Defendants move to dismiss plaintiffs' complaint pursuant to CPLR 3211(a)(7) on the grounds that plaintiffs have failed to state a cause of action. Plaintiffs Pinnn Inc. ("Pinnn") and Martin Pjetri ("Mr. Pjetri") oppose the motion. Plaintiffs assert five causes of action and seek a declaratory judgment and damages. Specifically, plaintiffs allege that: 1) they were fraudulently induced to enter into the subject promissory note, security agreement, and personal guaranty (the "loan agreement"); 2) the plaintiffs entered into the loan agreement under economic duress; 3) defendants slandered plaintiffs' reputation by ruining their credit history and rendering them unable to satisfy their legitimate debt obligations; 4) defendants converted plaintiff Pinnn's certificate of deposit ("CD") when they took the proceeds therein in partial satisfaction of the outstanding balance of the loan; and 5) defendants breached the terms of the CD agreement by seizing the proceeds from the CD when plaintiffs defaulted on the loan.

Standard of Review Governing Motions under CPLR 3211(a)

When reviewing a motion to dismiss brought pursuant to CPLR 3211(a)(7), a court must afford the complaint a liberal construction, accept the alleged facts as true, and grant plaintiff the benefit of every favorable inference. Goldman v. Metro Life Ins. Co., 5 NY3d 561, 571 [2005]. With respect to such a motion made pursuant to CPLR 3211(a)(7), a court must limit its inquiry to determining whether the facts alleged "fit within any cognizable theory." Leon v. Martinez, 84 [*2]NY2d 83, 88 [1994]. As the Court of Appeals stated in Guggenheimer v. Ginzburg, 43 NY2d 268, 275 [1977], the "criterion is whether the proponent of the pleading has a cause of action." Relevant Facts

Pinnn is a New York corporation, and Mr. Pjetri is its sole owner. Pinnn operates a restaurant in Manhattan. In December 2007, plaintiffs wanted to renovate the restaurant and needed to procure a loan to pay for the necessary work. Around that time, plaintiffs were aware that defendants were advertising the availability of building improvement loans of up to $1 million at 6 percent interest per year.

In or around December 2007, Mr. Pjetri met with Frank Celetano ("Mr. Celetano"), a vice president of Commerce Bank, to inquire about the availability of a building improvement loan. Mr. Pjetri allegedly informed Mr. Celetano that the loan would be used to finance the renovation of the restaurant and that he wished to begin construction as soon as possible. Mr. Celetano purportedly told Mr. Pjetri that Pinnn's application would definitely be approved and that Mr. Pjetri could begin construction as soon as Mr. Celetano told him that the loan application had been approved. A few days later, during a visit to the restaurant by Mr. Celetano, Mr. Pjetri told him that the kitchen, the counter, and dining area would be demolished and rebuilt, and Mr. Celetano reassured Mr. Pjetri that the loan application would be approved.

Pinnn applied for a $100,000 building improvement loan from Commerce Bank. The application expressly stated that the act of either plaintiff signing the application did not commit Commerce Bank to extending a loan to the plaintiffs — Mr. Pjetri signed the application in his corporate capacity and personally as a guarantor. Nowhere on the application was the applicable or desired interest rate stated. Around that time, Pinnn also opened a seven-month CD account of an unspecified amount with Commerce Bank that was scheduled to mature on July 19, 2008. The terms of the CD stated that the CD would be renewed automatically if the funds were not withdrawn within ten days after the date of maturity. Plaintiffs were apparently informed that once the CD matured, the money could be used to pay back some of the loan.

