How Can We Clear Our Boat’s Title?

My wife and I own a 35-foot California-registered sailboat that we purchased 20 years ago. We recently formed a revocable family trust for estate planning purposes, and for various reasons we decided to register the boat under Coast Guard documentation when we transferred the boat into the trust. Unfortunately, the Coast Guard has advised us that the boat was documented at some point before we bought it, and that it had never been removed from documentation. According to the Coast Guard, title to the boat is still in the name of the person who sold us the boat, but we had no idea that the boat had ever been Coast Guard documented. And, to make matters worse, a preferred ship mortgage was recorded by a private party on the Coast Guard title in 1980, and there is no record that the mortgage was ever satisfied. We tried to contact the person who sold us the boat, but we learned that he had passed away several years ago, and we have been unable to locate the person who recorded the mortgage. How could this have happened, and what can we do now to clear the title?

What a mess! We discussed the shortcomings of the vessel titling system in a previous installment of this column [’Ask a Maritime Attorney – Title Choices Have Boater Stumped,’ The Log, April 18, 2007], so we won’t go into a lot of detail about how this problem may have developed. The bottom line is that a DMV clerk must have failed to require proof of removal from Coast Guard documentation when the previous owner transferred the boat to California registration. The seller then signed over the California pink slip when he sold you the boat. The more important question is how to fix the problem now that it has been uncovered.

The simplest approach to any title problem is to contact the people who are the source of the problem and determine whether they still have a legitimate interest in the boat. In the case described above, you will need to track down the mortgage holder and, since the seller is apparently deceased, you will need to locate the seller’s heirs.

If you can locate the seller’s heirs, and if the estate was probated, you are in good shape since the executor of the estate is authorized to sign a bill of sale. The heirs will presumably agree to cooperate, since there seems to be no question that the boat was sold to you. Even if the estate was not probated, the heirs may be authorized to execute the transfer paperwork if the value of the boat is less than $100,000. This is another topic that we discussed in greater detail in a previous installment of this column [’Ask a Maritime Attorney – Probate Law for Boat Transfers,’ The Log, June 14, 2007].

Things get a little more complicated if you are unable to locate these people or if they are unwilling to cooperate. In either case, you will probably need to retain an attorney to file a ’quiet’ title action. This is a type of lawsuit where a judge is asked by the plaintiff, who in this case would be the current boat owner, to sort out the title problems and then clear things up with a court order. That order may then be submitted to the Coast Guard, and the Coast Guard will update its records according to the judge’s instructions.

After filing a quiet title action in a case where some or all of the parties cannot be located, it will of course be impossible to serve the court papers on those people. Under those circumstances, the court may allow service by publication in a newspaper after the plaintiffs demonstrate that they diligently searched for the missing parties. After publication of the court papers, the judge may be able to issue the court order through a default judgment, since no one is likely to oppose the lawsuit.

Finally, if the prior owner or the mortgage holder are located but they are unwilling to cooperate, or if they still claim an interest in the boat or the mortgage, the parties will need to fight it out in court. One argument available to the boatowner is that the previous owner and the mortgage holder should have taken action to protect their interest years ago. This concept is known as ’laches,’ and it may be successfully argued if the mortgage holder or the prior owner failed to diligently assert their claim for so long that the new owners have been prejudiced by that delay.

The best possible outcome in a case like this would be for the mortgage holder and the prior owner to have simply forgotten to file some Coast Guard paperwork, and for that paperwork to be signed now by the proper parties. If this is not possible, a quiet title action may be quick and easy, if no one shows up to dispute anything. However, if clear title to the vessel is in dispute, this type of lawsuit can be very unpleasant and very expensive. Keep your fingers crossed.