Also known as: defalcate · defalcates · defalcated · defalcating · defalcator · defalk · embezzlement · misappropriation
Written by attorneys · grounded in primary & secondary sources — see below
A fraudulent conversion of property by a person entrusted with it. The conversion occurs after lawful acquisition or possession and requires intent to defraud, distinguishing it from a mere failure to repay a debt or an initial trespassory taking.
Dominic Drake, a warehouse supervisor, received weekly cash deposits from customers to hold for his employer. After several months he began using portions of the cash to pay personal bills instead of depositing them. Because Drake initially held the funds lawfully, his later personal use constituted defalcation rather than larceny.
Daphne Doyle discovered that a marketing firm had published her childhood photographs and life story in an advertising campaign without permission. The firm profited from the association while Doyle received nothing. The unauthorized exploitation of her identity for commercial gain amounted to defalcation of her property right in her likeness.
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Dylan Duffy, an associate at a firm, learned that a partner had withdrawn client settlement proceeds for personal use. The partner had received the money lawfully as escrow but converted it. Duffy's knowledge triggered a duty to report the defalcation despite the client's request for silence.
Delilah Duran, a solo practitioner, transferred client retainers from her trust account to cover office expenses. She intended to replace the money later but never did. The knowing conversion of entrusted funds constituted defalcation and resulted in disbarment regardless of her repayment intentions or clean record.
Diane Dawson, a court clerk, collected filing fees that litigants paid to obtain hearings. Instead of remitting the fees to the state treasury she deposited them into a personal account. The conversion of funds she held only in her official capacity constituted defalcation.
Diego Duarte, a prison commissary officer, received inmate wage deposits that he was required to hold for their benefit. He used a portion of the deposits to purchase personal supplies. Because Duarte held the money lawfully as custodian, his personal expenditures amounted to defalcation.
Defalcation requires that the defendant first acquire the property lawfully and then convert it while in lawful possession. Larceny instead requires a trespassory taking at the moment of acquisition.
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The defendant must act with intent to defraud. An intent to return identical property negates the offense, but an intent to return only similar property satisfies the fraudulent intent element.
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Yes. A defendant who converts property under a bona fide belief that he is entitled to it as payment for a debt does not commit defalcation.
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No. Traditional embezzlement statutes limit the offense to property that may be the subject of larceny, which excludes real property and services.
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…Hanover Milling Co. v. Metcalf , 240 U.S. 403, 413. In recent years, its scope has been extended. It has been held to apply to misappropriation as well as misrepresentation, to the selling of another's goods as one's own, — to misappropriation of what equitably belongs to a competitor. International News Service v. Associated…