2010 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 7-19-2010 

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utl Aut o Ins C o v

. Midt own M ed C tr Inc P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 08-4387

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w Di git al Reposit ory

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w . vi ll anova . e du/thir dc ir c uit_2010/949NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT

_____________ N o. 08- 4387

_____________ S T AT E F AR M M UT UAL AUT OM OB I L E I NS UR ANC E CO M P ANY; S T AT E F AR M F I RE & CAS UAL T Y I NS UR ANC E CO M P ANY v. M I DT OWN M E DI CA L CE NT E R, I NC ; RO NAL D NE S T E L ; S I M ON F I S HM AN; F RA NK S OL OM ON, D. C. ; P AUL BO VE , D. C. ; P HYS I CI ANS M ANAGMEN T

C O M P A N Y , IN C ; T A B O R C H IR O P R A C T IC C E N T R , P .C .,

S im o n F is h m a n a n d M ir ia m F is h m a n , A p p e llan ts

(P u rsua n t t o F ed . R . A p p . P . 1 2 (a))

_____________ N o. 09- 2621

_____________ S T AT E F AR M M UT UAL AUT OM OB I L E I NS UR ANC E CO M P ANY; S T AT E F AR M F I RE & CAS UAL T Y I NS UR ANC E CO M P ANY v. M I DT OWN M E DI CA L CE NT E R, I NC ; RO NAL D NE S T E L ; S I M ON F I S HM AN; F RA NK S OL OM ON, D. C. ; P AUL BO VE , D. C. ; P HYS I CI ANS M ANAGMEN T

C O M P A N Y , IN C ; T A B O R C H IR O P R A C T I C E N T E R , P .C .,

S im o n F is h m a n a n d M ir ia m F is h m a n , A p p e llan ts

(P u rsua n t t o F ed . R . A p p . P . 1 2 (a))2 A p p ea l from the U n it ed S tat es D istri ct C o u rt f o r th e E a ste rn D istric t o f P e n n sy lv a n ia ( D . C . N o. 2: 02- cv- 7389) D i s t r i ctJ udge: H onor abl e Petr es e B . T ucker Subm i t t ed U nderT hi r d C i r cui tL A R 34. 1( a)

J anuary15, 2010 B efor e: A M B R O , C H A G A R E S, and ST A PL E T O N , C i r cui tJ udges

( O pi ni on fi l ed: J ul y19, 2010)

OP I NI ON C H A G A R E S, C i r cui tJ udge. Si m on and M i r i am F i s hm an appe al the D i s t r i ctC our t ’ s or der s es t abl i s hi ng and enl ar gi ng a cons t ruct i ve trus ti n favorof St at e Farm M utual A ut om obi l e I ns ur ance C o m p a n ya n d S tate F a rm F ire a n d C a su a ltyIn su ra n c e C o m p a n y(c o llec tiv e ly , “S tate Far m ”) agai ns tt he Fi s hm ans ’ m ar i t al r es i dence . T he Fi s hm ans al s o appea l the D i s t r i ct C our t ’ s deci s i on t o gr antan equi t yi nt er es ti n t he Fi s hm ans ’ m ar i t al r es i dence . Forthe r eas ons s etfor t h bel ow , t hi s C our tw i l l vaca t e the D i s t r i ctC our t ’ s or der s and r emand for further proceedings. I. B eca us e w e w r i t e s ol el yforthe bene fi tof the part i es , w e r eci t e onl ythe es s ent i al3

