Islander Yachts, Inc. v. One Freeport 3 Vessel

• Decision Date: 31 October 1985
• Citation: 219 Cal.Rptr. 654,173 Cal.App.3d 1081
• Parties: ISLANDER YACHTS, INC., Plaintiff and Appellant, v. ONE FREEPORT 36' Vessel, # 145, etc.et al., Defendants and Respondents. A020278.
• Court: California Court of Appeals Court of Appeals

Page 654

219 Cal.Rptr. 654

173 Cal.App.3d 1081

ISLANDER YACHTS, INC., Plaintiff and Appellant, v. ONE FREEPORT 36' Vessel, # 145, etc.et al., Defendants and Respondents.

A020278.

Court of Appeal, First District, Division 4, California.

Oct. 31, 1985.

As Modified Nov. 13, 1985.

Gustlin, Golob & Bragin, Philip R. Gustlin, Los Angeles, for plaintiff and appellant.

David M. Zeff, William N. McGrane, Jr., San Francisco, for defendants and respondents.

CHANNELL, Associate Justice.

Harbors and Navigation Code section 491 ¹ allows a vessel manufacturer to obtain a lien against a vessel in order to obtain payment for the cost of construction. ( s491, subd. (c); see Civ.Code, § 1180.) We find that appellant Islander Yachts, Inc., a boat manufacturer, is estopped from asserting this lien against the Freeport 36-foot yacht purchased by respondent Vincent Braun, ² and that Braun's bona fide purchase of the yacht without knowledge of Islander's vessel lien would have extinguished that lien even if Islander had not been estopped from asserting it. We therefore affirm the judgment.

I. FACTS

In late 1981, respondent Vincent Braun made arrangements with Sailboats/Sausalito, Inc., a vessel dealer, to purchase a sailboat. Appellant Islander Yachts, Inc. constructed the vessel in Irvine, California for sale to Sailboats/Sausalito.

On February 11, 1982, ³ Wells Fargo Bank, Braun's lender for the purchase of the vessel, requested Islander to issue a master carpenter's certificate. This document certified that Islander had transferred 100 percent of its interest in the vessel to Sailboats/Sausalito. Islander did not advise either Braun or Wells Fargo Bank that it intended to reserve any lien rights against the vessel.

On April 15, Islander delivered the vessel to Sailboats/Sausalito, which issued checks totaling $77,245 in payment to Islander. The following day, Sailboats/Sausalito transferred title to the vessel to Braun and Wells Fargo Bank and was paid $134,700 for it. Sailboats/Sausalito then stopped payment on the Islander checks and conveniently went out of business. Dick Levine, the owner of Sailboats/Sausalito, has disappeared. ⁴

Seeking to obtain payment for the vessel, Islander filed a complaint on May 18, asserting a lien against the vessel pursuant to section 491 and attempting to foreclose on the lien. ⁵ Islander obtained a right to attach order on May 18 and an ex parte writ of attachment on the following day. On May 24, the sheriff seized the vessel.

Braun filed application for an order setting aside the right to attach order and quash the writ of attachment on June 2. On August 26, the trial court granted this application and entered an order setting aside its previous right to attach order, quashing the writ of attachment, and releasing the property.

On October 29, Braun filed a motion for summary judgment on the ground that Islander had no cause of action to foreclose on the lien because it had no right to obtain a lien against the vessel. An order for summary judgment and judgment itself was issued on December 10. Islander appeals from both the August 26 order setting aside the right to attach order and quashing the writ of attachment and the December 10 order and summary judgment. ⁶ The December 10 summary judgment was proper or not, depending on the correctness of the trial court's August 26 order. As such, this opinion will focus on the correctness of the earlier order.

II. FEDERAL PREEMPTION

First, Braun contends that federal law preempts Islander's lien. Although federal law provides for maritime liens to obtain payment for repairs made to vessels (46 U.S.C. § 971) and preempts state law to this extent (46 U.S.C. § 975), a federal maritime lien does not lie to obtain payment for construction of a vessel. (New Bedford Co. v. Purdy (1921) 258 U.S. 96, 99, 42 S.Ct. 243, 243, 66 L.Ed. 482; Matter of Mission Marine Assoc., Inc. (3d Cir.1980) 633 F.2d 678, 680; Fahey v. Gledhill (1983) 33 Cal.3d 884, 887, 191 Cal.Rptr. 639, 663 P.2d 197; Farwest Steel Corp. v. Barge Sea-Span (9th Cir.1985) 769 F.2d 620 [federal admiralty jurisdiction over contract for repair of vessel]; see also 10 Cal.L.Rev. 55 (1921-1922).) Only if the contract is of a maritime nature--related to a maritime service or transaction--does federal admiralty jurisdiction exist. (Graco, Inc. v. Colberg, Inc. (1984) 162 Cal.App.3d 322, 327, 208 Cal.Rptr. 465 [U.S. app. pending].) Contracts for construction of a vessel are non-maritime contracts because, until launched, a vessel is not directly connected with navigation or commerce by water sufficient to bring it within admiralty jurisdiction. (See, e.g., Thames Co. v. The "Francis McDonald" (1920) 254 U.S. 242, 243-245, 41 S.Ct. 65, 65-66, 65 L.Ed. 245; B & B Salvage & Rigging, Inc. v. M/V North Bend (E.D.Mo.1982) 548 F.Supp. 123, 124, affd. (8th Cir.1983) 716 F.2d 908; Jensen v. Dorr (1914) 23 Cal.App. 701, 702, 139 P. 659.) Although the distinction between contracts for vessel construction and contracts for vessel repair has been criticized, federal courts continue to make it. (See Ohio Barge Line, Inc. v. Dravo Corporation (W.D.Pa.1971) 326 F.Supp. 863, 864.) There being no federal admiralty jurisdiction, Islander's claim is properly brought under the state vessel lien statutes. (See Jensen v. Dorr, supra, 23 Cal.App. at p. 702, 139 P. 659 [former statute]; see also §§ 490, 491.)

