BILL ANALYSIS
Bill No: SB
254
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 254 Author: Wiggins
As Introduced: February 24, 2009
Hearing Date: April 28, 2009
Consultant: Chris Lindstrom
SUBJECT
Horses: sale, purchase, or transfer.
DESCRIPTION
SB 254 revises horse racing law relative to the sale of
equines. Requires each purchase, sale or transfer to be
accompanied by a written bill of sale signed by the buyer
and seller. Prohibits any person from acting as a dual
agent, as defined, without the knowledge and written
consent of the buyer and seller. Restricts an agent's
compensation to no more than $500 per transaction unless
the amount of compensation is disclosed in writing and the
buyer and seller provide written consent. Enhances
penalties for violations of this section of law.
Specifically, the bill:
1)Defines "equine" to mean a horse of any breed used for
racing or showing, including prospective racehorses,
breeding prospects, stallions, stallion seasons,
broodmares, yearlings, or weanlings, or any interest
therein.
2)Requires any sale, purchase, or transfer of an equine to
be:
a) Accompanied by a written bill of sale or
acknowledgment of purchase and a security agreement
setting forth the purchase price.
SB 254 (Wiggins) continued
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b) Signed by both the purchaser and the seller or
their duly authorized agents or, in a transaction
solely relating to a season or fractional interest in
a stallion, signed by the syndicate manager or
stallion manager.
3)Provides that when a sale, purchase or transfer of an
equine is accomplished through a public auction, the bill
of sale requirement may be satisfied by the issuance of
an auction receipt generated by the auction house and
signed by the purchaser or an agent whom the purchaser
has authorized.
4)Makes it unlawful for a person to act as a "dual agent,"
which is defined as a person acting as an agent for both
the purchaser and the seller, in a transaction involving
the sale, purchase, or transfer of an interest in an
equine without the prior knowledge of both the purchaser
and seller, and the written consent of both the purchaser
and seller.
5)Makes it unlawful for a person acting as an agent for
either a purchaser or a seller or acting as a dual agent
in a transaction involving the sale, purchase, or
transfer of an equine to receive in excess of five
hundred dollars ($500) worth of compensation, fees,
gratuities, or other items of value, related directly or
indirectly to that transaction, from an individual or
entity, including any consigner involved in the
transaction, other than the agent's principal, unless
both of the following occur:
a) The agent receiving the item of value and the
individual or entity giving the item of value disclose
the transfer of that item of value in writing to both
the purchaser and seller.
b) The purchaser and seller each consent thereto in
writing.
6)Requires any person acting as an agent for a purchaser or
seller or acting as a dual agent in a transaction
involving the sale, purchase, or transfer of an equine
shall, upon request by his or her principal or
principals, provide to the requesters, copies of all
SB 254 (Wiggins) continued
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financial records in the possession or control of the
agent pertaining to the transaction. For purposes of
this subdivision, financial records shall not include the
agent's or owner's work product used to internally
evaluate the equine.
7)Provides that any person injured by a violation of this
section of law shall recover treble damages from persons
or entities violating the law, and the prevailing party
in any litigation under this section shall be entitled to
an award of costs of the suit, reasonable litigation
expenses, and attorney's fees. As used in this section,
treble damages shall equal three times the sum of both of
the following:
a) The difference, if any, between the price paid for
the equine and the actual value of the equine at the
time of sale.
b) Any payment made in violation of the new section of
law governing an agent's compensation.
8)Provides that no contract or agreement for payment of a
commission, fee, gratuity, or any other form of
compensation in connection with any sale, purchase, or
transfer of an equine shall be enforceable by way of an
action or defense unless both of the following occur:
a) The contract or agreement is in writing and is
signed by the party against whom enforcement is
sought.
b) The recipient of the compensation provides a
written bill of sale or auction receipt for the
transaction of the equine.
9)Authorizes the California Horse Racing Board (CHRB) to
suspend or revoke the license of any person who violates
this section.
10)Provides that the provisions related to the award of
damages or enforceability of an action shall not apply to
the acts or omissions of an entity or individual engaged
in conducting a public auction of an equine, or the
entity or individual's employees or agents, if both of
the following conditions apply:
SB 254 (Wiggins) continued
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a) The acts or omissions of the entity, individual,
employee, or agent are in furtherance of or pursuant
to the conduct of the public auction of an equine.
b) The entity or individual is appropriately licensed
or authorized to conduct that specific public auction
by CHRB and any other governmental entity whose
permission or authorization is required to conduct the
auction.
