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COURT OF APPEALS
NOTICE
DECISION
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.
December 16, 1999
                                                                                                                                                     A  party  may  file  with  the  Supreme  Court  a
                                                                                                                                                     petition  to  review  an  adverse  decision  by  the
                                                                                     Marilyn L. Graves
                                                                                                                                                     Court of Appeals.   See § 808.10 and RULE 809.62,
                                                                                     Clerk, Court of Appeals
                                                                                                                                                     STATS.
                                                                                     of Wisconsin
No.                                                                                  99-1490
                                                                                     STATE OF WISCONSIN
                                                                                                                                                     IN COURT OF APPEALS
                                                                                                                                                     DISTRICT IV
RANDALL LEMKE,
PLAINTIFF-APPELLANT,
V.
GEORGE ARROWOOD D/B/A M&G TRUCKING, INC.,
DEFENDANT-RESPONDENT.
APPEAL from an order of the circuit court for Waupaca County:
PHILIP M. KIRK, Judge.   Reversed and cause remanded with directions.
Before Dykman, P.J., Eich and Vergeront, JJ.
¶1                                                                                   PER CURIAM.    Randall Lemke appeals from an order dismissing
his contract action against George Arrowood.   He claims the circuit court erred
when  it  determined  that  the  contract  was  unconscionable,  and  therefore
unenforceable.   We agree.   We further conclude that the record was sufficient to




No(s). 99-1490
establish  damages  in  Lemke’s  favor,  and  remand  for  further  proceedings
consistent with this opinion.
BACKGROUND
¶2                                                                                   Lemke owned a trucking business which went bankrupt.   Arrowood
subsequently  approached  Lemke  for  assistance  in  starting  his  own  trucking
business, M&G Trucking.   Lemke agreed to help, with the understanding that he
would receive half of M&G Trucking’s profits for three years.   Lemke contacted a
number of his former customers and asked them to hire M&G Trucking.    He
contacted his former employees and asked them to work for Arrowood’s company.
He acquired the necessary licenses, permits and insurance for M&G Trucking.   He
set up a computer system for Arrowood’s company, which included a data base of
300 to 500 potential customers, negotiated rates which Lemke had spent five years
developing,  and  trained  Arrowood  to  use  the  system.     Lemke  also  leased
Arrowood  computers,  software,  a  phone  system,  a  copy  machine,  and  office
furniture from his old business for $200 a month.
¶3                                                                                   On May 18, 1992, after Lemke had already spent approximately five
weeks on the project, Lemke and Arrowood entered into a written contract “to
clarify and document” their agreement.  The contract provided in relevant part:
1.                                                                                   [Lemke] shall provide assistance in the form of “start
                                                                                     up labor” to M&G Trucking Ltd., for a period of  5
                                                                                     weeks without pay, commencing on April 9, 1992 and
extending through May 15, 1992.
2.                                                                                   [Lemke] shall be paid in the amount of $8.00/hour for
each  hour  of  work  put  in  for                                                   [M&G  Trucking]
following the start up period.
3.                                                                                   [Lemke] shall be paid an additional amount equal to ½
of the net profits arising out of the trucking operation
known as M&G Trucking Ltd.   Net profits shall be
defined  as  operating  income,  less  actual  expenses
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No(s). 99-1490
incurred  such  as  wages,  utilities,  permits,  etc.,  but
shall  not  include  depreciation  expense,  estimated
corporate  income  tax  liability,  or  any  payment  to
shareholders  or  relatives  of  shareholders.    Payment
based on net profits shall be paid at least yearly within
one month of the end of the year; however, net profits
shall never be less than $400.00 per month to [Lemke]
under this provision for use of the equipment set forth
in paragraph 6.
4.                                                                                     The effective date of this agreement shall be April 9,
1992.
5.                                                                                     This agreement shall be effective initially for a period
of three years starting from the effective date.   This
agreement  shall  automatically  renew  on  identical
terms  of  compensation  for  a  similar  period  unless
specifically    revoked    by    either                                                [Lemke]    or
[Arrowhead] within  6 months, but not less than  60
days, from the end of the agreement.
6.                                                                                     [Lemke]  shall  lease  to  [Arrowood],  as  part  of  this
contract, the computer equipment and software, office
furnishings,  and  phone  system  currently  located  at
1220  Depot  St.,  Manawa,  WI.     For  income  tax
purposes, the payment of  ½ the profits to  [Lemke]
shall be designated as rental payments for the use of
the above mentioned equipment.                                                         [Arrowood] is not
authorized to copy any of the software or programs,
without the consent of [Lemke].
