Weingot v. Unison Agreement Corp.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

--------------------------------X

YISROEL WEINGOT and SURI

WEINBERGER, a/k/a SURI WEINGOT,

MEMORANDUM & ORDER

Plaintiffs, 21-CV-4542 (JS)(AYS)

-against-

UNISON AGREEMENT CORP.; REAL

ESTATE EQUITY EXCHANGE INC.; and

ODIN NEW HORIZON REAL ESTATE FUND

LP,

Defendants.

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APPEARANCES

For Plaintiffs: Charles Wertman, Esq.

Law Offices of Charles Wertman P.C.

100 Merrick Road, Suite 304W

Rockville Centre, New York 11570

Elliot J. Blumenthal, Esq.

Law Offices of Elliot J. Blumenthal, PLLC

483 Chestnut Street

Cedarhurst, New York 11516

For Defendants: Alexander J. Gershen, Esq.

Jamie Danielle Wells, Esq.

Scale LLP

315 Montgomery Street, 10th Floor

San Francisco, California 94104

SEYBERT, District Judge:

On August 22, 2022, Plaintiffs Yisorel Weingot and Suri

Weinberger, a/k/a Suri Weingot (collectively, “Plaintiffs”) filed

an Amended Complaint against Defendants Unison Agreement Corp.

(hereafter, “Unison”), Real Estate Equity Exchange Inc. (hereafter

“REX”), and Odin New Horizon Real Estate Fund LP (hereafter

“Odin”), (collectively, “Defendants”), alleging fifteen causes of

action: (1) two counts of common law fraud; (2) fraudulent

misrepresentation; (3) two counts of quiet title; (4) unjust

enrichment; (5) violations of the Truth in Lending Act (hereafter,

“TILA”), 15 U.S.C. § 1601, et seq., and Regulation Z of the Federal

Reserve Board (hereafter “Regulation Z”), 12 C.F.R. § 226.1;

(6) violations of New York Banking Law, Article 12-D; (7) deceptive

acts pursuant to New York General Business Law § 349; (8) false

advertising pursuant to New York General Business Law § 350;

(9) unconscionable conduct; (10) rescission; (11) slander of

title; (12) declaratory relief; and (13) injunctive relief. (Am.

Compl., ECF No. 30, ¶¶ 61-179.) On October 7, 2022, Defendants

filed a Motion to Dismiss the Amended Complaint (hereafter,

“Dismissal Motion”). (Dismissal Motion, ECF No. 32; see also

Support Memo, ECF No. 33.) On November 7, 2022, Plaintiffs filed

their Opposition to Defendants’ Motion, to which Defendants

replied on November 21, 2022. (Opp’n, ECF No. 36; Reply, ECF No.

37.)

On July 20, 2023, upon referral from the undersigned,

Magistrate Judge Anne Y. Shields issued a Report and Recommendation

(hereafter, “Report” or “R&R”) recommending the Court dismiss with

prejudice:

(1) the TILA, New York Banking Law and New

York General Business Law claims (the Sixth,

Seventh, Eighth, and Ninth Causes of Action);

(2) the claims for declaratory and injunctive

relief (the Fourteenth and Fifteenth Causes of

Action); (3) the claim for unconscionable

contract (the Tenth Cause of Action); (4) the

slander of title claim (the Twelfth Cause of

Action); and (5) the claim for unjust

enrichment (the Fifth Cause of Action).

(R&R, ECF No. 47, at 18.) Judge Shields further recommended “the

fraud claims set forth [in] the First, Second, and Third Causes of

Action be dismissed as pleadings against Defendants Real Estate

Equity Exchange Inc. and Odin New Horizon Real Estate Fund LP” and

the Dismissal Motion be denied in all other respects.1 (Id.)

For the following reasons, Plaintiff’s objections are

OVERRULED in part and SUSTAINED in part, the R&R is ADOPTED as

modified, and Defendants’ Dismissal Motion is GRANTED as follows:

The First, Second, and Third Causes of Action (Common Law Fraud

and Fraudulent Misrepresentation) are dismissed as against

1 On August 31, 2023, Defendants filed a Notice of Supplemental

Authority (hereafter, “Notice”) advising the Court of a decision

rendered in the Western District of Washington in favor of Unison.

(See ECF No. 49(citing Olson v. Unison Agreement Corp., No. 22-

CV-01859, 2023 WL 5609251, at *2 (W.D. Wash. Aug. 30, 2023)). On

September 5, 2023, Plaintiffs filed a response to Defendant’s

Notice. (See ECF No. 50.) While the Court acknowledges the claims

and facts alleged in Olson are similar to those alleged in the

instant case, the analysis in that case was undertaken with respect

to a state-specific statute, i.e., the Washington State Consumer

Protection Act. No such claims are before this Court.