f a c ts. S tate F a rm b ro u g h t a s u it ag a in st S im o n F ish m a n a n d se v e ra l co -d e f e n d a n ts al l egi ng a s cheme t o defr aud St at e Farm bys ubm i t t i ng fal s e medi cal r epor t s , bi l l s , and otherdocument s t o St at e Farm i n an att empt t o obt ai n paym entform edi cal tr eatm ent purpor t edl ypr ovi ded t o i ndi vi dual s i ns ur ed bySt at e Farm ort o i ndi vi dual s w ho cl ai m ed t o have be en i nj ur ed byi ndi vi dual s i ns ur ed bySt at e Farm . O n February16, 2006, the j ur yr eturned a ve r di ctagai ns tSi m on Fi s hm an, fi ndi ng hi m l i abl e t o St at e Farm for , i nt er al i a, comm on l aw fr aud and s t atut or yi ns ur ance fr aud. M i r i am F i s hm an, Si m on F ishm an ’s sp o u se, w as n o t a de fe n d an t i n the u n d erly ing ac ti o n . T h e D istri ct C o u rt en tered jud g m en t aga inst S im o n F ishm an o n A p ri l 4, 20 0 6 , aw ard ing S tat e F arm compensa t or ydamages i n t he amountof $331, 046 and puni t i ve damages i n t he amountof $1, 915, 200. T he j udgm ental s o aw ar ded St at e Farm $304, 000 i n puni t i ve damages agai ns tM i dt ow n M edi cal C ent er , I nc. and ent i t l ed St at e Farm t o r ecove rthe s um fr om Si m on Fi s hm an. T he D i s t r i ctC our taw ar ded St at e Farm at t orney s ’ fee s and cos t s t ot al i ng $ 6 5 0 ,1 1 3 .7 8 . O n A pr i l 28, 2006, St at e Farm comm ence d col l ect i on pr ocee di ngs agai ns tSi m on Fi s hm an byw r i tof exe cut i on. Si m on Fi s hm an fi l ed a c l ai m forexempt i on on M ay26, 2 0 0 6 , as se rtin g , inte r a lia, a n e x e m p tio n f o r th e F ish m a n s’ m a rital h o m e , “o w n e d jo in tly w i th non-

