Philadelphia Real Estate Law and Litigation Case

A compelling Philadelphia Real Estate Law and Litigation Case

The following opinion, although not precedential, is noteworthy when considering real estate law in the Commonwealth of Pennsylvania. The matter was remanded to the Philadelphia Common Pleas Court, with an opinion issued by the trial court in October 2014 and the case addressed quiet title, ejectment and constructive trust issues.

Harper J. Dimmerman, Attorney at Law, is also an adjunct professor at Temple University, lecturer to other lawyers on legal topics and handles Philadelphia real estate law matters. He offers free, initial consultations – (215) 545-0600.

Appellees No. 3148 EDA 2012
Appeal from the Judgment Entered December 18, 2012
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): March Term, 2011, No. 003016
Geraldine Renzulli (“Geraldine”) appeals from the judgment entered in
this quiet title action. The trial court denied Geraldine’s request to order
that certain real estate be transferred into her name, and it also granted a
counterclaim in ejectment that was filed by Appellees herein, who are
Geradine’s son, Frederick Renzulli (“Fred”), and Fred’s wife Kristin Renzulli
(“Kristin”). After careful review, we reverse and remand for further
Typically, this Court first recites the evidence presented by the verdict
winners, which, in this case, are Fred and Kristin. We have elected to
examine the evidence presented by both Appellant and Appellees. This
approach will lead to a better understanding of how the trial court herein
erred in its application of the law and the proper resolution of the appeal. J-A09009-14
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Geraldine was married to John A. Renzulli (“John A.”),1
and three
children were born of the marriage: Fred, Fred’s older brother John J.
Renzulli (“John J.”), and Fred’s younger sister Danielle Renzulli. The
property that is the subject of this lawsuit is located at 1830 East Passyunk
Avenue, Philadelphia. Geraldine has resided at 1830 East Passyunk Avenue
since approximately 1986. Originally, Geraldine lived there with her three
children, but they have since become adults and moved elsewhere. It was
undisputed that Geraldine exercised control over the property from 1986
until 2012. She collected and retained the rental income from an apartment
on the first floor, occupied the upper two floors of the house without paying
rent, and maintained the property.
The real estate located at 1830 East Passyunk Avenue was never titled
in Geraldine’s name, nor was it ever titled in the name of her husband
John A. Instead, since 1986, title to the premises was held by various
members of the Renzulli family. When Geraldine instituted this quiet title
action, Fred had title to 1830 East Passyunk Avenue.2
Geraldine averred in
her complaint that she was the rightful owner of said property as Fred held it
in a constructive trust for her benefit. She asked that the court order that
Fred execute a deed to transfer it into her name. Fred and Kristin denied
John A. and Geraldine separated but it is unclear whether they ever
The house is now worth about $265,000. J-A09009-14
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that the property was held in a constructive trust for the benefit of
Geraldine. They also counterclaimed for ejectment and for damages
occasioned by Geraldine’s rent-free occupation of the premises and her
collection of income from the apartment on the first floor.
We will now recite the title transfers that are relevant to this appeal.
On January 29, 1986, Michael Mattiocco deeded 1830 East Passyunk Avenue
to Josephine Rettig. Josephine Rettig is John A.’s mother and Geraldine’s
mother-in-law. On November 9, 1989, Josephine Rettig executed a deed to
the property to her grandsons, John J. and Fred. On October 3, 2007,
John J. transferred his one-half interest in 1830 East Passyunk Avenue to his
brother, Fred. On February 7, 2008, Fred deeded the property to his wife,
Kristin, and on February 22, 2011, Kristin re-transferred the real estate into
her husband Fred’s name.
To establish her entitlement to relief, Geraldine presented the
following evidence explaining each transfer of the property in question.
