The following papers numbered 1 to 28 read herein:

Upon the foregoing papers, plaintiffs Brett E. Wynkoop and Kathleen Keske move for an order: (A) pursuant to CPLR 3001, granting them a declaratory judgment declaring [*2]their rights as against defendant 622A President Street Owners Corp. (622A Owners) with respect to: (1) plaintiffs' use of the cellar in the building owned by 622A Owners, (2) plaintiffs' subletting apartment 2 of the building to James Borland, (3) plaintiffs' entitlement to indemnification for defending a prior action against them, and (4) plaintiffs' right to be assigned additional shares relating to their occupation of additional space under the proprietary lease; and (B) pursuant to CPLR 5519 (c), staying all proceedings pending the outcome of defendants' appeal of the dismissal of the prior action, Taylor v Wynkoop, Index No. 6548/12, or, alternatively, staying the counterclaims pending a determination of the a motion to amend/renew/reargue made in the prior action (Motion Sequence No. 2).

Defendants and plaintiffs on the counterclaim Kyle Taylor,^[FN1] Hilary Taylor and Rajeev Subramanyam (collectively referred to as the Shareholder Defendants) move for an order, pursuant to CPLR 6401, appointing a temporary receiver for 622A Owners (Motion Sequence No. 3).

Plaintiffs cross move for an order: (1) pursuant to Business Corporation Law §§624 and 720 and CPLR 3211 (a) (1) and (a) (7), dismissing the Shareholder Defendants' counterclaims; and (2) quashing defendants' demand for discovery and issuing a protective order (Motion Sequence No. 4).

By way of an order to show cause dated May 20, 2014, the Shareholder Defendants move for an order: (1) enjoining plaintiffs, their attorneys, agents and parties acting in concert with them, from holding themselves out as representatives of 622A Owners or taking any action on the behalf of 622A Owners; (2) ordering plaintiffs to turn over the books and records of 622A Owners and statements, checkbooks, and passwords associated with all bank accounts belonging to 622A Owners to Subramanyam; and (3) ordering plaintiffs to provide all necessary authorizations, documents and signatures to permit Subramanyam to exercise control of all of 622A Owners bank accounts as president and treasurer (Motion Sequence No. 6).

By way of an order to show cause dated May 20, 2014, plaintiffs move for an order: (1) pursuant to CPLR 6301, enjoining the Shareholder Defendants from taking action purporting to be on the behalf of 622A Owners; (2) pursuant to CPLR 6301, enjoining the Shareholder Defendants from coming within 100 yards of plaintiffs; (3) pursuant to CPLR Art. 78, enforcing the May 16, 2014 shareholder vote electing Winkoop, Keske and Charmaine Chester as the board of directors, or alternatively holding a hearing to resolve any dispute regarding shares and votes (Motion Sequence No. 5).

The portion of plaintiffs' motion for a declaratory judgment (Motion Sequence No. 2) is denied without prejudice to renewal after joinder of issue or without prejudice to plaintiffs moving for a default judgment as against 622A Owners. The portion of plaintiffs' motion requesting a stay of the counterclaims pending the determination of the appeal of the dismissal of Taylor v Wynkoop, Index No. 6548/12 or a stay pending reargument/renewal of [*3]the dismissal is denied.

The Shareholder Defendants' motion for the appointment of a receiver (Motion Sequence No. 3) is denied.

The portion of plaintiffs' cross motion (Motion Sequence 4) seeking dismissal of the counterclaims is denied. The portion of plaintiffs' cross motion seeking to quash discovery and for a protective order is granted only to the extent that the parties are directed to appear for a conference to be held on January 30, 2015, at 9:30am, to address the scope of the discovery. The cross motion is otherwise denied.

The Shareholder Defendants' motion for a preliminary injunction (Motion Sequence No. 6) is granted to the extent that it is ordered that plaintiffs, their attorneys, agents and parties acting in concert with them, are enjoined from holding themselves out as representatives of 622A Owners or taking any action on the behalf of 622A Owners. The motion is otherwise denied but with leave to renew following the new election ordered herein. It is further ordered this motion is converted to a special proceeding (CPLR 401; Business Corporation Law § 619) and the Shareholder Defendants are directed to purchase a separate index number within 20 days.