j udgm entdebt ors pous e, M i r i am F i s hm an, as t enant s bythe ent i r et i es . ” J oi nt A p p e n d ix (“ JA ” ) 1 2 3 . F o r re a so n s th a t ar e u n c lea r f ro m th e re c o rd , the D istric t C o u rt d id notrul e on the exe m pt i on. O n N ovember5, 2007, St at e Farm m oved t o s t r i ke Si m onA l exande rFi s hm an i s one of Si m on Fi s hm an’ s br other s . St at e Farm al l eges t hat 1 cert ai n chec ks s i gned byA l exande rFi s hm an w er e fr audul ent l ys i gned af t erA l exande r Fi s hm an w as dece as ed. T he Fi s hm ans denythi s al l egat i on and di s put e the cl ai m that A le x a n d e r F is h m a n is d e c e a s e d . 4 Fi s hm an’ s cl ai m forexempt i on. O n S ep tem b er 9 , 2 0 0 8 , the D istri ct C o u rth eld a h ea ri n g o n S im o n F ishm an ’s cl ai m forexempt i on and St at e Farm ’ s m ot i on t o s t r i ke. A tthe hea r i ng, St at e Farm m oved i nt o evi dence t en che cks w r i t t en bySi m on Fi s hm an t o N at i onal C i t yM or t gage Com pany betw een A ugus t2002 and M ay2003 t ot al i ng $17, 983. 85. T he che cks , m or t gage paym ent s on t he mar i t al r es i dence , w er e dr aw n on a Fl eetB ank ac counti n t he names of A l exande rFi s hm an, Si m on Fi s hm an, and M i r i am F i s hm an. O n Sept ember10, 2008, t he 1 D i s tr i ctC our ti s s ued an or deres t abl i s hi ng a $17, 983. 85 cons t ruct i ve trus tagai ns tthe F is h m a n s ’ m a ri ta l r e s id e n c e in f a v o r o f S ta te F a rm . O n Sept ember24, 2008, Si m on Fi s hm an moved forr econs i der at i on. O n O ct ober 8, 2008, St at e Farm fi l ed a r es pons e i n oppos i t i on t o Si m on Fi s hm an’ s m ot i on for r econs i der at i on r eques t i ng t hatt he D i s t r i ctC our ti ncr eas e the cons t ruct i ve trus tbas ed on an addi t i onal m or t gage c heck a nd gr antSt at e Farm the appr eci at ed val ue of the con struct i ve trustbyaw ardi ng t hem a ninet een p ercentequ i t yi nter esti n the Fis hm ans’ m ar i t al r es i dence . O n O ct ober14, 2008, t he D i s t r i ctC our tdeni ed Si m on Fi s hm an’ s m ot i on for r e c o n s i d e r a t i o n , i n c r e a s e d t h e c o n s tru c t i v e tru s tt o $ 4 3 , 8 2 2 . 6 4 , a n d g r a n t e d S t a t e F a r m a ni net een pe r centequi t yi nt er es ti n t he Fi s hm ans ’ m ar i t al r es i dence . Si m on Fi s hm an andT he D i s t r i ct C our t l acke d j ur i s di ct i on t o ent er i t s M ay 11, 2009 or der . T he 2 F ishm an s filed a N o ti ce o f A p p ea l on O ctob er 3 0 , 2 0 0 8 ap p ea li n g the D istri ct C o u rt ’s Sept ember10 and O ct ober14, 2008 or der s . “[T] he t i m el yfi l i ng of a not i ce of appea l i s an eventof j ur i s di ct i onal s i gni fi canc e, i m m edi at el yconfe r r i ng j ur i s di ct i on on a C our tof A ppeal s and di ves t i ng a di s t r i ctcour tof i t s contr ol overthos e as pect s of the ca s e i nvol ved i n the appe al . ” V enen v. Sw eet , 758 F. 2d 117, 120 ( 3d C i r . 1985) ( ci t i ng G r i ggs v. Pr ovi dentC ons um erD i s countC o. , 459 U . S. 56, 58 ( 1982) ) . T he D i s t r i ctC our tl acke d j ur i s di ct i on t o i ncr eas e the s i ze of t he cons t ruct i ve trus tand equi t yi nt er es tw hi l e an a p p e a l o f th e D istric t C o u rt’s d e c isio n to e sta b lish th e c o n stru c tiv e tru st a n d e q u ity interest w as p en d ing b ef o re this C o u rt . A cc o rdin g ly , w e w il l vac ate the D istri ct C o u rt ’s M ay11, 2009 or der . O n r emand, t he D i s t r i ctC ourtm ay , of cour s e, cons i derw hetherany equ i t able r em edyt o w hich Stat e F arm m aybe en t i t l ed sho uld t ake ac cou nt of these a d d itio n a l a m o u n ts . 5 M i r i am F i s hm an, as an i nt er es t ed thi r d- par t y , appea l ed t o t hi s C our ton O ct ober30, 2008 fr om both t he Sept ember10, 2008 or deres t abl i s hi ng the cons t ruct i ve trus tand the O c to b e r 1 4 , 2 0 0 8 o rd e r e n lar g in g th e tru st a n d g ra n tin g S tate F a rm a n e q u ityin ter e st in the mar i t al r es i dence . W hi l e the appe al w as pendi ng, on M ay11, 2009, the D i s t r i ctC our tgr ant ed a m o tio n b yS tate F a rm to in c re a se th e c o n stru c tiv e tru st to $ 9 3 ,8 3 8 .7 9 a n d th e e q u ity i nt er es tt o 40. 79 per cent . T he Fi s hm ans fi l ed an A m ended N ot i ce of A ppeal on M ay20, 20 09 . W e con sol i dated bo t h ap peals . II. T h e D istric t C o u rt h a d ju risd ictio n p u rsu a n t to 2 8 U .S .C . § § 1 3 3 1 a n d 1 3 6 7 . S tate 2 F arm arg u es th at w e lac k juri sd ict ion o v er this ap p ea l bec au se th e D istri ct C o u rt ’s ord ers ar e notfi nal . T hi s C our thas “j ur i s di ct i on of appe al s fr om al l fi nal deci s i ons of the di s tr i ctcourt s of the U ni t ed St at es . ” 28 U . S. C . § 1291. A fi nal deci s i on “ends the6