Josephine Rettig testified as follows. The property was originally transferred
into her name in 1986 as payment for a debt owed to her son, John A. She
said that an unidentified person handed her the deed and told her that it was
from her son. Ms. Rettig explained that John A. had previously told her that
she would be receiving the deed to the property because he was going to be
arrested for drug dealing and feared that the property would be forfeited to
the government if it was placed in his name. At that time, Ms. Rettig agreed
to hold the property for the benefit of John A. and Geraldine so that it would J-A09009-14
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not be confiscated by the government and the family would have a place to
Martin Mattiocco is Michael Mattiocco’s father; Michael is the named
grantor in the 1986 deed to Ms. Rettig. Martin testified as follows. In 1986,
John A., Ms. Rettig’s son, owned a car dealership. Martin purchased a
number of cars from John A. and owed John A. money. At that time,
Martin’s son Michael owned 1830 East Passyunk Avenue and did not want to
maintain it. Michael agreed to give John A. the property in question to
satisfy Martin’s debt to John A. John A. told Martin and Michael that the
property was to be placed in the name of his mother, Ms. Rettig.
John A. confirmed Martin’s description of the events leading to the
transfer of the property to his mother. He stated that Martin owed him
money for cars that Martin purchased from him and that John A. agreed to
accept 1830 East Passyunk Avenue as payment for that debt. John A.
explained that his mother’s name was placed as grantee on the deed since
he “was having a lot of problems at the time with the government and I
figured my wife would have someplace to go and then when I [got] out of
jail I would straighten it all out.” N.T. Trial, 7/31/12, at 45. That witness
specified that all of his other property, including their home and other joint
assets that he owned with Geraldine, had been forfeited to the federal
government as a result of his drug dealing and failure to pay income taxes
on his illegal income. Id. at 70. John A. believed that, if 1830 East
Passyunk Avenue was placed in his and Geraldine’s names, it would also be J-A09009-14
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taken by the government, and his family would have nowhere to live when
he went to jail. Id.
Ms. Rettig delineated the circumstances surrounding her execution of
the November 9, 1989 deed transferring the property from herself and into
the names of her two grandsons, John J. and Fred. She was called before a
federal grand jury about whether she or her son owned 1830 East Passyunk
Avenue. She invoked the Fifth Amendment and then called John A., who
was in prison, and told him that she no longer wanted the real estate in her
name. John A. responded to “give it to my two sons, put it for them for
them to hold for me.” Id. at 16. She hired her accountant to prepare the
deed and transferred the title to the premises into the names of John J. and
Fred, who were nineteen and eighteen years old, respectively, at that time.
Ms. Rettig’s testimony was that her reason for transferring 1830
Passyunk Avenue to John J. and Fred was for “them to hold [the property]
for their father and mother.” Id. at 17. Ms. Rettig continued that John J.
and Fred “didn’t even know it. They did not know I had transferred the
property.” Id. They were never shown the deed. Id.
John A. also confirmed this aspect of Ms. Rettig’s testimony. He
related that while he was in jail, his mother called and told him that she
“didn’t want it in her name no more” so he “told her to put it in my kids’
name.” Id. at 48. Danielle was not placed on the deed since she was too
young. John A. testified that John J. and Fred were not told about the 1989
deed. J-A09009-14
– 6 –
In 1986, Geraldine and John A. and the three children moved into
1830 East Passyunk Avenue. John A. subsequently went to prison for tax
fraud and drug dealing. When he was released from jail in 1996, he went to
reside at 1830 East Passyunk Avenue. John A. paid for renovations to the
house both in 1986 and upon his release from prison. John A. was
imprisoned again shortly after 1996 and remained in jail until 2008. After he
was released in 2008, John A. and Geraldine were separated. John A.
testified that he allowed Geraldine to purchase his interest in the real estate
for $10,000. John A. stated at trial that Geraldine did transfer that amount
of money to him in exchange for his agreement to relinquish any ownership
rights to the property that he may have owned.
