No Recording Is Required for Maritime Liens

Several years ago, I was sued by an electrician who had done some work for me on my 33-foot motoryacht. I ignored the lawsuit because he was incompetent and I had already paid him for most of the job. He apparently got a default judgment against me, but I did not pay much attention to the paperwork since I had already sold the boat. Last week, I received a letter from the boat’s current owner, explaining that the electrician is now going after him. The electrician never recorded a lien against the boat, so I was not concerned about this when I sold the boat. Can he go after the current owner? What can I do to make this problem go away?
The answer to this question requires an understanding of both maritime liens and default judgments.

Under principles of maritime law, a boat is treated as a separate entity, and the boat itself may be deemed responsible for many of the services that are rendered to the vessel. This is the central theme of the law of maritime liens.

Since the boat is responsible for the services, the sale of the boat to an unrelated third party will not extinguish a maritime lien. And, since maritime liens are valid without recording, the boat may be sold to a third party without notice to the buyer of a perfectly valid unrecorded lien.

The recording system maintained by the Coast Guard may provide a notice of a claim against the vessel, but it has no effect on the validity of a lien. A maritime lien is automatically perfected against a vessel, and a lien will be valid without recording anything with the Coast Guard. As such, the instrument recorded with the Coast Guard is actually a ’Notice of Claim of Lien,’ rather than a ’lien.’

The scenario described here by the reader is fairly common. The lien claimant was unable to collect from the original owner – but after the sale, he may believe that he will have more luck against the new owner. Most vessel purchase contracts include a provision that requires a seller to stand behind the promise of an unencumbered title to the boat, so it’s hard for a seller to walk away from these obligations.

The reader also indicated that the lien was supported by a default judgment. A default judgment may be awarded in cases where the defendant refuses to respond to a lawsuit. It has the same effect as a judgment rendered after a trial, and as such it may provide proof of the validity of a lien.

The defendant may petition the court to set the judgment aside, but this kind of relief must be pursued promptly. In California, a default may be set aside within six months for ’mistake, inadvertence, surprise or excusable neglect.’ This is a pretty simple process — but after six months, things get a lot more complicated. And after two years, it is virtually impossible to set aside a default.

The proper approach in this case would have obviously involved a timely response to the lienholder’s lawsuit before the default was entered. A lawsuit must be answered even if you feel it is frivolous.

Since a maritime lien stays with a boat after the sale, this is a problem that will not go away. A judgment – even a default judgment – will provide the lienholder with undeniable proof that the claim is valid. And a default cannot be set aside unless it is challenged within the required time limit.

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