Accordingly, the Court declines to consider the supplemental

authority offered by Defendants at this juncture.

Defendants REX and Odin; the Fifth (Unjust Enrichment), Sixth (TILA

and Regulation Z), Seventh (NY Banking Law), Eighth (Deceptive

Acts), Ninth (False Advertising), and Tenth (Unconscionable

Contract) Causes of Action are dismissed as against all Defendants;

the Eleventh Cause of Action (Rescission) is dismissed as against

Defendants REX and Odin; and the Twelfth (Slander of Title),

Fourteenth (Declaratory Relief), and Fifteenth (Injunctive Relief)

Causes of Action are dismissed as against all Defendants.

BACKGROUND

I. Factual and Procedural Background

The Court presumes the parties’ familiarity with,

adopts, and incorporates herein, the factual and procedural

background as set forth in the R&R.2 (See R&R at 1-4.) See

generally Sali v. Zwanger & Pesiri Radiology Grp., LLP, No.

19-CV-0275, 2022 WL 819178, at *1 (E.D.N.Y. Mar. 18, 2022) (where

no party challenges magistrate judge’s recitation of factual and

procedural backgrounds of the case, upon clear error review,

adopting and incorporating same into court’s order).

2 The Court further adopts Judge Shields’ use of the term

“Agreements” to constitute the three relevant Agreements discussed

by the parties in the underlying motion papers, namely: (1) the

Unison Homeowner Adoption Agreement; (2) the Unison Homeowner

Covenant Agreement; and (3) the Unison Homeowner Mortgage and

Security Agreement. (See R&R at 2.)

II. Defendants’ Objections to the R&R

Defendants assert three main objections to Judge

Shields’ R&R, alleging the Report erred in: (1) concluding

Plaintiffs adequately pled their fraud claims against Unison

because it, (a) failed to identify contract terms within the

Agreements that conflicted with Unisons’ representations to

Plaintiffs, (b) failed to address Plaintiffs’ second fraud count

based upon Defendants’ alleged false appraisal, (c) accepted

Plaintiffs’ “conclusory allegations of fraudulent intent,” and

(d) “does not address Plaintiffs’ failure to allege reasonable

reliance or an actual pecuniary loss”; (2) failing to dismiss

Plaintiffs’ quiet title claim based upon Plaintiffs’ lack of

injury-in-fact; and (3) failing to dismiss Plaintiffs’ rescission

claim against all Defendants or against REX and Odin because

(a) Plaintiffs failed to allege how money damages or other legal

remedies would be inadequate at law, (b) Plaintiffs reaped the

benefits of the contract which typically bars rescission claims,

(c) the Court’s reliance on Robinson v. Sanctuary Record Groups,

Limited, 826 F.Supp.2d 570, 575 (S.D.N.Y. 2011), is misplaced,

(d) the Court’s claim that Plaintiffs adequately pled rescission

because they have “adequately pled claims sounding in fraud” is

inaccurate since Plaintiffs did not, in fact, adequately plead

their fraud claims, and (e) Plaintiffs allege no specific or

wrongful conduct by REX and Odin that would warrant rescission.

(Objs., ECF No. 48, at 9-25.)

In response, Plaintiffs assert: (1) their fraud claims

should be permitted to move forward because the Amended Complaint

identified the portions of the Agreements that were purportedly

fraudulent; (2) they have adequately pled their claim for quiet

title based upon their claims that they own the property in

question and the existence of Defendants’ adverse claim to the

property; and (3) they have adequately pled all elements of their

rescission claim.3 (Reply to Objs., ECF No. 49, at 2-12.)

3 Notably, Plaintiffs did not object to Judge Shields’

recommendation to dismiss: “(1) the TILA, New York Banking Law and

New York General Business Law claims (the Sixth, Seventh, Eighth,

and Ninth Causes of Action); (2) the claims for declaratory and

injunctive relief (the Fourteenth and Fifteenth Causes of Action);

(3) the claim for unconscionable contract (the Tenth Cause of

Action); (4) the slander of title claim (the Twelfth Cause of

Action); and (5) the claim for unjust enrichment (the Fifth Cause

of Action).” (R&R at 18; Reply to Objs., ECF No. 49, at 2

(requesting the Court adopt Judge Shields’ Report “in its

entirety”).) Nor did they object to Judge Shields’ recommendation

to dismiss all “fraud claims set forth at the First, Second, and

Third Causes of Action” against Defendants REX and Odin. (Id.)