III. ESTOPPEL

Braun contends that Islander is estopped from asserting the state vessel lien because it stated in its master carpenter's certificate ⁷ that it had conveyed 100 percent of its interest in the vessel to Sailboats/Sausalito. The certificate did not state that the vessel was subject to a lien pursuant to section 491. Islander contends that Braun had no right to rely on the master carpenter's certificate because this document is not a true lien release. ⁸

The doctrine of equitable estoppel is founded on concepts of equity and fair dealing. It provides that a person may not deny the existence of a state of facts if he or she intentionally led another to believe a particular circumstance to be true and to rely on this belief to his or her detriment. Equitable estoppel bars a claim when the party to be estopped is apprised of the facts, and intends that his or her conduct be acted on, or so acts that the party asserting the estoppel has a right to believe it was so intended; and when the party asserting estoppel is ignorant of the true state of facts, and relies on the conduct of the party to be estopped to his or her detriment. (County of Los Angeles v. City of Alhambra (1980) 27 Cal.3d 184, 196, 165 Cal.Rptr. 440, 612 P.2d 24; Strong v. County of Santa Cruz (1975) 15 Cal.3d 720, 725, 125 Cal.Rptr. 896, 543 P.2d 264.)

The existence of estoppel is a question of fact for the trial court, whose decision will be upheld on appeal if supported by substantial evidence. (People v. Casa Blanca Convalescent Homes, Inc. (1984) 159 Cal.App.3d 509, 531, 206 Cal.Rptr. 164.) Estoppel to assert a lien may be inferred from the circumstances and from the conduct of the parties. (R.D. Reeder Lathing Co. v. Allen (1967) 66 Cal.2d 373, 378, 57 Cal.Rptr. 841, 425 P.2d 785 [mechanic's lien].) Islander, in the business of constructing yachts, knew of the existence of the vessel lien; Braun did not. ⁹ When purchasing the vessel, Braun and his lender relied on Islander's statement in the master carpenter's certificate that Islander retained no interest in it. Islander's silence about the existence of the lien supports "an inference of guile"--an inference that Islander intended that its affirmative statement that it had conveyed 100 percent of its interest in the vessel to Sailboats/Sausalito should lull Braun into believing that Islander had no right to assert a lien against the vessel. (R.D. Reeder Lathing Co. v. Allen, supra, 66 Cal.2d at pp. 378-379, 57 Cal.Rptr. 841, 425 P.2d 785; see Evid.Code, § 623.) The natural inclination of Braun and his lender to rely on Islander's representation that it had conveyed 100 percent of its interest in the vessel to Sailboats/Sausalito before Braun purchased it was particularly justified because Islander's president executed the master carpenter's certificate himself.

Islander opened the door to Braun's and Wells Fargo Bank's reliance on the representations in the master carpenter's certificate, even though that reliance might not be completely justified. (See Corsa Boats, Inc. v. Sun Bank of Miami (Fla.App.1981) 405 So.2d 1340 [vessel manufacturer estopped after executing title registration transferring vessel free of liens, enabling purchaser to borrow funds from bank].) Islander is estopped from asserting a state vessel lien. ( s491.)

IV. VESSEL SALE TO BONA FIDE PURCHASER

Section 491 ¹⁰ provides that a state vessel lien has "preference over all other demands" against the vessel. However, Braun contends that, even if Islander is not estopped from asserting the lien, his bona fide purchase of the vessel from Sailboats/Sausalito before the date Islander filed its lien extinguishes the lien. ¹¹ (See Graham v. Annis (1915) 28 Cal.App. 754, 760, 153 P. 981; see also Brown v. Johnson, supra, 98 Cal.App.3d at p. 851, 159 Cal.Rptr. 675 [vendor's lien].) This presents a question of first impression. In its notice of intended ruling, the trial court explained its decision to grant Braun's motion to set aside the right to attach order and quash the writ of attachment: "[T]here is nothing about the statutory lien created by Harbors and Navigation Code Sections 490, et seq., which protects it from defeasance upon transfer of the property to a bonafide purchaser for a value without notice. While the precise issue was not then before the Court, the language in Graham v. Annis (1915) 28 Cal.App. 754, 760, 153 P. 981, is compelling. When analyzing the nature of this very statutory lien, the Court therein stated: [p] '... It seems to us the lien declared by the statute would not preclude...