From the Super Mario Wiki
Happy Harbor is a port town located in the Ocean World; like most ports, Happy Harbor has a variety of ships located in the waters near. It seems to specialize in shipping goods too, as evidenced by various stores in it advertising doing just that.
In The Super Mario Bros. Super Show! episode "20,000 Koopas Under the Sea", King Koopa, wanting to conquer Happy Harbor, began to attack it with his submarine, the Koopilus, which the Mushroom inhabitants of Happy Harbor believed was a sea monster. King Koopa promised to get rid of the attacking sea monster if the residents of Happy Harbor made him their ruler, though this plan of King Koopa's was spoiled by Mario, Luigi, Toad, Princess Toadstool and Captain Abidab, who revealed King Koopa's evil nature to the inhabitants of Happy Harbor.
Later, after capturing Mario, Luigi and Princess Toadstool, who were hunting what they believed to be a sea monster with Toad and Captain Abidab, Koopa Nemo revealed to them that, after they ruined his previous plan, he made a new one; instead of taking over Happy Harbor, he would simply destroy it with the Koopilus. This plan of Koopa Nemo's was eventually foiled by Super Mario and Super Luigi, who, while the Koopilus was destroying ships in Happy Harbor's port, managed to cause Koopa Nemo to accidentally crash the Koopilus, which exploded and was destroyed, meaning it could no longer menace Happy Harbor.