MR. JUSTICE STARK
delivered the opinion of the court.
Chouteau county instituted this action for the purpose of establishing a preference claim against the assets of the Benton State Bank, an insolvent banking corporation now in the possession and under the control of John T. Phelan, as receiver. The case was submitted to the court upon an agreed statement of facts and resulted in an order denying the preference, from which the county has appealed.
Section 4767, Revised Codes 1921, which was in force at the times in question, made it the duty of the county treasurer to deposit all public moneys in his possession or under his control in solvent banks of the county designated by the board of county commissioners, and required him to take from such banks bonds or securities prescribed and approved by the board of county commissioners, sufficient and necessary to insure their safety and payment, and further provided: “When
more than one such bank is available in any county, such deposits shall be distributed ratably among all such banks qualifying therefor, substantially in proportion to the paid-in capital of each such bank willing to, receive such deposits under the terms of this Act, and it shall be the duty of the county treasurer to prorate all such deposits among all the banks in his county qualified to receive same as in this Act provided, to the end that an equitable distribution of such deposits be maintained.” By section 11318, Revised Codes 1921, a failure to observe the requirements of the above statute was made a criminal offense.
Between March 7, 1921, and March 5, 1923, George A. Boynton was the duly elected, qualified and acting county treasurer of Chouteau county and as such was the custodian of its public funds. During this period there were some fifteen banks in operation in Chouteau county, in all of which, except two, the treasurer had deposited county funds to the full extent for which they had been qualified.
The Benton State Bank had a capital stock of $125,000 and had thus been designated and qualified to receive deposits of public funds of the county up to $325,000. On December 23, 192'2, the county treasurer had on hand $452,833.52 of public funds, which were on deposit in the various depositories of the county; of this amount $251,538.75 was in the Benton State Bank on general deposit, subject to check, this bank having been selected by the treasurer as the medium through which he transacted the general financial business of the county. The bulk of these funds was derived from taxes which had been collected during the latter part of November, and the first part of the month of December of said year. Prior to the twenty-third day of December the treasurer had not made a complete apportionment of these moneys amongst the banks of the county qualified to receive deposits. Such an apportionment would have required him to have deposited some additional funds in the Stockmen’s National Bank of Fort Benton and the First National Bank of Geraldine, and to have correspondingly decreased the amount on deposit in the Benton State Bank.
On December 23, 1922, the Benton State Bank became insolvent, closed its doors and has since remained closed. At that time it had on hand in cash the sum of $11,579.91.
On April 18, 1923, the then county treasurer presented a claim to the receiver of the Benton State Bank for the full amount of the county’s deposit therein, and the same was allowed by him as a general claim against the assets of the bank. There has been paid on this claim the sum of $57,936.27, leaving a balance due thereon of $193,902.48. Subsequent to the presentation and allowance of the above-mentioned claim, the county instituted this proceeding to have a portion of said balance declared to be entitled to a preference over the general claims against the assets of the bank in the hands of the receiver.
Counsel for the county in their brief have made a computation showing the amount of money which the treasurer should have had on deposit in each of the banks in Chouteau county qualified to receive deposits of county funds on December 23, 1922, if the same had been apportioned amongst them in proportion to their paid-in capital stock. According to this computation the amount on deposit in the Benton State Bank was $129,925.51 in excess of the amount which would have been deposited therein if the treasurer had made a correct apportionment amongst the banks of the county qualified to receive deposits. Deducting from this amount the sum of $57,636.27, which has been paid on the county’s claim, leaves a balance of $72,293.24 for which the preference claim is asserted, on the ground that the excess deposit in the Benton State Bank was illegal. It is argued that, this excess deposit being illegal, the county never consented thereto, and hence did not become a general creditor of the bank for the amount thereof, but that the bank held this excess deposit as a trustee
ex maleficio
for its use and benefit.
Counsel rely on the case of
Yellowstone County
v.
First Trust & Savings Bank,
46 Mont. 439, 128 Pac. 596, to sustain their position, but it does not do so. The statute under consideration in that case (sec. 3003, Rev. Codes 1907) charged
the county treasurer with the safekeeping of all county funds, but authorized him to make general deposits of funds upon requiring from the depository an indemnity bond in double the amount deposited, with sureties to be approved by the county commissioners and filed with the clerk of the county. The defendant bank had furnished a bond in the sum of #25,000 which had been duly approved and filed and was therefore sufficient to authorize the treasurer to make a general deposit in the sum of $12,500 therein. The bank became insolvent and at the time of its suspension the county treasurer had on deposit therein the sum of $33,000. This court held that to the extent of $12,500 the countv funds deposited in the bank by the treasurer constituted a general deposit and as to that amount the county was only entitled to share with the general creditors in the distribution of the bank’s assets. In reference to the balance of the deposit the court said: “The deposit of $20,500 excess, without security, was wrongful and unlawful. The county did not consent thereto, never parted with its title to such funds, and the treasurer and the bank officers knew of these facts, being chargeable with knowledge of the law. The bank was an active participant in the wrong, and the result follows, as of course, that as to such excess the bank held it as a trustee
ex maleficio,
for the use and benefit of the county. ’ ’
The basis of this holding was that the bank, being cognizant of the facts and chargeable with knowledge of the law, was an active participant in the wrong committed. That is a condition precedent to the creation of a trust
ex maleficio,
since it arises on account of fraud or misconduct of the trustee or by virtue of some illegal act on his part.
