Home Sav. Bank v. Gertenbach

Decision Date28 June 1955
PartiesHOME SAVINGS BANK, a banking corporation, Respondent, v. Kenneth GERTENBACH, Appellant, Julius J. Gates et al., Defendants.
CourtWisconsin Supreme Court

Ray T. McCann, Milwaukee, for appellant.

Stern & Stern, Milwaukee, for respondent.

CURRIE, Justice.

Counsel for the defendant Gertenbach correctly urges that the learned trial court applied the wrong test, as to the sufficiency of evidence necessary to sustain the jury's answer to the first question of the special verdict, in setting the same aside on the ground that such answer was 'against the great weight and preponderance of the credible evidence in the case'. The proper test to have been applied was whether there was any credible evidence which supported the jury's answer. Anderson v. Stricker, 1954, 266 Wis. 1, 6, 62 N.W.2d 396; Commerce Ins. Co. v. Badger P. & H. Stores, 1953, 265 Wis. 174, 182, 60 N.W.2d 742; Czerniakowski v. National Ice & Coal Co., 1948, 252 Wis. 112, 115, 31 N.W.2d 156; and Wisconsin Telephone Co. v. Russell, 1943, 242 Wis. 247, 252, 7 N.W.2d 825.

While we are in accord with the view expressed by the trial court in his memorandum decision, that the greater weight of the evidence is opposed to the jury's answer to the first question of the verdict, nevertheless, the testimony of Gertenbach and his attorney constituted evidence upon which the jury might ground its finding that the agreement was made on or about August 1, 1950, by the bank acting through its president, to release Gertenbach from the guaranty if he sold and transferred his stock to Schwartz. The credibility of such evidence was for the jury. It was therefore error for the trial court to change such answer of the jury to such question of the special verdict from 'yes' to 'no'.

Counsel for the plaintiff bank contend that irrespective of the jury's findings in the special verdict plaintiff is entitled to recover on the continuing guaranty against Gertenbach as a matter of law. Among the grounds advanced in support of such contention are the following:

(1) Gertenbach's liability on the guaranty continued until the required written notice of revocation was given by him.

(2) The alleged promise to release Gertenbach as guarantor is void for want of consideration.

(3) The president of the bank was without authority from the board of directors to make the alleged agreement releasing Gertenbach as guarantor.

(4) There is no credible evidence that the directors ever ratified the alleged agreement to release Gertenbach from the guaranty.

In considering the first of the above enumerated contentions, it seems to us that counsel has failed to perceive the effect which would necessarily result from a valid termination of the guaranty. If the contract is validly terminated, all of its terms are abrogated and there ceases to exist any requirement with respect to giving written notice of revocation. The provision of the instrument covering written notice of revocation provides a means whereby the guarantors can relieve themselves of liability as to any obligations of Gates Golden Grill incurred after the giving of the notice, but liability of the guarantors still continues as to previously contracted indebtedness of such debtor corporation. On the other hand, a valid termination would relieve the guarantors from all liability whatsoever.

The law is clear that a guaranty which is required by the Statute of Frauds to be in writing may be terminated by a subsequently executed oral agreement. Kelly Springfield Tire Co. v. Faulkner, 1937, 191 Wish. 549, 71 P.2d 382. This is true even though the original instrument of guaranty be executed under seal. 3 Corbin on Contracts, p. 222, sec. 574. The brief submitted in behalf of plaintiff bank urges that to permit proof of termination in the form of an oral agreement would violate the parol evidence rule because it would vary an express term of the contract of guaranty, viz., the one requiring that written notice of revocation be given. A complete answer to this is found in the following statement appearing in 3 Corbin on Contracts, p. 225, sec. 574:

'The existence and the terms of this modifying or discharging agreement can be proved by the same kinds of evidence that are admissible to prove any other kind of contract; and one denying the making or the terms of such an agreement can support his denial by the usual kinds of testimony, written or oral.

'But after these issues have been determined and the court finds, as a fact, the making and the terms of the modifying or discharging agreement, we are no longer interested in the terms of the antecedent contract for purposes of enforcement of them, in so far as those terms have been nullified by the new agreement. They are of yesterday; and their jural effect has been nullified by the events of today. This is the ordinary substantive law of contracts; it is not a rule of evidence and is not stated in the language of evidence, parol or otherwise.' (Emphasis supplied.)

