In re Hugill

RICKS, District Judge. This case is certified to the court by the referee; the trustee having made application for leave to sell, free from liens, property belonging to the bankrupt’s estate. The firm of Cooper Bros, filed proof of claim in the sum of $284.38, including interest as corrected at the hearing, and now claim a lien for the same by reason of a chattel mortgage on bankrupt’s property. The validity of this lien is contested by the trustee and some of the creditors. The contention of counsel for Cooper Bros, is that, as part of the consideration for the note and chattel mortgage was valid, said instruments were merely voidable, and that, as between them and their creditors, they are entitled to have them participate in the distribution to the extent of the valid part of their claims. They cite several cases in Ohio, all 'of which show that there was, throughout the transaction, no attempt at fraud. But in this case there was fraud from the beginning. Hugill, through his timidity, fearing a damage suit by the Valley Railroad Company, was quite willing to make any disposition of his property that would defeat that company in this possible litigation, and protect him. The chattel mortgage and note, although given for $2,500, were in fact given for $320.64. Affidavit was made that this full amount was due. Said chattel mortgage was recorded as the statutes of Ohio direct. It served its purpose to mislead and deceive the creditors of Hugill. It is no answer to this to say that no one lost anything by this transaction. It is sufficient to look to the motive and purpose of the maker of the note and mortgage, to see what his intent was, which was evidently to hinder and delay his creditors. I think [619] Hie referee was correct in Ids conclusions that the instruments were fraudulent, and that the holders thereof ought not to participate to any extent in the distribution of this bankrupt’s estate.