National Liability & Fire Insurance Co. v. Rick's Marine Corp.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

---------------------------------X

NATIONAL LIABILITY AND FIRE

INSURANCE CO.,

Plaintiff, MEMORANDUM AND ORDER

15-CV-6352(DRH)

-against-

RICK'S MARINE CORP. AND ADAM

WEINSTEIN,

Defendants,

---------------------------------X

RICK'S MARINE CORP.,

Third-Party Plaintiff,

-against-

THE MOTOR VESSEL PELAGIC, its

Engines, Tackle, Appurtenances,

etc., in rem,

Third-Party Defendant.

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A P P E A R A N C E S:

Attorneys for Plaintiff National Liability

& Fire Insur. Co.:

Nicoletti Hornig & Sweeney

88 Pine Street

Seventh Floor

New York, New York 10005

By: William M. Fennell, Esq.

Cali L. Chandiramani, Esq.

Guerric S.D.L. Russell, Esq.

Attorneys for Defendant/Third-Party Plaintiff Rick’s

Marine Corp.:

Kennedy, Lillis, Schmidt & English

75 Maiden Lane

Suite 402

New York, NY 10038-4816

By: Craig S. English, Esq.

Attorneys for Defendant Adam Weinstein:

Rosenberg & Pittinsky, LLP

232 Madison Avenue

Suite 906

New York, NY 10016

By: Laurence D. Pittinsky, Esq.

HURLEY, Senior District Judge

The purpose of this decision is to provide my Findings

of Fact and Conclusions of Law as required by Federal Rule of

Civil Procedure 52. The case was tried before me, non-jury, on

October 2, 3, 4 and November 13, 2018, with the post trial

memoranda of counsel being fully submitted by April 1, 2019.

Background

This action arises from the sinking of a marine

pleasure vessel, the Pelagic, which was owned by defendant Adam

Weinstein ("Weinstein"), and serviced, stored and launched by

Richard Dillworth ("Dillworth"), the owner and operator of

defendant Rick's Marine Corporation ("RMC"). Upon being launched

at the RMC boatyard on May 8, 2015 – after being stored at that

location for the winter of 2014-2015 – it sank within hours.

As a result of its sinking, the Pelagic was declared a

total loss, leading the insurer of the vessel, plaintiff National

Liability and Fire Insurance Co. ("National"), to pay the

$290,000 face amount of the policy to its insured Weinstein.

Weinstein then transferred Pelagic's title to the insurance

carrier as the subrogee of its perceived causes of action against

RMC for the sinking.

RMC maintains that it is the aggrieved party. In its

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view, the boat was delivered to the marina in the Fall of 2014

for repairs, winter storage, and for launching in the Spring with

a causative latent defect, explained infra. Based on that

belief, RMC seeks, inter alia, to recover damages to the dock to

which the Pelagic was tethered at the time of its submersion. In

addition, RMC has refused to release the Pelagic, such as it is,

to National until it is paid certain sums predicated on an

asserted maritime lien.

Nature of the Affirmative Relief

Sought by the Parties

The parties' divergent positions as to the reasons

leading to the loss of the vessel and related issues have

produced multiple claims being leveled against one or more of the

captioned parties.

1. National's Claims Against RMC,

as Subrogee of Weinstein and Its

Contingent Claim Against Weinstein

The relief sought by National, as enumerated in the

"WHEREFORE" clause of its "FIRST AMENDED COMPLAINT" is as

follows:

(i) against Defendant Rick's

Marine Corp. declaring that the M/V PELAGIC

is not subject to any maritime lien,

mechanics lien, or other lien in favor of

Defendant Rick's Marine Corp;

(ii) in the alternative, to the

extent Defendant Rick's Marine Corp. has a

lien against the M/V PELAGIC, then judgment

against Defendant Adam Weinstein for breach

of his sales contract with Plaintiff National

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warranting title to be free and clear of all

liens and encumbrances, awarding Plaintiff

National (1) general and consequential

damages including, but not limited to, the

impairment of the use and marketability of

the M/V PELAGIC, diminution in value, costs

and fees relating to the detention of the

vessel and in securing the release of the

vessel (including surveyor, salvage, and

attorneys' fees), the cost of satisfying the

lien, and all amounts Plaintiff National is

found to be owing to Defendant Rick's Marine

Corp. to clear title to the vessel, and (2)

that the M/V PELAGIC be released to Plaintiff

National while Defendant Rick's Marine Corp.

disputes its claim with Defendant Adam

Weinstein;

(iii) directing the marshal or

designated third-party to seize the M/V

PELAGIC on behalf of Plaintiff from the

unlawful possessor, Defendant Rick's Marine

Corp. and awarding Plaintiff possession of

the vessel together will all of Plaintiff's

damages, costs, and expenses arising from the

wrongful conversion of the vessel and arising

from effectuating the release of the vessel;

(iv) awarding to Plaintiff any

diminution in the vessel's value due to the

improper detainment or conversion of the

property, the equivalent daily charter hire

for a vessel comparable to the M/V PELAGIC,

any damage to the vessel, and loss of market

for the vessel since the time the M/V PELAGIC

was lawfully sold to Plaintiff National

through the date the vessel is released to

Plaintiff National's custody;

(v) awarding Plaintiff National its

general and consequential damages as a result

of Defendant Rick's Marine Corporation's

wrongful and/or unworkmanlike repairs,

services, winterizing, and/or launching of

the vessel resulting in its sinking and total

loss;

(vi) declaring that [the] marine

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insurance policy issued by Plaintiff National

to Defendant Adam Weinstein [does not cover1]

breaches of contract, including in particular

Plaintiff National's breach of contract claim

in the original Complaint (and in this

Amended Complaint) and, consequently,

Plaintiff National has no duty to defend or

indemnify Defendant Adam Weinstein;

(vii) awarding to Plaintiff its

costs and attorney's fees; and

(viii) for such other and further

relief this Court may deem just [and]

equitable . . . .

