Pepper v. Litton

Litton (defendant), sole shareholder of Dixie Splint Coal Company, obtained a judgment against his own company for back salary while Pepper's (plaintiff) separate royalty suit against the company was still pending, then used his judgment to buy the company's assets at an execution sale before pushing the company into bankruptcy. The bankruptcy trustee unsuccessfully sued in state court to unwind the sale, and Litton then filed a bankruptcy claim for the unpaid remainder of his judgment; the bankruptcy court disallowed his entire claim and ordered the trustee to recover the assets, but the court of appeals reversed.