Question:
I purchased a fifty-percent interest in a boat with a good friend a few years ago. He had access to a slip, and we titled the boat solely in his name so we could use that slip. Our agreement called for us to split all of the expenses for owning and operating the boat, but I ended up paying the slip rent and most of the other expenses by myself. He said he would pay me back, and I didn’t think much about those expenses or about the title issue until recently, when I learned that he has listed the boat for sale with a broker. He refuses to talk to me or to return my calls, and I am very concerned that he will refuse to reimburse me for the expenses or for my share of the purchase price after the boat is sold. Is there anything I can do to protect my investment? Can I claim a maritime lien for the money that is owed to me?
Answer
Our reader’s dilemma is complicated by the fact that he needs to untangle two separate agreements. He first needs to establish whether he is an owner of the boat, notwithstanding that he is not on the title. The answer to that question will then determine how to pursue reimbursement for the operating expenses that he paid.
The agreement between our reader and his ex-friend for their joint acquisition and ownership of the boat is probably best described as a verbal partnership agreement, which called for them to co-own the boat and to split the proceeds when the boat was ultimately sold. The refusal by his friend to acknowledge his ownership rights would amount to a breach of their verbal partnership agreement.
Unfortunately, a breach of a partnership agreement will not give rise to a maritime lien. This will be the case even if we were to characterize the agreement as a vessel purchase agreement. Maritime liens are generally based upon services that are provided directly to a vessel. An agreement between individuals for the ownership or the purchase of a boat does not actually provide any benefit or service to the boat, and as such it will not give rise to a maritime lien.
Slip fees, maintenance, and repair costs do give rise to a maritime lien, so our reader may be able to get some traction with those expenses. Unfortunately, his efforts in this direction may also be blocked, because a boat owner may not assert a maritime lien against his or her own boat. And, as noted above he will be asserting an ownership claim.
So, our reader cannot claim a maritime lien for his half of the purchase price or for reimbursement of the operating expenses. But he does have legal options. One such option would be to pursue a claim in Federal Court under Admiralty Rule “D” of the Federal Rules of Civil Procedure. Admiralty Rule D governs title, possessory and partition actions in federal admiralty courts, and it outlines the process for obtaining security for resolving ownership disputes. It calls for an “in rem” lawsuit to be filed against the vessel itself, where the boat is arrested and held in the custody of the U.S. Marshals or their substitute custodian during the course of the litigation. The court will determine who really owns the boat and the Coast Guard will be ordered to modify the boat’s ownership records accordingly.
The most significant substantive benefit to the federal court procedure is that the court has jurisdiction to clear the title as to anyone who may claim to have an interest in the boat, even if that person is not named in the lawsuit. Another significant benefit is that the boat will not be a “flight risk” since it will remain in custody during the course of the lawsuit. The Federal Court procedure is, however, a lot more expensive than a similar procedure available in state court.
A title dispute involving a boat may be heard in state court by filing a “quiet title” lawsuit against the individual whose claim of ownership is disputed. The state court procedure is available, even for a federally documented vessel, because the dispute involves only the individuals who are named in the lawsuit. A state court does not have jurisdiction to proclaim the status of the vessel’s title against the entire world.
Unfortunately, litigation is expensive, and both of the procedures described above will cost a lot of money. As frequently noted in this column, it is always better to avoid a lawsuit than to win one, and the claims described in this case are a good example of this. The agreement regarding title and costs of ownership should have been established in writing before the boat was purchased. As always, anyone facing this type of case should consult with an experienced maritime lawyer.
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 [email protected].
