RENDERED: MARCH 23, 2023

TO BE PUBLISHED

Supreme Court of Kentucky

2021-SC-0561-DG

MGG INVESTMENT GROUP LP APPELLANT

ON REVIEW FROM COURT OF APPEALS

V. NOS. 2020-CA-0434, 2020-CA-0478, 

2020-CA-0821, 2020-CA-0900, 2020-CA-0960

FAYETTE CIRCUIT COURT NO. 20-CI-00248

BEMAK N.V., LTD; MULL ENTERPRISES 

LIMITED D/B/A YEOMANSTOWN STUD;

HILL ‘N’ DALE EQUINE HOLDINGS, INC.; 

LNJ FOXWOODS, LLC; MCMAHON OF 

SARATOGA THOROUGHBREDS, LLC; 

ORPENDALE UNLIMITED COMPANY; 

FLINTSHIRE FARM, LLC; and THOMAS B. 

SEARS A/K/A BRAD SEARS

APPELLEES

OPINION OF THE COURT BY JUSTICE VANMETER

AFFIRMING

The federal Food Security Act of 1985 (“FSA”) abrogated a common 

exception in the Uniform Commercial Code (“UCC”) that allowed for a security 

interest to remain when a farm product passed from seller to buyer. Primarily, 

this appeal raises two interconnected issues. First, the issue of whether the 

FSA applies when the good in question is a thoroughbred horse, in this case 

one with particularly valuable breeding rights. And if so, a second question

arises of whether breeding rights are farm products within the FSA. Finding
2

the FSA clear in its meaning and preemptive of Kentucky’s UCC, we hold that 

thoroughbreds and the right to breed them are farm products within the 

meaning of the FSA and as a result any security interest in those products was 

extinguished when they were sold to their respective buyers.

I. Factual and Procedural Background

The issues presented in this appeal stem from one of Kentucky’s 

signature industries: the racing and breeding of thoroughbred horses. MGG 

Investment Group LP (“MGG”) entered into a financing agreement with Zayat 

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

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

Inv. Grp. LP v. Mull Enter. Ltd., Nos. 2020-CA-0478-MR, 2020-CA-0434-MR, 

2020-CA-0821-MR, 2020-CA-0900-MR, 2020-CA-0960-MR, 2021 WL 5264189, 

at *1 (Ky. App. Nov. 12, 2021). Zayat Stables’ most notable thoroughbred is 

AMERICAN PHAROAH, winner of the 2015 Triple Crown and the only horse to 

ever win the Grand Slam of Thoroughbred Racing.

1 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.

1 The informally-named Grand Slam consists of the three Triple Crown races—

the Kentucky Derby, Preakness Stakes, and Belmont Stakes—as well as the Breeders’ 

Cup Classic. See Des Bieler, Watch American Pharoah win horse racing’s first-ever 

Grand Slam at Breeders’ Cup, Wash. Post (October 31, 2015), 

https://www.washingtonpost.com/news/early-lead/wp/2015/10/31/watchamerican-pharoah-win-horse-racings-first-ever-grand-slam-at-breeders-cup/.
3

Id. The agreement defined “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 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.

The agreement obligated Zayat Stables to report to MGG any sale of 

equine collateral and Zayat Stables agreed not to sell any such collateral except 

as permitted by the agreement. Ultimately, MGG alleges that Zayat Stables 

sold equine collateral in contravention of the agreement, and from those sales 

this matter arose. Zayat Stables sold horses and mares as well as breeding 

rights to various entities that are now parties to this appeal. The purchasing 

entities and their role in this matter are listed below.

a. Bemak N.V., Ltd. (“Bemak”) does Business in the United States as 

Ashford Stud. AMERICAN PHAROAH has stood at Ashford Stud’s Versailles 

farm since 2016. 

b. Mull Enterprises Limited d/b/a Yeomanstown Stud (“Yeomanstown”)

Purchased the stallion EL KABEIR from Zayat Stables on September 20, 2017.

