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Civil Theft through Unauthorized Use of Funds

Posted by Kammie Cuneo | Oct 20, 2022 | 0 Comments

Civil theft exists when the criminal state of mind—to permanently deprive the owner of the benefit of their property—exists. E.g., In re Est. of Chavez, 2022 COA 89M, ¶ 47 (Colo. App. Aug. 25, 2022). When a perpetrator takes money in an unauthorized manner, post-hoc characterizations, such as calling it “safe keeping,” do not exculpate that theft. Id. at ¶ 24.

Under Colorado law, civil theft is committed when (1) the plaintiff owned something of value, (2) the defendant knowingly obtained control over it without authorization, and (3) defendant did so with the specific intent to permanently deprive him of the benefit of his property. Steward Software Co. v. Kopcho, 266 P.3d 1085, 1087 (Colo. 2011); Huffman v. Westmoreland Coal Company, 205 P.3d 501, 509 (Colo. App. 2009).

Civil Theft and Breach of Contract

Civil theft may occur in the course of a business transaction and even when that transaction is defined by a contract between the perpetrator and victim. Civil theft can co-exist with a contractual obligation and is not abrogated by the judicially-created doctrine of the economic loss rule. Bermel v. BlueRadios, Inc., 440 P.3d 1150, 1154 (Colo. 2019) (“particularly inappropriate to apply the economic loss rule to bar statutorily imposed liability for intentionally wrongful conduct”). Civil theft requires a specific state of mind that is not required for a breach of contract.

The holding in Bermel clarifies that civil theft is not barred where the theft also constitutes a breach of the parties' contract. Id., 440 P.3d at 1151. So that justice is served, judicially-created doctrines “should not be available to shield intentional tortfeasors from liability for misconduct that happens also to breach a contractual obligation.” Id. at 1154 n.6; see also In re Bloom, No. 22-1005, 2022 WL 2679049, at *4 (10th Cir. July 12, 2022).

Unauthorized Use of Funds

Unauthorized use of funds is an act of permanently depriving those funds from the rightful owner. Itin v. Ungar, 17 P.3d 129, 131 (Colo. 2000). The defendant in Itin received funds for a particular transaction but then transferred the money to his own accounts without authorization, which constituted permanently depriving for civil theft. Id.

Similarly, in Tisch v. Tisch, the majority shareholder had spent company profits in an unauthorized manner. 439 P.3d 89, 105 (Colo. App. 2019) (“unauthorized loan payments, payments on personal credit cards, and payments to himself as an hourly employee, vendor, and officer”). Even though the majority shareholder had sole discretion to authorize distributions, the company profits spent by the majority shareholder on his other businesses and personal expenses effectively constituted distributions in which the minority shareholders were entitled to share. Id. Thus, the minority shareholders in Tisch were permanently deprived of their interest in those profits, which constituted civil theft. Id.

A Practically Certain State of Mind

The culpable state of mind for civil theft requires only that the thief was “aware that his manner of using the trust funds is practically certain to result in depriving another person of the use or benefit of the funds.” Franklin Drilling & Blasting Inc. v. Lawrence Constr. Co., 463 P.3d 883, 888 (Colo. App. 2018); see also People v. Stewart, 739 P.2d 854, 856 (Colo. 1987). 

The “knowingly” element in the civil theft statute, CRS 18-4-401(1)(b), does not require a “conscious objective to deprive another person of the use or benefit of the construction trust funds, but instead requires the [thief] to be aware that his manner of using the trust funds is practically certain to result in depriving another person of the use or benefit of the funds.” People v. Anderson, 773 P.2d 542, 545 (Colo. 1989).

The attorneys at Thomas P. Howard, LLC litigate civil theft cases in Colorado.

About the Author

Kammie Cuneo

Kammie Cuneo is an experienced intellectual property attorney. Her practice includes IP and commercial litigation as well as transactional work for a wide variety of clients, from global companies to small start-ups.


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