Transit, Horluck both claim breach of contract

The tables are poised to turn in the lawsuit ex-foot-ferry owner Hilton Smith filed against Kitsap Transit on Monday.

Smith, who sold the Port Orchard/Bremerton foot-ferry business to Kitsap Transit in 2002, is suing the agency and two transit officials for approximately $38,000. Smith claims Kitsap Transit owes him the money for ferry service he provided between Dec. 1 and Dec. 20, 2003.

“They refused to pay it,” Smith said.

Smith ran the service under contract to Kitsap Transit for nearly a year before turning the reins over to Port Orchard-based Kitsap Harbor Tours. Kitsap Transit, when it drafted the sale and service contract, made Smith ineligible to bid on the ferry-provider contract, essentially forbidding him to run the foot-ferry after the Dec. 31, 2003, cut-off.

Kitsap Transit does not deny it withheld Smith’s December payment. However, transit officials claim they are not only entitled to keep the money under the terms of the contract, but Smith may owe them money beyond the $38,000 in question.

Kitsap Transit’s attorney, Ron Templeton, said a number of issues have come up since the sale of Horluck was finalized in December. To begin with, the Carlisle II, which Kitsap Transit bought from Smith for $340,000, developed a huge leak bad enough to make the vessel unusable for regular service. The boat is now in Port Townsend undergoing an in-depth inspection and repairs.

Although the leak was found after the sale went through, Templeton said there’s evidence Smith knew about the leak and actively hid it from transit officials. Despite numerous surveys done of the boat before the purchase, Templeton said transit didn’t find out about the leak until a former Horluck employee told officials it was there. The boat’s pumps had apparently kept the boat dry enough to avoid immediate notice.

“It was behind the engines and difficult to access, so unless an extremely careful inspection was done, you wouldn’t have caught it,” Templeton said.

As soon as the leak was found, he said, payment for Smith’s December services was immediately stopped. However, once out of the water, more problems were found.

Templeton said the workers at Port Townsend Shipwrights Cooperative, who specialize in wooden vessels, found significant deterioration to the Carlisle’s hull. He said the paint was almost completely gone and there was evidence shipworms had started eating their way into the wood. Under Coast Guard regulations, the boat must be pulled out of the water for a complete inspection every few years — a preventative measure to keep the boat hull from deteriorating too far.

The paperwork on-board showed the boat needed to be pulled out every three years, with the next inspection due in April. However, Templeton said Coast Guard officials said wooden boats operating in salt water — like the Carlisle is — are usually required to be inspected every two years. He said the Coast Guard told him the only way the paperwork would say three years is if the boat was registered to a fresh-water body like Lake Washington.

“They’re currently investigating why the paperwork on board shows a three-year haul-out period,” Templeton said.

Finally, Kitsap Transit may get slapped with a $32,000 fine because it took over the lease of a boat — the Spirit of ‘76 — that didn’t have a security plan as outlined by the Department of Homeland Security. Templeton said all boats that carry more than 150 passengers must have one and the deadline for submitting the plan was Dec. 31. Kitsap Transit took over the ‘76’s lease effective Dec. 31 and Templeton said that may make them liable.

Kitsap Transit was not originally planning to take responsibility for the ‘76 as well, but decided to add the boat to its fleet as a second back-up vessel.

In all, Templeton said Kitsap Transit is very unhappy with the whole situation. If the total bill for the Carlisle and the ‘76 exceeds the $38,000 withheld from Smith, Templeton said the agency will “absolutely” counter-sue. He said Smith was required under the terms of the contract to sell the Carlisle in a “sound, sea-worthy condition” and comply with all rules and regulations affecting both boats.

“I’m surprised they sued us,” Templeton said. “I don’t think Horluck’s attorney has read the agreement very carefully.”

Kitsap Transit director Dick Hayes was equally surprised — and dismayed —to hear about the lawsuit. He said at this point Kitsap Transit probably won’t get the Carlisle back until March, depending on the extent of the repairs needed. In his opinion, Smith is totally responsible for the problems found and should be held accountable.

Hayes said he was also a little bothered by the fact the lawsuit named him and transit employee John Clauson as individual defendants as well.

“These things never hold up,” he said. “But it makes the wives nervous.”

Smith, on the other hand, maintains Kitsap Transit has no right to keep his money. He said the agency bought the Carlisle in an as-is condition and, as a result, absolved him of having to pay for any leaks. Smith said after three pre-sale surveys ordered by Kitsap Transit, officials should have known about the leak — and probably did, he added.

“The Carlisle is an old wood boat,” Smith said. “It leaks, and has leaked on and off since I’ve owned it.”

As for Kitsap Transit’s claims that Horluck failed to keep the Carlisle properly maintained, Smith said he has always followed the Coast Guard’s mandates to the letter. If the paperwork says haul the boat out every three years, he said, that’s what he’s always done. Smith said he’s never heard anything about a two-year rule and said every survey done of the boat up to this point has found it in satisfactory condition.

“We did what the Coast Guard told us to do,” he said. “Why would I take an asset and not do what the Coast Guard said?”

Smith said all he wants out of this lawsuit is to get the money that’s rightfully owed him. He said Kitsap Transit has unlawfully deprived him of his property and believes the courts will uphold his claim.

Although the lawsuit has been filed with Kitsap County Superior Court, Kitsap Transit has not yet been formally served with papers so no court calendar for the suit has been established.

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