Ownership and Transfer of Horses and Interests in Horses, including Warranty and Fraud. Summary of relevant cases.

Alpert v. Thomas, 643 F. Supp. 1406 (D. Vt. 1986).
An Arabian horse buyer claimed that prior to purchase of the horse, which was acquired as a stallion prospect on an installment basis, she was given an oral guarantee that the horse would breed sound. The purchase agreement provided that the horse was sold “as is,” but the agreement contained no “merger clause.” Several months after the purchase, when the mares failed to get in foal the buyer determined that the horse could not breed. Buyer was sued when she refused to make further payments on the purchase price. The trial court first ruled that issues concerning the sale of a stallion were governed by the UCC and that revocation of acceptance was effective despite the “as is” contract. The court noted that because the seller knew the horse was being bought for breeding, custom and usage in the horse trade is that the implied warranty of merchantability includes a warranty that the stallion is fertile and capable of getting a mare in foal. The court rejected the claim of the selling farm that it was not a “merchant.”

Appleby v. Hendrix, 673 S.W.3d 295 (Tex. App. 9 Dist. 1984).
Discussions of the suitability of a horse for breeding as an express warranty.

Arine v. McAmis, 603 P.2d 1130 (Ok. 1979).
Mare sold at auction was announced to have been “in foal.” Buyer discovered mare was not in foal, and struck a new deal with the auction company for a reduced price. After transporting the horse to California, buyer discovered that the mare was infertile, and rescinded the sale. The court held that the evidence supported rescission and that an award of attorneys fees in the buyer’s favor was justified under an Oklahoma statute allowing attorneys fees for an action on an account or note.

Baram v. Farugia, 606 F.2d 42 (1979).
“In this age of space travel and computer technology, a horse named Foxey Toni requires us to return to a more tranquil era and examine elements of trover and conversion under Pennsylvania common law. We must decide in this diversity case whether payment of the horse’s full value to the owner by one converter precludes recovery by the original power in a conversion action against persons who received possession from the original converter. We hold that recovery from the first converter precludes further recovery of compensatory or punitive damages for subsequent conversions.”

Bradshaw v. Thompson, 454 F.2d 75 (6th Cir. 1972).
Horse owner sued his agents for breach of fiduciary duty for failure to sell horses at highest and best prices, and demanded an accounting. The trial court sent the case to the jury, and the owner appealed after being dissatisfied with the verdict. The appeals court held that even though an equitable claim was made, the case was properly tried to a jury.

The owner also sued one agent for signing over registration papers to a buyer at auction. The appeals court held that the sale was complete at the fall of the hammer, and that transfer of title to the horse was not tied to transfer of registration papers.

Brodsky v. Nerud, 414 N.Y.S.2d 38, 25 U.C.C. Rep Serv. 1266 (App. Div. 1979).
Claimer of racehorse sued for rescission after determining the horse was a gelding instead of a colt as stated in the racing program. The racing association asserted that it had corrected the mistake by a public address. The trial court dismissed the case at the close of plaintiff’s evidence. The appeals court reversed, holding that the failure of the racing association to correctly list the sex of the horse could constitute negligence, and the program constituted an express warranty by the owner (subject to the owner’s defense that he conveyed the correct information to the racing association). The appeals court also reversed the trial court’s determination that the claimer had not rejected the horse within a reasonable time, distinguishing Myron v. Yonkers Raceway.

Butler v. Shipshewana Auction, Inc., 697 N.E.2d 1285 (Ind. App. 1998).
An auction company is exonerated from fraud because “[t]he evidence presented to the trial court revealed that it is not within Shipshewana Auction’s custom to observe or inspect livestock or horses brought to auction prior to their sale.”

Calloway v. Manion, 572 F.2d 1033 (5th Cir. 1978).
Buyer acquired a mare, as a show horse, in exchange for another horse. Prior to the exchange, buyer noticed swelling in the hock, but was supposedly told by the seller that it “was not a problem.” Buyer and seller agreed, though, that if the horse was unsuitable, the remedy would be return of the horse for credit to acquire another horse. After the exchange, buyer determined that the mare had an incipient ovary condition that caused her to kick her hock. Buyer sought rescission and damages based on breach of warranty and misrepresentation. Buyer was unable to prevail on the breach of warranty claim because the contractual remedy was the exclusive remedy. Although buyer prevailed on his fraud claim and could recover damages, he was not entitled to rescission because he exercised dominion over the mare and because he bred her and she got in foal.

Chernick v. Caseres, 759 S.W.2d 832, 7 UCC Rep. Serv. 2d 781 (Ky. App. 1988).
Horse buyer attempted to revoke acceptance of horse, three years after purchase, after it was discovered in subsequent litigation brought by subsequent buyer (see Chernick v. Fasig-Tipton, below) that the horse was unfit for breeding. The court of appeals affirmed the trial court’s determination that the attempted revocation was ineffective because it was untimely and because his attempt to breed the horse after learning of the defect was an act of dominion over the horse.

Chernick v. Fasig-Tipton, 703 S.W.2d 885 (Ky. App. 1986).
Thoroughbred horse sold by auction company at a breeding stock sale was determined by the buyer to be unfit for breeding and rejected the horse. The trial court determined that the auction company was negligent because it failed to take reasonable care to ensure the catalog information was accurate, and determined that the consignor had committed fraud in not disclosing that the horse had previously aborted a foal. It awarded return of the sales proceeds and damages against the sales company, and punitive damages against the consignor. The court of appeals upheld the judgments against the sales company and consignor, but reversed the award of damages against the sales company because no claim for damages was lodged against the sales company. It suggested that the sales company has a high duty to buyers, and that punitive damages will be given in the appropriate case.

Cohen v. North Ridge Farms, Inc., 712 F. Supp. 1265 (E.D. Ky. 1989).
Purchaser of a yearling thoroughbred at auction determined after the sale that the horse had a displaced soft palate. The purchaser attempted to rescind the purchase and sued for return of his purchase price. The district court held that the disclaimers of warranty in the sales catalog were effective to prevent rescission based on failure of consideration and mutual mistake. The court further dismissed a claim based on misrepresentation because the consignor was under no duty to inspect, discover or disclose defects in the horse. The court also held that the auctioneer had no fiduciary duty to the purchaser to inspect or require its consignors to inspect horses for defects.

Coleman v. Neel, 590 So. 2d 1278 (La. 1991).
Buyer of horse for breeding purposes determined that the horse was unsound for breeding after only one mare got in foal. Buyer’s action for rescission (redhibition under Louisiana law) resulted in a judgment for the seller. The court of appeals affirmed, holding that the buyer failed to prove that the horse was unsound at the time of the sale. The buyer’s claim that the horse had a defect of wind was also rejected because the trial court found that laryngieal hemiplegia did not constitute a wind defect, and that any defect could have been discovered by the buyer.

Courtin v. Sharp, 280 F.2d 345 (5th Cir. 1960).
Buyer agreed to purchase a thoroughbred from a seller. Before a written contract could be executed and while the horse was still in the possession of the seller, the horse was accidentally killed. The court (construing Kentucky law) held that the risk of loss transferred to the buyer upon the “completed verbal sale,” and the buyer was thus liable for the purchase price.

Comment: This pre-UCC case is discussed in J. White and R. Summers, 1 UNIFORM COMMERCIAL CODE (4th ed.) sec 5-3. White and Summers assert that the case should be decided differently under the UCC, and that the seller should never be considered a bailee for purposes of transfer of risk of loss under section 2-509(2).

Fasig-Tipton Co. v. Jaffe, 449 N.Y.S. 268, 269 (App. Div. 1982).
Auction company sued buyer of horses for deficit from resale of horses after buyer defaulted. Summary judgment was entered against buyer despite buyer’s claim that auction company misrepresented that a profit would be made from the purchases. Appeals court reversed, holding that the defense presented a trial issue.

Forbis v. Reilly, 684 F. Supp. 1317 (W.D. Pa. 1988).
Buyer of two Arabians claimed that seller committed fraudulent misrepresentation by asserting that mare was capable of producing a foal and that colt was one of the finest ever bred by the seller. It was also allegedly represented that the colt’s “human eye” would “fill in.” Summary judgment was granted for the seller. With regard to the mare, the court noted that there was no indication that the statement was untrue when made. With regard to the colt, the court stated that no reasonable reliance was placed on the representations, and that the statements about the quality of the horses was mere puffing. The court noted that the buyer was experienced with horses.

Fuller v. Fasig-Tipton Co., 587 F.2d 103 (2d Cir. 1978).
Auction company deducted from sales proceeds sums to repay debt owed to auction company by seller’s consigning agent. The appellate court reversed a summary judgment granted to the auction company, holding that one dealing with an agent for a disclosed principal may not set off the agent’s indebtedness against amounts owed the principal. Agreement of principal to loan money to agent was held not to have relieved auctioneer of its obligation to pay principal.

Gaillard v. Hancock, 111 F. 3d 138 (9th Cir. 1997).
Four co-owners of the racehorse SUNDAY SILENCE entered into an agreement whereby they agreed to syndicate the horse as a stallion at the end of his racing career, and that the parties would share in all expenses and proceeds relating to the horse. One co-owner, Arthur Hancock, was to serve as syndicate manager and was to receive four breeding rights as such. One of the owners, Zenya Yoshida, bought the interests of the other three prior to a syndicate being formed. However, he paid a substantial sum to Hancock to buy his potential breeding rights granted as syndicate manager.

One of the other co-owners sued, contending that the extra purchase price to Hancock was merely a way of paying Hancock more than the others, and the extra funds should have been shared with all co-owners as proceeds relating to the horse. The district court granted summary judgment to Hancock and the Ninth Circuit affirmed on the basis that Yoshida had the right to buy Hancock’s breeding rights because they were separate from Hancock’s interest in the horse, even though they were contingent.

Green v. McGrath, 662 F.Supp. 337 (E.D. Ky. 1986).
A case which wanders all over the map in trying to apply general principles of law to a situation where a stallion had disappeared before a breeding contract which was not quite “live foal” and not quite “no guarantee” was performed.

Harry F. Guggenheim v. Commissioner, 46 T.C. 559 (1966).
Purchaser of racehorse later syndicated racehorse as a stallion, selling several shares. Gain on sale of shares treated as capital gain, but contested by IRS. Tax Court ruled that stallion shares constituted interests in the stallion and not mere breeding rights, and thus gain could be treated as capital gain.

Hayes v. Equine Equities, Inc., 480 N.W.2d 178, 18 UCC Rep. Serv. 2d 452 (Neb 1992).
Buyer, who purchased horse upon seller’s false representations concerning the cost of the horse, rescinded sale after horse he purchased foundered. Seller claimed that the rescission, which occurred 21 months after the sale, was untimely. The court stated that the delay was excused by the continued reassurances of the seller and the difficulty in discovery of the misrepresentation. The court also held that the buyer was justified in relying on the representations.

Highland Stud International, et al. v. Baffert, et al., Civil Action No. 00-261-JMH (E.D.Ky. 2002).
The former purchaser of the “breeding rights” to Kentucky Derby winner REAL QUIET purchased his “racing qualities” in 2000. The 2000 agreement provided that the horse was sold “as is” and with no representation or warranties concerning the physical condition of the colt. The purchaser later sued the seller, trainer, and a veterinarian asserting various claims, including breach of contract and fraud, after REAL QUIET manifested a tendon injury after his arrival in Kentucky. The Court held that the purchaser could not assert “tort claims” such as fraud, under the “economic loss doctrine.” That doctrine provides that in sales governed by the UCC and involving purely economic losses as opposed to personal injuries, a party is bound by the contract and generally is limited to only contract claims. The Court also held that there was no breach of contract. Therefore, the purchaser’s claims were dismissed.

