TOULMIN, District Judge
(after stating the facts as above). The petition of intervention, which is the proof of ’claim in this case, does not directly or expressly allege the consideration for the note described in the petition. It alleges that “the only security held by petitioner for the balance due is said note and mortgage, which was given to secure the said loan of $3,825 made by petitioner to said Dunn Bros.” on the date said note and mortgage were executed and delivered. Thus it impliedly alleges that said note was given for money loaned on that day. Petitioner, however, attaches to the petition, as “Exhibit A,” a paper writing which he says is a copy of said note and mortgage, and which he makes a part of the petition. Said writing recites that the consideration of the note is:
“Ifor the purchase money we (Dunn Bros.) hereby mortgage our (their) entire stock of merchandise consisting of fixtures, dry goods, notions, shoes, hats, hardware, groceries, and farm implements for the above advanced money. * * ~ Now purchased by us from him (W. C. Park) with the proviso that the title to the same is to remain in him and his assigns until this note, with expenses of collection, fully paid off and discharged.”
[686]*686Said writing also provides that, should the maker of the note before its maturity attempt to sell or otherwise dispose of the described property, the note shall become due and payable at once. In this condition the sworn petition was presented to the referee as a claim against the bankrupt estate.
Sections 57a and 57b of the bankruptcy act (Act July 1, 1898, c. 541, 30 Stat. 560 [U. S. Comp. St. 1901, p. 3443]) provides:
“That the proof of claim shall consist of a statement under oath in writing signed by the creditor setting forth the claim, the consideration therefor, and whether any, and if so, what securities are held therefor, and if founded upon ah instrument of writing such instrument shall be filed with the proof of claim.”
The proof must show the,consideration for the claim, and the statement of the consideration must be sufficiently full and explicit to enable othe'r creditors to investigate as to the fairness and legality of the claim. In re Blue Ridge Packing Co. (D. C.) 125 Fed. 619; In re Scott (D. C.) 93 Fed. 418; In re Stevens (D. C.) 107 Fed. 243.
“The proof of claim should be sufficient to enable the referee passing on it to do- so intelligently and judicially.” In re Wooten (D. C.) 118 Fed. 670; In re Eagles (D. C.) 90 Fed. 695.
If the allegations of the proof do not set forth all the necessary facts to-establish a claim, or are self-contradictory, the claim may be disallowed ; or the referee may unquestionably order proper and legitimate inquiries into the fairness and legality of such claim, that he may be enabled to, pass on it intelligently and judicially. In re Castle Braid Co. (D. C.) 145 Fed. 224.
■ The proof of claim as presented in this case did not show its consideration with certainty or clearness. It inferentially showed it was for money loaned, but it, with more directness and certainty, showed it was for money dlue petitioner for a stock of goods, wares, and merchandise purchased by Dunn Bros, from him, the title to which was to remain in him until the note given for the purchase money was fully paid.
■ The, allegations of the proof of the claim were clearly self-contradictory and were, in our opinion, such as to warrant, if not to require, before allowance, an investigation of its fairness and legality, if its absolute disallowance.
“A referee iu the interest of fair dealing and good conscience lias unquestioned power to postpone tbe claim ef a creditor, and should do so whenever the circumstances are such as to arouse suspicion or to throw doubt upon the validity of the claim.” Brandenburg on Bkrey. § 830.
The referee is vested with a wide discretion in the allowance and dis-allowance of claims. Brandenburg on Bkrey. § 862.
But it is contended by the appellee, and was so held by the district judge, that there was no notice by proper pleadings filed before the referee, raising objections to Park’s claim, and that the referee’s action in investigating it and taking evidence as to its bona fides and validity was without authority and was erroneous. With this contention we do not agree.
[687]*687The bankruptcy act is silent as to the form of objections to claims against a bankrupt estate. Although, preferably they should be filed in writing, they may he stated oraljy. Collier on Bkrcy. (7th Ed.) p. 608 ; Brandenburg on Bkrcy. § 862.
“There is nothing: in the act or in the rules in bankruptcy directing the form of such objections.” In re Royce Dry Goods Co. (D. C.) 133 Fed. 100.
The court, in Re Cannon (D. C.) 133 Fed. 8367, said:
“Tlie manner of making such objections is thus left open, and should, 1 think, be largely committed to the discretion of the referee.”
Whether there was or not any formal notice to Park of the objections made to his claim is, we think, wholly immaterial in this case, as he appeared in person and by attorney at the hearing, was fully examined as a witness, and participated in the examination of the other witnesses in "regard to liis claim, and, so far as the record shows, made no objection thereto, lie thereby waived all informality or irregularity, if any, in the proceeding had.
