My boat lives in the water a couple weeks at a time, I pulled it last week for scheduled maintenance. As it turned out, it sat on the trailer for 5 days before I got to it. When I pulled the plugs on the gearcase of the starboard engine a litre and a half of water flowed out into my pail. Not even oily water. The port engine ran water for about a cupfull, then oily water, then oil. I change drive oil every 20-25 hours, this time was only 15 because I often saw oil on the water and smelled it when we swam off the back. I always change the plug gaskets as well. Now with 8 more hours I have the same symptoms as before, and with an oily film on the outside of the prop and case. I’m going to pull it again today and see whats in the cases but looking for opinions before I go to the dealer.

I have first hand experience with a good friends boat. One gear case since day one full of water. Shop pressure tested per Mercury. Passed pressure test. They sent out new lower unit. Now this summer other engine same issue. Have not pressure tested yet. Engines now have roughly 140 hours.

A liter and a half or water poured out? Doesn’t the gearcase only hold 17 oz of lube?

I am glad to hear that you found the problem as it could have been catastrophic. In our little shop that we mainly repair small fishing boat motors, we regularly not only pressure test but also vacuum test the lower units. You would be amazed how many pass the pressure but fails the vac test (think of a leak that is like a check valve or exhaust flapper). As a lower cools down it forms a vacuum which can suck the water into the gearcase. I know absolutely nothing about the Merc 400 gearcase, but maybe that will help find a solution.

17 oz of lube brings the level to the top plug hole which is less than half way up and there is more open space above that.

Yes, spec is 17 oz. Last fall I had some slight milky discoloration on my port side motor. Pressure tested and vacuum tested ok. Haven't changed it yet this year so time will tell. Hopefully it was just a drain plug seal. I may switch back to the old blue plug seals, I have plenty left over. Never had an issue with them in 32 years of lube changes.

Figured there was space for expansion just didn’t realize there was that much real estate.

3.0L Merc sportmasters are notorious for sucking water in after they cooled down. MAD EFI made billet shift shaft and drive shaft seal carriers that doubled the amount of seals preventing water intrusion. I don't know anything about the 400r cases but maybe it's a similar issue.

Thanks for the responses. I dont think I feel any smarter than I did a few days ago though. I’m gonna run it for a few more days and monitor as closely as I can.