Hoffmann v. Fasig-Titpton New York, Inc., 1991 WL 5867 (S.D.N.Y. 1991).
Disgruntled purchaser of horse at auction sought to stay arbitration proceeding brought by auction company by filing a claim in New York state court. The defendant auction company removed the case to federal court on the basis of diversity jurisdiction, even though it was a New York corporation. The federal court remanded the action to state court because the removal was improper, holding that the auction company was not a mere nominal party for purposes of diversity jurisdiction.

Hughes v. Robertson, 1 TB Mon 215 (Ky. 1823).
Seller sold buyer a racehorse seller knew to be blind, but was not discovered by buyer in a pre-purchase inspection. The court held that an action at law for fraud was available to the buyer, because the seller had a duty to reveal the whole truth about the horse’s defect.

In re Blankinship-Cooper, Inc., 43 B.R. 231, 39 UCC Rep. Serv. 1008 (Bkrtcy N.D. Tex. 1984).
Bank had perfected security interest in stallion and in debtor’s “general intangibles,” and bank retained possession of the registration papers. Priority dispute arose with respect to the breeding rights, where a prior purchase money security interest existed on the horse. Bankruptcy court held that the breeding rights were not general intangibles and therefore the prior security interest prevailed. Moreover, possession of the registration papers gave no priority to the bank.

In re Bob Schwermer & Assoc., 27 B.R. 304 (Bkrcy N.D. Ill. 1983).
Bank filed financing statement with Illinois Secretary of State to perfect security interest in race horse. Held that security interest was properly perfected because race horse was not a farm product for purpose of perfection. Movement of race-horse following filing of financing statement, held not to defeat perfection.

In re Calumet Farm, Inc. (First City, Texas-Houston v. Due Process Stables), No. 92-268 (E.D. Ky. 1993).
Priority dispute arose between secured lender and transferee of breeding rights to stallion. Although the district court held that the immediate dispute was moot as to the breeding rights directly in issue, the district court gave guidance to the bankruptcy court as to resolution of the priority dispute as to future breeding rights. The court stated that a purchaser for value of a season from a shareholder takes property severed from the shareholder’s interest in the stallion, and thus does not bear the risk of the originating shareholder’s bankruptcy.

In re Wildlife Center, Inc., 102 B.R. 321 (Bkrcy E.D.N.Y. 1989).
Jockey Club registration papers are separate property than the horse itself. Possession of the papers perfected the auctioneer’s security interest in them. Turnover order denied.

Johnson v. Waugh, 672 N.Y. Supp. 2d 148 (A. D. 3 Dept. 1998).
A joint venture in a horse is declared, notwithstanding the fact that many of the owners were not on the horse’s papers.

J.P. Morgan Delaware v. Onyx Arabians II, Ltd., 825 F. Supp. 146 (W.D. Ky. 1993).
Holder of promissory notes for purchase of stallion share sued when buyers defaulted. Buyers claimed that the purchase agreements had been breached by the sellers, and holder of notes was subject to that defense. The district court ruled that whether the holder had knowledge of claims and defenses so as to be subject to them is a question of fact precluding summary judgment.

Keck v. Wacker, 413 F. Supp. 1377 (E.D. Ky. 1976).
Mare was listed in the auction sale catalog as “barren,” but had, in fact, aborted a foal. Purchasing bidder, after the horse aborted a subsequent foal, revoked his acceptance of the mare, and the consigning seller sued for the purchase price. The trial court found that a material, although innocent, misrepresentation occurred, and that the revocation was effective. An award of punitive damages and attorneys fees was denied.

Keeneland Association v. Eamer, 830 F. Supp. 974 (E.D. Ky. 1993).
Purchaser of thoroughbred weanling from auction sale company attempted to rescind sale because after the sale the weanling was determined to have O.C.D. lesions in the ankles. The district court granted summary judgment in favor of the sales company and consignor. The court ruled that the auction company had no fiduciary duty to the purchaser, and that the disclaimers of warranty in the sales catalog were binding. The court ruled that the fraud claims were not valid because there was no evidence in the record that the consignor misrepresented the weanling’s condition.

Keller v. Merrick, 955 P.2d 876 (Wyo. 1998).
The application of the Uniform Commercial Code to “representations concerning the gentleness of the horse.” Purchasers bought horse for their son from a horse dealer, who had represented that the horse was gentle and suitable for an inexperienced rider. The son mounted the horse, and was injured when the horse galloped away. The seller took the horse back and refunded the purchase price, but the buyers sued for the injuries to their son. The trial court granted summary judgment to the buyers based on the Wyoming Recreation Safety Act. The appeals court reversed, holding that a warranty claim upon the sale of a horse was not governed by the Act, and that the sellers had a viable claim for breach of warranty under the UCC.

Kwik-Lok Corp. v. Pulse, 702 P.2d 1226 (Wash. App. 1985).
Mr. Pulse, co-owner of a stallion, conveyed his interest in the stallion to Kwik-Lock. By separate letter, Kwik-Lock conveyed two free breedings a year to the stallion to Mr. Pulse. Kwik-Lock terminated Mr. Pulse’s free breedings after several years. The trial court ruled that the letter was enforceable, and granted damages to Mr. Pulse. In holding that the grant was enforceable despite the lack of a time limit, the appeals court held that grant of breeding rights in a stallion was not a sale of goods to which Article 2 of the Uniform Commercial Code applies. The appeals court held that parol evidence was relevant to determination of duration of the breeding rights.

Lane v. Spragg, 481 S.E.2d 592 (Ga. App. 1997).
Horse purchaser sued farm owner’s father for misrepresentation in connection with the sale, under the theory that father was a partner in the farm business. Appeals court upheld summary judgment for father, based on father’s affidavit that he did not share in profits and losses.

Leal v. Holtvogt, 702 N.E.2d 1246 (Ohio App. 2 Dist. 1998).
This case is an extraordinarily interesting one. There was a defect in an Arabian stallion sold by an expert to a novice, who had relied on expert’s advice on what horse to buy, establishing a “confidential” but not a “fiduciary” relationship. The Court rejected claims of (a) negligent misrepresentation (because there was no affirmative representation) and (b) breach of express warranty (because the seller’s statements were “puffing”), but sustained plaintiff’s claims for (a) breach of the implied warranty of fitness for a particular purpose, and (b) actual fraud. Each of the latter claims was based on silence as to the defect — because of the confidence reposed by the buyer and the seller. The only frequently-cited horse case which the Court relies on is Slyman v. Pickwick Farms, 15 Ohio App. 3d 25 (1984), but this case should become a leading case in the equine industry.

Lee v. Cox, 18 UCC Rep. Serv. 807 (M.D. Tenn. 1976).
Seller of horses was to retain registration papers until horses were paid for in full. Buyer filed bankruptcy and the bankruptcy judge ordered the seller to turn over the registration papers, so the horses could be sold. On appeal, the district court held that the seller’s possession of the registration papers perfected a security interest in them, and therefore the bankruptcy court had no authority to require the papers to be turned over to the debtor’s estate. Moreover, under the contract of sale, the seller retained legal title to the papers.

McClure v. Duggan, 647 F. Supp. 211 (N.D. Tex. 1987).

Statute of Frauds; Fraud

Plaintiff alleged breach of an oral agreement to sell him a horse. Trial court ruled that the oral agreement was unenforceable under the statute of frauds, but the plaintiff could proceed under a fraud claim for misrepresentation allegedly made to induce him not to buy the horse.

Miron v. Yonkers Raceway, Inc., 400 F.2d 112, 5 UCC Rep Serv 673 (2d Cir. 1968).
Buyer purchased a racehorse from an auction at Yonkers, which horse was discovered the day after the sale to have had a fractured bone in its leg. Yonkers and the consignor refused to take the horse back. The consignor sued buyer and Yonkers for the purchase price, and the buyer counterclaimed. The court held that because the buyer passed up a reasonable opportunity to examine the horse at the place of sale, as is customary in the business, his later rejection of the horse was wrongful because he did not reject the horse within a reasonable time. The court added that the injury may have occurred after the sale, and therefore the buyer could not meet his burden of proving the warranty breach.

Moyglare Stud Farm, Ltd. v. Due Process Stable, Inc., 562 F. Supp. 289 (S.D.N.Y. 1983).
Buyer, a New Jersey corporation whose principal resided in New York, revoked acceptance of horse purchased from seller, a Irish company. The seller sued for a declaration that the revocation was invalid, in federal court in New York. The court held that venue was proper there, although neither party resided in New York, because the cause of action arose in New York.

Nagels v. Christy, 330 S.W.2d 754 (Mo. 1959).
Dealer in horses represented five-gaited show mare to be a “lady’s and amateur’s horse” when, in fact, both the dealer and the owner knew the horse became unsound after warm-up. The buyer, who relied on this representation, sued for fraud and the jury awarded a refund of the purchase price and punitive damages. On appeal, the seller asserted that the representations of the dealer should not impose liability on him. The appeals court held that there was sufficient evidence that the dealer was an authorized agent for the seller, and thus the seller was liable for the representations of the agent.

Newman v. Armstrong Holdings (Brampton), Ltd., No. 94-CA-1350-MR (Ky. App. 1995).
Disclaimer in conditions of sale effective to block a rescission of the sale of a horse purchased at auction.

North Ridge Farm v. Stathatos, 760 S.W.2d 89 (Ky. App. 1988).
See North Ridge Farms v. Trimble, below.

North Ridge Farms, Inc. v. Trimble, 37 UCC Rep. Serv.1280 (Ky. App. 1983), aff’d sub nom, Trimble v. North Ridge Farms, 700 S.W.2d 396 (1985); following remand, North Ridge Farm v. Stathatos, 760 S.W.2d 89 (Ky. App. 1988).
Syndicator of a stallion took a security interest in a share sold to a syndicate member. One year’s nomination (breeding season) was sold to another breeder. The Kentucky Court of Appeals held that the buyer of the breeding season took free of the security interest in stallion syndicate share from which the season was derived. The Court stated that the buyer of the season could not be a buyer in the ordinary course of business of goods under section 9-307 of the UCC because although the stallion share was within the definition of “goods,” the season was severed from those goods. However, because the syndicate agreement authorized the sale of seasons, the security interest was extinguished as to the season pursuant to UCC section 9-306. The Kentucky Supreme Court affirmed, its reasoning different from that of the Court of Appeals, but the earlier (unreported) decision became the basis of In re Blankenship-Cooper, Inc. which is much broader in scope.

On remand, the trial court awarded damages in favor of the buyer of the season, who had not been permitted to breed. The court held that the agent who handled the transaction for a disclosed principal was not liable, but the principal was liable. The Kentucky Court of Appeals affirmed.

Norton v. Lindsay, 350 F.2d 46 (10th Cir. 1965).
Buyer of racehorse rescinded sale and sued for refund of his purchase price when he determined after purchase that the horse had been subject to nerve-severing surgery (“high nerved”). The court of appeals affirmed the trial court’s grant of summary judgment to the buyer on the basis that a representation that a horse was sound created an express warranty.

O’Shea v. Hatch, 640 P.2d 515, 33 UCC Rep. Serv. 561 (N.M. 1982).
Horse sold to buyer was represented as a gelding when, in fact it was a ridgling. After discovery of the problem, the buyer sought to revoke acceptance of the horse, but the seller refused. The buyer then attempted to correct the problem with surgery, but the horse continued to be unsuitable for riding. The buyer sued and was awarded judgment in his favor. The court held that despite the surgery and continued training of the horse, the buyer maintained his right to revoke acceptance.

Presti v. Wilson, 348 F. Supp. 543 (E.D.N.Y. 1972).
Plaintiff sued to enforce an alleged oral agreement to buy a horse. The court dismissed the suit based on the statute of frauds.

