(after stating the facts as above). The appellant bank is successor in interest and liability to the Federal Trust & Savings Bank, original defendant named in the bill filed by appellee, as trustee in bankruptcy, to recover the amount of alleged unlawful preferences obtained from the bankrupt, Earl H. Prince; and this appeal is from a decree which approves the master’s report therein and awards such recovery upon two transactions, namely: One of $575.79, as a balance of certain deposits made by the bankrupt under special arrangement with the bank, between February 10th and 14th, appropriated by the bank immediately prior to the bankruptcy proceedings, and the other amounting to $4,250 for so-called “margin certificates” theretofore issued by the bank for special deposits made by the bankrupt, which were obtained and appropriated by the bank on February 15th, the day on which the proceedings. in bankruptcy were instituted. Both amounts were applied by the bank as credits upon pre-existing indebtedness of the bankrupt under promissory notes. The circumstances attending these transactions, together with the facts from which the nature of each must be ascertained, are not only settled by the master’s findings of fact, but are undisputed.
[1] While objection is urged to inferences of fact found by the master as to the mutual intention of the parties in the outcome — ■ in substance to benefit the bank out of such assets to the exclusion of other creditors — as unwarranted by evidence, we believe no doubt is entertainable of the intention to give and obtain a preference over other creditors, with mutual knowledge of the bankrupt’s insolvency, if, in other respects, the transactions (one or both) were violations of the Bankruptcy Act. The issue in each instance, therefore, is one of law, whether the amounts thus obtained and applied constituted' unlawful preferences, with the solution of each resting on established facts as to the relation existing between the bankrupt and the bank in the matters so applied.
Counsel for the appellant contends for reversal mainly, if not entirely, on this proposition in substance: That the various deposits by the bankrupt, out of which these appropriations arose, were made and carried in the common relation of debtor and creditor, and were thus subject to the right of set-off provided by section 68 of the Bankruptcy Act — as upheld and defined by the Supreme Court in N. Y. County Bank v. Massey, 192 U. S. 138, 141, 24 Sup. Ct. 199, 48 L. Ed. 380, and by this court in Re George M. Hill Co., 130 Fed. 315, 64 C. C. A. 561, 66 L. R. A. 68, so that both method and fact of appropriation by the bank become immaterial, either amount being enforceable in such relation, as against the trustee in bankruptcy.
[2] The citations referred to rest on the general and well-settled doctrine of the relation created between banker and depositor, when *709deposits are made upon general account in the ordinary course peculiar to banking business; and in the absence of proof that the deposit was otherwise intended and received, it may rightly be presumed that such was the nature of the transaction. On the other hand, it is equally well settled that deposits may be made and accepted for specified purposes, not within the general rule, whereby “the bank becomes bailee of the depositor” (Marine Bank v. Fulton Bank, 2 Wall. 252, 256, 17 L. Ed. 785; Scammon v. Kimball, Assignee, 92 U. S. 362, 370, 23 L. Ed. 483), or trustee of the fund, with title thereto remaining in the depositor until the purpose of deposit is discharged; and the relation thereby established is not that of debtor and creditor, although it was not intended that the identical money so deposited was to be held for the payment. It is the fund, not the particular money deposited, which becomes the subject-matter of the bailment or trust (Woodhouse v. Crandall, 197 Ill. 104, 64 N. E. 292, 5 L. R. A. 385, and notes; Shopert v. Indiana Nat. Bank, 41 Ind. App. 515, 83 N. E. 515), as illustrated in Bank of Brodhead v. Smith, Trustee, 199 Fed. 704, decided by this court in an opinion filed April 23, 1912. The tenability, therefore, of the foregoing contention, hinges upon the inquiry whether the transactions in controversy arose out of general or special deposits under one or the other above-mentioned rules.
[3] 1. The first item of $575.79, charged as an unlawful preference, was a balance of deposit account standing in favor of the bankrupt and appropriated by the bank, February 14th, one day prior to the bankruptcy proceedings. Prince, the bankrupt, had long been engaged in business as dealer on the Chicago Board of Trade, and up to February 10th had an active general banking account with the Federal Trust & Savings Bank; also was indebted to the bank upon promissory notes in excess of $30,000. On February 10th, the bank “called” these loans and applied thereon $3,095 of the balance in favor of Prince in his bank account, leaving $3.25 as a balance of deposit account. Thereupon it was proposed and agreed on the part of the bank, if Prince “would thereafter make deposits to cover the same, it would pay certain salary and pay roll checks of employés of Prince and checks issued to the Board of Trade Clearing House.” Pursuant to this agreement deposits were made by Prince, February 10th, 11th, and 14th, aggregating $3,079, but entered on the books of the bank February 14th. Checks made by Prince for the stipulated purposes were paid by the bank aggregating $2,506.46. On February 14th — at a conference and arrangement for closing out the entire business of the bankrupt, as hereinafter mentioned — the balance of the deposit account then standing in his favor, $575.79, was charged off by the bank and applied upon his indebtedness to the bank. Irrespective of the master’s findings, that the arrangement of February 10th was “calculated to keep Prince going,” was “primarily in the interest of the bank,” and intended for its benefit to the exclusion of other creditors, we are of opinion that the deposits left and made thereunder constituted special deposits, well within the above-mentioned rule, whereby title to the un*710expended fund remained in the bankrupt, so that the bank was without right, either to apply the residue upon his pre-existing indebtedness, or for allowance thereof against the trustee by way of set-off. Libby v. Hopkins, 104 U. S. 303, 306, 26 L. Ed. 769; Western Tie Co. v. Brown, 196 U. S..502, 507, 25 Sup. Ct. 339, 49 L. Ed. 571; Bank of Brodhead v. Smith, Trustee, supra.
