Mull Enterprises Limited D/B/A Yeomanstown Stud v. Mgg Investment Group Lp

RENDERED: NOVEMBER 12, 2021; 10:00 A.M.
TO BE PUBLISHED

Commonwealth of Kentucky
Court of Appeals

NO. 2020-CA-0478-MR

MGG INVESTMENT GROUP LP APPELLANT

APPEAL FROM FAYETTE CIRCUIT COURT
v. HONORABLE KIMBERLY N. BUNNELL, JUDGE
ACTION NO. 20-CI-00248

MULL ENTERPRISES LIMITED
D/B/A YEOMANSTOWN STUD APPELLEE

AND NO. 2020-CA-0434-MR

MULL ENTERPRISES LIMITED CROSS-APPELLANT
D/B/A YEOMANSTOWN STUD

CROSS-APPEAL FROM FAYETTE CIRCUIT COURT
v. HONORABLE KIMBERLY N. BUNNELL, JUDGE
ACTION NO. 20-CI-00248

MGG INVESTMENT GROUP LP CROSS-APPELLEE
AND NO. 2020-CA-0821-MR

MGG INVESTMENT GROUP LP APPELLANT

APPEAL FROM FAYETTE CIRCUIT COURT
v. HONORABLE KIMBERLY N. BUNNELL, JUDGE
ACTION NO. 20-CI-00248

HILL ‘N’ DALE EQUINE HOLDINGS, INC.;
LNJ FOXWOODS, LLC; MCMAHON OF
SARATOGA THOROUGHBREDS, LLC; AND
ORPENDALE UNLIMITED COMPANY APPELLEES

AND NO. 2020-CA-0900-MR

MGG INVESTMENT GROUP LP APPELLANT

APPEAL FROM FAYETTE CIRCUIT COURT
v. HONORABLE KIMBERLY N. BUNNELL, JUDGE
ACTION NO. 20-CI-00248

BEMAK N.V., LTD. APPELLEE

AND NO. 2020-CA-0960-MR

MGG INVESTMENT GROUP LP APPELLANT

-2-
 APPEAL FROM FAYETTE CIRCUIT COURT
v. HONORABLE KIMBERLY N. BUNNELL, JUDGE
ACTION NO. 20-CI-00248

FLINTSHIRE FARM, LLC AND THOMAS
B. SEARS A/K/A BRAD SEARS APPELLEES

OPINION
AFFIRMING IN PART, REVERSING IN PART,
AND REMANDING

** ** ** ** **

BEFORE: ACREE, GOODWINE, AND JONES, JUDGES.

GOODWINE, JUDGE: MGG Investment Group LP (“MGG”) appeals the

judgment of the Fayette Circuit Court dismissing its claims against Mull

Enterprises Limited d/b/a Yeomanstown Stud (“Yeomanstown”) based on KRS1

413.242. Yeomanstown cross-appeals the circuit court’s determination that MGG

may be entitled to equitable tolling in dismissing its claims without prejudice.

MGG also appeals judgments of the Fayette Circuit Court dismissing

its claims against Hill ‘N’ Dale Equine Holdings, Inc. (“Hill ‘N’ Dale”); LNJ

Foxwoods, LLC (“Foxwoods”); McMahon of Saratoga Thoroughbreds, LLC

(“McMahon”); Orpendale Unlimited Company (“Orpendale”); Flintshire Farm,

1
Kentucky Revised Statutes.

-3-
LLC (“Flintshire”); and Thomas B. Sears a/k/a Brad Sears (“Sears”) under CR2

12.02(f) and granting summary judgment on behalf of Bemak N.V., Ltd.

(“Bemak”). After careful review of the record and applicable law, and

consideration of oral arguments by the parties, we affirm in part, reverse in part,

and remand for entry of a judgment dismissing MGG’s claims against

Yeomanstown with prejudice.

BACKGROUND

Zayat Stables, LLC (“Zayat Stables”) is in the business of “[o]wning,

raising, maintaining, buying, selling, racing, breeding and promoting horses.”

Record (“R.”) at 867. The most well-known of Zayat Stables’ thoroughbreds is

AMERICAN PHAROAH, winner of the 2015 Triple Crown.

In 2016, MGG loaned Zayat Stables $30 million secured by

all of the property and assets and all interests therein and
proceeds thereof now owned or hereafter acquired by any
Person upon which a Lien is granted or purported to be
granted by such Person as security for all or any part of
the Obligations, including, without limitation, all Equine
Collateral.

R. at 748. The financing agreement defines “Equine Collateral” as

all horses, stallions, mares, weanlings, foals,
thoroughbred bloodstock and/or stallion shares, breeding
rights, lifetime breeding rights and/or fractional interests
therein, their offspring and young, both born and unborn,
and/or fractional interests therein, stallion seasons and

2
Kentucky Rules of Civil Procedure.

-4-
 shares, and any other interests in any of the foregoing,
owned by [Zayat Stables] or any of its Subsidiaries,
howsoever classified, whether now owned or hereafter
acquired, and including all substitutions and
replacements thereof.