The form of the claim as presented to the referee, and the facts and circumstances shown by the evidence on the hearing in regard to its validity, 'were such as to arouse suspicion, and to throw doubt upon, such validity. The evidence showed that the statement in the mortgage as to the consideration therefor was not true, and that the indebtedness claimed on the hearing arose in a different maimer from that stated. A creditor of a bankrupt estate who files his claim against the estate is required to present a statement under oath ot what his claim is, and he cannot sustain it by evidence of an indebtedness arising in a different manner from that stated. Brandenburg on Bkrcy. § 682 ; In re Lansaw (D. C.) 111 Fed. 365.
Waiving the variance between the statement and the mortgage of the consideration therefor and that testified to on the hearing, we will consider the question presented on the good faith and validity of the mortgage. Park testified that the mortgage was delivered to him by C. M. Dunn and the money given by him to said Dunn on the date of the mortgage, September 9, .1908. It was not witnessed at the time, and neither the signature of C. M. Dunn nor E. J. Dunn, composing the firm of Dunn Bros., was signed to the mortgage. There is also some doubt on the evidence whether it was signed by “Dunn Bros.” at that time. However this may be, it appears that Park claimed to he dissatisfied with the mortgage and subsequently carried it to E. J. Dunn and asked him about it. Dunn took it and said “they would fix it.” It appears that about October 1, 1908, at the store of Dunn Bros., J. C. Madden witnessed the signing of the mortgage by E. J. Dunn; but said Madden in his testimony does not state what particular signature or name was signed and was witnessed by him. The mortgage is signed “Dunn Bros., by E. j. Dunn.” It also appears from Park’s testimony that C. M.
Free access — add to your briefcase to read the full text and ask questions with AI
TOULMIN, District Judge
(after stating the facts as above). The petition of intervention, which is the proof of ’claim in this case, does not directly or expressly allege the consideration for the note described in the petition. It alleges that “the only security held by petitioner for the balance due is said note and mortgage, which was given to secure the said loan of $3,825 made by petitioner to said Dunn Bros.” on the date said note and mortgage were executed and delivered. Thus it impliedly alleges that said note was given for money loaned on that day. Petitioner, however, attaches to the petition, as “Exhibit A,” a paper writing which he says is a copy of said note and mortgage, and which he makes a part of the petition. Said writing recites that the consideration of the note is:
“Ifor the purchase money we (Dunn Bros.) hereby mortgage our (their) entire stock of merchandise consisting of fixtures, dry goods, notions, shoes, hats, hardware, groceries, and farm implements for the above advanced money. * * ~ Now purchased by us from him (W. C. Park) with the proviso that the title to the same is to remain in him and his assigns until this note, with expenses of collection, fully paid off and discharged.”
[686]*686Said writing also provides that, should the maker of the note before its maturity attempt to sell or otherwise dispose of the described property, the note shall become due and payable at once. In this condition the sworn petition was presented to the referee as a claim against the bankrupt estate.
Sections 57a and 57b of the bankruptcy act (Act July 1, 1898, c. 541, 30 Stat. 560 [U. S. Comp. St. 1901, p. 3443]) provides:
“That the proof of claim shall consist of a statement under oath in writing signed by the creditor setting forth the claim, the consideration therefor, and whether any, and if so, what securities are held therefor, and if founded upon ah instrument of writing such instrument shall be filed with the proof of claim.”
The proof must show the,consideration for the claim, and the statement of the consideration must be sufficiently full and explicit to enable othe'r creditors to investigate as to the fairness and legality of the claim. In re Blue Ridge Packing Co. (D. C.) 125 Fed. 619; In re Scott (D. C.) 93 Fed. 418; In re Stevens (D. C.) 107 Fed. 243.
“The proof of claim should be sufficient to enable the referee passing on it to do- so intelligently and judicially.” In re Wooten (D. C.) 118 Fed. 670; In re Eagles (D. C.) 90 Fed. 695.
If the allegations of the proof do not set forth all the necessary facts to-establish a claim, or are self-contradictory, the claim may be disallowed ; or the referee may unquestionably order proper and legitimate inquiries into the fairness and legality of such claim, that he may be enabled to, pass on it intelligently and judicially. In re Castle Braid Co. (D. C.) 145 Fed. 224.
■ The proof of claim as presented in this case did not show its consideration with certainty or clearness. It inferentially showed it was for money loaned, but it, with more directness and certainty, showed it was for money dlue petitioner for a stock of goods, wares, and merchandise purchased by Dunn Bros, from him, the title to which was to remain in him until the note given for the purchase money was fully paid.
■ The, allegations of the proof of the claim were clearly self-contradictory and were, in our opinion, such as to warrant, if not to require, before allowance, an investigation of its fairness and legality, if its absolute disallowance.
