C. Breach of Trust

• Library: The Criminal Law of South Carolina (SCBar) (2014 Ed.)

C. Breach of Trust

1. Relationship to Larceny

South Carolina's breach of trust statute provides that "[a] person committing a breach of trust with a fraudulent intention or a person who hires or counsels another to commit a breach of trust with a fraudulent intention is guilty of larceny." S.C. Code Ann. § 16-13-230(A) (2003). Subsection B of the statute provides that breach of trust involving $2,000 or less is a misdemeanor subject to magistrate's court penalties, more than $2,000 but less than $10,000 is a felony subject to fine or imprisonment for not more than five years, and $10,000 or more is a felony subject to fine or imprisonment for not more than ten years. Id. This is the standard punishment for economic crimes pursuant to the Crime Classification Act of 1993. A third or subsequent conviction, regardless of the amount involved, is a class E felony (ten year maximum). S.C. Code Ann. § 16-1-57 (2003). These penalties became effective January 1, 1994. Prior to that time any breach of trust was punishable as grand larceny with a ten year maximum. S.C. Code Ann. § 17-25-20 (2003). Breach of trust is a "serious offense." S.C. Code Ann. § 17-25-45(C)(2) (Supp. 2012). See Chapter I.C.7., "Most Serious Offenses" and "Serious Offenses," supra. For discussion of issues regarding restitution in a breach of trust case, see State v. Gulledge, 321 S.C. 399, 468 S.E.2d 665 (Ct. App. 1996), aff'd as modified, 326 S.C. 220, 487 S.E.2d 590 (1997), discussed in this supplement to subsection A.3. Restitution.

In one of the first reported cases construing the statute the Court observed that "the object of our act was simply to enlarge the field of larceny, removing what before might have been a defense for those who received property in trust and afterwards fraudulently appropriated it." State v. Shirer, 20 S.C. 392, 408 (1884). In the described situation the fraudulent conversion would not entail guilt of common law larceny because there was no trespassory taking from the owner's possession; possession was already lawfully with the converter via the trust. See previous section on larceny.

Shirer involved a classic case of breach of trust, or embezzlement as it is generally known in otherjurisdictions. A clerk converted funds ofhis employer to which the clerk had exclusive access. Consequently, it could be fairly said that the funds were in his possession as distinguished from custody. If the agent or employee has only custody with the greater right of possession residing in the owner, then the employee's conversion is larceny. State v. Self, 1 S.C.L. (1 Bay) 242 (1792). Nonetheless, the Court in Shirer, concerned perhaps that the facts of that case might suggest custody and hence larceny instead of possession and breach of trust, gave the statute a very expansive interpretation. "We do not understand, however, that our act was intended to apply only to cases where the common law could not reach." Shirer, at 409. The Court then opined that breach of trust prosecutions would be appropriate in regard to clerks who might be properly indicted for common law larceny. This perceived overlap between the two offenses does cause some confusion.

The often cited case of State v. McCann, 167 S.C. 393, 166 S.E. 411 (1932), involved a breach of trust conviction of a person who was given a check in South Carolina with instructions to cash it, pay several specified debts of the check drawer in Georgia, and then return the balance to the owner in South Carolina. The defendant paid the specified debts but also used part of the balance to pay in Georgia a substantial debt of his own and then returned the smaller remaining balance to the owner in South Carolina. A major issue in the case involved jurisdiction because, as the Court observed, "[t]he real conversion . . . occurred in Georgia . . . ." Id. at 401, 166 S.E. at 414. Nonetheless, the Court properly found jurisdiction and venue in South Carolina because there was evidence from which the jury could have concluded that at the time he received the check, he had the fraudulent intent to convert a part of it. Accord State v. Jordan, 255 S.C. 86, 177 S.E.2d 464 (1970). If that assessment of the facts is correct, then it would appear that the offense was that of larceny by trick as discussed in the preceding section and not breach of trust. Indeed, after surveying earlier cases contrasting the two offenses, the Court observed:

The effect of the decisions from which we have quoted is clearly a holding that breach of trust with fraudulent intention, in this [S]tate, is nothing more or less than larceny. It might well be termed 'statutory larceny,' as distinguished from larceny at common law. The main distinction between the two crimes is this: In common-law larceny, possession of the property stolen is obtained unlawfully, while in breach of trust, the possession is obtained lawfully. As will be seen by an examination of the cases of State v. Posey, [88 S.C. 313]; State v. Gorman, 2 Nott. & McC. (11 S.C.L.) 90, 10 Am. Dec., 576; State v. Thurston, 2 McMul. (27 S.C.L.) 382; State v. Self, l Bay (1 S.C.L.) 242; and State v. Lindenthall, 5 Rich. (39 S.C.L.) 238, 57 Am. Dec., 743, if possession of the property is obtained through artifice, trick, or other fraud, then such possession is not lawfully obtained and the crime is larceny at common law, rather than that of breach of trust, as contemplated by the statute.

McCann, at 397-98, 166 S.E. at 413. Nonetheless, and without further clarification of the point, the Court affirmed the conviction of breach of trust even though the facts requisite to its conclusion on jurisdiction would seem to compel the conclusion that the initial taking was unlawful and, therefore, larceny.

A federal district court, after analyzing via a habeas corpus case the relationship between the two South Carolina offenses, concluded that the breach of trust statute "merely eliminated an element, unlawful possession; it did not create a new element of lawful possession." McPhatter v. Leeke, 442 F. Supp. 1252, 1254 (D.S.C. 1978). The court then approved of a South Carolina breach of trust conviction in which, quite clearly, the fraudulent intent to convert existed at the time the defendant induced the owner to turn over to him possession of the property.

Perhaps such a conclusion is consistent with the South Carolina Supreme Court's treatment of...