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SHOGYO INTERNATIONAL CORPORATION v. FIRST NATIONAL BANK OF CLARKSDALE

JULY 24, 1985

SHOGYO INTERNATIONAL CORPORATION
v.
FIRST NATIONAL BANK OF CLARKSDALE, MISSISSIPPI



BEFORE WALKER, PRATHER AND SULLIVAN

SULLIVAN, JUSTICE, FOR THE COURT:

Co-Products Unlimited, Inc., a manufacturer, acting through Gus Roessler, its general manager, ordered 100,000 plastic wheel casters in August, 1979, from Shogyo International Corporation, a New York import company. Gene Rubin, sales manager of Shogyo, required Co-Products, as a new customer, to provide Shogyo with a letter of credit from a bank. The First National Bank of Clarksdale, Mississippi, declined to issue a letter of credit but after conversations between Wayne Winter, executive vice-president of the Bank, Roessler and Rubin, the Bank agreed to give a guarantee and did send a letter of guarantee to Shogyo guaranteeing the first shipment of casters to Co-Products.

Shogyo then issued a letter of credit to its foreign suppliers and when the casters were shipped to Co-Products the invoice was supplied to the Bank and the Bank forwarded a cashier's check to Shogyo.

 This system was used twice in 1979. Its internal operation consisted of Roessler telling his principals that he needed to order materials and Roessler would then notify the Bank. The principals and the Bank would then arrange credit at the Bank. Winter, on behalf of the Bank, would then write the letter of guaranty to Shogyo.

 On February 5, 1980, Co-Products ordered 150,000 wheel casters from Shogyo. The purchase order stated that it was placed under the "usual" terms. To both Rubin, of Shogyo, and Roessler, of Co-Products, this meant a guarantee from the Bank, just as the other transactions had done.

 The crux of this case is the letter sent by Wayne Winter from the Bank to Shogyo International on February 19, 1980. This letter said:

 FIRST NATIONAL BANK OF CLARKSDALE P. O. BOX 220 CLARKSDALE, MISSISSIPPI 38614

 February 19, 1980

 Shogyo International Corporation 300 Northern Blvd. Great Neck, New York 11021

 Attantion: Mr. Gene Rubin

 Re: Co-Products Limited, Inc.

 Dear Mr. Rubin:

 Co-Products Limited, Inc. has made financial arrangements with us to purchase 150,000 casters at $.43 each in shipments of 50,000.0

 It is our understanding the first shipment will arrive in June. ...


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