Accordingly, Judge Shields’ recommendation as to those claims are

reviewed for clear error. Kruger v. Virgin Atl. Airways, Ltd.,

976 F. Supp. 2d 290, 296 (E.D.N.Y. 2013), aff’d, 578 F. App’x 51

(2d Cir. 2014) (“The Court reviews portions of the R&R to which a

party makes no objection for clear error”). Upon clear error

review of Judge Shields’ recommendation to dismiss said claims,

the Court finds none. Accordingly, Judge Shields’ recommendation

to dismiss the Fifth, Sixth, Seventh, Eighth, Ninth, Tenth,

Twelfth, Fourteenth, and Fifteenth Causes of Action against all

Defendants, and to dismiss the First, Second, and Third Causes of

Action against Defendants REX and Odin, is hereby ADOPTED.

DISCUSSION

I. Legal Standards

A. Reports and Recommendations

A district court “may accept, reject, or modify, in whole

or in part, the findings or recommendations made by the magistrate

judge.” 28 U.S.C. § 636(b)(1)(C); see also FED. R. CIV. P. 72(b)(3).

The district judge must evaluate proper objections de novo;

however, where a party “makes only conclusory or general

objections, or simply reiterates [the] original arguments, the

Court reviews the Report and Recommendation only for clear error.”

Pall Corp. v. Entegris, Inc., 249 F.R.D. 48, 51 (E.D.N.Y. 2008)

(quoting Barratt v. Joie, No. 96–CV–0324, 2002 WL 335014, at *1

(S.D.N.Y. Mar. 4, 2002)); FED. R. CIV. P. 72(b)(3); see also U.S.

Small Bus. Admin. v. Ameritrans Holdings, LLC, No. 20-CV-1166, 2024

WL 704621, at *2 (E.D.N.Y. Feb. 21, 2024) (applying clear error review

where “[d]efendants’ regurgitation of their original arguments [was]

readily apparent when comparing their [underlying motion] to their

[o]bjections”). The Court need not review the findings and

conclusions to which no proper objection has been made. Thomas v.

Arn, 474 U.S. 140, 150 (1985).

B. Motions to Dismiss

A claim is properly dismissed pursuant to Federal Rule

of Civil Procedure (hereafter “Rule”) 12(b)(6) where it “fail[s]

to state a claim upon which relief can be granted.” FED. R. CIV.

P. 12(b)(6). In determining whether to grant a Rule 12(b)(6)

motion, courts must “accept as true all factual allegations

contained in the Complaint and draw all inferences in plaintiff’s

favor.” Glob. Network Commc’ns, Inc. v. City of N.Y., 458 F.3d

150, 154 (2d Cir. 2006). “A complaint may not be dismissed

pursuant to Rule 12(b)(6) unless it appears beyond doubt, even

when the complaint is liberally construed, that the ‘plaintiff can

prove no set of facts in support of his claim which would entitle

him to relief.’” Id. (quoting Conley v. Gibson, 355 U.S. 41, 45-

46 (1957)); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

Thus, to survive a motion to dismiss, Plaintiff need only allege

“enough facts to state a claim to relief that is plausible on its

face.” Basile v. Levittown United Tchrs., 17 F. Supp. 3d 195, 200

(E.D.N.Y. 2014) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,

570 (2007)).

II. Analysis

A. Defendants’ Objections Warrant Clear Error Review

Turning to Defendants’ objections, the Court finds them

to be “mere reiterations of the arguments in [the] original papers

that were fully considered, and rejected, by” Judge Shields. Out

of the Blue Wholesale, LLC v. Pac. Am. Fish Co., Inc., No.

19-CV-0254, 2020 WL 7488072, at *2 (E.D.N.Y. Dec. 21, 2020)

(quoting Rizzi v. Hilton Domestic Operating Co., Inc., No.

19-CV-1127, 2020 WL 6243713, at *2 (E.D.N.Y. Oct. 23, 2020)

(collecting cases)). Defendants’ regurgitation of their original

arguments is apparent when comparing their Dismissal Motion to

their Objections. (Compare Support Memo at 16 (arguing the fraud

claims are not viable because Plaintiff failed to explain “what

was wrong” with the alleged misrepresentations made by Defendants

and Plaintiffs did not allege “any facts showing how [the]

appraisal was fraudulent as opposed to just a differing opinion”),

17-18 (arguing Plaintiffs fail to allege reasonable reliance and

pecuniary loss), 28 (contending the quiet title claim fails because

Plaintiffs failed to allege “a sufficient injury in fact”), 32

(averring rescission claims should be dismissed because Plaintiffs

are not lacking a “complete and adequate remedy at law,” and

retained the fruits of the contract at issue), with Objs. at 9-25

(arguing same)). Thus, the Court reviews Judge Shields’ analysis

for clear error; however, even under de novo review, the Court

would reach the same conclusions set forth below.

