Montana Attorney General Opinion 16-311

Opinion No. 311. Banks and Banking-Trust Funds, Use of By the Bank. HELD: A Montana bank or trust company, exercising trust powers, may not legally deposit trust funds in the commercial department of the fiduciary bank or trust company by setting aside government bonds to the 'amount of the trust funds as se- curity therefor. June 30, 1936. Hon. Frank H. Johnson Superintendent of Banks The Capitol You have submitted the following question: "It has been customary for banks holding trust funds to set aside from their assets Government bonds to the amount of the trust funds which are deposited in cash awaiting in- vestment. There has never been any action taken that I know of in this matter and I would like to get your advice as to what authority a bank has in accepting trusts to redeposit trust funds under its control in a checking ~ccount on its bOoks." The question, as I understand it, is whether a Montana bank or trust company, exercising trust powers, may legally deposit trust funds in the commercial department of the fiduci- 318 OPINIONS OF THE ATTORNEY GENERAL ary bank or trust company by setting aside government bonds to the amount of the trust funds as security. I find no statute in Montana au- thorizing such deposit and in the ab- sence thereof it is my opinion that it may not be done. On the contrary, St.-ction 7889, R. C. M. 1935, expressly forbids it in the following language: "A trustef' may not use or deal with the trust property for his own bene- fit, or for any other purpose uncon- nected with the trust, in any manner." (See In re Jennings Estate, 74 Mont. 449, 241 Pac. 648; also Section 7897, Revised Codes.) When a bank makes such deposit of trust funds in its commercial depart- ment, it, in effect, loans such funds to itself in violation of the statute. The fact that the loan is secured by government bonds is not material. A trustee cannot in this manner acquire power withheld by statute. 'lIlhile ex- ecutors or administrators may invest trust funds, it is only after approval and authority given by the court. See Section 10306, R. C.; In re Harper's Estate, 98 Mont. 356, 40 Pac. (2d) 51.