Plaintiffs motion for a preliminary injunction/article 78 proceeding (Motion Sequence No. 5) is granted to the extent that the election held on May 16, 2014 is declared invalid; and it is ordered: (1) that the shareholders of 622A Owners shall hold a new special meeting of shareholders to elect a new board within 40 days of today's date on a date, time and location set by the referee (appointed below) after consulting with the parties attorneys that is at least 10 days after the date the notice of meeting is to be sent; (2) that the referee (appointed below) shall send a notice of the meeting to the shareholders by regular mail; (3) that Roger E. Siegel, Esq, 16 Court Street, Ste. 2506, Brooklyn, NY 11241, (718) 852-3113, is appointed as a referee to act as an inspector of the election; (3) that the parties are directed to pay the referee, upon the completion of the report of the inspector, a minimum fee of $250 and additional fee of $250 per hour if the meeting lasts more than an hour as compensation for his/her services, which sum shall be shared equally by the parties; (4) that the referee appointed herein is subject to the requirements of Rule 36.2(c) of the Chief Judge, and if the referee is disqualified from receiving an appointment pursuant to the provisions of that Rule, the referee shall notify the Appointing Judge forthwith; and (5) that by accepting this appointment the referee certifies that he/she is in compliance with Part 36 of the Rules of the Chief Judge (22 NYCRR Part 36), including but not limited to, section 36.2(e) ("Disqualification from appointment"), and section 36.2(d) ("Limitations on appointments based upon compensation"); and it is further ordered that the Shareholder Defendants, their attorneys, agents and parties acting in concert with them, are enjoined from holding themselves out as representatives of 622A Owners or taking any action on the behalf of 622A Owners. The motion is otherwise denied. This motion/article 78 proceeding is converted to a special proceeding (CPLR 401; Business Corporation Law § 619) and plaintiffs are directed to purchase a separate index number within 20 days.

This action involves an acrimonious dispute amongst the shareholders and proprietary leaseholders of a small four unit cooperative (coop) apartment building owned by 622A Owners that was converted into a coop in the mid-1980s. Plaintiffs jointly own 50 percent of the shares of 622A Owners, and are the proprietary leaseholders of apartments 1 and 2 of the building.^[FN2] It is undisputed that plaintiffs purchased their shares in February 1995, that they live in apartment 1, which is located on the first floor of the building, that they exclusively occupy the building's cellar which is connected to their first floor living space by way of a circular stairway, and that they have sublet apartment 2 from the time of their purchase of their shares for apartment 2. Defendant Kyle Taylor purchased his 25 percent shareholder interest in 622A Owners and entered into his proprietary lease for apartment 3 in September 2010. Kyle Taylor lives (or lived)^[FN3] in apartment 3 with his wife, defendant Hilary Taylor. Defendant Rajeev Subramanyam, who holds a 25 percent shareholder interest in 622A Owners, purchased his shares and entered into his proprietary lease for apartment 4 in January 2006.

It is essentially undisputed that, from the time that plaintiffs purchased their interest in 622A Owners, the shareholders of 622A Owners managed 622A owners without following the corporate formalities required by 622A Owners' by-laws and by the Business Corporation Law. 622A Owners operated without a board of directors, officers or a management company. Upon becoming a shareholder, Wynkoop assumed the roles of treasurer and building manager and Keske assumed the roles of vice-president and secretary (Amended Complaint 23-25; 1/13/14 Wynkoop Aff. ¶ 9). Without the holding of any annual meetings or the election of board members or officers, plaintiffs continued in these roles even after the Shareholder Defendants purchased their shares. Disputes thereafter arose between plaintiffs and the shareholder defendants relating, among other things, to access to the basement areas and the maintenance of the building, including a repair of a water leak in a skylight on the building's roof and water damage associated with the leak. In October 2011, while the parties were embroiled in these maintenance disputes, the Shareholder Defendants first requested the holding of a shareholder meeting. The Shareholder Defendants, however, assert they received no response despite continued requests (8/24/12 Kyle Taylor Aff. ¶¶ 10-11, 26-37, 46-51; 8/26/12 Subramanyam Aff. ¶ 26).

Unable to resolve their differences with plaintiffs, in March 2012, Taylor and Subramanyam commenced an action (Taylor v Wynkoop, Index No. 6548) (Prior Action), styled as a shareholder derivative action, against the plaintiffs in this action, as well as plaintiffs' subtenant, James Borland, and 622A Owners as a nominal defendant. In the [*4]amended complaint in the Prior Action, Taylor and Subramanyam sought, inter alia, an order directing the holding of a shareholder meeting to elect a board of directors, the termination of Wynkoop and Keske's shares in 622A Owners and their ejectment from the building, the ejectment of Wynkoop and Keske from the cellar, and alleged a cause of action based on a breach of fiduciary duty. The court (Rivera, J.), in an order dated November 7, 2013, dismissed the Prior Action without prejudice, finding that Taylor and Subramanyam had failed to adequately plead demand futility as is required to excuse a demand upon the board of directors as is required by Business Corporation Law § 626 (c) to commence a shareholder derivative cause of action.

