You need to move it to another file (rather than a folder), this can also be used to rename.
Move:
File.Move(@"c:\test\SomeFile.txt", @"c:\test\Test\SomeFile.txt");
Rename:
File.Move(@"c:\test\SomeFile.txt", @"c:\test\SomeFile2.txt");
The reason it says "File already exists" in your example, is because C:\test\Test
tries to create a file Test
without an extension, but cannot do so as a folder already exists with the same name.