Litton (defendant) is the sole shareholder of the Dixie Splint Coal Company (Dixie Splint). Pepper (plaintiff) sued Dixie Splint for royalties due under a lease. While the case was pending, Litton sought and obtained a judgment against Dixie Splint for claims of back salary. Pepper then obtained a judgment. Litton executed on his judgment and purchased the corporation’s assets in an execution sale. Litton then caused Dixie Splint to file for bankruptcy. The bankruptcy trustee brought suit in state court to have Litton’s judgment and the execution sale set aside, but was unsuccessful. Litton then filed a claim in bankruptcy court for the remainder of his judgment that was not satisfied by the execution sale. The bankruptcy court disallowed Litton’s entire claim and ordered that the bankruptcy trustee should recover all of the assets that Litton purchased at the execution sale. The court of appeals reversed.