Registry Rules Committee of the Registry Council of ASHBA NOTICE OF PROPOSED RULE CHANGES – Transfers without Signatures
We are proposing several changes to the current Registry Rules and Regulations (“Registry Rules”) regarding the transfer of registered American Saddlebred horses in instances where one or more Transfer Reports are missing from the chain of ownership. The obligations of Recorded Owners to transfer registered American Saddlebred horses to transferees has been clarified and strengthened. This Notice is accompanied by a draft of the proposed rules, together with a version that has been marked to show changes from the most recently published rules.
Members of ASHBA who wish to comment on these proposed changes will have an opportunity to do so by sending written comments by no later than 5 p.m. ET, on Friday, February 18, 2022. Please see the section “Submission of Comments,” below.
We are also updating the Registry Rules to reflect the merger of the American Saddlebred Registry, Inc. into the American Saddlebred Horse Association, Inc., which was effective on February 18, 2021. The combined organization is now known as “American Saddlebred Horse and Breeders Association, Inc.” Additional clarifying and simplifying changes have been made. Not all rule changes are summarized in this notice; interested parties are encouraged to read the full text of the proposed rule and the marked version showing changes from the previously published rules and regulations.
Background
The rules of the Association and its predecessors have historically required an “unbroken chain of recorded ownership” to transfer a registered American Saddlebred horse’s official ownership into the current owner’s name; this was necessary to ensure the identity of the specific horse and to protect the integrity of the breed. With the advent of DNA testing to identify the parentage of foals born to registered American Saddlebred horses and the identity of a specific horse who was previously DNA tested and established to be an American Saddlebred horse to a nearly exact degree of certainty, the chain of ownership is no longer necessary to identify a horse. Interested parties, including the Association, continue to have a need to be sure that transfers are recorded in a manner that complies with law to avoid and defeat subsequent claims of individuals who may claim an ownership interest. We believe that, in certain circumstances, adequate protections can be put in place to streamline and modernize the transfer recordation process to record current owners of registered American Saddlebred horses without requiring a complete chain of recorded ownership.
In addition to proposing changes to the transfer process for the instances described below, we are also proposing to reorganize the relevant sections of the rules to make the rules clearer about which requirements apply to which situations.
Recognized Auctions and Sales Companies
We have refined the rules regarding recognized (formerly referred to as “authorized”) auctions and sales companies. These organizations will not be permitted to sell non-registered American Saddlebred horses or sell American Saddlebred horses without the concurrent transfer of the registration to the new owner.
Change of Ownership by Operation of Law
Change of ownership “by operation of law” are situations in which title to legal ownership takes place pursuant to a statutory (state or federal) provision because of a legally recognized change regarding the former owner. These types of transfers include, among others, the transfer to an estate or trust as a result of the death of the owner (in the case of an individual), the transfer to a legal entity in the event of a merger or dissolution of the owner (which was a partnership, corporation, limited liability company, etc.), the transfer to a bankrupt estate in the case of a bankruptcy, the transfer to a receiver in the case of receivership, or the transfer to a guardian in the case of an incompetent. These types of transfers are very clearly defined by state or federal law and the subsequent transfer of assets (e.g., a horse) from these types of “acquirers” requires a specific legal process. Accordingly, we are not proposing any substantive change to our current rules regarding these types of transfers. We will continue to require a recorded transfer to the “successor” by operation of law, as well as a recorded transfer to any subsequent purchaser or transferee, unless a court order expressly directs us otherwise. We are proposing to update the fee rule (discount) regarding multiple simultaneous transfers to cover additional scenarios and reduce from 5 to 2 the number of horses involved in the simultaneous transfer.
Change of Ownership – Missing Signatures – Seizures, Adoptions, and Resales – Without Transfers of Certificates of Registration
Each state has its own mechanism for the seizure of abused or neglected animals (including horses, although laws may not be the same for domestic pets and horses, which may be considered livestock), and the effect of such seizure on legal ownership. Further, state law may give the owner appeal or redemption rights. Our current rule states that to change the ownership to a Humane Society or an equine rescue organization that is an I.R.C. 501(c)(3) tax-exempt entity, we require a court order stating that the prior owner is divested of ownership and that the Humane Society or equine rescue organization now has title to the horse and that any applicable appeal period has expired. We are not proposing any change to this requirement.