In late December 2007, according to the plaintiffs, Mr. Celetano telephoned Mr. Pjetri and informed him that Pinnn's loan application had been approved and that plaintiffs could begin renovating the restaurant. Construction rendered the restaurant inoperable, and plaintiffs incurred debts of nearly $100,000. On January 7, 2008, when Mr. Pjetri visited Mr. Celetano to formalize the loan, Mr. Celetano informed him that Pinnn's application had been denied. Having already begun renovations and incurred significant debt, Pinnn agreed to borrow $100,000 at 7.5 percent interest per year for five years. Pinnn executed a $100,000 promissory note payable on demand or five years from the date of execution to Commerce Bank, which stated that the annual interest rate was 7.5 percent and that Commerce had acquired a security interest in certain collateral, including the proceeds from Pinnn's CD. Plaintiffs were obligated to repay the loan in 50 monthly installments of $2,008.89. Mr. Pjetri also executed a personal guaranty for the loan.Failure to make any payment due under the note constituted a default. Between February 2008 and July 2008, plaintiffs paid the requisite interest payments. Although a date on which plaintiffs defaulted on the note is not asserted by the defendants, plaintiffs admit that they, "ultimately fell behind in their payments." Complaint at ¶ 20. Starting in mid-July 2008, and until early 2011, plaintiffs received several notices stating that the CD had matured and asking [*3]whether Pinnn wished to renew the CD. Mr. Pjetri allegedly made numerous attempts to withdraw the money from the CD account, but was rebuffed on the basis that the CD was collateral for the as-yet unpaid loan. In or around early 2011, Mr. Pjetri discovered that the defendants had closed the CD account and taken the proceeds to satisfy the outstanding balance of the loan.

Plaintiffs' First Cause of Action: Fraud

Defendants argue that plaintiffs' claim for fraud in the inducement fails either because evidence of pre-contract oral representations is barred by the parol evidence rule or because plaintiffs' reliance on such representations was not reasonable. The facts purportedly establishing the defendants' fraudulent act must be plead with sufficient detail to support the inference of the elements of actionable fraud, namely: a misrepresentation of material fact; scienter; reliance; and injury. See McGhee v. Odell, 96 AD3d 449, 450 [1st Dept 2012]; CPLR 3016(b). Reliance on the misrepresentation must also be reasonable where the means for discovering, "by the exercise of ordinary intelligence," the, "true nature" of the subject transaction are available to the complainant. 88 Blue Corp. v. Reiss Plaza Assoc., 183 AD2d 662, 663 [1st Dept 1992] (quoting Schumaker v. Mather, 133 NY 590, 596 [1892]).

The merger clause in the subject loan agreement — "This note and all other Loan Documents constitute the entire agreement of the parties hereto relating to its subject mater and supersede any and all prior and concurrent oral and written communications with respect to the subject matter herein" (defendants' affirmation at Exhibit 2) — may be insufficiently specific and, therefore, not bar this court from considering parol evidence relating to the defendants' pre-contract representations at to the terms on which they would agree to loan money to the plaintiffs. Compare Sabo v. Delman, 3 N.Y.2d155 [1957] with Danann Realty Corp. v. Harris, 5 NY2d 317 [1959]; but see Vision Development Group of Broward County, LLC v. Chelsey Funding, LLC, 43 AD3d 373 [1st Dept 2007] (reversing Supreme Court's award of a preliminary injunction to plaintiff on the grounds that plaintiff could not prove likelihood of success on the merits because the written pledge agreement contained both a merger clause and a "no oral modification" clause that precluded the consideration of parol evidence).

However, this court need not rule on the significance of the merger clause. Plaintiffs' reliance on defendants' preceding oral representations was not reasonable given that the material terms of the loan that the plaintiffs were actually offered — including, the 7.5 percent rate of interest, the security interest created in the proceeds of Pinnn's CD, and Mr. Pjetri's personal guaranty — were clearly inscribed on the face of the loan agreement that was signed by the plaintiffs. See Shalam v. KPMG LLP, 89 AD3d 155 [1st Dept 2011] (holding that, as a matter of law, plaintiff could not prove justifiable reliance because he: 1) acknowledged understanding that he was not making an investment, but rather engaging in a tax-avoidance strategy; 2) signed loan agreements associated with the transaction; and 3) notwithstanding the complexities of the transaction, plaintiff, "willfully blinded himself" by, "failing to ask questions, pay attention to details, or read the documents he signed."); defendants' affirmation at Exhibit 2. Mr. Pjetri understood that the loan was being offered under terms that differed from those purportedly enumerated in Mr. Celetano's prior oral representations and the defendants' advertisements, and agreed to be bound by the written terms in the loan agreement. Consequently, the facts that plaintiffs have alleged simply do not fit within a theory of actionable fraud. [*4]

