Bostwick-Braun Company v. Szews

United States District Court for the Western District of Wisconsin · 1986 · Corporations

645 F. Supp. 221 (1986)

Updated August 22, 2026

Corporationspersonal liability of shareholders/officerspiercing the corporate veilsummary judgmentcorporate veilundercapitalizationwaiverestoppel

Facts

Plaintiff, a hardware distributor, sought to recover $39,899.12 for purchases made in connection with a franchise operating as Westowne Pro Hardware. Although Nicholas and Nancy Szews signed the 1980 franchise agreement, contemporaneous records showed that Benns Corporation had been incorporated just before the agreement and that plaintiff's own documents referenced the business as corporate. In 1982 the parties executed a settlement agreement expressly naming Benns Corporation d/b/a Westowne Pro Hardware, and Nicholas also signed a separate personal guaranty limited to a $14,000 line of credit that later expired. Plaintiff also had opportunities to investigate the corporation's financial condition, including a contractual right to receive a financial statement.

Issue

Did the defendants sign the franchise agreement in their individual capacities so as to become personally liable for the business debt? If not, could plaintiff nonetheless pierce the corporate veil based on inadequate capitalization where plaintiff knew it was dealing with a corporation and had the opportunity to evaluate its financial condition?

Rule

When the undisputed record shows that parties executed an agreement on behalf of a corporation and the other contracting party knew it was dealing with the corporation, the officers/shareholders are not personally liable on the contract merely because they signed without corporate titles. Wisconsin law would entertain veil-piercing based on inadequate capitalization, but a creditor that knowingly dealt with the corporation and had the opportunity to examine its financial condition waives, and is estopped from asserting, an undercapitalization-based veil-piercing claim absent allegations of fraud.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

A building-supply wholesaler in Milwaukee prepared a dealership agreement granting selling rights to "Lakefront Home Center" in Madison. Owen Hart and Leah Hart signed the agreement without adding officer titles, but the wholesaler's credit file, bank-contact notes, and account setup form all identified the customer as Lakefront Retail, Inc., formed two days earlier.

If the wholesaler later sues Owen and Leah personally for unpaid inventory under the dealership agreement, what is the strongest result?

Explanation. When the record as a whole shows the agreement was made on behalf of a corporation and the other party knew it was dealing with that corporation, the shareholders or officers are not personally liable merely because they signed without corporate titles. The surrounding documents here point one way: the wholesaler's own records recognized the corporation as the customer.