B. Objection 1: Plaintiffs’ Fraud Claims4

1. Plaintiffs Have Adequately Pled Common Law Fraud Based

Upon Alleged Misrepresentations

Defendants contend Plaintiffs’ fraud claims against

Unison should be dismissed because Plaintiffs do not identify any

“contradiction between the Agreements [executed by the parties]

and the [allegedly fraudulent] marketing statement[s]” made by

Defendants. (Objs. at 6-7.) This argument is without merit and

unsupported by the record. As Judge Shields correctly stated,

(see R&R at 10-11), to adequately plead a claim for fraud or

fraudulent misrepresentation, Plaintiff must show: “(1) a material

misrepresentation of a presently existing or past fact; (2) an

intent to deceive; (3) reasonable reliance on the

misrepresentation by Plaintiff; and (4) resulting damages.”

Rockaway Beverage, Inc. v. Wells Fargo & Co., 378 F. Supp. 3d 150,

4 Defendants assert several objections to the R&R based upon Judge

Shields’ purported failure to address certain arguments made by

Defendants. As a general matter, it is well established “there is

no requirement for a court to specifically address each and every

argument raised by a party in papers filed with the Court.”

Hallmark Licensing, LLC v. Dickens, Inc., No. 17-CV-2149, 2020 WL

6157007, at *7 (E.D.N.Y. Oct. 21, 2020) (citing Miller v. Metro.

Life Ins. Co., No. 17-CV-7284, 2018 WL 59093477, at *5 n.5

(S.D.N.Y. Nov. 15, 2018) (further citations omitted)). “By

extension, neither is a court required to address each and every

case cited by a party in support of its position.” Id. The Court

has nonetheless reviewed the merits of each of Defendants’

Objections and, for the reasons discussed infra, finds all but one

objection to be unpersuasive. To the extent Defendants raise

objections not expressly discussed herein, the Court finds those

objections to be without merit.

166 (E.D.N.Y. 2019) (citing Ipcon Collections LC v. Costco

Wholesale Corp., 698 F.3d 58, 62 (2d Cir. 2012)). Plaintiff must

also satisfy the heightened pleading standard under Rule 9(b),

which requires Plaintiff to “specify the time, place, speaker, and

content of the alleged misrepresentations,” state “how the

misrepresentations were fraudulent” and the “events which give

rise to a strong inference that the defendant had the intent to

defraud, knowledge of the falsity, or a reckless disregard for the

truth.” Id.; FED. R. CIV. P. 9(b).

Contrary to Defendants’ contention, Plaintiffs have

adequately pled their fraud claims against Unison because, inter

alia, Plaintiffs have indeed identified a “contradiction between

the Agreements [executed by the parties] and the [allegedly

fraudulent] marketing statement[s]” made by Defendants. (Objs at

6-7.) In the Amended Complaint, Plaintiffs allege statements made

on Unison’s website and by Unison’s representative contradict the

terms of their Agreements. (Am. Compl. ¶¶ 45.) In particular,

Plaintiffs allege the Unison website states, “[w]e share in a

portion of your home’s change in value when you decide to sell”

and that a Unison representative repeated this statement to them

on October 31, 2017. (Am. Compl. ¶¶ 37-38.) Plaintiffs further

allege that such statements were entirely contradicted by the terms

of the Agreement, which granted Unison the option to purchase an

interest in the property of approximately 68% at a later date.

(Id. at ¶¶ 44-45.) While the Court acknowledges Defendants’

position that, upon close examination of the effect of the

Agreements, Unison’s statements did not contradict the Agreements’

terms, at this pleadings stage of the litigation, the Court cannot

make such determination as a matter of law. See Suez Equity Invs.,

L.P. v. Toronto-Dominion Bank, 250 F.3d 87, 104 (2d Cir. 2001)

(declining to “resolve[] on the pleadings” the tension between

oral representations and the terms of an agreement). Accordingly,

the Court agrees with, and adopts, Judge Shields’ recommendation

to allow Plaintiffs’ fraud claims (Counts One, Two, and Three) to

move forward against Unison.

