of the original notes. The holders of these bonds of the bankrupt company filed with the Referee claims for the amounts set forth in the bonds, and the allowance of the claims, over objection of a creditor, has led to the present certification of the record to this court.

The contention of the exceptant in regard to the action of the Referee is that the record fails to disclose any competent evidence tending to establish the bonds as evidences of legitimate indebtedness on the part of the bankrupt company. The banks and other holders did not receive the bonds in question as collateral upon the original notes, but upon renewal notes, and therefore are not, he urges, holders in the usual course of business as defined in the rule of law in the premises as it exists in the states of New York and Pennsylvania. Not being holders in the usual course of business, the bondholders, it is claimed, owned the bonds subject to any defense which might have been made against them in the hands of the Frontier Coal Company; and the right of the Frontier Coal Company to their possession has not been established, exceptant contends, by any competent evidence, and therefore the Referee was in error in approving the claim of the bondholders.

The contention of the exceptant is, we think, largely based upon a misconception of the law applicable to the finding of the Referee. The foundation of the present exception is apparently based upon the idea that a claimant, in the face of objection, must establish this claim by full and satisfactory competent evidence. We are not in accord with this position. A sworn proof of claim against the bankrupt is prima facie evidence of its allegations in case it is objected to. Whitney v. Dresser (U. S. Sup. Ct.), 200 U. S. 532, 15 Am. B. R. 326, 26 Sup. Ct. 316. The person objecting to the claim has the burden of overturning it. In the instant case it does not appear, either from the record or any exception, that the claims under consideration were not supported by proper affidavit, and filed in accordance with all the requirements of section 57 of the Bankruptcy Act. Admitting the correctness of exceptant's claim that claimants were not holders in the usual course of business, it was nevertheless the burden of the objecting creditor to produce evidence to establish the invalidity of the bonds in the

hands of the original holder. The bonds, as appears from an examination, passed upon delivery. It was not for the Referee to declare them invalid unless so satisfied by evidence produced; and the evidence offered by exceptant is insufficient to establish his claim that the Frontier Coal Company originally held the bonds by fraud. That evidence does bring before the mind. a picture of ground capable of bringing forth fraud; but it fails to show a growing crop of fraud. The entire operation of two companies by the same officers, under circumstances indicating possibility of conflict of interests, undoubtedly furnished opportunity for fraud; but opportunity or possibility, or even probability, of fraud is not fraud.

Apart from the failure of exceptant's own testimony to establish the claim that the bonds were wrongfully appropriated and used by the Frontier Coal Company, we find ourselves unable to agree with his contention that no competent evidence appears in the record to sustain the Referee's approval of the claim. Exceptant's counsel demanded the books of original entry of both the Penn-Clarion Coal Company and the Frontier Coal Company, which, for some unknown reason, were not produced by the Trustee of the first-named company or the Receiver of that last mentioned. These books might have been of use to counsel in the trial of his issue, and undoubtedly the production of them should have been enforced, but the failure of the Trustee and the Receiver, respectively, is not to raise any presumption of fact against a third person. From the standpoint of positive and competent evidence, Charles A. Royce and M. A. Voelker each testified that the Frontier Coal Company had advanced to the Penn-Clarion Coal Company, prior to the use of the bonds by the former, about $120,000, and that the mortgage was authorized and executed to take care of this indebtedness, and that it was fully understood by the directors of the Penn-Clarion Coal Company, at the time the mortgage was approved, that the bonds were to be delivered to the Frontier Coal Company. As tending to establish the exact amount of the indebtedness, a paper purporting to be a transcript of the ledger account of the Penn-Clarion Coal Company with the Frontier Coal Company was offered in evidence by counsel for the exceptant, without any objection being made, and without limitation in the offer.

Ignoring any claim as to the binding effect of his offer upon exceptant, we are firmly of the opinion that the Referee, despite the fact that the paper might have been excluded from evidence in the face of proper objection, had the right to weigh it in the consideration of the testimony relative to the transfer of the bonds. If it were considered incompetent or irrelevant as proof, counsel ought not to have offered it generally and without qualification. However, the transcript of account was not the only evidence of the indebtedness of the bankrupt to the Frontier Coal Company at the time the bonds were pledged and no testimony was offered which tangibly tended to show an unlawful conversion of the bonds by that company.

The record before us requires the dismissal of the exceptions and the confirmation of the order of the Referee.

IN THE MATTER OF FRYE-SWEETSER COMPANY, BANKRUPT. U. S. District Court, Northern District of Ohio, Western Division, July, 1924. LIENS-PARTICULAR LIENS-CHATTEL MORTGAGES-EFFECT OF FAILURE TO FILE OR RECORD-CHATTEL MORTGAGE GIVEN PRIOR TO FOUR MONTHS' PERIOD BUT FILED WITHIN SUCH PERIOD IS VALID.

