Ask a Maritime Attorney: What are the procedures on the foreclosure of a maritime lien?

Question:

I have a boat service company that handles a wide range of maintenance and repair projects for clients in the Southern California yachting community. I recently completed a major engine overhaul aboard a client’s sportfishing yacht. He made several payments, but the job was completed six months ago, and he still owes me around $10,000. I understand that I have a maritime lien on the boat and that I can have it arrested by Federal Marshals, but I don’t know anything about the procedure or the costs. Can you shed some light on this?

Answer

Our reader is correct. He does appear to have a maritime lien against his client’s boat. A maritime lien may arise from a wide variety of maritime services, but generally speaking, work that is performed on a boat with the authorization or approval of the boat’s owner or person in charge will give rise to a maritime lien. And as our reader further notes, the foreclosure of a maritime lien on a vessel does involve a “civil arrest” by a Federal Marshal. In our reader’s case, however, the size of his claim suggests a different approach.

Federal Marshals may take a boat into custody to foreclose on a maritime lien, but a “judicial foreclosure” such as this is extremely expensive. The procedure requires the creditor to bring an “in rem” action in Federal Court. The vessel is sued as if it were an individual defendant, and the lawsuit is served by a U.S. Marshal who takes the vessel into custody and then transfers custody to a commercial custodian.

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 attorney fees, all of which will cost thousands of dollars. Those costs will go up dramatically if the boat owner chooses to fight the claim, and the attorney’s 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 boat owner for a “wrongful arrest.”

There are other, less expensive options. A maritime lien is a security devise, which means that it 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 $10,000 obligation described by our reader, the creditor should consider small claims court. A small claims action is limited to $10,000, 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 benefit creditors even if they waive a portion of their claim. Check out the web site of the California Courts Self Help Center: https://selfhelp.courts.ca.gov/small-claims-california.

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.

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 (www.weilmaritime.com) in Seal Beach. He is certified as a Specialist in Admiralty and Maritime Law by the State Bar of California Board of Legal Specialization and a “Proctor in Admiralty” Member of the Maritime Law Association of the United States, an adjunct professor of Admiralty Law, and former legal counsel to the California Yacht Brokers Association. If you have a maritime law question for Weil, he can be contacted at 562-799-5508, through his website at www.weilmaritime.com,  or via email at dweil@weilmaritime.com.

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