c. Hill ‘N’ Dale Equine Holdings, Inc. (“Hill ‘N’ Dale”) purchased the mare

AMERICAN CLEOPATRA from Zayat Stables on November 15, 2017.
4

d. LNJ Foxwoods, LLC (“LNJ”) purchased two of the breeding rights to 

AMERICAN PHAROAH from Zayat Stables and Justin Zayat on December 21, 

2018.

e. Orpendale Unlimited Company (“Orpendale”) purchased 100% of the 

breeding qualities of AMERICAN PHAROAH, including all ownership rights 

following the horse’s retirement from racing, from Zayat Stables on January 16, 

2015. This agreement allowed members of the Zayat family to retain certain 

lifetime breeding rights to AMERICAN PHAROAH. These rights were 

transferrable, but subject to a right of first refusal by Orpendale. In 2019, 

Orpendale exercised its right of first refusal to purchase seven of the breeding 

rights from Zayat Stables and the Zayat family.

f. McMahon Of Saratoga Thoroughbreds, LLC (“McMahon”) is a

thoroughbred farm in Saratoga, New York. They purchased a 50% share of the 

horse SOLOMINI from Zayat Stables on December 3, 2019. Concurrently with 

this purchase, McMahon also purchased the other 50% of SOLOMINI from 

Orpendale.2

g. Flintshire Farm, LLC (“Flintshire”) and Thomas B. Sears (“Sears”). Sears

manages Flintshire Farm collectively with the entity Flintshire. Around March 

6, 2019, Flintshire purchased the interests in the horse LEMOONA from Zayat 

Stables. Initially, those interests included only breeding rights, but following 

2 Orpendale purchased a 50% ownership interest in SOLOMINI from Zayat 

Stables on January 2, 2018. MGG was aware of this transaction and agreed to a 

partial lien release.
5

LEMOONA’s retirement from racing, Flintshire obtained all interests in the 

thoroughbred and took possession. Flintshire later sold LEMOONA to a third 

party in 2020.

In January of 2020, MGG brought suit against Zayat Stables for breach 

of contract and fraud, seeking to recover $23 million in principal and interest 

owed to MGG. MGG later amended its complaint to include claims against the 

purchasers of the equine collateral.3 MGG brought claims for replevin and 

constructive trust against Orpendale, LNJ, Hill ‘N’ Dale, McMahon, and 

Yeomanstown; claims for intentional interference with a contract against 

Orpendale and Bemak; and claims for unjust enrichment against Flintshire 

and Sears.

Prior to discovery, Orpendale, LNJ, Flintshire, Hill ‘N’ Dale, McMahon, 

and Sears moved to dismiss. The circuit court granted the motions, finding the 

purchases were protected by the FSA. A motion for summary judgment for 

Bemak was granted on similar grounds.4 The claims against Yeomanstown 

were dismissed by the circuit court for procedural reasons, with a finding that

the claims were barred by KRS5 413.242 and were beyond the statute of 

limitations. However, the claims against Yeomanstown were dismissed without 

prejudice as the circuit court found MGG may be able to invoke equitable 

3 MGG also brought claims against individual members of the Zayat Family. 

Those individuals are not parties to this appeal.

4 Bemak had already filed an answer when the various motions to dismiss were 

tendered. Resultingly, Bemak moved for summary judgment on the same grounds as 

the other purchasers. 

5 Kentucky Revised Statutes.
6

tolling. MGG appealed the dismissal of the claims and Yeomanstown crossappealed the circuit court’s decision to dismiss without prejudice.

The Court of Appeals affirmed the circuit court in all respects, save one. 

