Carl A. Wiker, Wiker & Duvall, John A. Duvall, Jeffrey E. Leber, Coudersport, for appellant.
John E. Rydesky, Rydesky & Malizia, Emporium, for appellee.
Jones, C. J., and Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ. Pomeroy, J., filed a concurring opinion. Roberts, J., filed a dissenting opinion. Manderino, J., dissents.
In this appeal, we must decide whether the lower court's decree imposing a constructive trust upon the
parties' entireties property in favor of the wife-appellee should be sustained.
Appellee, Leslie A. Butler, and appellant, William L. Butler, married on March 27, 1968. In May of the following year, the parties took title to a parcel of land as tenants by the entireties for the recited consideration of $1,600.00. Subsequently, they erected a modular home on the land, bringing their total investment to $22,000.00, exclusive of the labor contributed by the parties. They lived in the property until their separation in March of 1971.
On April 29, 1971, appellee instituted a divorce action against appellant and in her complaint specifically requested the court to determine the property rights and interests of the parties in the jointly-held realty.*fn1 Following a hearing on the complaint, the lower court reserved decision on appellee's right to a divorce until the issues of support and property rights could be resolved.
Following a hearing on March 11, 1974, a Master's Report was filed with the court wherein certain recommended findings of fact and conclusions of law were made. In relevant part, the Master found that the land and dwelling held jointly by the parties represented an investment of about $22,000.00; that $6,000.00 of this sum came from joint savings of the parties with the remaining $16,000.00 coming from a joint bank account. Significantly, the Master found that this $16,000.00 was the appellee's own money which the appellant had caused her to place in their joint account through his influence and control and because she trusted and relied upon his advice. The Master then concluded, as a matter of law, that, as a result of the actions of the appellant in taking "undue advantage" of his wife by having her transfer her assets into their names without consideration, a
"constructive trust" in the amount of $16,000.00 was created in favor of appellee in the jointly-held realty.
On March 20, 1974, the lower court entered an order accepting, adopting, and approving the Master's Report and further ordered that judgment be entered in favor of appellee in the sum of $16,000.00 against the jointly-held realty. The court also directed the Master to conduct further proceedings to effectuate a partition of the realty.*fn2 We granted allocatur and vacated the order of the Superior Court quashing the appeal to that Court. We now, after considering the merits, vacate the lower court's order for the reasons which follow.*fn3
Crucial to this case is appellee's assertion that the Act of May 10, 1927 P.L. 844, § 1, as amended, 68 P.S. § 501, which converts a tenancy by the entireties into a tenancy in common of equal one-half shares after a divorce and permits either party of partition the property, is inapplicable. This argument is based upon appellee's contention that the creation of the entireties property arose from appellant's exertion of undue influence on her and the family finances. We agree that, where a spouse in a confidential relationship abuses that confidence and by fraud or undue influence causes a "gift to entireties" to arise, we will look behind that transaction and, when necessary, impose the equitable remedy of a constructive trust in order to avoid unjust enrichment. See generally Restatement (Second) of Trusts, § 2 Comment (b), § 44 ...