[4] 2. The other charge of preference — in obtaining “margin certificates” for the aggregate sum o'f $4,250, on the day the petition in bankruptcy was filed, which were then credited upon the pre-existing indebtedness of the'bankrupt to the bank — involves like inquiry as to the nature of the certificate and deposit thereby certified, and consideration as well of the circumstances under which they were acquired by the bank. For both phases of the inquiry the facts in evidence are 'recited in the preceding statement for the purposes of this opinion, and the details do not require repetition, but the crucial facts may be'briefly stated.
These certificates were issued by the bank, in its representative capacity as a “Board of Trade Depositary,” under the rules of the Board of Trade and its undertakings as such depository. Eacli certificate in controversy was issued to Prince, the bankrupt, upon his deposit of the amount thereof (either in money or by his check accepted as cash), for the purpose specified in the certificate, namely, as pledge or security on his Board of Trade contract with a second party named therein. Each certifies the amount deposited to be payable on its return indorsed by both parties named therein, or “on the order of the president of the Board of Trade,” as provided by the Board rules “under which the above-named deposit has been made,” and each bears designation as “not negotiable or transferable,” and is signed by the cashier of the bank. The purpose of each further appears in evidence, in accord with the recitals and plainly within the understanding of all the parties. Each of the outstanding certificates so issued to the bankrupt was on deposit with the “Clearing House of the Board,” as required by the rules, evidencing the amount thus pledged with the bank as security for the trade therein mentioned, which had not been closed. Under this state of facts, we believe the deposits thus made and accepted at the bank were plainly so limited in their purpose, that the rule in reference to general deposits by a customer of the bank is without force therein; that each was received and certified by the bank, as depository of the fund thus pledged by the bankrupt for performance of his trade, creating no title thereto in the bank, nor other right than that of bailee or stakeholder, to hold for payment in conformity with the stated purpose. So the fact of deposit and holding thereunder vested no right in the bank to divert the fund from such purpose and apply it upon the bankrupt’s indebtedness.
The bank, however, secured possession of these certificates before making such application and the further contention is thereupon pressed that it is entitled to an allowance for their amount, either in that form or by way of set-off against the trustee, notwithstanding the circumstances under which they were acquired. Arrange-*711men! to that end was made on February 14th, with the bank as the moving party, after its closure of the bankrupt’s credit account as above mentioned. Mr. Anderson, another operator on the Board of Trade, was called in by the bank for conference in respect of the bankrupt’s open trades, of which “quite a number” were then outstanding, inclusive of trades secured by the “margin certificates.” On examination thereof Anderson was satisfied that they “showed a profit,” taken as an entirety, and agreed to their assumption by his corporation. All the open trades were then transferred by the bankrupt to such corporation, and its substitution was carried out in the Board of Trade on the following day, resulting in release of the certificates issued to the bankrupt and on deposit for a portion of the trades thus taken over; and these certificates were received by the Anderson Company, pursuant to the Board rules on substitution of their own securities, and were thereupon delivered by them to the bank, without intervention of the bankrupt. On the same day the bankruptcy proceedings were instituted, doubtless precipitated by the substitution.
These transactions establish, as we believe, an unlawful preference in favor of the bank, with Anderson & Co. serving as intermediary to that end. The various propositions advanced as to results which may have arisen through default in the bankrupt’s trades, in whole or in part, in the absence of such substitution, are beside the inquiry; nor is it material what may have been the estimate of net profit in the trades, nor what portions were profitable respectively. As the transfer was made and performance of the several trades assumed by the purchaser, release of the certificates to secure performance on the part of the bankrupt was plainly intended. Thereupon the bankrupt became entitled to them. Delivery of the certificates to the bank, therefore, consummated a transfer in violation of the Bankruptcy Act, for which recovery by the trustee is expressly provided. Thus their appropriation by the bank for credit upon the indebtedness of the bankrupt was unauthorized.
Is the bank, however, entitled to like benefit out of the transactions through set-off in its favor, as contended? We are of opinion that no such right exists under the terms and obvious purpose of section 68 of the act. The first clause (68a) cited in support thereof, provides only “for cases of mutual debts or mutual credits” between the estate and a creditor, wherein “the account shall be stated and one debt shall be set off against the other.” In our understanding of the authorities (as above stated), these special deposits and liabilities are not embraced in such provision for set-off. But, if it be assumed that the relation of debtor and creditor was created between the bank and the bankrupt at any stage, such relation must arise through the transaction which released the pledge, making the amount deposited payable to the bankrupt, whereby the bank (under the. assumption) becomes his debtor. Thus viewed, the claim of set-off must he rejected under the express limitations prescribed in clause “b” (2) of the section. Moreover, in Western Tie & Timber Co. v. Brown, 196 U. S. 502, 510, 25 Sup. Ct. 339, 49 L. Ed. 571, *712the lasRmentioned clause is construed to be applicable as well to a case of trust relation, and the opinion states that allowance of the claim of set-off “under the circumstances disclosed would violate the plain intendment of the inhibition” of that clause,
i The transcript of testimony on the part of a witness (Wolf), received in evidence under objection, upon which error is assigned, does not enter into consideration for the purposes of the appeal, and tlie question raised as to its admissibility becomes immaterial.
■ The', decree of the District Court, therefore, is affirmed.