Eurochem Trading USA Corporation v. Ganske, Julie et al

Filing 61

ORDER: Defendants' preliminary objections to the issuance of a prejudgment writ of attachment are DENIED. Not later than August 3, 2018, each side will file its own report presenting their predictions on whether this will be a one-day or a t wo-day evidentiary hearing on plaintiff's request for a writ, the witnesses they would intend to call, and a proffer of the evidence they would attempt to adduce from each witness. Signed by Magistrate Judge Stephen L. Crocker on 7/27/18. (jat)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
EUROCHEM TRADING USA CORPORATION,
Plaintiff,
v.
W. KENT GANSKE, individually and
d/b/a and sole proprietor of AG CONSULTANTS,
and JULIE L. GANSKE,
Defendants.
ORDER
W. KENT GANSKE, individually and d/b/a AG
CONSULTANTS, and JULIE GANSKE,

18-cv-16-slc

Counter-Plaintiffs and Third-Party Plaintiffs,
and
WS AG CENTER, INC.,
Third-Party Plaintiffs,
v.
EUROCHEM TRADING USA CORPORATION,
Plaintiff and Counter-Defendant,
and
EUROCHEM GROUP AG, SCOTT SIMON, IVAN
BOASHERLIEV, BENTREI FERTILIZER, LLC
and BEN-TREI, LTD.,
Third-Party Defendants.
___________________________________________________________________________________

Plaintiff EuroChem Trading USA Corporation (“ECTUS”) is a wholesaler of fertilizer and
other agricultural chemicals to customers in the United States. From 2012 to 2017, ECTUS
sold product to one or more agri-businesses owned or controlled by W. Kent Ganske, a
Wisconsin resident. In this lawsuit, ECTUS seeks to recover more than $14 million that it says
W. Kent Ganske and his companies owe it for product that ECTUS delivered but for which it
was never paid. ECTUS is suing W. Kent Ganske and his wife, Julie Ganske because it asserts
that the Ganskes have breached their personal guaranty to pay this outstanding debt. ECTUS

is suing “W. Kent Ganske d/b/a and as sole proprietor of AG Consultants” for breach of contract,
unjust enrichment, goods sold, accounts and accounts stated.
Defendants have counterclaimed for fraud in the inducement and misrepresentation in
conjunction with the guaranty, and they seek declaratory judgment that certain claims are
subject to arbitration,1 and a declaratory judgment that the guaranty is invalid for lack of
consideration. Defendants have requested punitive damages. Dkt. 14.
Before the court is ECTUS’s motion under Fed. R. Civ. P. 64 and Wis. Stat. § 811.03
for issuance of a prejudgment writ of attachment against the property owned by the Ganskes and
by W. Kent Ganske in his capacity as sole proprietor and d/b/a AG Consultants. Dkt. 40.
ECTUS argues that preliminary relief is warranted because the debt owed by defendants was
obtained by fraudulent statements by W. Kent Ganske. Defendants deny any fraudulent
conduct, but assert that an attachment writ would be improper in any event because: (1)
ECTUS waived its right to seek preliminary relief when it agreed not to seek a writ in a related
arbitration action; (2) issuance of the writ would jeopardize the interests of defendants’ secured
creditors; (3) case law does not support the issuance of a writ under the facts alleged by ECTUS;
and (4) a prejudgment writ would violate the 14th Amendment’s guarantee of due process.
As I discuss below, defendants’ legal challenges to the writ are unpersuasive. As for the
alleged factual basis for a writ, ECTUS has made at least a colorable showing that it meets the
criteria for the issuance of a prejudgment writ of attachment under Wis. Stat. § 811.03(1)(d).
Although defendants’ affidavits in opposition are largely conclusory and fail in many respects

1

ECTUS contends, and the Ganskes do not dispute, that this claim is no longer at issue because
the relevant parties have been dropped from the arbitration action.

2

to show a genuine dispute as to several material facts, defendants have put enough facts into
dispute to warrant an evidentiary hearing, which the court will schedule with the parties’ input.