Id. at 752. Under the financing agreement, Zayat Stables was obligated to report to

MGG any sale of equine collateral. Id. at 809. Zayat Stables agreed not to sell any

equine collateral except as permitted by the agreement. Id. at 819. The agreement

allowed, in part, for sales which were for fair market value and in the ordinary

course of business. Id. at 765. Upon any sale, Zayat Stables was required to

prepay principal with a percentage of the proceeds. Id. at 784.

These appeals involve sales of ownership interests in EL KABEIR,

AMERICAN CLEOPATRA, and SOLOMINI, three horses owned by Zayat

Stables at the time the financing agreement was executed, as well as the sale of the

breeding rights to AMERICAN PHAROAH and LEMOONA. On September 20,

2017, Zayat Stables privately sold EL KABEIR to Yeomanstown for $500,000.

On November 15, 2017, Zayat Stables privately sold AMERICAN CLEOPATRA

to Hill ‘N’ Dale for $1.3 million. Between December 2018 and June 2019, Zayat

Stables sold nine shares of the breeding rights to AMERICAN PHAROAH to

Foxwoods and Orpendale for a total of $3.3 million. On March 6, 2019, Zayat

Stables privately sold the breeding rights to LEMOONA to Flintshire and Sears for

$150,000. On December 3, 2019, Zayat Stables privately sold its fifty percent

-5-
ownership interest in SOLOMINI to McMahon.3 MGG claims none of these sales

were for fair market value and that Zayat Stables did not prepay principal upon

receiving the proceeds from the sales in violation of the financing agreement.

In September 2019, Zayat Stables defaulted on the loan.

Subsequently, MGG sent Zayat Stables a notice of default and reservation of

rights. On January 21, 2020, after failing to reach an agreement for liquidation,

MGG filed suit against Zayat Stables alleging breach of contract and fraud. R. at

1043-46. MGG’s claims against Zayat Stables remain pending before the circuit

court.

On February 11, 2020, MGG amended its complaint to include claims

against purchasers of equine collateral, including the appellees. In relevant part,

MGG claimed intentional interference with contract against Orpendale, replevin

and constructive trust against Yeomanstown, Hill ‘N’ Dale, Foxwoods, Orpendale,

and McMahon, as well as unjust enrichment against Flintshire and Sears.4 MGG

claimed Bemak tortiously interfered with its security interest when Bemak

facilitated Orpendale’s purchase of AMERICAN PHAROAH breeding rights.

3
Zayat Stables previously sold a fifty percent interest in SOLOMINI to Orpendale for $800,000.
Prior to the sale to Orpendale, Zayat Stables obtained a partial release from MGG and, after the
sale, transferred proceeds to MGG in accordance with the financing agreement. R. at 1031-37.
McMahon contemporaneously purchased Orpendale’s ownership interest.
4
MGG also amended its complaint to include claims against individual members of the Zayat
family. These individuals are not parties to these appeals.

-6-
 Yeomanstown moved to dismiss MGG’s claims based on the statutes

of limitations under KRS 413.242 and KRS 413.125. The circuit court granted the

motion, holding KRS 413.242 and KRS 413.125 are applicable and the discovery

rule is inapplicable herein. However, in dismissing MGG’s claims against

Yeomanstown without prejudice, the court also determined MGG may be entitled

to equitable tolling.

The remaining appellees moved for summary judgment and dismissal

of MGG’s claims. In granting the motions, the circuit court determined the Food

Security Act of 1985 (“FSA”) applied to these sales because horses and breeding

rights are “farm products” under 7 U.S.C.5 § 1631(c)(5). R. at 2560.6 The court

further determined, based upon MGG’s own description of Zayat’s business,

appellees were buyers “in the ordinary course of business” who took the horses or

breeding rights free of MGG’s security interest. R. at 2560-61.

These appeals and cross-appeal followed.

5
United States Code.
6
This citation is to the order dismissing MGG’s claims against McMahon. The court’s
reasoning in dismissing the claims against Foxwoods, Orpendale, Hill ‘N’ Dale, Flintshire, and
Sears, as well as granting summary judgment in favor of Bemak, is essentially identical to its
reasoning in the McMahon order.

-7-
 STANDARD OF REVIEW

A motion to dismiss under CR 12.02(f) for failure to state a claim

upon which relief may be granted is reviewed de novo. Carruthers v. Edwards,

395 S.W.3d 488, 491 (Ky. App. 2012) (citation omitted).

The court should not grant the motion unless it appears
the pleading party would not be entitled to relief under
any set of facts which could be proved in support of his
claim. In making this decision, the circuit court is not
required to make any factual determination; rather, the
question is purely a matter of law. Stated another way,
the court must ask if the facts alleged in the complaint
can be proved, would the plaintiff be entitled to relief?

