08/12/2010 3:44PM

Stonewall suit against Chase, Fifth Third won't stall sale


LEXINGTON, Ky. − The sale of more than 100 Stonewall Farm horses will go ahead despite the farm’s Aug. 11 lawsuit against Fifth Third, the bank that has taken control of the bloodstock; its receiver Bluewater Sales; and JPMorgan Chase Bank.

Fifth Third, which sued Stonewall earlier this year for $14.8 million in alleged unpaid loans, and Stonewall reached an agreement Wednesday night under which Stonewall will release stallion certificates that prove the horses’ breeding, thereby allowing the sale. The proceeds from those sales will be escrowed, and Stonewall’s attorney said the farm will take outstanding stud fees out of sale proceeds and pay them to Chase Bank, which has a $7 million lawsuit pending against Stonewall, farm owner Audrey Haisfield, and 11 other entities.

Five Stonewall-related entities filed suit Wednesday in a Lexington bankruptcy court in a move that could have forestalled the sale of the horses, mostly broodmares and their offspring pointing for auction in September and November. The entities claimed, in part, that they held liens on many of the Stonewall horses’ sale proceeds because they are owed stud fees from a number of the matings that produced the young stock and the foals the broodmares are carrying. By declining to release stallion certificates for those horses, the entities would have prevented any buyer from registering the horses in question with The Jockey Club.

“We were never really attempting to stop the sale, because it’s from the sale that we get paid our stud fees,” Stonewall attorney John Hamilton said. “The purpose of the lawsuit was to have a court determine that a stallion farm has a lien on stud fees that have to be paid when foals are sold. Any horse that is sold for which we have a stud fee owing will be set aside, plus 6 percent Kentucky sales tax, will be put in an escrow account subject to bankruptcy court orders . . . and anything over the stud fee is Fifth Third’s money to apply to them.”

Earlier this year, Haisfield filed stud fee liens on Stonewall horses that Fifth Third had consigned to the Ocala Breeders’ Sales Company’s June 2-year-old sale, but that move was blocked when Fayette Circuit Court ordered the sale to take place and the proceeds placed in escrow. In seeking that emergency order, Fifth Third had alleged that Haisfield’s liens were “part of a clear effort on her part to shift monies away from entities on the Fifth Third loan documents to other Haisfield entities.”

But Hamilton said Stonewall’s complex web of entities were part of Haisfield’s business practice and that Fifth Third was aware of that practice.

Fifth Third attorney Craig Robertson declined to comment on pending litigation.