Daniel S. Krueger v. Paul C. Hsu ( 2021 )

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
April 20, 2021
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.
Appeal No. 2019AP2030 Cir. Ct. No. 2018CV243
STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT III
DANIEL S. KRUEGER,
PLAINTIFF-RESPONDENT,
V.
PAUL C. HSU AND HSU’S GINSENG ENTERPRISES, INC.,
DEFENDANTS-APPELLANTS.
APPEAL from a judgment of the circuit court for Marathon County:
JILL N. FALSTAD, Judge. Affirmed.
Before Stark, P.J., Hruz and Seidl, JJ.
Per curiam opinions may not be cited in any court of this state as precedent
or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).
¶1 PER CURIAM. Paul Hsu and Hsu’s Ginseng Enterprises, Inc.,
(collectively Hsu) appeal from a money judgment entered against both Paul and
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the corporation, stemming from a futures contract for the sale of ginseng grown by
Daniel Krueger. Hsu argues that Paul was not a party to the contract with
Krueger; the parties had modified the contract by their conduct; and even if the
parties did not modify the contract, Krueger failed to mitigate his damages.1 We
reject Hsu’s arguments and affirm.
¶2 In July 2014, Hsu and Krueger signed a contract whereby Hsu would
purchase ginseng from Krueger for a four-year period at $70 per pound. In 2014
and 2105, Hsu honored the contract and Krueger received the agreed-upon $70 per
pound for his crop. In 2016 and 2017, however, Hsu paid only $50 and $40 per
pound, respectively. Krueger commenced an action against Paul and the
corporation alleging a breach of contract and unjust enrichment. Following a
bench trial, the circuit court granted a money judgment in favor of Krueger against
both defendants. Hsu now appeals.
¶3 Hsu first argues the circuit court erred by finding Paul joint and
severally liable with the corporation for the failed payments, when the evidence
showed that at all times he was acting on behalf of the corporation of which he
was the owner and president. Hsu also contends the corporation took delivery of
the ginseng and issued all payments, and Paul thus should not have been held
personally liable for any contract breach.
¶4 An agent who seeks to escape liability has the burden of proving that
the principal’s corporate status was disclosed to the aggrieved party. Benjamin
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Hsu does not challenge on appeal a central issue at trial—whether there was a valid,
enforceable contract. The issue is abandoned, and we shall not further address it. See Reiman
Assocs., Inc. v. R/A Advert., Inc., 102 Wis. 2d 305, 306 n.1, 306 N.W.2d 292 (Ct. App. 1981).
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Plumbing, Inc. v. Barnes, 162 Wis. 2d 837, 851, 470 N.W.2d 888 (1991). The
contracting party does not have a duty to inquire into the corporate status of the
principal even when it is within that party’s capability of doing so. Id. The failure
to use the “Inc.” notation in the contract itself is often critical in the determination
of whether there was adequate disclosure of corporate status. Id.¶5 Whether the contracting party has sufficient notice of the principal’s
corporate identity is a question of fact. Id. at 852. The standard of review
following a bench trial is whether the circuit court’s findings of fact are clearly
erroneous. WIS. STAT. § 805.17(2) (2019-20);2 Ozaukee Cnty. v. Flessas, 140
Wis. 2d 122, 130-31, 409 N.W.2d 408 (Ct. App. 1987). Moreover, the notice
must be given at or prior to the execution of the contract documents. Benjamin
Plumbing, 162 Wis. 2d at 852.
¶6 Here, there is no dispute that Paul approached Krueger, Paul
negotiated the contract, Paul drafted the contract, and Paul signed the contract
personally without using the corporate name in the contract—much less the “Inc.”
notation—or otherwise disclosing the corporation’s status. In fact, there is no
mention of the corporation on the contract line indicating “Buyer’s name or
company.” The contract reflects neither that it was entered into for the
corporation’s benefit, nor that Paul was acting as an agent of the corporation at the
time he executed the contract.
¶7 Hsu argues that Krueger’s testimony at trial shows that Krueger had
either actual or constructive notice of the corporate status. This argument fails
2
All references to the Wisconsin Statutes are to the 2019-20 version unless otherwise
noted.