Our intermediate court determined that the FSA preempted Kentucky’s farm 

products exception and that both thoroughbreds and their breeding rights are 

farm products within the FSA. The court further determined KRS 413.242 

acted to bar the claims against Yeomanstown until the action against the 

debtor, Zayat Stables, was resolved. Finally, while the court agreed that the 

claims against Yeomanstown were further barred by the two-year statute of 

limitations found in KRS 413.125, it disagreed that MGG may be able to invoke 

equitable tolling. The Court of Appeals reasoned that the inspection rights 

contained in MGG’s agreement with Zayat Stables gave MGG the means of 

discovering Zayat Stables’ malfeasance from the time it occurred. Thus, MGG

“fail[ed] to identify any extraordinary circumstance beyond its control[.]” MGG 

Inv. Grp. LP, 2021 WL 5264189, at *9.

MGG moved for discretionary review pursuant to CR6 76.20,7 which this 

Court granted.

II. Standard of Review

“Since a motion to dismiss for failure to state a claim upon which relief 

may be granted is a pure question of law, a reviewing court owes no deference 

6 Kentucky Rules of Civil Procedure.

7 The provisions of CR 76.20 are now contained in Rule of Appellate Procedure 

(“RAP”) 44.
7

to a trial court's determination; instead, an appellate court reviews the issue de 

novo.” Gregory v. Hardgrove, 562 S.W.3d 911, 913 (Ky. 2018) (quoting Fox v. 

Grayson, 317 S.W.3d 1, 7 (Ky. 2010)). In ruling on a motion for failure to state 

a claim, the trial court should take all the allegations in the complaint as true 

and not dismiss “unless the pleading party appears not to be entitled to relief 

under any set of facts which could be proven in support of his claim.” Marshall 

v. Montaplast of N. Am., Inc., 575 S.W.3d 650, 651 (Ky. 2019) (quoting Morgan 

v. Bird, 289 S.W.3d 222, 226 (Ky. App. 2009)). “[T]he 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?” Fox, 317 

S.W.3d at 7.

Similarly,

The proper standard of review on appeal when a trial judge has 

granted a motion for summary judgment is whether the record, 

when examined in its entirety, shows there is no genuine issue as 

to any material fact and the moving party is entitled to a judgment 

as a matter of law. The trial judge must view the evidence in a 

light most favorable to the nonmoving party, resolving all doubts in 

its favor. Because summary judgment does not require findings of 

fact but only an examination of the record to determine whether 

material issues of fact exist, we generally review the grant of 

summary judgment without deference to either the trial court's 

assessment of the record or its legal conclusions.

Hammons v. Hammons, 327 S.W.3d 444, 448 (Ky. 2010) (internal citations and 

quotation marks omitted).

III. Analysis

This appeal asks us to examine a two-part question as to all Appellants 

save Yeomanstown: (1) Does the FSA preempt the traditional exception for farm 
8

products found in Kentucky’s version of the UCC, and (2) if so, are

thoroughbred horses and their breeding rights farm products under the FSA.

8 

As to Yeomanstown, we must resolve two independent questions: (1) are the 

claims against Yeomanstown barred by KRS 413.242, and (2) is MGG entitled 

to equitable tolling of KRS 413.125.

A. The FSA Preempts Kentucky’s Farm Products Exception.

Kentucky, as with many other states, has long provided that a buyer in 

the ordinary course of business, “takes free of a security 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). However, this provision also contains an 

exception for buyers of farm products from a person engaged in farming 

operations. Pursuant to the farm products exception, a security interest

attached to a farm product survives the sale and remains with the good sold.

In 1985, Congress, in direct response to the farm products exception, 

enacted the FSA “to remove such burden on and obstruction to interstate 

commerce in farm products.” 7 U.S.C.9 § 1631(b). Accordingly, the FSA 

abrogated the farm products exception and provided, “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, 

8 MGG appears to concede that Zayat Stables was an entity involved in farming 

operations and that the various purchasers of the equine collateral were buyers in the 

ordinary course of business. Accordingly, the only question that remains for this 

court is whether the FSA applies to thoroughbreds.

9United States Code.
9

even though the security interest is perfected; and the buyer knows of the 

existence of such interest.” 7 U.S.C. § 1631(d).

