The question on this appeal is whether we should overturn an order of Referee Edward J. Ryan, affirmed by the United States District Court for the Southern District of New York, Irving Ben Cooper, J.; the order dismissed the petition of Stratford Financial Corporation ("Stratford"), a Chapter XI debtor-in-possession, to compel Finex Corporation ("Finex") to turn over $25,000. For the reasons set forth below, we affirm.

The $25,000 represents the proceeds of five checks payable to Stratford by Seefeld Hermanos, S.A. ("Seefeld"), an Argentinean firm. Stratford acquired the checks in its lending business; it had made a loan of $50,000 to Seefeld evidenced by ten notes of $5,000 each, payable at monthly intervals. Thereafter, in April 1963, Stratford entered into a letter agreement with Finex whereby Finex was purportedly given an interest in the Seefeld notes in return for an advance to Stratford of $40,000. Stratford's Chapter XI petition was filed in October 1963, before which date Seefeld had already paid a few of the notes to Stratford. Thereafter, in succeeding months, Seefeld paid Stratford the $5,000 due on each of five notes; each time, Adolf Sonnenschein, Stratford's president, endorsed Seefeld's check for $5,000 and delivered it to Finex. Appellants debtor-in-possession and the creditors' committee claim that this was improper and seek the return of $25,000. The significant issue litigated before the referee, reviewed by the district court, raised here is whether the arrangement between Stratford and Finex created a trust for the benefit of Finex.

It may be conceded that if the arrangement between Stratford and Finex was simply a loan, then Stratford's president had no right to endorse over to Finex the five checks from Seefeld after the Chapter XI petition was filed. The letter, reproduced below,1 purported to confirm that (1) Finex would immediately turn over $40,000 to Stratford, (2) Finex would have "a 100% interest" in the first eight Seefeld notes to mature, (3) Stratford would pay Finex the principal within five days of each note's maturity or payment by Seefeld, (4) Finex would be paid $7,000 within five days of the first $5,000 note's maturity, only $3,000 on the last note's due date, and $5,000 on the six notes in between, (5) after January 5, 1964, Stratford would pay Finex fifteen per cent interest on the cash balance due Finex, and (6) Stratford guaranteed full repayment of the notes and of Finex's charges. Finally, the letter stated:

The loan shall be conducted solely in our name * * *. However, we shall hold all notes pertaining to this transaction `in trust' for our mutual benefit.

Appellants argue that the words "in trust" in the letter agreement are not dispositive. They point to the following as requiring reversal of the finding that there was, in fact, a trust: Stratford's promise to pay interest, its guarantee of payment of principal, its failure to segregate the Seefeld notes (the alleged trust res) or indicate on them in any way that they were held in trust, and Stratford's commingling in its general checking account, prior to the filing of the Chapter XI petition, of payments it received on the Seefeld notes.

The formation of a trust relationship is dependent upon the intention of the parties, which, if not clearly indicated by the language of the parties, is to be inferred from all the circumstances. 1 Scott, Trusts § 12.2 (2d ed. 1956). We therefore recite some of the facts that led the referee to conclude that a trust, not a debtor-creditor, relationship was created: Stratford and Finex had entered into two prior similar agreements, each using the words "in trust"; no lawyers were used in drawing up these agreements between Stratford and Finex; they were prepared by Stratford, which had long experience in the financing business; Finex, with no such background, relied on Stratford to draw the documents to create and carry out a trust; and the commingling of the proceeds of the first few Seefeld notes in Stratford's general checking account was very brief. Judge Cooper additionally noted that Finex had no knowledge of Stratford's failure to segregate.

To these facts negating a simple debtor-creditor relationship and supporting a trust finding should be added the following: Finex's president testified that Sonnenschein had promised to keep the notes "separately from any unsecured deals"; there was no commingling of the five Seefeld checks in issue because they were physically handed over, duly endorsed, to Finex; the absence of any promissory note from Stratford in three transactions totalling substantial sums between Finex and Stratford; even though Stratford was in financial difficulty, it always remitted the proceeds of Seefeld checks promptly to Finex; moreover, it never attempted to use the remaining notes for its own purposes, although obviously badly pressed for cash.

All of this adds up to strong support for the finding of a trust by the referee, who alone had the opportunity to hear the testimony of the parties to the transaction and assess their credibility. Appellants argue that federal bankruptcy courts should be wary of recognizing trusts since they, in effect, produce preferences, and that those who rely on a trust relationship have the clear burden of proving it. It is not necessary to decide whether these general propositions are completely accurate as applied to these facts. Even assuming that they are, there is present here more than sufficient evidence for the trust finding to withstand an attack as "clearly erroneous," see In the Matter of Chicago Express, Inc., 222 F. Supp. 566, 572 (S.D. N.Y.1963), aff'd, 332 F.2d 276 (2d Cir.), cert. denied, Pennsylvania R. Co. v. Chicago Express, Inc., 379 U.S. 879, 85 S. Ct. 146, 13 L. Ed. 2d 86 (1964), particularly when appellants seek to overturn both the referee's finding and the district court's affirmance. Rader v. Lichtenthal, 306 F.2d 195, 197 (2d Cir. 1962); see In the Matter of Melnick, 360 F.2d 918, 920 (2d Cir. 1966) (per curiam).

Accordingly, the judgment of the district court is affirmed.