Criminal Liability or Breach of Contract?
Facts of the Case
In 1984, Mitchell D. Burton sold his home to Jack Waldron using a creative financing arrangement after Waldron was denied a conventional loan. Waldron traded the equity in his home for a down payment and agreed to pay the remaining $210,000 through an all-inclusive trust deed. These payments were meant to cover Burton’s existing obligations to Valley Bank and First Security, which had trust deeds on the property.
Waldron made timely monthly payments from March 1984 to February 1986. However, in April 1986, he discovered that Burton had not forwarded the March and April payments to Valley Bank. Burton claimed the lapse was due to a bounced check, but after continued nonpayment and foreclosure by Valley Bank in December 1986, Waldron stopped paying. Burton was later charged with theft for allegedly misappropriating Waldron’s payments.
The Legal Issue
The central issue on appeal was whether Burton’s failure to apply Waldron’s payments to the underlying trust deed obligations constituted theft under Utah Code Ann. § 76-6-404, which criminalizes exercising unauthorized control over someone else’s property with intent to deprive.
The Court’s Ruling
The court found that the contract between Burton and Waldron was unambiguous and imposed no express duty requiring Burton to use Waldron’s payments to pay Valley Bank or First Security. Although Waldron believed Burton would do so, the agreement gave Burton discretion and did not restrict his use of the funds.
The court criticized the state’s attempt to criminalize what was essentially a breach of a private real estate agreement, warning that adopting such a broad interpretation of the theft statute could distort commercial transactions and result in unnecessary criminalization of civil disputes.
Conclusion
The Utah Court of Appeals reversed the theft conviction, holding that Burton’s conduct, while possibly unethical or contractually improper, did not rise to the level of criminal theft. The decision reaffirms a critical legal principle: breach of contract is not inherently criminal, and courts must avoid blurring the line between civil and criminal liability without clear statutory authority.