Case Name: Monark Metal & Supply Company, Respondent, vs. Schmidt, Trustee, and another, Appellants
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1928-03-06
Citations: 195 Wis. 294
Docket Number: 
Parties: Monark Metal & Supply Company, Respondent, vs. Schmidt, Trustee, and another, Appellants.
Judges: 
Reporter: Wisconsin Reports
Volume: 195
Pages: 294–304

Head Matter:
Monark Metal & Supply Company, Respondent, vs. Schmidt, Trustee, and another, Appellants.
February 8
March 6, 1928.
Reginald I. Kenney of Milwaukee, for the appellant trustee, A. C. Schmidt.
For the appellant American National Bank there was a brief by Edgar L. Wood, attorney, and oral argument by John C. Warner, both of Milwaukee.
For the respondent there was a brief by Fish, Mar shuts & Hoffman, attorneys, and F. C. John, of counsel, all of Milwaukee, and oral argument by Mr. John.

Opinion:
Crownhaet, J.
To get the intent of the parties it is necessary to analyze the documents, assuming the position and condition of the parties at the time. There seems to be no dispute over the meaning of the contract between the two metal companies. It is plainly worded. The contract was not to be effective until the plaintiff should write the American Exchange Bank, and it should agree "that the drafts presented at their bank will be paid by them upon presentation of documents and invoice attached thereto,— drafts to be paid five days sight." The plaintiff thereupon wrote the bank, not as provided in the contract, but, after explaining the general terms of the contract, presented its proposition to the bank as follows:
"Mr. Sadek intimated your bank would guarantee the payment of these drafts within five days after the same are presented at your bank for collection."
There is no mention here that the bank should take upon itself the direct obligation of payment. It was to guarantee collection of the drafts. To this proposition of plaintiff the bank replied that it had "made arrangements with Mr. Sadek to finance this shipment one car at a time." No promise here to pay — at best it can only be said to be an acceptance of the plaintiff's proposition to guarantee collection of drafts on shipments one car at a time.
Then follows the plaintiff's response, where, for the first time, it is suggested that the bank "will honor our drafts ninety per cent, amount of invoice with order bill of lading attached for each car of metal." To this there was no response by the bank, and it is fair to assume that the bank accepted plaintiff's interpretation of the agreement, — silence gave consent.
So we have the final meeting of the minds of the hank and the plaintiff on this contract. The bank having made arrangements with the defendant Metal Company to finance its contract to purchase metal from the plaintiff, it thereupon entered into an agreement with the plaintiff to honor its drafts for metal shipped to defendant Metal Company pursuant to its contract with- such company, such drafts to have bill of lading attached and to be for ninety per cent, of the invoice price, and drafts to be paid five days after sight. There can be no reasonable doubt about this being the final understanding of the parties.
Pursuant to the contracts here set forth, plaintiff shipped one car of metal, drew its draft on defendant Metal Company for ninety per cent, of the' invoice price, presented it to the bank with invoice and bill of lading attached, and the bank collected the draft and remitted to the plaintiff.
The plaintiff and defendant Metal Company had some trouble over the quality of the metal and the balance due on the shipment, which difference was fully adjusted. Then at this point the defendant Metal Company refused to- accept shipment of the other two cars, and notified plaintiff accordingly. Here, it is contended, was a plain breach of defendant Metal Company's contract with plaintiff, for which such defendant was liable to respond in damages. The plaintiff then made inquiry of the bank whether it would honor drafts as agreed, to which the bank replied that its arrangements with defendant Metal Company had been canceled and "you cannot, accordingly, count on any protection from us on drafts against this company." This was a plain, understandable refusal on the part of the bank to accept any further drafts on the defendant Metal Company. What was the bank's liability, if any, by reason of such refusal?
Let us see what was the nature of the contract. The plaint iff claims that the contract was one of direct liability of the bank to the plaintiff. If so, it was only for ninety per cent, of the invoice of the shipment, not for the whole shipment, as the court found. The bank claims its liability, if any, was only that of a guarantor, and that such an agreement was void under the statute of frauds, sec. 241.02, Stats., on the ground that the contract does not express any consideration. We think the contract sufficiently expresses the consideration. Alltone Co. v. Cebett, 194 Wis. 591, 217 N. W. 302. But the bank did not agree to guarantee the performance-of defendant Metal Company's contract.
The plaintiff, before accepting the contract with defendant Metal Company, had the right to first ascertain if "the drafts presented at their bank will be paid," and the bank clearly intended to convey to the plaintiff the understanding that the drafts would be paid by the bank, upon condition that they were accompanied by invoice and bill of lading, f. o. b. Milwaukee. In other words, the bank was to have the security of the bills of lading before it paid the drafts. This was an agreement it could make within the field of its proper functions. Sub. (1) (f), sec. 221.04, Stats. But the bank did not agree to guarantee the contract of the defendant Metal Company. It had' no authority to do so. American Exp. Co. v. Citizens State Bank, 181 Wis. 172, 194 N. W. 427. It agreed to accept the drafts when accompanied by invoice and bill of lading, and then only to the extent of ninety per cent, of the invoice, and for one car at a time. To hold the bank on its agreement, it was necessary for the plaintiff to comply with the terms of the agreement on its part. If it had done so, it may be presumed that under the arrangements the bank had made to finance the defendant Metal Company, it would have been amply protected. On the other hand, the bank could not enforce the terms of the contract between the principals. When the defendant Metal Company canceled its contract, the bank was under no duty to compel performance. It could stand on the terms of its special contract, and under that contract there never has been a compliance on the part of the plaintiff to entitle it to damages against the bank. Before plaintiff could hold the bank liable it had to ship the metal and present to the bank the drafts therefor, — ninety per cent, of the invoice with bill of lading attached. Then, and not until then, could plaintiff recover against the bank.
But it is claimed that the bank, by its refusal to honor any further drafts, waived the necessity of the plaintiff complying fully with the terms of the contract. That is true, and the bank is not complaining that plaintiff failed to comply with the terms of its contract. It has waived any benefits it would have received if the plaintiff had complied with its contract, but that does not fix any liability against the bank. Before the plaintiff can say the bank is liable to it, it must comply with its contract, because it relies on the contract to fix the measure of damages. It may be repeated that the bank did not in any way guarantee the performance of the defendant Metal Company's contract. Its contract with plaintiff was a separate, specific contract, which was dependent upon its express terms and not upon the terms of the major contract between the metal companies.
As we have interpreted the bank's agreement,, it was not a contract of guaranty but a direct contract to purchase a negotiable security with collateral attached. If the plaintiff had presented the security to the bank in accordance with its contract, and the bank had refused to accept and pay for the same, it would have had its remedy. Not having complied with its contract, it cannot maintain an action against the bank for breach of contract. -
The finding of the court that the defendant Metal Company breached its contract is supported by the evidence. The trustee defendant claims that the proof does not sustain the damages found by the court. We have examined the evidence and we think it is sufficient to sustain the judgment against the trustee. It is true that the court admitted improper evidence as to the price of metal in St. Louis, but it also had evidence of prices in Milwaukee. As the trial was before the court there was no prejudice.
By the Court. — The judgment of the circuit court against the American National Bank is reversed, with directions to dismiss the complaint as to said defendant. The judgment against the trustee is sustained. That part of the judgment decreeing a lien on the assets of the bankrupt in the possession of the bank, in favor of the bank, is set aside.