A chattel mortgage in Ohio, given more than four months before the bankruptcy of the mortgagor, as security for a present loan, but filed within four months preceding the filing of a petition in bankruptcy against the mortgagor constitutes a valid lien against the bankrupt's estate.

(See Collier, 13th Ed., p. 1510; Am. B. R. Digest, § 441.)

Petition to sell property of bankrupt estate and cross-petition asking for payment of note secured by chattel mortgage. Crosspetition sustained.

L. E. Ludwig, for claimant.

W. L. Parmenter and L. C. Brodbeck, for trustee.

GRINDLE, Referee:

Clara H. Sweetser filed a preferred claim against the above estate, basing the same upon a promissory note of $1,050, dated

August 1, 1921, said note being secured by a mortgage of the same date on the property of said bankrupt. Said mortgage was filed with the recorder of Auglaize County, Ohio, on February 1, 1922, and on February 6, 1922, an involuntary petition in bankruptcy was filed against the Frye-Sweetser Co. and said company was adjudged a bankrupt on February 27, 1922. The trustee in bankruptcy in due time filed a petition to sell the property of said estate, whereupon Clara H. Sweetser filed her answer and cross-petition asserting the execution of said note and mortgage and asked to have said obligation paid in full. The trustee in answer to said cross-petition averred:

(1) That said note and mortgage were not executed for a present consideration, but were executed for the purpose of securing an existing indebtedness owing to the said Clara H. Sweetser.

(2) That said mortgage was not filed as required by law.

(3) That said mortgage was filed within four months preceding the filing of the petition in bankruptcy herein.

(4) That said mortgage was attempted to be executed without the proper or legal authority of said company.

1. The record in this case shows that on August 1, 1921, Clara H. Sweetser drew her check for $1,000 in favor of the Frye Sweetser Co. This check was endorsed by O. H. Cook, Secretary, presented to the bank and paid, and said company received the proceeds thereof. The indebtedness thus created has not been paid. There is no testimony to support any claim that said company was indebted to the said Clara H. Sweetser prior to the making of said loan of $1,000.

2. The record also shows that said company was organized under the laws of the state of Delaware, with its principal office in the city of Wilmington, Delaware, while the property of said company was located principally in the county of Auglaize, state of Ohio. A corporation is deemed a resident of the state wherein it is incorporated and its principal place of business is situated, within the meaning of the Act relating to recording instruments, and the county of its residence must be taken to be the county in which such place of business is located. Fairbanks Steam Shorel Co. v. Wills (U. S. Sup. Ct.), 240 U. S. 642, 36 Am. B. R. 754.

Therefore, said mortgage was properly filed in Auglaize County, Ohio. Section 8561, Ohio General Code.

It is averred by the trustee, however, that said mortgage is void for the reason that it was not filed until six months after it was executed, the language of Section 8560, General Code, stating that a chattel mortgage shall be absolutely void as against the creditors of the mortgagor, subsequent purchasers, and mortgagees in good faith, unless the mortgage, or a true copy thereof, bə forthwith deposited as directed in Section 8561. It must be first noticed, however, that the word "creditors," as used in this statute, means judgment, execution, or attachment creditors. Matter of Alden (D. C., Ohio Ref.), 16 Am. B. R. 362.

A mortgage is not entirely void by reason of an omission to file it forthwith, but it becomes effective whenever it is deposited with the proper officer. Wilson v. Leslie, 20 Ohio 161; Kilbourne v. Fay, 29 O. S. 277.

A chattel mortgage is inoperative against creditors of the mortgagor until filed, but, on such filing, it becomes valid and effective as against general creditors who became such between the time of the execution and time of filing. In re Schmitt (D. C., Ohio), 6 Am. B. R. 150, 109 Fed. 267.

This section does not make an unfiled chattel mortgage void as between the parties, or as against general creditors who take no step to obtain a lien upon the mortgaged property. In re Shirley (C. C. A., 6th Cir.), 7 Am. B. R. 229, 112 Fed. 301.

Under the decisions just cited, it is clear that, in this state, a chattel mortgage, until filed in the proper office, is void as against creditors of the mortgagor, but when properly filed the instrument becomes effective against all creditors except those who have obtained a lien on said property. And this doctrine is supported by the case of Foerstner v. Citizens Trust Co. (C. C. A., 6th Cir.), 26 Am. B. R. 377; 186 Fed. 1, where the syllabus

says:

"It seems, that under the statutes of the state of Ohio concerning the validity and effect of unfiled chattel mortgages, the mortgagee takes legal title as between the parties as to such unfiled instruments, which title is good as against all creditors who have not, before bankruptcy proceedings inter vened, acquired a lien by legal proceedings."