James v. Wilson, 95 S.W.3d 875, 883-84 (Ky. App. 2002) (internal quotation

marks and footnotes omitted).

Summary judgment is also reviewed de novo. Isaacs v. Sentinal

Insurance Company Limited, 607 S.W.3d 678, 681 (Ky. 2020) (citation omitted).

In determining whether summary judgment was proper, we must determine

“whether the circuit [court] correctly found that there were no issues as to any

material fact and that the moving party was entitled to a judgment as a matter of

law. Summary judgment is appropriate where the movant shows that the adverse

party could not prevail under any circumstances.” Id. (citation omitted).

ANALYSIS

On appeal, MGG argues: (1) the circuit court erred in granting

summary judgment and dismissing its claims based on the FSA; (2) KRS 413.242

-8-
does not bar its claims against Yeomanstown; and (3) MGG is entitled to

application of the discovery rule and/or equitable tolling, making its claims against

Yeomanstown timely under KRS 413.125. On cross-appeal, Yeomanstown argues,

because MGG is not entitled to equitable tolling, its claims should have been

dismissed with prejudice.7

First, MGG alleges the circuit court erred in determining the FSA

allowed the appellees to take horses and breeding rights free of MGG’s security

interest. Within this argument, MGG claims: (1) thoroughbred race horses and

breeding rights thereto are not “farm products” under the FSA; (2) the appellees

are not “buyers in the ordinary course” under the statute; and (3) the AMERICAN

PHAROAH breeding rights were not sold by the same party which created the

security interest therein.

Prior to passage of the FSA in 1985, many states enacted “farm

products exceptions” under the Uniform Commercial Code (“UCC”) to protect

security interests in farm products. Kentucky’s farm products exception mirrors

those of other states and mandates

[e]xcept as otherwise provided in subsection (5) of this
section, a buyer in ordinary course of business, other
than a person buying farm products from a person
engaged in farming operations, takes free of a security

7
At oral arguments, Hill ‘N’ Dale joined Yeomanstown in this argument. Although Hill ‘N’
Dale argued MGG’s claims were time barred by KRS 413.125, the circuit court did not reach this
argument because it found application of the FSA dispositive of the claims against Hill ‘N’ Dale.

-9-
 interest created by the buyer’s seller, even if the security
interest is perfected and the buyer knows of its existence.

KRS 355.9-320(1) (emphasis added).

Congress adopted the FSA to eliminate these exceptions and protect

purchasers of farm products from “double payment.” 7 U.S.C. § 1631(a)(2). The

FSA requires

[e]xcept as provided in subsection (e) and
notwithstanding any other provision of Federal, State, or
local law, a buyer who in the ordinary course of business
buys a farm product from a seller engaged in farming
operations shall take free of a security interest created by
the seller, even though the security interest is perfected;
and the buyer knows of the existence of such interest.

7 U.S.C. § 1631(d).8

MGG argues Kentucky’s farm products exception is not entirely

preempted by the FSA because the General Assembly, by amending the UCC

definition of farm products, specifically included “[e]quine interests, including, but

not limited to, interests in horses, mares, yearlings, foals, weanlings, stallions,

syndicated stallions, and stallion shares (including seasons and other rights in

8
Subsection (e) delineates the manner by which a buyer takes the farm product subject to a
security interest created by the seller. For farm products to sell subject to a security interest, the
buyer must either receive direct notice or, where applicable, appropriate filings must be made
through a central filing system. Kentucky has not implemented a central filing system, making
direct notice to the buyer necessary to protect a security interest created by a seller.

-10-
connection therewith), whether or not the debtor is engaged in farming operations

and without regard to the use thereof.” KRS 355.9-102(1)(ah)5.

“Pre-emption may be either expressed or implied, and is compelled

whether Congress’ command is explicitly stated in the statute’s language or

implicitly contained in its structure and purpose.” Gade v. National Solid Waste

Management Ass’n, 505 U.S. 88, 98, 112 S. Ct. 2374, 2383, 120 L. Ed. 2d 73

(1992) (internal quotation marks and citations omitted). The FSA expressly

preempts state farm products exceptions through inclusion of “notwithstanding any

other provision of Federal, State, or local law” within the language of the statute.

Farm Credit Bank of St. Paul v. F & A Dairy, 477 N.W.2d 357, 360 (Wis. Ct. App.

1991). This is reinforced by Congress’ statements of intention in enacting the

FSA, as recorded in a House Committee Report.

The bill is intended to preempt state law (specifically the
so-called “farm products exception” of the Uniform
Commercial Code section 9-307) to the extent necessary
to achieve the goals of this legislation. Thus, this Act
would preempt state laws that set as conditions for buyer
protection of the type provided by the bill requirements
that the buyer check public records, obtain no-lien
certificates from the farm products sellers, or otherwise
seek out the lender and account to that lender for the sale
proceeds.