7.                                                                                     This  agreement  may be  voided  at  any time  by the
mutual consent, in writing of  both  [Arrowood]  and
[Lemke].
¶4                                                                                     Both parties testified that they considered their agreement to   have
two components:   the monthly rental payment for the office equipment, plus the
greater of half of the profits or some guaranteed minimum amount for a renewable
term of three years in exchange for Lemke’s start-up assistance.   In his deposition
testimony, which was entered into evidence, Lemke clarified that the minimum
$400  per  month  payment  specified  in  the  contract  included  the  separately
negotiated $200 monthly rent for the office equipment.   The parties further agreed
that Lemke had already completed the start-up assistance at the time the contract
was signed, and that Lemke was thereafter paid $8 an hour (considerably lower
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No(s). 99-1490
than  the                                                                               $35  an  hour  rate  he  testified  he  would  normally  charge  for  doing
computer work) for some additional computer assistance.
¶5                                                                                      In September of 1992, Lemke asked Arrowood to buy the equipment
M&G Trucking was leasing.   There was an unresolved dispute in the testimony
about whether Lemke seized the equipment at the time he made the request.   In
any event, Arrowood paid Lemke $5,200 to purchase all of the equipment except
the computers, which Lemke repossessed.   Arrowood either told Lemke that he
believed the purchase of the equipment terminated their contract, or asked whether
it would do so.   Lemke told Arrowood that purchase of the equipment voided the
rental portion of the agreement, but that he still expected to be paid half of the
profits for three years in exchange for his start-up assistance.   Arrowood never
paid  Lemke  any  portion  of  the  profits  of  M&G  Trucking,  or  any  other
compensation for Lemke’s start-up assistance, and neither party ever terminated
the contract or the renewal clause in writing.
¶6                                                                                      Lemke filed suit in 1996, seeking to recover either $200 per month
or half of M&G’s profits for the six years following the signing of the parties’
contract.     Arrowood  raised  affirmative  defenses  of  accord  and  satisfaction,
compromise and settlement, oral modification of the contract, and rescission of the
contract.   At trial, Arrowood also argued that Lemke had breached the contract by
seizing the office equipment.   The trial court dismissed the action immediately
after the hearing, finding that the contract was unconscionable, and that there was
no evidentiary basis on which to calculate damages.   The court further found that
there was no bilateral consideration, because the contract did not require Lemke to
do anything.
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No(s). 99-1490
STANDARD OF REVIEW
¶7                                                                                      We will review the trial court’s findings of fact under the clearly
erroneous standard.    See  § 805.17(2), STATS.    However, the construction of a
written contract presents a question of law that we review de novo.   See Ondrasek
v. Tenneson, 158 Wis.2d 690, 694, 462 N.W.2d 915, 917 (Ct. App. 1990).   We
will  also  independently  determine  whether  the  settled  facts  establish  any
affirmative defenses, such as unconscionability, or accord and satisfaction.   See,
e.g., Zubek v. Edland,  228 Wis.2d  783,  788,  598 N.W.2d  273,  276  (Ct. App.
1999); Leasefirst v. Hartford Rexall Drugs, Inc., 168 Wis.2d 83, 89, 483 N.W.2d
585, 587 (Ct. App. 1992).
ANALYSIS
¶8                                                                                      It is well settled that a contract must include an offer, acceptance and
consideration to be valid.   See Gustafson v. Physicians Ins. Co. of Wisconsin, 223
Wis.2d 164, 173, 588 N.W.2d 363, 367 (Ct. App. 1998).   The offer and acceptance
require mutual expressions of assent.   See id.   Consideration exists when an intent
to be bound to the contract is evident.    See id.    Consideration may be either
executory (that is, yet to be given or performed), or executed (already given or
performed) at the time the contract is formed.    See  17 C.J.S. Contracts  § 92
(1999).   In Hooper v. O.M. Corwin Co., the supreme court stated:
Where one voluntarily accepts and avails himself of the
benefit of services when he has the option to accept or
reject them, a promise to pay for them may be inferred; and
standing  by  and  seeing  services  performed  which  will
accrue to one’s benefit, knowing that they are performed in
expectation that they will be paid for at a given rate, may
fairly be treated as evidence of an agreement to pay for
them at that rate.