2. Plaintiffs Adequately Pled Fraud Based Upon False

Appraisal

Based upon a single case from the Supreme Court,

Appellate Division, First Department, Defendants assert “it is

well-settled that allegations of an inadequate third-party

appraisal cannot serve as the basis for a fraud claim.” (Objs. at

13-14; Support Memo at 17.) However, the case Defendants cite,

Mandarin Trading Limited v. Wildenstein, concerns facts and

circumstances entirely inapposite to those at issue in this case.

65 A.D.3d 448, 449 (2009), aff’d, 16 N.Y.3d 173 (2011). In

Mandarin, the court found a fraudulent misrepresentation action by

plaintiff against an appraiser was not viable because the complaint

“fail[ed] to state that the appraisal was made to induce

[plaintiff’s] reliance.” Id. at 450. Here, Plaintiffs assert

exactly that. (Am. Compl. ¶¶70-73.) Moreover, Plaintiffs do not

claim that the appraisal was conducted by a neutral third-party,

as was done in Mandarin; rather, Plaintiffs allege it was

Defendants who created an unreasonably low appraisal value

designed to mislead Plaintiffs into signing the Agreements at

issue. (Id.) Accordingly, Defendants’ reliance on Mandarin is

misplaced, and, in the absence of any countervailing authority,

the Court adopts Judge Shields’ recommendation to permit

Plaintiffs’ fraud claim based upon the appraisal to proceed against

Unison.

3. Plaintiffs’ Claims of Fraudulent Intent Were Not

Conclusory

Defendants object to Judge Shields’ Report insofar as it

finds Plaintiffs have adequately pled that Defendants intended to

deceive Plaintiffs. (Objs. at 14-15.) Upon evaluation of the

allegations set forth in the Complaint, and the applicable case

law, the Court finds Plaintiffs have adequately pled defendant

Unison’s intent to deceive.

“Although Rule 9(b) contains a heightened particularity

standard, it also relaxes the standard for pleading fraudulent

intent: Malice, intent, knowledge, and other conditions of a

person’s mind may be alleged generally.” Duran v. Henkel of Am.,

Inc., 450 F. Supp. 3d 337, 353 (S.D.N.Y. 2020) (citing FED. R. CIV.

P. 9(b)) (internal quotation marks omitted). Thus, to sustain a

fraud claim, a plaintiff must “allege facts that give rise to a

strong inference of fraudulent intent.” Id. (quoting Lerner v.

Fleet Bank, N.A., 459 F.3d 273, 290 (2d Cir. 2006)). “A strong

inference of fraudulent intent may be established either (a) by

alleging facts to show that defendants had both motive and

opportunity to commit fraud, or (b) by alleging facts that

constitute strong circumstantial evidence of conscious misbehavior

or recklessness.” Cargo Logistics Int’l, LLC v. Overseas Moving

Specialists, Inc., 557 F. Supp. 3d 381, 395–96 (E.D.N.Y. 2021)

(internal quotations and citations omitted). In determining

whether a plaintiff has adequately pled a “strong inference” of

fraudulent intent, courts “consider the complaint in its entirety

and take into account plausible opposing inferences” and if such

inferences are “cogent and at least as compelling as any opposing

inference one could draw from the facts alleged, then it is

sufficiently strong” such that plaintiff’s claims can survive a

motion to dismiss. Duran, 450 F. Supp. 3d at 353(citing Loreley

Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Secs., LLC, 797 F.3d 160,

177 (2d Cir. 2015)) (further citations and internal quotation marks

omitted).

Here, the Court finds Plaintiffs have provided just

enough factual allegations to plausibly show Unison’s fraudulent

intent. Plaintiffs allege Defendants told them that they were

only giving up a portion of the appreciation of their home’s value,

when, in fact, they gave Unison the option to purchase

an approximate 68% interest in their home. (Am. Compl. ¶¶ 44-45,

62-64.) Plaintiffs plausibly allege that such misrepresentations

were made to them by Unison in order to induce them to sign the

operative Agreements. Accordingly, Judge Shields correctly

concluded Plaintiffs adequately pled fraudulent intent as to

Unison.

4. Plaintiffs Adequately Alleged Reasonable Reliance and

Pecuniary Loss

Defendants argue Plaintiffs’ fraud claims are not viable

because Plaintiffs failed to establish that their reliance upon

Defendants’ statements was reasonable and that they suffered

pecuniary loss. (Objs. 17-19.) “In assessing the reasonableness

of a plaintiff’s alleged reliance, courts consider the entire

context of the transaction including factors such as its complexity

and magnitude, the sophistication of the parties, and the content

of any of the agreements between them.” Equinox Gallery Ltd. v.

