March 2012

Are you thinking about buying a ranch through an informal seller finance deal? If so, beware.  Andalusian breeder Rancho Mi Hacienda and owner Gilda Arana learned the hard way the pitfalls of doing this type of deal “on the fly”.

Rancho thought it had an enforceable written agreement whereby Coy Lynn Owens and his wife Linda agreed to sell Rancho 126 acres of land in Hopkins County, Texas. After all, Rancho did have a letter signed by Coy Lynn memorializing the parties’ verbal agreement concerning the ranch sale. 

In reliance, Rancho transported its seventy-three Andalusian horses from California to Texas and moved them onto the property. Further, Rancho paid Coy Lynn $25,000 and gave the Owenses’ daughter an Andalusian horse of her choosing. Rancho also expended substantial sums on a log cabin, shelter for the horses, and utilities for the premises. It was Rancho’s understanding that the $25k and the horse constituted the down payment, and that an additional $200,000 was to be paid to the Owenses at the end of a five year term.

Photo:  a very majestic Andalusian mare

Around the time Rancho took possession of the property, Coy Lynn Owens went to federal prison for mail fraud. Linda filed for divorce soon after Coy Lynn was incarcerated. In an agreed divorce decree entered by the divorce court, Linda was awarded the realty in question and Coy Lynn was divested of any title to it. 

Shortly after the divorce decree was entered, Rancho sued Coy Lynn, Linda, and L&L Investments (a holding company) seeking, among other things, specific performance of the ranch sale agreement, and damages related to the horses such as vet bills, the cost of five horses who died, and lost earnings for one year’s breeding season.

Rancho had Coy Lynn served with the lawsuit at the prison. When Coy Lynn did not file an answer, Rancho took a default judgment against Coy Lynn and nonsuited Linda and L&L Investments.  After the jump, you’ll see why this was a costly mistake.

Rancho (apparently still in possession of the property) later tried to levy execution on the 126-acre tract to satisfy its judgment against Coy Lynn. In response, Linda obtained a judgment from a JP Court ordering Rancho evicted from the property.

Linda also filed suit in district court against Rancho seeking a declaratory judgment that, among other things, Linda was the sole owner of the property and that it was not subject to execution. The trial court and the Texarkana Court of Appeals agreed with Linda on these points.  The Court of Appeals held that because Rancho’s suit was filed after the divorce decree divested Coy Lynn of all interest in the property, it was no longer community property subject to execution on a judgment against Coy Lynn alone. 

In hindsight, Rancho probably realized that nonsuiting Linda was a terrible idea.  According to the Court:

Although Rancho’s suit originally included [Linda] as a defendant, it made the choice not to pursue an action against [Linda] and filed a nonsuit as it pertained to her, electing to pursue judgment only against [Coy Lynn], who was apparently perceived to be the low-hanging fruit.

Case informationRancho Mi Hacienda v. Bryant, 2012 WL 952853, No. 06-11-00080-CV (Tex. App.—Texarkana, Mar. 22, 2012). The full text of the opinion can be found here.

Happy Monday!  This picture was posted on Facebook this morning by cutting horse trainer Uwe Roeschmann.  I don’t know whose truck is pictured here, but if you are the owner…thanks for the laugh!

Last Friday, for the fourth or fifth time, I attended the annual Animal Law Institute.  The Institute is a CLE program put on by Animal Law Section of the State Bar of Texas.  It moves around each year, but this year it was at Texas Wesleyan School of Law here in Fort Worth.

You may be wondering, “what is animal law, and is equine law a part of animal law?” I have been practicing equine law for years, and I still don’t really know the answer. According to Wikipedia,

animal law is a combination of statutory and case law in which the nature—legal, social or biological—of nonhuman animals is an important factor. Animal law encompasses companion animals, wildlife, animals used in entertainment and animals raised for food and research. The emerging field of animal law is often analogized to the environmental law movement 30 years ago.

Most of the speakers at the Institutes I have attended in the past have seemed to generally focus on 1) animal rights/welfare issues; and 2) issues related to animal rescues and public shelters. 