John J. likewise testified that he, his parents, and his two siblings
moved to 1830 East Passyunk Avenue after the government took their home
in 1986. Id. at 76. John J. thought that the real estate was owned by his
parents. He testified that he did not have any knowledge that, in 1989, the
property was placed in his and Fred’s names and stated that he never saw
the deed. Id. at 77. John J. reported that Fred was arrested in 1999, and,
at that time, John J. first learned that he and Fred had title to the premises
since he executed a paper allowing the house to be used as collateral for
Fred’s bail. Id. at 82. John J. said that he always considered the real estate
to be owned by his mother and father.
John J. described the circumstances surrounding his transfer of his
one-half interest in the real estate into his brother’s sole name. In 2007, J-A09009-14
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John J. owned a business that was failing, and he had a significant amount
of debt. Geraldine “told me I want you to take your name off the property
before I get judgments against me on my property.” Id. at 86. Since John
J. was weighing whether to file for bankruptcy and since he considered his
mother to own the property, he followed her instructions and transferred his
one-half interest in 1830 East Passyunk Avenue into the sole name of Fred.
Geraldine’s testimony was consistent with that of her mother-in-law,
John A., and John J. In 1986, John A. told her that he “had acquired the
property from a debt that was owed to him” and that it would be titled in his
mother’s name. Id. at 100. The property was titled in this manner because
John J. “was the target of an investigation” and eventually, they would lose
1830 East Passyunk Avenue if it was titled in their names. Id. Geraldine
continued that, as result of John A.’s criminal activity, they lost their home,
and the Internal Revenue Service placed a tax lien against both Geraldine
and John A. The tax lien was filed in 1993 and amounted to $785,000. Id.
at 102.
Geraldine continued that, after her mother-in-law no longer wanted to
be involved in the property ownership issue, John A. instructed his mother
that the real estate was to be placed in the names of John J. and Fred.
Geraldine related that she never told either of her sons that 1830 East
Passyunk Avenue was in their name. Id. at 103. Geraldine confirmed that
in 2007, when John J. started to experience financial difficulties, she J-A09009-14
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instructed him to transfer the real estate into Fred’s name so that it would
not be seized by his creditors. Id. at 117.
Geraldine testified that from 1986 onward, she lived on the premises
rent-free, maintained the property, paid the real estate taxes on it, and
collected the rental from the first-floor apartment. Geraldine related that,
after she and John A. separated, she purchased his interest in 1830 East
Passyunk Avenue for $10,000. She borrowed $5,000 of that amount from
Fred and repaid him. She had $1,000 of her own and borrowed the
remaining amount from other people.
Geraldine explained why the real estate was placed in Kristin’s name in
2008. Fred and Kristin wanted to purchase a bar in Wildwood, New Jersey,
known as the Anglesea Pub. Fred did not have satisfactory credit, so Kristin
planned to secure a loan for the property. Geraldine stated that she agreed
to allow Fred to place the real property into Kristin’s name so that it could be
listed as her asset on her loan application. Id. at 119.
Geraldine insisted that all the record owners from 1986 onward held
the property in a constructive trust for her benefit. She continued that there
was an agreement that the property would be transferred into her name
when the tax lien was removed, in 2009. Id. at 116. She spoke with Fred
in 2009 about getting the property placed in her name. He responded that
John A. owed him $47,000 for an emissions machine that was purchased for
a business that John A. owned. Fred said that Geraldine “had to pay his
father’s bill” before he would give Geraldine the house. Id. at 121. J-A09009-14
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Geraldine did not believe that she was liable for this debt since she had
already purchased John A.’s interest in the property. She therefore
instituted this lawsuit to have the property transferred into her name.
In response to this evidence, Fred testified that in 1989, his
grandmother told him that she had made a gift to him and John J. of the
property on 1830 East Passyunk Avenue. N.T. Trial, 8/1/12, at 40. He
insisted that in 2007, John J. transferred his one-half interest in the real
estate to Fred in payment for various loans that Fred had given John J. over
the years. Id. Fred stated that he and his mother Geraldine had an
arrangement whereby she managed the property and that he allowed her to
keep the rent in exchange for maintaining it, and this agreement was
reached when he was eighteen years old. Id. at 41. Fred alleged that he,
not his mother, had given $10,000 to his father, but maintained that it was
to induce his father to cease harassing Geraldine rather than in payment for
any interest that John A. had in the property. Kristin acknowledged that the
property was transferred into her name to enable her to obtain a loan, but
denied that Geraldine was involved in the transaction and gave her
permission for its occurrence.
