Opinion ID: 490523
Heading Depth: 2
Heading Rank: 4

Heading: Banco Nacional's Other Contentions

Text: 53 Banco Nacional also contends that defendants' counterclaims should be rejected because the setoffs will operate as preferences prejudicing other United States nationals having claims against the Cuban government, and because Cuban Electric was insolvent when nationalized and its nationalization thus caused defendants no injury. We reject both contentions. 54 As to the alleged preferences, this Court has held that victims of Cuban expropriation may assert counterclaims as setoffs even though, in effect, preferences may result. See Menendez v. Saks & Co., 485 F.2d 1355, 1373-74 (2d Cir.1973), cert. denied on this issue, 425 U.S. 991, 96 S.Ct. 2201, 48 L.Ed.2d 815 (1976), rev'd on other issues sub nom. Alfred Dunhill of London Inc. v. Republic of Cuba, 425 U.S. 682, 96 S.Ct. 1854, 48 L.Ed.2d 301 (1976). Counterclaims not seeking affirmative recovery are usually not disallowed as preferences. See, e.g., 11 U.S.C. Sec. 553 (1982 & Supp. III 1985). This is especially appropriate when the setoffs were asserted well before the legal formation of an estate for the benefit of creditors. Here it was not until 1963 that the United States Government froze Cuban Government assets in this country, thereby creating such an estate. Thus, it cannot be said that defendants will unduly benefit to the prejudice of other claimants since without the assertion of these counterclaims in 1961 the sums on deposit from the Cuban banks would not have been frozen and would doubtless have been removed from the United States by Banco Nacional long before 1963. 55 As to the alleged lack of injury, neither the record nor the district court's findings support Banco Nacional's contention that Cuban Electric was insolvent when it was nationalized. According to the district court's findings, it was the expropriation itself that caused the nonpayment of the debts to defendants. The court found that [o]n or after August 6, 1960, Cuban Electric was incapable of discharging its debts to [defendants] because of the expropriation of its assets by enactment of Resolution No. 1. (Findings at 4; emphasis added.) Under the clearly erroneous standard set by Fed.R.Civ.P. 52(a), we cannot properly disturb this finding of fact since it is certainly plausible in light of the record viewed in its entirety. Anderson v. City of Bessemer City, 470 U.S. 564, 573-74, 105 S.Ct. 1504, 1511-12, 84 L.Ed.2d 518 (1985). There was uncontradicted evidence that Cuban Electric had a net worth of $72,613,220 on December 31, 1959, five weeks after its initial default. There is no evidence that it was insolvent when formally expropriated some seven months later. 56 Moreover, even if Cuban Electric had been insolvent when it was nationalized, this would not necessarily have meant that Cuba's action caused defendants no injury. Defendants were injured so long as assets existed after the nationalization to pay creditors some percentage of their claims. We note that a mere 39% liquidating or reorganization dividend would have sufficed to pay each defendant more than the amount of its offset here. For these reasons, Banco Nacional's lack-of-injury argument must be rejected.