Plaintiffs' Second Cause of Action: Economic Duress

A party may seek a declaration that a contract is voidable on the grounds of economic duress if the party alleges facts sufficient to support the contention that the complaining party was compelled to agree to the terms of the contract, "by means of a wrongful threat which precluded the exercise of its free will." Stewart M. Muller Const. Co., Inc. v. New York Tel. Co., 40 NY2d 955, 956 [1976]; see also Restatement [Second] of Contracts § 175 [1981].

The defendants did not threaten to breach an agreement with the plaintiffs to lend at 6 percent interest unless the plaintiffs agreed to additional terms. 805 Third Ave. Co. v. M.W. Realty Assoc., 58 NY2d 447, 451 [1983] (holding that, "a party cannot be guilty of economic duress for refusing to do that which it is not legally required to do."). The "Business Credit Application" expressly stated that plaintiffs' signature on the application did not bind the defendants to lend, and nowhere on the application was an interest rate written. Defendants' affirmation at Exhibit 1. Therefore, there was no enforceable agreement to lend money to plaintiffs at a specific interest rate. That the defendants' refusal to lend plaintiffs $100,000 at 6 percent interest, "may have come at an inconvenient time does not transform the exercise of a legal right into a wrongful threat." Bank Leumi Trust Co. of New York v. D'Evori Intern, Inc., 163 AD2d 26, 30 [1st Dept 1990]. Lastly, plaintiffs have not alleged that they could not have obtained a comparable loan at the terms they hoped to receive from another source. Kenneth D. Laub & Co., Inc. v. Domansky, 172 AD2d 289 [1st Dept 1991]. Therefore, because the defendants were not obligated to lend money to the plaintiffs at all, let alone at 6 percent interest, the plaintiffs were not coerced into borrowing from the defendants at 7.5 percent interest per annum and the loan agreement is not voidable.

Plaintiffs' Third Cause of Action: Slander

Plaintiffs assert that the defendants slandered their reputation, causing their credit history to be ruined and rendering them unable to obtain credit from other sources.

Slander is the speaking of defamatory words to a third party that tends to injure the plaintiff in his or her reputation or trade. See Liffman v. Booke, 59 AD2d 687 [1st Dept 1977]. In an action for slander, the particular words must be set forth in the complaint. CPLR 3016(a). The only statements alleged by plaintiffs that could potentially serve as the factual basis of a cause of action for slander are Mr. Celetano's alleged representations that plaintiffs would definitely be approved for a 6 percent per annum loan of $100,000. Such statements cannot communicate a defamatory idea about the plaintiffs' trade or business and, therefore, are not actionable. See Cole Fischer Rogow, Inc. v. Carl Ally, Inc., 29 AD2d 423, 426 [1st Dept 1968] (granting defendants' motions to dismiss on the grounds that language in their advertisement could not be construed by the public as harmful to the plaintiff in its profession and, therefore, could not be defamatory). Even if these statements were harmful, they were not published but, instead, spoken only to Mr. Pjetri. See Synder v. Sony Music Entertainment, Inc., 252 AD2d 294, 298 [1st Dept 1999] (granting motion for summary judgment dismissing plaintiff's cause of action for slander on the grounds that the statement was never heard by a third party). Therefore, plaintiffs do not have a cause of action sounding in slander.