During the course of this Prior Action, a board of directors was selected by way of a stipulation entered into on the record in open court on April 30, 2013. As part of the stipulation, each shareholder was to be a director. The stipulation, however, did not address the appointment of corporate officers.

Despite the stipulation, the parties' disputes with respect to the operation and control of 622A Owners continued. By way of a July 7, 2013 notice signed by Keske as "secretary", Keske and Wynkoop called a meeting to remove Taylor and Subramanyam from their board seats and elect replacements for them. Plaintiffs concede that Taylor and Subramanyam appeared for the meeting on July 14, 2013, and before anything else occurred, "declared their intended votes to oppose any change in the board, and left the meeting" (Amended Complaint ¶ 70). Taylor and Subramanyam then left the meeting, whereupon plaintiffs called the meeting to order, voted to remove Taylor and Subramanyam from the board and voted to elect Charmaine Chester as a third member of the board (5/20/14 Wynkoff Aff. ¶¶ 9-10).

In November 2013, plaintiffs commenced the instant action, seeking, inter alia, the declaratory relief sought against 622A Owners with respect to the use of the cellar and the subletting of Apartment 2 that is the subject of plaintiffs' motion for a declaratory judgment. In addition, plaintiffs pleaded a cause of action for negligent misrepresentation against 622A Owners relating to the condition of the cellar as well as one for indemnification, and several causes of action against Subramanyam and Taylor premised on different legal theories relating to their alleged failure to make repairs, their failure to pay their building maintenance and their making false allegations in the prior action. The Shareholder Defendants have answered, and have pled counterclaims against plaintiffs seeking, in a derivative capacity for 622A Owners, damages for breach of contract (relating to alleged breaches of the Proprietary Leases for apartments 1 and 2), breach of fiduciary duty, and conversion and seeking plaintiffs' ejectment from their apartments and/or injunctive relief based primarily on plaintiffs' use of the cellar, their subleasing of Apartment 2 and their alleged misuse of the 622A Owners' maintenance payments. 622A Owners, however, has not served an answer and would currently appear to be in default.

During the pendency of this action, Keske, acting as "secretary," sent notices to the Shareholder Defendants stating that the annual shareholder meeting was to be held on May [*5]16, 2014. It is essentially undisputed that Taylor and Subramanyam arrived at the meeting with Joanna Peck, an attorney, who they desired to act as an inspector of the elections under the By Laws and under Business Corporation Law §§ 610 and 611.^[FN4] Wynkoop was present and had a proxy from Keske. The meeting was contentious from the beginning, with Wynkoop asserting that he was the only board member present, and as such, was the presiding officer of the meeting, and with Taylor and Subramanyam insisting on proof of Wynkoop's ownership of shares despite their concessions in this action and the prior action of Wynkoop's shareholder status. Taylor and Subramanyam also objected to Keske's authority to call the meeting as secretary, and they ultimately only agreed to proceed with the meeting under protest.

From the beginning of the meeting, Wynkoop objected to Peck's right to serve as an inspector of the election and asserted that the meeting was being adjourned to another location. Thereafter, Taylor and Subramanyam, asserting that they were acting as directors of 622A Owners, voted to appoint Peck as an inspector of the election. Wynkoop, however, remained at the meeting and asserted that Taylor and Subramanyam had no authority to vote as directors because they had been removed from the board the previous summer.

During an argument about Subramanyam and Taylor's request that Wynkoop read the minutes from the last meeting, Taylor asserted that Wynkoop assaulted him by slapping his hand with a folder. Wynkoop, however, denied that he assaulted Taylor, and asserted that he was simply pulling the folder away from Taylor who had tried to grab it out of his hand. Taylor, nevertheless, called the police, who arrived at the meeting location, and apparently interviewed the parties. The police, however, did not arrest Wynkoop or take other action than accept the filing of a report by Taylor.

After Wynkoop returned from talking to a police officer, Taylor was not present at the meeting location. When Wynkoop asked Subramanyam where Taylor was, Subramanyam stated that he could not continue the meeting after assaulting Taylor, and that Taylor could not be in a "safety zone" while Wynkoop was present. Wynkoop again asserted that the meeting had been adjourned, while Subramanyam asserted that the meeting would continue. Wynkoop then apparently stepped away from the meeting location. Taylor thereafter returned and Subramanyam continued the meeting and proceeded to vote their shares to elect Kyle Taylor, Hilary Taylor and Rajeev Subramanyam as the board of directors. While Subramanyam was casting his votes for Kyle Tayler, Wynkoop returned to the meeting but did not vote his shares or his proxy, and continued to assert that the meeting had been [*6]adjourned. Taylor and Subramanyam thereafter adjourned the shareholders' meeting, and at another location, held a board of directors' meeting at which they elected Subramanyam president and treasurer and Taylor vice-president and secretary. At or around the same time, Wynkoop held his own "adjourned" shareholder meeting in the absence of Taylor and Subramanyam, and elected a board consisting of him, Keske and Chester.

