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Buford v. Wilmington Trust Co.

argued: January 21, 1988.

ANTHONY A. BUFORD, JR.
v.
WILMINGTON TRUST COMPANY, APPELLANT



On Appeal From the United States District Court for the Eastern District of Pennsylvania, D.C. Civil No. 86-6450.

Gibbons, Chief Judge, Weis and Greenberg, Circuit Judges.

Author: Gibbons

GIBBONS, Chief Judge:

In this diversity breach of contract action defendant Wilmington Trust Company (Wilmington) appeals from a judgment of $732,178.76 in favor of plaintiff Anthony A. Buford, Jr. (Buford). The contract in issue is an Agreement and Plan of Reorganization dated April 19, 1984, in which Buford, as seller, agreed to transfer all his stock in The Pennsylvania Group, Incorporated (Penn Group) to Wilmington in exchange for (1) Wilmington common stock having a fair market value of $600,000 at closing, and (2) additional Wilmington common stock, after closing, having a fair market value in an amount depending on Penn Group's future revenues. At issue is Wilmington's refusal to deliver the additional common stock. The jury found in Buford's favor on liability, and the district court entered judgment in his favor for the value, as of the date of the judgment, of shares withheld. Wilmington contends: (1) that the court erred in denying its motion for judgment notwithstanding the verdict or for a new trial; and (2) that the court erred in calculating damages based on the value of the stock on the date of the judgment rather than the date of the breach of contract. We will affirm the judgment in Buford's favor on liability, but reverse and remand for recalculation of the amount of the judgment.

I.

At the time of the contract Buford owned all the stock of Penn Group, a Pennsylvania retail discount securities brokerage business conducted at Bala Cynwyd, Pennsylvania; Wilmington, a Delaware banking corporation, conducted a retail discount securities business, incident to its banking business, in Wilmington, Delaware, known as Wilmington Brokerage. Buford received $600,000 worth of Wilmington common stock at closing. Under paragraph 9.07 of the contract Wilmington agreed to give him additional shares if Penn Group had certain specified gross revenues in the fiscal years July 1, 1984 -- June 30, 1985 and July 1, 1985 -- June 30, 1986. The number of shares were to be determined by their market value on the payment date, which was the fifteenth business day after the end of the relevant fiscal period. The contract defined gross revenue of Penn Group as

To assure that Penn Group gross revenue would be properly calculated, paragraph 9.07 of the contract further provided:

(c) Purchaser [Wilmington] hereby represents and warrants to Seller [Buford] that Purchaser will not intentionally reduce, delay, divert to other offices or otherwise manipulate the amount of Gross Revenues in a manner intended to reduce the additional compensation to which Seller would be entitled hereunder.

(d) Purchaser agrees that for the fiscal year ending June 30, 1985, it will allocate not less than $40,000 of its advertising expenditures to promote the discount brokerage business acquired from Penn Group hereunder, and for the fiscal year ending June 30, 1986, Purchaser will allocate its discount brokerage advertising expenditures to the business acquired from Penn Group hereunder in an amount at least equal to the lessor of: (i) 50 % of Purchaser's total discount brokerage advertising expenditures for the fiscal year ending June 30, 1986 or (ii) Purchaser's total discount brokerage advertising expenditures for the fiscal year ending June 30, 1986 multiplied by the percentage of Purchaser's discount brokerage gross revenues for the preceding fiscal year contributed by the business acquired from Penn Group hereunder.

It is undisputed that the gross revenues of Penn Group for the two specified fiscal years never reached the contract amounts which would trigger Wilmington's duty to deliver additional stock. Buford contends however, that Wilmington breached the quoted undertakings with respect to diversion of revenue from and advertising expenditures for Penn Group, thereby intentionally reducing Penn Group's revenue. Buford contends that absent Wilmington's breach of contract the specified gross revenue levels would have been met, and the deferred payments of stock should have been made.

Following a four-day trial the district court submitted the case to the jury on interrogatories:

1. Did Wilmington Trust Company breach a contractual obligation to Anthony A. Buford, Jr. causing Mr. Buford harm?

2. State the amount, in dollars, of gross revenue which the Penn Group would have received had Wilmington Trust not breached the contract for the fiscal years 1985 and 1986.

Wilmington did not object to these interrogatories. The jury answered the first question affirmatively, and in answer to the second found that Penn Group's gross revenues absent the breach would have been $777,000 in fiscal 1985 and $976,000 in fiscal 1986. These amounts exceed the gross revenues ...


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