First Amended Complaint (DE 9) at 14-15.2

2. Affirmative Relief Sought by

Weinstein in His Crossclaim

Against Defendant RMC as Set Forth

in His Answer to National's Complaint

In its Answer to National's First Amended Complaint,

Weinstein denies the substance of National's claims, and lists an

1 The WHEREFORE clause in the FIRST AMENDED COMPLAINT,

subparagraph (vi), describes a maritime insurance policy being

issued to Weinstein "for breaches of contract." Reference to the

body of the insurance contract indicates that the quoted language

seemingly constitutes a scrivener's error. I took the liberty of

modifying the language used to reflect the message apparently

intended to be conveyed by National vis-a-vis its obligation to

defend and indemnify Weinstein with respect to RMC's claim "for

services rendered." First Amended Compl. ¶ 70; see also id. at ¶

71 ("Breaches of contract are clearly excluded from the Policy

and, therefore, there is no duty to defend or indemnify Defendant

Adam Weinstein with respect to such claims.").

2 Some of the above quoted items of relief sought by

National were not pursued at trial. By way of example, National

includes within its demand for damages a sum reflecting the

"daily charter hire for a vessel comparable to the M/V Pelagic"

absent any suggestion, no less evidence as to what that sum might

be. (First Amended Compl., WHEREFORE clause ¶ iv.)

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array of affirmative defenses, followed by four crossclaims

against RMC. The first seeks damages for RMC's purported

negligence in sinking the Pelagic to the extent that the fair

market value of the vessel and its gear exceeded the $290,000

Weinstein received from National.

The second crossclaim asks for the same relief but

under a breach of contract theory, while the third asserted

cause of action is premised on the law of bailment.

Weinstein's final and fourth crossclaim against RMC is

contingent in nature: if National prevails against Weinstein on

its breach of warranty claim pertaining to the Pelagic being

transferred free and clear of any liens, then Weinstein "asks for

contribution and/or indemnification, in whole or in part, and

judgment over and against Rick's Marine, for any amount that

Weinstein is obliged to pay, together with the reasonable

attorneys' fees, expenses and costs that Weinstein incurs in the

defense and prosecution of this action." (Weinstein's Answer to

Amended Compl. with Crossclaims (DE 13) at 11.)

RMC denies any liability as to Weinstein’s crossclaims and

asserts thirteen affirmative defenses. (RMC’s Reply to Crossclaim

(DE 17).)

3. Affirmative Relief Sought by

RMC in Its Crossclaim Against

Defendant Weinstein as Set Forth

in Its Answer to National's Complaint

In its Answer to National's First Amended Complaint,

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RMC asserts various affirmative defenses, followed by a

crossclaim against Weinstein for services provided. (RMC’s Answer

to Amended Complaint with Counterclaims (DE 10) at p. 13-18.)

Weinstein denied RMC’s crossclaim by an answer

containing twenty-three affirmative defenses invoking such

theories as the "doctrine of accord and satisfaction" (Second

Affirmative Defense), full payment of "all monies due" (Seventh

Affirmative Defense), and "Rick's Marine did not perform the

Repairs and Services for which Rick's Marine claims payment is

due" (Twenty-First Affirmative Defense). (Answer to Co-Defendant

Rick Marine Corp.’s Crossclaim (DE 14).)

4. RMC's Third-Party In Rem Complaint

Against the Pelagic3

Two causes of action are alleged in RMC's third-party

complaint against the vessel, to wit, one for sums allegedly due,

and unpaid by Pelagic's owner relating to "authorized and

necessary services, work and repairs . . . [done] to the said

vessel" (First Cause of Action), and the other for unpaid storage

incurred as a result of the Pelagic's stay at the boatyard. As

to each a maritime lien is asserted. (RMC’s Third-Party Complaint

3 Evidence pertaining to RMC's in rem action against the

Pelagic was not presented at trial and is, accordingly, deemed

abandoned. As a practical matter, however, this seemingly is of

no consequence because RMC has a lien on the vessel for unpaid

services rendered – as explained later in the text –, and the

Pelagic was valueless by the time of trial. (See, e.g., Trial

Tr. at 46:1-5.)

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(DE 15) at pp. 6-9.)

Format

The event which gave rise to the multiple claims

outlined above was the sinking of the Pelagic. Accordingly that

will be the initial subject addressed.

Findings of Fact and Conclusions of Law

Regarding the Purchase of the Pelagic, its

Delivery to RMC in November 2014 and its

Sinking Upon Being Launched in May 2015

1. Weinstein purchased the 39 foot Pelagic in June

2014 for a sum "in excess of $300,000." (Trial Transcript

("Tr.") at 272:8.)

2. Immediately after purchase, Weinstein "with three

experienced captains" on board sailed the Pelagic from its point

of purchase, viz. in South Carolina, to New York, absent "any

instances of leakage" being experienced. (Id. at 97:22-98:5.)

