Texas Horse Lawyer & Attorney : Alison Rowe Law Firm : Equine Legal Matters, Racing, Thoroughbreds : Dallas, Bryan, Texas

An attorney called me last week to ask what her client, a trainer, should do about a prospective buyer who had picked up a horse from the trainer to "try out" but failed to bring the horse back after the trial period.  The trainer had been hired by the horse's owner to find a buyer for the horse.  After months of trying to make contact with the prospective buyer, the trainer finally made contact to learn that the horse had allegedly died of colic while in the prospective buyer's care.  There were no written agreements between the owner and trainer or owner/trainer and prospective buyer.

The first thing I asked was whether they called the police or sheriff when the horse was not returned.  In potential theft situations, it is always advisable to call law enforcement and get a copy of their report.  I also suggested a bit of investigative work to determine if the horse was, in fact, dead.  They had called the vet the prospective buyer usually uses, but the vet had no record of seeing the horse.  I suggested that they send a letter to the prospective buyer asking for proof that the animal was euthanized and asking him to pay the asking price for the horse.  The next step was to file suit if he did not pay (I suggested that she make the trainer and owner joint plaintiffs).

Under Texas law, the trainer and owner in this situation have a colorable claim for conversion and theft under the Texas Theft Liability Act (the "TTLA") against the potential buyer.  People with ownership or possessory rights have standing on both claims. And assuming the trainer spent money to take care of the horse while in her care and was going to get a commission on the sale, the damages element is also satisfied as to the trainer.  Attorneys’ fees and costs are recoverable by the prevailing party under the TTLA.

Is the trainer liable to the owner in this situation?  The trainer would only be liable to the owner under the “principal-agent” theory if the trainer acted without actual authority when she gave the horse to the prospective buyer to try out.

What's the lesson here?  The trainer and owner would have been in a better position if they had obtained a written agreement with the prospective buyer containing a "risk of loss" provision, whereby the prospective buyer would agree to pay the owner if the horse died or was injured in the prospective buyer's care.  The trainer could have also required the prospective buyers to make payment in escrow for the horse, and agreed to return the money if and when the horse was returned.

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It pays to get your horse sale agreements in writing.  Both buyers and sellers should pay careful attention to the "warranties" section of any agreement. 

The Equine Law & Business Letter reports that a federal court in Arkansas ordered a seller to pay almost $100,000 in damages for breaching warranties in connection with the sale of 30 horses.

The court's opinion states that the owner of a riding camp in Colorado contracted with a rancher in Arkansas for the purchase of 30 trail riding horses that would be suitable for inexperienced riders and children.  The camp operator reached an oral agreement with the rancher that was later reduced to writing.  The written contract provided for the rancher to deliver 30 horses, all geldings, to the camp at a total cost of $30,000, and that the horses would be in excellent condition and trained as trail horses.

According to the opinion, all but four of the horses that were delivered were either unsuitably trained, too young (25 of the horses were 2 years old and one of the horses was 17 months old), or stallions.  Allegedly, only 2 of the 30 horses were suitable for trail riding.  The camp operator ended up selling 22 of the unsuitable horses, and one of the horses died.  She sued the rancher for breach of warranties, breach of contract, deceptive trade practices, fraud and deceit.

After a two-day bench trial, the court found in favor of the camp operator.  Specifically, the court concluded that at the time the contract was formed, the rancher "knew of the particular purpose for which the horses were required.  He knew that [the camp operator] was relying on his skill and judgment to select and furnish suitable horses."  Because the implied warranties of merchantability and suitability for a given purpose were not excluded from the written contract, the court found that the rancher breached both warranties.  

The court awarded the camp operator $9,914.61 for her net loss on the sales transaction, plus $3,276.60 for incidental damages (including transportation, wormer and veterinary expenses).  The camp was also awarded $71,700 in lost profits attributable to not having enough horses to operate the business at full capacity for one season.    Lost profits attributable to later years were disallowed because the court reasoned that one year provided the camp operator "ample time to buy horses."

The case is Manula, et al v. Wheat, No. 4:06CV01107JLH, in the U.S. District Court for the Eastern District of Arkansas, Western Division, October 5, 2007.

For more information, see the November-December 2007 issue of Equine Law & Business Letter.

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