Foreclosing on Lien Not Necessarily Worth the Cost
A judicial foreclosure of a maritime lien is extremely expensive. The procedure requires the creditor to bring an ’in rem’ action in federal court, where the vessel is sued as if she were an individual defendant. The lawsuit is served by a U.S. marshal who takes the vessel into custody and then transfers custody to a commercial custodian. If the parties are unable to reach a settlement, the vessel may ultimately be sold through a marshal’s auction. The procedure is conducted under the oversight of a federal judge, and it is usually the best option for a large claim where competing creditors are fighting over a limited amount of equity in the vessel.
An unopposed arrest and marshal’s auction, where the boat owner simply walks away without fighting the creditor’s claims, will involve court costs, marshal’s fees, custodial costs, and (of course) attorney fees, all of which will add up to at least $20,000. Those costs will go up dramatically if the boat owner chooses to fight the claim and the attorneys’ fees may not be recoverable even if the action is ultimately successful. Further, if the court determines that the creditor’s claim is invalid or that it does not qualify as a maritime lien, the creditor may be liable to the owner for a ’wrongful arrest.’
In view of the substantial costs and risk involved, why bother with a vessel arrest at all? A maritime lien is a tool for securing a debt with valuable collateral (the boat). If the boat owner is a solvent and established member of his or her community, there is probably no need to arrest the boat even if the claim is a valid maritime lien. The creditor may file a collection lawsuit in state court, and if a judgment is awarded, the boat owner’s bank account and other assets (including, if necessary, the boat) may be used to satisfy the claim.
For a relatively small claim, such as the $8,500 obligation described above, you should consider small claims court. A small claims action is limited to $7,500, but a creditor with a larger claim may waive the excess amount of his or her claim and proceed in small claims court. The expedited time frame and reduced costs of that procedure may be to your benefit in the long run. You might want to visit the website of the California Courts Self Help Center at www.courtinfo.ca.gov/selfhelp/smallclaims.
A vessel arrest is a powerful tool for the enforcement of a maritime lien, but it may not be the best tool for a creditor with a small claim. He or she must consider a long list of issues before committing to the considerable cost of the procedure, including the nature and amount of the claim, the value of the boat, the existence of competing liens, the solvency of the boat owner, and the question of whether costs and fees may be recovered as a part of the claim. Speak to your attorney about these issues and consider them carefully.