In the face of this factual background, the court turns first to the parties' competing motions seeking injunctive relief relating to the May 16, 2014 shareholder meeting. These motions for injunctive relief effectively require the court to determine the propriety of the election pursuant to Business Corporation Law § 619. A special proceeding, however, is the exclusive means of seeking relief under section 619 (see Esformes v Brinn, 52 AD3d 459, 462 [2d Dept 2008]; Chiulli v Reiter, 130 AD2d 617, 618 [2d Dept 1987]). As a court may ignore such a defect with respect to the form of the proceeding and deem the motions to have been brought in the proper fashion and in the absence of any prejudice to the parties in doing so, the court will convert each of the motions into a special proceeding (CPLR 103 [c]; Vincent C. Alexander, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, C103:3; see also Esformes, 52 AD3d at 462-463; Albanese v Albanese, 4 Misc 3d 1023 [A], 2004 NY Slip Op 51003 * 1 [U] [Sup Ct, Nassau County 2004]). Plaintiffs and the Shareholder Defendants are each required to purchase a separate index number for their respective motions/special proceedings within 20 days of service of this order with notice of entry (CPLR 103 [c]; Vincent C. Alexander, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, C103:3).

In considering the parties' claims, the court finds that, under the facts and circumstances here, justice requires a new election to be held within 40 days of this decision (Business Corporation Law § 619). In this regard, plaintiffs correctly assert that Peck was not properly appointed as the inspector of the elections. Under Article II, Section 6 of the By Laws, any shareholder entitled to vote at a meeting of the shareholders can request the appointment or election of an inspector of election. The By Laws further provide that the appointment of such an inspector is done pursuant to Business Corporation Law § 610, which states that an inspector may be appointed by the directors, or if not so appointed, by the officer presiding at the shareholder meeting (Business Corporation Law § 610 [a]). In applying these provisions, the court finds that the issue of appointing an inspector was not raised at a properly noticed board meeting in that the e-mails sent by the Shareholder Defendants' attorney to plaintiffs' attorney do not constitute notice for purposes of a board meeting (By Laws, Art. III, § 5).^[FN5] In addition, since Keske was not present at the meeting, [*7]all of the directors were not present at the shareholder meeting to waive the absence of proper notice (By Laws, Art. III, § 5). As neither Subramanyam nor Taylor may be deemed the officer presiding over the meeting for purposes of appointing an inspector, they did not have the authority to appoint an inspector by their own action.^[FN6] However, Peck's continued presence at the meeting, despite her unauthorized status, might not, in and of itself, serve to invalidate the meeting (see 5 Fletcher, Cyclopedia of Corporations § 2024 [2014]; Madison Ave. Baptist Church v Baptist Church of Oliver St., 28 NY Super Ct 649 [Super Ct 1866], affd 31 NY Super Ct 109 [1869], reversed on other grounds 46 NY 131 [1871]; United Chines Society v Yee Mun Wai, 22 Haw 604, 1915 WL 1412 [Haw Ter 1915]; see also Clay v Clay, 389 So2d 31, 40-41 [La 1979] [although reversed on appeal on other grounds, trial court found that vote not invalidated by shareholders refusal to have attorney leave the room during vote]).

On the other hand, when Peck's presence is considered in conjunction with other issues relating to the conduct of the meeting, there are real questions regarding the meeting's fairness. The Shareholder Defendants may be correct that Wynkoop had no authority to adjourn the meeting to another location over the objections of Subramanyam and Taylor when both Subramanyam and Taylor were physically present at the meeting, as Wynkoop, even with the proxy, did not have a majority for the adjournment (see Matter of Dollinger v Dollinger Corp, 51 Misc 2d 802, 804-805 [Sup Ct, Monroe County 1966]; see also Gunzburg v Gunzburg, 74 AD2d 636, 637 [2d Dept 1980]; cf. Jordan v Allegany Co-op Ins. Co., 147 Misc 2d 768, 771 [Sup Ct, Allegheny County 1990]). Nevertheless, later in the meeting, when Taylor was absent from the meeting following his stepping outside in order to talk to the police, Wynkoop may technically have had a majority shareholder vote to adjourn the meeting when he again stated that he was adjourning the meeting. Since Taylor [*8]had expressly stated that he was only stepping away from the meeting in order to speak with the police, Wynkoop's failure to give Taylor some additional time to return to the meeting renders the adjournment unfair to Taylor (see Hong v 384 Grand St. Housing Dev. Fund Co., Inc., 2008 NY Slip Op 31456 [U] [Sup Ct, New York County 2008] [conducting a meeting in an extremely expeditious manner in order to avoid consideration of the votes of dissenters who were a few minutes late to the meeting]).