DISCUSSION
I. Applicable Law
Rule 64 of the Federal Rules of Civil Procedure authorizes provisional remedies at the
commencement of and during the course of an action for the purpose of securing satisfaction of
the judgment ultimately to be entered in that action. Fed. R. Civ. P. 64; 11A Wright, Miller &
Kane, Federal Practice and Procedure § 2931 (2d ed. 2005). The kinds of remedies and the
circumstances under which they can be used are matters of state law. Id.
Wisconsin’s attachment procedure is set forth in Wis. Stat. Ch. 811. Under the statute,
a judge may issue a writ of attachment “on the request of the plaintiff at any time before final
judgment and after a summons and a complaint are filed,” Wis. Stat. § 811.02, provided that
the plaintiff satisfies one of the statutory grounds set forth in Wis. Stat. § 811.03. ECTUS is
proceeding under § 811.03(1)(d), which provides:
(1) On contract or judgment. Before any writ of attachment shall
be executed the plaintiff or someone in the plaintiff's behalf shall
make and annex thereto an affidavit setting forth specific factual
allegations to show that the defendant is indebted, or that
property of the defendant is available, to the plaintiff in a sum
exceeding $50 specifying the amount above all setoffs, and that the
same is due upon contract or upon a judgment and that the affiant
knows or has good reason to believe . . .
(d) That the defendant fraudulently incurred the obligation
respecting which the action is brought[.]

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Thus, in order to obtain a writ pursuant to a contractual claim under § 811.03(1)(d), a
party must present evidence that:
(a) the party against whom attachment is sought is indebted or has
property that is available to the party seeking attachment;
(b) the claim of the party seeking attachment exceeds $50,
specifying the amount owed above all setoffs; and
(c) the party whose assets are to be attached fraudulently incurred
the obligation for which the action is brought.
To satisfy this last requirement, the plaintiff must show, by clear and satisfactory evidence, that:
(1) the party whose assets are to be attached made a statement of fact which was untrue; (2) it
was made with intent to defraud and for the purpose of inducing plaintiff to act upon it; and (3)
plaintiff did in fact rely upon it and was induced thereby to act to his damage. W. H. Hobbs
Supply Co. v. Ernst, 270 Wis. 166, 169, 70 N.W.2d 615, 617 (1955) (citing Larson v. Splett, 267
Wis. 473, 66 N.W.2d 181 (1954)).
Although ECTUS opted to file a motion with notice to defendants, the statute permits
a court to issue a writ ex parte. In the event a writ is issued and executed, the defendant may
move “at any time” to vacate or modify the writ “for any sufficient cause,” Wis. Stat. § 811.18,
with the court to hold a hearing on such a motion “forthwith.” Wis. Stat. § 811.19. The
burden of proof lies with the plaintiff. Id. At least one court has interpreted the statute to
require the plaintiff to show, in addition to the criteria above, a likelihood of success on the
merits of the underlying action similar to that required by Fed. R. Civ. P. 65. Select Creations,
Inc. v. Paliafito America, Inc., 828 F. Supp. 1301, 1356-57 (E.D. Wis. 1992).

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II. Defendants’ Preliminary Objections
Before addressing the parties’ evidentiary submissions, it is necessary to consider
defendants’ global objections to ECTUS’s motion.

First, defendants argue that ECTUS

somehow waived its right to seek preliminary relief in this action by agreeing to voluntarily
withdraw its request for a prejudgment attachment in a pending arbitration proceeding between
ECTUS and WSAG. In support, defendants have submitted emails exchanged between the
parties and the arbitrator that memorializes an agreement reached by the parties in response to
the arbitrator’s conclusion that he lacked jurisdiction to decide whether the non-signatories (W.
Kent Ganske and AG Consultants) were proper parties to the arbitration. See Exhs. 1 and 2 to
Def.’s Opp. Br., dkt. 46. Under that agreement, ECTUS agreed that it would “not seek
preliminary relief against WSAG in the arbitration” and would amend its pending federal court
case to add AG Consultants and W. Kent Ganske as defendants on a claim based on liability on
the invoices. Id., exh.2.
These documents offer no support for defendants’ claim that ECTUS agreed to forego
a prejudgment writ of attachment against defendants in this case, a claim that ECTUS
vehemently denies. Indeed, if, as defendants insist, “it was anticipated and agreed by the
parties” that ECTUS would abandon its pursuit of prejudgment relief against any party in any
forum, then one would have expected that term to have been included along with the other
terms stipulated to by the parties in the arbitration proceeding. As defendants concede, that
term is not there. Accordingly, this court has no basis on which to find that ECTUS knowingly
and intentionally relinquished its right to seek a writ of attachment against the Ganskes in this
federal court action. See CHH Indus. Am. LLC v. Jones Lang LaSalle Americas, Inc., 882 F.3d 692,