EXISTING LAW
Existing law prohibits a person from receiving any form of
compensation in connection with the sale or purchase of a
racehorse, prospective racehorse, stallion, or broodmare,
unless the purchaser and seller have agreed in writing to
the payment of that compensation.
Existing law provides that no contract or agreement shall
be enforceable by way of an action or defense unless there
is a document in writing sufficient to indicate that the
party against whom enforcement is sought or his or her
authorized agent or broker has agreed to the commission,
fee, gratuity, or other form of compensation.
Existing law provides that anyone who receives a
commission, fee, gratuity or any other form of compensation
in violation of this section is subject to treble damages
to the injured purchaser or seller.
Existing law authorizes the CHRB to suspend or revoke the
license of any person who violates this section. Any
transfer of an interest in a racehorse, prospective
racehorse, stallion, or broodmare shall be accompanied by a
written bill of sale setting forth the purchase price.
BACKGROUND
Purpose of the bill. According to the author's office,
"current law lacks clarity and has resulted in
opportunities for unscrupulous individuals to defraud
people in the sale of horses. SB 254 seeks to remedy this
problem by mandating a reliable written record of horse
transactions and punishing, through treble damages and
potential license revocation, those who use equine
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transactions to defraud."
Arguments in support. Stonestreet, the sponsor of the
bill, writes, "[t]he unfortunate reality of the equine
world is that traditionally acceptable industry practices
have resulted in an environment which provides an
opportunity for unscrupulous individuals to defraud others
and when such fraud has been both difficult to detect and
correct. The intent of the statute is leveled at both
correcting the business culture by mandating written
agreements and deterring inappropriate behavior by
providing enhanced damages. The revision does not change
the intent of [existing law], it simply clarifies the
language and improves the efficacy of the statute.
"A substantially similar bill [was signed] into law in
Kentucky in 2006 with universal industry support. Shortly
afterwards, a similar law was enacted in Florida.
Currently, there is an identical bill pending in Virginia
and one in Maryland."
Barretts Equine Limited writes that SB 254 will "require
transparency in equine transactions and will inure to
everyone's ultimate benefit."
Hey & Hey, Attorneys-at-Law write, "Due to the high price
of litigation, many times someone may have a solid case yet
their recovery would be less than the costs involved and it
doesn't make sense to litigate. The clarification of the
treble damages language as well as the insertion of
awarding costs and attorney fees to the prevailing party
would allow many people whose case many not be worth
millions but who have been defrauded to bring a cause of
action. The dual agent and commission provisions will
protect many people involved in the industry. Anecdotal
evidence of "secret" commissions is prevalent throughout
the industry. Once recent situation involved a seller who
was willing to sell a horse for $50,000. The buyer's
trainer knew that their clients were willing to spend
$150,000 and suggested to the seller's trainer that they
sell the horse for $150,000 and the trainer's split the
$100,000 difference without informing the buyer or the
seller. The revision to current law will help protect the
thousands of people who buy and sell horses every year in
California.
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PRIOR/RELATED LEGISLATION
SB 560 (Wiggins), 2007-2008 Legislative Session . Identical
to SB 254 (Wiggins), 2009. Held in Assembly Rules. Never
heard in either house.
AB 1418 (Tucker), Chapter 311, Statutes of 1994 . Provides
that no licensee or any other person may receive a
commission, fee, gratuity, or any other form of
compensation in connection with the sale or purchase of a
racehorse, prospective racehorse, stallion, or brood mare,
unless the purchaser and seller have agreed in writing to
the payment of the commission, fee, gratuity, or other
compensation. No contract or agreement shall be
enforceable by way of an action or defense unless there is
a writing sufficient to indicate that the party against
whom enforcement is sought or his or her authorized agent
or broker has agreed to the commission, fee, gratuity, or
other form of compensation. Anyone who receives a
commission, fee, gratuity or any other form of compensation
in violation of this section is subject to treble damages
to the injured purchaser or seller. CHRB may suspend or
revoke the license of any person who violates this section.
Any transfer of an interest in a racehorse, prospective
racehorse, stallion, or brood mare shall be accompanied by
a written bill of sale setting forth the purchase price.
SUPPORT : As of April 24, 2009:
Barretts Equine Limited
Hey &Hey, Attorneys-at-Law
Stonestreet (sponsor)
OPPOSE : None on file as of April 24, 2009.
DUAL REFERRAL : Senate Judiciary Committee
FISCAL COMMITTEE : No.
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