dismiss under CPLR 3211(a)(1) and (7).
Lower Court Decision
Supreme Court, Oneida County, granted defendants' motion in part, dismissing the third cause of action (breach of the December 2020 oral agreement) and the sixth through tenth causes of action (account stated; unjust enrichment; quantum meruit), and granted plaintiffs' cross-motion for leave to amend in part.
Appellate Division Reversal
The Appellate Division modified the order by: (1) reinstating the third cause of action only insofar as White Management alleges breach of the December 2020 oral agreement regarding remodeling of the Dunkin' Donuts stores and common-area improvements (and recognizing that whether White Management is a separate corporate entity is an issue of fact not resolvable on a motion to dismiss); and (2) reinstating the seventh through tenth causes of action for unjust enrichment and quantum meruit because plaintiffs may plead quasi-contract in the alternative where the existence/coverage of the contract is disputed. It affirmed dismissal of the portion of the third cause relating to KFC drive-throughs and Vanilla Box build-outs due to the KFC leases' merger clauses and the parol evidence rule, and it affirmed dismissal of the account stated claim due to a demonstrated dispute over the amount owed.
Legal Significance
Clarifies that a no-oral-modification clause in existing leases does not bar a separate oral agreement that does not modify those leases; merger clauses in later, integrated leases bar reliance on prior oral promises concerning the same subject matter. Also confirms that at the pleadings stage under CPLR 3211, plaintiffs may pursue unjust enrichment and quantum meruit in the alternative where there is a bona fide dispute over the existence of a governing contract or whether it covers the disputed work.
Separate oral agreements not altering written lease terms may be enforceable despite no-oral-modification clauses, but merger clauses in later integrated leases will supersede prior oral promises; quasi-contract claims may proceed in the alternative when contract existence or scope is contested, while account stated fails if the debt is genuinely disputed.