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No(s). 99-1490
Hooper v. O.M. Corwin Co., 199 Wis. 139, 144-45, 225 N.W. 822, 824 (1929);
see also Silverthorn v. Wylie,  96 Wis.  69,  71 N.W.  107  (1897)  (holding that
services previously performed constitute good consideration for a promise to pay
for those services).
¶9                                                                                       Here,  the  evidence  was  undisputed  that  Arrowood  approached
Lemke  and  promised  to  pay him one-half  of  the  profits of  his  new  trucking
business  in  exchange  for  Lemke’s  assistance  in  getting  the  business  started.
Lemke orally consented and performed his part of the bargain.   Thus, Arrowood’s
contention that the plain language of the contract required Arrowood to perform
start-up services for free is disingenuous at best.   Rather, we conclude that at the
time the parties entered into the written contract, Arrowood’s promise to pay
Lemke $400 a month (including a $200 rental payment), or half of the profits for a
renewable  term  of  three  years,  was  supported  by  the  executed  consideration
already given by Lemke.   The provision in the contract that Lemke would perform
the start-up services “without pay” meant no more than that he would not be paid
an hourly wage for those services.    Instead, he was to receive one-half of the
profits of M&G Trucking, or at least $400 per month including rental payments
for three years, as specified in paragraph three in the contract.
¶10    We next consider whether this agreement was so unfair to Arrowood
as to be unenforceable.   An otherwise valid contract is not enforceable if it is
unconscionable.    A  contract  is  “unconscionable  when  no  decent,  fair-minded
person would view the result of its enforcement without being possessed of a
profound sense of injustice.”   Foursquare Properties Joint Venture I v. Johnny’s
Loaf & Stein, Ltd., 116 Wis.2d 679, 681, 343 N.W.2d 126, 127 (Ct. App. 1983).
In  order  to  find  unconscionability,  a  court  must  find  both  substantive  and
procedural unconscionability.   See Leasefirst, 168 Wis.2d at 89-90, 483 N.W.2d at
6




No(s). 99-1490
587-88.                                                                                   Substantive  unconscionability  means  the  terms  of  the  contract
unreasonably favor one of the parties.   See Discount Fabric House of Racine,
Inc. v. Wisconsin Tel. Co., 117 Wis.2d 587, 602, 345 N.W.2d 417, 425 (1984).
Procedural unconscionability results from inequalities between the parties as to
age, intelligence, business acumen and relative bargaining power.   See id.
¶11    The  record  does  not  establish  the  contract  was  substantively
unconscionable.   First of all, Lemke performed approximately 200 unpaid hours of
work for Arrowood.   At his usual rate of $35 an hour, that time would be worth
$7,000.   But Lemke gave Arrowood more than the benefit of his time.   He also
gave him the benefit of his expertise and his prior business contacts.   In addition,
the arrangement allowed Arrowood to get up and running without an outlay of
capital which he apparently did not have.   In exchange, Arrowood promised to pay
at  least                                                                                 $400  a  month  (including  $200  per  month  toward  the  lease  of  office
equipment), or $14,400 over a period of three years.   This was not so unreasonable
as to be viewed as profoundly unjust.
¶12    Furthermore,  the  incentive  of  shared  profits  could  well  have
encouraged Lemke to provide Arrowood with advice and computer services at the
reduced rate of $8 an hour throughout the first three-year term of the contract, and
thus might have justified extending the contract.   The fact that Lemke provided
only  limited  services  after  the  execution  of  the  contract  does  not  make  the
automatic extension provision unconscionable, because either party could cancel
the extension within six months but not less than sixty days from the end of the
first three-year term, and the parties could mutually agree to terminate the contract
at any time.   The fact that Arrowood may have failed to exercise his right to cancel
the extension after it became clear that Lemke was providing no further benefit to
him does not make the contract itself unconscionable.   Because we conclude the
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No(s). 99-1490
contract was  not substantively unconscionable,  we  need  not consider  whether
there was any procedural unconscionability in the parties’ positions.
¶13    Having determined the existence of a valid contract, we turn to the
question of whether the record supports any of Arrowood’s affirmative defenses.