Price v. Scharps, 405 So. 2d 1043 (Fla. App. 1981).
Buyer of in-foal mare, who after the purchase paid the stud fee owed by seller of mare, sued the seller for reimbursement. The court held that the buyer was entitled to recover the stud fee from seller of the mare.

Richard v. Comeaux, 626 So.2d 507 (La. App. 1993).
Buyer bought horse with the oral understanding that he would receive registration papers needed to register the horse with the American Quarter Horse Association. After he had not received the papers for two months, he sued for rescission. The appeals court upheld a judgment allowing rescission.

Shannon v. Kinderhill Select Bloodstock, No. 91-CI-00213 (Woodford Cir. Ct. Ky. 1992).
Seller of breeding rights that retained stallion service certificates to secure payment had a prior perfected security interest and was entitled to retain certificates.

Russell v. Lawrence, 507 S.E.2d 161 (Ga. App. 1998).
This case holds that a security interest in horses was not effectively granted by the owner of a farm where the horses are kept, who claimed to have purchased them when he purchased the real estate. The farm owner “had no legal right to sell what he did not own,” and “merely registering the horses at national associations” did not give a “voidable title to the horses.” While this case is predominantly a UCC Article IX case, it has Article II in general implications.

Sessa v. Riegle, 427 F. Supp. 760 (E.D. Pa. 1977).
Purchaser of standardbred racehorse sued seller for breach of warranty when horse was discovered to have tendenitis and thrombosis of the arteries. The trial court found for the seller, holding that the seller’s statement that the horse was sound was an expression of opinion, and not a warranty. The court also doubted that sufficient reliance was shown because purchaser was chiefly relying on his agent’s evaluation of the horse. Further, there was no showing that the defects existed at the time the burden of proof shifted, which was the time the seller tendered the horse for delivery. Moreover, there was no breach of the warranty of merchantability, because the horse was fit to race despite the fact that the alleged defects delayed its racing career and affected its performance.

Siciliano v. Hudson, 1996 WL 407562 (N.D. Miss. 1996).
Buyer of horse who claimed she was defrauded by seller could not recover under seller’s homeowner’s insurance policy.

Simpkins v. Ritter, 204 N.W.2d 383 (Neb. 1973).
A leading case on the question of whether a horse’s papers are evidence of its ownership.

Simpson v. Widger, 709 A.2d 1366 (N.J. Super. A.D. 1998).
Buyer of show horse in 1989 sued seller for fraud and breach of warranty when the horse developed ringbone disease in 1994. The seller allegedly assured the buyer that the horse was sound. The court, relying on Norton and Sessa, that the warranty of “soundness” meant that the horse was “serviceably sound,” not free from problems that could affect the performance of the horse. The court also held that no fraud had been shown because there was no evidence that the seller believed that the presence of ringbone might affect the horse’s serviceability and resale value. Finally, the court held that limitations had run on the warranty claim, despite the delay in discovery of the defect.

Small v. Ciao Stables, Inc., 289 Md. 554, 425 A.2d 1030 (1981).
Buyer of thoroughbred from auction company sued auction company for rescission because horse suffered from a wind condition. Auction company defended the action but a jury found in favor of the buyer. The seller, who had consigned through an agent, then sued the auction company for the purchase price. The court held that the seller’s suit was barred by principles of res judicata since there was no indication that the auction company had not adequately defended the original action.

Simpson v. Widger, 709 A.2d 1366 (N.J. Super. A.D. 1998).
This case, citing both Norton v. Lindsay, 350 F.2d 46 (10th Cir. 1965) and Sessa v. Riegle, 427 F. Supp. 760 (E.D. Pa. 1977), aff’d o. b. 568 F.2d 770 (3rd Cir. 1970), held that a warranty of “soundness” does not include the confirmation defect which might lead to a future inability of the horse to perform. Citing no horse or other animal cases, the Court also held that an independent veterinary examination, which included X-rays which might have disclosed the defect, established “the absence of reliance as a matter of law.”

Slyman v. Pickwick Farms, 472 N.E.2d 380 (Ohio 1984).
A discussion of a horse’s respiratory condition as an express warranty.

Snow v. American Morgan Horse Ass’n, 686 A.2d 1168 (N.H. 1996).
American Morgan Horse Association claimed horse breeder defrauded it by falsely registering foals. Appeals court affirmed the fraud ruling but held that damages for such fraud were not recoverable under the New Hampshire Consumer Protection Act.

Stewart v. Shanahan, 277 F.2d 233 (8th Cir. 1960).
Buyer sued in federal court for misrepresentation and breach of warranty upon a purchase of $3,750 show horse. The district court dismissed buyer’s claims for mental anguish because they were unrecoverable under these claims. The buyer thus did not have a sufficient amount in controversy to invoke diversity jurisdiction in federal court. The Court of Appeals reversed, holding that if the mental distress allegations were made in good faith, jurisdiction in federal court was proper.

Thoroughbred Horseman’s Ass’n v. Dyer, 905 S.W.2d 752 (Tex. App. 1995).
Horse auction company deemed to have lien on registration papers to secure auction fees and commissions, where horse was withdrawn from the auction sale.

Toney v. Lambarth, 514 S.W.2d 106 (Mo. 1974).
Purchaser and seller entered into a written contract of sale contingent upon examination of the horse by a veterinarian and a determination that the horse was sound. The veterinarian declared the horse not sound because of an eye defect. The trial court held that the horse was sound, and thus denied rescission. The appeals court reversed on the basis that the contingency was not met, even if the horse was “sound” relative to its intended purpose.

Travis v. Washington Horse Breeders Ass’n, 759 P.2d 418 (Wash. 1988).
Purchaser of a horse that was discovered to have a heart murmur sued for rescission. The court upheld a jury verdict finding that the auctioneer and consignor had violated the consumer protection act because it was unconscionable that such a horse would be offered for sale as a race horse without a physical examination.

Tribe v. Peterson, 964 P.2d 1238 (Wyo. 1998).
An interesting discussion of conversation about an “extra gentle” horse.

Trimble v. North Ridge Farms, Inc., 700 S.W.2d 396 (Ky. 1985).

See North Ridge Farms v. Trimble, above.

White v. Roberts, 454 S.E.2d 584 (Ga. App. 1995).
Buyer, a resident of Georgia, alleged that sellers and their veterinarian, residents of Nebraska, conspired to defraud him by selling him a lame horse. All sale transactions occurred in Nebraska. The Georgia Court of Appeals ruled that the Georgia trial court did not have jurisdiction over the veterinarian.

Whitehouse v. Lange, 910 P.2d 801 (Idaho 1966).
Buyer approached seller about acquiring a mare for breeding purposes. Mare turned out to be infertile. Appeals court upheld judgment against buyer based on implied warranty of fitness, even though seller selected the particular horse to purchase. Seller’s claim that buyer failed to mitigate damages by not having horse treated at a veterinary college was rejected by the court because there was insufficient evidence that the treatment would have successfully restored fertility.

Wilson v. Lexington Trots Breeders Ass’n, No. 93-CA-0755-MR (Ky. App. 1994).
Defendant was the successful bidder on several horses sold at auction. On the purchase form, he printed corporate name as the buyer, but signed his name without indicating agency status. The conditions of sale provided for personal liability unless an agent authorization was filed with the auction company. Upon default, the auction company sued the individual. Summary judgment in favor of the auction company against the individual was upheld on appeal.

Vallette v. Toussaint, 467 So.2d 107 (La. App. 1985).
Buyer of horse determined that horse was not Louisiana bred, as represented, and brought action to rescind the sale. Under Louisiana law, the attempted rescission was too late, but the court ruled that seller’s communications with the buyer were equivalent to attempts to repair, which toll the prescribed period for rescission.

Vanier v. Ponsoldt, 833 P.2d 949 (Kan. 1992).
Buyer of an Arabian stallion at a Kentucky auction financed part of the purchase price by a note and security agreement to consignor. Two years after the purchase, buyer defaulted and was sued by the consignor. Buyer raised fraud and breach of warranty as a defense because the consignor had represented that the stallion was sound, when, in fact, the stallion had OCD lesions in the hock prior to the sale, and the swelling which possibly indicated the condition was reduced by draining the fluid in the hock and injecting corticosteroids. Further, at the auction, the horse was bid-up by the buyer’s advisor, who was actually acting on behalf of the sales company. As to the warranty claim based on the representations of soundness, the court ruled that the representations were only opinions, and that there was no evidence that the statements were untrue at the time they were made. The claim for fraud was barred by the one-year contractual limitation on the time for rescission. As to the fraud at the auction, the court ruled that the buyer ratified the sale when he continued to make payments after finding out about it. The court also upheld the forum selection clause in the security agreement, and held that the law of the forum, Kansas, rather than the governing substantive law, Kentucky law, governed whether a party was entitled to a jury trial.

White Devon Farm v. Stahl, 389 N.Y.S.2d 724, 20 UCC Rep. Serv. 291 (Special Term 1976).
Buyer of racehorse intending to retire horse to stud at a later date revoked acceptance of the horse a year after delivery was made, after determining that the horse was unfit for breeding. Seller claimed that buyer’s inspection and revocation were untimely. The Court ruled that because the parties contemplated that the buyer would use the horse as a stallion and because infertility was difficult to detect, the inspection and revocation were timely and effective.

Yuzwak v. Dygert, 7 UCC Rep. Serv. 2d 731, 534 N.Y.S.2d 35 (App. Div. 1988).
Seller stated to potential buyer prior to auction sale that horse was quiet and easy to handle. The buyer sued for breach of warranty and fraud. The appeals court held that the statement constituted a warranty and a representation on which a fraud claim may be based.

Securities & Antitrust Issues

Hialeah, Inc. v. Florida Horsemen’s Benevolent & Protective Ass’n, 899 F. Supp. 616 (S.D. Fla. 1995).
Hialeah Racetrack claimed that the Florida HBPA unjustifiably withheld its consent to allow Hialeah to simulcast races, which consent was required under the Interstate Horse Racing Act, and caused its members to refuse to send horses to race at the track, in order to urge Hialeah to restrict its part of the takeout. The court held that Hialeah had standing to pursue an anititrust claim against the HPBA, and that a claim was properly made under federal and state antitrust laws.

Holden v. Hagopian, 978 F.2d 1115 (9th Cir. 1992).
Promoter of general partnership which owned horses was sued under the securities laws by parternership investors who claimed that the partnership interests were securities. The Court of Appeals held that the interests in the partnership were not “securities” as that term is defined in the securities laws.

Kefalas v. Bonnie Brae Farm, 630 F. Supp. 6 (E.D. Ky. 1985).
Purchaser of a share in a stallion syndicate sued for violation of federal and state securites laws. The district court held that fractional interest shares in the stallion syndicate were not “securities” regulated by federal and state securities laws.

Kelley v. Mid-America Racing Stables, Inc., Fed. Sec. L. Rep. par 96,224, 139 F.R.D. 405 (W.D. Ok. 1990), and Kelley v. Mid-America Racing Stables, Inc., Fed. Sec. L. Rep. par 95,626, 1990 WL 193626 (W.D. Ok. 1990).
Securities fraud claim brought by investors in a corporation formed to engage in investing in horses. In the first opinion, the district court denied a motion for class certification, largely because the plaintiffs were not suitable class representatives. In the second opinion, the district court held that a claim against the company’s accountants that they should have known that the value of the horses was overstated, stated a claim under the securities laws sufficient to survive a motion to dismiss.

