Custom Fuel Services, Inc. v. Lombas Industries, Inc.

WISDOM, Circuit Judge:

This case is one of first impression. The question this appeal presents is whether a parent corporation can insulate its vessel from maritime liens by transferring title to its wholly-owned subsidiary as a nominal owner and taking back a preferred ship mortgage in an amount equal to the value of the vessel. The transaction was innocuous until the vessel’s charterer became unable to pay its suppliers. When the suppliers seized the vessel and asserted their maritime liens, the true owner intervened to enforce the priority of its “mortgage”. Because the vessel owner had…