Sikh Forum, Inc. v Saluja, 2024 NY Slip Op 02831 [227 AD3d 1024]
May 22, 2024
Appellate Division, Second Department
[*1]
Sikh Forum, Inc., Plaintiff,
v
Maan S. Saluja et al., Defendants/Third-Party Plaintiffs-Appellants, et al., Defendants. Maninder Sethi et al., Third-Party Defendants-Respondents.
Harris Law Firm, Rockville Centre, NY (Sondra I. Harris of counsel), for defendants/third-party plaintiffs-appellants.
Ran Mukherjee, P.C., Brooklyn, NY, for third-party defendants-respondents.
In an action for declaratory and injunctive relief, the defendants/third-party plaintiffs appeal from an order of the Supreme Court, Nassau County (David J. Gugerty, J.), entered May 14, 2021. The order granted the third-party defendants’ motion pursuant to CPLR 3211 (a) to dismiss the third-party complaint.
Ordered that the order is modified, on the law, by deleting the provision thereof granting those branches of the third-party defendants’ motion which were pursuant to CPLR 3211 (a) to dismiss the second and third causes of action of the third-party complaint, and substituting therefore a provision denying those branches of the motion; as so modified, the order is affirmed, with costs to the defendants/third-party plaintiffs, and the third-party action is severed and converted into a special proceeding pursuant to Not-for-Profit Corporation Law §§ 618 and 621.
In March 2019, Sikh Forum, Inc. (hereinafter Sikh Forum), a not-for-profit corporation that owns and operates a gurdwara, or Sikh temple, commenced this action, inter alia, alleging that the defendants held a sham meeting in which they claimed to have elected themselves as the board of trustees of Sikh Forum. Thereafter, in June 2020, certain members of Sikh Forum who had been named as defendants in the action commenced a third-party action against certain alleged officers and/or members of the board of directors of Sikh Forum. The third-party complaint sought damages for breach of fiduciary duty, a judicial declaration with regard to the election that was the subject of the main action commenced by Sikh Forum, and injunctive relief compelling the third-party defendants to provide access to certain books and records which previously had been demanded. The third-party defendants moved pursuant to CPLR 3211 (a) to dismiss the third-party complaint for lack of standing. In an order entered May 14, 2021, the Supreme Court granted the third-party defendants’ motion. The defendants/third-party plaintiffs appeal.
“On a defendant’s motion to dismiss the complaint based upon the plaintiff’s alleged lack of standing, the burden is on the moving defendant to establish, prima facie, the plaintiff’s lack of standing as a matter of law” ( U.S. Bank N.A. v Marrero , 221 AD3d 631 , 633 [2023] [internal quotation marks omitted]; see Wilmington Sav. Fund Socy., FSB v Matamoro , 200 AD3d 79 , 90 [2021]). “To defeat [*2] a defendant’s motion to dismiss, the plaintiff has no burden of establishing its standing as a matter of law, but must merely raise a question of fact as to the issue” ( Sizova v Union Mut. Fire Ins. Co. , 217 AD3d 1007 , 1008 [2023] [internal quotation marks omitted]; see Wilmington Sav. Fund Socy., FSB v Matamoro , 200 AD3d at 90).
Under Not-for-Profit Corporation Law § 623 (a), a derivative action “may be brought in the right of a domestic or foreign corporation to procure a judgment in its favor by five percent or more of any class of members” ( see Feliciano v Seabrook , 214 AD3d 711 , 712 [2023]). Here, the third-party defendants established, prima facie, that the defendants/third-party plaintiffs lacked standing to assert a derivative claim of breach of fiduciary duty on behalf of Sikh Forum by demonstrating that the defendants/third-party plaintiffs did not represent five percent or more of any class of members of Sikh Forum. In opposition, the defendants/third-party plaintiffs failed to raise a question of fact ( see N-PCL 623 [a]; Sizova v Union Mut. Fire Ins. Co. , 217 AD3d at 1008; Feliciano v Seabrook , 214 AD3d at 713). Accordingly, the Supreme Court properly determined that the defendants/third-party plaintiffs lacked standing to bring a claim of breach of fiduciary duty derivatively on behalf of Sikh Forum ( see Tae Hwa Yoon v New York Hahn Wolee Church, Inc. , 56 AD3d 752 , 755 [2008]; see also Schaefer v Chautauqua Escapes Assn., Inc. , 158 AD3d 1186 , 1187 [2018]).
However, the Supreme Court should not have directed dismissal of the second cause of action of the third-party complaint, which asserted individual claims for declaratory relief with regard to the election of new officers and directors ( see N-PCL 618). Likewise, the third cause of action of the third-party complaint asserted individual claims seeking injunctive relief to compel the production of certain books and records of Sikh Forum ( see id. § 621 [b], [d]) and the court should not have directed dismissal of that cause of action for lack of standing ( see CPLR 3211 [a] [3]; Matter of Smith v Calvary Baptist Church , 35 AD3d 749 , 750 [2006]; see also Tae Hwa Yoon v New York Hahn Wolee Church, Inc. , 56 AD3d at 754).
Although the defendants/third-party plaintiffs did not bring the third-party action as a special proceeding pursuant to the Not-for-Profit Corporation Law, “[g]enerally, where an action or proceeding is brought in the wrong form or under an inappropriate statute, the court, in its discretion, may deem it brought in a proper fashion, thus avoiding a dismissal” ( Tae Hwa Yoon v New York Hahn Wolee Church, Inc. , 56 AD3d at 755 [internal quotation marks omitted]; see Jackson v Bank of Am., N.A. , 149 AD3d 815 , 818 [2017]). Accordingly, we convert the third-party action into a special proceeding pursuant to Not-for-Profit Corporation Law §§ 618 and 621 ( see Tae Hwa Yoon v New York Hahn Wolee Church, Inc. , 56 AD3d at 755; Esformes v Brinn , 52 AD3d 459 , 460 [2008]). Duffy, J.P., Ford, Dowling and Ventura, JJ., concur..