The trial court entered its verdict on August 13, 2012. Significantly,
the trial court rendered only one credibility determination, which was that
“Geraldine Renzulli was not credible.” N.T. Trial, 8/13/12, at 2. It found
Geraldine unworthy of belief on the basis that she admitted that the
transfers of the property were designed to “frustrate and avoid government J-A09009-14
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forfeiture and tax lien procedure as if it were an appropriate legal solution to
her difficulties.” Id. The court also concluded that Geraldine could not
prevail since she “did not have the clean hands required to recover in
equity.” Id. On these two bases alone, the trial court found in favor of
Appellees as to Appellant’s quiet title action, and granted Appellees
ejectment of Appellant from 1830 East Passyunk Avenue. It declined to
award attorney’s fees or damages to Appellees.
In its Pa.R.A.P. 1925(a) opinion, the trial court again indicated its
verdict was premised solely upon its conclusions that Geraldine was not
credible and did not have the clean hands necessary to recover in equity. It
made no credibility rulings as to any other witness. It supported its decision
in this matter based on the fact that Geraldine’s “testimony regarding
ownership of the property was not credible because she admitted to
attempting to defraud the government through forfeiture and tax lien
procedures.” Trial Court Opinion, 1/15/13, at 4. Based upon her admitted
fraud as to the government, the trial court opined that “it was reasonable to
ultimately find that title was never placed, nor intended to be placed in
Appellant’s name.” Id. at 4-5.
This appeal followed denial of Appellant’s post-trial motion and entry of
judgment on the verdict. Appellant raises these contentions on appeal:
1. In an Action to Quiet Title, where the Appellant sought
the Court award her the property in which she had resided for
over 22 years as the real and rightful owner of the property, title
to which was in the name of Appellee, Frederick Renzulli, and
previously in the name Appellee, Kristin Renzulli, was it an abuse J-A09009-14
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of discretion and an error law for the Court not to decide the
case on its merits, but instead, find in favor of the Appellees on
their Counterclaim, to be awarded the property as the true and
rightful owners of the property because the Court found
Appellant not credible and lacking in clean hands?
2. Were the reasons why the Court found that Appellant
was not credible and lacked clean hands because she never had
her name on the title to the property because of a forfeiture tax
lien scheme and because she signed the names of others to legal
documents supported in the record, or was it an abuse of
3. Did the trial court abuse its discretion, fail to apply the
principles of equity and commit error of law by not examining
the testimony of the Appellees, by not judging their credibility
and their bad conduct under the maxim of the clean hands
doctrine on their Counterclaim, equally and in the same way and
under the same scrutiny as the Court examined Appellant’s
testimony for credibility, and applying the clean hands doctrine
and, in fact, not examining the testimony of the Appellees at all
and awarding Appellees the property?
4. Was it an abuse of discretion, a misapplication of the
rules of equity and error of law to grant Appellee, Frederick
Renzulli, the relief he requested in his Counterclaim of Ejectment
by default, without making any findings on the matter of
Appellee’s claim to real ownership of the property and weighing
the relative equities of the matter, resulting in Appellees’ unjust
enrichment, an inequitable result?
5. Did the trial court misapply the maxim of unclean hands
as to Appellant’s conduct which prevented the Appellant from
having the Court decide the case on the merits and effectively
deciding the merits of the case against her?
6. Did the trial court abuse its discretion and/or commit
error of law in not considering the evidence presented by
Appellant that title to the property was held by Appellees as
constructive trustees for the benefit of Appellant?
