Can a Boat Repairer Get a Maritime Lien on a Vessel He Co-owns?

Several years ago, I entered into a verbal agreement with a boat owner to help restore a classic motoryacht. I knew in advance that the owner would not have funds to pay me, so I asked that he make me a partner in the boat in lieu of payment. Last year, he changed the locks and asked me to leave the boat after a disagreement about the quality and the pace of the job — and I then learned that he had failed to add my name as a partner on the boat’s title. I hired a lawyer to go after him, and the court eventually entered judgment in my favor for breach of the partnership agreement. I recorded the judgment with the Coast Guard as a maritime lien, but I have since learned that the boat was sold a couple of days before I recorded the judgment. What should I do?
A maritime lien may be valid against a vessel, even if it is never recorded, and even if the vessel is sold to someone with no notice of the existence of the lien. This assumes, however, that the claim in question is actually a maritime lien. Based on what our reader has shared, he probably has a claim against his ex-partner, but he does not have a maritime lien against the vessel.

Maritime liens are complicated. They have little in common with liens against real estate or other forms of personal property, and they have been the subject of more installments of this column than any other single area of maritime law.

Our reader is faced with two problems. First, it appears that he was made a partner in the boat to persuade him to work on the boat without compensation. That may have been a good deal for both parties, but as a consequence of the partnership, our reader was then doing work aboard his own vessel. An owner of a vessel is not entitled to a maritime lien against his own boat, regardless of the ownership percentage.

In this case, it appears that the original owner failed to add our reader as a partner to the Coast Guard documentation, but this will not affect his status as an owner. Coast Guard documentation provides evidence of ownership, but the actual transfer of ownership is a consequence of the agreement between the parties. Transfer of ownership may therefore occur without recording the bill of sale or other notice to the Coast Guard, unless the transfer is expressly contingent upon the recording of those documents.

After our reader and his partner parted company, our reader successfully sued the partner for breach of the partnership agreement. The breach related to the steps taken by the ex-partner to deny access to the boat to our reader, who was theoretically a part owner. This leads to the second obstacle to a claim of a maritime lien.

Generally speaking, maritime liens arise when services are provided to a vessel that relate to the operation and maintenance of the vessel. There are exceptions and technicalities that complicate this definition, but a dispute between owners of a vessel will never give rise to a maritime lien.

Any maritime lien analysis is further complicated by the fact that the recording process with the Coast Guard is not characterized as the recording of a lien. The recorded document is actually a “notice of claim of lien.” The recording process simply gives notice to the rest of the world that somebody claims to have a lien against a boat. The lien may not be a valid maritime lien, and the recording of the document has no real legal effect beyond simply providing notice of the alleged claim. The Coast Guard will therefore accept the recording of almost any claim without rendering any opinion as to the validity of the claim.

Regardless of the validity of the maritime lien, our reader will nonetheless continue to have a judgment claim against his ex-partner. That judgment will allow him to go after the assets of the partner under a procedure available through the state court in which the judgment was obtained. The procedure would have allowed him to seize the boat if he had completed the procedure before the boat was sold. Now that the boat has been sold, he needs to pursue the cash  proceeds of the sale rather than the boat itself. The principal difference between a state court claim and a maritime lien is that the maritime lien will continue to encumber a vessel after it is sold.

Finally, since our reader’s claim does not appear to be a maritime lien, he should promptly file paperwork with the Coast Guard to release his notice of claim of lien against the vessel. If the claim is not released, the new owner may file a lawsuit to instruct the Coast Guard to release the claim — and in that event, our reader could be liable to the new owner for attorney fees and costs relating to that lawsuit.

As noted above, maritime liens are complicated. The facts and circumstances of any claim involving a vessel should be reviewed by an experienced maritime attorney before drawing any conclusions about the validity of the lien or the preferred method of enforcing the claim.

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