The Kentucky Court of Appeals on November 12 unanimously upheld a circuit court ruling that rejected a New York investment firm’s claims against farms and individuals who purchased livestock rights. and horses from Zayat Stables.
Investment Group MGG was embroiled in a fraud and breach of contract lawsuit against Zayat Stables that borrowed approximately $30 million from the company and used its equine assets as collateral, including nine Breeding rights for the 2015 Triple Crown winner American pharoah . Starting in 2017, Zayat began selling some of his assets and did not notify MGG of these transactions.
Zayat sold the following: stallion prospects El Kabeir to Yeomanstown Stud for $500,000; Grade 1 is placed Queen Cleopatra of America (full sister to American Pharoah) sold separately to Hill ‘n’ Dale Ranch for $1.3 million; breeding rights to American Pharoah for LNJ Foxwoods (two rights) and Orpendale (seven rights) for $3.3 million; Breeding rights for bet winners, 3 ranked Lemoona to the Flintshire and Brad Sears farm for $150,000; and 50% interest for stallion Solomini to Saratoga’s McMahon for $125,000.
El Kabeir at Yeomanstown Stud
Zayat eventually defaulted on his loans with MGG in September 2019, and when a liquidation agreement could not be reached, MGG filed his lawsuit on January 21, 2020. About three weeks later, MGG revised its complaint to include farms and individuals that purchased horses and breeding rights. Throughout February and March, the purchaser filed motions of annulment, and all were subsequently approved by Judge Kimberly Bunnell of the Fayette Circuit Court (Ky.) largely on the same basis. juridical.
A provision in the U.S. Food Security Act states: “a purchaser in the ordinary course of business who purchases agricultural produce from a seller engaged in farming activities shall not be required to pay interest secured by the seller.” generates, even though the guaranteed interest is perfected; and the buyer is aware of the existence of such interest.”
Also under the Food Security Act, Kentucky is a “direct notice” state, which means that MGG must meet specific requirements for “direct notice” to secure its rights to horses or livestock rights.
Bunnell’s order notes that MGG did not comply with those requests.
In the Yeomanstown Stud case, Bunnell denied the charges without prejudice (that is, without being permanently dismissed and with the option of being brought back to court) because she felt MGG’s claim may be entitled to a condition known as “fair charging”, that is, in relation to the statute of limitations restrictions. Any legal action regarding the taking of personal property must begin within two years of the alleged misappropriation. Yeomanstown purchased El Kabeir from Zayat Stables on September 20, 2017, and MGG filed a complaint against Yeomanstown on February 11, 2020, more than four months after the statute of limitations expired.
MGG argued in its appeal that the statute of limitations clock does not begin when the transaction occurs but when MGG discovers it has occurred. Courts will allow some lawsuits to be filed after the statute of limitations if — in this case, the sale of El Kabeir — MGG cannot discover the sale easily.
However, the appeals court found that MGG “with reasonable care” could have known about the sale of El Kabeir because it had the right to visit, inspect or appraise Zayat Stables’ equine property or to request an appraisal of the horses. at any time at Zayat Stables’ cost.
“MGG’s failure to exercise these assessment powers is fatal to any claim that the injury suffered by them was ‘inherently unknowable’ within the statutory period,” the appeals court wrote in the order. mine.
The appeals court order affirmed the dismissal of all claims against Hill ‘n’ Dale, LNJ Foxwoods, McMahon, Orpendale, Flintshire, Sears and Bemak NV, which was an offshore company that facilitated transactions for Orpendale and Ashford Stud. The court also sent Yeomanstown’s motion to dismiss back to the circuit court to issue a ruling dismissing all biased claims, meaning the action is permanent and cannot be reviewed. again.
Zayat Stables was placed in the custody of court-appointed recipient Elizabeth Woodward beginning January 22, 2020. With the assistance of Gatewood Bell, Woodward cataloged the stables’ assets, handling the chemicals. barn related menus and maximize the value of the horses through racing, training and sales. As of April 2020, Zayat Stables owns 32 horses raised in 17 different locations and has ownership rights in another 15 that Woodward must track, according to her report. In Woodward’s most recent report filed on February 16, 2021, Zayat Stables was reduced to two horses. As of December 31, 2020, she has collected approximately $1,716,215 in sales and wallet money, and spent $1,136,775 on food bills, training fees, veterinary bills, costs and commissions related to sales. Since Ahmed Zayat filed for Chapter 7 bankruptcy in New Jersey, any net proceeds go to the bankruptcy trustee.