“A referee iu the interest of fair dealing and good conscience lias unquestioned power to postpone tbe claim ef a creditor, and should do so whenever the circumstances are such as to arouse suspicion or to throw doubt upon the validity of the claim.” Brandenburg on Bkrey. § 830.
The referee is vested with a wide discretion in the allowance and dis-allowance of claims. Brandenburg on Bkrey. § 862.
But it is contended by the appellee, and was so held by the district judge, that there was no notice by proper pleadings filed before the referee, raising objections to Park’s claim, and that the referee’s action in investigating it and taking evidence as to its bona fides and validity was without authority and was erroneous. With this contention we do not agree.
[687]*687The bankruptcy act is silent as to the form of objections to claims against a bankrupt estate. Although, preferably they should be filed in writing, they may he stated oraljy. Collier on Bkrcy. (7th Ed.) p. 608 ; Brandenburg on Bkrcy. § 862.
“There is nothing: in the act or in the rules in bankruptcy directing the form of such objections.” In re Royce Dry Goods Co. (D. C.) 133 Fed. 100.
The court, in Re Cannon (D. C.) 133 Fed. 8367, said:
“Tlie manner of making such objections is thus left open, and should, 1 think, be largely committed to the discretion of the referee.”
Whether there was or not any formal notice to Park of the objections made to his claim is, we think, wholly immaterial in this case, as he appeared in person and by attorney at the hearing, was fully examined as a witness, and participated in the examination of the other witnesses in "regard to liis claim, and, so far as the record shows, made no objection thereto, lie thereby waived all informality or irregularity, if any, in the proceeding had.
The form of the claim as presented to the referee, and the facts and circumstances shown by the evidence on the hearing in regard to its validity, 'were such as to arouse suspicion, and to throw doubt upon, such validity. The evidence showed that the statement in the mortgage as to the consideration therefor was not true, and that the indebtedness claimed on the hearing arose in a different maimer from that stated. A creditor of a bankrupt estate who files his claim against the estate is required to present a statement under oath ot what his claim is, and he cannot sustain it by evidence of an indebtedness arising in a different manner from that stated. Brandenburg on Bkrcy. § 682 ; In re Lansaw (D. C.) 111 Fed. 365.
Waiving the variance between the statement and the mortgage of the consideration therefor and that testified to on the hearing, we will consider the question presented on the good faith and validity of the mortgage. Park testified that the mortgage was delivered to him by C. M. Dunn and the money given by him to said Dunn on the date of the mortgage, September 9, .1908. It was not witnessed at the time, and neither the signature of C. M. Dunn nor E. J. Dunn, composing the firm of Dunn Bros., was signed to the mortgage. There is also some doubt on the evidence whether it was signed by “Dunn Bros.” at that time. However this may be, it appears that Park claimed to he dissatisfied with the mortgage and subsequently carried it to E. J. Dunn and asked him about it. Dunn took it and said “they would fix it.” It appears that about October 1, 1908, at the store of Dunn Bros., J. C. Madden witnessed the signing of the mortgage by E. J. Dunn; but said Madden in his testimony does not state what particular signature or name was signed and was witnessed by him. The mortgage is signed “Dunn Bros., by E. j. Dunn.” It also appears from Park’s testimony that C. M. Dunn had the transaction with him, delivered the mortgage to him, and received the money from him on or about September 9, 1908; but it appears that said C. M. Dunn had the mortgage in his possession on December 19, 1908, and on that day signed it in the presence of the witness Blassengame. So it is we find the mort[688]*688gage in the possession of one of the makers of it in October, and in the possession of the other in December, when each separate and apart from the other signed it in the presence of a witness. It does not appear when, if ever, the mortgage was redelivered to Park, otherwise than by its deposit for record. It was shown to have been in the possession of C. M. Dunn, last prior to its record, and on the date of its record. '
No inventory or valuation of the stock of goods seems to have been made and furnished to Park, and no special examination of the stock made by him. Dunn Bros, remaining in possession of the goods, continuing business, and selling goods, just as before the mortgage was made; their failure to sign the mortgage and have it witnessed until from one to three months after it purports to have been made; their possession of the mortgage subsequent to their signing it; and the withholding it from record — are badges of fraud which were sufficient, in our opinion, to warrant the judgment and finding- of the referee that the mortgage was made to hinder, delay, and defraud the creditors of said Dunn Bros., and was null and void, in which judgment and finding we concur. Blennerhasset v. Sherman, 105 U. S. 100-118, 26 L. Ed. 1080; Clayton v. Exchange Bk., 121 Fed. 630, 57 C. C. A. 656; Hilliard v. Cagel, 46 Miss. 309.
The decree of the District Court is reversed, and the case remanded, with instructions to proceed in conformity to this opinion.