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711 (7th Cir. 2018)(“Waiver entails the voluntary and intentional relinquishment of [a] known
right.”).
Second, defendants argue–without citing any legal authority–that issuance of the writ
would jeopardize the interests of defendants’ secured creditors by somehow permitting ECTUS
to “leapfrog” ahead of defendants’ secured creditors. Like defendants’ first argument, this one
is unfounded. As ECTUS points out, by law a prejudgment writ of attachment is subordinate
to existing liens on personal property. See Wis. Stat. § 409.317(1)(b)1 (a lien creditor has
priority only over an unperfected security interest); Kepler v. Travelers Indem. Co., No.
98-35139-7, 2000 WL 33950020, at *3 (Bankr. W.D. Wis. Mar. 21, 2000) (under Wisconsin
law, attaching creditor is treated as having a lien in the property when the creditor levies upon
the attachment). Any security interests that were perfected prior to the execution of the writ
would continue to have priority.
Third, defendants argue that “there is no authority” for a court to “impose[] a writ of
attachment on a Wisconsin resident.” Defs.’ Opp. Br., dkt. 46, at 14. Defendants are wrong.
Wis. Stat. § 811.03 does not limit its application to non-Wisconsin residents, and in fact,
Wisconsin courts have issued writs of attachment against Wisconsin residents. See, e.g., Schroeder
v. Wacker, 2000 WI App 116, 235 Wis. 2d 274, 616 N.W. 2d 524 (Ct. App. April 26, 2000)
(Table) (unpublished disposition) (writ issued against Wisconsin resident); Hobbs Supply, 270
Wis. 166, 70 N.W. 2d 615 (trial court issued prejudgment writ of attachment against Wisconsin
resident; court of appeals reversed trial court’s finding that defendant incurred obligation by
fraud). Further, ECTUS does not lose its motion merely because two federal cases it cites, Select
Creations, Inc. v. Paliafito America, Inc., 828 F. Supp. 1301 (E.D. Wis. 1992), and Illumination
Dynamics Co., Ltd. v. Pacific Lighting Solutions, L.L.C., No. 14-cv-613-wmc, 2014 WL 8795697

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(W.D. Wis. 2014), involved facts different from this case. ECTUS would be entitled to a
prejudgment writ of attachment if it satisfies the requirements of Wis. Stat. § 811.03(d);
whether it can point to a reported case with identical facts is irrelevant.
Finally, defendants argue that a prejudgment writ would violate their right to due process.
Defendants rest their argument on United States General, Inc. v. Arndt, 417 F. Supp. 1300 (E.D.
Wis. 1976), in which the court held that a prior version of the Wisconsin attachment statute
violated the Due Process Clause of the Fourteenth Amendment. Relying on a trio of Supreme
Court cases scrutinizing state prejudgment remedies2 , the Arndt court ruled that Wisconsin’s
prejudgment attachment scheme was unconstitutional because it provided neither notice and
hearing prior to the writ’s issuance, nor “adequate alternative safeguards . . . to prevent
mistaken seizures of property.” Id. at 1312. The court found Wisconsin’s attachment procedure
deficient in the following respects: (1) it permitted the issuance of a writ on a conclusory
supporting affidavit; (2) it permitted a writ to issue upon plaintiff’s posting of a minimum bond
of $250, which the court deemed wholly inadequate to assure the defendant had a reasonably
adequate remedy in the event of a wrongful attachment; (3) it failed to provide a defendant with
sufficient opportunity to obtain immediate relief from a wrongful issuance or execution of a writ;
and (4) it specifically precluded a judge from considering whether the plaintiff was likely to
succeed on the merits on the underlying claim. Id. at 1312-13.
As defendants acknowledge, the Wisconsin Legislature responded to the Arndt decision
by amending the statute in 1977. See Wis. L., chap. 412, §§ 2-7. Although the statute still
permits a judge to issue an attachment writ ex parte, the legislature added safeguards to diminish

2

See Sniadach v. Family Finance Corp., 395 U.S. 337 (1969), Fuentes v. Shevin, 407 U.S. 67, (1972),
and North Georgia Finishing Inc. v. Di-Chem, Inc., 419 U.S. 601 (1975).