The meeting's fairness is also called into question by: (1) Wynkoop's continued assertion that he was the presiding officer of the meeting; (2) Taylor and Subramanyam protesting the propriety of the notice, yet continuing the meeting under protest; (3) Taylor and Wynkoop's pedantic request that Wynkoop prove his shareholder status despite their concessions of his status in this action and the prior action; (4) Taylor's calling the police based on the purported assault;^[FN7] and (5) the statements by Subramanyam that he did not accept Wynkoop's continued presence at the meeting following the alleged assault. Accordingly, reasonable grounds exist for finding that the meeting was not held in a fair, proper or regular manner, and that the votes taken by Taylor and Subramanyam electing one version of the board and votes taken by Wynkoop at his purported adjourned meeting electing another version of the board should all be rejected and a new election held (see Hong, 2008 NY Slip Op 31456; Heisler v Gingras, 169 Misc 2d 403, 406 [Sup Ct, Albany County 1996], affd 235 AD2d 900 [3d Dept 1997], affd as modified on other grounds 90 NY2d 682 [1997]; Jordan, 147 Misc 2d at 772-773; see also Ronnen v Ajax Elec. Motor Corp., 88 NY2d 582, 591 [1996]).

Given the level of the acrimony displayed by the plaintiffs and the Shareholder Defendants against each other at the May 16, 2014 meeting, the court, pursuant to the authority under Business Corporation Law § 619 to take "action as justice may require," has appointed a referee to act as an inspector at the election (see Heisler v Gingras, 169 Misc 2d at 406).

With respect to the ancillary injunctive relief requested by the parties, the Shareholder Defendants' requests relating to the corporate books, records and bank accounts are denied as premature given that a new election has been directed. Leave, however, is granted to renew such requests following the new election ordered herein. Plaintiffs request that the court issue a preliminary injunction enjoining the Shareholder Defendants from coming within 100 yards of the plaintiffs and requiring them to stay away from plaintiffs' home and work is denied without a hearing. Wynkoop's allegation that Taylor tried to grab a folder out of his hand simply fails to show that the Shareholder Defendants pose any real threat to the plaintiffs' safety or well being that would warrant the extraordinary remedy of a preliminary injunction (see Taub v Taub, 33 AD3d 612, 612 [2d Dept 2006], lv dismissed 7 NY3d 917 [*9][2006]; cf. Lefrak v Schneps, 223 AD2d 581, 582 [2d Dept 1996]; Park S. Assoc. v Blackmer, 171 AD2d 468, 469 [1st Dept 1991]).

Turning to plaintiffs' motion for a declaratory judgment, the court notes that the motion for a declaratory judgment must be treated as one for summary judgment on plaintiffs' declaratory judgment causes of action (see Jason v Herdman, 70 AD3d 1382, 1382 [4th Dept 2010]; Patrick M. Connors, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 3001:7 and 3001:21 [procedural course of a declaratory judgment action is essentially the same as any other action]; see also Reid v I. Grant, Inc., 94 AD3d 500, 501 [1st Dept 2012] [applying summary judgment standard to a motion for declaratory judgment]). 622A Owners, however, has not answered in this action.^[FN8] Since issue has not been joined by 622A Owners and since the motion for declaratory judgment seeks declarations and other relief exclusively with respect to 622A Owners, plaintiffs' motion for a declaratory judgment is premature and must be denied (see City of Rochester v Chiarella, 65 NY2d 92, 101-102 [1985]; Gaskin v Harris, 98 AD3d 941, 942 [2d Dept 2012]; Jason, 70 AD3d at 1382).

In considering plaintiffs' cross motion to dismiss the counterclaims, the court finds that the portion of the motion seeking relief pursuant to CPLR 3211 (a) (1) (dismissal based on unquestioned documentary proof) is untimely, as the Shareholder Defendants' answer with counterclaims was served electronically on plaintiffs on December 24, 2013 (CPLR 2103 [b] [7]), and the motion was not made until February 14, 2014, a date well past the 20 days allowed to reply to the counterclaim (CPLR 3012 [a]; Giglio v NTIMP, Inc., 86 AD3d 301, 307 [2d Dept 2011]; see also CPLR 3211 [e]; Lema v New York Cent. Mut. Fire Ins. Co., 112 AD3d 891, 892 [2d Dept 2013]).^[FN9] Plaintiffs arguments that the counterclaims are barred by the statute of limitations are also untimely, as those arguments are properly raised as part of a CPLR 3211 (a) (5) motion, which like a CPLR 3211 (a) (1) motion, must be made within the 20 days allowed to reply to the counterclaim (CPLR 3211 [e]; Nowacki v Becker, 71 [*10]AD3d 1496, 1497 [4th Dept 2010]; Bowes v Healy, 40 AD3d 566, 566 [2d Dept 2007]). Further, no request has been made to treat the cross motion as one for summary judgment (CPLR 3211 [c]) and the parties have not unequivocally charted a summary judgment course (see Wesolowski v St. Francis Hosp., 108 AD3d 525, 526 [2d Dept 2013]; Hendrickson v Philbor Motors, Inc., 102 AD3d 251, 257 [2d Dept 2012]; Bowes, 40 AD3d at 567).

