Equine Law Blog

Are Limitations Periods in Mortality or Major Medical Policies Enforcable?

alison@alisonrowe.com (Alison Rowe) — Tue, 21 Oct 2008 10:00:00 -0600

Equine mortality and major medical insurance policies often contain a provision stipulating that any action or proceeding under the policy must be brought within a certain period of time, typically one year.

Absent a contractual provision to the contrary, the statute of limitations applicable to an action based in contract will apply to an action under an insurance policy (for example, an insurance coverage dispute).

Are contractual limitations periods in insurance policies enforceable? Generally, courts will enforce the limitations provisions unless they violate limitations-related statutory law in the state the policy was issued or delivered, or in the state where the law suit is brought. In rarer instances, courts have refused to enforce insurance policy limitations periods because they were judicially interpreted to be "unreasonable."

Statutory prohibitions. Some states have statutes voiding limitations periods that are shorter than a given period of time. Thus, the limitations-related statutes in the state in which you are seeking to enforce your policy must be consulted to determine the applicability of a given provision. Under Texas law, any contractual limitations period is void if it is shorter than two (2) years. See Texas Civil Practice & Remedies Code, Section 16.070(a). In Maryland, an insurance or surety contract cannot set a shorter time to bring an action under the contract than required by the state where the insurance contract is issued or delivered. See Section 12-104 of the Maryland Insurance Code. Maryland has a 3 year statue of limitations for contract actions. Thus, a one-year contractual limitations period in an equine insurance policy would be void in Texas and Maryland. Absent such statutory prohibitions, however, the contractual limitations period in the insurance contract will be enforced.

Does the limitations period in the policy cover my tort-related claim of "bad faith" denial of coverage or "unreasonable delay"? Probably. Many insured litigants argue that their tort claims such as bad faith are not covered under the contractual limitations period because the tort claim is not a "claim under the policy." Although courts have entertained (and sometimes agreed with) this argument, according to insurance fraud lawyer Rick Hammond, the weight of the cases tend to enforce the statutory limitations period for all claims related to the policy. Of course, the contractual limitations period will not apply to any claim if it is void under state law, as discussed above.

Does a Bank's Prior-Filed Security Interest Have Priority Over a Stableman's Lien?

alison@alisonrowe.com (Alison Rowe) — Tue, 14 Oct 2008 10:00:00 -0600

No. In states that have adopted the Uniform Commercial Code (UCC), courts will probably hold that the possessory stableman's lien is superior, even if the bank's UCC Financing Statement was filed before the stableman took possession.

When Does the Conflicting Lien Situation Arise? If someone borrows money to buy a horse or horses, the bank will often require the borrower to sign a security agreement pledging the horse(s) as collateral on the note. When the borrower stops making payments on the loan, the bank normally will repossess the horses and sell them to foreclose on the note. In some instances, when a borrower stops paying the bank, they also stop paying the boarding facility that is taking care of their horses. The nonpayment of board gives the boarding facility a statutory stableman's lien on the horse(s) as long as the boarding facility maintains possession. Let's assume the bank's lien was first in time--i.e. the bank lent the purchase money to the owner and filed a UCC Financing Statement before the boarding facility took possession of the horses. The question becomes, who is entitled to the first lien on the horses...the bank or the stableman? Also, is the bank entitled to come onto the boarding facility's property and repossess the horses?

Under Section 9.333 of the UCC, the Possessory Lien Has Priority. Section 9.333 and its Official Comment under the Texas version of the UCC states that "the possessory lien has priority over a security interest unless the possessory lien is created by a statute that expressly provides otherwise...the possessory lien takes priority, even if the statute has been construed judicially to make the possessory lien subordinate." This means the bank's lien, even if prior filed, is subordinate to the stableman's lien.

WARNING--Courts May Follow Old Cases. Even though the UCC is clear on this, a trial court in one of my cases found that the stableman's lien was subordinate to a bank's security interest. The court cited Blackford v. Ryan, 61 S.W. 161 (Tex. Civ. App. 1901)(holding that a bank's pre-existing security interest is superior to an agister's lien when a horse was placed in a stable without the bank's knowledge). This case, as well as several other pre-1930 Texas cases with similar holdings, interpreted the common law agister's lien and not the statutory lien under Section 70.003 of the then non-existent Property Code. These cases were also decided before Texas adopted the UCC. But the cases are still presented in Texas Jurisprudence and other legal treatises as being current law. There are many cases that have found the possessory lien to be superior when it comes to garagemen keeping automobiles under Section 70.003, but no Texas cases involving stablemen. Despite the current lack of appellate review on the issue, I think most courts will defer to the UCC and the car cases and hold that the stableman's lien is superior.

Do Horse Trainers Have a Lien on Horses they Train for Unpaid Training Fees?

alison@alisonrowe.com (Alison Rowe) — Tue, 07 Oct 2008 14:15:27 -0600

In most states, trainers do not have a statutory lien for unpaid training fees and other training-related expenses such as show entry fees and hauling. This means, unless a trainer has a written security agreement signed by the owner providing a lien on the horses in the event of nonpayment of training fees, the trainer cannot hold or sell the owner's horse when training fees remain unpaid. You need to check your state's statutes, however, as there are exceptions. Oklahoma's stableman's lien statute, for example, does include a lien for training services. You can find your state's lien statutes on Equine Law and Horsemanship Safety.