My equine law practice, by way of contrast, is primarily focused on business issues. That said, I have advised several equine-related 501(c)(3) nonprofit organizations.

Rick and I at Will Rogers Equestrian Center with two of our animals. 

This year’s Institute covered a lot of animal welfare/rights issues, but it also added an overview of equine law by Dawn Reveley, and another presentation on vet malpractice defense into the mix.   Below is a recap:

  • Will Potter, a journalist from Washington, DC, discussed the Animal Enterprise Terrorism Act. This is a 2006 federal law with which I was not previously familiar. According to Potter, the law was pushed by animal industry groups and corporations to target animal rights protestors by labeling their activities as "terrorism".  Read more about it on Will Potter’s blog, Green is the New Red. To loosely quote Potter’s [very sound] advice to would-be animal rights protestors: “Come up with a plan and get organized before you stage your protest, so people won’t think you’re crazy!” 
  • Don Feare, an attorney from Arlington, Texas, shared some excellent information for attorneys who represent animal rescue groups. Some main points include (equine nonprofits, listen up!) 1) animal welfare groups should incorporate as a nonprofit corporation to limit liability; 2) liability insurance is a necessity, especially if the organization is doing public adoption events; and 3) adoption contracts should make clear when title to the animal passes to the new owner and should be signed by all adult members of the household at which the animal is being placed.
  • Scott Heiser, a Portland-based attorney with the Animal Legal Defense Fund, talked about how his nonprofit organization helps local prosecutors win animal cruelty cases (both through financing and by helping try cases). Heiser discussed the “business records” exception to the hearsay rule, as it applies to veterinary reports in criminal animal abuse cases. In general, vet reports are not admissible in lieu of testimony under the business records exception if the vet report was “prepared specifically for use at trial.”
  • Nicole Paquette, Texas Senior State Director with the Humane Society of the United States (HSUS) in Washington, DC, covered the new laws from 2011 Texas Legislature that the HSUS believes benefit animals. These bills include 1) HB 1451, the “Puppy Mill Bill”–requiring licensing and inspection of dog and cat breeders who maintain 11 or more female breeding animals; 2) HB 1103–“Responsible Pet Owner Classes” required for convicted animal abusers; and 3) HB 2471–the “Good Animal Samaritan Bill”, which limits civil liability of people who render aid to an injured or distressed animal.
  • Dr. Don Ferrill (remember him from this post?) talked about how to successfully defend veterinarians in malpractice and negligence cases. His advice to plaintiffs: “Always pay your vet bill before you sue your vet.”

Watch this website for information on next year’s Animal Law Institute.

In general, a defendant can only be immune from suit in a Texas horse-related injury case if the plaintiff was a “participant in a farm animal activity or livestock show” when the injuries occurred.

Chapter 87 of the Texas Civil Practice & Remedies Code (the “Act”) was amended in 2011 to, among other things, include farm animals other than equines. However, the “participant” requirement did not change in 2011.  Neither the former nor the current version of the Act specifically states whether or not employees of equine activity sponsors are considered “participants in a farm animal activity or livestock show” under the Act.

The 1st Court of Appeals in Houston is the only Texas court to have taken up this issue (Dodge v. Durdin, 2005).  In that case, Deborah Dodge sued her employers, Magestic Moments Stables, et al, after a horse kicked her in the abdomen as she was administering paste-wormer at the direction of her employer. Dodge claimed that she incurred $4,000 in medical bills as a result of her injuries, and that her employers’ negligence was the proximate cause of her damages. 

Majestic Moments claimed that Dodge’s suit was barred by the Act.  The trial court agreed, and dismissed the case.  On appeal, the 1st Court of Appeals disagreed that the Act applied to an employer / employee relationship.

This warning sign should not be a "news flash" to anyone.

Citing its review of legislative intent, together with the duties assigned to Texas employers under the Texas Labor Code, the 1st Court of Appeals held that, “the Equine Act applies to consumers and not to employees and that Dodge is therefore not a ‘participant’ under the Equine Act.” 

Workers’ compensation did not cover Dodge’s alleged injures. Unlike employers in many states, Texas employers are able to opt out of the workers’ compensation system. For more information, see this post.

