LIVESTOCK LIENS THAT PERTAIN TO THE HORSE INDUSTRY
Livestock Liens That Pertain To The Horse Industry
By Theresa LaVoie
About Theresa LaVoie
Ms. La Voie has been involved with horses for more than 20 years both as an equine law attorney and an avid equestrian who breeds and shows her own Tennessee Walking Horses both in California and Tennessee. She also enjoys carriage driving and has competed in three-day-combined driving events. Prior to these activities, Ms. La Voie’s Arabian horse participated for many years on the Arabian Horse Show Circuit in dressage and jumping.
Ms. LaVoie's equine law practice focuses on sales and leasing, boarding and breeding contracts, liability releases, horse related accidents, stallion syndication, and veterinarian liability concerns. She also lectures on equine legal matters and has been designated as an equine law expert witness.
For those in the equine boarding or training business, timely payment for services rendered can greatly impact an equine business. Failure to promptly pay professionals can create not only short term cash flow problems, but also impact a businesses’ long term economic viability. A common complaint from equine service providers is that their clients fail to pay them for the services that they have rendered. For the attorney, the critical question is a remedial one: What remedies exist for the collection of unpaid fees?
Livestock Service Lien
(Cal. Civil Code § 3080, et seq.)
All providers of services to horses, other than the breeders and veterinarians, must look to Civil Code
§ 3080, et seq. for a possessory lien to satisfy outstanding fees and costs.
“Livestock” means any cattle, sheep, swine, goat, or horse, mule, or other equine.
A “livestock servicer” includes any individual, corporation, partnership, joint venture, cooperative, association, or any other organization or entity which provides livestock services.
“Livestock services” include all grazing, feeding, boarding, transportation and general care, including health services obtain or provided by livestock servicer. It is somewhat of a catch all in that it includes “other services” rendered to livestock. Under Civil Code § 3080, a livestock servicer (stable) is granted an automatic general lien on the livestock in its possession to secure the performance of all obligations of the owner of the livestock to the livestock servicer. No filing is necessary – the lien continues as long as the horses are in the statute’s possession.
The lien has priority over all other liens and security interests in the animal and arises as the charges for the livestock become due. See Revised Cal. Commercial Code § 9-333). However, the lien is dependent upon the stables. The lien covers the owner’s original contract obligations for services provided, reasonable charges for the services provided to the animal after the lien arises, the lienholder’s costs of enforcement of the lien, including attorneys’ fees.
The stable can use any peaceful and lawful means to prevent the horses from leaving the property, such as padlocking the horse’s enclosures. If the horse’s owners arrive to take the horses, the boarding stable can call law enforcement to asset them in preventing the horses from leaving.
However, the boarding stable cannot lawfully sell the horses to satisfy the lien without a court order. If the stable improperly sells the horse without a court order or otherwise follow the statutory procedure before selling the boarder’s horses, the boarder may have a legal claim for “conversion” which is essentially a civil form of theft, in the amount of the horses’ fair market value, plus ay reasonable expense that the boarder incurred in pursuing the horses. However, the boarding stable would still have a legal claim for the outstanding board amount (less any proceeds that the stable received from the sale of the horses), and the amount of this claim typically exceeds the horses’ worth. Therefore, a boarders’ suit for conversion would only be worthwhile if the horses’ fair market value greatly exceeds the amount of the outstanding board, which is not usually the case.
I. Rights and Remedies of Lienholder
Once the lien arises, the lienholder has a choice of options consisting of:
(a) Retaining possession of the animal and charge the owner for the reasonable value of providing livestock services until the owner’s obligation has been paid by the owner. (This is not the most practical course of action as the lienholder continues to incur costs which may never be paid by an unscrupulous owner who doesn’t care about the horse, or who is not in a position to pay.)