What if My State Has a Stableman's or Agister's Lien Statute but No Trainer's Lien? Currently, every state except Rhode Island has a stableman's or agister's lien statute. These statutes provide those who board, pasture, or stable the horses of another with a lien on the horse if charges related to the care of the horse are not paid. Charges related to the "care" typically include the monhtly board rate, supplements, wormer, vaccinations, farrier, and veterinary services paid or advanced by the boarding facility on behalf of the owner. The stableman's lien statutes do not create a lien for unpaid training fees unless training fees are included in the language of the statute. See Carney v. Wallen, 665 N.W.2d 439 (Iowa Ct. App. 2003)(holding that a trainer who provided training and did not also provide board could not obtain a stableman’s lien because training services do not pertain to actions or services performed in the course of acting as a stable keeper).

What if a Trainer Both Boards and Trains a Horse? In most states, a trainer who both boards and trains a horse has a lien on the horse for unpaid charges related to the care, but not the training fees or other training charges unrelated to the care (i.e. entry fees, hauling). See Davis v. Sewell, 696 S.W.2d 247, 248 (Tex. App.—Texarkana 1985, no writ)(holding that a person hired to both train and board horses had a lien arising from unpaid charges for the care). This means that if an owner is current on his board and care charges, a trainer must allow an owner to pick up his horse and cannot sell the horse to satisfy the unpaid training fees. If an owner is delinquent in both board and training, the trainer can hold the horse until board is paid, and sell the horse to satisfy the board bill but not the training bill.

What if a Trainer Has Been Boarding and Training a Horse, but There is No Boarding Agreement? Absent a contractual provision concerning remuneration, a stableman is entitled to the reasonable value of his services. O’Neal v. Knippa, 19 S.W. 1020 (Tex. 1892); Crenshaw v. Bishop, 143 S.W. 284 (Tex. Civ. App.—Fort Worth 1911). Thus, the amount of the lien in such circumstances would be the reasonable value of the boarding services in the area or county where they were provided. This will also depend on whether the service provided was stall board, pasture board, full care, etc.

Is a Horseowner Liable for Damages if a Horse Gets Loose?

alison@alisonrowe.com (Alison Rowe) — Wed, 21 May 2008 10:00:00 -0600

A gentleman recently told me that his stallion had gotten loose, gone onto his neighbor's unfenced property, and "worried" the neighbor's mares. The neighbor shot at the stallion with a shotgun, and stated that the police told him he was justified in doing so because the stallion was "trespassing on his property."

Is the stallion owner liable for property damage or injury to persons caused by his stallion? Generally speaking, not unless the stallion owner knowingly let the stallion roam free.

Important to this analysis is that Texas is, generally speaking, still an open range state. That is--livestock may still roam at large in Texas with two exceptions:

Public highways. The Texas Agriculture Code states "[a] person who owns or has responsibility for the control of a horse, mule, donkey, cow, bull, steer, hog, sheep, or goat may not knowingly permit the animal to traverse or roam at large, unattended, on the right-of-way of a highway." Tex. Agric. Code § 143.102 (Vernon 2004)(emphasis added). The statute defines a "highway" as "a U.S. highway or a state highway in this state, but does not include a numbered farm-to-market road." Id. at § 143.101. Therefore, U.S. and state highways in Texas are effectively considered closed ranged. Conversely, the 40,000-plus miles of farm-to-market roads in Texas are unaffected by this statute.
Stock Law Counties or Areas. Chapter 143 of the Agriculture Code permits local elections to adopt a law (a.k.a. "stock law"), where a person may not permit any animal of the class mentioned in the proclamation to run at large in the county or area in which the election was held. A typical stock law will prohibit horses, mules, donkeys, sheep, goats, and cattle from running at large.

As expressly provided by the Code, some counties in Texas have enacted county wide stock laws, yet others have chosen to elect stock laws only in certain precincts or areas within said county. Unfortunately, there is no statewide index that traces the counties or areas where stock laws have been passed.

Rather, the results of local stock law elections are recorded in the minutes of the county commissioners court for that specific county. Thus, an attorney may have to review several decades worth of commissioners court records in order to locate the results of a stock law election. However, many county clerks, especially those in predominately rural counties, are often able to direct individuals to the applicable stock law or laws for their respective counties. Another quick resource on whether or not you are in a stock law area is the county attorney for your county.

Going back to our fact pattern, even if our friend's stallion had escaped in a stock law county or area, our friend would not necessarily be liable for any injury or property damage caused by his stallion. "A violation of the statute requiring restraint of animals in stock law counties does not create a prima facie case for recovery so as to require the owner of livestock to prove an excuse or explanation for the animals' escape." Davis v. Massey, 324 S.W.2d 242, 243 (Tex. Civ. App.--Waco 1959, no writ). In other words, a knowing violation of the statute or an actual showing of negligence on the part of the stallion owner will generally be required for liability to attach. Also, in an open range counties, farmers and other landowners bear the responsibility to exclude (fence out) livestock. Thus, if the neighbor's property was in an open range area, keeping the stallion out would have been the neighbor's responsibility.