Since a CPLR 3211 (a) (7) motion may be made at any time (see Hendrickson, 102 AD3d at 257), the court will thus address that portion of plaintiffs' motion on the merits. In considering a motion to dismiss for failing to state a cause of action under CPLR 3211 (a) (7), the pleading is to be afforded a liberal construction (CPLR 3026), and the court should accept as true the facts alleged in the complaint, accord plaintiff the benefit of every possible inference, and only determine whether the facts, as alleged, fit within any cognizable legal theory (see Hurrell-Harring v State of New York, 15 NY3d 8, 20 [2010]; Leon v Martinez, 84 NY2d 83, 87-88 [1995]). Although evidentiary material may be considered in determining the viability of a complaint, the complaint should not be dismissed unless defendant has established "that a material fact alleged by the plaintiff is not a fact at all and that no significant dispute exists regarding it" (Stewart v New York City Tr. Auth., 50 AD3d 1013, 1014 [2d Dept 2008] [internal quotation marks and citations omitted]; see also Lawrence v Miller, 11 NY3d 588, 595 [2008]; Nunez v Mohamed, 104 AD3d 921, 922 [2d Dept 2013]). "Whether the complaint will later survive a motion for summary judgment, or whether the plaintiff will ultimately be able to prove [his or her] claims, of course, plays no part in the determination of a prediscovery CPLR 3211 motion to dismiss" (see Shaya B. Pac., LLC v Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, 38 AD3d 34, 38 [2d Dept 2006]).

With respect to the sufficiency of counterclaims, plaintiffs initially assert that the Shareholder Defendants have failed to allege sufficient facts showing that they satisfied Business Corporation Law § 626 (c)'s requirement for a derivative action of a demand for action by the board or that such a demand would have been futile.^[FN10] "Demand is futile, and excused, when the directors are incapable of making an impartial decision as to whether to bring suit" (Bansbach v Zinn, 1 NY3d 1, 9 [2003]). As is relevant to the claims here, it has been said that a plaintiff may satisfy this standard by alleging with particularity "that a majority of the board of directors is interested in the challenged transaction" (Marx v Akers, 88 NY2d 189, 200-201 [1996]). Despite the use of the word "majority" of the board, the courts have also held that the rule applies where 50 percent of a board is interested in the transaction, the board is thus deadlocked and thus unable to act on the demand (see Lauer v Schoenholtz, 106 AD2d 551, 552 [2d Dept 1984], lv dismissed 64 NY2d 610 [1985] and 65 NY2d 637 [1985]; Harris v 42 E. 73rd St., Inc., 145 NYS2d 361, 363-364 [Sup Ct, New [*11]York County 1955]; Untermeyer v Fidelity Daily Income Trust, 580 F2d 22, 24 [1st Cir 1978]; Tuscano v Tuscano, 403 F Supp2d 214, 222-224 [EDNY 2005]; Macris v Sevea International, Inc., 307 P3d 625, 635-636 [Utah Ct App 2013]).

In applying these rules to the facts here, the court finds that the Shareholder Defendants' allegations show that plaintiffs' interest relating to their continued use of the cellar, or their right to sublet apartment 2, or the conversion of maintenance payments is unique to them, and is different from that of the other shareholders (see Marx, 88 NY2d at 202-203). The Shareholder Defendants have thus sufficiently alleged that any demand regarding these issues would have been futile in light of plaintiffs' interest and the hostility between plaintiffs and the Shareholder Defendants (id.; see also Bansbach, 1 NY3d at 12; Tsutsui v Barasch, 67 AD3d 896, 897-898 [2d Dept 2009]; Javaheri v Old Cedar Dev. Corp., 22 AD3d 804, 805 [2d Dept 2005]; Lauer, 106 AD2d at 552). It is evident that the real issue is not so much the futility of making a demand, but rather, whether the Shareholder Defendants have adequately pled viable causes of action.

