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Beware of Secret Liens when Buying and Selling

Summary – This article is a review of liens against marine vessels under federal law and Florida law, with a focus on Yacht sales.

 

When a vessel sells, there are significant TITLE ISSUES for both Buyers and Sellers which may not be readily apparent. Advice from a knowledgeable attorney and documentation service benefits Buyers and Sellers concerned with clear title and indemnity for title. New vessels and previously owned vessels each have their own process for transfer of title and potential pitfalls.

When it comes to the title of your vessel, any new purchase should come with a Bill of Sale and a Manufacturer’s Certificate of Origin (also known as an “MSO”). These documents will allow the owner to register the vessel in the state of his or her choice and/or with the United States Coast Guard or a foreign registry.

When buying a used vessel, the Buyer should also receive a Bill of Sale. Sellers should be aware of the fact that their signature on the Bills of Sale generally will put the Seller in a position of indemnifying the Buyer for any claim against the title should a claim arise.

So, what types of claims can come up? Maritime Liens are a creation of US Federal Law, and may also fall under State Law. Individuals and companies that provide “necessaries” to a vessel may claim a Maritime Lien without any filing or notice whatsoever. Thus the liens are “secret” until such time as the lien holder decides to take action against the vessel. And since the lien is against the vessel (known as an in rem claim against property) and not the owner at any given time, the lien follows the vessel. Therefore a recent Buyer might find his or her new vessel saddled with a valid and enforceable lien they did not know existed, and for goods or services they did not purchase.

How can Buyers and Seller know about the claims, should they arise? An abstract of title can be requested for U.S. documented boats, which should show any mortgages or other liens against the vessel. But, be aware that under both federal law (U.S.C. Title 46 § 31343, the “Maritime Lien Act”) and Florida law (Fla. Stat. § 713.60) secret liens may exist which may give rise to future claims against vessels. These are generally liens in favor of persons or companies that provide necessary maintenance or services to a vessel.

A lien may not be known about or no claim may be made at the time the yacht is sold. To protect against future claims against the vessel, the Buyer should insist on a title warranty from the Seller stating that the vessel is being sold free and clear of any and all mortgages, liens or encumbrances against the vessel. This is in addition to the warranty of title generally stated in the Bill of Sale. With proper preparation you will have the Seller in a position to indemnify the Buyer should a claim arise. Also, Buyers should consider title insurance, which is fairly new to the market, but includes coverage for legal fees in defending title.

As a crew member, knowledge of the recent whereabouts and happenings surrounding a yacht which the Buyer is considering for purchase can be a significant benefit. Issues of whether the current dock bill, recent engine work or a paint job has been paid may be invaluable to a purchaser about to take possession. Due diligence may come in the form of assuring that bills have been paid by the party who incurred those bills prior to the transfer of ownership.

By taking the above precautions, you can help ensure that an owner’s dream of a yachting lifestyle does not turn into a sinking nightmare.

By David E. Irwin, Esquire, November 19, 2008.

David E. Irwin is a Florida attorney. This article is intended for general informative purposes, and is  not intended to provide anyone legal advice as to any specific legal issue. You may contact David E. Irwin of Kelley Uustal, PLC by telephone at (954) 522-6601, or by e-mail at dei@justiceforall.com.

 

Add comment December 5th, 2008

Salvage, contract or common law

Summary – Article by David E. Irwin on Salvage under the general maritime law of the United States. This article focuses on the basics for establishing the amount of salvage award granted to persons rescuing a distressed vessel.

When the subject of admiralty and maritime law comes up there are usually questions of great speculation and interest. This is largely due to the ancient traditions of the sea which form the basis of modern day admiralty law. Indeed, even the United States, a part of the “new world,” bases its general maritime law on traditional maritime law principles. In fact, much of the case law relied on by maritime attorneys today is precedent set by cases which were heard in courts during the nineteenth century.One subject of maritime law in particular is often of interest to those who sail the seas. That is the question of salvage rights. It is true that a person, a crew of persons or an entity can claim an interest in a vessel which was rescued from a certain marine peril.

Salvage is defined as compensation allowed to persons by whose assistance a ship or its cargo have been saved, in whole or in part “from impending peril on the sea, or in recovering such property from actual loss, as in the case of shipwreck, derelict or recapture.” The Blackwall, 77 U.S. 1 (1869).