Can the neighbor shoot the stallion if he is "trespassing"? Probably not. In How to Deal With Trespassers On Your Property, we touched on when a landowner may shoot at a person who is trespassing. Lethal force against people is allowed in certain limited circumstances, such as the prevention of arson, burglary, or theft. There is not any such thing as criminal trespass on the part of a horse that would give occasion to use lethal force, because horses cannot know they are trespassing and thus cannot commit "trespass". Secondly, while the Texas Health & Safety Code allows landowners to shoot or kill dogs or coyotes that are posing a danger to their livestock, that statute does not apply to non-canine species.

The Statute of Limitations in Veterinary Malpractice Actions

alison@alisonrowe.com (Alison Rowe) — Tue, 13 May 2008 10:00:00 -0600

Veterinarians may have several legal defenses to claims of malpractice. One of the most important procedural defenses is that of the statute of limitations. A statute of limitations is a state law that puts a limit on the amount of time a plaintiff has to file a lawsuit, usually from the time the injury occurred or when he or she discovered the injury. If the statute of limitations runs out before the lawsuit is filed, then no legal action may be taken. Any attempt to do so will result in the judge dismissing the suit without hearing the merits of the claim. In order to "toll" the statute of limitations (i.e. make the limitations period stop running), the plaintiff must actually file suit. Demand letters sent to the vet or the verbal notification of a future claim do not act to toll the statute of limitations.

With veterinary malpractice cases for injury to or death of a horse, the applicable statute of limitations may be based on claims for injury to personal property in that state, as domestic animals are considered personal property of the owner. Those cases usually have a statute of limitations of four (4) years.

For states that include veterinarians under the list of professions covered by malpractice statutes, they may be based upon statutes that set time limits for malpractice. These statues of limitations are usually shorter, typically two (2) years.

For instance, Georgia law provides a two (2) year statute of limitations for medical malpractice actions. However, veterinarians are not included in the definition of malpractice actions, because those involve injuries to people only. Georgia has a four (4) year statute of limitations for injuries to personal property, which would arguably apply to a veterinary malpractice claim brought in Georgia.

Importantly, the manner in which a plaintiff pleads his or her claim (i.e., whether he or she claims common negligence or malpractice) may dictate the statute of limitations. If a negligence claim is not barred by limitations and a malpractice action is barred, a court would allow the negligence action to go forward and dismiss the malpractice action.

For more information on vet malpractice actions and the applicable statute of limitations, see Veterinarian Malpractice by Davis S. Favre.

Potential Law Suit Over Eight Belles?

alison@alisonrowe.com (Alison Rowe) — Wed, 07 May 2008 14:36:42 -0600

Several people have asked me if I thought there would be litigation over the death of Eight Belles after her second place finish at the 2008 Kentucky Derby on May 3. Although animal rights activists staged a protest at the office of the Kentucky Horse Racing Authority after the filly's death, I don't think there will be any litigation.

The filly's death did not seem to be caused by the negligence or wrongdoing of any person or entity.

What did cause Eight Belles to break both front ankles? According to the Wall Street Journal, Eight Belles' breakdown may have arisen from a variety of factors such as genetics, track surface, training methods, or medications. Interestingly, Eight Belles and 2006 Kentucky Derby winner Barbaro were both descendants of Northern Dancer, a 1950s Thoroughbred whose racing career was cut short by leg injuries.

What is being done in the horse racing industry to prevent future breakdowns? The Welfare and Safety of the Racehorse Summit, which first convened in 2006 after Barbaro's breakdown in the Preakness, met again in Lexington March 17-18, 2008. The Summit promulgated its recommendations to improve racehorse welfare, and those recommendations addressed the following issues:

Track Surfaces--including research and development of synthetic (Polytrack) surfaces
Catastrophic injuries
Racing Medication & Drug Testing Laboratories
Education--focusing on training methods
Regulation--to establish uniform regulation of medication and integrity issues
Solutions for unwanted Thoroughbreds
Promote genetic diversity of the Thoroughbred

If the Summit's recommendations are implemented, huge positive changes in the Thoroughbred racing industry could be realized. However, according to Dan Metzger, the President of the Thoroughbred Owners and Breeders Association, "miracles will not happen overnight."

Does a Veterinarian Have to Treat Your Horse in an Emergency?

alison@alisonrowe.com (Alison Rowe) — Tue, 06 May 2008 10:00:00 -0600

Someone recently asked me if he had a case against an equine surgery clinic that told his local vet during a telephone conversation to not send them the mare because they did not have room for her at the clinic. The mare died 4 hours later of colic complications, and the owner stated that she would have lived if the vet clinic had admitted her and performed colic surgery. The mare in that case was not a current patient of the clinic. The owner would not have a valid claim against the clinic in that case.