Plaintiffs' Fourth Cause of Action: Conversion

A cause of action for conversion requires a showing by the plaintiff that he or she owns and has the right to possess personal property and that the subject personal property is in the [*5]unauthorized possession of another person who has excluded the rights of the owner. See Republic of Haiti v. Duvalier, 211 AD2d 379, 384 [1st Dept 1995]. If the personal property is money, it must be specifically identifiable and subject to the obligation to be returned or treated in a certain manner. Id.

The issue of whether plaintiffs' conversion claim is time-barred is immaterial. Even accepting plaintiffs' alleged facts as true and granting them the benefit of every favorable inference, plaintiffs have not alleged sufficient facts to show that the defendants' exercised unauthorized possession of the proceeds of the CD.

The issue is whether defendants' taking of the proceeds in partial satisfaction of the unpaid balance of the loan was unauthorized. Defendants had a perfected security interest in the proceeds from Pinnn's CD. See UCC § 9-203; UCC §9-314; UCC §9-104. A secured party with a perfected security interest may exercise any of the rights accorded secured parties by the UCC as well as any rights bestowed upon the secured party by agreement of the parties. UCC §9-601[a]. A secured party that is the bank where the deposit account collateral is maintained may, "apply the balance of the deposit account to the obligation secured by the deposit account." UCC 9-104[a][1]; See UCC § 9-607[a][4]. Furthermore, in the event that the plaintiffs defaulted on the loan agreement, the defendants were authorized to, "sell, lease, transfer, or otherwise deal with the [c]ollateral or proceeds thereof in Lender's own name ." Defendants' affirmation at Exhibit 2. By their own admission, plaintiffs defaulted on their obligations under the loan agreement when they ceased making the requisite payments on the loan. Plaintiff's complaint at ¶ 20. Therefore, plaintiffs did not have a possessory right in the proceeds of the CD, and the defendants did not obtain unauthorized possession of the proceeds when they seized them to satisfy the unpaid balance of the loan. On these facts, plaintiffs do not have a cause of action sounding in conversion.

Plaintiffs' Fifth Cause of Action: Breach of Contract

Lastly, plaintiffs contend that the defendants breached the terms of the agreement governing the CD that Pinnn opened with Commerce Bank. To establish a cause of action for breach of contract, the plaintiff must prove: 1) the existence of a contract between the plaintiff and defendant, 2) performance by the plaintiff, 3) breach by the defendant, and 4) damages resulting from the breach. Harris v. Seward Park Housing Corp., 79 AD3d 425, 426 [1st Dept 2010].

The plaintiffs do not have a cause of action for breach of contract against the defendants. Notwithstanding the alleged terms of the agreement pertaining to the CD, which are assumed to be true for the purposes of this motion, plaintiffs do not dispute that Mr. Pjetri signed a loan agreement as an officer of Pinnn that gave the defendants a security interest in the CD. Pursuant to the aforementioned remedies granted to the defendants as parties with a perfected security interest in the proceeds of the CD, the defendants had the right to avail themselves of the proceeds to recoup the balance of the unpaid loan without breaching an agreement pertaining to the CD. Exercising a legal, contractual right does not give rise to a claim by another party for breach of contract. See Highland Sand and Gravel, Inc. v. Squicciarini, 272 AD2d 375 [2d Dept 2000] (holding that the plaintiff corporation's exercise of its contractual right to pay defendant the balance of the purchase price of a deceased shareholder's shares without penalty did not constitute a breach of contract); Johnson, Drake, and Piper, Inc. v. State, 24 AD2d 11 [3d Dept [*6]1965] (holding that the State of New York did not breach a contract with claimant by exercising its contractual right to open sections of the new highway while construction was ongoing).Therefore, it is



ORDERED that the motion to dismiss is granted in its entirety and the complaint is dismissed with prejudice.

The foregoing constitutes the decision and order of the court.