Slaten et al v. Slaten et al

Filing 41

OPINION AND ORDER re: 26 FIRST MOTION to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6). filed by Whitney J Slaten, Martha Slaten. The motion is GRANTED IN PART and DENIED IN PART. All of plaintiffs' claims are dismissed except for the breach of contract claim, which shall proceed. By November 28, 2023, defendants shall file an answer to the amended complaint. By separate Order, the Court will schedule an initial conference. The Clerk is instructed terminate the motion. (Doc. #26). SO ORDERED. Martha Slaten answer due 11/28/2023; Whitney J Slaten answer due 11/28/2023. (Signed by Judge Vincent L. Briccetti on 11/14/2023) (mml)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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WARREN C. SLATEN and SYBIL SLATEN,
:
Plaintiffs,
:
v.
:
:
WHITNEY J. SLATEN and MARTHA
:
SLATEN,
:
Defendants.
:
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OPINION AND ORDER
22 CV 9488 (VB)

Briccetti, J.:
Plaintiffs Warren C. Slaten and Sybil Slaten bring this action against their son and
daughter-in-law, defendants Whitney J. Slaten and Martha Slaten, respectively, asserting breach
of contract, conversion, fraud, and equitable lien claims.
Now pending is defendants’ unopposed motion to dismiss the amended complaint
pursuant to Rule 12(b)(6). (Doc. #26).
For the following reasons, the motion is GRANTED IN PART and DENIED IN PART.
The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332.
BACKGROUND
For the purpose of ruling on the motion, the Court accepts as true all well-pleaded
allegations in the amended complaint and draws all reasonable inferences in plaintiffs’ favor, as
summarized below.
Plaintiffs allege they agreed to help defendants obtain a $406,899.79 line of credit from
Morgan Stanley by pledging plaintiffs’ assets—primarily retirement accounts—as collateral for
the loan (the “Loan”). According to plaintiffs, defendants used the Loan to purchase a home in
Rhinebeck, New York (the “Property”). Defendants allegedly needed to use plaintiffs’ accounts
as collateral because defendants’ poor credit prevented them from securing a conventional

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mortgage. Accordingly, on June 18, 2018, Morgan Stanley executed a Liquid Asset Line
Agreement (“LAL Agreement”) signed by defendant Whitney Slaten and a Third Party Pledge
Agreement (“PA”) signed by plaintiff Warren Slaten. 1 The LAL Agreement listed three
accounts as collateral, two of which are individual accounts of plaintiff Warren Slaten, and one
of which is held jointly by plaintiffs.
Plaintiffs and defendants did not enter into a formal written agreement among themselves
regarding entry into the LAL Agreement and PA. However, according to plaintiffs, their
agreement to pledge their Morgan Stanley accounts as collateral for the LAL Agreement was
contingent upon defendants repaying the Loan within one year using “funds defendants would
then be able to obtain through a conventional mortgage on [the Property].” (Doc. #24 (“Am
Compl.”) ¶ 5). Plaintiffs contend this agreement was “discussed and expressed both verbally and
within the numerous electronic exchanges between the parties.” (Id. ¶ 4).
According to plaintiffs, defendants defaulted on the alleged agreement by failing to
secure a conventional mortgage on the Property and repay the Loan within one year. Plaintiffs
contend they repeatedly demanded defendants make monthly interest payments on the Loan to
prevent default, which would put plaintiffs’ accounts at risk. On November 1, 2019, defendants
allegedly began making $2,000 monthly payments on the accumulating interest. However,
according to plaintiffs, defendants stopped making monthly payments in May 2022, again
putting plaintiffs’ assets in jeopardy.
In August 2022, plaintiffs allege they offered to provide a private mortgage to defendants
to enable defendants to repay the Loan, which would free plaintiffs’ assets from being tied up as

1

The LAL Agreement and PA are attached as exhibits to the amended complaint. (Docs.
##24-1–24-5).
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Loan collateral (as well as provide plaintiffs with the ability to foreclose if defendants became
delinquent on payments). Defendants, however, refused this offer and claimed the Loan was
“part of their inheritance from plaintiffs, which defendants should receive at this time rather than
after the deaths of both plaintiffs.” (Am. Compl. ¶ 10).
In August 2022, plaintiffs allege defendants’ failure to make monthly payments to
Morgan Stanley forced plaintiffs to use personal funds to pay off the balance of the debt, and that
plaintiffs had to expend an additional $25,000 in 2022 “to ensure property taxes were paid and
prevent a tax lien and potential tax sale of” the Property. (Am. Compl. ¶¶ 11, 24). According to
plaintiffs, defendants have refused to agree to any repayment plan and continue to reside at the
Property free of any mortgage or rent payments. As a result, plaintiffs allege they have incurred
damages of $340,000 and that damages are continuing to accrue.
DISCUSSION
I.