However, in order to have a valid oral agreement terminating the guaranty as to Gertenbach, such new agreement must be supported by consideration. It is contended that the alleged parol agreement to release Gertenbach lacks such essential element of consideration. According to the testimony of Gertenbach and Meinecke, Gertenbach refused to sell his stock in Gates Golden Grill unless he was released from the guaranty, and, after Kruyne in behalf of the bank agreed to such release, Gertenbach then proceeded to sell and transfer such stock to Mr. and Mrs. Schwartz. The record does not establish that Gertenbach had made any binding commitment to sell such stock to Mr. and Mrs. Schwartz prior to the making of such alleged verbal agreement between Gertenbach and the bank as to the release of Gertenbach from the guaranty. Therefore, in proceeding to sell and transfer the stock to Mr. and Mrs. Schwartz, Gertenbach did something that he had the privilege of doing, or not doing, as he saw fit. It is this transfer of the stock to Mr. and Mrs. Schwartz which counsel for Gertenbach contends constituted the consideration for the alleged agreement on the part of the bank to release Gertenbach from liability on the guaranty.

That such act on the part of Gertenbach constituted sufficient consideration to support the alleged promise of the bank to release him from the guaranty, is amply demonstrated by the following statements appearing in 1 Williston on Contracts (rev. ed.) pp. 323, 326, secs. 102, 102A:

'The requirement ordinarily stated for the sufficiency of consideration to support a promise is, in substance, a detriment incurred by the promisee or a benefit received by the promisor at the request of the promisor. * * *

'Benefit and detriment have a technical meaning. Neither the benefit to the promisor nor the detriment to the promisee need be actual. 'It would be a detriment to the promisee, in a legal sense, if he, at the request of the promisor and upon the strength of that promise, had performed any act which occasioned him the slightest trouble or inconvenience, and which he was not obliged to perform' [Bigelow v. Bigelow, 1901, 95 Me. 17, 22, 49 A. 49.]'

The definition of consideration referred to in the above quotation from Williston on Contracts, that the same may consist of a detriment to the promisee or a benefit to the promisor, has been adopted by this court. Drovers' Deposit Nat. Bank v. Tichenor, 1914, 156 Wis. 251, 256, 145 N.W. 777; Onsrud v. Paulsen, 1935, 219 Wis. 1, 4, 261 N.W. 541; and Estate of Hatten, 1940, 233 Wis. 199, 219, 288 N.W. 278.

The fact that the bank may not have received any actual benefit from Gertenbach's sale of his stock to Mr. and Mrs. Schwartz is immaterial. As this court pointed out in Estate of Hatten, supra, 233 Wis. at page 216, 288 N.W. 278, the law is not concerned with mere inadequacy of consideration.

The fact that the alleged verbal agreement releasing Gertenbach from the guaranty was supported by legal consideration does not necessarily mean that such agreement is binding upon the bank. If Kruyne, as president of the bank, had no actual or apparent authority to make such an agreement, and his act in so doing was not subsequently ratified by the board of directors, the contract would not be binding upon the bank and would present no valid defense to the bank's action upon the guaranty.

This brings us to consideration of the last two contentions advanced by counsel for the plaintiff bank, viz., the lack of authority on the part of Kruyne to make the alleged agreement, and the alleged absence of credible evidence tending to establish ratification by the directors. The continuing guaranty was carried on the collateral ledger of the bank as an asset of the bank. There is no evidence of any actual authority extended to Kruyne as president of the bank to release an asset of this kind without its full money's value having been paid to the bank. The general rule applicable to the situation at hand is succinctly stated in 7 Am.Jur., Banks, p. 185, sec. 250, as follows:

'He [the president of the bank] cannot, unless specially empowered to do so, release debtors of the bank otherwise than in due course and on full payment of their debts.'

For authorities in support of the above stated principle see annotations in 11 A.L.R.2d 1305, 1309, 1316; 108 A.L.R. 713, 715 [this annotation relates to the authority of a bank cashier but is equally applicable to a bank president]; 67 A.L.R. 970, 976.

4 Zollman, Banks and Banking (perm. ed.) p. 259, sec. 2233, states:

'The release or composition of a debt is a matter peculiarly within the province of the directors. It affects, not only the prosperity of the institution, but its very existence. There is no necessity for the sole judgment of the president, cashier, or other officer of the bank.'

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