There are other circumstances in which an abused or neglected horse changes ownership without passing through a legal process in which a court issues an order directing the transfer of ownership and registration. Well-meaning individuals and organizations devote substantial time and resources to the care and rehabilitation of these horses and seek to “reunite” the horses with their identity as a registered American Saddlebred horse. In many instances, the horse may have changed ownership more than one time. Our current process requires that the current Recorded Owner consent to the transfer to the new applicant for registration transfer, which for a variety of reasons can defeat the effort to transfer the registration. In instances where there have been multiple changes of ownership, this consent requirement poses an inappropriate burden on the previous Recorded Owner of the horse, even if they desire to assist the new owner.
The Uniform Commercial Code, which has been adopted in some form in every state, provides for the lawful transfer of title to goods (including horses) by certain types of sellers (“a merchant who deals in goods of that kind”) and buyers who are “good faith purchasers for value” in these transactions. U.C.C. § 2-403; KRS § 355.2-403. We believe that this provision, together with the affirmative requirement for transfer when a horse is transferred or sold, allows the Registry to treat the buyers of horses from non-recognized auctions and other horse traders as the lawful owners of horses sold through these mechanisms and permits the transfer of the Certificate of Registration to the buyer. We will require documentation to establish that the transfer was conducted in this manner, including a bill of sale or other written documentation identifying the horse, the date of sale, the seller, and the buyer. We may also require an opinion of legal counsel to the Buyer regarding compliance with the legal requirements of the statute and the passage of title. We are seeking comments from Association members regarding the laws in their states on this statutory provision and its interpretation.
To avoid risk to the Association and to buyers in these situations, while protecting any remaining legal rights of the current Recorded Owner, we are proposing that the current Recorded Owner will be notified of the proposed transfer. Instead, however, of requesting consent to the transfer, we will require that the current Recorded Owner advise the Registry of any lawful claim, which could include a right of return or first refusal (not waived), retained breeding rights, unsatisfied lien claims, redemption rights under a state’s seizure law, etc. After consulting with Registry legal counsel, if the claim is determined to be valid and unresolved, we will cancel the transfer application. If there is no valid claim, we will issue a 9-month conditional transfer to the buyer. Notice of the conditional transfer will be published on the Association’s website. During the period of the conditional transfer, the horse may be shown under the buyer’s name in recognized competition, however, the buyer may not resell or transfer title to the horse and no offspring resulting from breeding the horse during the 9-month period will be recognized by the Registry. If the Registry is not notified of any claims regarding the conditional transfer during the 9-month period, the transfer will be made permanent, and the Certificate of Registration will be issued.
We have not proposed any changes dealing with unregistered offspring (live or in utero) of a horse that is acquired through these circumstances. We invite comment on whether and when such registrations could be permitted, assuming that all other requirements of registration can be met.
Recorded Owner Obligations
Obligations on Sale to Transfer Registration. We are proposing rule changes that strengthen the obligations of Recorded Owners to transfer the registration of sold or transferred horses, and the consequences for failing to do so. The ability of the Registry to transfer the registration of horses in the circumstances described in the preceding section is dependent on the requirement that transfers are the obligation of the Recorded Owner when the horse is initially sold or transferred. Any rights that the current Recorded Owner wishes to retain in the transaction must be documented in writing signed by the buyer or transferee.
Submission of Comments
Current members of the Association are invited to comment on these matters, as well as any other proposed rule changes. Please submit any comments in writing to:
Registrar
American Saddlebred Horse and Breeders Association, Inc.
4083 Iron Works Parkway
Lexington, KY 40511
k.adams@asha.net
Submissions must be signed by a current member of the Association. The deadline for submission of comments is 5 p.m. ET, on Friday, February 18, 2022. We may respond to comments individually, in the form of “frequently asked questions,” or in commentary to the final rule. We would like to finalize the rules by March 31, 2022, but are under no obligation to do so.