Prom 1917 until the latter part of 1924, Carl E. Larson was city treasurer of the city of Payette in the state of Idaho and also cashier of the Payette National Bank. During that period the funds of the city were deposited by the city treasurer in the bank of which he was cashier. In 1917 the laws of the state provided that the city treasurer might be required to keep all moneys in his hands belonging to the municipality in such place or places of deposit as might be provided by ordinances, but no ordinances should be passed by which the custody of public money should *769be taken from the custody of the city treasurer and deposited elsewhere than in some regularly organized bank, nor without a bond to be taken from the bank, in such penal sum and with such security as the council or board of trustees might direct and approve, sufficient to save the municipality from loss. Laws of 1893, p. 111. Pursuant to this statute, in August, 1917, the Payette National Bank executed a bond in the penal sum of $15,000 to the city treasurer, conditioned that the bank would safely keep and upon demand well and truly pay or cause to be paid all orders for city money, and would well and truly turn over and deliver all city money so deposited upon proper demand. In 1921 the Legislature of the state enacted a general depository law which differed materially from the act of 1893. Laws of 1921, p. 557. Two different depository bonds were submitted by the depository under this act, but the bonds so submitted were rejected for one reason or another, so that no depository bond was in fact executed or given as required by law. On November 15, 1922, the depository bank became insolvent and suspended payment, and the defendant, Jackson, was later appointed receiver by the Comptroller of Currency. When the bank closed its doors, it had on deposit the sum of $4,322.77 belonging to the city. Just before the bank suspended, Larson, as city treasurer and cashier of the bank, took th'e amount due the city from the funds in the vault of the bank, placed it in a sack, and transferred the sack to another bank. This money was later returned to the depository bank at the request of the bank examiner or receiver. The city of Payette then brought suit against the city treasurer and the American Surety Company, as surety on his official bond, to recover the loss sustained by the failure of the bant, and judgment was given in favor of the city. This judgment was satisfied by the surety, and the surety thereby became subrogated to all rights of the city of Payette and its treasurer as against the bank and its receiver. The present suit was thereupon brought by the surety against the receiver of the bank to recover the amount of the judgment, less two dividends paid thereon. The complaint contains two causes of action— the first based on the theory that the money was wrongfully and illegally deposited in the bank by the city treasurer in violation of the laws of the state, and the bank thereby became a trustee of the funds so deposited; and the second on the theory that the plaintiff had a right, in any event, to recover the money removed from the bank by the city treasurer and afterwards restored to the bank at the request of the bank examiner or receiver. From a decree of dismissal, the present appeal has been prosecuted.
Little need be said as to the second cause of action. The funds were removed from the bank when it was known to be insolvent, and, if the relation of debtor and creditor then existed, such withdrawal was clearly void under the express provisions of section 5242 of the Revised Statutes (12 USCA § 91), which provides that all payments of money made after the commission of an act of insolvency, or in contemplation thereof, with a view to prevent the application of its assets in the manner prescribed by law, or with a view of preference of one creditor to another, except in payment of its circulating notes, shall be utterly null and void. National Security Bank v. Butler, 129 U. S. 223, 9 S. Ct. 281, 32 L. Ed. 682; Corbin v. Mumford (D. C.) 148 F. 37; Ball v. German Bank (C. C. A.) 187 F. 750.
We will now return to the first cause of action. If the city funds were lawfully deposited in the depository bank, the relation of debtor and creditor existed between the city and the hank, and it is well settled that neither the city nor those claiming under it can under sueh circumstances claim any preference over general creditors. On the other hand, if the deposits were made by the city treasurer in violation of the laws of the state, it is equally well settled that the bank became a trustee, and that the city, or those claiming under it, may recover from the receiver the amount of the trust fund, if less than the amount of cash coming into his hands at the inception of the receivership, unless it is made to appear that some portion of the trust fund had theretofore been paid out or dissipated by the bank. Spokane County v. First Nat. Bank (C. C. A.) 68 F. 979; Merchants’ Nat. Bank v. School District No. 8 (C. C. A.) 94 F. 705; Smith v. Mottley (C. C. A.) 150 F. 266; Board of Com’rs v. Strawn (C. C. A.) 157 F. 49, 15 L. R. A. (N. S.) 1100; In re J. M. Acheson Co. (C. C. A.) 170 F. 427; Titlow v. McCormick (C. C. A.) 236 F. 209. We do not understand that this rule is controverted. Indeed, it is so firmly established by the decisions of this and other courts that the question is no longer an open one. It seems quite clear to us that the city funds were deposited in violation of the laws of the state. We think the Depository Act of 1921 superseded the act of 1893, but, if it did not, the bond executed in 1917 did not satisfy the requirements of the act of 1921. The fact that the bond was *770made payable to tbe city treasurer instead of to the municipality would perhaps be immaterial, but the bond given was a personal one and the sureties only justified in the amount for which they became liable, whereas under the Depository Act of 1921 sureties on personal bonds must justify in double that amount. There are other differences to which we need not refer, because under the provisions of the act of 1921 the city treasurer is not liable personally or on his official bond for any moneys that may be lost by reason of the failure or insolvency of any bank which becomes a depository under the law, and in this ease a recovery was had against the treasurer and the surety on his official bond on the express ground that the depository law had not been complied with.
