692 F.2d 455 (7th Cir. 1982), 81-2620, American Nat. Bank and Trust Co. of Chicago v. Weyerhaeuser Co.
|Docket Nº:||81-2620, 81-2690.|
|Citation:||692 F.2d 455|
|Party Name:||AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, Plaintiff-Appellant, Cross-Appellee, v. WEYERHAEUSER COMPANY, Defendant, Third-Party Plaintiff and Counter-Defendant- Appellee, Cross-Appellant, v. The FIRST JERSEY NATIONAL BANK, Third-Party Defendant and Counter-Plaintiff- Appellee.|
|Case Date:||October 26, 1982|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Argued May 5, 1982.
Joel S. Siegel, Arvey, Hodes, Costello & Burman, Chicago, Ill., for plaintiff-appellant.
John W. Rotunno, Bell, Boyd & Lloyd, Chicago, Ill., for defendant-appellee, third party plaintiff.
Richard W. Burke, Jeffrey D. Waren, Chicago, Ill., for third party defendants.
Before CUDAHY and ESCHBACH, Circuit Judges, and TEMPLAR, [*] Senior District Judge.
CUDAHY, Circuit Judge.
In this diversity action, appellant American National Bank and Trust Company ("American") seeks to recover damages for breach of contract arising from an alleged wrongful refusal to accept shares of stock
tendered to appellees, Weyerhaeuser Company ("Weyerhaeuser") and its tender offer agent, First Jersey National Bank ("First Jersey"). The district court granted summary judgment in favor of Weyerhaeuser and First Jersey and denied a motion by American for partial summary judgment on damages, concluding that American could not maintain this action under theories of agency, assignment or subrogation. We reverse.
The material facts relevant to the issues on this appeal are largely uncontested. 1 On August 9, 1978, Weyerhaeuser issued a written offer to purchase up to 3,500,000 shares of its common stock at $32.00 per share, provided that the stock was tendered by August 22, 1978. Under the terms of Weyerhaeuser's offer, if more than 3,500,000 shares were tendered, Weyerhaeuser would purchase shares on a pro rata basis from shareholders tendering 100 or more shares each. The offer also allowed shareholders to condition the tender of their shares upon Weyerhaeuser's acceptance of a designated minimum number of shares if the offer was oversubscribed and proration was undertaken. A shareholder could conditionally tender his shares simply by writing the minimum number of shares that Weyerhaeuser must accept in a box captioned "Conditional Tender" appearing on the letter of transmittal which accompanied the tendered share certificates. First Jersey, pursuant to a contract with Weyerhaeuser, was designated as the depositary for the tender offer. Although First Jersey was charged with ascertaining whether all documents required for the tender were properly executed, Weyerhaeuser reserved the right of "[d]etermination of all questions as to validity, form, eligibility, time and acceptance of shares tendered, as well as to the proper completion or execution of Letters of Transmittal and documents ...." Appellee's Supp.App. at 43.
On August 18, 1978, American sent a letter to Bivest & Co. ("Bivest") concerning the Weyerhaeuser tender offer. 2 Bivest was the nominee of American to hold title to securities on behalf of the beneficial owners whose trust accounts were managed by American. In this case, Bivest held title to 40,000 shares of Weyerhaeuser common stock beneficially owned by American's customer, the Illinois State Board of Investment (the "Board"). By letter received by American during the afternoon of August 18, the Board authorized American to tender its 40,000 shares of Weyerhaeuser common stock registered in the name of Bivest.
Later that afternoon, a teller in American's securities division prepared a letter of transmittal on behalf of Bivest as the registered owner of the Board's 40,000 shares of Weyerhaeuser stock. The teller then sent both the letter and the share certificates to First Jersey, and First Jersey received the letter and certificates before the expiration of Weyerhaeuser's tender offer. Several days after the August 22 expiration date, Weyerhaeuser announced that more than 3,500,000 shares had been tendered. Because the offer was oversubscribed, Weyerhaeuser invoked the proration provisions of the offer to purchase, agreeing to buy 61% of the shares tendered by any tenderor. The offer, however, precluded acceptance of those shares that were defectively tendered and those shares that were conditionally tendered by any tenderor where the minimum number entered in the "Conditional Tender" box exceeded 61% of the total shares tendered by that tenderor.