Congress possesses the power to preempt state law through express 

language in a statute. Oneok, Inc. v. Learjet, Inc., 575 U.S. 373, 376 (2015). “If 

the statute contains an express pre-emption clause, the task of statutory 

construction must in the first instance focus on the plain wording of the 

clause, which necessarily contains the best evidence of Congress' pre-emptive 

intent.” CSX Tranport., Inc. v. Easterwood, 507 U.S. 658, 664 (1993).

Congress spelled out in the statute what it intended to accomplish. The 

statute is designed to address “certain State laws [that] permit a secured lender 

to enforce liens against a purchaser of farm products,” 7 U.S.C. § 1631(a)(1),

and to protect purchasers from “double payment for the products, once at the 

time of purchase, and again when the seller fails to repay the lender[.]” 7 

U.S.C. § 1631(a)(2). Crucially, Congress intended the act to have effect 

“notwithstanding any other provision of Federal, State, or local law[.]” 7 U.S.C. § 

1631(d) (emphasis added).

We find it clear from the language of the FSA that Congress intended to 

preempt the farm products exception of Kentucky’s UCC. The language of the 

statute explicitly addresses situations in which purchasers of farm products 

take subject to a lien and its purpose being to extinguish that lien with some 

exceptions not relevant here. In other words, the FSA was designed precisely 

to preempt the farm products exception, “notwithstanding. . . State, or local 

law[.]” 7 U.S.C. § 1631(d).
10

This conclusion is consistent with that of courts beyond this 

Commonwealth. See, e.g., United States of America v. Winter Livestock Comm'n, 

924 F.2d 986, 993 n.8 (10th Cir. 1991) (noting preemptive effect of FSA on 

conversion claims); State Bank of Cherry v. CGB Enters., 964 N.E.2d 604, 608 

(Ill. App. Ct. 2012) (“Section 1631(d) is a clear expression of an intent to 

preempt state law[]”); First Nat'l Bank & Trust v. Miami County Coop. Ass'n, 897 

P.2d 144, 151 (Kan. 1995) (“[The FSA] preempts the Kansas Uniform 

Commercial Code provisions and any other federal, state, or local law governing 

security interests in agricultural products and production of agricultural 

products[]”); Fin-Ag, Inc. v. Cimpl’s, Inc., 754 N.W.2d 1, 7 (S.D. 2008) (“[The 

FSA] preempt[s] UCC provisions and create[s] a general rule protecting buyers 

in the ordinary course of business who purchase farm products subject to a 

lender's security interest[]”).

MGG argues that KRS 355.9-102(1)(ah) evinces Kentucky’s intent to 

remove thoroughbreds from the FSA. That statute provides, 

“Farm products” means goods, other than standing timber, with 

respect to which the debtor is engaged in a farming operation and 

which are... Equine 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 connection therewith), whether or not the debtor is 

engaged in farming operations and without regard to the use 

thereof. If goods are farm products, they are neither equipment nor 

inventory[.]

KRS 355.9-102(1)(ah)(5). MGG points to the differences between the FSA and 

the statute, specifically the FSA’s requirement that the seller be engaged in 

farming operations, and that the FSA is more narrowly focused. Ultimately, 
11

MGG argues a change in Kentucky law does not correspondingly expand 

federal law.

We find MGG’s arguments unavailing. KRS 355.9-102(1)(ah)(5) and its 

predecessor KRS 355.9-109(3)(b)10 were intended to clarify an issue that had 

bedeviled the thoroughbred industry since the introduction of the UCC: how to 

classify equine interests under the UCC. Prior to the 1990 amendment to KRS 

355.9-109, horses could fall into different categories as collateral depending on 