We first note that the only defense to the contract argued in the response brief is
accord and satisfaction.   This is also the only defense which was fully developed
before  the  trial  court,  although  others  were  mentioned  in  the  answer  to  the
complaint.    We  therefore  deem  any  other  affirmative  defenses  to  have  been
abandoned.    See Cynthia E. v. La Crosse County Human Services Dept.,  172
Wis.2d 218, 232-33, 493 N.W.2d 56, 63 (1992) (Holding that the proper way for a
respondent to raise an issue which would support a lower court decision, but
which  was  not  addressed  by  the  lower  court  because  it  found  another  issue
dispositive, is to assert and fully discuss the issue in the appellate brief.   Otherwise
the reviewing court has discretion to address the issue, deem it waived, or remand
it to the lower court.); Goossen v. Estate of Standaert, 189 Wis.2d 237, 252, 525
N.W.2d 314, 320 (Ct. App. 1994) (holding that we need not address arguments
which are not developed on appeal).
¶14    An  agreement  between  parties  to  discharge  an  existing  disputed
claim is termed accord and satisfaction.   See Flambeau Prods. Corp. v. Honeywell
Info. Sys. Inc., 116 Wis.2d 95, 112, 341 N.W.2d 655, 664 (1984).   Like other
contracts, it requires an offer, an acceptance and consideration.   See id.   The rule
of accord and satisfaction provides that if a creditor cashes a check from a debtor
which  has  been  offered  as  full  payment  for  a  disputed  claim,  the  creditor  is
deemed to have accepted the debtor’s conditional offer of full payment for the
entire claim notwithstanding any reservations by the creditor.   See id. at 101, 341
N.W.2d at 658.   Thus, a creditor’s act of cashing the check discharges the entire
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No(s). 99-1490
debt, even if the creditor objects to the amount either verbally or in writing.   See
Butler v. Kocisko,  166 Wis.2d  212,  219,  479 N.W.2d  208,  211-12  (Ct. App.
1991).
¶15    In order for a court to find a valid accord and satisfaction:                      (1) there
must  be  a  good  faith  dispute  about  a  debt;  and  (2)  the  creditor  must  have
reasonable notice that the tendered payment is intended to be in full satisfaction of
the debt.   See Flambeau, 116 Wis.2d at 111, 341 N.W.2d at 663.                           “The debtor’s
mere refusal to pay the full claim does not make it a disputed claim … [because] a
part payment furnishes no consideration for relinquishing the balance of the debt.”
Id. at 113-114, 341 N.W.2d at 664.
¶16    Here, there was a factual dispute, unresolved by the trial court, as to
whether  Arrowood  told  Lemke  that  he  considered  the                                 $5,200  payment  as
satisfying all obligations, or only asked him whether it would do so.   However,
there was no dispute that $5,200 was the fair value of the equipment which Lemke
transferred  to  Arrowood  upon  receipt  of  the  payment.    Nor  was  there  any
testimony that the amount of the profits to be divided was in doubt at the time the
payment was tendered.   Arrowood himself testified that he wished to be relieved
of his obligations under the contract because he was “financially strapped,” not
because  he  disputed  the  amount  owed.    Thus,  we  see  no  factual  basis  for
Arrowood to argue that Lemke had a good-faith dispute as to the amount of
Arrowood’s  obligation,  and  we  see  no  consideration  for  Lemke  to  release
Arrowood from the profits agreement.    We therefore conclude that Arrowood
failed to establish accord and satisfaction.
¶17    The trial court determined that there was no evidentiary basis on
which to award damages.   However, the contract provided for a minimum $400
9




No(s). 99-1490
monthly payment, out of which the parties agreed $200 was actually designated
for equipment rental.   It was undisputed that Arrowood did not pay any amount,
aside from the lease payments and for computer services performed after the start-
up period, and that neither party cancelled the automatic extension within the
specified period.   Therefore, we have no difficulty concluding, as a matter of law,
that Lemke has at least proven damages in the amount of $200 per month for six
years.
¶18    Lemke argues that he is entitled to considerably more under the
alternate measure of damages in the contract, based upon his calculations of M&G
Trucking’s profits during the six years following the effective date of the contract.
His calculations, however, include a number of questionable items.   Because there
is no factual dispute in the record as to the amount involved in each category
Lemke claimed should be included in the profit calculation, we will consider, as a
matter  of  law,  which  of  the  categories  should  properly  be  used  to  measure
damages under the contract.
