Court Opinion

ID: 6912838
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:29:54.290189+00
Date Added: 2024-06-11T16:06:33.958736
License: Public Domain

POPE, Circuit Judge
(dissenting).
It is clear that the trial judge would not have approved the referee’s decision had he not accepted the argument that this case was ruled by the Union Bank & Trust Co. v. Loble, 9 Cir., 20 F.2d 124.1 My dissent is based, first, on my belief that the Loble case in no way supports the conclusion here reached, but is quite distinguishable, and second, that the adoption of the rule here proposed will in the long run have a seriously injurious effect upon banking and business practices.
Differing from the circumstances here, the facts in the Loble case were that the bank (a) itself formulated and proposed the plan, (b) at a time when there was nothing on deposit, which plan (c) called for special sales to be made for a declared special purpose, whereby (d) funds designed to be used for this special purpose came into the hands of the bank as they would otherwise not have done, and (e) the bank itself was the first to violate its own agreement as to the special use of the funds by asserting its own claim of lien.
Hence the court said that the circumstances under which the Loble case fund was created “were sufficient to so far impress upon it the character of a trust fund that the bank should be held es-topped to assert a lien thereon or the right of set-off.” (Emphasis mine.) By quotation from another case, the court indicated its view that the deposits made in the Loble case “were obviously not made in ordinary course, in any fair sense of that phrase.”
Quite the contrary situation existed here. This plan was proposed by the bankrupt, modified to- meet a suggestion of the bank, and the bank (a) agreed to “go along with the bankrupt on the plan. * * * providing that the monthly payments of ten per cent were made”. At the time, (December, 1952) (b) there were already funds on general deposit in the bank. (The amount that month ranged from $8,165.79 to $22,301.09, and the bank had loaned $22,000 on October 11, preceding.) ' (c) The sums in the bank at date of exercise of set-off were $2,889.14. The fund existing when the plan was initiated was depleted during the liquidation program. (The bank’s situation got worse instead of better.) (d) The sales under the extension agreement were in ordinary course and the proceeds were not earmarked for any special purpose nor did the execution of the plan place in the bank funds it would not otherwise have had. And (e), the bank itself fully carried out its agreement, and it was not until the bankrupt filed its petition that the bank claimed the set-off. Thus it is apparent that we have here none of the factors which led to the Loble decision, namely, proceeds of a special sale which created a fund under circumstances sufficient to impress upon it “the character of a trust fund.”
That the Loble decision was limited to those special facts above outlined has been stated by both this and other courts. In Ingram v. Bank of Cottage Grove, 9 Cir., 29 F.2d 86, 87, this court, distinguishing it, said: “True, it was held in the Loble Case that the bank waived, or was estopped to assert, its right of set-off, because of an agreement between the *404bank and the bankrupt that certain moneys derived from a special sale conducted by the bankrupt and placed on deposit in the bank should be paid to certain eastern creditors, but there is no basis for any claim of waiver or estoppel here.”2 *****8 (Emphasis mine.)
The rule properly applicable here is that stated in Killoren v. First Nat. Bank in St. Louis, supra, note 2, 127 F.2d at page 542, as follows: “Nothing was done to indicate that the relátionship of debt- or and creditor which had before existed was to be changed into a different relationship. In these circumstances, under the law of Missouri, the plaintiff failed to establish that the deposits made, by the Shoe Company were for a special purpose, or that they were funds in which third parties had an interest, so as to impress them with a trust.”
I can find here none of the elements of an estoppel. Those are (a) some representation made by one party upon which (b) the other party relies and changes his position to his detriment. Bankrupt proposed the plan. The bank did no more than agree to go along. It got no more benefit from the plan than any other creditor. Indeed it may well have gotten much less. The exact day when the bank’s agreement was procured does not appear, but if it was that day in December, 1952, when the deposit was $22,328.-59, then its agreement to “go along” surrendered a then possibility of its collecting in full by applying the account. How the creditors can say they changed position to their detriment in reliance on any act or representation of the bank, I cannot see.
The type of arrangement here attempted was designed to accomplish a useful object, — to get a faltering business on its feet, all to the end that ultimately all creditors may be paid, and the owner save his business. True, the attempt failed, but it was worth the try. Such attempts, I think, should be encouraged. But from now on no bank, creditor of such a debtor, will dare to agree to “go along”, on such a plan, because if it should fail, and bankruptcy follow, as here, the bank would risk being held to have waived its right of set-off. That is the principal reason why I think the rule of the Loble ease should not be extended to this case where the facts are so different.

. The opinion of the judge, in its entirety, was as follows: “Memorandum of Decision — Because I am not impressed as an original proposition that such a loose arrangement, as presented here, should work a loss of the bank’s right of set-off, I have examined Union Bank & Trust Co. v. Loble, 20 F.2d 124 closely. The learned referee thought it was controlling; counsel for petitioner strongly urges that the present ease and that case are distinguishable.
“I do not feel that I should strain to distinguish the Loble case, and I will follow the view the referee took of it.
“If, as appears to be the case, peti- . tioner feels that the referee’s decision (and my affirmance) will seriously affect banking practices, petitioner is in position to take the question to the Circuit Court. If that is done, I would suggest that the Circuit should not be limited, as the presentation before me was limited, to consideration only of the findings made by the referee.”

. These clear limitations of the Loble case have been noted in other circuits. Thus in Killoren v. First Nat. Bank in St. Louis, 8 Cir., 127 F.2d 537, 543, the court, after outlining the facts of the Loble case, described its holding as follows: “The trial court held that the deposit was in the nature of a special deposit brought about by the bank under an agreement that it was to be devoted to certain purposes, and that, ‘By breach of contract a trust cannot be converted to a debt, the title to special deposits cannot be transferred, and set-off against them cannot be had by the defaulting contractor.’ In re Gans & Klien, D.C., 14 F.2d 116, 117. The Circuit Court of Appeals [Union Bank & Trust Co. v. Loble], 9 Cir., 20 F.2d 124, 126, in affirming the lower court, expressed the view that, ‘ * * * the circumstances under which the fund was created, and the co-operation of the bank and the bankrupt in its creation were sufficient to so far impress upon it the character of a trust fund that the bank should be held estopped to assert a lien thereon or the right of set-off.’ ”
And in Citizens Nat. Bank of Gastonia, N. C. v. Lineberger, 4 Cir., 45 F.2d 522, 530, the court said: “In Union Bank & Trust Co. v. Loble * * * the deposits made were proceeds of a special sale, held on the advice of the bank, to raise funds for Eastern creditors. It was held that the circumstances under which this fund was created and the co-operation of the bank and the bankrupt in its creation so far impressed it with a trust as to es-top the bank from asserting its right of set-off.”