l i t i gat i on on t he mer i t s and l eave s not hi ng forthe courtt o do butexec ut e the j udgm ent . ” G r i derv. K ey s t one H eal t h Pl an C ent . , I nc. , 580 F. 3d 119, 131 ( 3d C i r . 2009) ( ci t at i ons om i t t ed) . W e gi ve the § 1291 fi nal i t yr equi r ementa “‘ pr act i cal r atherthan a t echni cal cons truct i on. ’ ” Penn Fami l yI ns t . , I nc. v. B l ack, 489 F. 3d 156, 162 ( 3d C i r . 2007) ( quot i ng C averv. C i t yof Tre nt on, 420 F. 3d 243, 261 ( 3d C i r . 2005) ) . W e have not ed that pos t - j udgm entor der s ar e us ual l yfi nal deci s i ons w i t hi n t he meani ng of § 1291 as l ong as th e d is tr ic t c o u rt h a s c o m p le te ly d is p o s e d o f th e m a tte r. O h n tru p v . F ir e a rm s C tr ., In c ., 802 F. 2d 676, 678 ( 3d C i r . 1986) . R evi ew of pos t - j udgm entor der s i s l es s l i kel yt o run af o u l of o u r po li cyag ains t i n terfering w ith tr ial co u rtp roc ee d ing s an d , if su ch o rde rs w er e notcons i der ed fi nal , “an a ggr i eved pa r tyw oul d foral l pr act i cal purpos es be deni ed m e a n in g f

u l r e v ie w ” o f

th e tr ia l c o u rt ’s p o s t-

ju d g m e n t o rd e rs . Id . T he cha l l enged or der s fol l ow ed entr yof j udgm enti n favorof St at e Farm and s et t l ed Si m on Fi s hm an’ s cl ai m forexempt i on and St at e Farm ’ s r eques t s fora cons t ruct i ve tru st a g a in st th e m a rital re sid e n c e a n d a n e q u ityin ter e st in th e m a rital re sid e n c e . W e h o ld th a t th e ya re f

in a l d e c isio n s u n d e r § 1 2 9 1 . W e re w e to c o n c lu d e o th e rw ise , the re is litt le pr os pectt hatfur t herpr ocee di ngs w oul d occurt o m ake them fi nal and ther e w oul d be no op po rtun i tyt o revi ew t he D i stri ctC ou rt ’s decis i on s. A ccordi ng l y , w e exerci se ju ri s d ic tio n o v e r t h e D is tr ic t C o u rt ’s o rd e rs . W e norm al l yr evi ew a di s t r i ctcour t ’ s fac tual fi ndi ngs forcl earerr orand i t s l egal c o n c lu s io n s d e n o v o . S e e G o rd o n v . L e w is to w n H o s p ., 4 2 3 F .3 d 1 8 4 , 2 0 1 (3 d C ir . 2 0 0 5 ).7

H ow ever , t he D i s t r i ctC our t ’ s or der s pr ovi ded no fa ctual fi ndi ngs nordi d t heyi ncl ude a n yleg a l co n c lu sio n s. O u r sta n d a rd o f re v iew w h e n c o n sid e rin g a g ra n t o f e q u itab le r emedi es i s w hethert he di s t r i ctcour tpr oper l yexer ci s ed i t s di s cr et i on. V oes t - A l pi ne T ra d in g U S A C o rp . v . V a n ta g e S te e l C o rp ., 9 1 9 F .2 d 2 0 6 , 2 1 1 (3 d C ir . 1 9 9 0 ). III . T he Fi s hm ans ar gue thatt he D i s t r i ctC our terr ed w hen i tes t abl i s hed a c ons t ruct i ve trus tagai ns tt he Fi s hm ans ’ m ar i t al r es i dence beca us e St at e Farm fai l ed t o m eeti t s bur den of pr oof and be caus e St at e Farm ’ s cl ai m w as t i m e- barr ed. T he Fi s hm ans al s o as s ertt hat th e D istric t C o u rt’s o rd e r g ra n tin g S tate F a rm a n e q u ityin ter e st in th e m a rital re sid e n c e is n o t s u p p o rt e d b yla w . A . A s t he Supr eme C our tof Penns y l vani a has expl ai ned, “[a ] cons t ruct i ve trus tar i s es w h e re a p e rso n w h o h o ld s title to p ro p e rtyis s u b jec t to a n e q u itab le d u tyto c o n v e yit t o a n o th e r o n th e g ro u n d th a t h e w o u ld b e u n ju stlye n ric h e d if