(Rogers
v.
Richards,
67 Kan. 706, 74 Pac. 255;
Barry
v.
Hill,
166 Pa. 344, 31 Atl. 126.)
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MR. JUSTICE STARK
delivered the opinion of the court.
Chouteau county instituted this action for the purpose of establishing a preference claim against the assets of the Benton State Bank, an insolvent banking corporation now in the possession and under the control of John T. Phelan, as receiver. The case was submitted to the court upon an agreed statement of facts and resulted in an order denying the preference, from which the county has appealed.
Section 4767, Revised Codes 1921, which was in force at the times in question, made it the duty of the county treasurer to deposit all public moneys in his possession or under his control in solvent banks of the county designated by the board of county commissioners, and required him to take from such banks bonds or securities prescribed and approved by the board of county commissioners, sufficient and necessary to insure their safety and payment, and further provided: “When
more than one such bank is available in any county, such deposits shall be distributed ratably among all such banks qualifying therefor, substantially in proportion to the paid-in capital of each such bank willing to, receive such deposits under the terms of this Act, and it shall be the duty of the county treasurer to prorate all such deposits among all the banks in his county qualified to receive same as in this Act provided, to the end that an equitable distribution of such deposits be maintained.” By section 11318, Revised Codes 1921, a failure to observe the requirements of the above statute was made a criminal offense.
Between March 7, 1921, and March 5, 1923, George A. Boynton was the duly elected, qualified and acting county treasurer of Chouteau county and as such was the custodian of its public funds. During this period there were some fifteen banks in operation in Chouteau county, in all of which, except two, the treasurer had deposited county funds to the full extent for which they had been qualified.
The Benton State Bank had a capital stock of $125,000 and had thus been designated and qualified to receive deposits of public funds of the county up to $325,000. On December 23, 192'2, the county treasurer had on hand $452,833.52 of public funds, which were on deposit in the various depositories of the county; of this amount $251,538.75 was in the Benton State Bank on general deposit, subject to check, this bank having been selected by the treasurer as the medium through which he transacted the general financial business of the county. The bulk of these funds was derived from taxes which had been collected during the latter part of November, and the first part of the month of December of said year. Prior to the twenty-third day of December the treasurer had not made a complete apportionment of these moneys amongst the banks of the county qualified to receive deposits. Such an apportionment would have required him to have deposited some additional funds in the Stockmen’s National Bank of Fort Benton and the First National Bank of Geraldine, and to have correspondingly decreased the amount on deposit in the Benton State Bank.
On December 23, 1922, the Benton State Bank became insolvent, closed its doors and has since remained closed. At that time it had on hand in cash the sum of $11,579.91.
On April 18, 1923, the then county treasurer presented a claim to the receiver of the Benton State Bank for the full amount of the county’s deposit therein, and the same was allowed by him as a general claim against the assets of the bank. There has been paid on this claim the sum of $57,936.27, leaving a balance due thereon of $193,902.48. Subsequent to the presentation and allowance of the above-mentioned claim, the county instituted this proceeding to have a portion of said balance declared to be entitled to a preference over the general claims against the assets of the bank in the hands of the receiver.
Counsel for the county in their brief have made a computation showing the amount of money which the treasurer should have had on deposit in each of the banks in Chouteau county qualified to receive deposits of county funds on December 23, 1922, if the same had been apportioned amongst them in proportion to their paid-in capital stock. According to this computation the amount on deposit in the Benton State Bank was $129,925.51 in excess of the amount which would have been deposited therein if the treasurer had made a correct apportionment amongst the banks of the county qualified to receive deposits. Deducting from this amount the sum of $57,636.27, which has been paid on the county’s claim, leaves a balance of $72,293.24 for which the preference claim is asserted, on the ground that the excess deposit in the Benton State Bank was illegal. It is argued that, this excess deposit being illegal, the county never consented thereto, and hence did not become a general creditor of the bank for the amount thereof, but that the bank held this excess deposit as a trustee
ex maleficio
for its use and benefit.
Counsel rely on the case of
Yellowstone County
v.
