Huerta de Soto on Justinian’s Digest 16.3.25.1

Here is Huerta de Soto’s interpretation and translation of Justinian’s Digest 16.3.25.1 in Money, Bank Credit and Economic Cycles (2012), which is a quotation from the Classical jurist Papinian (142–212 AD):

“Roman jurists established that when a depositary [sc. in an irregular deposit - LK] failed to comply with the obligation to immediately return the tantundem upon request, not only was he clearly guilty of the prior crime of theft, but he was also liable for payment of interest on arrears. Accordingly, Papinian states:

He who receives the deposit of an unsealed package of money and agrees to return the same amount, yet uses this money for his own profit, must pay interest for the delay in returning the deposit.

(Huerta de Soto 2012: 32).

Huerta de Soto makes a similar statement on p. 65 of Money, Bank Credit and Economic Cycles, citing the Digest 16.3.25.1.

Now Huerta de Soto is correct that the passage in question says that interest must be paid if the person owing the tantundem is in default. But he is utterly incorrect in saying that the Roman jurists though that the guilty party was also “clearly guilty of the prior crime of theft.” That is not what the passage says.

Let us look at the original Latin with my more literal translation:

Qui pecuniam apud se non obsignatam, ut tantundem redderet, depositam ad usus proprios convertit, post moram in usuras quoque iudicio depositi condemnandus est.

“He who uses money deposited with him not sealed up, so that he should restore a tantundem, if he defaults [sc. in payment] must also be condemned in an action on deposit (actio depositi) to [sc. pay] interest.” (Digest 16.3.25.1; my translation).

In Roman law, if you deposited money unsealed or not contained in a box, it was not considered a bailment (or depositum regulare). It was either a mutuum (a loan for consumption) or in later law an irregular deposit (depositum irregulare), the latter being very much like a mutuum too.

In fact, the Digest 19.2.31 tells us quite clearly that when money was left unsealed with someone (and implicitly even a banker) it was not a bailment:

idem iuris esse in deposito: nam si quis pecuniam numeratam ita deposuisset, ut neque clusam neque obsignatam traderet, sed adnumeraret, nihil alius eum debere apud quem deposita esset, nisi tantundem pecuniae solveret.

“The same rule of law applies to deposits, for where a party has deposited a sum of money without having enclosed it in anything, or sealed it up, but simply after counting it, the party with whom it is left is not bound to do anything but repay the same amount of money [tantundem]” (Digest 19.2.31; trans. from Scott 1932).

Therefore the guilty party described in Digest 16.3.25.1 was not guilty of the “prior crime of theft.” Why? Let us look at the translation again:

Qui pecuniam apud se non obsignatam, ut tantundem redderet, depositam ad usus proprios convertit, post moram in usuras quoque iudicio depositi condemnandus est.

“He who uses money deposited with him not sealed up, so that he should restore a tantundem, if he defaults [sc. in payment] must also be condemned in an action on deposit (actio depositi) to [sc. pay] interest.” (Digest 16.3.25; my translation).

The money left on “deposit” is not a bailment, but an irregular deposit. The text does not say that the guilty party had committed “theft” in using the money, for Roman law allowed the holder of the money given as an irregular deposit to use that money as he pleased, just as in a mutuum contract. Despite Huerta de Soto, nor did Roman law require the banker to keep some amount of money equivalent to the initial deposit available for all depositors at all times. Fractional reserve banking was perfectly legal and acceptable.

The text is telling us that, if the party who owed the money defaulted in payment, he was also to be required by law to pay interest in compensation to the “depositor,” in addition to the principal sum owed (this is the significance of the Latin word quoque meaning “also” in the text), when he brought an action or law suit for recovery of the money (or “action on deposit”).

That is all the text says, and Huerta de Soto’s interpretation of it is wrong.


BIBLIOGRAPHY

Huerta de Soto, J. 2012. Money, Bank Credit and Economic Cycles (3rd edn.; trans. M. A. Stroup), Ludwig von Mises Institute, Auburn, Ala.

Scott, S. P. 1932. The Civil Law. Central Trust Co., Cincinnati.