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1 comment December 5th, 2008

Appellees’ Answer Brief – Issue of proper Forum in Marine Manufacturer case

Summary – Florida’s 4th District Court of Appeals ruled in favor of Appelles’ to keep their action for contract rescission and breach of warranty in a Florida court even when the Defendant yacht manufacturer was a New Jersey corporation. Attorney David E. Irwin authored the Appellees’ Answer Brief which may be reviewed by clicking on the link below. The Court’s final opinion based on this Brief appears in the previous Post. 

For the complete Answer Brief, please click on the link below -
Appellees’ Answer Brief

Add comment October 23rd, 2008

Appeal decision- 112 Nissan v Ocean Yachts

Summary – In the decision below, Florida’s 4th District Court of Appeals holds that in an action for rescission and breach of warranty, a south Florida forum was proper against a New Jersey yacht manufacturer, where warranty repairs were directed by the manufacturer to be conducted in a Palm Beach boat yard. David E. Irwin was responsible for writing the Appellees’ Brief upon which the Court’s decision was based. The Appellees prevailed in keeping an action for rescission of the purchase contract and for breach of warranty in Palm Beach Circuit Court, rather than the action being transferred to New Jersey. 

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA

FOURTH DISTRICT

 July Term 2008

 OCEAN YACHTS, INC. and STATEN ISLAND YACHT SALES, INC.,

Appellants,

v.

ANTHONY TANTILLO and NISSAN 112 SALES CORPORATION,

Appellees.

 

No. 4D08-269

[August 20, 2008j

KLEIN, J.

 

Plaintiff Nissan 112 Sales Corporation purchased in New York a boat manufactured by Ocean Yachts in New Jersey. Nissan sued Ocean Yachts in Palm Beach County, where the boat was being operated, and Ocean Yachts moved to dismiss for improper venue. We affirm the denial of the motion, because Ocean Yachts authorized a boat yard in Palm Beach County, as its representative, to perform warranty repair work on the defective boat.

The complaint alleged that Ocean Yachts had made some warranty repairs to the defective boat at its New Jersey facility, but the repairs were not satisfactory, and other defects appeared after the boat was brought to Florida. Ocean Yachts then directed that further warranty work be done at a Florida boat yard.

 

Section 47.051, Florida Statutes (2007), which addresses venue provides in part:

 

Actions against foreign corporations doing business in this state shall be brought in a country where such corporation has an agent or other representative, where the cause of action accrued, or where the property in litigation is located.

The trial court concluded that venue was proper in Palm Beach County, because the complaint alleged that warranty work was performed in Palm Beach County by agents or representatives of Ocean Yachts, and this allegation was not controverted by Ocean Yachts.

 

Ocean Yachts relies o n its warranty, which provides that its “designated service representatives are not the agents of Ocean Yachts.” Our statute, however, says venue against a foreign corporation will lie in a county where the corporation has “an agent or other representative,” and in Piper Aircraft Corp. v. Schwendemann, 564 So. 2d 546 (Fla. 3d DCA 1990), the court held that a service center which was authorized by the defendant to perform warranty work was a representative, for purposes of venue, even though it may not have been an agent of the manufacturer. See also Breed Techs. v. Allied Signal, Inc., 861 So. 2d 1227 (Fla. 2d DCA 2003) (agreeing with Piper and noting that labels in agreements are not conclusive as to actual legal relationships).

We agree with Piper and Breed and therefore affirm.

SHAHOOD, C.J and DAMOORGIAN, J., concur.

*        *       *

Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach County; Robin L. Rosenberg, Judge; L.T. Case No. 50- 2007CA00826 1XXXXMB.

 

Samuel Cozzo and Michel 0. Weisz of Berger Singerman, Miami, for appellant Ocean Yachts, Inc.

Cindy L. Ebenfeld and Mark Hicks of Hicks & Kneale, P.A., Hollywood, for appellant — Staten Island Yacht Sales, Inc..

 

Andrew W. Anderson and David E. Irwin of Houck Anderson P.A., Ft. Lauderdale, for appellees.

Not final until disposition of timely filed motion for rehearing

 

Add comment October 23rd, 2008

Boat Purchases can be tricky

Summary – The link below contains an article by David E. Irwin published in Smart Business Broward/Palm Beach in August 2005. The article provides an overview yacht purchases and what to watch out for from a legal perspective.  

Boat Purchases can be tricky

Add comment October 23rd, 2008