The decision of whether to accept an animal as a patient is at the sole discretion of a veterinarian. This rule is set forth in Article II.E. of the the Principles of Veterinary Medical Ethics of the American Veterinary Medical Association, which applies to all veterinarians in the United States. The Texas Rules of Professional Conduct for veterinarians codifies that rule for vets practicing in Texas. Therefore, even in emergency situations, vets do not have to take your horse if, for example, you cannot pay for the treatment or they simply do not have time to treat your horse.

For a vet to be potentially liable to a horse owner for injury or death of their horse, a veterinarian-client-patient relationship (VCPR) must first exist. The VCPR is established when all of the following conditions are met:

1) the vet has assumed responsibility for making clinical judgments regarding the health of the horse and the need for medical treatment, and the owner has agreed to follow the vet's instructions;
2) the vet has sufficient knowledge of the horse to initiate at least a preliminary diagnosis of the medical condition of the horse. This means that the veterinarian has recently seen and is personally acquainted with the keeping and care of the horse by virtue of an examination of the horse, or by medically appropriate and timely visits to the premises where the horse is kept; and
3) The vet is readily available, or has arranged for emergency coverage, for follow-up evaluation in the event of adverse reactions or the failure of the treatment regimen.
That said, Article II.F. of the Principles of Veterinary Medical Ethics does say that, in emergencies, vets have an ethical responsibility to provide essential services for animals when necessary to save life or relive suffering, subsequent to client agreement. This rule allows vets to arrange with colleagues to provide emergency services when they cannot be available to provide services. If a vet believes that they don't have the experience or equipment to manage and treat certain emergencies in the best manner, the vet may offer to expedite referral to vets qualified to provide the emergency services.
This ethical rule does not rise to a "cause of action" against a vet clinic if you are not a current client and they cannot take your horse in an emergency. Further, the rule's inclusion of the phrase "subsequent to client agreement" infers that vets may only have a duty to provide or help obtain emergency services for their clients (i.e. only after a VCPR is established).
Horse owners should keep handy the contact information of the closest emergency vets or clinics in their area and use them in a true emergency. If an emergency vet is not available, ask the veterinarian who normally treats your horse to give you a protocol of what to do in an emergency situation, and keep those instructions someplace you will be able to find them quickly in an emergency.

What if Potential Buyer Does Not Return Horse After Trial Period?

alison@alisonrowe.com (Alison Rowe) — Tue, 29 Apr 2008 10:00:00 -0600

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.

Should the Carriage Ride Industry in New York City be Banned?

alison@alisonrowe.com (Alison Rowe) — Tue, 22 Apr 2008 10:47:09 -0600

My brother-in-law, Adam Rowe, recently asked me what I thought about the ASPCA's and other activist groups' recent attempts to pass legislation that would ban horse-drawn carriage rides in New York City. The activists claim that the industry as whole should be banned because the horses are allegedly overworked and deprived of proper food, water, and shelter. If you go to the Carriage Horses-NYC blog, a site maintained by one such activist group, you see a woman standing next to a horse in harness and holding a heart-shaped sign bearing the slogan, "Give These Horses Their Freedom."

My first reaction to the activists' cause was, assuming at least some carriage operators treat their horses well, why would they want to ban the trade as a whole? The draft horses have a job and are being put to use, which in my mind is preferable to the dubious fate of the "unwanted horse", which many of these horses might become if they cannot be used for surrey rides. Due to the recent ban on horse slaughter in the U.S., many in the horse industry predict that unwanted horses will be now be euthanized and disposed of, or shipped to Mexico or Canada for slaughter. See USA Today article on subject. The activists (and many other horse lovers, myself included) would probably prefer that the carriage horses be released into vast green pastures to run free for the rest of their lives (which can be 30 years or longer). However, the activists trying to pass this legislation seem short on ideas on who will take care of the horses once they are "given their freedom."

Another thought is that the mistreatment of carriage horses is already illegal in New York. According to New York law (McKinney's Agriculture & Markets Law Sect. 353), a carriage driver is guilty of a Class A misdemeanor if he "overdrives, overloads, tortures or cruelly beats" a horse or allows another to do so. He is also liable if he deprives a horse of "necessary sustenance, food or drink," or neglects or refuses to furnish a horse such "sustenance, food, or drink". I assume that if a particular carriage driver is charged under this criminal statute, his business will not flourish for long.

Perhaps the most humane thing the activists can do is involve local law enforcement in the investigation of the carriage drivers whom they suspect are guilty of animal cruelty, and let the carriage operators who properly treat their horses continue to do business in peace.

Equine Business Plans

alison@alisonrowe.com (Alison Rowe) — Thu, 03 Apr 2008 12:55:15 -0600

Every horse business should have a written business plan. There are a couple of reasons for this. First, if your business is a start-up, the business plan will help you reduce financial risk by realistically assessing anticipated income and expenses before the business is launched. Second, a written and regularly-updated business plan will help you in the case of an audit by the IRS, especially if the IRS suspects that your horse business may actually be a "hobby" or that you did not actively participate in the management of the business. Finally, a written business plan, especially if attractively packaged, can help foster good business relationships with banks, creditors, and others in the horse industry who can either send you business or help you in some other way.