the status of the owner. Thus, a horse could be considered equipment, 

inventory, or a farm product depending on the activity of the owner. Further, 

practitioners were advised that horses used in racing could lose their status as 

farm products even where the individual or entity racing the horse was also 

engaged in farming activities (unless the racing and farming activities could be 

adequately connected). R. David Lester, Security Interests in Thoroughbred and 

Standardbred Horses: A Transactional Approach, 70 Ky. L. J. 1065, 1089 

(1982). KRS 355.9-109(3)(b) solved the narrow problem of how horses were 

classified, but it did not simultaneously carve thoroughbreds out of the FSA 

and reapply the farm products exception. Assuming, arguendo, that MGG is 

10 Prior to its repeal and reenactment in 2000, KRS 355.9-109(3)(b) addressed 

the classification of goods and provided that farm products were to include 

equine, including but not limited to, interests in horses, mares, 

yearlings, foals, weanlings, stallions, syndicated stallions and stallion 

shares (including seasons and other rights in connection therewith), 

whether or not the debtor is engaged in farming operations and without 

regard to the use thereof. If goods are farm products they are neither 

equipment nor inventory[.]

KRS 355.9-109(3)(b) (1999).
12

correct, we would still be left with the same issue but flowing in the opposite 

direction: that KRS 355.9-102(1)(ah)(5) provides no limit on what is considered 

a “horse.” This omission would make the carve-out apply not only to 

thoroughbreds, but to all horses. Because the language of the FSA makes 

clear its preemptive effect, and because horses are listed within the FSA, this 

would leave us in the same position as we are now, tasked with determining 

the scope of the definition of “horse.”

We need not engage in such a task, however, because we find KRS 

355.9-102(1)(ah) merely clarifies how equine collateral is classified and did not 

return the farm products exception to such collateral. There being no carveout of the preemptive effect of the FSA with regard to thoroughbreds, we next 

must determine if thoroughbreds are considered farm products within the 

scope of the FSA.

B. Thoroughbreds are farm products under the FSA.

MGG argues the intent of Congress was for the FSA to apply only to 

agricultural commodities, a category which may include many kinds of horses, 

but not thoroughbreds. If MGG is correct, then the FSA would not apply to the 

thoroughbreds at issue and the farm products exception would protect MGG’s 

security interests.

MGG’s argument revolves around the FSA’s definition of “farm product” 

which states,

The term “farm product” means 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 
13

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). MGG posits that the use of the phrase “agricultural 

commodity” encompasses “a species of livestock such as . . . horses.” Under 

this interpretation, only horses that are agricultural commodities are covered 

by the FSA. This would exclude thoroughbreds, according to MGG, as they are 

too exceptional to fall under the definition of a commodity.

“When engaging in statutory interpretation, it is imperative that we give 

the words of the statute their literal meaning and effectuate the intent of the 

legislature.” Samons v. Ky. Farm Bureau Mut. Ins. Co., 399 S.W.3d 425, 429 

(Ky. 2013). We interpret this provision to mean that Congress did not place 

any such limiting factor upon “horses.” The plain language of 7 U.S.C. § 

1631(c)(5) sets forth three categories of goods that the FSA considers “farm 

products”: (1) “an agricultural commodity such as wheat, corn, soybeans, or”; 

(2) “a species of livestock such as cattle, hogs, sheep, horses, or poultry used or 

produced in farming operations, or”; (3) “a product of such crop or livestock in 

its unmanufactured state (such as ginned cotton, wool-clip, maple syrup, milk, 

and eggs)”. The presence of the disjunctive “or” between “soybeans” and “a 

species of livestock” indicates those two phrases are to be given separate 

meanings. See United States v. Woods, 571 U.S. 31, 45 (2013) (“[o]perative 

terms are connected by the conjunction ‘or’ . . . [the] ordinary use [of ‘or’] is 

almost always disjunctive, that is, the words it connects are to ‘be given 

separate meanings[]’”); Garcia v. United States, 469 U.S. 70, 73 (1984) (“Canons 
14

of construction indicate that terms connected in the disjunctive in this manner 

be given separate meanings[]”). Accordingly, the literal meaning of the statute 

separates agricultural commodities “such as wheat, corn, soybeans” from “a 

species of livestock such as . . . horses” and both from the products of such 

crops or livestock. Indeed, had Congress intended for agricultural commodity 

to encompass both crops and livestock, that intent could have been 

underscored by merely deleting the word “or” after the word “soybeans.” 