Dorfman, 306 F. Supp. 3d 560, 577–78 (S.D.N.Y. 2018) (citing

Emergent Cap. Inv. Mgmt., LLC v. Stonepath Grp., Inc., 343 F.3d

189, 195 (2d Cir. 2003) (quotations omitted)). Moreover,

“[w]hether [a] [p]laintiff’s reliance on [a] [defendant’s]

representations was reasonable cannot be resolved as a matter of

law” on a motion to dismiss. Id.; see also Schlaifer Nance & Co.

v. Est. of Warhol, 119 F.3d 91, 98 (2d Cir. 1997) (stating the

determination of whether one’s reliance was “reasonable” is a

“fact-intensive” inquiry). Accordingly, at this nascent stage of

litigation, and drawing all inferences in favor of Plaintiff, the

Court finds Plaintiffs have, albeit narrowly, pled sufficient

facts to plausibly allege their reliance upon Defendants’

representations was “reasonable.”

Plaintiffs have also sufficiently alleged they have

suffered damages. Under New York law:

[t]he injury element of a fraud claim is

interpreted differently depending on whether

the remedy sought is damages or rescission.

An action for damages requires the showing of

some concrete pecuniary loss. By

contrast . . . an action to rescind a contract

for fraudulent inducement does not require a

showing of injury in the traditional sense

which is required in an action for damages.

Dornberger v. Metro. Life Ins. Co., 961 F. Supp. 506, 543 (S.D.N.Y.

1997) (internal citations omitted). Based on Plaintiffs’

recitation of the facts, they have not incurred money damages thus

far; indeed, they may never incur such damages if Unison decides

not to exercise the purchase option per the Agreements. (See

generally Am. Compl.) Thus, although Plaintiffs have failed to

allege monetary damages, they have plausibly alleged to have

forgone some right to their property by virtue of Unison’s option

to purchase an approximate 68% interest in their home. (Id. at ¶

44.) Accordingly, Plaintiffs have made a sufficient showing of

damages as to their fraud claim; hence, if proven at trial, the

remedy would be rescission, not money damages. Dornberger, 961 F.

Supp. at 543.

For these stated reasons, the Court adopts Judge

Shields’ recommendation to deny dismissal of Plaintiffs’ fraud

claims (Counts One, Two, and Three) against Defendant Unison.

C. Objection 2: Plaintiffs’ Quiet Title Claims

To adequately plead a claim for quiet title, a plaintiff

“must set forth facts showing: (i) the nature of the plaintiff’s

interest in the real property and the source of this interest;

(ii) that the defendant claims an interest in the property adverse

to that of the plaintiff, and the particular nature of the

interest; (iii) whether any defendant is known or unknown, or

incompetent; and (iv) whether all interested parties are named.”

Gustavia Home LLC v. Env’t Control Bd., No. 18-CV-6485, 2019 WL

4359549, at *5 (E.D.N.Y. Aug. 21, 2019), report and recommendation

adopted, 2019 WL 4346012 (E.D.N.Y. Sept. 11, 2019). Defendants do

not dispute these elements have been adequately pled, but rather,

assert Plaintiffs do not have standing to bring their quiet title

claim against Unison because Unison has not yet exercised its

option to purchase Plaintiffs’ home. (Objs. at 20.) The Court

disagrees.

“Essential to the maintenance of an action to determine

a claim to real property is that the complaint state a claim, by

the defendant, of an estate or interest in the real property,

adverse to that of the plaintiff.” Barberan v. Nationpoint, 706 F.

Supp. 2d 408, 419 (S.D.N.Y. 2010) (citations omitted). In the

Amended Complaint, Plaintiffs allege the Mortgage and Security

Agreement grants Unison a “lien on the property [at issue] in the

amount of $115,000.” (Am. Compl. ¶ 51.) Plaintiffs further allege

the Defendants “claim some estate, right, title, lien or interest in

or to the Property adverse to Plaintiffs’ title, and these claims

constitute a cloud on Plaintiffs’ title to the Property.” (Id. at

¶ 154.) Accepting these allegations as true, as it must at the

motion to dismiss stage of the litigation, the Court finds the

lien and option described in the Amended Complaint constitute

sufficient “clouds” on Plaintiffs title such that Plaintiffs have

plausibly pled their claims for quiet title. Barberan, 706 F.

Supp. 2d at 419 (“A plaintiff may bring a quiet title action

against potential clouds on title . . . [and] plaintiffs [are]

entitled to commence an action to quiet title even if the defendant

had yet to trespass or intrude on the property.”) (citing Marchand

v. N.Y.S. Dept. of Env’t Conservation, 51 A.D.3d 795, 858 N.Y.S.2d

282, 283 (2008) (quotation marks and alterations omitted)).

