In the Matter of Devaull's Inc., a Corporation of the State of New Jersey, Bankrupt, Harry W. Kellum and Mira O. Kellum

KALODNER, Circuit Judge.

This is an appeal from an Order-in bankruptcy in which the District Court affirmed the finding of the Referee-that a corporate chattel mortgage was-partially invalid in that one of four notes-which constituted the underlying obligation for the mortgage was paid and another was given without consideration..

The facts are as follows:

In 1950 Harry W. Kellum and his wife,. Mira O. Kellum, formed Devaull’s Inc.,, the bankrupt corporation, with a paid-in-capital of $40,000. They continued operation of the business until January 4,. 1956, at which time they divested themselves…