Since there is really no downside to have a written business plan, I suggest that every horse business (including businesses that have been operating for a while without a written business plan) keep an electronic and hard copy of a business plan that addresses the following items:

1) A summary of the business goals and objectives of the business;

2) An outline of how you will attain your business goals;

3) A list of the types of advisers you will consult (such as horse industry mentors, accountants, and attorneys);

4) How the business will be owned (i.e. through and entity such as an LLC, who all owns an interest in the business, the percentage interest each owner holds, etc.);

5) How the business will be financed (i.e. where you will obtain the initial capital needed to start up the business, and the amount needed);

6) Projected income and expenses for the next 6 months and year (be conservative...most business plans underestimate expenses and necessary capital; also, you should avoid projecting income and expenses further out than one year as these often become meaningless due to changing conditions and strategies);

7) The method(s) you will use to find and secure good clients (advertising, networking, shows, etc.).

There really is no "magic formula" for a good business plan, nor should it be set in stone. Your business is your dream, and your plan needs to set out your unique and individual vision and talents. Your business plan will act as a "road map" for your business to help you stay on course with your goals and avoid foreseeable hazards. It should be updated and revised at least once per year, if not more often.

To help you get started, see the attached Sample Equine Business Plan, to which you can add information to fit the needs of your particular horse business. As you can see, my sample is fairly basic. There are a lot of sample business plans you can pull up online, and most of those are pretty complex. One site that provides sample business plans is BPlans.com. Do not let the complexity of others' business plans intimidate you into not doing one at all. While more detail is better in some instances, do not put off doing a business plan just because you don't know your exact numbers or you see others putting pie graphs in their business plans. The key here is to have something in writing that you can add to and enhance as your business grows.

Race Horse Trainers "Guilty Until Proven Innocent"

alison@alisonrowe.com (Alison Rowe) — Fri, 14 Mar 2008 15:31:12 -0600

"Absolute insurer rules" and "trainer liability rules," common in horse racing and other equine sports, presume that trainers are responsible when their horses test positive for illegal substances. In effect, the rules make trainers guilty unless proven innocent.

The effect of this presumption is to shift the burden of proof from the governing body to the trainer, who must prove innocence by showing that he or she did not negligently administer a prohibited substance to the horse or did not negligently allow someone else to interfere with the horse. These rules can result in the imposition of a penalty against the trainer and/or the horse's owner without actual proof of guilt.

Courts have uniformly upheld the absolute insurer rules, despite the fact that they appear to violate the due process of law.

The New York Court of Appeals (the court of last resort in New York), held that "...the trainer responsibility rule is a practical and effective means of promoting these State interests--both in deterring violations and in exercising sanctions. The imposition of strict responsibility compels trainers to exercise a high degree of vigilance in guarding their horses and to report any illicit use of drugs, medications or other restricted substances by other individuals having access to their horses. Additionally, the rebuttable presumption of responsibility facilitates the very difficult enforcement of the restrictions on the use of drugs and other substances in horse racing. Indeed, it would be virtually impossible to regulate the administering of drugs to race horses if the trainers, the individuals primarily responsible for the care and condition of their horses, could not be held accountable for the illicit drugging of their horses or for the failure either to safeguard their horses against such drugging or to identify the person actually at fault. It is not surprising, therefore, that trainer responsibility rules have been upheld almost without exception, in other jurisdictions." Casse v. New York State Racing and Wagering Authority, 517 N.E.2d 1309, 1312 (N.Y. 1987). See also Allen v. Kentucky Horse Racing Authority, 136 S.W.3d 54 (KY App 2004); Fogt v. Ohio State Racing Commission, 210 N.E.2d 730 (Ohio Ct. App. 1965); Sandstrom v. California Horse Racing Board, 189 P. 2d 17 (Cal. 1948).

For detailed discussion of the application of agencies and organizations in the horse industry, see The Complete Equine Legal & Business Handbook by Milton C. Toby.

How to Deal with Trespassers on Your Property

alison@alisonrowe.com (Alison Rowe) — Thu, 06 Mar 2008 16:03:58 -0600

Landowners who run horse businesses on their land often run into situations in which an unwelcome person attempts to come onto their property. Sometimes the unwelcome party is someone who once boarded their horse with the property owner, but no longer has a business relationship with the property owner. In other instances, the trespasser may include a current boarder who has stopped paying the property owner the agreed amount, but still comes out to enjoy the facility as well as their horse without also bringing payment.

Except in special circumstances (mineral exploration, freshwater lakes and streams, easements, beaches, cemeteries) land owners do not have a legal obligation to let uninvited parties onto their land if it is privately-owned. In other words, the fact that a land owner is running an equine-related business on their land does not give uninvited or unauthorized persons the right to access the private land. Under Section 30.05 of the Texas Penal Code, a person commits criminal trespass if "he enters or remains on or in property of another without effective consent and he 1) had notice that the entry was forbidden; or 2) received notice to depart but failed to do so."

Below are some steps landowners can take to protect their property from trespassers before a trespass occurs:

1) Post a Sign on Your Property - In addition to the posted sign bearing the Chapter 87 equine liability statute, landowners should also post a "Private Property--No Trespassing" sign at a conspicuous place near the entrance of their property.

