It is contended by tbe plaintiffs, appellants, tbat since tbe banks involved in tbis case were all national banks, tbe funds in controversy, namely, one-fourth of tbe residue of tbe estate of tbe late T. E. Bobbitt, deceased, were funds held in trust by tbe bank and used *465by tbe bank in tbe conduct of its own business, and tbat upon failure of tbe First National Bank of Granville, they, as beneficiaries of said funds, bad a lien upon tbe United States bonds and other securities set aside for tbe protection thereof; and they invoke section 248, subsection (k), of tbe chapter entitled “Federal Beserve System,” United States Code Anno., Title 12, Banks and Banking, at page 319, sec. 248, which, after making provision for national banks to act as trustees, executors, administrators, guardians, and in other fiduciary capacities in which State banks come in competition with national banks, reads as follows:
“(k) . . . National banks exercising any or all of the powers enumerated in this subsection (k) shall segregate all assets held in any fiduciary capacity from the general assets of the bank, and shall keep a separate set of books and records showing in proper detail all transactions engaged in under authority of this subsection. . . .
“No national bank shall receive in its trust department deposits of current funds subject to check, or the deposit of checks, drafts, bills of exchange, or other items for collection or exchange purposes. Funds deposited or held in trust by the bank awaiting investment shall be carried in a separate account and shall not be used by the bank in the conduct of its business unless it shall first set aside in trust department United States bonds or other securities approved by the Federal Beserve Board.
“In the event of the failure of such bank, the owners of the funds held in trust for investment shall have a lien on the bonds or other securities so set apart, in addition to their claim against the estate of the bank.”
It was the duty of the First National Bank of Granville to segregate all of the assets held by it in any fiduciary capacity, including the funds in controversy, from the general assets of the bank, and to keep a separate set of books and records showing in proper detail all transactions engaged in by it in its fiduciary capacities; and if any of the trust funds were used in the conduct of the bank’s business, it was the duty of the bank to first set aside in its trust department United States bonds or other securities to secure the fund so used, so that, in the event of failure, the owners of the fund so used should have a lien on such bonds or securities, in addition to their claim against the estate of the bank.
The bank did not keep the funds in controversy separate from its general assets, but elected to use them in the conduct of its business by depositing United States bonds or other securities to secure the same. The bank and its successor trustees are therefore bound by its acts in depositing security therefor and using the funds in its business.
The intention of the statute invoked is to protect beneficiaries of trust funds, by having the bank to either keep the trust funds segregated from its general assets or by securing such trust funds with proper securities. *466Tbe bank received tbe funds in controversy and deposited tbe same to its own credit, and paid interest to tbe beneficiaries as provided in tbe will of T. E. Bobbitt. In so doing tbe bank accepted tbe trust created by tbe terms of tba will and exercised control over tbe funds in controversy as trustee; and, to enable it to use sucb funds in tbe conduct of its own business, it set aside in its trust department United States bonds and other securities to secure tbe same.
Tbe funds in controversy were funds accepted by tbe bank as trustee under tbe terms of tbe will, and were used by tbe bank in tbe conduct of its business, after having been secured by securities set aside for that purpose, and we, therefore, conclude that tbe plaintiffs have a lien on tbe bonds and other securities set apart as security in tbe trust department of tbe First National Bank of Granville, in addition to their claim against tbe estate of tbe bank, and that there was error in adjudging that “tbe plaintiffs’ claim declared on in this action is neither a preferred nor a secured claim against tbe First National Bank of Granville.”
Tbe case is remanded to tbe Superior Court that there may be there entered a judgment that tbe plaintiffs have and recover $4,401.59 as a preferred and secured claim against tbe First National Bank of Gran-ville, together with costs in this behalf incurred.
Reversed.