mess when an owner dies

[Mac]

Hi I check in and read messages once in a while but don't post that often. My topic is to remind any of you owners to think about having "in case of death or disablement" clauses when partners go in together to buy horses. One of my partners on a two-year-old Aragorn colt just died, and I am left with the third partner, whom I'd never met, plus an heir, an 18 year old kid whose trustee has not yet made a decision in regard to the fate of the horse ownership, plus is not paying his share of the bills for two months now. Obviously you can imagine how my trainer is enjoying not getting completely paid on a total of four horses including mine and three others now partially owned by this 18-year-old.

On top of that, my partner who died also was the managing partner of a syndicate of other horses with fractional owners, and their new representative assumed that this horse was supposed to be in that syndicate, which is not the case, and has attempted to figure out how to buy the heir out and place the horse under management. I finally helped him understand that the horse is not in that syndicate and that myself and the surviving partner should have first shot at buying out the heir and/or each other. What a mess.

[KBEquine]

Hi Mac:

That sounds like a mess. Was there any wording at all in the partnership about what happens if any partner stops paying their share for any reason?

Or for anyone else in a partnership, if you have words of wisdom on what to put into a partnership agreement on this point, I'd love to hear it.

We'd thought about partnerships at various times, but I always wondered what happened when someone just stopped paying.

[BlazingColours]

That does sound like a mess... hope it is cleared up soon and perhaps the 18 yr old will get into it with you all. Good luck!

[Mac]

kb i don't have the agreement with me so I can't cite it right now, but most of the ones I am in (about 3 different partnerships) do give the other partners the right to assume ownership if the non-paying partner has been notified by by certified mail and has had 90 days to correct his/her non-payment. Something like that. But i don't know how the clause can stand up if it is ever tested in court.

If you email my privately I'll be happy to send you a sample of the one we are using the most.

My partnerships thus far have worked out very well. No arguments, no friction whatsoever. But we sure didn't see this coming!

[Mac]

thanks blazingcolours!

[LB]

Thanks for the reminder, and I hope you are able to get things cleared up soon! It seems to me that the 18 yo's trustee should be required to pay outstanding bills regardless of what he ultimately decides to do about horse ownership.

If you do have the right to assume ownership (per your partnership agreement) I'd get that certified letter in the mail asap. At the very least I'd probably try to use that clause as a cudgel when dealing with the trustee since presumably the Aragorn colt has value that would be lost to the estate if the other partners simply took the colt over for unpaid bills.

[Shammy Davis]

There was a great article on this in the April 2000 Owners' Circle (published by TOBA). I tried to google it to give you a link, but TOBA has changed the format for its website and it was nowhere to be found.

If you can find it, the title was Extracting Oneself from a Non-Paying Partner. It was written by Steve Swartz. The old link was www.toba.org/ownership/partnership_extraction.html

Steve Swartz was/is a owner/trainer at Santa Anita. He is also a retired attorney who specialized in veterinary malpractice suits.

Even though your partner is deceased, I'm pretty sure the estate is responsible for his financial obligations.

This article gives a number of suggestions about handling the non-paying individual and setting a value on the horse so that all parties are clear on their responsibilities. He suggests that if the parties cannot come to agreement, their is a judicial process known as "partnership dissolution" lawsuit. I'm pretty sure the points Swartz offers will stand a court test and might be helpful.

I hope you get this remedied. It is truly a sad state of affairs for the paying partners. Holy cow, when you get a lawyer involved, this could take more than a few months. Best of luck.

[Mac]

shammy thanks. Supposedly the trustee and attorney have finally looked at the horse partnership details and have assured the new syndicate manager that they will soon address this, but too much longer and we'll have to all do something. I'll follow up on your links...appreciated!!!

[Mac]

thank you also LB!

[Mac]

thank you also LB!

[Dave C]

The other thing you (and your trainer) should check out is what the laws are regarding unpaid stabling bills. In my jurisdiction it only takes 30 days of unpaid bills to allow the boarding party to seize the horse and sell it at public auction to cover the board. This is very useful method for getting rid of non paying partners as the paying partners show up at the sale and buy the horse with clean title. Many jurisdictions have stabling acts left over from the first half of the 20th century when it was a major issue.

[Shammy Davis]

Dave C posted:

. . . In my jurisdiction it only takes 30 days of unpaid bills to allow the boarding party to seize the horse and sell it at public auction to cover the board. . .

In some states the above is known as a "livestock servicer lien right."

The problem w/this action is that it forces the sale of the horse, not necessarily, depending upon the state law, to the remaining original owners or their agents. It sounds to me like MAC wants to keep the partnership going.

Also in some racing jurisdictions, the trainers can go to the stewards and file a financial claim but in this case the horse can be banned from the track until all financial obligations have been fulfilled.

[Mac]

thanks Dave C and Shammy,

the Aragorn colt is training well so I definitely hope to remain involved with him and/or end up with more of him if need be. Everything that is being suggested is good to know and I think my trainer would like to hear and read what you guys have experienced and are suggesting. Many thanks, as we can't let the trustee continue too much longer without giving us all some resolution and letting us either buy the horse or get the bills caught up and let the new heir participate!

[Dave C]

You're right Shammy it does force the sale of the horse. But, given that the sale requirements are only that the sale be public, not advertised, if the horse goes through the local auction market, the only people who know the value of the horse are the partners that the trainer wants to keep involved. They get to bid on the horse with their own money, given that anything in excess of the board goes back to the owners. The point of the trainer doing this is that he can keep the horse and the partners that he wants, eliminating the partner that is not paying his fair share.

[HR LLC]

Mac,

From what I read, it appears you have a general partnership on the aragorn horse. Is that correct?

If so, each partner in a general partnership has personal liability for all of the partnership debts. In other words, you and the 2nd partner have to cover that outstanding training bill.