Super Wings Int'l, Ltd. v. J. Lloyd Int'l, Inc.

• Decision Date: 17 December 2012
• Docket Number: No. 12–1717.,12–1717.
• Citation: 701 F.3d 870
• Parties: SUPER WINGS INTERNATIONAL, LTD., Plaintiff–Appellee v. J. LLOYD INTERNATIONAL, INC., Intervenor below–Appellant Jody L. Keener, Defendant–Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

701 F.3d 870

SUPER WINGS INTERNATIONAL, LTD., Plaintiff–Appellee

v. J. LLOYD INTERNATIONAL, INC., Intervenor below–AppellantJody L. Keener, Defendant–Appellant.

No. 12–1717.

United States Court of Appeals, Eighth Circuit.

Submitted: Nov. 15, 2012.

Filed: Dec. 17, 2012.

Michael Kevin Lahammer, Robert F. Wilson, Cedar Rapids, IA, for appellant.

Mark A. Roberts, Dawn Marie Gibson, Cedar Rapids, IA, for appellee.

Before MURPHY, BENTON, and SHEPHERD, Circuit Judges.

MURPHY, Circuit Judge.

Super Wings International, Ltd. (Super Wings) sued Jody Keener for failing to pay on a promissory note. Keener asserted that he did not have to pay because Super Wings had breached an agreement it had with Keener's company, J. Lloyd International, Inc. (JLI). JLI intervened, and the case was tried to the court. The district court ¹ ruled that Super Wings had fulfilled its contractual obligations to JLI, that Keener was liable for failing to pay on his note, and that JLI's claim against Super Wings should be dismissed. Keener and JLI appeal. We affirm.

Super Wings is a trading and marketing company active in the toy industry. It is based in Hong Kong, and its owner Tim Yip also owns other companies which manufacture toys and the mold and tooling equipment used to make them. Super Wings receives purchase orders from customers, and then contracts with Chinese factories to manufacture the requested items. It also markets other toys made in China. JLI is an American wholesaler and marketer of toys founded by Jody Keener. Keener met Yip in the mid 1990s when the latter was associated with Toy Zone, another toy wholesale and marketing company. In 2006 JLI purchased a number of Toy Zone's assets in China, including many of its molds and tools. Around that time Wai Har Yip, Tim Yip's older sister, became a 50% owner of JLI. Wai Har Yip is also known as Dora Yip.

JLI began purchasing toys and equipment directly from Super Wings in 2006. After JLI submitted purchase orders to it, Super Wings contracted with Chinese factories to manufacture the requested items. JLI was the owner of the molds and tooling used in the Chinese factories making its toys, but that equipment was stored by Super Wings when not in use. When the toys were finished, Super Wings transferred them to JLI which sold them to retailers. From 2006 to 2008, JLI bought over $4 million worth of toys and equipment from Super Wings, but Tim Yip testified that he remembered JLI paying only $300,000 of the amount owed Super Wings. Keener testified that by 2008 he “wanted to get out of the relationship” with Super Wings.

To resolve their differences Super Wings and JLI entered into an agreement on December 30, 2008. They agreed that JLI owed Super Wings approximately $4.5 million “for manufacturing various toys, molds and other processes” and that Super Wings would discharge JLI's debt in exchange for the execution of two promissory notes attached to the agreement. One of the notes was for $2 million plus interest and was to be signed by Keener, and the second note was for about $2.5 million plus interest and was to be signed by Dora Yip. Keener and Dora Yip signed their respective notes, making them personally liable for the amounts due. The agreement between Super Wings and JLI also stated that Super Wings was “in possession of certain molds and tooling” owned by JLI, that Super Wings would “complete all work in progress,” and that it would “release [JLI's] molds and tooling to a party authorized by [JLI] to receive same.” The agreement did not define the term “release” or detail how JLI's property would be released.

At the time of this agreement there was manufacturing work in progress on one particular type of toy, and production was completed on it by the end of July 2009. Super Wings shipped the finished toys and associated molds and tooling to JLI in the United States, and JLI paid the shipping cost. At JLI's direction its agent also picked up other molds and tooling in Super Wings' possession, first in March 2009 and then again in July of that year. Even after these transfers, Super Wings was still in possession of over 90% of JLI's molds and tooling. Thousands of pieces of equipment were stored in warehouses owned by Tim Yip. Since Super Wings had no interest in continuing to store JLI's property, it repeatedly asked JLI to retrieve it. Keener made the first six monthly payments on his promissory note from January to June 2009, but he did not make the one due in July 2009 or any thereafter.

Super Wings sued Keener in August 2009 for failing to pay on his note. Keener's defense to Super Wings' claim was that Super Wings had breached their December 2008 agreement by not releasing JLI's property and therefore he did not have to pay the amount due on his note. JLI moved to intervene as a third party plaintiff in...