3. Prior to taking that "three" or "four" day trip,

the Pelagic successfully completed a shake-down cruise in open

seas. (Id. at 98:9-24.)

4. Weinstein operated the vessel "through the summer"

of 2014 without incident, and delivered the boat to RMC in

"November of 2014." (Id. at 97:9-16.)

5. RMC operates Rick's Marine, which is a marina and

vessel repair facility located in Freeport, Nassau County, New

York. (Id. at 280:20-23.) RMC's "owner and operator" was and is

Dillworth. (Id. at 280:17-19.)

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6. Weinstein delivered the Pelagic to Rick's Marine in

November 2014 for the purposes of (a) "winteriz[ation]," (b)

"stor[age]", (c) "for certain repairs" to be made and, finally

(d) to be "launch[ed] . . . back into the water in the [S]pring."

(Joint Post-Trial Order, [DE 45] Stipulated Facts (VIII); see

also Tr. 292:11-293:2.)

7. Weinstein had "no idea how to winterize a boat"

(id. at 115:3-13), and, accordingly RMC, agreed to, and did

perform that process (id. at 123:23-124:17; Nat’l Ex. 9).

8. The reported details of the winterization process

done by Dillworth and/or an assistant, (Tr. at 302), are recited

in the company's invoice. They include "drain[ing] SW [i.e. salt

water] washdown [and] run[ning] non-tox [antifreeze] through all

drains and strainers." (Nat'l Ex. 9.) Whether the invoiced non-

tox antifreeze was ever added to the SW washdown systems is

questionable. At Dillworth's pretrial deposition he testified

that it was not. (Tr. at 316:21-25.)

9. With respect to the Spring launching, that was done

by Dillworth and his "son's godfather, John Galvin” ("Galvin").

(Id. at 362:8-17.) They did not do "a full bow to stern

inspection of the vessel while it was on land before it went into

the water." (Tr. at 361:17-25.)

10. RMC did not check the bilge pumps to determine

whether they were operating properly before launching. (Tr. at

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336:12-15.)

11. The Pelagic was launched somewhere between 1:00

and 1:30 p.m. on May 8, 2015. (Tr. at 336:24-337:2.) Dillworth

remained at the marina for four hours or less before catching a

5:08 p.m. train for a Rangers hockey game at Madison Square

Garden. (Id. at 336:20-337:1.) The Pelagic was one of seven or

eight boats he and his assistant launched that day yet he did not

assign anyone to keep an eye on any of the vessels during his

absence. (Id. at 337:8-11.) Dillworth returned to the marina at

around 1:30 a.m. on May 9 by which time the Pelagic had sunk.

(Id. at 337:25-338:10.)

RMC's Position as to Facts Bearing on

the Bailment Issue Discussed Infra

12. Before discussing the "certain repairs" RMC agreed

to perform and their relevance to the present dispute, it is

important to understand Dillworth's specific position as to the

cause of the sinking. In his view, "[t]he cause of the sinking

was the failure of a hose clamp, and a loose — fitting hose,

which were unrelated to any alleged act or omission of RMC."

(Post-Trial Memo of RMC (DE 71) at 12.) The referenced hose was

a part of an onboard saltwater washdown system, which device

permitted an operator to hose-down the decks of the Pelagic using

seawater obtained through a seacock.

Dillworth maintains that the evidence at trial

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established that the subject hose "fit loosely on the seacock

valve" and came dislodged when the single clamp holding the hose

in place ruptured due to overtightening. (Id. at 13; see also

Tr. 423:21-24.) That, in turn, caused seawater to course through

the open, below waterline seacock directly into the hull.

The separation of the hose from the through-hull

seacock fitting, the argument continues, is said by RMC to have

occurred long after the winterization process was completed,

specifically in the brief interim between the vessel's launching

and its sinking several hours later while still at the marina and

under the exclusive control of RMC.

But why wasn't the hose problem detected and corrected

during the Fall winterization by RMC? That query brings us to

the repair issue advanced by Dillworth regarding the repairs the

marina agreed to undertake, and those Weinstein indicated he

would handle himself or otherwise address. In that regard, RMC

refers to several emails exchanged with Weinstein. The first

email is from Weinstein to Dillworth asking in essence for price

quotes for twelve listed repair "projects." Number 8 on the list

reads: "Fix raw water wash down." (RMC Ex. C at AW0194.) In

response, RMC's Dillworth estimated "[a]t most a few hundred,

could be only a minor wiring issue." (RMC Ex. D, third page,

item 8, black text.) Of note, no mention is made by him of a

singular overtightened clamp securing a loose tube to the seacock

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apparatus. This suggests that Dillworth did not look at the

washdown before providing an estimate or, if he did, did not see

the supposed deficiency now cited.

In any event, Weinstein, after receiving repair cost

estimates from Dillworth, sought input from his friend, Stephen

Feinstein ("Feinstein") as to reasonableness of the estimated

charges. As to item 8, Feinstein told Weinstein that the raw

water washdown "works fine, issue is with quick connect hose to

fitting which activates the constant pressure pump, just needs a

different type of hose connection." (RMC Ex. C, third pg.,

numbered item 8, red text.) "So don't pay him [viz. Dillworth],

we will get another hose connector." (Tr. at 159:15 to 160:24.)

Feinstein contacted Dillworth directly consistent with that

conclusion whereupon Dillworth indicated item 8 would not be

addressed. (Tr. at 163:4-13.)