-11-
Food Services of America v. Royal Heights, Inc., 871 P.2d 590, 595 (Wash. 1994)

(en banc) (citing H. R. REP.9 No. 271, pt. 1, 99th Cong., 1st Sess. 110 (1985),

reprinted in U.S.C.C.A.N.10 1103, 1214). Based upon this reasoning, Kentucky’s

farm products exception is preempted by the FSA.

MGG further argues neither thoroughbred race horses nor breeding

rights qualify as “farm products” under the FSA. The FSA defines a “farm

product” as

an agricultural commodity such as wheat, corn, soybeans,
or a species of livestock such as cattle, hogs, sheep,
horses, or poultry used or produced in farming
operations, or a product of such crop or livestock in its
unmanufactured state (such as ginned cotton, wool-clip,
maple syrup, milk, and eggs), that is in the possession of
a person engaged in farming operations.

7 U.S.C. § 1631(c)(5).

When interpreting a statute, we must first consider the plain language

of the law and, where there is no ambiguity, we will look no further. Seeger v.

Lanham, 542 S.W.3d 286, 291 (Ky. 2018) (citation omitted). Where no ambiguity

exists, “there is no need to resort to the rules of statutory construction in

interpreting it. The words of the statute are simply accorded their commonly

understood meaning.” Id. at 293 (citation omitted).

9
House of Representative Reports.
10
United States Code Congressional and Administrative News.

-12-
 Herein, farm products are plainly defined to include horses. MGG

attempts to distinguish thoroughbreds from workhorses, claiming only the latter

can be considered farm products. However, Congress did not provide such a

distinction. Although addressing another clause of the FSA, a United States

District Court accurately described the place of statutory construction when it

stated,

[i]t is apparent that Congress intended by the FSA to shift
the potential burden of loss in cases of the sale of farm
products to the lenders who finance farm operations,
rather than have that burden imposed upon buyers, thus
inhibiting interstate commerce. If Congress has cast its
net too broadly in the FSA, at least in some
circumstances, the proper remedy is in legislative
amendment, not strained construction by the judiciary.

Lisco State Bank v. McCombs Ranches, Inc., 752 F.Supp. 329, 334 (D. Neb. 1990).

In defining farm products, Congress only qualified that the horse must

be “used or produced in farming operations[.]” 7 U.S.C. § 1631(c)(5). “Farming

operations” are not defined by the FSA. However, Kentucky’s UCC defines

“farming operation[s]” to include “raising, cultivating, propagating, fattening,

grazing, or any other farming, livestock, or agricultural operation[.]” KRS 355.9-

102(1)(ai). Additionally, BLACK’S LAW DICTIONARY (11th ed. 2019), borrows

from the federal bankruptcy statute in defining “farming operation[s]” as “[a]

business engaged in farming, tillage of soil, dairy farming, ranching, raising of

crops, poultry, or livestock, or production of poultry or livestock products in an

-13-
unmanufactured state.” See also 11 U.S.C. § 101(21). MGG cites to no alternative

definition for farming operations which does not include raising livestock,

including horses.

Certainly, there are owners of thoroughbred race horses who are not

engaged in farming operations. However, Zayat Stables is not such an owner. In

fact, in its amended complaint and the financing agreement, MGG defines the

nature of Zayat Stables’ business as “[o]wning, raising, maintaining, buying,

selling, racing, breeding and promoting horses.” R. at 867. Because Zayat Stables

raises horses, it is engaged in farming operations. Furthermore, because the horses

in question were sold by a business engaged in such operations, they are farm

products.

Following similar reasoning, the AMERICAN PHAROAH breeding

rights are also farm products. Again, MGG attempts to narrow the definition of

farm products in a manner which Congress did not in enacting the FSA. This

Court, in a decision which predates enactment of the FSA, determined a stallion

syndicate granting one free nomination per breeding season of a mare to be bred to

the stallion for its lifetime is properly classified as a farm product. North Ridge

Farms, Inc. v. Trimble, 1983 WL 160534, 37 UCC Rep. Serv. 1280, 1288 (Ky.

-14-
App. Dec. 2, 1983).11 Similarly, we are persuaded that lifetime breeding rights in

AMERICAN PHAROAH are farm products under the FSA.

MGG next argues the FSA does not apply to the subject sales because

the appellees are not buyers in the ordinary course of business. 7 U.S.C. §

1631(d). A buyer in the ordinary course of business is defined as “a person who,

in the ordinary course of business, buys farm products from a person engaged in

farming operations who is in the business of selling farm products.” 7 U.S.C. §

1631(c)(1). MGG’s argument must fail because, as discussed previously, within

the amended complaint and security agreement, MGG defines Zayat Stables’

business to include the selling of horses. R. at 867. We cannot overlook this

admission.

