Court Opinion

ID: 9476994
Source: CourtListenerOpinion
Date Created: 2023-08-05 06:10:43.023504+00
Date Added: 2024-06-11T17:45:37.444311
License: Public Domain

WIDENER, Circuit Judge,
concurring:
I concur in the result.
*419I do so because the defalcation of Riley amounted to a dishonest conversion of the bank’s funds when he placed the false notes in the bank. My reasoning is thus akin to that of the Tennessee court in Smothers. The fact that the money from the notes was used to pay other false notes at the same bank should be only coincidental. Had Riley previously obtained funds on false notes to other banks and paid the other banks with BB & T’s funds, there would be no doubt of liability on the bond. Thus, I would not find it necessary to, nor hold, as does the majority, that the exclusion does not apply because the interest was realized rather than not realized.
I also do not agree with that part of the opinion at the end of page 5 which relies upon an economic theory that “interest payments cannot be categorized solely as profit because the real interest rate is only 3 per cent while the remaining interest charged represents inflation, not profits.”
There are two reasons not to rely on this theory. The first is that the man who pays interest at a bank is simply disinterested in economic theories. He pays the bank at the rate of 10 per cent per annum, for example, and the fact that an economist would say he is only paying 3 per cent because of inflation is an economic theory he will find difficult to grasp, as do I. After all, a bank calculates its profits on the 10 per cent charged, not the 3 per cent theoretical level.
The second reason is that we allow recovery on embezzled funds used to pay interest which has never been as low as 3 per cent per annum from the beginning of this scheme in 1972 until its termination in 1984. Without referring back to public sources of data, I suggest that the prime rate during this period has varied from not less than about 5 per cent to about 20 per cent. If we are going to base our opinion on a 8 per cent “real interest rate”, then I suggest that not limiting the bank’s recovery to the lower rate deserves explanation.