Marshall v. Harris, 555 P.2d 756 (Ore. 1976).
Inexperienced horseman acquired an interest in two racehorses in exchange for agreeing to pay the expenses associated with the horses. The seller retained control of the horses. The buyer defaulted and the seller sued. The court ruled that the fractional interests in the race horses constituted “securities” regulated by the Oregon securities laws, and the buyer was entitled to rescind the sale.

McGonigles v. Combs, 968 F.2d 810 (9th Cr. 1992).
Investors in Spendthrift Farm sued promotors and others under the securities laws, alleging a variety of misrepresentations and omissions in the stock offering material. The trial court dismissed the claims against several defendants, and a jury verdict was rendered in favor of the remaining defendants. The Court of Appeals affirmed.

Romani v. Shearson Lehman Hutton, 929 F.2d 875 (1st Cir. 1991).
Disappointed purchaser of limited partnership interest in equine limited partnership sued promoters for fraudulently inducing him to invest in the partnership. The court ruled that the purchaser failed to allege securities fraud claim with the particularity required by the federal rules. The court stated that a claim that the partnership’s financial projections were unrealistically optimistic, given the recession the horse industry was entering, was insufficiently specific.

Sheets v. Dziabis, 738 F. Supp. 307 (N.D.Ind 1990).
Purchaser, who owned no mares, bought two shares in stallion syndicates through a bloodstock agent. The bloodstock agent allegedly told the purchaser that the shares were a good investment because he could sell the seasons in advance through the bloodstock agent. The court held that the shares consituted securities because profit was expected to derive from the efforts of others, specifically the bloodstock agent.

Stratmore v. Goodbody, 866 F.2d 189 (6th Cir. 1989).
Plaintiff, a member of a stallion syndicate, claimed that a provision in the syndicate agreement which prevented him from selling a nomination at auction constituted a violation of the antitrust laws. The court of appeals ruled that such prohibition was not void as violating the antitrust laws because any anticompetitive effect was negligible.

Thornock v. Kinderhill Corp., 712 F.2d 1123 (S.D.N.Y. 1989).
Limited partnership interest holders in limited partnership engaged in the horse business sued under federal securities laws and RICO alleging that defendants failed to disclose the down-turn in the thoroughbred market in their private placement memorandum and disclosed only selective information about the market. The district court held that the plaintiffs adequately alleged causation, but failed to properly allege a RICO violation.

Duties and Rights of Co-Owners, Trainers, Agents, Boarders, Partners, and Syndicate Managers

Archibald v. Act III Arabians, 755 S.W.2d 84 (Tex. 1988).
Horse owner sued trainers for damaging horses due to improper training. Texas Supreme Court held that an implied warranty of good and workmanlike performance applies to horse training services.

Beasley v. Trontz, 677 S.W.2d 891 (Ky. App. 1984).
Bloodstock agent purportedly represented both buyer and seller in a horse sale transaction. The agent failed to disclose ceratin facts about the transaction to one of the parties. The buyer sued for specific performance of the sales contract and was awarded summary judgment. The court of appeals reversed the summary judgment, and held that if the seller could show that the agent was representing both the buyer and the seller, the seller could void the contract of sale.

Bibeau v. Ward, 645 N.Y.S.2d 107 (App. Div. 1996).
Plaintiff sued agent for breach of contract requiring the agent to acquire, train and care for, and attempt to sell horses at a profit. Agent acquired horses, but did not train or care for the horses, and consigned them at a loss. Trial court awarded damages (including lost profits) for breach of contract, and punitive damages for gross negligence and fraud. Appeals court ruled that breach of a contract did not amount to gross negligence or fraud, and the award of lost profits was improper because they were speculative.

Bradshaw v. Thompson, 454 F.2d 75 (6th Cir. 1972).
Horse owner sued his agents for breach of fiduciary duty for failure to sell horses at highest and best prices, and demanded an accounting. The trial court sent the case to the jury, and the owner appealed after being dissatisfied with the verdit. The appeals court held that even though an equitable claim was made, the case was properly tried to a jury.

The owner also sued one agent for signing over registration papers to a buyer at auction. The appeals court held that the sale was complete at the fall of the hammer, and that transfer of title to the horse was not tied to transfer of registration papers.

Buster v. Hale, No. 88-CI-067 (Scott Circuit Court, Kentucky, May 20, 1988).
Lien priority dispute arose among a perfected security interest, stallion-keeper’s liens, and an agister’s lien. The trial court ruled that a syndicate shareholder was a “stallion keeper,” entitling him or her to the benefits of the stallion-keeper’s lien against the mare where the mare-owner failed to pay the stud fee. The court ruled that both the stallion-keeper’s lien and the agister’s lien had priority over a perfected security interest. As to the respective priority between the stallion-keeper’s lien and the agister’s lien, the court ruled that the concept of marshalling of assets should apply to allow the holder of the agister’s lien to first satisfy the board bills from horses other than the horse on which the stallion-keeper’s lien was placed.

Continental Bank v. Meyer, 10 F.3d 1293 (7th Cir. 1993).
Bank sued investors in thoroughbred breeding limited partnership to collect notes. Investors (who were lawyers) counterclaimed against bank for fraud and for aiding the alleged fraud of the promotors. The Court held that statements by bank officers that constituted opinions of the quality of the investment, and that the investment was risk free, did not, as a matter of law, constitute fraud.

Dall v. Kaylor, 658 A.2d 78 (Vt. 1995).
Vermont buyer discovered that horse he purchased from seller in Maryland suffered from chronic bone disease, and sued for breach of warranty. Vermont Supreme Court held that the courts of Vermont had jurisdiction over Maryland seller.

DiGrazia v. Old, 900 S.W.2d 499 (Tex. Ap.. 1995).
While horse was under care of trainer and being treated by a veterinarian, horse died from blood poisoning. The veterinarian led horse owner to believe that the cause of death was electrocution. Horse owner sued after the limitations period had run. The court ruled, though, that limitations had not run against the veterinarian because of his possible fraudulent concealment, but limitations had run against the trainer, because the trainer had no reason to know of the cause of death and thus could not have engaged in fraudulent concealment.

Dimario v. Coppola, 10 F. Supp. 2d 213 (E.D.N.Y. 1998).
This case gives an extraordinary effect to custom and usage in the thoroughbred horse business. In this case, the trainer of multiple stakes winning stallion RUNAWAY GROOM testified that he had been promised expressly (but orally) that he would be paid cash compensation, in addition to his usual benefits, in a sum equal to ten percent (10%) of the proceeds of RUNAWAY GROOM’S syndication upon retirement. The owners of the horse apparently did not disagree that this had been the oral agreement, but contended that the statute of frauds applied, and that the statue of limitations had run before the trainer filed his lawsuit. The Court recited much custom in the business, some of it inaccurately (“Each syndicate interest grants the holder a proportionate share in the profits and expenses of the stallion”), but was exactly correct that the usual compensation to a trainer of a successful male thoroughbred is the grant of a lifetime breeding right upon syndication. The term orally agreed in this case was said to be unusual. After wandering off into the discussion of cases involving “the absence of a material term” in a contract, and the undoubted rule that silence on such a term may be cured by “proof of established custom and practice in the industry,” the Court indicated that in this case there is no question of a silence the trainer was not guilty of “mistake and perjury.” There was no statute of frauds or statute of limitations problem, held the Court. However, having discussed for many pages the use of custom and usage in adding to or interpreting a contract, the Court decided to rewrite the contract: “These customs must be construed as implied precise terms of the original contract.” The oral contract was not enforced; rather, compensation was limited to customary compensation. By “construed” the judge meant “constructed.”

Garner-Rose v. Anderson, 894 S.W.2d 223 (Mo. App. 1995).
Plaintiff claimed fees for boarding horse. The court ruled (on setting aside a default judgment) that fact that defendant’s ex-wife had taken the horse and transfered it to the plaintiff was a defense to the claim for boarding fees.

Gebert v. Yank, 218 Cal. Rptr. 585 (Cal App. 1985).
Thoroughbred allegedly injured by inappropriate use of a shank by sales consignor. Court upheld jury verdict for breach of bailment contract, despite no finding of negligence.

Gross v. Victoria Station Farms, Inc., 578 N.W. 2d 757 (Minn. 1998).
Horse escaped from boarding farm, and owner sued for breach of contract and negligence, alleging lameness had resulted. Boarding farm moved for summary judgment, presenting affidavits of veterinarians that the lameness resulted from a prior condition. Owner presented an affidavit of a PhD, who had degrees in geology and paleontology, but who studied horsemanship. The trial court granted summary judgment because the PhD was unqualified to give an expert opinion as to the cause of equine lameness. The Supreme Court of Minnesota affirmed.

Gussin v. Shockey, No. 90-1402 (4th Cir. 1991).
Horse buyers claimed their agent took a secret commission or markup when he acquired horses for them, and they sued for fraud and breach of fiduciary duty to recover. Judgment requiring the secret commission or markup to be paid to buyers was affirmed on appeal.

Harlan v. Lovett, 1996 WL 97590 (Tenn. App. 1996).
Lessee of farm acreage for pasturage of horses failed to pay rent, and lessor sold the horses to collect the rent. Court of Appeals held that the lessee was entitled to recover damage for conversion, and that the lessor did not have a statutory lien for payment of rent because the horses were placed on leased property.

Knott v. Boone, 1996 WL 220 (unpublished).
Syndicate manager liable for dealing with one partner of partnership that owned share in the stallion syndicate, where syndicate manager should have known that partner was acting against interest of the partnership.

Lampley v. L.M. Webb, 1996 WWL 524330 (E.D. Pa. 1996).
Partner in joint venture sued other partners for breach of contract and fraud. Court held that plaintiff partner could not testify as to value of horses in order to establish amount of damages, because there was no authority under FRE 701 allowing an equitable owner to testify as to value.

Lindsay-Field v. Friendly, 43 Cal. Rptrt. 2d 71 (Cal. App. 2 Dist. 1995).
Manager of a stallion syndicate transported stallion to Australia for the southern hemisphere breeding season after receiving a majority vote of the syndicate members in favor. A nonapproving minority of members sued and a jury held in favor of the syndicate manager and majority. The appeals court reversed, holding that unanimous consent was required to give the syndicate manager authority to make such a drastic change in the fundamental rights of the nonapproving syndicate members.

Lundberg v. Church Farm, Inc., 502 N.E.2d 806 (Ill. 1986).
A discussion of actual and apparent authority of an agent in the context of negotiating an agreement to “stand” a stallion, which term is defined.

Marsh v Gentry, 642 S.W.2d 574, 37 A.L.R.4th 484 (Ky. 1982).
Partners sold a horse at public auction. One partner secretly bid on the horse, without informing the other partner. Another partnership horse was secretly purchased by the other partner in a private sale. The Kentucky Supreme Court ruled that one partner’s secret purchases of partnership horses, sold at auction or privately, constituted a breach of the partner’s fiduciary duty to the other partner. The Court also rejected the defense that self-dealing in partnership assets was a custom in the industry.

Mason v. Jackson, 914 S.W.2d 728 (Ark. 1996).
Riding teacher was paid by student to select a horse to purchase. Student was dissatisfied with horse and sued the riding teacher for negligence. Court ruled that teacher was not negligent.

Mizan Arabians v. The Pyramid Society, 851 F.2d 357 (6th Cir. 1987).
Horse auction firm sold a consigned horse below the “reserve” set by the seller. The court of appeals affirmed the district court’s finding of liability and award of damages measured by the difference between the sale price and the reserve bid, rather than the fair market value and reserve bid.

Simmons v. Plummer, 902 P.2d 1084 (N.M. App. 1995).
Sellers promised bloodstock agent a commission if he found a buyer for their interest in a race horse. The interest was subject, however, to a right of first refusal, which was exercised upon the intended sale. The agent sued for his commission and the court ruled in favor of the agent.