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the possibility of a mistaken seizure. Specifically, in response to the defects noted above, the
amended statute: (1) requires the plaintiff’s affidavit to contain “specific factual allegations to
show that the defendant is indebted to the plaintiff,” Wis. Stat. § 811.03; (2) requires the
issuing judge to set the plaintiff’s bond at an amount “sufficient to provide adequate security to
the defendant for any damages the defendant may sustain by reason of the attachment,” Wis.
Stat. § 811.06; (3) permits the defendant to move at any time to vacate or modify the writ “for
any sufficient cause,” Wis. Stat. § 811.18, requires the court to hold a hearing on such a motion
“forthwith,” and imposes the burden of proof on the plaintiff, Wis. Stat. § 811.19; and (4)
contains no language expressly precluding the court from assessing the merits of the underlying
claim.
Notwithstanding defendants’ conclusory arguments to the contrary, these modifications
seem adequate to address the Arndt court’s concerns. Indeed, defendants have not cited to any
case decided in the 40 years since the statute’s amendment to suggest otherwise. In any event,
this discussion is academic in this case because defendants received actual notice and an
opportunity to be heard on ECTUS’s request for a prejudgment writ of attachment. Further, as
discussed in the next section, this court intends to hold an evidentiary hearing at which
defendants may contest the propriety of the writ and, should the writ be issued, provide input
on the appropriate bond amount to be posted by plaintiff. Thus, any claim by defendants that
they have been deprived of due process is purely hypothetical. It is not a basis for denying
ECTUS’s writ application.

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III. The Parties’ Evidentiary Submissions
A. Facts Proffered by ECTUS
Having rejected defendants’ preliminary challenges, I turn to the merits of ECTUS’s
motion. Along with its motion for writ of attachment, ECTUS has submitted two declarations
to meet the § 811.03 requirements: one from Ivan Boasher, ECTUS’s former president and
current commercial director, dkt. 40-1; and one from Patricia Aubort, a CPA and principal
consultant for Avant Advisory Group, a firm that provides forensic, fraud and corporate
investigations. Dkt. 40-2. These declarations allege the following:
ECTUS sold fertilizer and other agricultural chemicals to W. Kent Ganske, both
individually and in his capacity as sole proprietor of and d/b/a AG Consultants. Boasher Aff.,
at ¶ 8. W. Kent Ganske is the sole shareholder of WSAG. Id. at ¶ 9. Boasher personally
handled all of the orders for products purchased by W. Kent Ganske or his companies and he
negotiated the contracts. Id. at ¶ 8.
In 2016, ECTUS and WSAG entered into a series of contracts (“the Contracts”) for the
sale and purchase of urea, phosphate and other products from ECTUS. Id. at ¶ 10. ECTUS’s
billing system required a certificate of good standing from the state in which the customer was
incorporated, but AG Consultants did not have such a certificate because it was a sole
proprietorship. For this reason alone, WSAG was set up as the “customer” in ECTUS’s billing
system. Id. at ¶¶ 9,10. However, W. Kent Ganske “acted at all times as if the Contracts were
with AG Consultants,” as evidenced by the following: checks given to ECTUS as payment for
products were drawn on AG Consultants’ bank accounts; the orders were placed by telephone
by W. Kent Ganske d/b/a and as sole proprietor of AG Consultants on behalf of AG Consultants;

