EXHIBIT 99.1



                                                          COMMERCE GROUP CORP.



                                                                  North

May 14, 2001


Mrs. Sylvia Machulak
President
General Lumber & Supply Co., Inc.
6001 North 91st Street
Milwaukee, Wisconsin  53225

Dear Mrs. Machulak:

At today's Commerce Group Corp.  (Commerce)  Directors'  meeting,  the Directors
were  informed  about the  confirmation  and status  letter you  requested  from
Commerce  and its  affiliates  to  establish  and confirm the amount due and the
collateral pledged to General Lumber & Supply Co., Inc. (GLSCO) as of Commerce's
fiscal year ended March 31, 2001. Today, Commerce's Directors approved, ratified
and confirmed the contents of this letter and authorized me to authenticate  and
confirm the outstanding obligations due to GLSCO, and to describe the collateral
pledged to GLSCO as of Commerce's fiscal year ended March 31, 2001, which are as
follows:

1.       Promissory Notes and Other Obligations

         a.       An open-ended,  secured, on-demand promissory note no. 3 which
                  was originally issued to GLSCO on December 31, 1981 in the sum
                  of $16,836.37 and has been  open-ended  since that date and is
                  to include all future advances, services, charges and interest
                  on a monthly basis. Pursuant to Commerce's Directors' approval
                  on  October  1,  1990,  the  interest  rate on this  note  was
                  increased to a rate of 4% over the prime rate base established
                  by the First  National  Bank of  Chicago,  Chicago,  Illinois.
                  Beginning with April 1, 1994, the interest rate is 4% over the
                  prime  rate base  established  by the First  National  Bank of
                  Chicago, Chicago,  Illinois, (now Bank One), but not less than
                  16% per annum.  The interest is payable  monthly and the total
                  amount  due to GLSCO on this  promissory  note as of March 31,
                  2001 is $926,204.89. (Schedule of Principal and Interest as of
                  March 31, 2001, Exhibit A)

                  Commerce is no longer issuing monthly promissory notes for the
                  payment of interest,  purchases,  rent,  etc., but pursuant to
                  our mutual understanding, Commerce is adding these liabilities
                  or   deducting   any   payments  to  the  current   open-ended
                  outstanding promissory note(s).

         b.       Commerce   leased   approximately   3,100  square  feet  on  a
                  month-to-month basis for its corporate  headquarter's  office;
                  the monthly rental charge was $2,145 since October 1, 1992. As
                  of December 1, 1995,  Commerce increased the space it rents to
                  4,032 square feet, and the monthly rental charge was increased
                  to  $2,789.  All other  terms and  conditions  of the  Amended
                  October 1, 1992 Lease Agreement remain the same. (Reference is
                  made to Exhibit B, December 1, 1995 Amended  Lease  Agreement,
                  included in April 13, 1998 confirmation letter.) (Reference is
                  made to Exhibit B, Lease Agreement, included in April 12, 1993
                  confirmation letter.)

         c.       Commerce  also  acknowledges  that  it  purchases  on an  open
                  account from GLSCO from time to time materials,  supplies etc.
                  that it needs for itself or for the Joint Venture. Some of the
                  purchases  are made through  GLSCO  because  Commerce does not
                  have the  credit  availability  from the  various  sellers  of
                  goods,  merchandise,  etc. that is required by it or the Joint
                  Venture.  The amount due from time to time varies. As of March
                  31, 2001, the amount due on this open account is $14.98.

         d.       GLSCO from time to time has  canceled  part of its debt by the
                  purchase of  restricted  Commerce  common shares at a price as
                  sold to third party purchasers on an arms-length  transaction.
                  There were no such transactions consummated during this fiscal
                  year.  However,  Commerce,  Homespan and GLSCO entered into an
                  agreement  on August 14, 2000 in which  Commerce  and Homespan
                  agreed  to sell to GLSCO  the real  estate  identified  as the
                  Standing  Rock  Campground  (SRC)  located  at the Lake of the
                  Ozarks in Camden County,  Missouri, for the sum of $1,249,050.
                  A Warranty Deed was conveyed to GLSCO and filed with the State
                  of Missouri Camden County  Recorder.  The contract  stipulates
                  that if SRC is sold by GLSCO within one year from  November 6,
                  2000, then an adjustment  would be made to the promissory note
                  issued by Commerce to GLSCO as shown in the following example:

<TABLE>
<CAPTION>



                                                                                         Example A         Example B
<S>                 <C>                                                                <C>                <C>
                    Net  proceeds   (including   sales  commission  and  related
                    expenses) received from the sale of the Standing Rock
                    Campground to a third party                                         $1,500,000        $1,000,000
                    General  Lumber & Supply Co.,  Inc.'s cost via  reduction of
                    its promissory note due from Commerce Group Corp.
                                                                                         1,249,050         1,249,050
                    The  difference  would be added or subtracted to the General
                    Lumber & Supply Co., Inc.  promissory  note with an interest
                    adjustment retroactive to the closing date of
                    the sale.                                                           $  250,950        $(249,050)
                                                                                     A Subtraction       An Addition
</TABLE>

                  On March 8,  2001,  GLSCO  executed  a listing  contract  with
                  Gaslight  Gundaker GMAC Real Estate Agents  located in Laurie,
                  Missouri,  to sell the SRC for a sum of $1.8 million less a 6%
                  real estate  broker's  commission  and less all usual  related
                  costs  incurred in the sale of this type of real estate.  This
                  listing  agreement  expires  on July  8,  2001,  unless  it is
                  extended.

                  In order to make an orderly  transaction,  the parties  agreed
                  that  Commerce  would  operate  the SRC  until  the end of its
                  fiscal year, which is March 31, 2001. Therefore, the amount of
                  the  promissory  note  due  to  Commerce  was  reduced  by the
                  purchase  price of  $1,249,050.  At the close of  business  on
                  March 31, 2001, Commerce owed GLSCO the sum of $926,204.89.

         e.       On January  10,  1997,  four-year  stock  options to  purchase
                  68,000 restricted Commerce common shares,  $0.10 par value, at
                  a price of $3.00 per share,  were  issued to GLSCO.  The price
                  and terms  were  based on  arms-length  transactions  that had
                  taken place during that period of time. GLSCO did not exercise
                  these  options,   therefore,  they  automatically  expired  on
                  January 9, 2001.

         f.       On July 12, 1999,  two-year stock options to purchase  500,000
                  restricted Commerce common shares, $0.10 par value, at a price
                  of $0.50 per share were  issued to GLSCO.  The price and terms
                  were based on  arms-length  transactions  that had taken place
                  during that period of time.
                  These options were given in view of the extended  credit terms
granted to Commerce by GLSCO.




  2.     Collateral Pledged to GLSCO

         The collateral specifically pledged to GLSCO is as follows:

         a.       San Luis Estates,  Inc.  (SLE)  Certificate  No.
 24 which is dated December 31, 1981,  consisting of 48,645 common  shares,  $
0.50 par value,
                  being 50% of the total issued and  outstanding  shares.
 SLE and Commerce agree that no additional  shares of any kind whatsoever
of SLE will
                  be issued as long as any monies are due to GLSCO.
 Reference is made to Exhibit 3 included in the April 9, 1990 confirmation
 letter.

         b.       A Deed  of  Trust  dated  November  3,  1983  by  and  between
                  Homespan, as party of the first part, and Ronald K. Carpenter,
                  Esq.  (Trustee),  as party of the second part, for the benefit
                  of Edward L. Machulak  (ELM),  as an individual,  and not as a
                  Director  or Officer of  Commerce  and GLSCO,  as party of the
                  third part. The Deed of Trust is in favor of ELM and GLSCO and
                  is open-ended to secure the promissory  note(s) due to ELM and
                  GLSCO  and to  further  secure  any  future  obligations  that
                  Commerce or Homespan  may incur from them.  This Deed of Trust
                  is  issued  to  Ronald K.  Carpenter,  Esq.,  Trustee  for the
                  benefit  of  ELM  and  GLSCO  and is a  lien  on the  331-acre
                  Standing Rock Campground located in Camdenton,  Missouri.  The
                  Deed of Trust  was filed for  record  on  November  5, 1984 in
                  Camden  County,  Missouri at 1:24 p.m. in Book 122,  Page 200.
                  See item 1(d) contained herein. Reference is made to Exhibit 4
                  included in the April 9, 1990 confirmation letter.

