The doctrine equating the monetary irregular-deposit contract with the loan or mutuum contract has also prevailed in Anglo-Saxon common law, via the creation of law in the binding case system. At the end of the eighteenth century and throughout the first half of the nineteenth, various lawsuits were filed by which depositors, upon finding they could not secure the repayment of their deposits, sued their bankers for misappropriation and fraud in the exercise of their safekeeping obligations. Unfortunately, however, British case-law
judgments fell prey to pressures exerted by bankers, banking customs, and even the government, and it was ruled that the monetary irregular-deposit contract was no different from the loan contract, and therefore that bankers making self-interested use of their depositors’ money did not commit misappropriation. Of all of these court rulings, it is worthwhile to consider Judge Lord Cottenham’s decision in Foley v. Hill and others in 1848. Here the judge arrives at the erroneous conclusion that the money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases. He is guilty of no breach of trust in employing it. He is not answerable to the principal if he puts it into jeopardy, if he engages in a haphazardous speculation; he is not
bound to keep it or deal with it as the property of his principal, but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to
that paid into his hands.
Considering this type of ruling, it is not surprising that Richard Cantillon fled from France to England, where financial practices were much more lax, and as we have seen, court rulings ended up defending the same line of argument he
used in his defense. In continental Europe, in contrast, the Roman legal tradition still exerted great influence. Roman jurists had impeccably formulated the nature of the monetary irregular deposit, basing it on the safekeeping obligation and the unlawfulness of banks’ appropriation of deposited funds.
Hence Richard Cantillon’s fear is understandable. He fled continental Europe at a time when the Bank of Amsterdam was still operating with its full prestige and a 100-percent reserve ratio. Also, the concept of irregular deposit began to
return to its classical legal roots (which outlawed fractional-reserve banking). It had already become clear that all banking systems which had been based on a fractional reserve had failed (i.e., the systematic failure of European banks of the late Middle Ages, of banks in Seville and Italy in the sixteenth and
seventeenth centuries and the system of Law in eighteenth-century France), and judges had regularly pronounced rulings against bankers’ appropriation of funds on deposit (and as we know, such decisions have even been made well into the twentieth century in France and Spain).
We must emphasize that, at least with respect to the institution that concerns us (the irregular deposit), clearly the Anglo-Saxon common law system has less effectively guaranteed the defense of property rights and the correct regulation
of social interaction than the legal system of continental Europe. We do not mean that the continental system in its latest version, Kelsenian and positivist, is superior to the common law system, only that the latter has often been inferior to Roman law. By “Roman law” we refer to the evolutionary, customary system based on the logical, exegetic, and doctrinal analysis of jurists of the Roman classical school. To put it another way, in the Anglo-Saxon common law system, past decisions are too binding, judges being often more influenced by the specific details of each case and by ostensible business activity than by the dispassionate, logical, and exegetic analysis which should be carried out based on essential legal principles. In short the Anglo-Saxon legal system depends excessively on
precedents, while the continental system, based on Roman law, rests on precedents, sound doctrine, and juridical theory.
judgments fell prey to pressures exerted by bankers, banking customs, and even the government, and it was ruled that the monetary irregular-deposit contract was no different from the loan contract, and therefore that bankers making self-interested use of their depositors’ money did not commit misappropriation. Of all of these court rulings, it is worthwhile to consider Judge Lord Cottenham’s decision in Foley v. Hill and others in 1848. Here the judge arrives at the erroneous conclusion that the money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases. He is guilty of no breach of trust in employing it. He is not answerable to the principal if he puts it into jeopardy, if he engages in a haphazardous speculation; he is not
bound to keep it or deal with it as the property of his principal, but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to
that paid into his hands.
Considering this type of ruling, it is not surprising that Richard Cantillon fled from France to England, where financial practices were much more lax, and as we have seen, court rulings ended up defending the same line of argument he
used in his defense. In continental Europe, in contrast, the Roman legal tradition still exerted great influence. Roman jurists had impeccably formulated the nature of the monetary irregular deposit, basing it on the safekeeping obligation and the unlawfulness of banks’ appropriation of deposited funds.
Hence Richard Cantillon’s fear is understandable. He fled continental Europe at a time when the Bank of Amsterdam was still operating with its full prestige and a 100-percent reserve ratio. Also, the concept of irregular deposit began to
return to its classical legal roots (which outlawed fractional-reserve banking). It had already become clear that all banking systems which had been based on a fractional reserve had failed (i.e., the systematic failure of European banks of the late Middle Ages, of banks in Seville and Italy in the sixteenth and
seventeenth centuries and the system of Law in eighteenth-century France), and judges had regularly pronounced rulings against bankers’ appropriation of funds on deposit (and as we know, such decisions have even been made well into the twentieth century in France and Spain).
We must emphasize that, at least with respect to the institution that concerns us (the irregular deposit), clearly the Anglo-Saxon common law system has less effectively guaranteed the defense of property rights and the correct regulation
of social interaction than the legal system of continental Europe. We do not mean that the continental system in its latest version, Kelsenian and positivist, is superior to the common law system, only that the latter has often been inferior to Roman law. By “Roman law” we refer to the evolutionary, customary system based on the logical, exegetic, and doctrinal analysis of jurists of the Roman classical school. To put it another way, in the Anglo-Saxon common law system, past decisions are too binding, judges being often more influenced by the specific details of each case and by ostensible business activity than by the dispassionate, logical, and exegetic analysis which should be carried out based on essential legal principles. In short the Anglo-Saxon legal system depends excessively on
precedents, while the continental system, based on Roman law, rests on precedents, sound doctrine, and juridical theory.
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