In sum, the gravamen of RMC's position disclaiming

responsibility for the sinking of the Pelagic is that the vessel

had a latent defect in its washdown system upon delivery to the

marina in November 2014, and that Dillworth was told at that time

not to address item 8 on Weinstein's list. Dillworth contends

that that communication eliminated the need for him to include

checking that part of the washdown system as part of the

launching protocol in May 2015 to assure it was then safe to

place the vessel in the water.

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13. RMC's labeling of the defect as "latent"

constitutes a misnomer. A condition is latent if it is "present

and capable of becoming[], though not now visible, obvious,

active or symptomatic." Meriam-Webster's Collegiate Dictionary,

Eleventh Ed. pg. 702; see also Kane v. Pater M. Moore Const. Co.,

Inc., 145 A.D. 3d 864, 868, (2d Dep't 2016)("If a defect could

not have been discovered by a layman, even by inspection, it is

considered a latent defect.").

14. Here, Dillworth highlighted during his testimony

that the cause of the mishap was an obviously misfitted hose

improperly secured by a single overtightened clamp instead of two

properly tightened clamps. (See, e.g., Post Trial Reply of RMC

to the Post Trial Submission of Plaintiff (DE 82) at p. 1.)

15. RMC, as previously noted, not only launched the

Pelagic in May of 2014, but also winterized the vessel in the

Fall of 2014. In performing the latter function, Dillworth or

his assistant had "hands on" contact with the salt water washdown

system. (See Nat’l Ex. 9, p.2 listing services rendered to

Weinstein by RMC (". . . drain SW washdown, run non-tox through

all drains and strainers [and] winterize SW livewell circulating

pump . . . ."); see also Tr. at 451:6-23.) So in winterizing the

salt water washdown, Dillworth, again, or his assistant had

occasion to see, and, in all probability did see, the purported

defects now mistakenly labeled by RMC as "latent."

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16. Central to RMC's argument is the contention that

the loose, overtightened hose and the manner in which it was

attached to the seacock barb constituted, in essence, an obvious

accident waiting to happen. (See, e.g., RMC Post-Trial Reply (DE

82) at 1.) Whether Dillworth's "latent defect" view as to the

cause of the loss is correct is at best problematic based on the

credible evidence adduced at trial. But more importantly for

present purposes, having been alerted to a problem with the

saltwater washdown system via Weinstein's request for a cost

estimate for its repair, and having been involved in the

winterization process of the system, why didn't Dillworth or his

assistant at least check to see if the needed repairs were done

before placing the vessel in the water? If such inspection

disclosed that the perceived hazard remained unaddressed,

Dillworth should have decided not to do the launch until the

defect was remedied.

17. Did the supposedly misshapen tubing become

dislodged due to a single overtightened clamp giving way as RMC

contends, or was the cause something else such as, e.g., the

freezing of the line attributable to improper winterization?

Without an answer to that question, the bailment presumption of

negligence by the bailee, discussed infra, comes into play.

18. Dillworth's related speculation about the tube

becoming dislodged sometime during the brief period separating

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the Pelagic's launching and his return from the Rangers game is

not credible. Instead, it appears to be a misguided effort to

excuse his inadequate pre and post launch inspections needed to

assure the vessel was watertight. (See, e.g., Tr. at 361:16-25

(lack of bow to stern inspection before boat placed in water);

id. at 379:4-18 (hoses and seacocks [except those leading to

engine] not checked pre launch); id. at 381:6-382:15 (Dillworth

testified he did not check hoses, clamps, or all the seacocks

after Pelagic was launched)).

Moreover, his reliance on the testimony of Christopher

Squeiri, a fellow marina operator in Freeport, to suggest that

the boat was still floating high and dry hours after its

launching is unavailing. Mr. Squeiri testified that he saw the

Pelagic at "about 5:00 [p.m.]" on May 8, 2015 in the water absent

any list or other evidence that it was being flooded. He

explained he knew it was the Pelagic due to its "light blue

hull." (Tr. at 510:7-511:21; see also id. at 516:16-18 and

523:17-524:5.) Given that the subject vessel's hull was white,

not blue, (id. at 524:18 - 525:2), it is clear to me that the

boat he saw the afternoon of the sinking was not the Pelagic and,

as a result, his testimony is not germane.

19. Based on evidence presented at trial, I find it is

more probable than not that the Pelagic was delivered into the

exclusive custody and control of RMC in the Fall of 2014 in good,

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seaworthy condition.

20. I further find that had the appropriate launching

protocol been followed as convincingly explained by Captain John

Lowe ("Lowe") of Lowe's Marine Survey, the Pelagic would in all

probability not have sunk. (Tr. at 588:17-25.) But several of

the required steps in that protocol were bypassed by RMC.

21. For instance, one of the steps required by the

protocol was checking the vessel's bilge pumps to assure they

were operational. (Id. at 589:1-591:17.) However, Dillworth

acknowledged that he didn't "test whether the bilge pumps

operated." (Id. at 336:12-15.) That oversight is significant

because any one of the several pumps had the capacity to keep the

vessel afloat, i.e., to expel more water from the bilge than

entered the hull from the untethered open seacock. (Id. at

593:18-594:12.)