In Dodge, the 1st Court of Appeals noted that the only other Texas court to have addressed the definition of “participant” was the Corpus Christi Court of Appeals in Johnson v. Smith (2002). In that case, the Corpus Christi court acknowledged that an independent contractor—not an employee—in charge of breeding and handling stallions was a participant under the Act.  The 1st Court of Appeals distinguished the Johnson case from the Dodge case on its facts.

Neither the Dodge nor the Johnson case were appealed to the Supreme Court. 

The Texas Supreme Court has not yet addressed whether or not an employee or independent contractor who is injured while working with horses on their employer’s premises is a “participant” for purposes of the Act.  Until the Supreme Court takes up this issue or the Legislature clarifies it, this issue continues to be somewhat unsettled in Texas. Texas equine businesses should therefore not rely upon the Act to provide immunity from suits brought by employees or independent contractors. 

Businesses can take several steps to minimize liability risk in this area, including 1) procuring insurance to cover employee or independent contractor injuries; 2) having employees or independent contractors sign liability releases; and 3) forming limited liability entities through which employees and independent contractors are retained.

A special thank you to reader Lois Mermelstein, Esq. of Austin, Texas for submitting this topic suggestion.

Here’s another case that demonstrates the importance of filing suit in the correct jurisdiction.

Remember Becky George’s APHA defamation case that was dismissed due to lack of personal jurisdiction? George was represented by Thomas Corea of the Corea Law Firm, PLLC in that matter. 

Thomas Corea represented John Anthony “Tony” Burris in another lawsuit involving an allegedly defamatory letter that defendants Pamela J. Bilek, the Bilek Family Trust, and Bilek Quarter Horses, LLC sent to the American Quarter Horse Association (“AQHA”).  The letter at issue complained of Burris’s activity as a judge for the AQHA.

Burris’s suit was originally filed in the 40th District Court of Ellis County, Texas. The Ellis County court dismissed Burris’s suit after determining that the State of Texas lacked personal jurisdiction over the Bilek defendants. Unlike in the Becky George suit, Corea did not appeal this dismissal.

The Ellis County Courthouse, in my hometown of Waxahachie, Texas

Seven days after Burris’s Ellis County case was dismissed, Corea filed (on behalf of Burris) three new lawsuits in Potter, Victoria, and Medina Counties of Texas. All of the new lawsuits alleged the same conduct against Bilek towards Burris that was the subject of the Ellis County lawsuit.

On the same day that the multiple lawsuits were filed, Corea sent an email to Bilek’s counsel advising that,

This is NEVER going away. Pam needs to get that through her drunk head that I will chase her to the end of the earth and she needs to get this settled now.

In response, Bilek’s counsel advised Corea that sanctions would be sought if Corea served any of the three new lawsuits. The Potter County lawsuit (which was identical to the Ellis County suit) was subsequently served on Bilek.

Bilek filed a special appearance (again alleging lack of personal jurisdiction) and motion for sanctions against Corea, the Corea Law Firm, PLLC, and Burris in the Potter County suit. Corea subsequently non-suited the Potter County case.

The 108th District Court of Potter County held a hearing on the motion for sanctions a couple of days after Corea non-suited the case. Corea appeared at the sanctions hearing by telephone, and did not object to any of the exhibits offered by Bilek’s counsel (who personally appeared).

The court found that all of the same jurisdictional facts alleged in Potter County had already been fully litigated and resolved in Ellis County, and determined that the Potter County suit was brought in bad faith and for purposes of harassment. 

The Potter County court ordered Thomas Corea, the Corea Law Firm, PLLC, and Tony Burris to pay Bilek $50,000 for costs and attorney’s fees, $10,000 to compensate Bilek for the deliberate and intentional harassment and inconvenience, and additional attorney’s fees in the event of unsuccessful appeal. 

Corea appealed the sanctions award. The Amarillo Court of Appeals upheld the sanctions awarded by the trial court, in their entirety.

Case informationCorea v. Bilek, 2012 WL 602898, No. 07-11-00114-CV (Tex. App.—Amarillo, Feb. 24, 2012).