Accordingly, the Court overrules Defendants’ second objection and

adopts Judge Shields’ recommendation not to dismiss Plaintiffs’

quiet title claims.

D. Objection 3: Plaintiffs’ Rescission Claim

Defendants assert several objections to the R&R’s

recommendation not to dismiss Plaintiff’s rescission claim.

(Objs. 21-25.) In particular, Defendants argue: (1) Plaintiffs

failed to allege how money damages or other legal remedies would

be inadequate at law; (2) Plaintiffs reaped the benefits of the

contract, which typically bars rescission claims; (3) the Court’s

reliance on Robinson v. Sanctuary Record Groups, Limited is

misplaced, (4) the Magistrate Court’s recommended finding that

Plaintiffs adequately pled rescission because they have

“adequately pled claims sounding in fraud” is inaccurate;

(5) Plaintiffs have not alleged specific or wrongful conduct by

REX and Odin warranting rescission. (Id.) For the reasons

discussed infra, and upon review of the pleadings, the parties’

submissions, and the applicable case law, the Court finds these

arguments to be without merit with regard to the rescission claim

against Unison. Accordingly, the Court overrules Defendants’

objections and adopts Judge Shields’ recommendation to deny

Defendants’ dismissal motion as to the rescission claim against

Unison. However, having found Plaintiff made no specific

allegations of fraud against REX and Odin which would form the

basis for a rescission claim against said Defendants, the Court

hereby sustains Defendants’ objection to Judge Shields’ report

concerning that claim. Therefore, the Court grants Defendants’

Dismissal Motion insofar as it seeks to dismiss the rescission

claim against Defendants REX and Odin.

1. Plaintiffs Have Alleged Money Damages Would be

Inadequate

In their Amended Complaint, Plaintiffs allege they are

entitled to rescission because they were fraudulently induced into

transferring an ownership interest in their property to Defendants

and because “money damages will not be sufficient to cure the stain

on Plaintiffs’ title to the Property and make Plaintiffs whole.”

(Am. Compl. ¶¶ 67, 138.) While the Court is mindful that:

(1) rescission is an extraordinary remedy, and (2) Plaintiffs face

the significant challenge of proving fraud occurred and equitable

remedies are insufficient to make them whole, the Court finds

Plaintiffs have plausibly pled just enough facts to survive

dismissal of their rescission claims. St. Francis Holdings, LLC

v. MMP Cap., Inc., No. 20-CV-4636, 2022 WL 991980, at *16 (E.D.N.Y.

Mar. 31, 2022) (denying defendant’s motion to dismiss plaintiff’s

rescission claim where “[p]laintiffs have adequately pled a claim

for rescission based on their claim for fraudulent inducement”).5

Despite Defendants’ contentions otherwise, Plaintiffs made clear

in their Amended Complaint that money damages are not sufficient

5 Moreover, upon review of Robinson v. Sanctuary Record Groups

Limited, 826 F.Supp. 2d 570, 575 (S.D.N.Y. 2011), the Court finds

Judge Shields’ reliance on the case to be wholly appropriate. (See

R&R at 17.) Accordingly, the Court finds Defendants’ objections

as to the applicability of Robinson to be without merit.

because such damages would not “cure the stain” on their property

title. (Am. Compl. ¶ 138.) Moreover, Defendants’ contention that

rescission is not necessary because “Plaintiffs already assert

claims for quiet title, which, if successful would provide the

very remedy that Plaintiff’s seek” is unavailing. (Objs. at 22.)

“At the pleading stage, a party is entitled to plead in the

alternative, . . . and is not required to elect between legal and

equitable relief.” Capax Discovery, Inc. v. AEP RSD Invs., LLC,

285 F. Supp. 3d 579, 593 (W.D.N.Y. 2018) (rejecting, at the motion

to dismiss stage of litigation, defendants’ argument that

plaintiffs’ rescission claims were precluded by their claims for

money damages) (internal citations omitted). Accordingly,

Defendants’ objection is overruled.

2. Plaintiffs’ Retention of the Sum Paid by Defendants

Does not Bar Their Rescission Claim

Based upon two state court decisions,6 Defendants contend

Plaintiffs cannot bring their rescission claim because they have

“retained the fruits of the contract [i.e., the initial $115,00

payment] for over four years.” (Objs. at 22.) While it may be

true that repeated affirmance of a contract might prevent

rescission of said contract thereafter, the Amended Complaint

6 See Stayton Realty Corp. v. Rhodes, 192 N.Y.S. 683, 685 (App.

Div. 1922); Torpey v. TJ Realty of Orange County Inc., 17 N.Y.S.3d

386 (N.Y. Sup. Ct. 2015).

plausibly alleges that such affirmance did not occur here.