2) Immediately Notify A Former Guest That They Are No Longer Welcome - If someone who used to have permission to access your land is no longer welcome, give them notice, either orally or in writing, that they are no longer welcome on your property and if they attempt to access your property (other than to pay you and take their horse, if money is owed), you will call the sheriff.

3) Include a Trespass Provision in Your Contracts - If you require people who access your land to sign contracts, include a provision in the contract that your land is private property and you reserve the right to deny them and their guests access if they breach the contract, even if their horse, tack, or other belongings remain on your property;

4) Secure the Property - If you know a trespass is imminent, lock the gate or take other measures to prevent entry upon the land. Call the sheriff or local police if you're in the city limits and let them know a trespasser is trying to get onto your property.

If, despite these efforts, someone trespasses on your property, the best thing to do is to call the sheriff and let them handle the trespasser. If for some reason you cannot have law enforcement intervene, Texas law (Section 9.41 of the Texas Penal Code) allows you to use "reasonable force" to protect your property. Reasonable force includes any force that is not potentially lethal. This would probably include physically blocking the trespasser's entry onto the land and perhaps even showing the trespasser that you have a gun and are prepared to use it if warranted. However, as discussed below, an actual discharge of a firearm, unless clearly not aimed anywhere towards the trespasser, may expose the land owner to unwanted scrutiny by law enforcement.

When is a landowner allowed to shoot at a trespasser? According to Section 9.42 of the Texas Penal Code, a landowner can shoot at or use other deadly force against a trespasser if the landowner reasonably believes the land or property cannot be protected or recovered by any other means, or that the landowner himself would be exposed to substantial risk of death or serious bodily injury if the landowner does not use deadly force. A landowner can also shoot at or use other deadly force against a trespasser if the force is immediately necessary to prevent the trespasser's imminent commission of arson, burglary, robbery, aggravated robbery, theft during the nighttime or criminal mischief during the nighttime; or to prevent the trespasser who is fleeing immediately after committing one of those acts from escaping with the property. "Criminal mischief" includes "knowingly or intentionally damaging or destroying, tampering with or marking, inscribing slogans, drawing or painting on tangible property " of the property owner.

Using potentially dangerous measures to protect your property is not recommended in all cases, as it can expose a property owner to possible physical harm and also criminal prosecution if too much force is used. However, property owners should be aware of, and exercise, their right to protect their property under the proper circumstances.

Horse Seller Ordered to Pay Trail Riding Camp $100k in Damages

alison@alisonrowe.com (Alison Rowe) — Fri, 29 Feb 2008 16:48:40 -0600

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.

What Happens if Lien Foreclosure Sale Proceeds Not Enough?

alison@alisonrowe.com (Alison Rowe) — Tue, 19 Feb 2008 11:37:48 -0600

In many cases, the proceeds from a stock breeder's or stable keeper's lien foreclosure sale will not be enough to satisfy your debt. In those cases, you may sue the owner for the deficiency, if any.

The law suit may not be worth it, however, as you could end up spending more on legal fees than you are owed. For these reasons, I recommend that everyone who takes a horse to be boarded or bred obtain a written contract providing an agreement for the customer to pay for your services as well as the services of third parties for their horse's care while in your possession.

Ideally, the agreement would include either 1) credit card information from the customer and an agreement that it will be charged for your services; or 2) the customer’s agreement that you may sell their horse at a public or private sale without notice to them if their account is in arrears more than 30 days.

This is especially important for farriers and veterinarians, as Texas law does not provide them any statutory lien to secure payment for their services.

What is a "Public Sale" as Referenced in Texas Lien Statutes?

alison@alisonrowe.com (Alison Rowe) — Tue, 19 Feb 2008 11:33:02 -0600

The law is vague as to what, specifically, constitutes a “public sale” as referenced in the stock breeder’s and stable keeper’s lien statutes. This clearly would not include a sale by private treaty to a third party without the possibility of others bidding on the horse. If you are foreclosing on either the stock breeder’s or stable keeper’s lien, the safest thing to do is to put the horse, upon proper notice to the debtor, in a horse or livestock auction that is being held in your area. You could also hold your own auction, provided that you provide sufficient public notice (i.e. put information about your sale in the “notices” section of the local newspaper or on the designated area of the courthouse steps in your county) so that the public may show up to bid on the horse.

Transfer of Jockey Club Papers after Lien Foreclosure Sale

alison@alisonrowe.com (Alison Rowe) — Tue, 19 Feb 2008 11:25:32 -0600

When you sell a registered Thoroughbred in a valid foreclosure sale, you may or may not be able to obtain the Certificate of Foal Registration (i.e. the “Jockey Club papers”) from the original owner. In either case, pursuant to Rule 9 of the Jockey Club’s American Stud Book, you or the buyer must provide the Jockey Club with the following items in order to have the horses’ papers transferred to your name or the buyer’s name:

1) A check or money order payable to The Jockey Club covering the fee for Duplicate Certificate of Foal Registration;

2) A set of four color photographs of the horse (front, both sides, and rear views) clearly showing the color, and the markings (or lack of markings) on the head, legs and body;

3) A completed and signed Duplicate Certificate Form containing the written description of the markings on the horse, including the exact location of the head and neck cowlicks;

4) Proof of ownership of that specific horse (for example, a bill of sale or canceled check including the name or pedigree of the horse, date of sale and the name of the new owner);

5) An opinion from an attorney, indicating that the sale was conducted in accordance with the laws of the state; and

6) Any further evidence and assurances as The Jockey Club may require, such as genetic typing, parentage verification, or information regarding the circumstances and validity of the sale.

