Penal Code 496(c): Treble Damages for Theft in California Business Disputes
Last updated: October 2026
Penal Code section 496 is a criminal statute with a civil remedy built in. A person injured by someone who received, concealed, or withheld property obtained by theft may sue for three times the actual damages, plus costs and attorney fees. (Pen. Code, § 496, subd. (c).) The California Supreme Court confirmed in 2022 that the remedy reaches business disputes, including a partner's diversion of company funds, as long as the conduct was theft with criminal intent and not an ordinary commercial default. Kolmogorov Law, P.C. pleads and defends these claims for businesses in Orange County, Los Angeles, and across California.
Call (909) 235-6116 or contact us online to discuss whether a section 496 claim fits your dispute.
Why a criminal statute matters in a civil case
Most business torts pay the plaintiff what it lost. Section 496(c) pays three times that, and adds attorney fees, which ordinary fraud and conversion claims do not. In a case where a partner moved $400,000 out of the company, the difference between a conversion judgment and a section 496 judgment is roughly $800,000 plus the fees. That changes settlement conversations.
It also changes how the complaint is drafted. The claim requires theft, and theft requires criminal intent. I plead it only when the facts support it, because a section 496 claim that fails at trial undermines everything else.
What the statute says
Subdivision (a) makes it a crime to buy or receive property that has been stolen or obtained in any manner constituting theft or extortion, knowing it was so obtained. (Pen. Code, § 496, subd. (a).) It equally covers concealing, selling, or withholding such property from the owner with that knowledge. Subdivision (c) gives anyone injured by a violation a civil action for three times the actual damages sustained, costs of suit, and reasonable attorney fees. (Pen. Code, § 496, subd. (c).)
"Theft" under California law includes obtaining property by false pretenses and embezzlement, not only taking it by stealth. That breadth is what brings business disputes within the statute.
What the Supreme Court decided
For years trial courts split on whether section 496(c) applied to business disputes at all. The California Supreme Court settled it in Siry Investment, L.P. v. Farkhondehpour, holding that a plaintiff may recover treble damages and attorney fees under section 496(c) when property has been obtained in any manner constituting theft, and that the statute's language covers the fraudulent diversion of partnership funds. (Siry Investment, L.P. v. Farkhondehpour (2022) 13 Cal.5th 333, 361.)
The court drew a line in the same opinion. Not every commercial dispute alleging fraud, misrepresentation, or breach of a promise amounts to theft. The plaintiff must establish criminal intent beyond mere proof of nonperformance or falsity, which keeps ordinary commercial defaults from being transformed into theft. Misrepresentations made innocently or inadvertently cannot support the claim, any more than an innocent breach of contract could. (Siry, supra, 13 Cal.5th at pp. 361-362.)
Where it fits in business litigation
The partner who diverts receivables to a new entity he controls. The bookkeeper who writes company checks to herself. The departing executive who takes equipment and refuses to return it. The buyer who takes delivery with no intention of paying. Those are the fact patterns where section 496 claims are pleaded alongside conversion, fraud, and breach of fiduciary duty. Our pages on a partner who steals from the company and employee theft and embezzlement cover the surrounding claims.
The claim does not fit a dispute over whether a contract was performed, a disagreement about how much a partner is owed, or a customer who could not pay. Pleading section 496 in those cases invites a demurrer and signals to the judge that the complaint overreaches.
Proving criminal intent in a civil courtroom
The standard of proof is still the civil preponderance standard, but the element is intent to steal at the time the property was obtained or withheld. Evidence that persuades: the money went to accounts the defendant hid; the defendant falsified records to cover the transfers; the defendant kept taking after being confronted; the explanation changed over time. Evidence that does not: a good-faith dispute about entitlement, a documented loan, or distributions the other owners knew about.
We build the intent case from documents before the complaint is filed, because the defendant's first move will be to recast the theft as a business disagreement.
Defending a section 496 claim
I also defend these. The best defense is usually the one the Supreme Court described: the conduct was a commercial dispute, not theft. A partner who took distributions he believed he was owed under the operating agreement has a real answer to the intent element. So does a manager who used company funds for a purpose he thought was authorized, or a party who withheld property under a claim of right. The treble damages exposure makes these claims worth fighting on the intent question rather than conceding it.
Related statutes
Computer data theft by a former employee has its own civil remedy under Penal Code section 502, which can be pleaded with section 496 when the data has value. Conversion supplies the single-damages baseline. Fraud adds punitive damages where malice is shown.
Where these cases are heard
Section 496 civil claims are pleaded in the Superior Court with the rest of the business case: the Central Justice Center in Santa Ana for Orange County, the Stanley Mosk Courthouse for Los Angeles. A parallel criminal referral is sometimes appropriate, and sometimes counterproductive; we discuss that choice early.
What to bring to the first meeting
Bring the bank records, the accounting entries, the agreements that define who was entitled to what, the communications in which the defendant explained the transfers, and a timeline of when you learned of each one. The timeline matters for limitations and for showing the conduct was deliberate.
Frequently asked questions
Can I get triple damages for theft in a civil case in California?
Yes, under Penal Code section 496(c), if the defendant received, concealed, or withheld property obtained by theft, knowing it was so obtained. The statute awards three times actual damages plus costs and attorney fees. (Pen. Code, § 496, subd. (c).)
Does Penal Code 496 apply to business partners?
It can. The California Supreme Court held that the statute covers the fraudulent diversion of partnership funds, provided the plaintiff proves theft with criminal intent rather than an ordinary commercial dispute. (Siry Investment, L.P. v. Farkhondehpour (2022) 13 Cal.5th 333, 361-362.)
Do I need a criminal conviction to sue under section 496?
No. The civil action under subdivision (c) does not depend on a prosecution or conviction. The plaintiff proves the elements of theft in the civil case.
What is the difference between conversion and a section 496 claim?
Conversion pays the value of the property and related losses. Section 496(c) pays three times actual damages plus attorney fees, but requires proof that the property was obtained by theft with criminal intent, a higher bar than conversion's wrongful dominion.
What defeats a Penal Code 496 claim?
Proof that the defendant acted under a good-faith claim of right or in an ordinary commercial dispute, without intent to steal. The Supreme Court was explicit that innocent or inadvertent misrepresentations and simple nonperformance do not qualify.
Talk to a California business fraud attorney
If someone took your company's money or property and you want the remedy that fits, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is at 327 Magnet, Irvine, CA 92618, and represents businesses in Orange County, Los Angeles, and throughout California. See also our business fraud page.
This page provides general information about California law and is not legal advice. Outcomes depend on the evidence of intent, the documents, and the court.