Dudley

(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…

The First National Bank of Portland prosecutes this appeal from an order of the District Court confirming an order made by the Referee in Bankruptcy. Bankruptcy Act, §§ 2, sub. a(10), 24, 25, ■39, 11 U.S.C.A. §§ 11 , sub. a(10), 47, 48, 67.

The Referee’s order, following a hearing on objections filed by the trustee, disallowed appellant bank’s claim against the bankrupt estate for a balance of $8,-184.19 remaining unpaid on the promissory note of the bankrupt, unless the bank should surrender and pay over to the trustee, appellee here, the sum of $2,889.14 “appropriated * * * from the bank account of the bankrupt” by setting-off as a credit to the bank’s note the entire balance of the bankrupt’s account on July 14, 1953, the day following bankruptcy.

Subject to exceptions not applicable here, § 68, sub. a of the Bankruptcy Act provides that: “In all cases of mutual debts or mutual credits between the estate of a bankrupt and a creditor the account shall be stated and one debt shall be set off against the other, and the balance only shall be allowed or paid.” 11 U.S. C.A. § 108, sub. a.

Although the language appears to be mandatory, the right of set-off under § 68, sub. a is…