(b) Selling the horse after:
Proceed to sell the animal after filing a complaint and seeking a court order granting the sale prior to receiving judgment on the complaint. (Provisional Remedy)
File a complaint and receive a judgment on the claim authorizing the sale. Or if the claim is reduced to a judgment, any execution of the judgment has the same priority as the livestock service lien and the lienholder may purchase the animal at the judicial sale held pursuant to the execution on the judgment and thereafter hold the livestock free of any liens or security interests on the livestock. Civil Code § 3080.02(c).
Obtain a release of interest in the animal from the owner.
Retain possession of the horse after obtaining a release of interest from the owner.
II. Release of Interest Procedure
After the lien has arisen, the lienholder may propose to retain the animal in satisfaction of any portion of the claim or all of the claim against the owner. The proposal must be in writing and written notice of the proposal must be given to any person claiming a lien upon or security interest in the livestock who is on file with the Secretary of State.
If, within 21 days after the notice was sent, the lienholder receives an objection in writing from a person entitled to receive notification, the lienholder must account for the proceeds pursuant to the court ordered sale. If the lienholder receives no objection, then the lienholder may retain the livestock in satisfaction of all or a portion of the debt upon the owner’s execution of a release of interest. Upon receiving an executed release of interest, the lienholder may conduct a sale of the horse.
The release shall contain all of the following information in simple, nontechnical language:
A description of the livestock covered by the release and the releasing party's interest in the livestock;
A statement of the amount of the lien to which the livestock is subject;
A statement that the releasing party has a legal right to a hearing in court prior to any sale of the livestock to satisfy the lien;
A statement by the releasing party that it is giving the lienholder permission to sell the livestock;
A statement of the extent to which the releasing party gives up any interest it may have in the livestock or in the sale proceeds of the livestock; and,
To the extent that the release is not given in full satisfaction of the lienholder's claim or claims against the releasing party, a statement by the releasing party that it is aware that the lienholder may still have a claim against it after the release has been executed.
III. Sale of Livestock as Provisional Remedy
Under Civil Code § 2080.03, upon the filing of the complaint, or at any time thereafter prior to judgment, the lienholder may apply to the court in which the action was commenced for an order authorizing sale of livestock.
(a) The application shall include all of the following:
A statement showing that the sale is sought pursuant to this chapter to enforce a livestock service lien;
A statement of the amount the lienholder seeks to recover from the defendant and the date that amount became due;
A statement setting forth the reasons why a sale should be held prior to judgment;
A description of the livestock to be sold and an estimate of the fair market value thereof; and
A statement of the manner in which the lienholder intends to sell the livestock. The statement shall include, but not be limited to, whether the sale will be public or private, the amount of proceeds expected from the sale, and, why the sale, if authorized, would conform to the standard of commercial reasonableness set forth in Section 3080.16.
(b) The application shall be supported by an affidavit or affidavits showing that on the facts presented therein, the lienholder would be entitled to a judgment on the claim upon which the action is brought.
(c) A hearing shall be held in the court in which the lienholder has brought the action before an order authorizing sale is issued. Except as provided in Section 3080.15, or as ordered by the court upon good cause shown, the defendant shall be served with a copy of all of the following at least 10 days prior to the date set for hearing:
A summons and complaint;
A notice of application and hearing; and
An application and all affidavits filed in support thereof.
IV Rights of the Debtor
(a) Opposition by Debtor
If the owner/debtor wants to oppose the motion for livestock lien sale, a notice of opposition must be served upon lienholder no later than three days prior to the hearing date. The opposition must state grounds for opposing the order, supporting affidavits and whether the owner is prepared to file an undertaking, including the estimated amount of the undertaking and the basis for the estimate. Civil Code § 3080.05.
The undertaking must be in an amount equal to the sum of (1) fair market value to the animal and (2) the cost incurred by lienholder to assembled and turn over the animal.
The court may enter an order directing the lienholder to release the animal to the owner or owner’s agent conditioned upon the filing of the undertaking. Once the owner files the required undertaking, the lienholder is obligated to turn over possession of the animal to the owner.