22. Since the Pelagic was delivered to RMC in

seaworthy condition and remained under its exclusive custody and

control up to and through its launching, there is a rebutable

presumption that RMC's negligence as the bailee of the vessel

caused its loss. As explained in Goudy & Stevens, Inc. v. Cable

Marine, Inc.:

[W]hen the bailor shows delivery to a bailee

and the bailee's failure to return the thing

bailed, he makes out a prima facie case of

negligence against the bailee, and it then

becomes the duty of the bailee to come

forward with the evidence to explain its

16

default by showing facts and circumstances

sufficient in law to exonerate it from

liability for the damage.

924 F.2d 16, 18 (1st Cir. 1991)(internal quotation marks and

citations omitted). See also Muller Boat Works, Inc. v. Unnamed

52' House Barge, 464 F. Supp. 2d 127, 146-47 (E.D.N.Y. 2006);

Nat'l Ex. 28, pp. 9-10 (Lowe's "Comments on launch protocol").

23. The presumption is rebutable. But RMC's effort to

accomplish that goal via reference to a latent defect supposedly

present upon delivery of the vessel to the marina, has proven to

be unavailing. Thus the presumption of negligence remains

unrebuted. See Johnson's Branford Boat Yard. Inc. v. Yacht

Altair, 260 F. Supp. 841, 844 (D. Conn. 1966). That alone

establishes that National has met its burden of proof as to RMC's

liability.

24. Parenthetically, even if, arguendo, the

presumption is culled from the analysis, the same result follows

given the negligent departures from the appropriate launching

protocol explained by Captain Lowe as previously referenced.

25. In sum, National has proven that RMC's negligence

- via the aid of the bailment presumption - was the reason the

Pelagic sank upon launching.

26. In reaching the above conclusion, I considered RMC

Exhibit G,4 the preliminary report prepared by marine surveyor

4 RMC Ex. G also appears in the record as A.W. Ex. X.

17

Anthony L. Fazio ("Fazio"). The report, dated May 14, 2015, was

prepared at the request of National and offered into evidence by

RMC at which time it was received subject to connection under

Federal Rule of Evidence 104(b). (Tr. 88:17-23.) One of the

links required consisted of a proper foundation for its

consideration as a business record under Rule 803(6). (See

generally Memorandum & Order, dated October 19, 2018 (DE 65).)

In any event, the parties eventually agreed that the exhibit was

a business record thereby obviating the need to call a

foundational witness. [But its trustworthiness was disputed by

National, coupled with the unconvincing argument that such

claimed deficiency barred its admission.] I find that the

specifics of National's argument goes to the weight to be

afforded to RMC Ex. G, not to its admissibility. Accordingly the

exhibit has been considered by the Court as evidence. However,

given that Fazio's report is predicated in substantial measure on

questionable information provided solely by an interested

principal of RMC, viz. Dillworth, it does not give cause to alter

my conclusion regarding RMC's liability for the loss of the

Pelagic. Simply put, although the exhibit survives the

trustworthiness hurdle to its admission, its weight, given the

attendant circumstances, is de minimis.

27. By way of an example of the problematic nature of

Fazio's conclusion – offered in support of RMC's "latent defect"

18

theory – is his "finding" that "the hose detached from the

fitting allowing raw water to flood in according to Rick

Dillworth." (RMC Ex. G (emphasis added).) In addition, given

the nature of the break, Dillworth's testimony that he found the

broken single clamp in the bilge totally separated from the

tubing rather than still attached to it, was seriously questioned

by Fazio as well as Lowe. (See Nat'l Ex. 8, NAT0594 (as to

Fazio); Tr. at 637:13-638:3; Nat'l's Proposed Findings of Fact

and Conclusions of Law at p. 5, n. 5(as to Lowe).) Indeed, the

likelihood of the clamp being totally dislodged from the tubing

was viewed by Fazio as "seem[ingly] impossible." (Nat'l Ex. 8,

NATO594.)

And incidentally, Fazio in his report opines that

"[r]esponsibility" for the loss "[m]ay lie, with the marina

facility that launched the vessel in the owners [sic] absence

that may not have provided due diligence in ensuring the vessel’s

watertight integrity. (Fazio's May 14, 2015 Preliminary Report

1, at 7, NATO141.)

RMC's Claim Against Weinstein for Damage

to Marina's Dock and Travel-lift Sling is

Found to be Without Merit

28. Since a preponderance of the credible evidence

establishes that Weinstein delivered the Pelagic to the marina in

sound condition, and RMC has failed to rebut the resulting

presumption that its negligence as bailee caused the loss of the

19

vessel, it necessarily follows, and I so find, that Weinstein

bears no responsibility for the captioned damages.

Findings of Fact and Conclusions of

Law as to Weinstein's Claim Against

RMC for an Amount in Damages Equal

to the Alleged Difference Between

the Fair Market Value of the Pelagic

Immediately Prior to Its Loss and

and the $290,000 Received From

National in Insurance Proceeds

29. Weinstein called Frank Abbey ("Abbey"), a marine

surveyor, to evaluate and assign a pre-casualty market value to

the Pelagic. (See Weinstein Ex. K-2, Abbey's resume.)

Abbey never "inspected" the Pelagic. (Tr. at 496:4-6.)

Instead, he referenced a source entitled "BUC Used Boat Price

Guide" and like publications said to be used by marine surveyors

to provide valuation figures to, inter alia, insurance companies.

(See Weinstein Ex. K-1 and Tr. at 496:7-497:25.) Based on that

process, he opined that "the boat could have had a value range

[of] $312,950 to $370,150" [or from] "$327,175 to . . . $386,975"

(emphasis added). (Id. at 498:10-17.)