h e w e re p e rm itt e d to re tain i t . ” B al azi ck v. I r et on, 541 A . 2d 1130, 1133 ( Pa. 1988) ( quot i ng Pi err o v. Pi err o, 264 A . 2d 692, 696 ( Pa. 1970) ) . “O ne w ho s eeks t o cons t ructa trus tbear s a hea vybur den of pr oof; the evi dence m us tbe cl ear , di r ect , pr eci s e and c onvi nci ng. [U ] nl es s the evi dence o f th e e x iste n c e o f

[ a c o n stru c tiv e tru st] is o f th e h ig h e st p ro b a tiv e v a lu e , eq u itysh o u ld notactt o convertan abs ol ut e ow ner s hi p i nt o an es t at e of l es s erqual i t y . ” R ober s on v. D a v is , 5 8 0 A .2 d 3 9 , 4 1 (P a . S u p e r. C t. 1 9 9 0 ) ( a lte ra tio n s in o ri g in a l) (c ita tio n s o m itte d ). P e n n sy lv a n ia la w is c lea r th a t “if o n lyo n e sp o u se is a d e b to r, en tiretie s p ro p e rtyis“The cour ti s notr equi r ed t o s t at e fi ndi ngs orconcl us i ons w hen rul i ng on a 3 m ot i on underR ul e 12 or56 or , unl es s thes e rul es pr ovi de otherw i s e, on anyot her m o tio n .” F e d . R . C iv . P . 5 2 (a )( 3 ). 8 im m u n e f

ro m p ro c e s s , p e titio n , le v y , e x e c u tio n o r s a le .” K le b a c h v . M e llo n B a n k , N .A ., 565 A . 2d 448, 450 ( Pa. Super . C t . 1989) ( emphasi s i n or i gi nal ) . H ow ever , w hen the t enanc ybyt he ent i r et i es w as cr eat ed i n fr aud of c r edi t or s , the pr oper t yi s notpr ot ect ed f ro m e x e c u tio n . P a tte rs o n v . H o p k in s , 3 7 1 A .2 d 1 3 7 8 , 1 3 8 2 -8 3 (P a . S u p e r. C t. 1 9 7 7 ). St at e Farm ar gued bef

or e the D i s t r i ctC our tthatthe Fi s hm ans pai d t hei rm or t gage u sing fu n d s d ir ec tl yo b tai n ed fro m the f rau d u lent sch em e. In the alt ern ati v e, S tat e F arm ar gued thatSi m on Fi s hm an w as t he s ol e w age- earneri n t he fa m i l y , thus the mort gage paym ent s ar e att r i but abl e s ol el yt o the j udgm entdebt orand ar e notpr ot ect ed bythe ent i r et i es pr oper t y . T he Fi s hm ans di s put ed both of thes e al l egat i ons , and as s ert ed that th e ym a d e th e m o rtg a g e p a ym e n ts u sin g jo in t sa v in g s f ro m a u se d a u to m o b ile d e a ler sh ip th a t S im o n F is h m a n o w n e d a n d th e F is h m a n s o p e ra te d to g e th e r u n til 1 9 9 5 . T h e D istri ct C o u rtd id n o t r eso lve th ese d ispu ted f ac ts i n h o lding that S tat e F arm w a s e n tit led to a c o n stru c tiv e tru st. R u le 5 2 (a )(3 ) o f th e F e d e ra l R u les o f