Simon v. Fasig-Tipton Co., 652 So.2d 1351 (La. App. 1995).
Dispute arose between novice owner and his agent. The owner sued for breach of fiduciary duty and the agent counterclaimed against the owner, alleging the owner committed conversion by failing to remit funds. It was the agent’s position that he was entitled to a proportionate interest in all horses owned by owner. The jury sided with the agent, but the appellate court held that the damages awarded were excessive.

Turner v. Grifs Western, Inc., 565 So.2d 874 (Fl. Dist. 1990).
Feed supplier sought an injunction based on Florida’s statutory agister’s lien. The court of appeals ruled that the feed supplier could not avail itself of the lien, thus an injunction preventing removal of the horse was improper.

Williams v Tam, 131 Cal. 64, 63 P. 133 (1900).
The plaintiff claimed to be a co-owner of two horses that had been owned by the plaintiff and her husband. The defendant denied that the plaintiff had an interest because the husband sold the horses to him. The court held that one co-owner did not have authority to sell the interest of the other co-owner.

Bankruptcy Issues

Heinz v. Phoenix Corp., No. 94-6394 (6th Cir. 1996).
Sales agreement for stallion sold to Calumet Farm granted certain “lifetime breeding rights” to third parties. Calumet Farm later filed for Chapter 11 bankruptcy, and as debtor-in-possession claimed that the lifetime breeding rights were mere executory contracts and therefore the owners were left with mere unsecured claims. The bankruptcy court, district court, and court of appeals agreed, based on the perception that lifetime breeding rights were not ownership interests in the stallion.

In re Becker, 217 B.R. 231 (Bkrcy M.D. Tenn. 1998).
Sellers entered into an agreement to sell 12 horses to buyer. The contract provided for a down payment, with installment payments. Seller was to retain the registration papers, releasing one at a time as each installment was made. After buyer defaulted, seller sued and received a judgment. Seller then had the sheriff seize the horses upon an execution, and the horses were boarded with sellers as bailees. Buyer filed bankruptcy, and sought turnover of the horses and the registration papers. The court granted the turnover, holding that no executory contract existed because the claim had been reduced to judgment, and because, despite the seizure, the horses and the papers were property of the estate. The court required the sellers to be “adequately protected” as a condition of turnover, however.

In re Blankinship-Cooper, Inc., 43 B.R. 231, 39 UCC Rep. Serv. 1008 (Bkrcy N.D. Tex. 1984).
Bank had perfected security interest in stallion and in debtor’s “general intangibles,” and bank retained possession of the registration papers. Priority dispute arose with respect to the breeding rights, where a prior purchase money security interest existed on the horse. Bankruptcy court held that the breeding rights were not general intangibles and therefore the prior security interest prevailed. Moreover, possession of the registration papers gave no priority to the bank.

In re Bob Schwermer & Assoc., 27 B.R. 304 (Bkrcy N.D. Ill. 1983).
Bank filed financing statement with Illinois Secretary of State to perfect security interest in race horse. Held that security interest was properly perfected because race horse was not a farm product for purpose of perfection. Movement of race-horse following filing of financing statement, held not to defeat perfection.

In re Calumet Farm, Inc. (First City, Texas-Houston v. Due Process Stables), No. 92-268 (E.D. Ky. 1993).
Priority dispute between secured lender and transferee of breeding rights to stallion. Although the district court held that the immediate dispute was moot as to the breeding rights directly in issue, the district court gave guidance to the bankruptcy court as to resolution of the priority dispute as to future breeding rights. Purchaser for value of a season from a shareholder takes property severed from the shareholder’s interest in the stallion, and thus does not bear the risk of the originating shareholder’s bankruptcy.

In re Fogerty (NCNB Nat’l Bank v. Fogerty), 114 B.R. 788, 11 UCC Rep. Serv. 2d 986 (S.D. Fl. 1990).
Lender’s financing statement described certain mares but did not reference their offspring. The bankruptcy court held that the description was sufficient to perfect lender’s security interest in the mare’s foals. The court reasoned that because a mare’s value is based on her ability to produce foals, a description of the mares was sufficient to alert third parties that a security interest in the mare’s foals was being claimed.

In re McKillips, 15 BCD 1061 (Bkrcy. N.D. Ill. 1987).
Owner of a horse breeding and showing operation filed a petition under Chapter 12 of the Bankruptcy Code. The bankruptcy court held that he did not qualify as a “family farmer” under Chapter 12.

In re Race Horses, Inc., 207 B.R. 229, 1997 WL 160311 (Bkrcy. E.D. Ok. 1997).
Creditor of racetrack filed an involuntary Chapter 11 petition. The bankruptcy court dismissed the petition because the requisite number of creditors did not join the petition. Even though the petition had an adverse effect on the track’s business, the court denied the track an award of costs, attorneys’ fees, and damages.

In re Wildlife Center, Inc., 102 B.R. 321 (Bkrcy E.D.N.Y. 1989).
Debtor in possession, a horse breeding farm, filed adversary proceedings to compel turnover of Jockey Club registration papers and stallion service certificates held by the creditor auctioneer. The bankruptcy court refused to issue turnover orders, holding that Jockey Club registration papers and stallion service certificates are separate property than the horse itself. Possession of the papers perfected the auctioneer’s security interest in them. Furthermore, the court reasoned, the auctioneer had a constructive trust claim to the papers due to the misconduct of the debtor.

In re Wolfson (Wolfson v. Equine Capital Corp.), 56 F.3d 52 (11th Cir. 1995).
Secured creditor of horse farm filed an adversary proceeding against bankrupt partner of horse farm claiming that the debt was nondischargeable in bankruptcy because farm and its partners failed to remit proceeds following sale of secured assets. A judgment in favor of the secured creditor was reversed by the court of appeals, which ruled that retention of proceeds by horse farm after it sold lender’s collateral did not constitute sufficient cause to except debt from discharge because lender supposedly was aware of farm’s actions.

Lee v. Cox, 18 UCC Rep. Serv. 807 (M.D. Tenn. 1976).
Seller of horses was to retain registration papers until horses were paid for in full. Buyer filed bankruptcy and the bankruptcy judge ordered the seller to turn over the registration papers, so the horses could be sold. On appeal, the district court held that the seller’s possession of the registration papers perfected a security interest in them, and therefore the bankruptcy court had no authority to require the papers to be turned over to the debtor’s estate. Moreover, under the contract of sale, the seller retained legal title to the papers.

Insurance Issues

Coronia v. American Reliable Insurance Co., 999 F. Supp. 299, 1998 WL 148420 (E.D.N.Y. 1998).

Jurisdiction

Insured, who raced horses in New York, brought action in New York against Canadian insurer and broker. Broker moved to dismiss for lack of jurisdiction. The court held that broker’s activities in soliciting the coverage in New York constituted doing business in New York so as to justify jurisdiction over the broker.

Digrazia v. Atlantic Mutual Ins. Co., 944 S.W.2d 731 (Tex. App. 1997).
Horse died from septicemia after electrical storm. Veterinarian prepared a necropsy report that stated the likely cause of death was septicemia rather than electrocution. The owner of the horse sued the veterinarian, but the suit was dismissed based on limitations. The owner then sued the veterinarian’s liability insurer for fraudulent concealment because it received the report but allegedly led the owner to believe that the cause of death was electrocution. Summary judgment was granted to the insurer but the court of appeals reversed because the although the insurer owed no duty to the horse owner to disclose, an affirmative misrepresentation could be the basis for a fraud claim.

Eppes v. Snowden, 656 F. Supp. 1267 (E.D. Ky. 1986).
Insured claimed policy limits for dead insured horse. The district court dismissed the claim because the claimant used backdated letters to establish the value of horse.

Pacific Indemnity Ins. Co. v. Aetna Casualty and Sur. Co., 688 A.2d 319 (Conn. 1997).
Farm worker was injured when horse boarded there kicked her. Farm’s insurer sued horse owner’s homeowner’s insurer to provide coverage. The court held that the exclusion for business pursuits applied because the boarding operation was engaged in for the purpose of earning a profit, even though it was not for earning a livelihood.

Schwegmann Giant Super Markets v. Golden Eagle Insurance, 693 F. Supp. 478 (E.D. La. 1988).
The holder of an insurance policy sued to collect from insurer. The court ruled that Mississippi law applied, and under Mississippi law, an insurance policy on horse was void ab initio where seller of horse did not inform insurer of the sale of interest in the horse. Title to horse passed when sale agreement was made.

Siciliano v. Hudson, 1996 WL 407562 (N.D. Miss. 1996).
Veterinarian was sued for mistaken advice to a client regarding the soundness of a horse the client purchased. Veterinarian made a claim under his homeowner’s policy. The court held that no coverage existed because coverage for bodily injury did not include injury to a horse and did not cover an emotional distress claim.

Tort Liability

Allis v. Turner, 1999 WL 184576 (N.Y.A.D. 4 Dept.).
A string cite on the doctrine that “horses do not generally wander unattended on public streets in the absence of negligence.”

B & B Livery, Inc. v. Riehl, 960 P.2d 134 (Colo. 1998).
A broad reading is given to a release clause, beyond the statutory limited liability of a horse professional.

Blose v. Mactier, 562 N.W.2d 363 (Neb. 1997).
Farrier was injured when trying to catch a horse and sued the owner of the horse for negligence. The trial court rendered a directed verdict for the horse owner. Because there was no evidence that the owner knew more than the farrier about the horse’s dangerous propensities, the Supreme Court of Nebraska upheld the directed verdict.

Bothell v. Two Point Acres, Inc., 965 P.2d 47 (Ariz. App. Div. 2 1998).
A strict construction of a common statute limiting the liability of horse owners.

Campbell v. Iowa Cent. Ry. Co., 99 N.W. 1061 (Iowa 1904).
Plaintiff sued railway when mare caught in cattle guard was killed by a passing train. The court ruled that the proper measure of damages was the value of the animal killed, as proven by the character of the foals that had been produced by her, rather than the average value of the plaintiff’s stock.

Cooperman v. David, 23 F.Supp. 2d 1315 (D. Wyo. 1998).
Interpretation of a statute limiting the liability of a horse owner, turning on whether or not the plaintiff assumed an “inherent risk.”

Daigrepont v. State, 688 So.2d 1290 (La. App. 1997).
Jockey injured in collision on racetrack sued stewards on theory that stewards were negligent in not previously removing an allegedly reckless jockey who caused the accident. The jockey was also an immigrant working without a green card. The court of appeals affirmed the trial court’s finding that although the stewards owed a duty to keep the track safe for jockeys, there was insufficient evidence that they were negligent in this instance. The court also held that there was no duty to remove a jockey because the jockey was illegally working.

DeGraff v. Wright, 944 P.2d 712 (Idaho 1997).
Horesback rider was injured when dog chased the horse she was riding. She sued the owners of the dog, but the jury found that the rider had trespassed on the dog-owner’s property, and thus a judgment was entered against the rider. The Supreme Court of Idaho reversed the decision because the trial court did not instruct the jury on the proper duty of an owner to a trespasser.

Douglass v. Dolan, 675 N.E.2d 1012 (Ill. App. 1997).
Motorcycle collided with a horse that escaped off land onto a public road. The injured motorcycle rider sued the landowner, the owners of the horse, and one who sold the horse to the current owners on an installment basis. The trial court granted summary judgment in favor of the landowner and the installment seller and the appeals court affirmed. The court held that the landowner had no duty to keep the horse from escaping. The court also held that the installment seller was not an owner of the horse so as subject him to liability.

Egan v. Cauble, 966 P.2d 363 (Wash. 1998).
It is a jury question as to whether an injured person assumed the specific risks associated with the use of a horse.