With regard to the AMERICAN PHAROAH breeding rights, MGG

further argues the security interest in the rights was not created by the seller of the

rights, making the FSA inapplicable. MGG claims Justin Zayat, individually and

separately from Zayat Stables, sold the breeding rights. Much like its prior

argument, MGG ignores its own amended complaint in making this assertion.

Specifically, within the amended complaint, MGG asserts “Zayat Stables and the

11
We cite this unpublished opinion as persuasive, not binding, authority. See CR 76.28(4)(c).
Because North Ridge Farms was decided before Congress enacted the FSA, this Court reached
its decision using the then-enacted UCC definition of farm products which included “crops or
livestock used or produced in farming operations or if they are products of crops or livestock in
their unmanufactured states . . . and if they are in the possession of a debtor engaged in raising,
fattening, grazing or other farming operations.” North Ridge Farms, 37 UCC Rep. Serv. at 1288.

-15-
Zayat Family purported to sell [AMERICAN PHAROAH] breeding rights Nos. 3-

9 to Defendant Orpendale[.]” R. at 692.12 Furthermore, the amended complaint

describes Justin Zayat as the President of Zayat Stables who is “in charge of the

day-to-day operations of Zayat Stables.” Id. at 643. In light of these declarations,

we are unconvinced by MGG’s argument.

As determined by the circuit court, MGG could have provided the

purchasers direct notice under 7 U.S.C. § 1631(e)(1) to protect its security

interests. MGG acknowledges the notice provisions of the FSA within the

financing agreement. Therein, Zayat Stables was required to:

Provide to [MGG] a list of the buyers, commission
merchants, selling agents and auctioneers to or through
whom the Borrower may sell any of the Equine
Collateral pursuant to the provisions of Section 1324 of
the Food Security Act of 1985, 7 U.S.C. 1631, in order
that [MGG] may give notices required by, and enjoy
protection afforded by, such Section. Schedule 7.01(q)
attached hereto and made a part hereof sets forth the
name and address of all such buyers, commission
merchants, selling agents and auctioneers. Borrower
agrees to provide [MGG] with any additions or deletions
from such Schedule immediately upon becoming aware
of the same, and, in any event, to update such Schedule at
least quarterly, and further agrees to notify the Collateral
Agent, in writing, of the identity and address of any other
buyer, commission merchant, or selling agent not
included on such Schedule 7.01(q) at least seven (7) days
prior to any sale of the Equine Collateral. BORROWER
ACKNOWLEDGES THAT PURSUANT TO 7 U.S.C.

12
With regard to the sale of AMERICAN PHAROAH breeding rights Nos. 1 and 2, MGG
asserts “Zayat Stables and Justin Zayat” purported to sell the shares to Foxwoods. R. at 689.

-16-
 1631(h)(3), BORROWER’S FAILURE TO COMPLY
WITH THE PROVISIONS OF THIS SECTION 7.01(q)
MAY SUBJECT BORROWER TO A FINE IN THE
AMOUNT OF $5,000,000 OR 15% OF THE VALUE
OF THE BENEFIT RECEIVED FROM SUCH
COLLATERAL, WHICHEVER IS GREATER.

R. at 818 (emphasis added).13

This provision of the financing agreement shows MGG was aware of

the requirement of direct notice to a purchaser of equine collateral to protect a

security interest. Furthermore, we are unconvinced by MGG’s claim that this

reference to the FSA “does not indicate that the parties intended the FSA to govern

the sales[.]” Reply Brief at 14. In fact, citation to the FSA in the financing

agreement is evidence of acknowledgment by the parties of the applicability of the

statute to any potential sale of equine collateral. To find otherwise would be

illogical. MGG would not have required Zayat Stables to provide names and

addresses of purchasers in order to provide notice under 7 U.S.C. § 1631(e) to

protect its security interests if the parties did not believe 7 U.S.C. § 1631(d)

applied to the relevant sales herein.

MGG next argues the circuit court erred in finding KRS 413.242 bars

its claims against Yeomanstown.

Before a party possessing a security interest or lien
against an equine interest that has been sold without the

13
Schedule 7.01(q) includes Keeneland Association, Inc., Fasig-Tipton Company, Inc., and
Ocala Breeders’ Sales Company. R. at 879. No appellee is named therein.

-17-
 debt to the party being discharged may bring an action
against the purchaser or selling agent of the equine
interest, the secured party shall pursue a remedy against
the debtor to the point where a judgment is rendered on
the merits or the suit is dismissed with prejudice.

KRS 413.242. Within its argument, MGG first claims it complied with the

requirements of the statute by attempting to distinguish the “claims” it brought

against Yeomanstown within its action against Zayat Stables from a separate

“action” it could have brought against Yeomanstown. Essentially, MGG argues its

claims are not barred by KRS 413.242 because they were brought within the action

against the debtor, Zayat Stables, rather than as a separate action against the

purchaser, Yeomanstown.

