A group of mortgage-backed lenders accused of selling to third parties without notice by Zayat Stables has lost its case in the Supreme Court of Kentucky in a lawsuit it tries to recover money from mortgage buyers. challenge.
The incident arose when Ahmed Zayat’s Zayat Stables sold a number of horses and breeding seasons that MGG Investments held a lien on horse businesses both inside and outside Kentucky and in the defense of the company. court, did not transfer the proceeds to the lender.
MGG lent Zayat Stables $30 million in 2016, within a year of Zayat’s hybrid American Pharoah won his first Triple Crown in 37 years and went to school. The loan is secured by an agreement that requires Zayat Stables to report to MGG any sale of equine collateral and not to sell the collateral unless otherwise authorized by the agreement.
Some of the mortgage sales described in the lawsuits happened several years before 2020, when both Zayat and Zayat Stables filed for bankruptcy protection in New Jersey. The filing was prompted when MGG received an uncontested judgment of more than $24 million against Zayat Stables at Fayette Circuit Courthouse in Lexington, Ky.
MGG filed a bankruptcy court lawsuit against Zayat and Zayat family members over the proceeds of the sale. After settling a portion of the debt, the lender pursues its value in collateral sold from buyers at the Fayette Circuit Court. MGG’s claims were denied and the Court of Appeal confirmed. The Supreme Court ruling, made on March 23, also confirmed and ended the pursuit of MGG.
The MGG can ask the high court to review its ruling, but such petitions are rarely granted. The decision was unanimous.
The Supreme Court found that Thoroughbreds, even those with valuable breeding rights, and their breeding seasons were “agricultural products” as defined by the federal Food Security Act. 1985. Under that statutory mechanism, the security interest or lien in agricultural products is dissolved upon sale. The court ruled that the FSA, which applies state law contained in the Uniform Commercial Code of Kentucky, treats the property like a commodity like eggs or crops.
Chief Justice Laurance VanMeter wrote: “We hold that the Purebred animals and the right to breed them are agricultural products within the meaning of the FSA and as a result any security interest in those products is forfeited. off when they are sold to their respective buyers”.
Bemak, the business name for Ashford Stud, Coolmore Stud’s North American operations, is among the defendants in the lawsuit. American Pharoah stands in Ashford.
Yeomanstown Stud bought a stallion El Kabeir in 2017 from Zayat Stables; Hill ‘n’ Dale Equine purchased American Cleopatra, a mare, the same year. LNJ Foxwoods purchased two American Pharoah breeding rights from Zayat Stables and Justin Zayat, son of Ahmed Zayat, in 2018.
According to the opinion, Orpendale purchased 100% of what the court called “American Pharoah’s breeding quality, including all post-retirement titles,” in 2015. Members of the Zayat family retain the transferable lifetime breeding rights to the stallion . In 2019, Orpendale purchased seven livestock rights from Zayat Stables and the Zayat family.
McMahon of Purebred Saratoga bought 50% of the shares of recital from Zayat Stables in 2019, and then McMahon bought Solomini’s other half from Orpendale after it received interest from Zayat Stables. MGG releases only the lien on the second half of the interest.
Flintshire Farms, managed by Brad Sears with the ranch organisation, purchased the interest in lemon then immediately buy him from Zayat Stables.
