Case Name: REICHERT v. PLYMOUTH UNITED SAVINGS BANK. APPEAL OF TOWNSHIP OF PLYMOUTH
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1934-10-23
Citations: 269 Mich. 136
Docket Number: Docket No. 1; Calendar No. 37,485
Parties: REICHERT v. PLYMOUTH UNITED SAVINGS BANK. APPEAL OF TOWNSHIP OF PLYMOUTH.
Judges: Nelson Sharpe, C. J., and Potter, North, Pead, Butzel, and Bushnell, JJ., concurred with Wiest, J.
Reporter: Michigan Reports
Volume: 269
Pages: 136–141

Head Matter:
REICHERT v. PLYMOUTH UNITED SAVINGS BANK. APPEAL OF TOWNSHIP OF PLYMOUTH.
1. Banks and Banking—Depositaries—Township Funds—Statutes.
Statute imposing liability on township treasurer and his surety for deposits of public funds not made in accordance therewith but .which also requires township board to designate depository held, not to make deposit illegal or constitute bank a trustee ex maleficio, where deposit was made without any depository having been designated, since bank is not prohibited from accepting township funds without being designated a depository (Act No. 40, Pub. Acts 1932 [1st Ex. Sess.]).
2. Same—Preferences—Township Funds—Prerogative Right.
Preference may not be accorded township funds in closed bank which had been deposited by treasurer therein without any depository having been designated, since neither the State nor any of its subdivisions has a prerogative right to preference (Act No. 40, Pub. Acts 1932 [1st Ex. Sess.]).
Edward M. Sharpe, J., dissenting.
Appeal from Wayne; Richter (Theodore J.), J.
Submitted June 14, 1934.
(Docket No. 1, Calendar No. 37,485.)
Decided October 23, 1934.
Receivership proceedings by Rudolph E. Reichert, State banking commissioner, against Plymouth United Savings Bank. On petition of Township of Plymouth, intervener, to have its deposit declared a preferred claim and of State banking commissioner for reorganization of-the bank. Order denying petition of Township of Plymouth. Decree authorizing' reorganization. Intervener appeals.
Affirmed.
John L. Crandell, for defendant township.
Goodenough, Voorhies, Long & Ryan, for defendant Plymouth United Savings Bank.

Opinion:
Wiest, J.
The deposits were all made after the effective date of Act No. 40, Pub. Acts 1932 (1st Ex. Sess.). That statute required the township board to designate a depository, dispensed with depository bond, required deposits be made in a depository, when designated, and constituted the treasurer and his bond liable for deposits made otherwise. No depository was designated, therefore, the treasurer deposited in accord with modern business conditions. The liability imposed by the statute on the treasurer could not make the deposit illegal or constitute the bank a trustee ex maleficio. The law does not prohibit a bank from accepting deposits of township funds without being designated a depository.
My thought is well expressed in United States Fidelity & Guaranty Co. v. Carter, 161 Va. 381, 405, 406 (170 S. E. 764, 90 A. L. R. 191, 207):
"While there is no express statutory provision authorizing a county treasurer to deposit public funds in his hands in bank to his credit as treasurer, he commits no misfeasance or malfeasance and is guilty of no wrong in so doing, provided he has acted in good faith and with due care. It is not only permissible for him to do so, but under modern business conditions he should do so. County of Mecklenburg v. Beales, 111 Va. 691 (69 S. E. 1032, 36 L. R. A. [N. S.] 285); Ætna Casualty & Surety Co. v. Board of Supervisors, 160 Va. 11 (168 8. E. 617); School Twp. of Eden v. Stevens, 158 Iowa, 119 (138 N. W. 927); Kies v. Wilkinson, 101 Wash. 340 (172 Pac. 351); Phillips v. Yates Center National Bank, 98 Kan. 383 (158 Pac. 23, L. R. A. 1917 A, 680); State v. McFetridge, 84 Wis. 473 (54 N. W. 1, 20 L. R. A. 223).
"A county treasurer holds public funds upon a trust for the commonwealth and/or the county. But trust funds may be deposited in bank on general deposit without committing a breach of trust; and the fact that the bank knows, or is charged with knowledge, that the fund is a trust fund does not make it a special deposit. We are of opinion, and so hold, that where public funds are deposited in bank by a county treasurer to his credit as such, without anything to establish it as a special deposit other than the bank's knowledge that the funds deposited are public funds, the deposit is a general deposit, the bank becomes indebted to him just as it does to any other fiduciary who deposits fiduciary funds therein, and he is entitled to no priority of payment because of the public character of the funds. People, ex rel. Stale Auditor, v. Home State Bank, 338 Ill. 179 (170 N. E. 205); Incorporated Town of Conway v. Conway, 190 Iowa, 563 (180 N. W. 677); City of Aurora v. Bank of Aurora, 227 Mo. App. 343 (52 S. W. [2d] 496); Kies v. Wilkinson, supra."
We held in Fry v. Equitable Trust Co., 264 Mich. 165 (90 A. L. R. 175), that the State has no prerogative right to preference and it follows that, if the State has no such right, its subdivisions have none.
But it may be said that the preference here sought is not prerogative but under the theory of a trust ex maleficio. The thought is ingenious but only fugitive.
The holding of my Brother shifts the liability of the treasurer and his surety to the bank, and, therefore, to the detriment of the other general depositors.
The order denying preference is affirmed.
Nelson Sharpe, C. J., and Potter, North, Pead, Butzel, and Bushnell, JJ., concurred with Wiest, J.