7. Did the trial court deny Appellant a fair trial, show bias
and ill will toward Appellant and prejudge this case and prevent
Appellant from completing the presentation of her testimony? J-A09009-14
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8. Were the trial court’s findings and Order granting
Appellees’ request for ejectment of Appellant fair and equitable
and according to the principles of equity?
Appellant’s brief at 1-3.
Initially, we ascertain the proper standard of review. An action to
quiet title is a civil action at law. Pa.R.C.P. 1061(a) (“Except as otherwise
provided in this chapter, the procedure in the action to quiet title from the
commencement to the entry of judgment shall be in accordance with the
rules relating to a civil action.”). However, imposition of a constructive trust
is considered an equitable remedy. Robbins v. Kristofic, 643 A.2d 1079,
1083 (Pa.Super. 1994) (“a constructive trust is not a trust in the ordinary
sense of the term but simply an equitable remedy designed to prevent
unjust enrichment”); Hercules v. Jones, 609 A.2d 837, 839 (Pa.Super.
1992) (“request for the establishment and enforcement of a constructive
trust is a matter within the jurisdiction of a court of equity”).
Where a complaint contains a cause of action to quiet title but also
seeks an equitable remedy, the court has jurisdiction to decide both the
legal and equitable causes. Sutton v. Miller, 592 A.2d 83, 85 (Pa.Super.
1991). Since the trial court herein resolved this litigation based upon the
assertion of the equitable remedy of imposition of a constructive trust, we
will employ the equity standard of review, as have all decisions involving
constructive trusts.
When reviewing a decision of the equity court, our standard of review
is very limited, and we cannot disturb the decision of an equity court “unless J-A09009-14
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it is unsupported by the evidence or demonstrably capricious.” Mid Penn
Bank v. Farhat, 74 A.3d 149, 153 (Pa.Super. 2013) (citation omitted).
Thus, the equity court’s determination will be affirmed unless it abused its
“discretion or committed an error of law. The test is not whether we would
have reached the same result on the evidence presented, but whether the
chancellor’s conclusion can reasonably be drawn from the evidence.” Id.
We first observe the following. As analyzed supra, the trial court’s
ruling herein was purportedly premised upon its determination that
Geraldine was not credible. It rendered no other credibility rulings.
Meanwhile, the court’s legal resolution of the merits of this matter indicates
that it was based upon the truth of Geraldine’s testimony. Specifically,
Geraldine stated that title was never transferred into either her or her
husband’s name to avoid the federal tax lien, but that it was everyone’s
intent that she be the equitable owner of the property. Although indicating
that she was not a credible witness, the trial court based its merits decision
on the truth of what she reported. It stated that a constructive trust could
not be imposed because Geraldine admitted that title was never intended to
be transferred to her so that it would not be seized by the federal
government. It also decided that, since Geraldine conceded that the titling
of the property was planned so as to avoid the tax lien, she operated with
unclean hands. These legal conclusions cannot be supported unless one
accepts that Geraldine was truthful about how the title scheme operated. J-A09009-14
– 14 –
More importantly, in the context of imposition of a constructive trust
for Appellant’s benefit, it is not relevant if the property was ever intended to
be placed in Appellant’s name. We have specifically observed, “when relief
through imposition of a constructive trust is prayed for, it is not the specific
intent between the parties to create a constructive trust but rather whether
or not imposition of a constructive trust is necessary to prevent unjust
enrichment.” DePaul v. DePaul, 429 A.2d 1192, 1194 (Pa.Super. 1981).
This principle is echoed in the pertinent provisions of the Restatement of
Trusts, which discusses constructive trusts only in comment e to § 1, as

A constructive trust is a relationship with respect to
property usually subjecting the person by whom its title is held
to an equitable duty to convey the property to another on the
ground that the title holder’s acquisition or retention of the
property is wrongful and that unjust enrichment would occur if
the title holder were permitted to retain the property. See
Restatement of Restitution § 160 [“Where a person holding title
to property is subject to an equitable duty to convey it to
another on the ground that he would be unjustly enriched if he
were permitted to retain it, a constructive trust arises.”] . . .