         c.       GLSCO, ELM, the Edward L. Machulak Rollover Individual
Retirement Account (ELM RIRA) and the Sylvia Machulak Rollover Individual
 Retirement
                  Account (SM RIRA)  collectively  and  individually identified
as the  lender(s),  have been assigned on October 19, 1987, all of the rights,
                  titles, claims,  remedies and interest in and to the mine
concession granted by the Government of El Salvador to Mineral San Sebastian,
  S.A.
                  de C.V.  (Misanse) on July 23, 1987,  and  thereafter  from
 time to time  amended,  and which  Misanse then  assigned to the Joint Venture
 on
                  September 22, 1987.  This  collateral  specifically  includes
 all of the San Sebastian  Gold Mine precious  metal ore reserves.  Commerce and
                  the Joint  Venture had the right to assign  this and any
 subsequent  concession  agreement.  Reference  is made to Exhibit 5 included
 in the
                  April 9, 1990  confirmation  letter.  Effective  February
1996, the Government of El Salvador  approved a revised  version of the mining
 law.
                  Therefore,  Commerce applied for the San Sebastian Gold Mine
mining  concession  applicable to this mining law. This concession is subject to
                  compliance  requirements  which  have been  presented  to
 the El  Salvador Director  of Mines and Hydrocarbons.  Therefore,  it i clearly
                  understood that this concession,  and all of the rights
thereunder,  in addition to the concession  granted on July 23, 1987,  together
 with
                  all precious metal ore reserves, is pledged as collateral to
 all of the parties herein mentioned.


         d.       An interest with ELM in filing financing  statements under
the Uniform  Commercial Code by an assignment and pledge of all corporate
 assets,
                  such as but not limited to the property of Commerce,  Joint
Venture, SLE, and Homespan, wherever located, now owned or hereafter acquired is
                  as follows:  all accounts,  all land contract  receivables,
 contract rights, instruments and chattel paper; all inventory,  all jewelry and
                  precious stones,  and all documents relating to inventory,
including all goods held for sale,lease or demonstration,  to be furnished under
                  contracts of service,  and raw  materials,  work in process
and materials  and supplies  used or consumed in the business of Commerce, Joint
                  Venture,  SLE, and Homespan;  all office furniture,  fixtures
and all other equipment;  all general intangibles,  all stock and securities of
                  any kind, and all rights,  titles, and interest in the
Commerce Group Corp./San  Sebastian Gold Mines, Inc. Joint Venture,  and all
additions         and accessions to, all spare and repair parts,  special
 tools,  equipment and replacements for all returned or repossessed  goods
the sale or
                  lease of which gave rise to, and all  proceeds  and
 products of the  foregoing.  Reference  is made to the Uniform  Commercial
 Code filing,
                  Exhibit 6, included in the April 9, 1990  confirmation
letter and the renewed UCC-1 filing on December 17, 1996,  Exhibit B, included
in the    April 14, 1997 confirmation letter.

3.       Cross Pledge Collateral Agreement

         GLSCO,  ELM, the ELM RIRA and the SM RIRA  individually are entitled to
         specific  collateral  that has been  pledged to them by  Commerce,  its
         subsidiaries,  affiliates  and  the  Joint  Venture.  Upon  default  by
         Commerce,  or its  subsidiaries  or  affiliates  or the Joint  Venture,
         GLSCO,  ELM,  the ELM RIRA and the SM RIRA have the first  right to the
         proceeds  from  the  specific  collateral  pledged  to  each  of  them.
         Commerce,  its  subsidiaries,  affiliates  and Joint  Venture also have
         cross-pledged  the  collateral  without  diminishing  the rights of the
         specific  collateral pledged to each of the following:  GLSCO, ELM, the
         ELM RIRA and the SM RIRA.  The  purpose  and the  intent  of the  cross
         pledge of collateral  is to assure GLSCO,  ELM, the ELM RIRA and the SM
         RIRA,  that  each of them  would  be paid in  full;  thus,  any  excess
         collateral that would be available is for the purpose of satisfying any
         debts and obligations due to each of the named parties.  The formula to
         be  used  (after   deducting   the  payments  made  from  the  specific
         collateral)  is to total all of the debts  due to GLSCO,  ELM,  the ELM
         RIRA and the SM RIRA,  and then to  divide  this  total  debt into each
         individual  debt  to  establish  each  individual's  percentage  of the
         outstanding  debt due. This  percentage  then will be multiplied by the
         total of the excess  collateral  to  determine  the amount of  proceeds
         derived from the excess  collateral  and then the amount due to each of
         them would be distributed.

4.       Cancellation of Inter-Company Debts Upon Default

         Since part of the  collateral  pledged to GLSCO,  ELM, the ELM RIRA and
         the SM RIRA is the  common  stock  of  Homespan,  Ecomm,  Sanseb,  SLE,
         Misanse,  UDI and the interest in the  ownership of the Joint  Venture,
         Commerce  agreed,  upon default of the payment of principal or interest
         to any of the  individual  lender(s)  mentioned  herein,  that  it will
         automatically cancel any inter-company debts owed to Commerce by any of
         its  wholly-owned  subsidiaries  or  affiliates or the Joint Venture at
         such time as any of the stock or Joint Venture ownership is transferred
         to the  collateral  holders as a result of  default  of any  promissory
         note.

