Story Case

Certain taxes in Alabama were required to be paid to the judges of the probate courts and by them delivered to the state treasurer. By the statutes, the judge is prohibited, under a penalty, from using the money or allowing any one else to use it. Charles Alston, Probate Judge of Barbour County, had a large amount of money collected under this law in his possession, and to keep it until it should be turned over to the state treasurer, he deposited it in the Bank of Barbour County. He made a special account for the fund, under the name, "Charles Alston, License Fund." Before this money had been withdrawn, the Bank of Barbour County failed. Alston was unable to produce the money he had collected and a prosecution against him was instituted by the state. He claimed that the deposit had been merely for safe-keeping, that he had intrusted the bank only with the custody of the fund, and that he had not allowed any one to use the fund contrary to the statute. It was the contention of the state, however, that the bank had never been a holder or trustee of money, but that it had taken the money for its own use, becoming liable for the amount, and that Alston had, therefore, violated the statute.

Should Alston be held for trial upon this charge, or is he entitled to have the prosecution dismissed?

Ruling Court Case. Foley Vs. Hill, Volume 2 House Of Lord Cases, Page 28

Foley and Sir Edward Scott were the owners of col-leries in Staffordshire. They kept a joint account at Hill's bank at Stainbridge, in Worcestershire. Later, a sum of £61,170, 10s was transferred from the joint account to a separate account then opened for Foley. From this time, Foley was paid his profits, arising from the colleries, by checks drawn upon the joint account. Hill contends that these checks were always paid in cash, and were never deposited to Foley's separate account. Foley contended that he was not paid in cash, and that they were given to Hill for deposit, and were not credited to him. For this reason, he brought a bill in equity to compel an accounting. He contended that the bank owned and managed by Hill and others, was a trustee, and should be held accountable in equity for their alleged irregular accounts.

Hill contended that a bill would not lie in equity for an accounting; that moneys deposited with them generally were not held by them as trustees, but that they became debtors to the depositor for that amount. In this view of the case, this alleged claim could not be brought into a court of equity, but must be brought in a court of law.

Decision: When a deposit is made at a bank, the transaction is in the nature of a loan. The banker, by accepting the deposit, agrees to stand debtor for that amount, and to repay the amount with that or other money, as suits his convenience, upon the call or direction of the depositor. This constitutes a legal claim, which is not a matter for a court of equity, but a matter for a court of law.

LordBraugham said in part: "Now, as to the banker: is his position with respect to his customers that of a trustee with respect to his cestui que trust? Is it that of a principal with respect to an agent, or that of a principal with respect to a factor? I see no ground for contending that there is any identity in those two points. I am now speaking of the common position of a banker, which consists of the common case of receiving money from his customer on condition of paying it back when asked for, or when drawn upon, or of receiving money from other parties, to the credit of the customer. The party who receives the money has the use of it as his own, and it is in the using of it that his trade consists. But for use of the money no banker could exist, especially a banker who pays interest. But even a banker who does not pay interest could not possibly carry on his business if he were to keep the money, and to pay it back, as a mere depository of the principal.

Lord Campbell said: "My Lords, when you come to examine the facts, it is quite clear that this is a purely legal demand. The relation between banker and customer, as far as the pecuniary dealings are concerned, is that of debtor and creditor." Judgment was held that a bill in equity was not the proper remedy.

Ruling Law. Story Case Answer

A general deposit creates the relation of debtor and creditor between the bank and the depositor. The bank receives the money, and is entitled to use it in a manner to make profit.

The Ruling Court Case shows that the bank is not a trustee of money deposited. Alston, the defendant in the Story Case, is a trustee under the statute, and the difference in the relation is clearly shown. The bank in which Alston deposited the money is only a debtor and the claim stands on the same footing as all its other debts.

Alston, however, must show the state what he did with the particular money, and if he made any disposition of it contrary to the duty imposed upon him, he is liable, even though not otherwise in fault. Although he can repay the amount, the state is still entitled to penalize him if he has misplaced the particular funds. He could, of course, have put them in a marked package in a bank vault, and it is his intention that he in effect did no more than that when he opened this special account. But no matter how peculiar the name of the account, he in no way required of the bank that it take any special course with this fund, and he received from the bank only a liability to repay the amount. It was an ordinary deposit, and under an ordinary deposit the bank is given the full ownership and right to use the money. This is a violation of the statute, and Alston must stand trial.