The actual condition of a boat is an important factor

in its evaluation. (Id. at 504:3-5.) Abbey assumed that the

vessel was in so-called BUC condition, that is "in good average

condition, typical age type and ready for sale." (Id. at 501:8-

14.) But not only did he never see, no less inspect the vessel,

he never spoke to the owner about its condition. As a result,

Abbey was unaware of its problems such as with its "engine

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mounts" which, he conceded, would affect its value. (Id. at

501:20-24.) Similarly unknown to Abbey is what Weinstein paid

for the vessel in "the [S]pring of 2014" before insuring it for

$290,000. (Id. at 502:7-9.)

In sum, Abbey's testimony — which is essentially the

lone predicate for this claim by Weinstein against RMC — falls

far short of being convincing.

Accordingly, this crossclaim by Weinstein against RMC

is rejected as unproven.

Findings of Fact and Conclusions of

Law as to Pre-sinking Repairs to the

Pelagic and Resulting Lien Pending

Payment by Weinstein

30. RMC furnished Weinstein with an invoice dated

December 31, 2015 for pre-sinking repairs rendered in the amount

of $21,045.95, later reduced to $17,602. (See RMC Ex. N and Tr.

at 443:9-445:6; id. at 701:1-9.) Accordingly, RMC seeks to be

awarded the reduced amount for the repairs he did to the Pelagic

prior to its loss. (See Post-Trial Memo of RMC (DE 71) at 22.)

Dillworth testified that the invoiced tasks were

performed and the associated cost remains unpaid (Tr. at 443:9-

445:6); Weinstein has not offered evidence to the contrary.

But does the obligation for payment rest with Weinstein

or National? Title to the Pelagic was transferred from Weinstein

to National on May 30, 2015. (See RMC Ex. Y (first Bill of Sale)

and Nat'l Ex. 3 (second Bill of Sale, dated June 23, 2015 which,

21

unlike its predecessor, lists the name of the transferee).)

Reference to the December 31, 2015 invoice indicates

that the services rendered by their very nature all occurred

before the May 8 casualty and while Weinstein owned the Pelagic.

(RMC Ex. N.) Thus payment of the outstanding invoice is

Weinstein's obligation.5

In sum, Weinstein is responsible to RMC for the $17,602

in repair costs.

Post-Sinking Storage Fees for the

Pelagic are National's Responsibility

but National is Entitled to

Indemnification From Weinstein

31. In RMC's "PRE-TRIAL STATEMENT WITH REGARD TO

DAMAGES" (DE 52-1) filed on September 18, 2018, Dillworth, via

RMC's crossclaim against Weinstein, lists the damages sought.

With respect to then unpaid storage charges, the figure of

$53,032.28 is provided with a supporting cite to invoice number

1086B. (RMC Ex. T.) The storage charges listed on that invoice

all pertain to storage services provided after ownership of the

Pelagic was transferred from Weinstein to National.6 That

5 Absent from the bills of sale is anything remotely

suggesting that Weinstein's indebtedness to RMC somehow became

National's responsibility upon transfer. In fact, a fair reading

of the language in the sales instruments excludes that

possibility.

6 By implication, it appears that all storage fees for the

Pelagic incurred prior to the transfer from Weinstein to National

were satisfied pre-litigation.

22

scenario certainly suggests that satisfaction of the subject

storage charges are National's responsibility at least in the

first instance.

National insists that the responsibility does not rest

with it. Its primary argument in support of that position goes

as follows: "[f]or a lien (if such is asserted by Rick's

Marine)[7] to cover storage fees, the storage fees ‘must be

specifically authorized to be included as part of a

garagekeeper's lien on a vehicle,'" (Reply by Plaintiff (DE 83)

at ¶ 36 (quoting Grant St. Constr., Inc. v. Cortland Paving

Co., 55 A.D.3d 1106, 1107, 865 N.Y.S.2d 762, 764 (3rd Dep't

2008).)

Here, National argues that it never agreed to pay for

the post-transfer storage fees while the remains of Pelagic

languished at the marina. However, that position is belied by

the fact that it did pay storage charges to RMC for a significant

portion of that period. (See Tr. at 34:19-35:12; id. at 347:21-

25; and Nat'l Ex. 8.6 at NAT 0509.) By that act, it impliedly

acknowledged its consent and corresponding obligation to pay the

post-transfer storage fees as the titled owner of the vessel.

7 RMC is asserting a maritime lien for its unpaid services

performed on the Pelagic, and legitimately so, under 46 U.S.C. §

31342(a) and N.Y. Lien Law § 1841). See generally Memorandum &

Order, dated May 17, 2017, (DE 65), denying summary judgment to

National on its conversion claim for RMC's refusal to release

possession of the vessel due to outstanding invoices.

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32. As to the issue of indemnification, National

contends that if it owes storage fees to RMC, it is entitled to

indemnification from Weinstein. That is so, we are told, given

the terms of the two bills of sale.

Weinstein warranted in the May 30 bill of sale that the

vessel was being "sold free and clear of all liens, mortgages or

encumbrances of any kind" (RMC Ex. Y at 1), while the June 23

instrument recites "the seller(s) warrants that the vessel is

free and clear of all liens, bills, mortgages, taxes or

encumbrances of any nature or kind" (Natl's Ex. 3).

