Business Associations Keyed to Hamilton
Pepper v. Litton
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Litton (P), the sole owner of a small corporation that became insolvent brought suit and received a judgment against it for “wage” claims. When it was declared bankrupt, Litton (P) made a priority claim for wages with the trustee, Pepper (D). Pepper (D) dismissed the claim and Litton brought suit in the district court. The court found that Litton was defrauding creditors and dismissed the claim under its broad equity powers. The court found that Litton’s (P) total control of the corporation resulted in unfair conduct. In addition, enforcing his claim would be unfair to the other creditors.
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