9

email correspondence received by ECTUS regarding the Contracts came regularly from AG
Consultants’ email addresses and from employees who indicated they were employees of AG
Consultants; ECTUS delivered the products purchased pursuant to the Contracts to barge
terminals owned or leased by AG Consultants in Illinois, Iowa and Wisconsin; ECTUS never
delivered any products to WSAG’s business location; and a forensic audit of WSAG’s and AG
Consultants’ business records found that the products purchased from ECTUS were recorded
as inventory on AG Consultants’ books and not WSAG’s books. Id. at ¶ 11.
Throughout their business relationship, ECTUS had offered WSAG and AG Consultants
credit of up to 180 days, delivering product with subsequent invoicing and pricing. Id. at ¶ 12.
Before extending this credit, ECTUS obtained Dunn & Bradstreet reports, which showed that
WSAG and AG Consultants were good credit risks. Id. In early 2016, however, WSAG and AG
Consultants began having problems meeting their payment obligations to ECTUS and asked
ECTUS to relax its payment terms. Id. at ¶ 13. ECTUS granted three extensions—in March
2016, June 2016 and November 2016—and the parties amended the Contracts accordingly. Id.
Before ECTUS granted these Payment Extensions, W. Kent Ganske told Boasher that WSAG’s
and AG Consultants’ businesses were stable and doing well and that they would be able to
comply with the new payment terms. Id. at ¶ 14.
In November 2016, Boasher received a credit report for WSAG and AG Consultants that
revealed debts that W. Kent Ganske had not previously disclosed to ECTUS. Id. at ¶ 15. When
Boasher asked W. Kent Ganske about the debts, Ganske denied owing them and said the credit
report was not accurate. Id. Boasher accepted Ganske’s representations and granted the third
Payment Extension. Id. Under the terms of this extension, Ganske/AG Consultants/WSAG
were to have paid the debts owed to ECTUS in full by May 31, 2017. Id. at ¶ 16.

10

But then in early 2017, W. Kent Ganske told Boasher that he/AG Consultants/WSAG
would be unable to meet the May 31 repayment deadline. Id. Boasher told Ganske that ECTUS
would not agree to another repayment plan until it had a better understanding of Ganske’s
financial situation, and he asked Ganske if Ganske would allow ECTUS to perform a forensic
analysis of WSAG’s and AG Consultants’ financial records. According to Boasher, Ganske
agreed. Id.
ECTUS retained Patricia Aubort of the Avant Advisory Group to perform the forensic
investigation, which was conducted at WSAG’s and AG Consultants’ offices on March 20-24,
2017. Aubort Aff., dkt. 40-2, at ¶¶ 4, 5. During her visit, Aubort reviewed and analyzed
WSAG’s and AG Consultants’ financial records, including their internal accounting and bank
records, and she interviewed the companies’ employees, outside accountants and bookkeepers.
Id. at ¶ 5. Aubort also interviewed Ganske. Id. Aubort’s investigation discovered “extreme
financial irregularities” in the records and practices of the two companies, including but not
limited to the following: (1) WSAG and AG Consultants maintained two sets of accounting
records, commingled assets amongst themselves and other entities and properties owned and
controlled by Ganske and had approximately $30 million of debt in excess of assets, with over
$9 million of this debt secured; (2) the companies did not observe corporate formalities, but
instead commingled their accounts and did not reconcile intercompany transactions; (3) they
used prepayments made by customers for product to fund operations and to pay other liabilities,
i.e., “robbed Peter to pay Paul”; (4) they treated customer prepayments as a negative asset rather
than a liability on the companies’ books, and used an “unexplained and unreconcilable
adjustment called ‘incoming AR from Peachtree’” to artificially hide the negative net accounts

11

receivable balance; (5) they delayed paying vendors, had unusual float levels in the purchase of
assets and had potential concealment of losses; and (6) AG Consultants had no inventory
tracking or valuation and sometimes its inventory was recorded on the books of WSAG for
“reporting purposes,” which included documents submitted to banks for loan transactions. Id.
at ¶¶ 6-13.
AG Consultants and WSAG had not disclosed these irregular practices to ECTUS; to the
contrary, they had concealed them in order to induce ECTUS to sell large quantities of product
on extended credit terms. Boasher Aff., dkt. 40-1, at ¶ 18. If ECTUS had known of these
irregularities, then it would not have entered into the Contracts or the Payment Extensions with
AG Consultants or WSAG, nor would ECTUS have sold any fertilizer to the companies on
deferred payment terms. Id. at ¶19.
In March 2017, W. Kent Ganske provided Boasher with a document that showed that
Ganske and AG Consultants had almost $23 million of debt that Ganske had not previously
disclosed to ECTUS. Id. at ¶ 20. This debt resulted from prepayments made to Ganske by
customers for future deliveries. Id. When Boasher learned of the debt, he realized that Ganske
had misled ECTUS about his ability to repay the debt he owed to ECTUS. Id.
In March and May 2017, W. Kent Ganske and J. Ganske, respectively, executed a
Continuing Guaranty (Unlimited), guarantying payment of all obligations of WSAG and AG
Consultants due and owing to plaintiff ECTUS. Id. at ¶ 21. The total amount owed to ECTUS
is $14,285,215.27, plus interest, liquidated damages and attorneys’ fees and costs. Id. at ¶ 22.

