I am in the middle of a complicated dispute with a former friend over a boat that we owned as “equal” partners for a few years. The partnership arrangement called for us to split the cost of the purchase and share equally in all expenses, but it wasn’t long before I was paying all of the overhead expenses myself. To make matters worse, he eventually moved aboard the boat without telling me. We eventually went our separate ways and he left me with the boat — but after he left he recorded a Notice of Claim of Lien against the boat to recover his share of the purchase price. I’m sorry to burden you with my soap opera, but I wanted give you a little background before asking a couple of specific questions. So, first question: In one of your previous articles, you mentioned that a dispute over a boat sale transaction will never give rise to a maritime lien. Can you explain the reasoning behind this rule and perhaps point me to a statute or case law to support that conclusion? Second, I ran across a federal statute that provides for the expiration of a claim of lien after three years, but I have also heard that maritime liens are not subject to any statute of limitations. Can you clear up that confusion for me?
Boat partnerships can provide a fun and economical way to own a boat. But if the partnership is based on an underlying romantic or business relationship, the boat partnership will be strained if (or when) the underlying relationship ends.
Our reader definitely has her hands full with this. Her specific questions are pretty straightforward, but I’m afraid she will be unraveling the other tentacles of the relationship for a long time.
Our reader referenced a previous installment of this column, where we stated that a dispute over a boat sale transaction will never give rise to a maritime lien. This is true because, generally speaking, maritime liens arise when services are provided to a vessel that relate to the operation and maintenance of the vessel or to a service provided directly to the vessel.
This premise is not articulated in any statute, but it is supported by a substantial volume of case law. For example, in 1989, the Sixth U.S. Circuit Court of Appeals held in a case called Cary Marine Inc. v. Motor Vessel Papillon that “the breach of a contract for the sale of a vessel is not a maritime contract and does not give rise to a maritime lien.”
There are exceptions to this rule, but the concept also includes services such as a brokerage commission or a title search. The transactions provide services to people rather than to the boat itself, so they cannot give rise to a lien against the boat.
And similarly, in our reader’s case, the former partner’s claim for a refund of a share of the purchase price does not involve a service that was provided to the vessel, so he cannot claim a lien against the vessel.
Unfortunately, in our reader’s case, her former partner recorded a Notice of Claim of Lien against the boat, even though the claim will not support a maritime lien. This paradox is explained by the fact that the lien recording system is focused on providing notice to the world that someone claims to have some kind of legal right against the vessel.
A “notice” is different than a “lien,” and in fact the web site for the Coast Guard’s National Vessel Documentation Center includes a disclaimer to the effect that recording a Notice of Claim of Lien has no effect on whether the claim is actually a valid lien. With this complicated Coast Guard recording system in mind, we will address our reader’s second question. There is no statute of limitations on a valid maritime lien. Instead, Federal law (Title 46 US Code, section 31343) provides for the expiration of a recorded notice of lien after three years. The expiration of the “notice” has no effect on the underlying lien itself (assuming the lien is valid).
This is basically a minor administrative “housekeeping” statute, and the sole consequence of the statute is to relieve new lien claimants of the requirement that they notify old lien claimants of their new lien claim, when the old claims are more then three years old.
We should note that while most maritime liens are not subject to any statute of limitations, they are instead subject to a legal principle known as “laches.” The laches principle basically says that if you sit on your rights for a long period of time, and as a consequence of that passage of time other people are somehow harmed by your failure to act, you may lose those rights. It’s a very vague principle, but it does provide incentive for a lien claimant to move things along.
Our reader will have a lot more on her mind as she works her way through the failed partnership, including her efforts to recover half of the operating expenses and her defense against her partner’s efforts to recover the down payment. A partnership agreement would obviously have been a good idea, but these disputes often get out of hand because one partner ignores a series of failures by the other partner to hold up the other end of the bargain. Now, her best bet is to consult a maritime attorney experienced in vessel partnerships and vessel purchase transactions.