The case was submitted to the court below on a mere showing that a sum in excess of the demand in suit came into the hands óf the receiver when the bank suspended. The appellant contends that the burden then shifted to the appellee to show that some part of the trust funds had been paid out or dissipated by the bank, while the appellee contends that the burden was still on the appellant to show that such was not the fact. In Spokane County v. First Nat. Bank, supra, this court said:
“If it had been alleged in the bill that at the time of its failure the bank held a sum of money equal to or less than the amount here sued for, the court might lawfully presume that sum to be of the public funds of Spokane county, since it will be presumed that trust funds have not been wrongfully misappropriated or criminally used by the officers of the bank.”
In. Merchants’ Nat. Bank v. School District No. 8, supra, we said:
“In the former ease it was held that the depositor of a fund intrusted to a bank, by which it has been misapplied, is not entitled to a general lien upon the assets of the bank for the repayment thereof, but that he can follow the same, so far as it can be traced in the possession of the bank, either in its. original form or in-forms to which it has been converted, or into a general fund, with which it has been commingled, and that his right to recover it in the latter instance will depend upon whether or not a sum of money still remains in the possession of the bank equal to the amount so due him; it being the presumption of the law that, if moneys have been disbursed out of such fund, it was the money which the bank had the right to pay out, and not the money which was intrusted to it in a fiduciary capacity.”
To the same effect, see Moreland v. Brown (C. C. A.) 86 F. 257.
In Smith v. Mottley, supra, the Circuit Court of Appeals for the Sixth Circuit held that the burden of showing that his property had been wrongfully mingled in the mass of the property of the wrongdoer was on the owner who sought to follow it, but, when this was done, the burden shifted to the wrongdoer to show that the money or property had passed out of his hands, and that his trustee in bankruptcy stood in the same position. This ruling was reaffirmed in Board of Com’rs v. Strawn, supra, Judge Lurton saying:
“But the later cases have met this difficulty in the case of blended moneys in a bank account, from which there have been drawings from time to time, by the fiction that the sums thus drawn out were from the moneys which the tort-feasor had a right to expend in his own business, and that the balance which remained included the trust fund which he had no right to use. It was upon this fiction that Knochball v. Hallett, 13 Ch. Div. 696, 726, et seq., was decided. That case was approved in National Bank v. Insurance Co., 104 U. S. 54, 26 L. Ed. 693 and has been followed in many subsequent eases when the trust fund has consisted of moneys on deposit. Smith v. Mottley [C. C. A.] 150 F. 266. But as this is a mere presumption it will not stand against evidence.”
It will thus be seen that the rule itself rests largely on a legal fiction. But, if there is a presumption that trust, funds have not been wrongfully misapplied or criminally used by the officers of the bank, as held by this court in the Spokane County Case, supra, and such a presumption no doubt obtains, it would seem to follow as a necessary corollary that the burden was on the bank or its successor in interest to prove that the trust funds or some part of them were in fact wrongfully misappropriated or criminally used by the bank. This presumption in nowise conflicts with the rule that in the end the claimant must trace the funds and establish his claim thereto by clear and satisfactory proof as against the receiver who represents all creditors.
It was stipulated at the trial that the city .treasurer made certain deposits in the depository bank from time to time; that the appellant was unable to show the form of the deposits, whether consisting of checks upon the depository bank or on some other bank, or whether consisting of cash, or partly of cash and partly of cheeks, and, if checks drawn on some other bank were deposited, *771the appellant was unable to show whether the depository bank received cash or credit for the same. Because of this stipulation it is contended that the city treasurer may have deposited checks on the depository bank, or on some other bank, for which the depository bank was simply given credit, and that in sueh case there would be no augmentation of the funds in the bank. But, in the absence of proof to the contrary, we must presume that the city treasurer obeyed the law and that he accepted and deposited nothing but cash, or the equivalent of cash.
On the entire record we are therefore of ■opinion that the appellant established its claim to the funds in controversy. The ends of justice will be best subserved, however, by remanding the cause to the court below for a new trial, thus permitting the appellee to prove, if able to do so, that the trust funds, or some part thereof, were paid out or dissipated by the bank, within the meaning of the rule adopted and applied by this court. Reversed accordingly.