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B. Facts Proffered by Defendants
In opposition to the writ of attachment, defendants have submitted four affidavits: two
from W. Kent Ganske (dkts. 46-8 & 49); one from Marc Farmer, WSAG’s outside accountant
(dkt. 48); and one from Carolyn Bauman, Farmer’s office assistant (dkt. 47). Ganske admits
that ECTUS and WSAG entered into a number of contracts for products in 2016, that these
contracts were amended to reflect extended payment terms and that the terms of these contracts
have not been met. He avers, however, that he entered into these contract terms based on
Boasher’s verbal assurances that he would “make things right” with Ganske and credit WSAG’s
account later. Supp. Aff. of W. Kent Ganske, dkt. 46-8, at ¶¶ 22-24. According to Ganske,
WSAG experienced a number of problems with ECTUS, including product containing large
foreign materials that caused damage to equipment, untimely shipments, and delivery of product
that WSAG did not need. Id. at ¶¶ 37-46. When Ganske brought these issues to Boasher’s
attention, he would repeatedly tell Ganske that ECTUS would “take care of you,” which Ganske
understood to mean that WSAG’s charges would be zeroed or reduced. Id. at ¶¶ 42, 46. Ganske
denies owing more than $14 million to ECTUS, asserting (without evidentiary support) that
when all of ECTUS’s promised credits and adjustments are accounted for, ECTUS actually will
owe defendants money. Def.’s Br. in Opp. dkt. 46, at 8, ¶ 19.
Ganske denies that he fraudulently misrepresented his financial situation to ECTUS, and
avers that when ECTUS asked about a specific creditor, he provided true and accurate
information to ECTUS regarding the status of such debt. Aff. of W. Kent Ganske, dkt. 49, at

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¶¶ 8,9. With respect to Aubort’s findings3 , Ganske denies that there was any commingling of
funds or any “concerted misconduct” by him or his companies, dkt. 48-6, ¶¶ 63, 84, and avers
that the IRS performed comprehensive audits in 2011 and 2015 and found “no evidence of
commingling or wrongdoing.” Id. at ¶ 59. However, while insisting that “significant accounting
formalities were observed” with respect to WSAG and AG Consultants, Defs.’ Br. in Opp., dkt.
46, at 7, ¶ 11, Ganske, Farmer and Bauman do not deny that:
•

WSAG and AG Consultants had $30 million debt in excess of assets;

•

the companies did not reconcile their multiple sets of accounting records;

•

WSAG/AG Consultants used customer payments for expenses, including
to acquire inventory;

•

these customer prepayments were treated as a negative asset rather than
a liability;

•

a $43 million unexplained and unreconcilable adjustment called
“incoming AR from Peachtree” artificially hides the negative net accounts
receivable balance;

•

WSAG/AG Consultants delayed paying vendors, had unusual float levels
in the purchase of assets and potential concealment of losses; and

•

AG Consultants had no inventory valuation or tracking.

Ganske admits that he and his wife signed a personal guaranty in 2017 under which they
agreed to pay all obligations of WSAG and AG Consultants due and owing to plaintiff ECTUS.
He avers, however, that he and his wife were induced into signing the guaranty by ECTUS’s
representatives, who made specific promises that have not been kept. Ganske Aff., dkt. 46-8,
¶ 87.

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In his affidavits, Ganske denies giving Aubort permission to perform a complete financial analysis
of his companies’ records and says he was misled about the reason she was doing so. Dkt. 48-6, ¶¶ 55-56;
Dkt. 49, ¶¶5, 6.