More information, including the American Stud Book rules discussed above, can be found on the Jockey Club’s website.

For instructions on transferring ownership of a registered Appaloosa, go to the APHA's website.

How to Enforce Texas Stock Breeder's Lien

alison@alisonrowe.com (Alison Rowe) — Tue, 19 Feb 2008 11:08:58 -0600

Fortunately, unlike many states, Texas does not require holders of stock breeder's liens to file suit or involve the courts in order to enforce their liens—provided the enforcement provisions in the statute are precisely followed.

If you own or stand a stallion and a mare owner does not pay for the breeding services, you have a stock breeder’s lien on the resulting foal (but not the mare) under Section 70.201 of the Texas Property Code. You may sell the foal in a public sale and apply the proceeds to the unpaid stallion fee and related service charges. Your lien remains in force for 10 months after the date the foal is born, but importantly, it cannot be enforced until 5 months after the date the foal is born.

Note: If you are in possession of the mare that was bred and the owner has not paid for board on the mare, you may also have a stable keeper’s lien on the mare and may enforce it as set forth in my previous blog entry, How to Enforce Texas Stable Keeper's Lien.

STEP 1

As soon as it becomes apparent that the mare owner is not going to pay for the breeding services, it is advisable (but not required) that you file a UCC Financing Statement putting the world on notice that you have a lien on the resulting foal (whether born or unborn at the time the debt accrues) for unpaid stallion service. The Financing Statement is best filed in both the county where you stand the stallion as well as with the Texas Secretary of State. Be sure to provide sufficient information in the Financing Statement to identify the foal (registered names and registration numbers of your stallion and the mare; date and place of stallion service, etc.) Instructions on filing the Financing Statement can be found at the Texas Secretary of State's website.

STEP 2

When the foal turns 5 months of age, send a notice of sale to the debtor. For a form of the notice of sale, click here.

STEP 3

Sell the foal at a public sale 30 days or more after you send the notice of sale referenced in Step 2.

Note: If you are not in possession of the foal when it becomes 5 months of age, you may need to take your notice of sale and UCC Financing Statement to the sheriff’s office of the county where the foal is located and have them help you seize the foal so it can be sold.

How to Enforce Texas Stable Keeper's Lien

alison@alisonrowe.com (Alison Rowe) — Mon, 18 Feb 2008 18:05:38 -0600

Fortunately, unlike many states, Texas does not require lien holders to file suit or involve the courts in order to enforce the stable keeper's lien—provided the enforcement provisions in the statute are precisely followed.

If you are boarding someone else’s horse, the board bill is 60 days or more past due, and you still have possession of the horse, you have an enforceable stable keeper’s lien under Section 70.003 of the Texas Property Code and may sell the horse in a public sale to satisfy the debt. In order to enforce a stable keeper’s lien, you must follow the following steps:

STEP 1

If the owner’s residence is not in Texas or not known, you do not need to send the notices set forth in Step 1 and Step 2 below. You may sell the horse at a public sale without notice to the owner—provided the board bill is at least 60 days’ past due and you have possession of the horse. Still, it is advisable that you keep some proof that you billed the customer and they did not remit payment before proceeding with the sale.

If the owner’s residence is in Texas and known, you start the lien enforcement process by sending a demand for payment by certified mail and regular mail to the owner’s last known address. Form Demand Letter.

STEP 2

If the owner does not pay the amount owed before the 11th day after the date you sent the demand letter referenced above, send out a notice of sale by certified mail and regular mail to the owner’s last known address. Form Notice of Sale.

STEP 3

Sell the horse at a public sale 20 or more days after you send the notice referenced in Step 2.

Note: If you are fortunate enough to get more for the horse at auction than you are owed, you must pay the overage to the owner. If the owner has moved out of Texas or its residence is unknown, you must pay the overage to the county treasurer of the county in which you boarded the horse.

Remember—the stable keeper’s lien is a possessory lien. This means that if you give the horse back to the owner before the bill is paid, the stable keeper’s lien is, practically speaking, no longer enforceable. In that case, you will need to file suit against the debtor to collect the unpaid board. This is why it is essential to obtain a written board agreement from every customer that contains the date you started boarding the horse, sets forth your fee for board, and includes an agreement that your customer will pay out-of-pocket expenses for care such as worming, farrier, supplements, and vet work.

Legal Advice for Sellers at Horse Auctions

alison@alisonrowe.com (Alison Rowe) — Mon, 18 Feb 2008 17:47:19 -0600

1. Avoid Undisclosed Dual Agency Problems. Sellers should enter into written agreements with their consignors or other agents, and agree upon commissions, reserve prices, and how disputes will be handled. You should also get an agreement from the consignor that all commissions will be fully disclosed to you. If a bloodstock agent, trainer, or someone else acting on behalf of a buyer approaches you or your consignor and asks for a commission, do not pay it.

