Court Opinion

ID: 9464722
Source: CourtListenerOpinion
Date Created: 2023-08-04 23:40:50.2499+00
Date Added: 2024-06-11T17:38:46.882463
License: Public Domain

GIBSON, Chief Judge,
concurring and dissenting.
I am in full agreement with the majority opinion except insofar as it holds that Man-dan’s withdrawals from PRS Products, Inc.’s account on October 26, 1973, and November 20, 1973, constituted recoverable preferences. The majority sustained the finding of the bankruptcy judge that the deposits from which these withdrawals came were accepted by Mandan with the intent to apply them to a pre-existing claim and agreed with his legal conclusion that they were not, therefore, protected by the set-off exception of § 68 of the Bankruptcy Act, 11 U.S.C. § 108. My review of the record convinces me that the factual finding underlying this conclusion is clearly erroneous and that the withdrawals- of October 26 and November 20, which totaled $20,344.22, constituted permissible set-offs.
Under the Bankruptcy Act, no voidable preference is ordinarily created when a bank sets off funds in an account of general deposit against a debt owed to it by the depositor. Jensen v. State Bank, 518 F.2d 1, 4 (8th Cir. 1975); Farmers Bank v. Julian, 383 F.2d 314, 324 (8th Cir.), cert. denied, 389 U.S. 1021, 88 S.Ct. 593, 19 L.Ed.2d 662 (1967). If a bank accepts a deposit in good faith and in the ordinary course of business, it usually has a right to set-off under § 68 of the Bankruptcy Act. See 4 Collier on Bankruptcy 168.16, at 917-18 (14th ed. 1975). This right to set-off applies unless the account has been accepted or built up by the bank for the real purpose of permitting it to obtain a preference. Jensen v. State Bank, supra at 4; Farmers Bank v. Julian, supra at 324.
The record in the present case indicates that the deposits preceding Mandan’s withdrawals of October 26 and November 20 were accepted by the bank in good faith and in the ordinary course of business. Indeed, the bankruptcy judge found “completely credible” the testimony of Mandan’s vice-president Dahlen that Mandan had considered the deposits of PRS Products, Inc. during these months as having been made in the ordinary course of business. Moreover, the record shows that these deposits exceeded Mandan’s withdrawals of October 26 and November 20 and that during this period Mandan regularly honored PRS Products, Inc.’s checks on its account, including overdrafts.
I do not believe that this record supports a finding of intent on Mandan’s part to accept or build up PRS Products, Inc.’s account in order to create a preference. I am left with the definite and firm conviction that the bankruptcy judge erred in finding that the deposits made by PRS Products, Inc. before the October 26 and November 20 withdrawals were accepted by the bank with an intent to create a preference and to be applied to a pre-existing claim. To the contrary, the record shows that these deposits were accepted in good faith and in the ordinary course of business. These findings are illustrative of a judicial overkill and bring to mind Mr. Justice Black’s observation in Pearlman v. Reliance Insurance Co., 371 U.S. 132, 135, [83 S.Ct. 232, 234, 9 L.Ed.2d 190] (1962) that “[t]he Bankruptcy Act simply does not authorize a trustee to distribute other people’s property among a bankrupt’s creditors.” Accordingly, I would allow Mandan to set off against its pre-existing claim the $20,344.22 which *420it withdrew from PRS Products, Inc.’s account on October 26 and November 20.