Legal Definitions - misapplication

Misapplication refers to the act of using funds or property that one lawfully possesses, but doing so in an unauthorized, improper, or illegal manner, often in violation of a trust or duty. It's distinct from theft because the person initially had a legal right to hold or control the assets, but then misused them for a purpose other than what was intended or permitted.

Here are some examples to illustrate this concept:

• Example 1: Misuse of Charity Funds

  Imagine the treasurer of a local animal shelter, who has legitimate access to the organization's bank accounts to manage its finances. Instead of using the funds solely for the shelter's operational costs, such as food, veterinary care, and facility maintenance, the treasurer uses a portion of the money to pay for a personal luxury vacation.

  Explanation: The treasurer lawfully held control over the charity's funds. However, diverting these funds for personal travel constitutes an improper and illegal use, as it violates their duty to the charity and its donors. This is a clear case of misapplication of funds.

• Example 2: Mismanagement of Estate Property

  Consider an individual appointed as the executor of a deceased parent's estate. The executor is legally responsible for managing the estate's assets, including a valuable art collection, and distributing them according to the will. Instead of selling the art collection through a reputable auction house to achieve the best price for the beneficiaries, the executor sells several pieces to a personal friend at a significantly reduced price, far below their market value.

  Explanation: The executor lawfully held control over the estate's property. Selling the art at an undervalued price to a friend, rather than acting in the best financial interest of the estate's beneficiaries, is an improper use of their authority and a misapplication of the estate's assets.

• Example 3: Unauthorized Use of Company Assets

  A marketing director at a technology company is provided with a corporate credit card and a company-leased car for business-related travel and expenses. While on a business trip, the director uses the corporate credit card to purchase expensive personal electronics and then uses the company car for an extended weekend road trip with family, unrelated to any company business.

  Explanation: The marketing director lawfully possessed the corporate credit card and company car for business purposes. Using these company assets for personal purchases and unauthorized leisure travel constitutes a misapplication, as they are diverting company property for private benefit outside the scope of their legitimate use.