First Trust & Savings Bank,
46 Mont. 439, 128 Pac. 596, to sustain their position, but it does not do so. The statute under consideration in that case (sec. 3003, Rev. Codes 1907) charged
the county treasurer with the safekeeping of all county funds, but authorized him to make general deposits of funds upon requiring from the depository an indemnity bond in double the amount deposited, with sureties to be approved by the county commissioners and filed with the clerk of the county. The defendant bank had furnished a bond in the sum of #25,000 which had been duly approved and filed and was therefore sufficient to authorize the treasurer to make a general deposit in the sum of $12,500 therein. The bank became insolvent and at the time of its suspension the county treasurer had on deposit therein the sum of $33,000. This court held that to the extent of $12,500 the countv funds deposited in the bank by the treasurer constituted a general deposit and as to that amount the county was only entitled to share with the general creditors in the distribution of the bank’s assets. In reference to the balance of the deposit the court said: “The deposit of $20,500 excess, without security, was wrongful and unlawful. The county did not consent thereto, never parted with its title to such funds, and the treasurer and the bank officers knew of these facts, being chargeable with knowledge of the law. The bank was an active participant in the wrong, and the result follows, as of course, that as to such excess the bank held it as a trustee
ex maleficio,
for the use and benefit of the county. ’ ’
The basis of this holding was that the bank, being cognizant of the facts and chargeable with knowledge of the law, was an active participant in the wrong committed. That is a condition precedent to the creation of a trust
ex maleficio,
since it arises on account of fraud or misconduct of the trustee or by virtue of some illegal act on his part.
(Rogers
v.
Richards,
67 Kan. 706, 74 Pac. 255;
Barry
v.
Hill,
166 Pa. 344, 31 Atl. 126.)
There are numerous cases holding that the unauthorized or illegal deposit of public funds in a bank which subsequently becomes insolvent creates a trust relationship in such funds between the bank and the public body to which they belong, but such holdings are in each instance based on the fact
that the bank had knowledge or notice of the illegality of the deposits, as had the bank in
Yellowstone County
v.
First Trust & Savings Bank,
supra.
(Board of Commrs. of Crawford County
v.
Strawn
(C. C. A.), 157 Fed. 49, 15 L. R. A. (n. s.) 1100;
Allen
v.
United States
(C. C. A.), 285 Fed. 678;
Re Fidelity State Bank, 35
Idaho, 797, 31 A. L. R. 781, 209 Pac. 449;
Independent District
v.
King,
80 Iowa, 497, 45 N. W. 908;
Myers
v.
Board of Education,
51 Kan. 87, 37 Am. St. Rep. 263, 32 Pac. 658;
Board of Fire & Water Commrs.
v.
Wilkinson,
119 Mich. 655, 44 L. R. A. 493, 78 N. W. 893;
State
v.
Bank of Commerce,
54 Neb. 725, 75 N. W. 28;
William R. Compton Co.
v.
Farmers’ Trust Co.
(Mo. App.), 279 S.
W.
746;
Grand Forks County
v.
Baird,
54 N. D. 315, 209 N. W. 782; 3 R. C. L., p. 555, sec. 182.) The principle announced in the foregoing authorities finds support in the case of
Montana-Wyoming Association of Credit Men
v.
Commercial National Bank of Miles City,
80 Mont. 174, 259 Pac. 1060.
The agreed statement does not bring the Benton State Bank within the rule laid down in the cases above cited. It had furnished bonds which had been duly approved and filed, entitling the county treasurer to deposit with it $325,000 of the public funds of the county, and it had a right to receive deposits up to that amount. So far as this record discloses, it had no knowledge or notice that the county treasurer was not complying strictly with the requirements of the statute in making a ratable distribution of the public money amongst the banks of the county which were qualified to receive the same. It had a right to rely upon the presumption that the treasurer was regularly performing his official duty in that respect. (Sec. 10606, Rev. Codes 1921.) It was not chargeable with notice of the fact that the treasurer had deposited with it a greater amount than he should have, taking into consideration the paid-in capital stock of the other banks in the (county which were willing to receive deposits of public funds and had qualified to receive the same.
Rehearing denied February 3, 1928.
If, under the facts agreed upon, the county treasurer was guilty of a wrongful act by not making a distribution of the county funds under his control in accordance with the statute prior to December 23 (which question we are not called upon to decide), so that his excess deposit with the Benton State Bank was illegal, the bank, not having knowledge of the facts, could not be held to have been a participant in the wrong so as to change its status from that of a general depository of the funds to that of a trustee
ex maleficio.
We think the order of the lower court denying the preference claimed was properly made, and the same is affirmed.
Affirmed.
Mb. Chief- Justice Callaway and Associate Justices Myers, Matthews and Galen concur.