Q: I am in the middle of a dispute with a boat mechanic. As a regular reader of your column I know that you have talked about maritime liens on various occasions in the past, but I have not found any information about my specific problem. I asked the mechanic to do some work for me. He presented an invoice for the work that exceeded the amount of his original estimate, he damaged the vessel interior during the work, and he never completed the job. The amount of the invoice for his services is comparatively small, and it is actually less than the cost to repair the damage that he caused. As such, I would prefer to just not pay his invoice, but he won’t even discuss the question of the damage until I pay him. What are the risks if I refuse to pay? Can he, for example, get a maritime lien against the vessel or cause other complications?
A: Our reader is correct. We have talked about maritime liens quite a few times in this column, but there is always a new twist. Here, our reader is concerned about the consequences of refusing to pay a disputed invoice from a maritime vendor.
The reason we frequently talk about maritime liens is because they are actually pretty complicated. As pointed out by a leading treatise in admiralty law (Grant Gilmore & Charles Black, The Law of Admiralty), “[t]he beginning of wisdom in the law of maritime liens is that maritime liens and land liens have little in common. A lien is a lien is a lien, but a maritime lien is not.”
People don’t “get” or “file” a maritime lien. They are formed automatically when someone does work on a boat with the authorization of a boat owner and the vendor is not paid. So nothing needs to be filed – they are automatic. But they are “automatic” only to the extent the parties agree to the amount, and – there is a provision for the optional filing of a “Notice of Claim of Lien” with the Coast Guard. Further, even if the parties agree on the amount and it is not paid, the foreclosure or collection of the lien is actually a very complicated and expensive procedure for the creditor and it requires the filing of a lawsuit in federal court.
In view of these complications, the biggest question in our reader’s case is whether the vendor will file a Notice of Claim of Lien against the boat for the incorrect amount. The filing of the notice is the process that people think of when they ask about “filing a lien” against a boat. But the notice has absolutely no legal effect, other than to notify the world that somebody claims to have a lien against the boat, even if the claim is later determined to be wrong. So it’s just a notice.
The problem with the notice is that it will stay on the boat’s title history until the claimant files a “satisfaction of claim of lien” or a judge orders it to be removed. And, if the owner ever wants to sell the boat, the buyer will demand that the notice be removed or satisfied. The law requires the notice to be filed in good faith, but a finding of “bad faith” requires a finding – in a lawsuit – of a very high level of fraud. This is a very expensive procedure with no guarantees.
So our reader finds himself in a difficult position. His mechanic can “cloud” the title of the boat by filing the notice and our reader’s only recourse may be to file a lawsuit against the mechanic. But the mechanic cannot take possession of the boat or otherwise foreclose on the lien unless he files a lawsuit in federal court, which would require at least $30,000 in legal fees. A no-win situation for either side that encourages the parties to open a dialogue and reach a compromise.
David Weil is licensed to practice law in the state of California and as such, some of the information provided in this column may not be applicable in a jurisdiction outside of California. Please note also that no two legal situations are alike, and it is impossible to provide accurate legal advice without knowing all the facts of a particular situation. Therefore, the information provided in this column should not be regarded as individual legal advice, and readers should not act upon this information without seeking the opinion of an attorney in their home state.
David Weil is the managing attorney at Weil & Associates (weilmaritime.com) in Long Beach. He is an adjunct professor of Admiralty Law at Loyola University Law School, a member of the Maritime Law Association of the United States and is former legal counsel to the California Yacht Brokers Association. If you have a maritime law question for Weil, he can be contacted at 562-438-8149 or at email@example.com.
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