Standard of Review
In deciding a Rule 12(b)(6) motion, the Court evaluates the sufficiency of the operative

complaint under the “two-pronged approach” articulated by the Supreme Court in Ashcroft v.
Iqbal, 556 U.S. 662, 679 (2009). 2 First, plaintiffs’ legal conclusions and “[t]hreadbare recitals of
the elements of a cause of action, supported by mere conclusory statements,” are not entitled to
the assumption of truth and are thus not sufficient to withstand a motion to dismiss. Id. at 678;
Hayden v. Paterson, 594 F.3d 150, 161 (2d Cir. 2010). Second, “[w]hen there are well-pleaded
factual allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. at 679.

2

Unless otherwise indicated, case quotations omit all internal citations, quotations,
footnotes, and alterations.
3

To survive a Rule 12(b)(6) motion, the allegations in the complaint must meet a standard
of “plausibility.” Ashcroft v. Iqbal, 556 U.S. at 678; Bell Atl. Corp. v. Twombly, 550 U.S. 544,
564 (2007). A claim is facially plausible “when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. at 678. “The plausibility standard is not akin to a
‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted
unlawfully.” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. at 556).
“In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6),
a district court may consider the facts alleged in the complaint, documents attached to the
complaint as exhibits, and documents incorporated by reference in the complaint.” DiFolco v.
MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010). “Where a document is
not incorporated by reference, the court may nevertheless consider it where the complaint relies
heavily upon its terms and effect, thereby rendering the document integral to the complaint.” Id.
II.

Breach of Contract Claim
Defendants argue plaintiffs fail to state a breach of contract claim because they do not

allege the existence of an enforceable contract between the parties, and their claim is
nevertheless barred by the New York statute of frauds because it cannot be performed within one
year and relates to an interest in real property.
The Court disagrees.
A.

Legal Standard

“Under New York law, a breach of contract claim requires proof of (1) an agreement, (2)
adequate performance by the plaintiff, (3) breach by the defendant, and (4) damages.” Fischer &
Mandell, LLP v. Citibank, N.A., 632 F.3d 793, 799 (2d Cir. 2011).

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A plaintiff must allege facts sufficient to show an enforceable contract existed including
facts “relating to the formation of the contract, the date it took place, the contract’s major terms,
the parties to the contract, or [a defendant’s] assent to its terms.” Berman v. Sugo LLC, 580 F.
Supp. 2d 191, 202 (S.D.N.Y. 2008); see also Valley Lane Indus. Co. v. Victoria’s Secret Direct
Brand Mgmt., L.L.C., 455 F. App’x 102, 104 (2d Cir. 2012) (summary order). “The existence of
a contract may be established through the conduct of the parties recognizing the contract.”
Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 97 (2d Cir. 2007). “In
determining whether the parties’ conduct is consistent with the existence of a binding contract, it
is necessary that the totality of all acts of the parties, their relationship and their objectives be
considered.” Id.
Under New York law, an agreement, which by its terms, cannot be performed within one
year or concerns a conveyance of an “estate or interest in real property” must be in writing or is
barred by the statute of frauds. N.Y. Gen. Oblig. Law §§ 5-701(a)(1), 703(1). The one-year
provision in the New York statute of frauds does not preclude an oral contract “unless there is
not the slightest possibility that it can be fully performed within one year.” Ohanian v. Avis
Rent A Car Sys., Inc., 779 F.2d 101, 106 (2d Cir. 1985).
B.

Analysis

First, fairly construed, the amended complaint plausibly pleads the existence of an
enforceable agreement between the parties. Defendants contend no contract exists because there
was no written agreement between the parties. But plaintiffs do not plead there is a formal
written contract to which both parties are signatories. Instead, plaintiffs allege defendants, in
consideration of using plaintiffs’ assets to secure the Loan, “agreed to repay with interest said
sum or any amount thereof utilized by defendants within one year or upon qualifying for a

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conventional mortgage, whichever even[t] occurred earlier.” (Am. Compl. ¶ 19). Plaintiffs were
allegedly induced to enter into this agreement by the promise of repayment “and the family
relationship between the parties.” (Id. ¶ 15). Plaintiffs allege this agreement was made verbally
and via “numerous electronic exchanges.” (Id. ¶ 4). As such, plaintiffs have plausibly alleged
the existence of an enforceable agreement at this early stage. 3
Second, the amended complaint plausibly alleges plaintiffs performed by signing the PA
and using their assets to secure the Loan for defendants’ use.
Third, the amended complaint plausibly alleges defendants breached the agreement by
failing to obtain a conventional mortgage and repay the Loan within one year.
Fourth, the amended complaint plausibly alleges damages. As a result of defendants’
alleged failure to repay the Loan, plaintiffs had to pay Morgan Stanley monthly interest
payments from June 2022 through August 2022 to avoid default. Plaintiffs likewise allege they
used personal funds to pay off the debt in August 2022 to avoid default and release their assets
from being used as collateral. Therefore, plaintiffs adequately allege they have incurred
damages.
Moreover, the agreement, as alleged, is not barred by the New York statute of frauds.
First, plaintiffs allege the parties “agreed the line of credit, to the extent utilized, would
be repaid within one year.” (Am. Compl. ¶ 3).

