422 F.2d 1278 (2nd Cir. 1970), 507, Oscar Gruss and Son v. Lumbermens Mut. Cas. Co.
|Docket Nº:||507, 508, 33263, 33311.|
|Citation:||422 F.2d 1278|
|Party Name:||OSCAR GRUSS & SON, Plaintiff-Respondent and Cross-Appellant, v. LUMBERMENS MUTUAL CASUALTY COMPANY, Defendant-Appellant and Third-Party Plaintiff, and Cross-Appellee, v. Isidor BUCHMANN, Third-Party Defendant.|
|Case Date:||March 03, 1970|
|Court:||United States Courts of Appeals, Court of Appeals for the Second Circuit|
Argued Feb. 10, 1970.
[Copyrighted Material Omitted]
Thomas A. Harnett, New York City (Joseph T. Keller, William D. Hand, Jr., New York City, on the brief), for appellant and cross-appellee.
Alfred Berman, New York City (Guggenheimer & Untermyer, Marvin E. Pollock, Leon H. Tykulsker, New York City, on the brief), for respondent and cross-appellant.
Before LUMBARD, Chief Judge, and FRIENDLY and FEINBERG, Circuit judges.
FEINBERG, Circuit Judge:
In 1961, Lumbermens Mutual Casualty Company issued a policy of insurance, known as a Brokers Blanket Bond, to Oscar Gruss & Son, a partnership dealing in securities. The policy insured Gruss against loss caused by fraudulent acts of employees. In July 1962, Gruss notified Lumbermens that a Gruss employee had apparently committed fraudulent acts which might cause substantial claims against Gruss. Claims in large amounts did subsequently descend upon Gruss and were finally settled at great expense. The reaction of Lumbermens, however, was to disclaim liability under the Brokers Blanket Bond policy and to resist to the end any claim for reimbursement by Gruss thereunder. Gruss eventually had to sue its insurer. In the fall of 1968, after four years of litigation in the United States District Court for the Southern District of New York, Gruss finally obtained a judgment against Lumbermens on the policy in the amount of $436,601.52, with costs of $4,321.95. Lumbermens appeals from that judgment and Gruss cross-appeals from the denial of one item of claimed loss and one item of costs. For reasons indicated below, we affirm on both appeals. We also invoke 28 U.S.C. § 1912 and F.R.A.P. 38 and award Gruss a total of ten per cent interest on its judgment, counsel fees of $7,500 on the appeal and double costs.
The action by Gruss against Lumbermens was brought in the New York Supreme Court in 1964, and was thereafter removed to the court below on grounds of diversity. The case was tried on a complaint which contained three causes of action, two of which concern us on this appeal. The first claimed $356,382 for loss sustained by plaintiff Gruss as a result of the dishonest acts of its employee, Isidor Buchmann, manager of plaintiff's wholly-owned Swiss subsidiary, Valoren & Handels, A.G. ('Valoren'). The second sought to recover court costs and attorney's fees amounting to $116,038, paid by Gruss in defending litigation brought against it because of Buchmann's fraudulent acts. 1 The first cause of action was tried to a jury, which returned a special verdict resulting in judgment for Gruss of $275,000 plus interest of six per cent from June 6, 1966, apparently the date of payment by Gruss on claims brought against it. The second cause of action was tried by the court, Richard H. Levet, J., who awarded Gruss $103,599.77, with interest of six per cent from varying dates. Before discussing the arguments of Lumbermens as to why we should set aside these awards, it will be helpful to state the facts.
From the evidence before it, the jury could have found the following: The policy in question was issued October 1,
1961, in the amount of $700,000. The policy insured Gruss against
Any loss through any dishonest, fraudulent or criminal act of any * * * Employees, committed anywhere whether committed alone or in collusion with others * * *.
Later riders to the policy also added Valoren, the Swiss subsidiary, as a named insured and its office as a covered office. Buchmann, a Swiss national, had been employed by Gruss since 1955 as manager of Valoren. Valoren paid him a small salary, but his major compensation was in the form of commission payments sent to him monthly by Gruss on the brokerage orders transmitted to Gruss by Valoren from Swiss financial institutions for execution on the New York or American Stock Exchange. Before Gruss opened the Valoren office, the New York Stock Exchange had required Gruss, a member firm, to guarantee all liabilities of Valoren and to make Buchmann a direct employee and a Gruss registered representative, in accordance with Stock Exchange policy. Thereafter, a course of business dealing ensued between Gruss, on the one hand, and its subsidiary and Buchmann, on the other. There were periodic reports and audits, and the relationship was apparently uneventful and profitable.
In 1962-- after seven years-- Gruss discovered that its confidence in Buchmann had been misplaced. Alerted by a telephone call from a Swiss banker that Valoren and Buchmann were in difficulty, one of the Gruss principals flew to Switzerland to...
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