Alternatively, in the third category Congress could have substituted the word 

“commodity” for “crop or livestock.”

Although not binding, we find it telling that the United States 

Department of Agriculture (“USDA”) interprets the FSA in the same way. The 

FSA’s implementing regulations instruct that farm products “must be specific 

commodities, species of livestock, and specific products of crops or livestock.”

9 C.F.R.11 § 205.106. The master list of such farm products includes, “Cattle & 

calves, goats, horses, hogs, mules, sheep & lambs, other livestock[.]” 9 C.F.R. § 

205.206(a). The master list places no limitation on what the FSA considers to 

be an applicable “horse.”

Finally, we note that the Kentucky legislature has expressed its 

acceptance of the FSA’s application to thoroughbred horses by statutory 

enactments subsequent to passage of the FSA. The “Keeneland Rule” provides 

that a lien on any horse of registered breed whose racing is regulated is 

11 Code of Federal Regulations.
15

extinguished when the horse is sold at public auction to a bona fide purchaser 

for value. When first enacted in 1976, the statute contained a specific process 

by which lienholders could protect their lien.12 When the statute was amended 

in 2000, the legislature eliminated that process and directed lienholders to the 

notice provisions of the FSA to protect the interests.13 The modern notice 

provision of the Keeneland Rule would be meaningless unless our legislature 

recognized that the FSA applied to thoroughbreds.

Accordingly, we find that the plain language of the FSA demonstrates 

that thoroughbred horses are farm products within the meaning of the act. 

This conclusion is supported by both the federal government’s own 

interpretation of its statute as well as the manner our legislature has 

interpreted the statute and leaves in place decades of common practice among 

actors in the equine industry.

Similarly, we hold the FSA also encompass the breeding rights to

AMERICAN PHAROAH and LEMOONA. Both the second and third categories of 

farm products in the FSA are capacious enough to cover the breeding rights of 

thoroughbreds. The second category includes a species of livestock such as . . 

. horses used or produced in farming operations. The third category includes 

12 Lienholders were required to provide “written notice by registered mail of 

such lien and the amount thereof, the name and address of the debtor and proper 

identification of the horse subject to lien are given to the organization [in the business 

of selling such horses] prior to the time of sale.” KRS 355.9-307(4) (1976).

13 In 2000, lienholders were informed their purchases took title to the horse free 

of any liens, “except to the extent provided by the Federal Food Security Act, 7 U.S.C. 

sec. 1631.” KRS 355.9-320(6).
16

the “product of such . . . livestock in its unmanufactured state.” Although 

MGG attempts to cast the breeding rights as mere legal abstractions, the reality 

is that the breeding of thoroughbreds involves very tangible products that 

easily comport with both common-sense and the FSA’s definition of a farm 

product. The rights to those products are indistinguishable from the products 

themselves for the purposes of the FSA. Resultingly, the breeding rights are 

also farm products under the FSA and those Appellees who purchased the 

rights took free of MGG’s security interest.

C. MGG’s claims against Yeomanstown are barred.

Finally, we address the claims against Yeomanstown. Unlike the other 

Appellees, Yeomanstown was dismissed not because the FSA extinguished the 

security interest in EL KABEIR, but because MGG’s action against 

Yeomanstown ran afoul of KRS 413.242. The circuit court further found the 

two-year statute of limitations in KRS 413.125 to apply to the claims, but 

because the circuit court believed there may be some equitable basis for MGG 

to assert that the statute of limitations should be tolled, Yeomanstown was 

dismissed without prejudice. On cross-appeal, the Court of Appeals 

determined MGG’s inspection rights foreclosed equitable tolling of KRS 413.125 

and directed the circuit court to enter a new judgment dismissing 

Yeomanstown with prejudice.