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C. An Evidentiary Hearing is Necessary
There is no question that ECTUS has satisfied the first two requirements for obtaining
a prejudgment writ under § 811.03(1)(d). As detailed above, Boasher’s affidavit shows that Julie
Ganske and W. Kent Ganske signed a personal guaranty in which they agreed to pay the
outstanding debts of WS AG Center, Inc. and Agricultural Consultants, and that the amount
of that debt exceeds $14 million. ECTUS has also made at least a preliminary showing that it
is likely to prevail on the merits of its underlying claim against the Ganskes for breach of the
personal guaranty, insofar as defendants admit that they signed it and have not (yet) produced
evidence to support their claim of fraudulent inducement.
Two other issues are more clearly disputed, both relating to ECTUS’s burden of showing
that “the party whose assets are to be attached fraudulently incurred the obligation for which
the action is brought.” Wis. Stat. § 811.03(1)(d). The first issue is whether W. Kent Ganske
committed fraud on ECTUS. According to ECTUS, “K.Ganske and K. Ganske in his capacity
of sole proprietor of and d/b/a AG Consultants misrepresented their financial situation in order
to induce ECTUS to extend credit to them and agree to the Payment Extensions.” Dkt. 40, at
11. ECTUS points to two statements by Ganske that it characterizes as false: (1) Ganske’s
statement to Boasher that “WSAG’s and AG Consultants’ businesses were stable and that their
businesses were doing well;” and (2) Ganske’s denial in November 2016 that he owed certain
debts shown on a credit report that had not been previously disclosed to ECTUS. Id. Thus, the

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“obligation” that ECTUS says was fraudulently incurred were the Payment Extensions granted
in March, June and November 2016.4
ECTUS’s evidence in support of its fraud claim is not overwhelming. Without more,
Ganske’s statement that his businesses were “stable” and “doing well” arguably is a statement
of opinion, not fact. See, e.g., Consolidated Papers, Inc. v. Dorr–Oliver, Inc., 153 Wis. 2d 589, 594,
451 N.W. 2d 456 (Ct. App. 1989) (“A representation is one of opinion if it expresses only the
maker's judgment as to quality, value, authenticity, or other matters of judgment.”). Moreover,
it is not clear from ECTUS’s proffered evidence that Ganske knew this statement was false when
he made it. Ganske’s second statement, in which he denied owing certain debts on a credit
report, is closer to the mark. Nonetheless, ECTUS will have to identify those debts more
specifically and show that Ganske knowingly lied about those debts (in addition to proving the
other elements of misrepresentation) in order to establish fraud and obtain a writ.
The second issue to be addressed at the hearing is whether ECTUS can obtain a writ of
attachment against the Ganskes’ property, including W. Kent Ganske’s sole proprietorship, AG
Consultants, when the debtor named on the obligations alleged to have been incurred by fraud
was WSAG, a corporate entity. Although ECTUS argues that proceeding against the Ganskes’

4

Although not contested by defendants, I note that the term “obligation” encompasses not just
the underlying debt but “to pay the terms of the contract made concerning the debt.” W achter v. Famechon,
62 W is. 117, 22 N.W . 160, 162 (1885). In W achter, 22 N.W . at 160, 162, the W isconsin Supreme Court
held that where the debtor obtained an increased term of credit by representing “that he was perfectly
good, and that his property was clear from incumbrance, with no mortgage or anything upon it; that he
did not owe a great deal; and that the plaintiff’s debt was as large as any he had,” when in reality he had
debt far in excess of his assets and was grossly insolvent, the trial court had erred in dismissing a writ of
attachment. Thus, even though ECTUS does not contend that W . Kent Ganske fraudulently incurred the
original Contracts, it may obtain an attachment writ if it can show that the Payment Extensions were
obtained by fraud.

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property is proper because the Ganskes are on the hook for WSAG’s debt by virtue of the
guaranty, ECTUS does not suggest that the guaranty was fraudulently obtained; rather, the fraud
occurred before the guaranty was signed, when ECTUS allegedly was duped into granting
Payment Extensions to WSAG by W. Kent Ganske’s false representations about the company’s
ability to pay. Under the plain language of the statute, ECTUS is not entitled to a writ of
attachment against the Ganskes’ property solely by virtue of the guaranty because ECTUS does
not contend that the guaranty was procured by fraud.
Taking a different tack, ECTUS argues that it is proper to attach the property of the
Ganskes and AG Consultants because AG Consultants had an implied contract with ECTUS,
insofar as AG Consultants received and accepted the benefit of product shipped and delivered
to it by ECTUS. Plt.’s Br., dkt. 40, at 9. This argument does not have much traction. Although
ECTUS now argues that it had an implied contract with AG Consultants for the shipment and
delivery of product, ECTUS does not deny that it had express contracts with WSAG covering
the same shipments and deliveries. Indeed, ECTUS is pursuing recovery from WSAG on these
contracts in the arbitration proceeding.
As defendants point out, it is well-settled that “[w]here a valid express contract is proven
no recovery can be had on an implied contract.” Schultz v. Andrus, 178 Wis. 358, 361, 190
N.W. 83 (1922). Although ECTUS insists this rule applies only when the express and implied
contracts are between the same parties, it cites no authority for this proposition other than the
negative implication it draws from defendants’ cited cases. Absent more persuasive authority
from ECTUS, I share defendants’ view that there can be only one contract: either an express