¶19    First,  Lemke  would  add  the  profits  from  a  spin-off  brokerage
company, M&G Logistics, to those of M&G Trucking.   We see nothing in the
contract which would require or permit that.   The contract entitles Lemke to an
amount calculated upon the profits, plus certain non-allowed expenses, of M&G
Trucking alone.
¶20    Next, Lemke claims that the trailer lease payments should be added
back into the profits calculation, based on his belief that M&G Trucking had
options to  buy the  equipment.    However,  Lemke  did not offer  any of  M&G
Trucking’s  actual  lease  agreements  into  evidence  to  support  his  theory,  and
Arrowood testified that M&G Trucking did not have any options to most of the
10




No(s). 99-1490
trailers.   Lemke has not specified the amount of the single lease which may have
included  a  purchase  option.    Thus,  there  is  nothing  in  the  record  to  support
including the full amount of the trailer lease payments in the profit calculations.
¶21    Lemke contends that certain capital gains should be added back into
the  profit  calculation  for  the  years                                                   1993  and  1996.    However,  there  was  no
testimony to explain the source of these capital gains.   Therefore, no reasonable
fact finder could conclude with reasonable certainty that the capital gains should
have been added to the profits.
¶22    Lemke also appears to argue that amounts deducted  from M&G
Trucking’s gains in  1992 and  1994 for equipment purchases should have been
claimed as depreciation deductions under § 179 of the Internal Revenue Code, and
should thus be added back into the profit calculation as depreciation.   However, it
does not appear that the purchase amounts were actually claimed as depreciation
deductions, and the person who prepared the tax returns for M&G Trucking did
not testify.   Therefore, no reasonable fact finder could conclude with reasonable
certainty that equipment purchase amounts should have been included in the profit
calculations.
¶23    The only categories which clearly should have been included in the
profit  calculations  according  to  the  contract  were  M&G  Trucking’s  annual
income, its annual depreciation deductions, and the wages and other amounts paid
directly to or for the benefit of Arrowood family members.
¶24    In 1992, M&G Trucking showed a net operating loss of $11,487 on
its  tax  returns.    Adding  back  in                                                      $6,530  which  M&G  Trucking  claimed  in
depreciation, the company still had no profit.   Therefore, Lemke was entitled to
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No(s). 99-1490
the amount of  $200 per month for the seven-and-a-half-month period between
May 18, 1992 and December 31, 1992, or $1,500.
¶25    Following  an  audit,  M&G  Trucking’s  1993  tax  returns  showed
income of  $2,229.   Adding  $5,382.50 which M&G Trucking paid in wages to
Arrowood’s wife, and $600 for Arrowood’s rent, Lemke was entitled to half of
$8,211.50, or $4,105.75 for 1993.
¶26    In  1994, M&G Trucking showed a net operating loss of  $3,211.
Adding $21,530 paid in wages to Arrowood family members, $2,541 in interest
paid to Arrowood, and $7,200 for Arrowood’s rent, Lemke was entitled to half of
$28,060, or $14,030 for 1994.
¶27    In  1995, M&G Trucking showed income of  $5,066.    In addition,
M&G Trucking paid $39,184.60 in wages to Arrowood family members, $4,598
in interest to Arrowood, and $7,200 for Arrowood’s rent.   Lemke was therefore
entitled to $10,509.11 for the first four-and-a-half months of  1995.   That totals
$30,144.86 for the first three years of the contract.
¶28    Lemke’s half  of  the  profits amounted to  $17,515.19 for  the  last
seven-and-a-half months of 1995.   In 1996, M&G Trucking showed income in the
amount of $5,321.   In addition, M&G Trucking paid Arrowood family members
$39,184.60 in wages, and paid Arrowood  $399 in interest and  $8,100 for rent.
Lemke was therefore entitled to $26,502.30 for 1996.
¶29    Lemke offered no basis on which to calculate the profits for 1997 or
1998 with reasonable certainty.   Therefore, he did not prove he was entitled to
more than $200 per month for 1997 and the first four-and-a-half months of 1998,
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No(s). 99-1490
or $3,300.   That adds up to $47,317.49 for the second three-year period, and total
damages in the amount of $77,462.35.
¶30    The trial court is directed to enter judgment for that amount, plus the
appropriate costs, to Lemke upon remand.
By the Court.—Order reversed and cause remanded with directions.
This opinion will not be published.  See RULE 809.23(1)(b)5, STATS.
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