“[I]t is axiomatic that, when interpreting a provision of a statute, a

court should not, if possible, adopt a construction that renders a provision

meaningless or ineffectual or interpret a provision in a manner that brings about an

absurd or unreasonable result.” Schoenbachler v. Minyard, 110 S.W.3d 776, 783

(Ky. 2003) (footnotes omitted). The statute plainly states the legislature intended

for creditors to pursue actions against sellers “to the point where a judgment is

rendered on the merits or the suit is dismissed with prejudice” prior to pursuing

any action against a purchaser. KRS 413.242. The intention of the legislature for

suits against debtors to first reach finality is unambiguous. Were we to adopt

MGG’s theory differentiating between a “claim” and an “action,” security interest

-18-
holders would be empowered to entirely circumvent KRS 413.242 by filing an

action which includes claims against both the debtor and purchaser at once. This

would effectively render KRS 413.242 meaningless, an outcome strongly

disfavored by our jurisprudence. Brooks v. Commonwealth, 217 S.W.3d 219, 223

(Ky. 2007); Commonwealth v. Phon, 17 S.W.3d 106 (Ky. 2000); DeStock No. 14,

Inc. v. Logsdon, 993 S.W.2d 952 (Ky. 1999). Therefore, MGG’s amendment of

the complaint against Zayat Stables to include claims against Yoemanstown is not

sufficient for compliance with KRS 413.242.

MGG further argues, regardless of its noncompliance with KRS

413.242, the statute is unconstitutional under Section 2 of the Kentucky

Constitution.14 Section 2 of the Kentucky Constitution states, “[a]bsolute and

arbitrary power over the lives, liberty and property of freemen exists nowhere in a

republic, not even in the largest majority.” The Supreme Court of Kentucky has

held “whatever is essentially unjust and unequal or exceeds the reasonable and

legitimate interests of the people is arbitrary.” Commonwealth Natural Resources

and Environmental Protection Cabinet v. Kentec Coal Co., Inc., 177 S.W.3d 718,

726 (Ky. 2005) (citation omitted). Where economic rights are involved, the

14
MGG provided notice to the Attorney General of its constitutional challenge to KRS 413.242
as required by KRS 418.075. The Attorney General declined to intervene in this action.

-19-
purpose of the statute must be rationally related to a legitimate state objective.

Beshear v. Acree, 615 S.W.3d 780, 816 (Ky. 2020) (citation omitted).

MGG contends there is no rational basis for such a distinction and

attempts to place the burden of identifying such a rationale on both Yeomanstown

and the circuit court.15 However, MGG solely bears the burden of dispelling any

conceivable basis which might justify the statute. Buford v. Commonwealth, 942

S.W.2d 909, 911 (Ky. App. 1997). “A strong presumption exists in favor of the

constitutionality of a statute. Furthermore, one who seeks to have a statute

declared unconstitutional bears the burden of dispelling any conceivable basis

which might justify the legislation.” Id. (citation omitted).

A rational basis may be any reasonable basis or
substantial and justifiable reason. A person challenging a
law upon equal protection grounds under the rational
basis test has a very difficult task because a law must be
upheld if there is any reasonably conceivable state of
facts that could provide a rational basis for the
classification. Furthermore, the General Assembly need
not articulate its reasons for enacting the statute, and . . .
has great latitude to enact legislation that may appear to
affect similarly situated people differently.

Teco/Perry County Coal v. Feltner, 582 S.W.3d 42, 47 (Ky. 2019) (citations

omitted). Furthermore, we need not agree with the wisdom or expediency of the

15
Although the circuit court did not directly address the constitutionality of KRS 413.242 in its
judgment, in granting Yeomanstown’s motion to dismiss the court implicitly found the statute
constitutional. The parties did not file post-judgment motions under CR 52.02 or CR 59.05.

-20-
General Assembly’s purpose for a statute for it to be constitutional. Buford, 942

S.W.2d at 911.

MGG argues KRS 413.242 unconstitutionally creates an arbitrary

classification favoring purchasers of equine interests over all other purchasers.

“We will accept at face value contemporaneous declarations of governmental

purposes, or in the absence thereof, rationales construed after the fact, unless our

examination of circumstances forces us to conclude that they could not have been a

goal of the classification.” Commonwealth ex rel. Stumbo v. Crutchfield, 157

S.W.3d 621, 624 (Ky. 2005) (citation omitted).

The General Assembly unquestionably has the power to enact such

statutes. Munday v. Mayfair Diagnostic Laboratory, 831 S.W.2d 912, 914 (Ky.