KRS 413.242 creates a special rule for parties seeking to enforce a 

security interest or lien against an equine interest that has been sold. It 

provides,
17

Before a party possessing a security interest or lien against an 

equine interest that has been sold without the 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. Here, MGG first brought an action against Zayat Stables. Prior

to the claims against Zayat Stables resolving, MGG amended its complaint to 

assert new claims against Appellees, including Yeomanstown. MGG now 

contends that its addition of Yeomanstown was proper because of a difference 

between a “claim” and an “action,” specifically that while MGG did bring claims

against Yeomanstown, it did not prematurely bring an action in defiance of KRS 

413.242.

We find MGG’s attempt to parse the difference between “claims” and 

“actions” in this context to be without merit. Yeomanstown was made a party 

pursuant to the filing of an amended complaint and summons was issued upon 

it. Pursuant to CR 3.01, a civil action was commenced against Yeomanstown. 

That the action grew out of another action initially against another party and 

was subsequently expanded to include Yeomanstown is immaterial. To find 

that Yeomanstown had claims asserted against it, but not an action would 

beggar credulity. Accordingly, we find that the claims asserted against 

Yeomanstown were synonymous with action for the purposes of KRS 413.242. 

Further, we agree with the Court of Appeals that to accept MGG’s 

interpretation would be to effectively render the statute meaningless. “Were we 

to adopt MGG's theory differentiating between a ‘claim’ and an ‘action,’ security 

interest holders would be empowered to entirely circumvent KRS 413.242 by 
18

filing an action which includes claims against both the debtor and purchaser at 

once.” MGG Inv. Grp. LP, 2021 WL 5264189, at *6. And even if MGG was to 

concede that had it included Yeomanstown as a defendant in the original 

action it would be barred, if we allowed parties to evade KRS 413.242 by simple 

amendment of the complaint we would create an exception that would swallow 

the rule. “It is elementary that a Statute should be construed, if possible, so 

that no part of it is meaningless or ineffectual.” Brooks v. Meyers, 279 S.W.2d 

764, 766 (Ky. 1955).14

Having found that the claims against Yeomanstown were properly 

dismissed pursuant to KRS 413.242, we are left with determining whether 

MGG may bring those claims again at a later date. No dispute exists that the 

claims are subject to the two-year statute of limitations in KRS 413.125. At 

issue is whether the claims should have been dismissed with or without 

prejudice.

The circuit court in its order dismissing the claims against Yeomanstown 

without prejudice made three relevant findings: (1) KRS 215.125 applied, (2) 

the discovery rule was inapplicable, and (3) there may be a basis for the 

equitable tolling of the limitations period. Upon its review, the Court of appeals 

14 MGG contends that application of KRS 413.242 in this way places an undue 

burden upon a creditor to resolve the initial action against the debtor more quickly 

than may be prudent or possible. However, we do not intend for this opinion to 

foreclose the possibility that where a creditor has provided proper notice to a thirdparty purchaser of equine collateral and brings an action against the debtor within 

two years, such creditor may be entitled to equitable tolling as to the later action 

against the purchaser.
19

agreed with findings (1) and (2), but reasoned that MGG’s failure to avail itself 

of its contractual right to inspect the collateral foreclosed equitable tolling.

“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) (quoting Lozano v. Montoya Alvarez,

572 U.S. 1, 10 (2014)). To be entitled to equitable tolling, a litigant must show 

“‘(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.” 594 S.W.3d at 194

(quoting Menominee Indian Tribe v. U.S., 577 U.S. 250, 255 (2016)). These are 

not factors to be considered, but rather are necessary prerequisites for the 

application of equitable tolling. Williams, 594 S.W.3d at 194.

We find that MGG has failed to show that it diligently pursued its rights 

pursuant to its contract with Zayat Stables. That contract provided MGG with

a right to,

(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 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[.]
20

MGG Inv. Grp. LP, 2021 WL 5264189, at *9. The record indicates that MGG 

made attempts to speak to members of the Zayat family and to some 

purchasers of the equine collateral, but did not otherwise exercise its extensive 

rights to examine Zayat Stables’ business activities as provided by the contract. 