The above quoted language created an express warranty

of a material fact, which warranty Weinstein clearly breached

with respect to the repair services provided by RMC. See

generally Metro. Coal Co. v. Howard, 155 F.2d 780, 784 (2d Cir.

1946); Trodale Holdings LLC v. Bristol Healthcare Inv'rs., L.P.,

2019 WL 1300335, at *5 (S.D.N.Y. Mar. 21, 2019). That Weinstein

had not received an invoice for the repairs until well after both

the loss and the transfer of title had occurred does not alter

that result.

The lien came into existence at the time the services

were provided. See Odyssea Marine, Inc. v. Siem Spearfish M/V,

2016 WL 4259083, *3 (E.D. La. Aug. 10, 2016)(" A maritime lien

attaches when the necessary good or service is provided, but the

lien typically will remain inchoate and may not be enforced

24

(i.e., the vessel may not be arrested) until the debt has matured

per the terms of the agreement (if any).").

National, following the vessel's transfer of title,

sought its possession unsuccessfully. (See Tr. at 353:4-355:5.)

In rejecting such requests, Dillworth relied on his "mechanic's

lien." (Id. at 349:18-21.) Because of that lien, National was

unable to accomplish its goal of obtaining possession of the

vessel and, in the process, stopping the ever mounting storage

fees. Had the vessel been free of liens as warranted by

Weinstein, the post-transfer storage costs now sought by RMC to

be recovered from National would have been presumably non-

existent.

Under the circumstance, it is Weinstein's obligation to

indemnify National for whatever sum it owes RMC for the post-

transfer storage fees. Even though an invoice for the repairs

had not yet been issued before National acquired title to the

Pelagic, Weinstein should have settled that known open item with

RMC instead of falsely representing to National the absence of

any outstanding bills, liens or other encumbrances.

Amount Owed to RMC by National for

Post-Transfer Storage at the Marina,

and Ultimately by Weinstein Based on

His Breach of Warranty

33. The next question is how much does National owe to

RMC for storage? Is it the amount sought by RMC, to wit

25

$53,032.28, or some lesser sum?8 Whatever it is, that is the

figure to be awarded to National pursuant to its indemnification

claim against Weinstein.

34. Is the $53,032.28 sought by RMC unconscionable and

thus unenforceable given that the sum sought considerably exceeds

the post May 8-9 value of the vessel? National posits that the

answer to that question should be in the affirmative. (See

Natl's Reply (DE 83) to Proposed Findings of Fact and Conclusions

of Law of RMC and Weinstein at p. 17.) In support of that

proposition, two lower court state cases are cited, viz. C.J.T.

Corp. v. Solomon, 273 N.Y.S. 563 (Manhattan Mun. Ct. 1934) and

Pollina v. Bergh, 346 N.Y.S.2d 318 (2d Dist. Ct. 1973)(citing

C.J.T. Corp.). I have read both and find neither helpful for

present purposes. All Weinstein had to do to eradicate the lien

was to settle-up with RMC as to the authorized repairs done. The

notion that Weinstein may strip the marina of its lien by simply

declining to recognize its obligation to make payment until

storage costs exceed the value of the vessel is a proposition I

decline to adopt on the authority provided.

35. However, an alternate argument advanced in

National's Reply is helpful. That argument is as follows:

Rick's Marine's claim for storage fees is

8 See RMC Post-Trial Findings of Fact (DE 72) at p. 23,

para. 158; see also RMC Ex. T (a 9-01-18 invoice for post-

casualty on-land storage).

26

also unconscionable in light of the fact that

Rick's Marine charged Weinstein $1,482 for

five months of winter storage prior to the

incident (Nat'l Ex. 9), which is $296.40 per

month. However, Rick's Marine now seeks

$1,302.00 per month for storage (RMC Ex. T).

If the Court awards any amount, it should be

based upon the rate that existed prior to the

casualty (i.e., $296.40 per month).

(Nat'l's Reply (DE 83) at 17.)

National's alternate argument has merit to the extent

(a) that the record is devoid of evidence to suggest, no less

establish, that National or Weinstein ever agreed, by conduct or

otherwise, to pay the $1,302 per month now sought by RMC, and (b)

RMC has not otherwise contradicted or challenged National's

alterative suggestion for satisfying the outstanding storage

fees. (See Nat's Ex. 9.)

Accordingly, National is responsible for payment of

storage fees to RMC in the amount of $296.40 per month for post

transfer storage fees through the entry of judgment. Further,

National is entitled to judgment against Weinstein in like sum on

its claim for indemnification.

The Insurance Policy Issued by

National to Weinstein Does Not Provide

Coverage for Breaches of Warranty

or Other Contract-based Claims

36. The Yacht Policy issued to Weinstein by BoatU.S.,

the marine insurance arm of National, covers the vessel and

appurtenances thereto (Nat'l Ex. 2, p.2 of Policy), as well as

27

claims for "bodily injury or property damage for which the

insured becomes legally liable through [the] ownership,

maintenance or use of the insured boat" (id. at p. 10). By its

terms, the policy does not cover contract-based claims, such as

National's claim against Weinstein for breach of warranty, unpaid

repair bills, or storage fees.

Parenthetically, with respect to RMC's cause of action

against Weinstein for harm to the marina's dock and sling caused

by the sinking, National had a duty to defend pursuant to the

coverage provision quoted in the last paragraph. However

Weinstein never asserted a counterclaim against National charging

a failure to defend as to this matter9 nor was the subject

pursued by him during trial either by way of proof or argument.