1992) (citation omitted). Kentucky’s appellate courts have repeatedly upheld the

constitutionality of statutes of limitation even where they arguably conflict with

sections of the Kentucky Constitution. Id. “[P]rovisions of statutes of limitations

should not be lightly evaded.” Id. (citation omitted). Acceptance of MGG’s

argument regarding the constitutionality of KRS 413.242 would violate these

settled principles and would call into question the constitutionality of many

provisions of KRS Chapter 413.

Furthermore, as identified by Yeomanstown, numerous Kentucky

statutes treat the equine industry in a manner different from the way in which other

-21-
industries within the Commonwealth are treated. See KRS 139.531 (exempting

certain equine sales from application of taxes); see also KRS 330.210 (regulating

the sale of horses by auction); KRS 525.130 (exempting killing of animals at

organized horse races or shows from cruelty to animals and imposing additional

penalties for offenses arising from a person’s treatment of an equine). In fact, the

entirety of KRS Chapter 230 separately regulates the horse racing and showing

industries.16 Furthermore, in enacting KRS Chapter 230, “the intent of the

Commonwealth [was] to foster and to encourage the horse breeding industry

within the Commonwealth and to encourage the improvement of the breeds of

horses[,]” as well as “to foster and to encourage the business of legitimate horse

racing with pari-mutuel wagering thereon in the Commonwealth on the highest

possible plane.” KRS 230.215(1). Although not part of Chapter 230, KRS

413.242 can undoubtedly be rationally related to the same government interests.

Therefore, as MGG is unable to dispel all conceivable rationales for the General

Assembly’s enactment of KRS 413.242, the statute is not unconstitutional.

Next, MGG argues its claims against Yeomanstown were timely. “An

action for the taking, detaining or injuring of personal property, including an action

16
See KRS 230.225 (establishing the Kentucky Horse Racing Commission); KRS 230.280 to
KRS 230.310 (regulating licensure for horse racing); KRS 230.357 (regulating sales, purchases,
and transfers of horses); KRS 230.781 (exempting international racing hubs from fees and taxes);
KRS 230.804 (establishing the Kentucky horse breeders’ incentive fund and regulating the
disbursement of monies from the fund); and KRS 230.990 (establishing penalties for violations
of statutes).

-22-
for specific recovery shall be commenced within two (2) years from the time the

cause of action accrued.” KRS 413.125. Yoemanstown purchased EL KABEIR

from Zayat Stables on September 20, 2017. MGG amended its complaint to bring

claims against Yeomanstown on February 11, 2020, more than four months after

the expiration of the statute of limitations. MGG concedes to these facts but argues

its claims are timely with application of the discovery rule.

Under the discovery rule, a cause of action does not accrue “until the

plaintiff discovers or[,] in the exercise of reasonable diligence[,] should have

discovered not only that he has been injured but also that his injury may have been

caused by the defendant’s conduct.” R.T. Vanderbilt Co., Inc. v. Franklin, 290

S.W.3d 654, 659 (Ky. App. 2009) (citation omitted). “Reasonable diligence means

that a plaintiff must be as diligent as the great majority of persons would [be] in the

same or similar circumstances[.]” Id. (citations omitted). This rule is available

only in the limited circumstances in which an injury is not readily discoverable or

ascertainable. Wiseman v. Alliant Hospitals, Inc., 37 S.W.3d 709, 712 (Ky. 2000)

(citations omitted). The discovery rule is most often applied to cases involving

latent injuries or illnesses. Mark D. Dean, P.S.C. v. Commonwealth Bank & Trust

Co., 434 S.W.3d 489, 502 (Ky. 2014) (citation omitted). Kentucky courts have

generally been reluctant to extend the discovery rule where they are without the

-23-
statutory authority to do so. Roman Catholic Diocese of Covington v. Secter, 966

S.W.2d 286, 288 (Ky. App. 1998) (citations omitted).

No statutory authority exists for applying the discovery rule to the

circumstances herein. Furthermore, this case is easily distinguishable from those

where the rule has been applied, namely those involving latent injuries or illnesses.

Here, MGG suffered no latent injury attributable to Yeomanstown’s actions.17

Had MGG exercised reasonable diligence, it would have discovered

Zayat Stables’ sale of EL KABEIR to Yeomanstown. While Zayat Stables may

have failed to comply with its obligation to notify MGG of the sale, MGG had

other means of discovering it. Primarily, it is uncontroverted that MGG had, under

the financing agreement, inspection rights which allowed agents of MGG to, with

written notice to Zayat Stables, “visit, inspect and conduct such examinations as

they may elect in their sole and absolute discretion[.]” R. at 814. As part of its

inspection rights, MGG was empowered

(A) to examine and make copies of and abstracts from
[Zayat Stables’] records and books of account, (B) to
visit, inspect and examine [Zayat Stables’] Equine
Collateral and other properties, (C) to permit Equine
Appraisers to visit, inspect and examine [Zayat Stables’]
Equine Collateral in connection with Equine Appraisals
permitted hereunder, (D) to verify materials, leases,
notes, accounts receivable, deposit accounts and [Zayat
Stables’] other assets, (E) to conduct audits, physical

17
In fact, MGG does not allege any wrongdoing attributable to Yeomanstown. Instead, MGG
alleges only wrongdoing by Zayat Stables in concealing the sale of EL KABEIR.