Had MGG done so, it likely would have ascertained that equine collateral was 

being sold without MGG’s consent and legal action could have been taken 

within the limitation period.15 Instead, MGG chose to sit on those rights 

despite increasing suspicion of Zayat Stables.

This Court is cognizant of the unusual situation surrounding this 

matter. MGG has alleged a pattern of extensive fraudulent dealing by Zayat 

Stables that occurred over almost the entirety of the two entities’ relationship. 

The actions of Zayat Stables may well constitute an “extraordinary 

circumstance” that prevented MGG from making its claim against 

Yeomanstown within the limitation period. Our decision today rests solely on 

MGG’s failure to show that it diligently pursued its contractual rights and 

should not be read to indicate that fraud akin to that perpetrated by Zayat 

Stables can never support the equitable tolling of the statute of limitations. 

Indeed, this Court makes no finding regarding other potential claims related to 

the agreement between MGG and Zayat Stables.

15 MGG suggests that even had it exercised its inspection rights, it nonetheless 

could have been thwarted by the simple act of moving the horses to another location. 

While true, such an act of deception would speak to the second element of equitable 

tolling, not the first. Whatever impediments to the effectiveness of inspection there 

may have been, the fact remains that MGG chose not to pursue that right.
21

In sum, we find that the action against Yeomanstown was barred by KRS 

413.242 and MGG was required to resolve its action against Zayat Stables prior 

to bringing a claim against Yeomanstown. Further, we find that MGG failed to 

diligently pursue the rights granted to it under its contract with Zayat Stables

and as such MGG is not entitled to the equitable tolling of the statute of 

limitations.

IV. Conclusion

For the foregoing reasons, the opinion of the Court of Appeals is affirmed

in all respects.

All sitting. All concur. 

COUNSEL FOR APPELLANT:

Daniel Ernest Hitchcock

William Craig Robertson

Thomas Edwin Joseph Travis

Wyatt Tarrant & Combs, LLP

Brian M. Lipshutz

Kannon K. Shanmugam

Paul Weiss Rifkind Wharton & Garrison, LLP

COUNSEL FOR APPELLEE, 

BEMAK N.V., LTD:

Barry Douglas Hunter

Medrith Lee Norman

Frost Brown Todd LLC

COUNSEL FOR APPELLEE, 

FLINTSHIRE FARM, LLC:

John Melvin Camenisch, Jr.

Rose Grasch Camenisch Mains, PLLC
22

Megan R. Holt

Hargrove Firm, LLP

COUNSEL FOR APPELEE, 

Hill ‘n’ Dale Equine Holdings, Inc.:

John Choate Roach

David Trevor Royse

Ransdell Roach & Royse, PLLC

COUNSEL FOR APPELLEE,

LNJ Foxwoods, LLC:

Andrew J. Donovan

Woodson Chapman Hopkins

Stoll Keenon Ogden, PLLC

COUNSEL FOR APPELLEE,

MCMAHON OF SARATOGA 

THOROUGHBREDS, LLC.:

Megan K. George

Marshall Reid Hixson

Gregory Paul Parsons

Stites Harbison, PLLC

COUNSEL FOR APPELLEE,

MULL ENTERPRISES LIMITED

D/B/A YEOMANSTOWN STUD:

Thomas Dulaney Bullock

Rachele Taylor Yohe

Bullock & Coffman, LLP

COUNSEL FOR APPELLEE, 

ORPENDALE UNLIMITED COMPANY:

Barry Douglas Hunter

Medrith Lee Norman

Frost Brown Todd, LLC

COUNSEL FOR APPELLEE,
23

THOMAS B. SEARS A/K/A

BRAD SEARS:

John Melvin Camenisch, Jr.

Rose Grasch Camenisch Mains, PLLC

Megan R. Holt

Hargrove Firm LLP

COUNSEL FOR AMICUS CURIAE, KENTUCKY BANKERS

ASSOCIATION:

John T. McGarvey

Matthew Thurman Senn

Morgan Pottinger McGarvey