2. Avoid Turnback. The prospective buyer has the right to ask the consignor anything relative to the horse’s condition and ownership. Be truthful and straightforward in your answers to avoid problems. Read the Conditions of Sale with your consignor. If a buyer purchases your horse and it does not pass the post-sale veterinary exam within the give time frame (24 or 48 hours), if the problem with the horse one of the conditions warrantied in the Conditions of Sale, the buyer has the right to return the horse to you (otherwise known as “turnback”), and you will not be able to keep the sales proceeds.

To avoid turnback, it is advisable to negotiate with the buyer and reach a mutually-acceptable agreement. One strategy is to reduce the price of the horse, or offer to pay for surgery if the problem is operable. A consignor might also offer to give the buyer some compensation for the risk of surgery.

3. Bidding on Your Own Horse. Although some people view consigned bidding as unethical, the rules and the law clearly permit it. The practice of bidding on your own horse has also been approved by the Sales Integrity Program. Note, however that if you bid on your own horse and are the final bidder, you will remain the owner of the horse but still owe a commission to the sales company (generally 5% of the final bid).

Legal Tips for Purchasers at Horse Auctions

alison@alisonrowe.com (Alison Rowe) — Mon, 18 Feb 2008 17:42:37 -0600

You do not have to risk being the victim of fraud or other legal issues when you set out to buy a horse at auction. Listed below are some ways prospective buyers can protect their interests and their equine investments:

1. Choose the Right Agent. No license is required for bloodstock agents to conduct business. Therefore, literally anyone who wants to call themselves a bloodstock agent can do so. It is thus essential that you check references before enlisting a bloodstock agent. Any auction company issuing a catalog will be willing to offer names of trusted agents in the area. You can also screen agents through an advocate organization, such the Texas Thoroughbred Association, by requesting references. Finally, ask others in the industry about the reputation and character of your candidates. There will be reluctance on the part of many in the industry to make less than complimentary remarks about an individual. Instead, they may refer you to someone else or offer an evasive answer; which can provide you some clues.

2. Establish Agreement with Trainer or Other Advisor Before the Sale. Trainers or boarding farm managers often provide advice to buyers in selecting racing or breeding prospects. Once a sale is consummated, however, the buyer does not always guarantee that the trainer or breeding farm manager will have the opportunity to train or board the prospect. If you call upon a trainer or breeding farm manager to provide advice with respect to a racing or breeding prospect, you should provide, and follow through with, an agreement with such advisors before the sale as to what the compensation and/or boarding or training opportunity is implicit in the business arrangement with the advisor.

3. Avoid Undisclosed Dual Agency Problems. “Dual Agency” is defined by TOBA’s Sales Integrity Program as, “the practice of an agent accepting a commission from the buyer for purchasing/bidding on the horse on the buyer's behalf and also accepting any commission or other commercial benefit from any party involved with the selling/consigning of the same animal, without disclosing this.” The most common dual agency practice is a pre-arranged agreement between the agent for the buyer and the agent for the seller that establishes a secret price for a horse prior to the sale, and then bidding up the price and dividing any overage between the agent and the consignor. Avoid dual agency by getting a written agreement with your agent, or use the forms posted on the Sales Integrity Program website at: www.salesintegrity.org. Your agreement should include amount of commissions, and an agreement that the agent will fully disclose all commissions for every transaction.

4. Familiarize Yourself with Limited Warranties in Conditions of Sale. Major Thoroughbred auction companies recognize extenuating circumstances that allow buyers to return a horse if the horse has a condition or conditions of which the buyer was unaware at the time of purchase (“limited warranties”). The limited warranties are stated in the front of each catalog under “Conditions of Sale.” Some examples of conditions auction companies might warranty include: breathing problems, vision problems, pregnancy (if mare declared to be in foal), cribbing, and spinal ataxia (a/k/a “wobbler syndrome”) in yearlings or weanlings, and bone warranties.

The warranties in the sales conditions have a very strict time limit which expire at different times (either 24 or 48 hours) after the sale or upon removal from the grounds (whichever comes first).
Make sure you are aware of all the sales conditions and limited warranties for a particular auction prior to bidding on a horse, as you will be bound by the conditions of sale whether you have read them or not. You should also listen to all announcements made from the auction stand prior to the sale of the horse, as there are also some conditions and warranties that must be announced at the time of sale.

5. Know When Title and Risk Pass to You. Both title and risk pass to the winning bidder at the fall of the auctioneer’s hammer. The winning bidder becomes responsible for the horse and its actions at that moment. Horses must be removed from the sales grounds within 24 to 48 hours, depending on the sale. Taking possession of the horse constitutes delivery and acceptance. Under most conditions of sale, the purchaser’s right to rescind a sale pursuant to the warranties in the conditions of sale is prefaced upon veterinary examination occurring on the grounds. Consequently, it’s imperative that before moving the horse, a veterinarian determines that the horse does not have any conditions that would allow the sale to be rescinded under the conditions of sale.