Opinion
July 17, 1961
In an action pursuant to section 977-b of the Civil Practice Act, by a stockholder of the defendant sugar corporation, for the appointment of a permanent receiver of its assets within the State of New York for the purpose of liquidating such assets, in which a temporary receiver of such assets has been appointed, and in which the corporation has interposed an answer pleading two separate affirmative defenses, the parties cross-appeal as follows for an order of the Supreme Court, Kings County, dated April 17, 1961: (1) Plaintiff appeals from so much of such order as denies his motion for summary judgment under rule 113 of the Rules of Civil Practice. (2) The corporation appeals from so much of such order as denies its motion for summary judgment dismissing the complaint and vacating the appointment of the temporary receiver, and as grants plaintiff's motion to strike out its first and second affirmative defenses for patent insufficiency, pursuant to rule 109 of the Rules of Civil Practice. In its first defense the corporation alleged that it has not ceased to do business within the meaning of said section 977-b and, hence, the court has no power to appoint a permanent receiver of its New York assets. In its second defense the corporation alleged that under the circumstances here, if section 977-b be held to authorize the appointment of a permanent receiver of its New York assets, then the statute is unconstitutional because the corporation and its stockholders would be unjustly and arbitrarily deprived of their property without due process and in violation of the due process clause of the Federal and State Constitutions (U.S. Const., 14th Amdt.; State Const., art. I, § 6). Order, insofar as appealed from, modified by striking out the second decretal paragraph which strikes out both the first and second defenses contained in the corporation's answer; and by substituting therefor a paragraph denying plaintiff's motion to strike out the corporation's first defense that it has not ceased to do business, and granting plaintiff's motion to strike out the corporation's second defense that the statute (Civ. Prac. Act, § 977-b) as applied to it is unconstitutional. As so modified, the order is affirmed, without costs. In our opinion, the proof is sufficient to show that, within the meaning of section 977-b of the Civil Practice Act, the corporation has not been nationalized. Under the language of the Cuban law (No. 851 of July 6, 1960) and of the Cuban Resolution (No. 1 of Aug. 6, 1960) it would appear that the Castro Government of Cuba has expropriated the Cuban assets of the corporation, but that the government has not absorbed the corporation unto itself in such manner or to such an extent as to put the corporation completely out of existence. Nor did the Castro Government, by this law and resolution, preserve the corporation merely as a corporate entity in the ownership and complete control of the government. Whether the corporation ceased to do business within the meaning of the statute (Civ. Prac. Act, § 977-b) is a question of fact ( Schwartz v. Compania Azucarera Vertientes-Camaguey De Cuba, 12 A.D.2d 506). The first defense alleges in detail the facts with respect to the corporation's claim that it has not ceased to do business. While it is not necessary to set up as an affirmative defense matters which may be proved under a general denial ( Dworski v. Genessee Country Abstract Co., 277 App. Div. 1094), the fact that the answer does so would not make the defense insufficient ( Morgan Munitions Co. v. Studebaker Corp., 226 N.Y. 94, 98), or require that it be struck out where it tends to clarify the issues ( Murray Oil Prods. Co. v. Hanover Fire Ins. Co., 261 App. Div. 809) or where it tends to avoid a claim of surprise on the part of plaintiff ( West Washington Cut Meat Center v. Solomon, 260 App. Div. 741, 743). In our opinion the facts alleged in the first defense, if proved, would tend both to clarify the issues and avoid surprise on the trial. The second defense alleges that, as applied to the facts of this case, the statute (Civ. Prac. Act, § 977-b) is unconstitutional. If, under the facts, the statute be not applicable, the complaint will be dismissed; if it be applicable, the statute has already been held to be constitutional ( Stephen v. Zivnostenska Banka, Nat. Corp., 3 N.Y.2d 931; Oliner v. American-Oriental Banking Corp., 252 App. Div. 212, affd. 277 N.Y. 588). Nolan, P.J., Beldock, Ughetta, Christ and Brennan, JJ., concur.