Smitty is a skeleton of a dead fish who wears the #1 hat, with two bottles of bubbles on the left and right side of the hat. When Mr. Krabs took his hat, he came to life asking Mr. Krabs to give the hat back.
Mr. Krabs, using a fake ghost, told SpongeBob that a man named, "Smitty Werben Jaegerman Jensen" was #1. He also said that SpongeBob's soda-drinking hat was his and that he had to get returned to him immediately, so SpongeBob buried it with this fish apparently forgetting the "Jaeger."
Mr. Krabs tried to get the hat out of Smitty's grave in order to sell it for a large amount of money, possibly $1,000,000. However, Smitty was actually an undead being. He then summoned a whole army of undead fish. Mr. Krabs said that they would take turns feasting on his insides, then eat his brain and leave his body for the buzzards. Smitty, however, thought that concept to be gross and just wanted the hat back and gave Mr. Krabs two options: give the hat back or suffer an attack from the army of the living dead. The skeletons attacked Mr. Krabs, who defeated them all with a makeshift sword out of a swordfish's skull. Smitty was eventually killed by Mr. Krabs (even though he was already dead). Mr. Krabs then tried to sell it to four people for $1,000,000. The hat, however, lost its value and nobody would buy it. They laughed at it being worth $1,000,000.
Hey man, that's my hat! Give it back!
I guess I'm gonna have to take it from you...
Only the army of the living dead!
That's disgusting! We just want the hat back!
This character was the first portrayal of death in the show.
When Mr. Krabs is standing in front of Smitty's grave it says " Smitty Werben Man Jensen" but, according to the name, Mr. Krabs told SpongeBob it really should be "Smitty Werben Jager Man Jensen." The graveyard illustrator forgot the word "Jager."