Both express trusts and resulting trusts are based upon an
intention of the person who creates them. . . . On the other
hand, a constructive trust is imposed, not necessarily to
effectuate an expressed or implied intention, but to redress a
wrong or to prevent unjust enrichment. A constructive trust is
thus the result of judicial intervention and is remedial in
character. J-A09009-14
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Restatement (Third) of Trusts § 1 comment e. That comment continues that
the provisions of the Restatement of Trusts are not applicable to constructive
Pennsylvania principles applicable to constructive trusts are consistent:
A constructive trust arises when a person holding title to
property is subject to an equitable duty to convey it to another
on the ground he would be unjustly enriched if he were
permitted to retain it. The necessity for such a trust may arise
from circumstances evidencing fraud, duress, undue influence or
mistake. Id. The controlling factor in determining
whether a constructive trust should be imposed is
Hence, we reject Appellees’ invocation of Restatement (Second) of Trusts
§ 63, and the Pennsylvania cases applying that section. That Restatement
provision states:
(1) Except as stated in Subsection (2), a trust is invalid if the
purpose of the settlor in creating the trust is to defraud his
creditors or other persons.
(2) If the beneficiary of the trust is a third person who at the
time of the creation of the trust had no notice of the fraudulent
purpose of the settlor, he can enforce the trust, except so far as
he is precluded from so doing because of the claims of the
defrauded persons.
The cases Appellees cite involve resulting trusts, which are subject to the
Restatement of Trust and applied § 63. See Policarpo v. Policarpo, 189
A.2d 171 (Pa. 1963); In re Summers’ Estate, 226 A.2d 197 (Pa. 1967);
Galford v. Burkhouse, 478 A.2d 1328 (Pa.Super. 1984). In this case, we
are examining whether a constructive trust was created, and the
Restatement is not applicable. We undoubtedly would be inclined to
invalidate a finding that Geraldine had title to the property if the federal
government, as creditor, sought that remedy. However, that holding would
result from the fact that the transfer was fraudulent as to it. Herein,
Appellees have been unjustly enriched by this scheme and cannot be heard
to complain about fraud that was not perpetrated on them. J-A09009-14
– 16 –
whether it is necessary to prevent unjust enrichment.
One who seeks the imposition of a constructive trust must do so
by clear, direct, precise and convincing evidence. Id.
Hercules, supra at 841 (citations omitted; emphasis added). Nowhere in
its opinion or on the record did the trial court even examine whether
Appellees would be unjustly enriched by their retention of 1830 East
Passyunk Avenue. It thus committed an error of law in resolving this matter
based upon the intent of the parties, which is not pertinent, and in failing to
consider the relevant legal principles. We thus agree with Appellant’s sixth
assertion, which is that the trial court did not apply the proper legal
principles to the evidence presented.
In examining whether a constructive trust was created by the
circumstances, there is no requirement that the transferee of title to the
property that is subject to the trust agree to transfer it to the person with
equitable title. Indeed, we have ruled that the intent of the transferee is
irrelevant. The sole consideration is whether imposition of a constructive
trust is necessary to prevent unjust enrichment. Thus, the question is
whether it would be inequitable for Appellees to retain the property since
they would be unjustly enriched by the present state of the title to 1830 East
Passyunk Avenue.
Appellant presented uncontested evidence that the real estate in
question was purchased with consideration provided by John A., Fred’s
father, and placed in Ms. Rettig’s name. Ms. Rettig’s unrebutted testimony J-A09009-14
– 17 –
was that she did not consider herself the owner of the property. She
understood that she was deeded the property so that there would be a place
for her son and his family to reside since all of their property had been taken
by the federal government. Appellees likewise failed to present any
evidence to contradict the fact that, all the while that the property was
deeded to the various family members, Geraldine resided there and
exercised all rights attendant with ownership of the property for twenty-five
years prior to institution of this action. The trial court did not find
Ms. Rettig, John A., or John J. incredible witnesses.