Faul v. Trahan, 718 So.2d 1081 (L. App. 3 Cir. 1998).
The Court upholds the constitutionality of an Equine Immunity Statute.

Filson v. Cold River Trail Rides, Inc., 661 N.Y.S.2d 841 (App. Div. 1997).
Participant in a horseback riding excursion was injured while attempting to mount her horse. She sued operator of the excursion for negligence, claiming it failed to provide a suitable horse. The defendant moved for summary judgment on the basis of a release signed by the participant prior to participating. The Appellate Division held that the release was unenforceable and void under a New York statute, and upheld the denial of summary judgment.

Ford v. Bynum Lvestock and Comm’n Co., 674 So. 2d 600 (Ala. 1995).
Experiences horseman was injured in sales ring and sued for damages. The trial court granted summary judgment to the sales company, but the court of appeals reversed on the basis that whether a danger was open and obvious is a question of fact to be decided by the jury.

Freskos v. City of New York, 663 N.Y.S.2d 174 (App. Div. 1997).
Experienced equestrian was injured when her horse was spooked when she was riding through Central Park. She sued city for failure to construct a fence segregating the bridle path from the road. The Appellate Division ruled that the city could not be liable because the plaintiff assumed the risk of potential injury.

Gibbs v. Jackson, 959 S.W. 2d 668 (Tex. App. 1997).
An automobile collided with a horse that had somehow escaped its pasture, and the driver of the automobile sued the owner of the horse for negligence. The jury issued a verdict in favor of the driver. On appeal, the Court of Appeals of Texas held that an owner of livestock has a duty to keep his domestic livestock from roaming onto public roads.

Gibbs v. Jackson, 1999 WL 188054 (Tex.).
A careful analysis, citing conflicting prior opinions, about the common law duty to make certain that animals do not stray from the field, including the importance of related statutory enactments.

Hallstrom v. Ammerman, 113 F.2d 872 (8th Cir. 1997).
Thirteen-year old girl was thrown from a horse and sued horse owner for negligence. The trial court gave an assumption of the risk instruction and a verdict was returned for the owner. The Court of Appeals reversed, holding that the assumption of the risk instruction should not have been given because the girl’s inexperience precluded her from knowing the risk.

Hill v. Harris, 1998 WL 960763 (Del. Super.).
An analysis of whether a particular individual was a partner in a riding stable, for the purpose of holding her liable for a negligent injury to a rider.

Huprich v. Bitto, 667 So.2d 685, 28 U.C.C. Rep. Serv. 2d 526 (Ala. 1995).
Arabian horse owner sued seller and manufacturer of corn feed following the death of several horses from a toxin created by a fungus on the corn. The seller, a farmer, was held not to be a “merchant,” thus implied warranty did not apply. The manufacturer was likewise exculpated because it could not be shown that he knew of the presence of the fungus or that it would create the toxin.

Irish v. Deep Hollow Ltd., 671 N.Y. Supp. 2d 1023 (1998).
There is no assumption of the risk of intentional or reckless behavior.

Johnson v. Waugh, 663 N.Y.S.2d 928 (App. Div. 1997).
Dump truck driver sued owners of standardbred race horse when his truck collided with the horse, which had escaped from a nearby farm while being unloaded. The jury found in favor of the truck driver, but the Appellate Division reversed because there was no evidence that the owner that was unloading the horse acted inconsistently with industry practice.

Norton v. Jim Phillips Horse Transportation, Inc., 901 F.2d 821 (10th Cir. 1989).
Limitation of liability on bill of lading held effective to limit liability of horse transport company.

Parsons v. Crown Disposal Co., 63 Cal. Rptr. 2d 291, 936 P.2d 70 (1997).
Horseback rider was thrown from his horse while riding on a bridle path when the horse was frightened by a garbage truck collecting trash from a bin on a lot adjacent to the bridle path. Summary judgment was granted in favor of the garbage company. The Supreme Court of California affirmed the summary judgment on the basis that no duty of care was breached in the normal operation of the garbage truck, despite the fact that the garbage truck driver knew of the nearby bridle path and knew the collection procedure might frighten a horse.

Riehl v. B&B Livery, Inc., 944 P. 2d 642 (Colo. App. 1997).
Rider sued livery for injuries sustained in a fall. The trial court dismissed the claim because the rider had signed a release. The court of appeals reversed because the release did not cover a claim based on faulty gear because such risk was not a foreseeable risk. The court explained the the risk of faulty gear was not a risk inherent in equine activities nor one obvious to an inexperienced rider.

Rutter v. Arlington Park Jockey Club, 510 F.2d 1065 (7th Cir. 1975).
Exculpatory clause in boarding agreement held effective under Illinois law in barn fire case.

Schwartz v. Armand ERPF Estate, 1999 WL 216815 (N.Y.A.D. 1 Dept.).
A balanced view of the obligation of property owners to foresee the danger created by their horses, which differs as between situations where adults as opposed to children are likely to be.

Shelly v. Stepp, 73 Cal. Rptr. 2d 323 (Cal. App. 2 Dist. 1998).
A description of the doctrine of “primary assumption of risk” in the context of practicing for show riding.

Supchak v. Pruitt, 503 S.E.2d 581 (Ga. App. 1998).
A case analyzing the obligation of a pasture owner for harm resulting from his horse wandering off, under principles of negligence.

Young v. Brandt, 485 S.E.2d 519, 1997 WL 12341 (Ga. App. 1997).
Rider who was thrown from a horse and suffered injuries sued and obtained a jury verdict for $250,000. The appeals court reversed because rider clearly assumed the risk of such an accident. The court emphasized that the rider was an experienced horsewoman.

Racing and Licensing

Allen v. Bolinsky, 654 N.Y.S.2d 777 (App. Div. 1997).
Trainer suspended after positive drug test appealed because veterinarian, not trainer, administered the drug without his knowledge at the behest of the horse’s owner. The appeals court upheld the suspension because the trainer regularly used the veterinarian’s services and could be considered his agent or employee.

Bulter v. Oklahoma Racing Comm’n, 874 P.2d 1278 (Ok. 1994).
Authority of the Oklahoma Racing Commission to impose a fine and suspension against horse trainer after horse tested positive for Etorphine upheld.

Catrone v. Thoroughbred Racing Ass’n, 929 F.2d 881 (1st Cir. 1991).
Trainer sued racing association for defamation following published reports based on allegedly stale information. Summary judgment granted and affirmed based on the qualified privilege enjoyed by the association.

Daigrepont v. State, 688 So.2d 1290 (La. App. 1997).
Jockey injured in collision on racetrack sued stewards on theory that stewards were negligent in not previously removing an allegedly reckless jockey who caused the accident. The jockey was also an immigrant working without a green card. The court of appeals affirmed the trial court’s finding that although the stewards owed a duty to keep the track safe for jockeys, there was insufficient evidence that they were negligent in this instance. The court also held that there was no duty to remove a jockey because the jockey was an illegally working.

Dugan v. Delaware Harness Racing Commission, 1998 WL 960708 (De. Super.).
A statement of the limits of due process hearing rights.

Foxbroro Harness, Inc. v. State Racing Commission, 95-AP-982 (Mass. App. 1997).
Foxboro Race Track had excluded a trainer from the track, largely because of his reputation. The Racing Commission ruled that the exclusion was arbitrary, and the decision was upheld on appeal.

Hadges v. Yonkers Racing Corp., 48 F. Supp. 1320 (2d Cir. 1995).
Case summarizes and concludes the legal saga of horse trainer George Hadges, represented by William Kunstler, in his ultimately unsuccessful claim against Yonkers and other tracks which denied him privileges. Sanctions were imposed against Kunstler in these efforts, but reversed on appeal.

Hall v. Louisiana State Racing Comm’n, 505 So.2d 744 (La. App. 1987).
At trainer’s suspension hearing before the racing commission, the commission relied solely on the file of the steward’s hearing and chemist’s reports. The court held that racing commission violated the trainer’s due process rights because it failed to afford him the right to cross-examine witnesses.

Lavin v. California Horse Racing Board, 66 Cal. Rptr. 2d 843 (1997).
Horse owners challenged racing board “zero tolerance” rule disqualifying the wins of horses after post-racing urine samples detected minute and insignificant amounts of a depressant. The depressant, scopolamine, had apparently been part of contaminated bedding straw. The California Court of Appeals upheld the regulation despite its harsh application in this case.

Lindemann v American Horse Shows Ass’n, 634 N.Y.S.2d 697 (App. Div. 1995).
Appeals court upheld suspension of owner from horse show association which occurred as a result of owner’s indictment for conspiracy to commit insurance fraud by killing horses.

Maryland Racing Comm’n v. Castrenze, 335 Md. 284, 643 A.2d 412 (1994).
Court held that racing license suspension under reciprocity statute did not require notice and hearing.

Marsh v. Illinois Racing Board, 689 N.E. 2d 1113 (Ill. 1997).
Owner and driver of standardbred horses had his license revoked for allegedly engaging in an unlawful betting scheme. He appealed the decision to the circuit court of Cook County, which stayed the administrative decision pending review. The licensing board sought an emergency order from the Illinois Court of Appeals, which set aside the stay of the circuit court. The owner/driver appealed that decision to the Illinois Supreme Court, which ruled that the Court of Appeals had no authority to set aside a lower court stay.

Monaci v. State Horse Racing Commission, 717 A.2d 612 (Pa. 1998).
An interesting discussion of the power of the Commission to control drugs, in a case where a portion of a split blood sample was stolen.

New Jersey Racing Comm’n v. Silverman, 696 A.2d 771 (N.J. Super 1997).
Harness racing horse driver was suspended after an administrative law judge found he violated regulations. Board of judges increased the penalty after executive director of racing commission called one of the judges and requested the increase. The Court held that such ex parte communication was improper, and reinstated the original penalty.

Parker v. Ohio State Racing Commission, 1998 WL 332950 (Ohio App. 9 Dist.).
Upholding the broad power of a racing commission to determine matters not specifically controlled in rules and regulations. The case involves a “walk over” versus a “no contest.”

Pernalski v. Illinois Racing Board, 692 N.E.2d (Ill. App. 1 Dist. 1998).
A case about the broad discretion of the racing board to discipline the trainer.

Pickwick Farms, Inc. v. Ohio State Racing Comm’n, 644 N.E.2d 1115 (Ohio App. 1994).
Ohio statute required, as a condition of eligibility in certain stakes races, standardbreds to be offspring of stallions that stand “the entire stud season in Ohio.” The court of appeals held that the statute did not prohibit a stallion from breeding in the southern hemisphere during the southern hemisphere breeding season because the “breeding season” referred to in the statute was from February 1 to July 31 of each year.

Plante v. Department of Business and Professional Regulation, 685 So.2d 886 (Fl App. 1996).
Veterinarian had license suspended for administering a concoction of sodium bicarbonate (baking soda) and sugar water to a standardbred racehorse just prior to a race. On appeal the veterinarian challenged Florida’s statute that prohibits administering a medication or drug for purposes of affecting the outcome of a horse race or dog race. The court upheld the statute and upheld the ruling that baking soda was a drug under the statute.

Rice v. New York State Racing and Wagering Bd., 653 N.Y.S.2d 601 (App. Div. 1997).
Harness driver accused of driving his horse with lack of effort. Court upheld suspension of driver because determination of Racing Board was supported by substantial evidence.

Smith v. Board of Horse Racing, 956 P.2d 752 (Mt. 1998).
An analysis of the due process rights available to a disqualified race horse owner. Stewards disqualified horse from win after determining that the horse had interfered with another. In accordance with Montana’s racing rules, which mandated that the Racing Board defer to the stewards’ decision, the Board upheld the decision. The Montana Supreme Court ruled that the lack of an opportunity by the owner to be heard by the stewards prior to the ruling violated the owner’s due process rights. Further, the Court ruled that the rule requiring the Board to defer to the stewards’ ruling was unconstitutional as a denial of due process.