Plaintiffs allege they received a one-time payment of $115,000 and

later, learning of the true terms of the Agreements, discovered

the alleged fraud. (See generally Am. Compl.) Defendants do not

contend Plaintiffs “affirmed” or otherwise underscored the

validity of the Agreements at issue; instead, Defendants argue

merely that Plaintiffs have, to date, retained the initial payment

made to them by Defendants. (Objs. at 22.) In the absence of any

case law supporting Defendants’ position that a party retaining a

one-time payment made pursuant to a contract prohibits rescission

of that contract based upon fraud, at this juncture, Defendants’

objection is unpersuasive. To the extent Defendants seek to recoup

their initial $115,000 payment made to Plaintiffs, they are free

to assert any such counterclaim that may be available.

3. Plaintiffs Have Adequately Pled Their Fraud Claims

Defendants assert that the R&R erroneously concluded

“[s]ince Plaintiffs have adequately pled claims sounding in

fraud . . . they have also adequately pled a claim for rescission

based upon their claim of fraud,” because Plaintiffs did not, in

fact, adequately plead all the elements of fraud. (R&R at 17;

Objs. at 23.) However, as discussed supra, the Court has already

found Plaintiffs have, indeed, plausibly pled all necessary

elements needed to advance their fraud claims against Unison.

Accordingly, the Court finds this objection unsustainable and

adopts Judge Shields’ recommendation not to dismiss Plaintiffs’

rescission claim against Unison.

4. Plaintiffs Have Not Alleged Wrongful Conduct by REX

and Odin Warranting Rescission

Defendants maintain the R&R erred in retaining

rescission claims against Defendants REX and Odin despite

concluding that Plaintiffs had not adequately alleged a claim of

fraud against them. (Objs. at 24-25.) The Court agrees. Since

Plaintiffs’ rescission claims against Defendants are based upon an

alleged fraud, and Plaintiffs have failed to adequately plead their

fraud claims against REX and Odin,7 Plaintiffs’ rescission claims

against REX and Odin cannot stand. See Hatteras Enterprises Inc.

v. Forsythe Cosm. Grp., Ltd., No. 15-CV-05887, 2018 WL 1935984, at

*11 (E.D.N.Y. Apr. 23, 2018) (dismissing rescission claim based

upon fraud where the court found plaintiff’s fraud claim had not

been pled with sufficient particularity). Accordingly,

Defendants’ objection is sustained, and the Dismissal Motion is

granted with respect to the rescission claim asserted against

Defendants REX and Odin.

7 The parties do not object to the R&R’s recommendation to dismiss

Plaintiffs’ fraud claims against REX and Odin. (See generally

Objs. and Reply to Objs.) Upon clear error review of such

recommendation, the Court agrees such claims shall be dismissed.

(See supra note 2.)

CONCLUSION

For the stated reasons, IT IS HEREBY ORDERED that

Defendants’ objections (ECF No. 48) are OVERRULED in part and

SUSTAINED in part, the R&R (ECF No. 47) is ADOPTED as modified,8

and Defendants’ Motion to Dismiss (ECF No. 32) is GRANTED in part

and DENIED in part such that:

1) The First, Second, and Third Causes of Action (Common

Law Fraud and Fraudulent Misrepresentation) are

dismissed as against Defendants REX and Odin;

2) The Fifth (Unjust Enrichment), Sixth (TILA and

Regulation Z), Seventh (NY Banking Law), Eighth

(Deceptive Acts), Ninth (False Advertising), and Tenth

(Unconscionable Contract) Causes of Action are dismissed

as against all Defendants;

3) The Eleventh Cause of Action (Rescission) is dismissed

as against Defendants REX and Odin;

4) The Twelfth (Slander of Title), Fourteenth (Declaratory

Relief), and Fifteenth (Injunctive Relief) Causes of

Action are dismissed as against all Defendants; and

5) Defendants’ Dismissal Motion is DENIED in all other

respects.

8 For the avoidance of doubt, the Court dismisses Plaintiffs’

rescission claim (the Eleventh Cause of Action) as against

Defendants REX and Odin, but adopts the R&R in all other respects.

It is FURTHER ORDERED that Defendants are to file their respective

Answers to Plaintiffs’ Amended Complaint by no later than April

26, 2024, and that this case is referred to Magistrate Judge

Shields for all pretrial matters.

SO ORDERED.

/s/ JOANNA SEYBERT

Joanna Seybert, U.S.D.J.

Dated: March 20, 2024

Central Islip, New York