-24-
 counts, valuations, appraisals, or examinations and (F) to
discuss [Zayat Stables’] affairs, finances and accounts
with any of its directors, officers, managerial employees,
independent accountants or any of its other
representatives[.]

Id. MGG was also entitled to equine appraisals at Zayat Stables’ expense. Id.

MGG’s failure to exercise these inspection rights is fatal to any claim that the

injury it suffered was “inherently unknowable” within the statutory period. Wilson

v. Paine, 288 S.W.3d 284, 287 (Ky. 2009) (citation omitted).

In the alternative, MGG argues it is entitled to equitable tolling as to

its claims against Yeomanstown. “Equitable tolling pauses the running of, or tolls,

a statute of limitations when a litigant has pursued his rights diligently, but some

extraordinary circumstance prevents him from bringing a timely action.” Williams

v. Hawkins, 594 S.W.3d 189, 193 (Ky. 2020) (citing Lozano v. Montoya Alvarez,

472 U.S. 1, 10, 134 S. Ct. 1224, 1231-32, 188 L. Ed. 2d 200 (2014)). “[T]o be

entitled to equitable tolling, a litigant must establish: (1) that he has been pursuing

his rights diligently, and (2) that some extraordinary circumstance stood in his way

and prevented timely filing, with those circumstances being beyond the litigant’s

control.” Id. at 194 (internal quotation marks and citation omitted). It is

incumbent on plaintiffs to locate and name the proper party defendant. Id. at 195

(citation omitted).

-25-
 The circuit court, in dismissing MGG’s claims against Yeomanstown

without prejudice, held “[e]quitable [t]olling could or may apply to the case at bar,

but the [c]ourt does not currently have sufficient evidence before it to make this

determination.” R. at 1357. Again, MGG argues only that Zayat’s actions in

failing to comply with the security agreement in reporting the sale entitles it to

equitable tolling of its claims against Yeomanstown. This claim must fail on the

same grounds as MGG’s argument for application of the discovery rule. Had

MGG exercised its inspection rights and practiced reasonable diligence, it would

have discovered the sale. MGG fails to identify any extraordinary circumstance

beyond its control which entitles it to equitable tolling.

CONCLUSION

Accordingly, the judgments of the Fayette Circuit Court on MGG’s

claims against Hill ‘N’ Dale, Foxwoods, McMahon, Orpendale, Flintshire, Sears,

and Bemak are affirmed. The judgment on MGG’s claims against Yeomanstown

is affirmed in part, reversed in part, and remanded with direction for the circuit

court to enter a judgment dismissing the claims with prejudice.

ALL CONCUR.

-26-
BRIEFS FOR APPELLANT/CROSS- BRIEF FOR APPELLEE/CROSS-
APPELLEE: APPELLANT, MULL
ENTERPRISES LIMITED D/B/A
W. Craig Robertson III YEOMANSTOWN STUD:
Daniel E. Hitchcock
Thomas E. Travis Thomas D. Bullock
Lexington, Kentucky Rachele T. Yohe
Lexington, Kentucky
Kannon K. Shanmugam
Stacie M. Fahsel BRIEF FOR APPELLEE, HILL ‘N’
Tanya S. Manno DALE EQUINE HOLDINGS, INC.:
Brian M. Lipshutz
Washington, D.C. David T. Royse
John C. Roach
ORAL ARGUMENT FOR Lexington, Kentucky
APPELLANT/CROSS-APPELLEE:
BRIEF FOR APPELLEE,
Kannon K. Shanmugam MCMAHON OF SARATOGA
Washington, D.C. THOROUGHBREDS, LLC:

Gregory P. Parsons
Marshall R. Hixson
Megan K. George
Lexington, Kentucky

BRIEF FOR APPELLEE, LNJ
FOXWOODS, LLC:

W. Chapman Hopkins
Andrew J. Donovan
Lexington, Kentucky

BRIEF FOR APPELLEES, BEMAK
N.V., LTD. & ORPENDALE
UNLIMITED COMPANY:

Barry D. Hunter
Medrith Lee Norman
Lexington, Kentucky

-27-
 BRIEF FOR APPELLEES,
FLINTSHIRE FARM, LLC &
THOMAS B. SEARS:

J. Mel Camenisch, Jr.
Megan R. Holt
Lexington, Kentucky

ORAL ARGUMENTS FOR
APPELLEES/CROSS-APPELLANT

David T. Royse
Lexington, Kentucky

Thomas D. Bullock
Lexington, Kentucky

-28-