"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.

Continue Reading Race Horse Trainers “Guilty Until Proven Innocent”

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.

 

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.

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.

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.

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. 

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.

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.

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).

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.