5.       Guarantors

         This agreement  further confirms that Commerce and all of the following
         are  guarantors to the loans made by GLSCO to Commerce:  Joint Venture,
         Homespan,  Ecomm,  SLE,  Sanseb and UDI.  They  jointly  and  severally
         guarantee payment of the note(s) that they caused to be issued and also
         agree that these  note(s) may be  accelerated  in  accordance  with the
         provisions   contained  in  the  agreement  and/or  any  collateral  or
         mortgages securing these notes. Also, Commerce, all of its subsidiaries
         and the Joint Venture  agree to the cross pledge of collateral  for the
         benefit of GLSCO, ELM, the ELM RIRA and the SM RIRA.  Reference is made
         to Exhibit 7 included in the April 9, 1990 confirmation letter.









6.        Re-Execution Agreement

         In the event GLSCO deems that it is necessary or advisable for GLSCO to
         have Commerce re-execute any document(s) entered into,  including,  but
         not limited to the promissory  note or collateral  agreement,  Commerce
         will re-execute such document(s) reasonably required by GLSCO. Commerce
         also  acknowledges  that  Commerce  may be liable to pay certain  costs
         related to any of the  transactions  entered  into with GLSCO.  If at a
         later date GLSCO  determines that an error has been made in the payment
         of such costs to GLSCO, then GLSCO may demand payment and Commerce does
         hereby  agree  to  make  such  payment  forthwith.   All  requests  for
         corrections  of any errors  and/or  payment of costs  shall be complied
         with by Commerce within seven (7) days of GLSCO's written request.  The
         failure of  Commerce  to comply with  Commerce's  obligation  hereunder
         shall  constitute  a default and shall  entitle  GLSCO to the  remedies
         available for default under any provisions of the agreements including,
         but not limited to the  promissory  note and/or the  collateral  pledge
         agreement.

7.       Omissions

         Commerce  believes that it has included all of its obligations,  monies
         due and has listed all of the collateral due to GLSCO,  however,  since
         these transactions have taken place over a long period of time in which
         changes could have taken place, it is possible that  inadvertently some
         item(s),  particularly  collateral,  could have been  omitted.  If that
         should prove to be a fact, then Commerce, the Joint Venture,  Homespan,
         Ecomm,  SLE, Sanseb,  and UDI agree that those omissions of collateral,
         if any, are meant to be included as collateral  with this  confirmation
         and agreement.

If you are in agreement with the contents of this letter,  please sign below and
return one copy to Commerce.

Very truly yours,

COMMERCE GROUP CORP.


/s/  Edward A. Machulak
Edward A. Machulak
Secretary


<PAGE>


The contents of this letter are agreed by the following:

COMMERCE/SANSEB JOINT VENTURE       HOMESPAN REALTY COMPANY, INC.
as Guarantor (Joint Venture)                            as Guarantor (Homespan)

/s/  Edward L. Machulak                              /s/  Edward L. Machulak
------------------------------------        ------------------------------------
By:  Edward L. Machulak, Auth. Designee      By:  Edward L. Machulak, President


ECOMM GROUP INC.                            SAN LUIS ESTATES, INC.
as Guarantor (Ecomm)                                 as Guarantor (SLE)

/s/  Edward A. Machulak                              /s/  Edward L. Machulak
------------------------------------        ------------------------------------
By:  Edward A. Machulak, President          By:  Edward L. Machulak, President


SAN SEBASTIAN GOLD MINES, INC.              UNIVERSAL DEVELOPERS, INC.
as Guarantor (Sanseb)                                as Guarantor (UDI)

/s/  Edward L. Machulak                              /s/  Edward L. Machulak
------------------------------------        ------------------------------------
By:  Edward L. Machulak, President          By:  Edward L. Machulak, President


Accepted by:

GENERAL LUMBER & SUPPLY CO., INC.

/s/  Sylvia Machulak
------------------------------------
By:  Sylvia Machulak, President
Date:  May 14, 2001


<PAGE>


                                              Exhibit A to Exhibit 99.1
                   (Schedule of Principal and Interest as of March 31, 2001
                          has been purposely omitted as it only reflects