Also of significance is the fact that the trial court at no point indicated
that it credited any of Fred’s testimony, and, most importantly, his
representation that Ms. Rettig intended to gift him and his brother the
property. Since Ms. Rettig’s unrebutted testimony was that she did not even
consider herself the owner of the property, any finding that she gifted
property that she did not own would be completely illogical and contrary to
common sense. Likewise, Fred’s representation that, at the age of eighteen,
he entered an agreement with his mother and allowed her to manage the
property on his behalf strains credulity.
Appellees did not pay any consideration for the property in question.
From 1986 to 2012, it was the home of Fred’s mother, who exercised all
ownership rights attendant to it. The facts at issue herein unquestionably
establish Appellees hold title to property subject to an equitable duty to J-A09009-14
– 18 –
convey it to Geraldine since they would be unjustly enriched if they were
permitted to retain it and since she has always been treated as its equitable
owner. Since the controlling factor in determining whether a constructive
trust should be imposed is whether it is necessary to prevent unjust
enrichment, and the question of whether there was an intent to create such
a trust is irrelevant, the trial court herein committed an error of law in
connection with its ruling as to whether a constructive trust was created.
We also examine the trial court’s application of the doctrine of unclean
hands. It applied this precept based upon the fact that the property was
placed in various family members names so that Geraldine had a home that
could not be seized pursuant to the federal tax lien. However, as Appellant
correctly asserts in her fifth issue, the doctrine of unclean hands was
improperly invoked by the trial court.
The doctrine of unclean hands has no application in this case. As we
observed in Walacavage v. Walacavage, 77 A.2d 723, 725 (Pa.Super.
The doctrine of unclean hands affects misconduct in the
matter in suit only, . . . and is available only when the plaintiff in
an equity suit has been guilty of unconscionable or unlawful
conduct respecting the transaction before the court. Comstock
v. Thompson, 286 Pa. 457, 461, 133 A. 638. A strikingly
analogous case is Vercesi v. Petri, 334 Pa. 385, 5 A.2d 563,
565. In that equity proceeding for an accounting, it appeared
that plaintiff and defendant had entered into an oral agreement
of partnership to conduct a restaurant, and all partnership assets
were taken in defendant’s name with the intent on the part of
plaintiff to evade his past creditors. The Court concluded that
the doctrine of unclean hands had no application, and speaking J-A09009-14
– 19 –
through Stern, J., said: ‘One of the limitations of the doctrine of
coming into equity with unclean hands is that the wrong-doing of
the plaintiff must have been in reference to the very matter in
controversy and not merely remotely or indirectly connected
therewith. . . .”
Hence, “the doctrine of unclean hands applies only where the plaintiff’s
wrongdoing directly affects the equitable relations existing between the
parties,” McLaughlin v. McLaughlin, 187 A.2d 905, 907 (Pa. 1963)
(emphasis in original). The doctrine of unclean hands, as noted in
Walacavage, is not applied as between the person with legal title and the
person with equitable title when the property was placed in someone’s name
to avoid creditors.
In this case, Appellant did not operate with unclean hands as to
Appellees. While the people involved in these series of transactions may
have operated with unclean hands with respect to the federal government,
Appellant did not have unclean hands with respect to her dealings with
Appellees. Hence, the trial court committed an error of law in applying the
doctrine of unclean hands herein.
In light of our findings that the trial court failed to apply the proper
principles in determining whether a constructive trust was created, did not
render any credibility determinations other than the one that Geraldine was
not credible when she stated that it was the intent of everyone that the
property would eventually be placed in her name, and that the doctrine of
unclean hands is inapplicable, we must reverse the trial court’s verdict. We J-A09009-14
– 20 –
remand for the trial court to apply the proper principles of law and render
appropriate credibility determinations as to the witnesses who testified at
trial. In light of disposition herein, we need not address Appellant’s
remaining allegations.
Judgment reversed. Case remanded for proceedings consistent with
this adjudication. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Date: 6/17/2014