SunOpta Grains and Foods, Inc. v. JNK Tech Inc.

Background

SunOpta Grains and Foods, Inc. sold soybeans to JNK Tech Inc., doing business as Salitek, and Cherith Agro, Inc., formerly known as JP Agro Trading, Inc. Both companies were founded, owned, and operated by Abraham T. “Tim” Kim. The parties initially discussed soybeans that had failed to meet specified germination rates under earlier contracts. In July 2016, however, their emails created a new agreement for 500 metric tons of soybeans at a new price and for shipment to China, without a stated germination requirement.

SunOpta shipped the soybeans in July 2016, and they arrived in China in August. Cherith did not pay the agreed contract price of $278,451.25. After requesting payment extensions, Kim complained in November that the soybeans had germination rates of about 65% and attempted to settle the debt for less than the contract price. SunOpta sued and moved for summary judgment, which asks whether the evidence presents any genuine dispute over an important fact requiring a trial.

Defendants asserted counterclaims for revocation of acceptance, breach of express warranty, and breach of the implied warranties of merchantability and fitness for a particular purpose. SunOpta sought judgment on claims for breach of contract, recovery of the price under the Uniform Commercial Code, account stated, unjust enrichment, and promissory estoppel. SunOpta also asked the court to hold Kim personally liable under an alter-ego theory by disregarding the companies’ separate legal identities.

Counterclaims

The court rejected the counterclaims. Under Minnesota law, a buyer may revoke acceptance when a product’s nonconformity substantially impairs its value, but revocation must occur within a reasonable time and before a substantial change in the goods’ condition unrelated to the seller’s defect. The court found no genuine factual dispute showing that the soybeans had a 65% germination rate when they arrived in China. Defendants relied on Kim’s email and photographs taken in November, after the soybeans had been in their control for about three months; those materials did not establish the germination rate on arrival.

The court credited SunOpta’s documentary evidence that the soybeans tested above 80% while in SunOpta’s control, that Kim selected the loads, and that Kim knew germination could decline during shipment, particularly during summer. The court also found that Kim did not test the soybeans when they arrived and did not complain about their germination until three months later. Because the evidence did not show a nonconformity attributable to SunOpta at the relevant time, revocation of acceptance was unavailable.

The court likewise rejected the warranty claims. It found that the phrase “for sprout” in SunOpta’s invoices and packing slips did not establish a warranty SunOpta breached because the record showed the soybeans met the relevant germination level while in SunOpta’s control and did not show they were nonconforming when they arrived in China.

SunOpta’s Claims

The court granted summary judgment on the breach-of-contract claim. It found that the July 2016 emails formed a new contract, SunOpta performed by shipping and delivering the soybeans, and defendants materially breached the agreement by failing to pay when payment was due in September 2016. The court determined that the contract damages were $278,451.25.

The court also granted summary judgment on SunOpta’s UCC claim for the price because defendants accepted the soybeans and failed to pay for them. It granted summary judgment on the account-stated claim because defendants did not object to the amount owed within a reasonable time. The court explained that Kim’s later objection concerned the quality of the soybeans, not the amount of the debt, and that he had repeatedly requested more time to pay without disputing the account balance.

Because the court found an enforceable contract, it deemed SunOpta’s alternative unjust-enrichment and promissory-estoppel claims moot. The court awarded prejudgment interest at 6% per year from October 1, 2016, through entry of judgment, and postjudgment interest at the applicable federal rate.

Personal Liability

The court pierced the corporate veil under Minnesota’s alter-ego doctrine, which can make an individual responsible for a corporation’s debt when the corporation was not operated as a genuinely separate entity and refusing liability would be unfair or unjust. The court found that JNK and Cherith had few corporate records, transferred money between themselves without sufficient documentation, and were inadequately capitalized. Kim also used corporate funds for personal expenses, including expenses for his wife, son, church, and property taxes, and made unexplained cash withdrawals.

The court concluded that Kim’s handling of the companies showed disregard for the corporate form and that it would be unfair and unjust to protect him from personal liability. The final order granted SunOpta’s motion for summary judgment, awarded $278,451.25 plus the specified interest, and held Kim personally liable for SunOpta’s damages.