How have the courts dealt with claims of a principal stockholder in a bankrupt corporation?
The following excerpt is from Dannerbeck v. Palmer, 502 F.2d 686 (9th Cir. 1974):
The trustee finds a parallel between this case and Braddy v. Randolph, 352 F.2d 80 (4th Cir. 1965). In that case the court rejected the claims of a person who was a principal stockholder, director and president of a bankrupt corporation, based on four secured notes issued to him by the corporation for money 'loaned' to the corporation. The claims were rejected on the ground that the 'loans' were actually contributions to the capital of the bankrupt which had been undercapitalized from its inception. Said the court:
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