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because Krueger admitted at trial only that he was familiar with “Hsu Ginseng
Enterprises.” Although Krueger also testified that “they” had been a buyer of his
product for twenty years, Krueger clarified that this relationship had not been
continuous and “I have sold to other ginseng buyers.” Regardless, the testimony
established only a general awareness of the entity at an unspecified time period.
There is no evidence that Krueger was aware of a corporate entity at the time he
executed the contract at issue in this case, and the circuit court was not clearly
erroneous in so finding. On this record, we agree with the court that the contract
was breached and that it was proper to find joint and several liability.
¶8 Hsu also argues that the parties modified the terms of the contract
through their conduct. Hsu contends that Krueger accepted price reductions in
2016 and 2017, and that Krueger also agreed to a three-pound weight reduction
per barrel for the 2017 crop due to debris in the ginseng. According to Hsu, by
accepting these reductions, Krueger agreed to a modification of the contract.
¶9 Acts upon which a party relies to prove modification of a contract
must unequivocally demonstrate such intent. Nelsen v. Farmers Mut. Auto. Ins.
Co., 4 Wis. 2d 36, 56, 90 N.W.2d 123 (1958). One party to a contract may not
alter its terms without the assent of the other. Id. at 55. Instead, there must be a
meeting of the minds as to the proposed modification. Id. at 55-56. Again, the
circuit court’s findings on this question must be upheld unless clearly erroneous.
WIS. STAT. § 805.17(2).
¶10 The record fails to unequivocally show that Krueger assented to a
reduction in the contract price. In fact, Krueger expressly told Hsu that he
expected full payment for the crops. As the circuit court found, the record also
shows that Krueger was not happy with the payments and that he never accepted
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the reduced payments as payment in full. Rather, Krueger expected Hsu to honor
the contract and to pay the full $70 per pound contract price, but Krueger cashed
the checks for partial payments due to financial pressure he was facing at the time.
¶11 The circuit court relied upon testimony from Krueger’s banker, who
approved Krueger’s operating line of credit and multiple advances for Krueger to
grow his ginseng crop. Krueger confirmed to the banker that he had a contract for
$70 per pound, the bank was shown the contract, and it was comfortable relying
on the contract. After the bank learned that Hsu was not paying in full, the bank
was not able to continue to fund Krueger’s operating commitments. The court
found that “Krueger’s accepting the checks and cashing them to pay the bank to
continue funding his farm operation did not in any way constitute a modification
of the contract.”3 The court did not err in determining that the parties did not
agree to modify the contract price.
¶12 Finally, Hsu argues that even if the parties did not modify the
contract, Krueger failed to mitigate his damages, thus eliminating Hsu’s liability
under the agreement. Hsu contends, “Despite being aware of a possible price
reduction prior to delivering the 2016 crop, [Krueger] never made any effort to
find a different buyer for his 2016 and 2017 crops at a higher price.”
¶13 Hsu misstates the legal standard, and it also entirely ignores its
burden of proof on this issue—i.e., to show that the injured party could have
mitigated its damages. See Kuhlman, Inc. v. G. Heileman Brewing Co.,
3
The court found that upon inspection of the 2017 crop, Hsu “did complain about the
quality of the crop,” and Krueger “did agree to a weight reduction of three pounds per barrel, but
he never agreed to reduce the purchase price to $40 a pound.” Krueger does not challenge this
finding, and we will not further address the issue.
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83 Wis. 2d 749, 752, 266 N.W.2d 382 (1978). As the circuit court noted, “no
evidence was presented to support this assertion.” Hsu never offered any evidence
concerning the time and efforts necessary to market the ginseng to a different
buyer, that other marketing options were available at the time, or that it was
unreasonable for Krueger not to pursue any such options if in fact they were
available. See id. The court properly rejected Hsu’s mitigation arguments.
By the Court.—Judgment affirmed.
This opinion will not be published. See WIS. STAT. RULE
809.23(1)(b)5.
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