The Shareholder Defendants' counterclaim for breach of contract (Counterclaim Count One) is based on breach of the requirements of: (1) paragraph 15 of the Proprietary Lease relating to the subletting of apartment 2 without prior written authorization from the board of directors; (2) paragraph 18 of the Proprietary Lease relating to compliance with governmental rules and regulations respecting the use or occupancy of the apartment, (3) paragraph 21(a) of the Proprietary Lease requiring that construction or alterations to the apartments be done in compliance with the rules and regulations of governmental agencies; and (4) paragraph 25 of the Proprietary Lease requiring the lessee to permit entry to the apartment and any storage space to allow access for the purpose of repairs or to cure any default by the lessee.

Addressing these claims seriatim, the court notes that plaintiffs have conceded their subletting of apartment 2 in their complaint. While plaintiffs assert that they received permanent board approval to sublet the apartment at or shortly after they purchased the shares relating to apartment 2, such approval is only presented in the form of an affidavit, and thus cannot be deemed to constitute evidence demonstrating that the material allegations of the counterclaim are not facts at all, especially in light of the bar on oral modifications contained in Paragraph 45 of the Proprietary Lease (see J.A. Lee Elec., Inc. v City of New York, 119 AD3d 652, 654 [2d Dept 2014]; Karimov v Brown Harris Stevens Residential Mgt., LLC, 117 AD3d 910, 912 [2d Dept 2014]). In considering this claim, the court notes that paragraph 41 of the Proprietary Lease expressly provides that the remedies of provided in other sections of the lease are not exclusive. Moreover, while the Shareholder Defendants may have a difficult time showing damages based on the breach here, there is no absolute limitation on obtaining damages based on a violation of a lease provision barring subletting (see Theatre Row Phase II Assoc. v National Rec. Studios, 291 AD2d 172, 175-176 [1st Dept 2002], lv granted 294 AD2d 966 [1st Dept 2002], lv dismissed 98 NY2d 693 [2002]).

With respect to the use of the cellar, the Shareholder Defendants have alleged that [*12]plaintiffs' have violated the certificate of occupancy's limitation on the use of the space to a "recreation room," that the use of the cellar violates the Multiple Dwelling Law because it is below grade and there are no windows, and because of there is a spiral staircase leading from apartment 1 to the cellar. Again plaintiffs' proof submitted to show that their use of the cellar is not in violation of the certificate of occupancy or the Multiple Dwelling Law fails to show that the allegations of the counterclaim are not facts at all (see J.A. Lee Elec., Inc., 119 AD3d at 654; Karimov, 117 AD3d at 912). The court notes that it cannot make a finding that the use of the cellar is not in violation of the Multiple Dwelling Law based solely on a reading of the statute (cf. Measom v Greenwich & Perry St. Hous. Corp, 268 AD2d 156, 159-162 [1st Dept 2000], lv dismissed 95 NY2d 959 [2000] and 99 NY2d 608 [2003]). Similarly, there are factual issues with respect to the legality of the spiral staircase, since its propriety within the apartment turns on whether each level of the apartment has an alternate compliant means of egress (Multiple Dwelling Law § 52 [4] and [8]; cf. Kowalski v Johnson, 247 AD2d 514, 514 [2d Dept 1998]). Contrary to plaintiffs' arguments, compliance with these governmental requirements is not waived merely because the work is alleged to have been performed many years ago and prior to the plaintiffs' purchase of their shares (see 1050 Tenants Corp. v Lapidus, 289 AD2d 145, 145-147 [1st Dept 2001]). Nor are the counterclaims precluded by the absence of formal violations issued by the Buildings Department (id. at 147). Finally, it would appear that as between 622A Owners and plaintiffs, there is at least a factual issue as to whether plaintiffs may be held liable for some of the alleged violations (see Eight Broadway Associates v 3117 Broadway Owners Corp., 2008 NY Slip Op 32522 [U] [Sup Ct, New York County 2008]; see also 1050 Tenants Corp., 289 AD2d at 145-147; Caldwell v 302 Convent Ave. Hous. Dev. Fund Corp., 272 AD2d 112, 113-114 [1st Dept 2000]; cf. Kahn v 230-79 Equity, 2 Misc 3d 140 [A], 2004 NY Slip Op 50302 * 2 [U] [App Term 1st Dept 2004]; but see Measom, 268 AD2d at 159-162).

As with the allegations relating to the subletting and the use of the cellar, plaintiffs have failed to show that the factual allegations relating to the violation of 622A Owners' right to access plaintiffs' space do not constitute facts at all (see J.A. Lee Elec., Inc., 119 AD3d at 654; Karimov, 117 AD3d at 912).