Super Sulky, Inc. v. United States Trotting Associations, 1999 WL 184056 (6th Cir. Ohio).
An interesting due process case in a close knit industry. For example: “Personal friendships are natural in a discrete community like the harness-racing world. They do not amount to proof of conspiracy.” The USTA’s conduct was found privileged against tortious interference with contracts and business relationships.

Tufariello v. Barry, 401 N.Y.S.2d 210, 60 App. Div. 2d 813 (1978).
At trainer’s suspension hearing before the racing commission, scientific evidence was introduced without establishing reliability and documentary evidence was introduced without establishing a foundation. The court remanded for a new hearing because due process protections were not afforded the defendant.

Youst v. Longo, 233 Cal. Rptr. 294 (1987).
Harness race driver sued another driver for cutting him off in a race. Supreme Court of California held that no tort claim could be made because the prospect of the driver’s winning the race was too speculative.

Tax Issues

Brown v. Commissioner, 1992 W.L. 155446, 64 T.C.M. (CCH) 20, T.C.M. (P-H) 92,379 (U.S. Tax Ct. 1992).
Claimed deductions and losses from standardbred breeding programs disallowed because programs were structured only as tax shelters to create artificial deductions and losses.

Calumet Farm v. Revenue Cabinet, 793 S.W.2d 830 (Ky. App. 1990).
Calumet Farm conveyed several “lifetime breeding rights” in the stallion Alydar. The Kentucky Court of Appeals ruled that lifetime breeding rights to a stallion did not qualify as interests in a horse exempt from Kentucky sales tax.

Daley v. Commissioner, 1992 WL 295162, 71 T.C.M. (CCH) 3147, T.C.M. (P-H) 96,259 (U.S. Tax Ct. 1996).
Surgeon engaged in horse activity never experienced a net profit. Tax Court dissallowed deductions as hobby losses.

Estate of Kluener v. Comm’r, 1996 WL 677504, 72 T.C.M. (CCH) 1326 (U.S. Tax Ct. 1996).
Taxpayer transfered horses to affiliated company, which sold them at auction for a substantial gain, which was offset by the affiliated company’s net operating loss. Tax Court ruled that, in reality, taxpayer was the seller of the horses, and thus the gains could not be offset by the NOLs of the affiliated company. The court ruled that the transfer to the affiliate was merely for tax avoidance because it was customary for horses to be sold at open auction, not privately.

Harry F. Guggenheim, 46 T.C. 559 (1966).
Purchaser of racehorse later syndicated racehorse as a stallion, selling several shares. Gain on sale of shares treated as capital gain, but contested by IRS. Tax Court ruled that stallion shares constituted interests in the stallion and not mere breeding rights, and thus gain could be treated as capital gain.

Jack Kent Cooke Inc. v. United States, 116 F.3d 1473 (4th Cir. 1997).
In 1984, Jack Kent Cooke, Inc., purchased equine and other assets from the Gluck Estate, the owner of Elmendorf Farm. At the time of the sale, Cooke believed that the horses were owned by a corporate subsidiary of the Gluck Estate. When Cooke later discovered its error, it backdated its books to reflect that understanding by creating a backdated transfer to the subsidiary, but the IRS disallowed deductions for depreciation during the backdated period and the court of appeals affirmed.

LiButti v. United States, 894 F. Supp. 589 (N.D.N.Y. 1995), rev’d, 107 F.2d 110 (2d Cir. 1997).
Horse owned by daughter of delinquent taxpayer was levied on by IRS under a claim that she held the horse as nominee for her father. The district court ruled that the horse was not subject to IRS levy imposed on horse because the evidence was insufficient that she was her father’s nominee and because, as an individual, she could not be considered to be her father’s alter ego.

On appeal, the Eleventh Circuit reversed this descision and remanded the case to the district court to reconsider certain evidence, including whether an adverse inference should be drawn against the horse owner as a result of the refusal of her father to testify, invoking his privilege under the Fifth Amendment.

Osteen v. Commissioner, 62 F.2d 356 (11th Cir. 1995).
Bank executive attempted to deduct losses from Persheron horse venture. Disallowance of deductions of horse-breeding operation affirmed by Tax Court and Court of Appeals because taxpayer failed to show that the operation was for profit.

Wardram v. Commissioner, 59 T.C.M. (PH) par 90,121 (1990).
Taxpayer who owned seven show horses and was parent of Olympic rider, held not to be engaged in a business.

Intellectual Property Issues

Equine Technologies, Inc. v. Equitechnology, (1st Cir. 1995).
Preliminary injunction by owner of the registered trademark “Equine Technologies” against user of trademark “Equitechnologies” upheld.

Treatment of Horses

Wagner v. Department of Agriculture, (3rd Cir. 1994). (withdrawn)
Petition for review of finding of the Department of Agriculture that the petitioners had mistreated horse, which determination was made on affidavits of veterinarians, denied.

RRR Farms, Ltd. v. American Horse Protection Ass’n, 957 S.W. 2d 121 (Tex. App. 1997).
The American Horse Protection Association engaged in lengthly discussions and even litigation with the Department of Agriculture to strengthen regulations designed to prohibit the practice of “soring” horses to get them to perform an exaggerated gate at horse shows. Owners of Tennessee Walking Horses sued the Association on the grounds that its activities constituted interference with prospective business advantage, malicious prosecution, abuse of process, and prima facie tort. The Texas Court of Appeals upheld the lower court’s dismissal of the case because the Association was immune from suit on the basis of the Noerr-Pennington Doctrine.

Court Procedures

Ammon v. Kaplow, 468 F. Supp. 1304 (D. Kan. 1979).
A Kansas resident sued a New York seller of a horse for breach of warranty. The horse had been purchased after the buyer responded to an advertisement placed by the seller in a horse journal of general circulation. The buyer picked up the horse in Ohio, and delivered it back to Kansas himself. After arrival in Kansas, the buyer determined that the horse was not as represented. The Kansas federal court ruled that Kansas had jurisdiction because the alleged misrepresentation caused an effect in Kansas, and because the contract was to be performed in Kansas because payment was made from Kansas.

Biggelaar v. Wagner, 978 F. Supp. 848 (N.D. Ind. 1997).
American horse breeder boarded horses with a Netherlands boarding farm under a contract that provided for a choice of forum in the United States. However, the American breeder sued in the Netherlands, and the Dutch defendant counterclaimed. Although the American breeder won at the trial level, the Netherlands Appellate Court ruled in favor of the Dutch defendant. The Dutch defendant then attempted to domesticate his judgment in the United States, and the American breeder took the position that the Netherlands courts were without jurisdiction. The United States court ruled that despite the forum selection clause, the American Breeder had waived its jurisdiction defense by initiating the action in the Netherlands.

Contraves Inc. v. McDonald Douglas Corp., 889 F. Supp. 470 (M.D. Fla. 1995).
This case involved the enforceability of a “forum selection clause” in a contract. It was not a horse case, but in the opinion upholding the clause, Judge Merryday raised a question in a footnote about whether horse purchase contracts between a California buyer and an Ocala, Florida seller could stipulate to venue in Lexington or Louisville, Kentucky, “where many lawyers and judges enjoy a lifetime of experience with the nuances of the equine industry?”

Coronia v. American Reliable Insurance Co., 999 F. Supp. 299, 1998 WL 148420 (E.D.N.Y. 1998).
Insured, who raced horses in New York, brought action in New York against Canadian insurer and broker. Broker moved to dismiss for lack of jurisdiction. The court held that broker’s activities in soliciting the coverage in New York constituted doing business in New York so as to justify jurisdiction over the broker.

Dall v. Kaylor, 558 A.2d 78 (Vt. 1995).
Vermont resident sued Maryland defendants from breach of warranty in connection with the purchase of a horse. The Vermont Supreme Court held that the courts had jurisdiction over the Maryland residents because they advertised their business nationally.

Falcon v. Faulkner, 903 P.2d 197 (Mont. 1995).
Breeding contract provided that the mare owner could return a subsequent year if mare failed to get in foal the first year. However, assignor of the breeding contract caused stallion owner to refuse the second breeding because mare owner had not paid for the contract. Mare owner sued assignor and stallion owner in Montana, but they failed to appear. The court refused to set aside the default judgment entered against them.

Garner-Roe v. Anderson, 894 S.W.2d 223 (Mo. App. 1995).
Default judgment was entered against horse owner on claim for boarding and training fees. Appeals court held that judgment should have been set aside because owner had a meritorious defense and because of misdeeds of plaintiff.

Gluck v. Fasig-Tipton Co., 310 N.Y.S.2d 809 (Special Term 1970).
Buyer of mare at New York auction sued Kentucky veterinarian who falsely certified that mare was pregnant. The court held that New York did not have jurisdiction over the veterinarian, as the exam and certification occurred in Kentucky, not New York, even though the veterinarian knew the certification would be used in a New York auction.

Hoffmann v. FasigTipton New York, Inc., 1991 WL 5867 (S.D.N.Y. 1991).
Disgruntled purchaser of horse at auction sought to stay arbitration proceeding brought by auction company by filing a claim in New York state court. The defendant auction company removed the case to federal court on the basis of diversity jurisdiction, even though it was a New York corporation. The federal court remanded the action to state court because the removal was improper, holding that the auction company was not a mere nominal party for purposes of diversity jurisdiction.

Marsh v. Illinois Racing Board, 689 N.E. 2d 1113 (Ill. 1997).
Owner and driver of standardbred horses had his license revoked for allegedly engaging in an unlawful betting scheme. He appealed to the decision to the circuit court of Cook County, which stayed the administrative decision pending review. The licensing board sought an emergency order from the Illinois Court of Appeals, which set aside the stay of the circuit court. The owner/driver appealed that decision to the Illinois Supreme Court, which ruled that the Court of Appeals had no authority to set aside a lower court stay.

Moyglare Stud Farm, Ltd. v. Due Process Stable, Inc., 562 F. Supp. 289 (S.D.N.Y. 1983).
Buyer, a New Jersey corporation whose principal resided in New York, revoked acceptance of horse purchased from seller, a Irish company. The seller sued for a declaration that the revocation was invalid, in federal court in New York. The court held that venue was proper there, although neither party resided in New York, because the cause of action arose in New York.

Saratoga Harness Racing, Inc. v. Veneglia, 897 F. Supp. 38 (N.D.N.Y. 1995).
Harness track located in New York sued New Jersey owner’s association in New York. The district court held that the New York court had jurisdiction over claim because simulcasting agreement was a contract to provide services in New York.

Simpson v. Widger, 709 A.2d 1366 (N.J. Super. A.D. 1998).
Buyer of show horse in 1989 sued seller for fraud and breach of warranty when the horse developed ringbone disease in 1994. The seller allegedly assured the buyer that the horse was sound. The court, relying on Norton and Sessa, that the warranty of “soundness” meant that the horse was “serviceably sound”, not free from problems that could affect the performance of the horse. The court also held that no fraud had been shown because there was no evidence that the seller believed that the presence of ringbone might affect the horse’s serviceability and resale value. Finally, the court held that limitations had run on the warranty claim, despite the delay in discovery of the defect.

Stewart v. Shanahan, 277 F.2d 233 (8th Cir. 1960).
Buyer sued in federal court for misrepresentation and breach of warranty upon a purchase of $3,750 show horse. The district court dismissed buyer’s claims for mental anguish because they were unrecoverable under these claims. The buyer thus did not have a sufficient amount in controversy to invoke diversity jurisdiction in federal court. The Court of Appeals reversed, holding that if the mental distress allegations were made in good faith, jurisdiction in federal court was proper.