3

Although defendants attach several exhibits to their motion to dismiss stating that
plaintiffs are “undoubtedly aware” of these documents (Def. Mem. 11), on a motion to dismiss,
the Court considers only documents attached to, incorporated by reference in, or integral to the
amended complaint. DiFolco v. MSNBC Cable L.L.C., 622 F.3d at 111. As such, the Court has
not considered Exhibits 4–9 to defendants’ motion. (Docs. ##26-11 to 26-16).
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Second, plaintiffs do not allege the agreement conveyed an interest in the Property. 4 In
substance, plaintiffs allege defendants agreed to pay back the Loan within one year or upon
obtaining a conventional mortgage (whichever occurred first) in exchange for using plaintiffs’
assets to secure the Loan. This type of agreement does not fall within the ambit of the statute of
frauds. See Ohr Somayach/Joseph Tanenbaum Educ. Ctr. v. Farleigh Int’l. Ltd., 483 F. Supp. 3d
195, 206 (S.D.N.Y. 2020) (finding the New York statute of frauds inapplicable where plaintiffs
“do not allege that they obtained or conveyed any interest in real property”).
Accordingly, plaintiffs’ breach of contract claim may proceed.
III.

Conversion Claim
Defendants argue plaintiffs’ conversion claim must be dismissed because plaintiffs have

not plausibly alleged they wrongfully took or detained plaintiffs’ property to the exclusion of
plaintiffs’ rights, and the three-year statute of limitations has run.
The Court agrees the conversion claim must be dismissed, but for a different reason,
namely that it is duplicative of the breach of contract claim.
Generally, “[f]or a claim of conversion to survive a motion to dismiss, it is not enough
merely to incorporate the factual allegations relating to breach of contract.” Flatscher v. The
Manhattan Sch. of Music, 551 F. Supp. 3d 273, 288 (S.D.N.Y. 2021). “Rather, a conversion
claim may only succeed if a plaintiff alleges wrongs and damages distinct from those predicated
on a breach of contract.” Id.

4

Plaintiffs state they “believed [the Property] would be collateral for any advancements
they may be forced to make over and above the pledge of their holdings” (Am. Compl. ¶ 3), but
this allegation, construed in plaintiffs’ favor, suggests plaintiffs believed defendants had a good
faith basis to represent they could repay any additional amounts defendants ended up
expending—not that the parties agreed plaintiffs would receive a conveyance of real property.
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Plaintiffs’ conversion claim is neither premised on distinct facts nor seeks distinct
damages from plaintiffs’ breach of contract claim. Both claims rest on defendants’ alleged
failure to qualify for a conventional mortgage or repay the Loan and seek the same damages.
Accordingly, plaintiffs’ conversion claim must be dismissed.
IV.

Fraud Claim
Defendants argue plaintiffs’ fraud claim must be dismissed because plaintiffs fail to plead

defendants knew, when the alleged agreement was entered, they would not fulfill its terms.
The Court agrees the fraud claim must be dismissed, but because it is duplicative of the
breach of contract claim.
“A fraud claim is not sufficiently stated where it alleges in essence that a defendant did
not intend to perform a contract with a plaintiff when he made it.” Meehan v. Meehan, 227
A.D.2d 268, 270 (1st Dept. 1996)); see also FPP, LLC v. Xaxis US, LLC, 764 F. App’x 92, 94
(2d Cir. 2019) (summary order) (“A fraud claim is tenable only when the fraud alleged is
collateral or extraneous to the contract” meaning the contract “does not address the factual bases
of the fraud claim.”). In substance, plaintiffs’ fraud claim is based on allegedly false statements
inducing plaintiffs into believing defendants would perform, and accordingly, arises from the
same facts as those underlying the breach of contract claim. In addition, both causes of action
seek the same damages.
Accordingly, plaintiffs’ fraud claim must be dismissed.
V.

Equitable Lien Claim
Defendants argue plaintiffs’ claim for an equitable lien on the Property is not appropriate

because damages, a legal remedy, is available.
The Court agrees.

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When a claim “lies solely at law for money damages, the remedy of an equitable lien is
unwarranted.” Meehan v. Meehan, 227 A.D.2d at 269–70. Because a plaintiff “can be
adequately compensated for breach of contract . . . by monetary damages, the cause of action for
an equitable lien [is] correctly dismissed.” Normandy Real Est. Partners LLC v. 24 E. 12th St.
Assocs. LLC, 168 A.D.3d 429, 431 (1st Dept. 2019). Here, in connection with their breach of
contract claim, plaintiffs seek, and can be adequately compensated by, monetary damages.
Accordingly, plaintiffs’ equitable lien claim must be dismissed.
CONCLUSION
The motion is GRANTED IN PART and DENIED IN PART.
All of plaintiffs’ claims are dismissed except for the breach of contract claim, which shall
proceed.
By November 28, 2023, defendants shall file an answer to the amended complaint.
By separate Order, the Court will schedule an initial conference.
The Clerk is instructed terminate the motion. (Doc. #26).
Dated: November 14, 2023
White Plains, NY

SO ORDERED:

____________________________
Vincent L. Briccetti
United States District Judge

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