V. Problems With Statutory Livestock Liens
There are a number of problems with statutory livestock liens that tend to make them more of a burden than a help to the livestock service provider.
(a) Procedures can be cumbersome. As for the livestock lien § 3080 et seq., there are a great deal of steps and procedures that must be followed. Notices must be given, a Complaint must be filed, motions for order authorizing sale must be drafted and served, hearings must be attended, and sale can be delayed until judgment on the Complaint is obtained.
(b) The process can be costly. The livestock provider will usually need the assistance of an attorney to comply with the judicial process. This may cost more than the horse is worth. The livestock provider still in possession of the horse will still have to care for the horse and the livestock provider’s cost and expense will continue to accumulate. Unless the horse is wroth a substantial sum, this accumulation of expenses can quickly surpass the worth of the horse.
VI. Courses of Action To Reduce Negative Effect of the Statutory Liens
Do not let debt accumulate before taking action. As soon as payment is not made, give notice to the debtor. If payment is not made in 30 days, take debtor to small claims court. Once a judgment is obtained for the debtor, have the sheriffs levy on the horse and conduct a sale. The livestock servicer will have to pay for the cost of the sale, but that amount is added to the judgment.
(a) Create a security interest in the horse as collateral for payment of the services. This can be done by creating a security interest agreement in the contact of the services provided.
(b) Put in or attach to the service agreement a Waiver of the hearing requirements of the livestock service lien law. Cal. Civil Code § 3080 et seq. The Waiver should be conspicuous in bold type, it should be initialed by the owner/debtor; it should contain wording that the owner/debtor has knowledge of his or her rights under § 3080 et seq. to a hearing, voluntarily waives those rights; after dispatch of notice for payment if payment is not made in 30 days then owner/debtor voluntarily releases interest in horse to livestock servicer/creditor in satisfaction of the debt. If the creditor sells the horse, then proceeds are to be distributed in accordance with Civil Code § 3080.16. (You would still have to give notice to other interested parties). This is untested; however, voluntary waivers are generally upheld except for intentional or willful conduct.
VII. Foreclosing on Collateral
After default, the secured party can take possession of collateral, if secured party can do so without breach of peace. If a secured party can not take possession of the collateral without breaching the peace or obtaining an agreement with the debtor to release possession of the collateral, the secured party will have to proceed to judicial process.
VIII. Disposing of Collateral
After default, a secured party may sell, lease, or otherwise dispose of any or all of the collateral in its present condition. The disposition of the collateral, including the method, manner, time, place, and other terms, must be commercially reasonable. If commercially reasonable, the secured party can dispose of the collateral by public or private sale. See Cal. Commercial Code § 9-610.
IX. Strict Foreclosure on Collateral<
Under California’s Commercial Code § 962, a secured party may accept collateral in full or partial satisfaction of the obligation it secures only if all of the following conditions are satisfied:
(a) The debtor consents to the acceptance, or secured party does not receive a notification of objection from the debtor within 20 days aft the proposal is sent.
(b) Secured party sends notification of the proposal to other parties claiming an interest in the collateral including any other secured party to lienholder that 10 days before the consented to the acceptance, held a security interest in or other lien on the collateral perfected by the filing of a financing statement, and secured party does not receive notice of objections with 20 days after notification of the proposal is sent.
X. Failure to Comply
Under California Commercial Code § 9624, if the secured party does not comply with the code, a court may order or restrain collection, enforcement, or disposition of collateral. And any failure to comply will make that person liable for damages in the amount of any loss caused by such failure.
The above article and all articles in this website are not intended to be legal advice. Readers should consult an attorney to determine how the law applies to their particular circumstances. Also, please understand that the law constantly evolves and changes. Certain of the decisions and legal propositions quoted in the above article may be out of date or superseded. Questions or comments about the above article can be directed to its author, Theresa LaVoie.