White v. Roberts, 454 S.E.2d 584 (Ga. App. 1995).
Purchasers of horse sued sellers and veterinarian for fraud and breach of warranty in connection with the sale of a horse in Nebraska. The Georgia court ruled it did not have jurisdiction over the Nebraska defendants.

Case Summaries

Ball Homes, Inc. & Lochmere Development Company v. Andover Golf & Country Club, Inc. and Whitaker Bank (2017-CA-885, 1038& 1047), Fayette Circuit Court 17-CI-640, 986 & 1360

ANDOVER GOLF & COUNTRY CLUB LITIGATION:   A flurry of litigation commenced April 2017 involving the foreclosure by Whitaker Bank of the Andover Golf Course property which includes the clubhouse and pool.  With the Andover entity apparently "handing over" the property to Whitaker in February 2017, Whitaker filed a foreclosure action (read the Complaint) in the Fayette Circuit Court (case #17-CI-640) on February 17, 2017, and quickly obtained an Order of Sale (read the Sale Order with disclosures for the sale).  Whitaker appears to be trying to strip off the restriction filed of record in the Fayette County Clerk's office that requires the property to be continuously used for a golf course by way of a separate Declaration of Rights lawsuit it filed March 15, 2017.  (Read case # 17-CI-986) Declaration of Rights Complaint).  The original developers of the property (Ball Homes, Inc. and Lochmere Development Corporation/Troy Thompson) moved to intervene in the foreclosure case to protect the development and to enforce the requirement that the golf course be maintained and used as a golf course.    They challenged Whitaker's efforts (see Motion to Dismiss) and filed a separate action, Fayette Circuit case # 17-CI-1360 (read the Complaint) to enforce the restrictions that require the property to continuously be used for a golf course that includes certain amenities of a clubhouse, restaurant and pool. The Developers filed a motion for temporary injunction asking the court to order Andover Golf and Country Club and Whitaker Bank and any successors, assigns or purchasers to open, operate and properly maintain the golf course and club.  Read the April 26, 2017 Motion.  Numerous homeowners' associations intervened in the cases by the time of the injunction hearing. On June 6, 2017, the Fayette Circuit Court granted the request of the Developers for a Temporary Injunction to require Whitaker Bank to maintain the property as a golf course and to operate the course.  Read the Temporary Injunction.  In June 2017, the Developers filed a motion with the Court pof Appeals to challenge the $1 Million Bond set by the trial judge.  Whitaker filed a similar motion challenging the injunction and seeking to dissolve it.  Those motions remain pending with the Court of Appeals. During the litigation the Developers issued letters to the Andover residents fully explaining their position and intent.  Read the April 25, 2017, Letter.  Read the July 25, 2017, Letter. The homeowners' associations then surprisingly challenged the standing of the Developers and argued that the Developers had no right to enforce the golf course restriction, nor any legal duty or obligation to enforce the restriction.  Whitaker joined in the standing challenge and further argued that the restriction of record is not enforceable.  As a result of the associations taking a position adverse to the Developers, several individual property owners intervened in the actions to express and protect their rights and position which is consistent with the position and arguments of the Developers.  In an Opinion and Order entered September 20, 2017, the trial court ruled that the Developers did not have standing to enforce the restriction even though the restriction is specifically for the benefit of and in the name of the Developers.  Read the Opinion.   Read more ›
Filed Under:

Behr Properties, LLC, The Beer Trappe, Inc. and Behr Enterprises, LLC v. Ashland Properties, et al. (2017-CA-1155, 17-CI-2156, Fayette Circuit Court)

The Behr entities filed an action against seeking an immediate injunction to validate its trespass through another business property.  The trial court denied the request and granted the property owner's request by cross motion for injunction prohibiting the trespass.  Behr appealed the temporary injunction to the Court of Appeals under CR 65.07.  On September 20, 2017, the Court of Appeals denied Behr's request to dissolve the injunction entered in favor of Ashland Properties and other defendants.  The injunction prohibits Behr and the other plaintiffs from trespassing on the defendants' property.  See the Court of Appeals Order Denying Motion for Interlocutory Relief; and see the Fayette Circuit Court's June 27, 2017, Temporary Injunction. Ashland Properties is seeking sanctions against Behr based upon the failure to comply with the Court's Temporary Injunction. Read more ›
Filed Under:

Talley v. Paisley (2016-SC-92-DG, Fayette Circuit Court, 13-CI-1952)

On August 24, 2017, in a case concerning a cohabiting, unmarried couple, the Kentucky Supreme Court affirmed the Court of Appeals' conclusion that a cotenant of real property, including one who holds as joint tenant with right of survivorship, is entitled to contribution from other cotenants with respect to his or her payments toward liens on the property in dividing equity from the sale of the property.  See the Opinion of the Court by Justice VanMeter. Read more ›
Filed Under:

Lexington Herald Leader v. University of Kentucky

Update of the court's rulings of June 27, 2017:  In an action brought by the Lexington Herald-Leader, the Fayette Circuit Court held that the University of Kentucky violated the Kentucky Open Records Act by refusing to disclose documents received and discussed by the University’s Board of Trustees during an ostensibly open “dinner meeting” for which it prepared no agenda, creating the misimpression that the dinner was merely a social event. Although the University attempted to invoke the attorney-client privilege as to a PowerPoint presentation made during that dinner meeting, the Court found that the Board’s decision to receive the report in an open meeting reflected a complete lack of any expectation of confidentiality. The documents pertained to the University’s evaluation of its billing issues that arose during its now severed relationship with the Appalachian Heart Center in Hazard, Kentucky.  See the Opinion and Order  and the Order to place records under seal. HERALD LEADER OPEN RECORDS REQUEST TO UNIVERSITY OF KENTUCKY, DECEMBER 2016:  The New York Times published an article on December 2, 2016, addressing the pending litigation involving the Kentucky Kernal Open Records request.  See the article. HERALD LEADER ATTORNEY GENERAL’S OPINION AUGUST 2016: In the newest round of efforts to shed light on the activities of UK, the Attorney General issued an August 31, 2016 (16-ORD-193), opinion addressing the refusal of UK to provide documents in response to a Herald Leader Open Records request for matters involving the Hazard cardiology practice acquired by UK and the expenses and fees paid by UK or KMSF to their lawyer and law firm Sheppard Mullin since 2013. The AG determined that UK’s refusal to provide records for in camera inspection by the AG to consider UK’s asserted exemptions violated the Open Records Act. HERALD LEADER ATTORNEY GENERAL’S OPINION JULY 2016: We are pleased to have had the opportunity to assist the Herald-Leader in its commitment to the transparency in government that is protected by both the Open Meetings and Open Records Acts. The information presented at the Trustees’ dinner meeting directly concerned the University’s management of funds, and so is exactly the type of information that our legislature recognizes that the citizens of the Commonwealth must receive in order to hold their public entities accountable. Although we have not yet received a response to our request to the Attorney General for the documents presented during the meeting, we are optimistic that they will soon be provided to the Herald-Leader. We also believe that, because the University chose to have an open meeting, Kentucky’s Open Meetings Act requires that minutes be prepared for the meeting, and those minutes must now be provided. The Attorney General’s Opinion reflects his agreement. Read the article here. UK reports as of August 9, 2016, in the Lexington Herald Leader that it intends to appeal the AG’s decision.   Read more ›
Filed Under:

Bonvillain v. O'Bryan (2016-CA-357, Fayette Circuit Court, 15-CI-4186)

On June 23, 2017, the Court of Appeals affirmed the Fayette Circuit Court.  On a matter of first impression, the COA agreed with the attorneys at MGM that an assignment of a right to receive royalties from a copyright is not testamentary in nature, rather is a transfer of a contract right.    The formalities of a will are not required to validly transfer the royalty right to be effective at the death of the assignor.  Read the ruling. Read more ›
Filed Under:

Lexington Rental Homes, LLC v. Saffery (2017-CA-1114, 16-CI-4242, Fayette Circuit Court)

On June 5, 2017, the trial court issued an opinion and order and granted summary judgment to the landlord over a lease dispute and amounts owed by the tenant.  The ruling included recovery of attorneys' fees under KRS 383.660 due to the willful breach of the lease.  Read the ruling. In July 2017, the tenant appealed to the Court of Appeals.  The appeal remains pending. Read more ›
Filed Under:

Sexton v. Bean (2015-CA-931, Fayette Circuit Court, 13-CI-705)

Former owner of real property sued to void the deed of conveyance from almost five (5) years earlier alleging that his and his wife’s signatures were forged. In deposition testimony both former owner and wife confirmed signatures were not forged on deed. Trial court granted summary judgment to current owner of real property and further awarded recovery of a portion of her attorneys’ fees and costs incurred in the defense of the action because Plaintiff’s allegations were contrary to his actual testimony. Plaintiff/former owner appealed.  The Court of Appeals issued its Opinion Affirming on May 12, 2017, in Sexton v. BeanRead the trial court's Order and Judgment › Real Estate/fraud/void deed based on forged signatures   Read more ›
Filed Under:

Agnich v. Tyler (2016-CA-653, Fayette Circuit Court 13-CI-2538)

Same-sex parents shared equal timesharing and joint custody of their autistic twins, and had entered an agreement that they would each remain in the same school district until the children graduated from high school. The twins' biological mother filed a Motion to relocate with the minor children to another state, and the trial court granted the motion over the non-biological mother's objection. The Court of Appeals vacated and remanded, finding that no evidence supported the trial court's conclusion that the children would have better resources if they moved.  The Court of Appeals determined that "a finding that the move is in LaDonna's personal interest is not the same as a conclusion that the children's interests will be benefited." Read the Opinion. Read more ›
Filed Under:

Prime Finish, LLC and Cameo, LLC v. ITW Deltar IPAC (08-CV-438-GFVT USDC Eastern District of KY)

The Court entered its Memorandum Opinion & Order May 5, 2017.  In a contract dispute arising from the painting of plastic automotive parts, the United States District Court for the Eastern District of Kentucky found that an issue of fact existed as to whether an “early termination fee” provided in the contract constituted a true liquidated damages provision, such that the plaintiff’s recovery would be capped at the amount of the fee, or was intended as compensation solely for the damage caused by early termination. The Court denied the defendant’s motion for partial summary judgment on this basis, permitting the plaintiff to pursue its a claim for the early termination amount as well as actual damages before the jury. Read the Opinion. Read more ›
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Gadd v. Hensley (2015-CA-1948 and 2016-CA-164, Garrard Circuit Court, 13-CI-308)

The Court of Appeals by Opinion issued March 24, 2017, held that the Garrard Circuit Court erred in holding that deed restrictions prohibited short-term rentals of residences.  The circuit court's had held that inhabitants of short-term rentals of residential property were not "residents" and therefore the use of the property was not for "residential" purposes and was therefore the operation of a business in contravention of the deed's language.  Arguments presented by the parties presented 3 unpublished Kentucky Court of Appeals cases which the circuit court relied upon in its ruling.  The Court of Appeals address each of the three unpublished cases but determined that upon review of published caselaw on the interpretation of deed restrictions, and in light of there being no prohibition in the restrictions for renting or leasing the property (for any period of time) and in fact the restrictions allow "for  advertising the sale or rental thereof," and because any ambiguity is construed against the drafter and in favor of free use of the property, "the language of the deed does not prevent Gadd from renting his property on a short-term basis which is any amount of time.  On April 7, 2017, the Court of Appeals order the opinion to be published.  Read the Order.  Read the Opinion.  In late April, Hensley filed seeking discretionary review with The Kentucky Supreme Court granted discretionary review on August __, 2017, and Gadd thereafter filed a cross motion for discretionary review. Read more ›
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