A Confidential Relationship Between a Decedent and Third Party Coupled with a Weakened Intellect can Lead to a Constructive Trust on Inter Vivos Transfers
In the appellate estate litigation case of Leach v. Davis, PICS Case No. 15-0198, (Pa. Super. Feb. 5, 2015), the Honorable Paula Francisco Ott, writing on behalf of the Pennsylvania Superior Court, ruled that the trial court erred in finding an inter vivos gift of real property in support of summary judgment, where there was a genuine issue of material fact as to the existence of an issue of whether grantor and grantee had a confidential relationship that could support a finding of undue influence. Summary judgment was reversed and affirmed in part.
Appellant Erica Leach appealed from the order of the trial court granting summary judgment in favor of appellee, Peggy Davis, appellant’s aunt, on appellant’s claims of (1) invalid inter vivid gift, (2) undue influence, (3) constructive trust, and (4) resulting trust arising out of the transfer of a farm property owned by decedent Ira Fleagle, appellee’s father and appellant’s grandfather.
Sometime in the 1980s, decedent and appellee set up a joint banking account so that decedent could rely on appellee to pay his bills and provide him with cash; appellee also lived with decedent and took care of him and his home. Decedent suffered a heart attack and was hospitalized; anticipating that decedent would need to be transferred to a nursing home, appellee asked decedent to sign over the farm property to her in order to protect it from the nursing home in the event decedent’s insurance ran out. While decedent was still hospitalized he and appellee executed a dollar deed transferring the farm to appellee.
On appeal, appellant argued that the trial court erred in issuing summary judgment in favor of appellee on all claims, asserting that she presented evidence that established genuine issues of material fact precluding summary judgment.
The court ruled that, viewing the evidence in the light most favorable to appellant, the non-moving party, appellant’s evidence established a genuine issue of material fact as to whether there was a confidential relationship between appellee and decedent and undue influence that resulted in the transfer of the property. The court noted that appellant presented evidence that appellee’s control of decedent’s finances could have resulted in “overmastering influence” or “weakness, dependence, or trust” that established a genuine issue of material facts as to whether there was a confidential relationship between appellee and decedent.
The court further ruled that appellant also established a genuine issue as to decedent’s weakened intellect, noting substantial testimony as to decedent’s severe medical condition and episodes of hallucination around the time of the execution of the deed.
Because appellant presented sufficient evidence of a confidential relationship between decedent and appellee and decedent’s weakened intellect, the court ruled that summary judgment was improper for appellant’s constructive trust claim, noting that a constructive trust would arise where a trustee would be under an equitable duty to reconvey property if the transfer was induced by fraud, duress, mistake, undue influence, or the abuse of a confidential relationship.
However, the court ruled that the trial court properly issued summary judgment in favor of appellee on appellant’s resulting trust claim. The court noted that a resulting trust only arose where the person making a disposition of property did not intend that the person taking the property have a beneficial interest. The court found that the language of the deed supported the determination that decedent did not intend to give appellee anything less than a full beneficial interest in the property.
Reference: Digest of Recent Opinions, Pennsylvania Law Weekly, 38 PLW 157 (February 17, 2015)
Filed Under: Trusts & Estates; Inter Vivios Transfers; Confidential Relationship; Undue Influence: Constructive Trust
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