For the same reasons, plaintiffs are not entitled to dismissal of the counterclaims for termination of plaintiffs' proprietary leases and for ejectment based on the same defaults and breaches of the proprietary leases (Counterclaim Counts Two and Three). In this regard, if the Shareholder Defendants prove the alleged defaults under the proprietary leases, 622A Owners may be entitled to cancel plaintiffs' shares, terminate the lease and require plaintiffs to surrender of possession of their apartments (see Proprietary Lease ¶¶ 30 [c], 30 [e], 31 [c]).^[FN11]

The ejectment cause of action relating to the use of the cellar (Counterclaim Count Four) may be problematic to the extent that the Shareholder Defendants assert that have plaintiffs have no right to use the cellar as incident to apartment 1 under the proprietary lease. In this respect the copy of the proprietary lease attached as an exhibit to the complaint - and thus deemed a part of the complaint (CPLR 3014) - contains a section 7A that gives apartment 1 rights to the cellar and back yard of the building and apartment 4 roof rights.^[FN12] Nevertheless, the allegations relating to the illegality of the use of the cellar and the propriety of the spiral staircase are sufficient to state an ejectment cause of action for the reasons discussed above with respect to the breach of contract and the other ejectment claims.

With respect to the breach of fiduciary duty (Counterclaim Count Five) and Conversion (Counterclaim Count Six) claims, the Shareholder Defendants' assertion that plaintiffs, without board or shareholder approval, improperly used funds belonging to 622A Owners to pay their legal fees in defending the prior action is sufficiently specific to state valid causes of action (see Tsutsui, 67 AD3d at 898-899; CPLR 3016 [b]), regardless of the sufficiency and specificity of the other allegations made in support of those claims. Of note in this respect, the amended complaint in the prior action shows that the majority, if not all, of the claims were brought against the plaintiffs in their individual capacity rather than "by reason of the fact that [plaintiffs are or were] a director or officer" as is required for them to obtain indemnification under the By Laws and the Business Corporation Law (By Laws Art. VII, § 1) (see Spring v Moncrieff, 10 Misc 2d 731, 732 [Sup Ct, New York County 1958]; [*13]Bensen v American Ultramar Ltd., 1996 WL 435039 * 2-3 [U] [SDNY 1996]; Business Corporation Law § 722 [a]; see also Tildon of N.J. v Regency Leasing Sys., 237 AD2d 431, 431 [2d Dept 1997]).

The plaintiffs are not entitled to dismissal of their claim for injunctive relief (Counterclaim Count Seven) or Attorney's Fees (Counterclaim Count Eight) as they have not specifically addressed those claims. Moreover, the Shareholder Defendants may be entitled to injunctive relief if they are successful with respect to certain of the claims alleging violations of government regulations and breach of the proprietary lease (see Seven Park Ave. Corp. v Green, 277 AD2d 123, 123-124 [1st Dept 2000], lv dismissed 96 NY2d 853 [2001]).

Contrary to plaintiffs' assertions, the Shareholder Defendants are entitled to discovery relating to 622A Owners' books and records other discovery that is material and necessary with respect to plaintiffs' causes of action and the Shareholder Defendants' counterclaims (see Retirement Plan for Gen. Empls. of the City of N. Miami Beach v McGraw Hill Cos., Inc., 120 AD3d 1052, 1055-1056 [1st Dept 2014]; Miller v Kastner, 96 AD2d 714, 714 [4th Dept 1983]; LoVerde v Interex Design & Equip. Corp., 54 AD2d 1090, 1091 [4th Dept 1976]). As part of this discovery, the Shareholder Defendants are entitled to notice an inspection of the entire cellar as such an inspection is relevant and material not just to the Shareholder Defendants' counterclaims, but also to the declarations requested by plaintiffs in the complaint (CPLR 3120 [1] [ii], [2]; Iskoswitz v Forkosh Const. Co., Inc., 269 AD2d 131, 132-133 [1st Dept 2000]; Haddad v Salzman, 173 AD2d 522, 522-523 [2d Dept 1991]). As some of the discovery demands appear overbroad, however, the court directs that the parties appear for a conference to determine the scope of this discovery (cf. Retirement Plan for Gen. Empls. of the City of N. Miami Beach, 120 AD3d at 1056).

Finally, the Shareholder Defendants motion for the appointment of a temporary receiver is denied as the unsupported allegations and accusations set forth by the Shareholder Defendants fall far short of the required "clear evidentiary showing that property of the corporation was in danger of being removed from the state, or lost, materially injured or destroyed " (Vardaris Tech, Inc. v Paleros, Inc., 49 AD3d 631, 632 [2d Dept 2008] [internal quotation marks omitted]; Matter of Kristensen v Charleston Sq., 273 AD2d 312, 312 [2d Dept 2000]; cf. Friedman v Ragin, 228 AD2d 642, 643 [2d Dept 1996]).

This constitutes the decision and order of the court.

E N T E R,

J. S. C.