Maritime Liens: The Nuts and Bolts

by Nicholas Walsh, PA

 

A maritime lien gives a provider of fuel, repair services etc. an automatic lien on the ship to which the services were provided. The lien allows the provider to seize the ship and sell it in satisfaction of the lien and the costs of sale.

By “automatic” I mean the lien exists the moment the fuel is pumped, the ship is repaired etc. If the boat sells the day after I pump the fuel, I can go to the new owner and demand payment, even if the buyer didn’t know about the lien or the fuel.

Similar liens exist in other industries. For example, Maine’s statutes give a contractor who installs a roof, sods a lawn or repairs a furnace a “mechanic’s lien” on the real estate. Aircraft mechanics, watchmakers, warehouseman, haycutters, even providers of stallion stud services, all enjoy the benefit of a statutory lien in the thing repaired, the goods stored, the hay cut, the foal thrown.

A major difference between a federal maritime lien and these state liens is that under federal maritime law the lien does not have to be recorded anywhere, although it is usually a good idea to publish it with the Coast Guard, and there is no strict timeline for suing to enforce the lien—but don’t wait too long or a court might decide you forfeited the lien by delay.

Maine has both federal and state maritime lien law. The federal law of maritime liens is found in the “general maritime law,” which is the court opinions, and in Title 46 United States Code Sections 31301-31343, the Commercial Instruments and Maritime Liens Act. The Maine law of maritime liens is found in Title 10 sections 1381-1386 (the Maine Marina and Boatyard Storage Act), and in Title 10 Chapter 627.

The Maine Marina and Boatyard Storage Act allows a boatyard to auction off a boat to satisfy the storage bill. I’ll discuss it more below.

Title 10 Chapter 627 is a set of Maine statutes for the enforcement of all manner of maritime liens. These statutes are relics of an earlier day when states made and enforced their own maritime law, and the statutes are almost certainly unconstitutional.

Here’s why. The U.S. Constitution says federal law controls over conflicting state law. The federal Commercial Instruments and Maritime Lien Act says expressly that it, not any conflicting state law, controls. There’s even an 1888 Maine case holding that suits to enforce a maritime lien may be brought only in Federal District Court using federal law.

It’s therefore likely that if a shipowner ever went to Federal District Court to challenge the constitutionality of a boatyard’s use of Maine law to seize and sell his documented boat to enforce a maritime lien, the boat owner would win. The sale would be undone, and just possibly the yard would face liability for “conversion,” or civil theft.

But using the federal law to get paid on a maritime lien is expensive. The process is fairly complex and the lienholder has to go to Federal District Court, where a lawyer’s meter ticks right along. Unfortunately, if the liened boat is documented you really have no choice but to go to the federal courts and use federal law.

There is, as a practical matter, one exception. I mentioned that Maine has the Marina and Boatyard Storage Act, allowing a yard to sell a boat at auction to recover unpaid storage (and to get an old boat out of the yard). Using the Maine Marina and Boatyard Storage Act is cheap, as such matters go. You don’t even have to go to court. And while by its terms the Maine Marina and Boatyard Storage Act is only available to recover storage fees, a creative lawyer can sometimes shoehorn in other items, including repairs. The problem is the Act creates a maritime lien, or what looks and acts like a maritime lien, and thus a foreclosure under that law leaves leave the yard open to a federal court challenge.

Here’s my suggestion for getting rid of a boat with outstanding storage bills. First, if it’s not a federally-documented vessel, put your concerns aside and proceed under the Maine Marina and Boatyard Storage Act.

If the boat is documented, be aware that Maine law says you can’t use the Marina and Boatyard Storage Act to get rid of a documented vessel which has a vessel mortgage. That’s because on such a boat the Coast Guard will not accept the state process as giving title to the winning bidder. So if the ship is documented, get the official number off the “main beam,” call the National Vessel Documentation Center (800-799-8362) and—credit card handy—ask for a title abstract. If the vessel is documented and has a vessel mortgage you have no choice but to go to federal court.

If the vessel is documented, but has no preferred mortgage, and has modest value, and if the yard has no reason to believe the boat owner will put up a stink, the Maine process can be used with small risk. Your call.

If the boat is documented, has no mortgage, but is either expensive or has an owner who’s trouble, go to Federal District Court. Otherwise you risk serious complications and expense.
I am leaving out of this discussion the “30 yard dumpster” remedy for abandoned boats, about which I have heard only rumors.

Let’s get back to vessel liens. What gives a person a vessel lien? A vessel lien must reflect the provision of “necessaries” to the ship. Necessaries are those goods and services necessary to keep the ship in navigation. Fuel, provisions, repairs, wharfage, and insurance premiums are all necessaries, and there are many other examples. By illustration, brokerage commissions are not necessaries, because the commissions are not necessary to keep the ship operating.

If the ship is arrested and sold at auction, or if it is refinanced or just sold in the market, the liens get paid, newest first. That means if the ship does not sell for enough to pay all the liens, the newest lien is first paid, then the second newest, and so on until the money runs out.

In shoreside liens (for example, a mechanic’s lien for a home repair) the order is reversed, with the oldest lien getting paid first. The newest-first priority reflects the policy of keeping the ship in navigation by offering good security to, for example, a shipyard which is considering whether to do work based on the credit of the ship. The rule also assumes that the newest creditor provides a benefit to the older creditors by keeping the ship operating, giving it a chance to work off earlier liens.

The liens listed above are all “contractual liens,” incurred deliberately by the ship. If the ship has a Preferred Vessel Mortgage, a creature of federal statute, the Preferred Vessel Mortgage gets paid ahead of any contractual liens incurred after the mortgage was recorded. Just about any loan to a ship is secured by a Preferred Vessel Mortgage, if the bank was on the ball and used the right magic words.

Salvage, crew wages, stevedoring, claims stemming from the death or injury of a sailor, and collision claims also create maritime liens, and these get special priority—they get paid ahead of even an earlier-recorded Preferred Vessel Mortgage. Each of these liens reflects a public policy favoring the lien.

Finally, if the ship is arrested and sold to pay liens, the costs of arrest, court and sale get priority over all liens.

Next month I’ll cover how to give notice that you have a lien, how to find out about other liens, how to get paid on a lien, and the special and useful “possessory lien” available to boatbuilders and shipwrights.By now you know there are moving parts here and judgment calls to be made. Before you commit to a lien enforcement action, talk to a lawyer who is familiar with maritime liens.

Nicholas Walsh is an admiralty attorney with an office in Portland, Maine. He may be reached at 207-772-2191, or nwalsh@gwi.net.