By letter dated September 1, 1978, and received by American no later than September 6, First Jersey returned to American all of the Board's shares of Weyerhaeuser stock, together with a photocopy of the letter of transmittal. First Jersey informed American that the tender was rejected because
the letter of transmittal's "Conditional Tender" box was marked "40,000," and this number was in excess of 61% of the total shares tendered. 3 The parties to this appeal dispute as a factual matter who was responsible for entering the number "40,000" in the "Conditional Tender" box. American contends that it desired to tender the 40,000 shares unconditionally (without requiring Weyerhaeuser to accept all 40,000) and, thus, none of its employees wrote that figure in the box. First Jersey, on the other hand, contends that none of its employees entered the "40,000" figure in the box; according to First Jersey, the letter of transmittal it received from American contained the "40,000" figure entered in the "Conditional Tender" box.
But as we point out infra, this factual dispute is not directly relevant to the question whether summary judgment was properly granted in favor of the appellees. Rather, the more important fact for our consideration, which is undisputed, is that, if the tender had been accepted, Weyerhaeuser would have purchased 24,400 shares (61% of 40,000) at $32.00 per share for a total price of $780,800.00. On September 7, 1978, one day after receiving the rejection letter from First Jersey, American purchased 24,400 shares of Weyerhaeuser stock at $32.00 per share from the Board for a total price of $780,800.00. 4 Although the market price of Weyerhaeuser stock was actually less than $32.00 at this time of purchase, see infra, note 7, American paid the higher tender offer price in order to make the Board whole for its loss.
Soon after receiving the letter from First Jersey, 5 a vice-president of American contacted First Jersey to inquire whether someone at First Jersey inadvertently entered "40,000" in the "Conditional Tender" box. First Jersey denied responsibility for entering the figure in the box and suggested that American contact Mr. Vandevert, corporate secretary of Weyerhaeuser, to determine if Weyerhaeuser would nevertheless accept the tender. In a telephone conversation, American's vice-president informed Vandevert of the tender and rejection of 40,000 Weyerhaeuser shares by First Jersey. Vandevert requested that American set out the pertinent details in a letter, after the writing of which, according to American's witness, Vandevert promised to "look at [the matter] and ... get back to [American]." Dep. of Mr. Hansen at 13. Vandevert received American's letter, which was dated September 8, on September 11.
After sending the letter to Vandevert, American closely monitored the price of Weyerhaeuser stock while awaiting a response from Vandevert. During the next several days, the market price of Weyerhaeuser's stock continued to decline slowly. Not hearing from Vandevert for more than a week, American finally called Vandevert by telephone on September 20, 1978, to ascertain his decision regarding the rejected tender. 6 During the telephone conversation of September 20 and as confirmed by letter, Vandevert informed American that Weyerhaeuser stood by First Jersey's initial decision to reject American's tender of 40,000 shares on behalf of the Board. See Appellee's Supp.App. at 64. The next day, September 21, 1978, American sold on the open market the 24,400 shares of Weyerhaeuser stock it had purchased from the Board. Because the market price of Weyerhaeuser stock at this time was more than two dollars per share lower than the tender offer
price of $32.00 per share (as well as being about $1.50 below the market price on September 7), American received only $710,887.75 for its shares, compared to the $780,000.00 it paid the Board for these shares.
American filed this suit for breach of contract on January 30, 1979, against Weyerhaeuser and First Jersey seeking to recover $69,912.25 (the difference between the price American paid the Board for the Weyerhaeuser stock on September 7, 1978, and the price at which American sold the stock on September 21). Shortly thereafter, Weyerhaeuser filed a third-party complaint against First Jersey, claiming that First Jersey was obligated to indemnify Weyerhaeuser for any liability it might incur. Weyerhaeuser then moved for summary judgment, joined by First Jersey, asserting that under the undisputed facts, American could not state any claim for alleged breach of the offer to purchase the tendered shares since American was not the real party in interest. In the alternative, Weyerhaeuser asked for partial summary judgment on the damage claim, to establish that American's damages (if liability were found) were limited to the difference between the price American paid the Board for the shares on September 7, 1978, and the open market price for the stock on that date. 7 American also moved for partial summary judgment on its damage claim, to establish that the correct measure of damages was instead the difference between the price it paid the Board on September 7 and the price it received when it sold the stock on the open market on September 21.
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