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contract between ECTUS and WSAG or an implied contract between ECTUS and AG
Consultants, but not both.
This does not mean ECTUS is out of luck. Although not explicitly argued in its brief,
ECTUS has proffered facts suggesting that this might be an appropriate situation to disregard
the corporate entity named on the contracts and find that AG Consultants is the alter ego of
WSAG, as ECTUS alleges in Count V of the Second Amended Complaint. Dkt. 31, at 13. In
Wisconsin, the “instrumentality” or “alter ego” doctrine requires proof of the following elements:
(1) Control, not mere majority or complete stock control, but
complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate
mind, will or existence of its own; and
(2) Such control must have been used by the defendant to commit
fraud or wrong, to perpetrate the violation of a statutory or other
positive legal duty, or dishonest and unjust act in contravention of
plaintiff's legal rights; and
(3) The aforesaid control and breach of duty must proximately
cause the injury or unjust loss complained of.
Consumer's Co-op. of Walworth Cty. v. Olsen, 142 Wis. 2d 465, 484, 419 N.W.2d
211, 217–18 (1988).
As detailed above, ECTUS has presented evidence that AG Consultants controlled and
dominated the finances and business practices with respect to the purchase of goods from
ECTUS that were the subject matter of the Contracts and Payment Extensions; WSAG and AG
Consultants mingled assets and accounts and ignored corporate formalities; and AG Consultants
used its control over WSAG to commit fraud on ECTUS. ECTUS’s affidavits are sufficient to
make out at least a prima facie case for piercing the corporate veil and finding that WSAG and

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AG Consultants are one and the same. I leave it to the parties to address this issue in more
detail at the evidentiary hearing.5

IV.

Defendants Have Not Shown They are Entitled to An Attachment Writ Against
ECTUS
Finally, defendants assert that if this court issues a prejudgment writ of attachment

against them, then it should also issue one against ECTUS. Defs.’ Br. in Opp. dkt. 46, at 20-21.
This request must be denied. Under Wis. Stat. § 811.03(2), a party applying for a prejudgment
writ of attachment in a tort action must file an affidavit specifying the amount claimed.
Defendants have not filed any affidavits specifying the amount of damages they claim from
ECTUS on either their counterclaim or third-party complaint, which sound in tort. See Select
Creations, 828 F. Supp. at 1357 (denying prejudgment writ of attachment when party failed to
present a clear account of debt owed). Absent compliance with the statutory requirements, this
court cannot and will not consider defendants’ offhand request for an attachment writ. Only
ECTUS’s application is properly before the court.

5

Having raised the corporate alter ego doctrine, let me now question its efficacy in light of the
ongoing arbitration between ECTUS and W SAG. If this court were to decide to disregard the corporate
entity and find AG Consultants to be the alter ego of W SAG, would this lawsuit have to be stayed in favor
of the arbitration? The court welcomes the parties’ input on this question.

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ORDER
IT IS ORDERED THAT:
(1) Defendants’ preliminary objections to the issuance of a prejudgment writ of
attachment are DENIED for the reasons stated in this order.
(2) Not later than August 3, 2018, each side will file its own report presenting their
predictions on whether this will be a one-day or a two-day evidentiary hearing on plaintiff’s
request for a writ, the witnesses they would intend to call, and a proffer of the evidence they
would attempt to adduce from each witness.
(3) The court is available for the evidentiary hearing on August 17, August 20, August
27, August 31, September 4, September 5, September 10 or September 11, 2018. (Note that
August 17 and August 31 only work if the hearing will be finished in one day.) In their August 3
submissions the parties are to report their availability and their preferences. The court then will
promptly schedule the hearing.

Entered this 27th day of July, 2018.

BY THE COURT:
/s/
_______________________
STEPHEN L. CROCKER
Magistrate Judge

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