For the above stated reasons, National's request for a

declaration that it has "no duty to defend Defendant Adam

Weinstein for National's cause of action for breach of contract"

or otherwise is granted.

Amount Owed by RMC to National

as Subrogee of Weinstein

37. National paid the $290,000 face amount of the

insurance policy it issued to Weinstein following the Pelagic's

9 See RMC's Answer to Natl's First Amended Complaint with

Crossclaim, DE 10; see also Nat'l's Proposed Findings of Fact and

Conclusions of Law, DE 74, at p. 24 ("At no time has Defendant

Weinstein asserted a counterclaim in this action against

National.").

28

loss. That amount is some evidence of the vessel's value.

Commercial Union Ins. Co. v. M/V Bill Andrews, 624 F.2d 643, 649

(5th Cir. 1980). No evidence was forthcoming suggesting a lesser

amount, while Weinstein's expert opined a value considerably in

excess of that number. The Court thus concludes that the

Pelagic's value in May of 2015 was $290,000.00. As subrogee,

National succeeds to Weinstein's rights to recover that amount

from RMC.

38. National also seeks to recover sums in excess of

the $290,000 it paid to Weinstein. (National's Proposed Findings

of Fact and Conclusions of Law (DE 74) at p. 19-20.) For

example, it requests an award of $6,794.49, that being the amount

it "paid to Rick's Marine to assist in the salvage of the vessel

and flushing of the engine and similar activities described in

the invoice after the sinking." (Id. at p. 19.) However, the

insurance policy issued to Weinstein (Nat'l Ex. 2), provides,

under the caption "Our Right to Recover," that "[y]ou may have

the right to recover from another party who is responsible for

your loss or loss to the insured boat. If we pay your loss under

this policy, this right of recovery will belong to us up to the

amount that we have paid you." (Nat'l Ex. 2 (DE 9-1) at 6.) So

that $6,794.49 charge, and the other like expenditures National

moves to recoup from RMC, would seem barred as a result of the

above quoted provision unless there is some predicate other than

29

subrogation at play. But what that other predicate might be

remains wholly unaddressed in National's submissions. For that

reason, the items of relief requested in paragraphs 50, 51, 52,

53 and 54 (see Nat'l's Proposed Findings of Fact and Conclusions

of Law (DE 74) at pp. 19-20) are denied.

39. With respect to paragraph 55, (id. at p. 20,)

there National asks to recover the salvage value of the vessel as

it existed shortly after the sinking, which opportunity was

purportedly lost due to "Rick's Marine's wrongful detention of

the vessel." (Id.) As explained earlier, RMC had the right to

detain the vessel based on its lien for unpaid repair services.

Thus this claim necessarily fails.

Conclusion Regarding Findings of Fact

and Conclusions of Law, Together

With Damage Awards

For the reasons given above:

1. National has proven that RMC's negligence — via

the aid of the bailment presumption – caused the loss of the

Pelagic; accordingly, National is entitled to judgment against

RMC in the amount of $290,000.00.

2. Since RMC bears sole responsibility for the

sinking, RMC's claims against Weinstein for damage to the

marina's dock and sling are found to be without merit;

accordingly, Weinstein is entitled to judgment dismissing this

counterclaim.

30

3. Weinstein has not proven that the Pelagic's

market value immediately prior to its sinking exceeded its

insured value of $290,000; accordingly his crossclaim against RMC

for the unproven differential is rejected and RMC is entitled to

judgment dismissing this counterclaim.

4. RMC's crossclaim against Weinstein for pre-

sinking repairs in the amount of $17,602.00 has been established

as has the legitimacy of its concomitant lien on the Pelagic due

to nonpayment; accordingly, RMC is entitled to judgment against

Weinstein on this crossclaim in the amount of $17,602.00.

5. Post-transfer storage fees for the Pelagic at

RMC's — at the rate of $296.40 per month as earlier explained —

are National's responsibility. However, because of Weinstein's

breach of warranty via his representation to National that the

vessel was being transferred free of any liens, bills or other

encumbrances, National is entitled to indemnification from

Weinstein for the storage fees it is required to pay to RMC up to

the date of this judgment; accordingly, RMC is entitled to

judgment against National in the amount of $16,894.80 (57 months

through February 2020) plus $9.88 per day from March 1, 2020 to

the entry of judgment and National is entitled to judgment

against Weinstein in like sum on its claim for indemnification.

6. Upon satisfaction of the judgment for the

outstanding repair bill and the outstanding storage fees,

31

National is entitled to possession of the Pelagic and

accordingly, upon such payment RMC shall immediately make the

Pelagic available for removal from the marina at National's

expense.

7. National's request for a judgment declaring

that it had no obligation under the marine insurance policy

issued to Weinstein to defend and, if necessary, indemnify him

with respect to National's breach of warranty and other contract-

based claims is granted.

8. National's request to recover sums from RMC in

excess of the $290,000 it paid to Weinstein is denied.

9. The claims asserted by the parties not

specifically addressed above have been considered by the Court

and determined to be devoid of merit and therefore are dismissed.

10. The Clerk of Court is directed to enter

judgment in accordance with the foregoing together with post

judgment interest pursuant to 28 U.S.C. § 1961 and to close this

case.

Dated: Central Islip, New York

March 11, 2020

/s Denis R. Hurley

Denis R. Hurley

United States District Judge

32