Lien On Me

 Unpaid bills can be the ruin of any business. Whether you operate a large training stable or a modest boarding farm, the way you deal with the inevitable client who cannot, or will not, pay the board bill might decide whether your business succeeds or fails. An obvious solution for providers of many services--simply quit the job, cut your losses, and go home--generally is not available to the person who boards or trains horses for others. Unlike a barn painter, who can limit his loss by refusing to finish the job when the client refuses to pay, a person who boards horses assumes responsibility for the welfare of the animals.

Horses neither know nor care whether their board bills are being paid. Blissfully unaware of their owners' financial problems, they continue to eat, occupy a stall or pasture, and require veterinary care and farrier services. A trainer might be able to suspend the conditioning of a client's horse until the bill is paid, but there are both legal and humane reasons to continue providing for the basic needs of the horses boarding at your farm. The result is a delinquent board bill that continues to grow, while your profit margin vanishes.

There are a few things you can do to prevent the problem from ever developing--screen your clients, keep your bookkeeping up-to-date and bill regularly, and address delinquent clients as soon as you become aware of a problem. Sometimes, though, your best efforts are not good enough, and you find yourself with a growing stack of board bills that you know will not be paid.

At this point, you might get some significant help from the laws of your state, if you know where to look. While specifics vary from jurisdiction to jurisdiction, statutes in many states provide for liens in favor of farms that board horses. Often termed "agister's liens" (an agister is a person in the business of boarding livestock for a fee as a bailee), they give the lienholder the right to retain or dispose of property for satisfaction of a debt.

Even if "agister's lien" is an unfamiliar term, chances are good that you have had experience with liens in the past. If you borrowed money to buy a car or truck, for example, the lender probably retained an interest in the vehicle. That interest is a lien, and it protects the lender by creating the right to repossess the vehicle if you do not keep up the monthly payments. A lien also gives the lender the right to recover his money in the event the vehicle is sold before the loan is satisfied.

In theory, at least, an agister's lien statute gives a farm owner the right to sell a client's horse and apply the proceeds of the sale to satisfy the delinquent board bill. In practice, however, things usually are not that simple. Terminology of agister's lien statutes varies from state to state, and it is essential that a farm owner be aware of the nuances of his or her state's law before taking any action involving a client's horse.

In some states, for example, a person who boards horses on a farm leased rather than owned might not be a qualified lienholder. In such a circumstance, an attempt to sell a client's horse to cover a board bill could be conversion, a legal term for taking another person's property without the right to do so. There can be civil penalties, and possibly criminal charges in some states, levied against the seller.

There are many other questions that must be answered based on your state's specific statutes. This article can provide some general direction, but for specific answers, you should consult an attorney familiar with your state and with equine law.

When does the lien take effect?

In some states, the lien comes into existence when the board charges are incurred, without any further action on the part of the farm owner. Some other states' statutes require a farm owner to take some subsequent action, often in court, to obtain the lien (the latter is called "perfecting" the lien).

The distinction is important. If the statute requires some action by the farm owner to perfect the lien, such as posting public notices prior to the sale of the client's horse or filing an action in court, the farm owner has no right to sell or retain the client's horse until the required action is taken. In a state where a farm owner must perfect the lien in some manner, prior sale of the horse could amount to conversion, and the farm owner could wind up with legal bills far in excess of the delinquent board bill.

What happens if the horse is returned to the owner before the board bill is paid?

In some states, the farm owner has a lien on a client's horse only so long as the horse remains in the possession of the lienholder. In those states, your lien will be defeated if you return the horse to the client while the bill is still outstanding. The circumstances under which the client regains possession also can be important. A client who slips onto the farm under cover of night to take back his horse might not defeat the lien, and he or she might be guilty of trespassing as well.

In other states, the lien does not depend on whether the farm owner has retained the horse or returned the animal to the client. In those states where the lien is not defeated by return of the horse to the client, the farm owner retains a secured interest in the horse even after the animal is returned to the client and the lienholder should be able to demand satisfaction of the lien if the horse later is sold.

What are the consequences if the farm owner refuses to return the horse to the client upon demand?

Because of the potential problems that can arise if the horse is returned to the client, generally it is to the farm owner's advantage to keep possession of the horse if at all possible. Some states' statutes give the farm owner the explicit right to retain the horse, while other statutes do so only implicitly. If a farm owner has no right to retain the horse, refusal to return the animal to the owner upon demand could amount to conversion.

If your state's statutes authorize sale of the horse to satisfy the lien, how must the sale be conducted?

State statutes also differ in the requirements they impose for a valid sale to satisfy an agister's lien, and a farm owner must be familiar with the requirements of his or her locale. There might be, for example, time limits imposed by law that a farm owner must observe. A few statutes allow the lienholder to conduct the sale of the horse himself or herself if there is proper notice, but in almost all cases, it is a safer course for the farm owner to enter the horse in a recognized sale, if possible. Satisfying a lien by selling the horse at a recognized auction might generate a higher price, and will make it more difficult for the client to later claim that the horse was not sold for a fair price.

If a horse must be sold to satisfy a lien, how are the proceeds of the sale distributed?

There will be many situations when the farm owner is not the only party with a security interest in a particular horse. A bank that has loaned money to a person to buy a horse probably has a secured interest in the animal (just as the bank retained a lien on your car), and there also might be other statutory liens in addition to the farm owner's lien. In Kentucky, for example, a statutory lien is created in favor of a veterinarian for work done, and the priority of competing interests must be resolved before the proceeds of a sale can be distributed.

In sum, agister's lien statutes create significant rights for a farm owner, but those statutes can be minefields for the unwary. The statutory requirements must be followed or your rights might not be protected. And some agister's lien statutes might allow you to recover only board charges, but not third-party charges such as payments you make to a farrier, veterinarian, or van service.

Some statutes also might be unconstitutional because they do not provide for sufficient due process notice and hearing requirements. If courts in your state have addressed the constitutionality of local agister's lien statutes, a safer course of action might be to sue in state court for the delinquent board bill, then proceed as a judgment creditor. In this way, judicial determination of the validity of the lien will virtually eliminate subsequent questions from the delinquent client.

A final approach, which might be the best of all, is for the farm owner to acquire a security interest in a client's horse before there is any payment problem. This can be done by including in your written boarding contract--which you should have in any case--a clause granting to the farm a security interest in the horse and outlining the procedure for retention and sale of the animal in the event the board bill cannot be paid. When there are no other secured interests in the horse, or in states where the boarding farm's interest is deemed superior, such a contractual arrangement makes selling a horse to satisfy an outstanding bill a relatively simple matter.

Many boarding farms operate without any written contract, however, and even when a contract is used, there are some farm owners who will not insist on a secured interest in a horse for fear of offending a client. For those farm owners, resorting to a statutory lien or proceeding as a judgment creditor are the only options.

No one wants to sell a client's horse to pay a board bill. If you find yourself in that unpleasant situation, however, it is important to become familiar with your state's laws, and to know what those laws allow and require of you. Success of your boarding operation might hang in the balance.

About the Author

Milt Toby, JD

Milt Toby is an author and attorney who has been writing about horses and legal issues affecting the equine industry for more than 40 years. Former Chair of the Kentucky Bar Association's Equine Law Section, Milt has written eight nonfiction books, including national award winners Dancer’s Image and Noor. He teaches Equine Commercial Law in the University of Louisville's Equine Industry Program.

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