C iv il P ro c e d u re d o e s n o t r e q u ir e th e D is tr ic t C o u rt to a rt ic u la te its f a c tu a l f in d in g s . 3 N onethel es s , “w her e, as her e, t he di s t r i ctcour ti s pr es ent ed w i t h confl i ct i ng pos i t i ons of s ubs t ance as t o how i ts houl d exer ci s e i t s di s cr et i on . . . i ti s a s al ut arypr act i ce t o gi ve the lit ig a n ts, e ith e r o ra llyo r in w riting , at le a st a m in im u m a rticu latio n o f th e re a so n s f

o r its deci s i on. ” I nt erpace C orp. v. C i t yof Phi l a. , 438 F. 2d 401, 404 ( 3d C i r . 1971) ; s ee a l s oT he Fi s hm ans al s o ar gue thatSt at e Farm i s t i m e- barr ed fr om chal l engi ng the 4 purpor t ed fr audul entt r ans fer s underthe Penns y l vani a U ni form Fr audul entT r ans ferA ct (P U F T A ). S e e 1 2 P a . C o n st. S tat. A n n . § 5 1 0 9 (1 ) (re q u irin g a c a u se o f a c tio n w ith r es pectt o a fr audul entt r ans fert o be br ought“w i t hi n foury ear s aft erthe tr ans ferw as m ade” or“w i t hi n one y earaft ert he tr ans ferorobl i gat i on w as orcoul d r eas onabl yhave been di s cover ed byt he cl ai m ant ”) . St at e Farm ar gues thatthe PU FT A t i m e l i m i t at i ons do notappl yt o i t s cl ai m , and i n t he al t ernat i ve, thatthe PU FT A l i m i t at i ons per i od w as t ol l ed b yS im o n F is h m a n ’s e f f o rt s to f ra u d u le n tly c o n c e a l th e m o rt g a g e p a ym e n ts . T he Fi s hm ans r ai s ed thi s i s s ue bef or e the D i s t r i ctC our t , ( s ee M em. of Law of D ef. Si m on Fi s hm an and Thi r d- Part yM i r i am F i s hm an i n O pp’ n t o Pl . ’ s M ot . t o St r i ke Si m on F i s h m a n ’ s C l a i m f

o rE x e m p t i o n 7 ) . H o w e v e r , th e D i s t r i c tC o u r tf a i l e d t o a d d r e s s i t . We d ec li n e to c o n side r th is cl aim in the firstinstan ce . R athe r, o n rem an d , the D istri ct C o u rt 9 St ew ar tv. G at es , 987 F. 2d 1450, 1454 ( 9th C i r . 1993) ( “[A ] bs ents om e i ndi cat i on of how the di s tr i ctcour t ’ s di s cr et i on w as exer ci s ed, thi s cour thas no w ayof know i ng w hether thatdi s cr et i on w as abus ed. ” ( ci t at i ons om i t t ed) ) ; B r ow ni ng v. K r amer , 931 F. 2d 340, 3 4 5 - 4 6 ( 5 th Ci r . 1 9 9 1 ) ( v a c a t i n g a n d r e ma n d i n g a wa r d o f a t t o r n e yf

e e s , d e s p i t e F e d . R. C i v. P. 52( a) , beca us e di s t r i ctcourtfai l ed t o i dent i fythe s peci fi c conduc tthat

“ u n re a s o n a b ly an d v e x a tio u s ly m u ltip lie d th e p ro c e e d in g s ” u n d e r 2 8 U .S .C . § 1 9 2 7 ). St at e Farm pr es ent ed tw o pot ent i al bas es fora cons t ruct i ve trus tt o t he D i s t r i ctC our t , and w e c a n n o t b e su re w h ich th e o ryth e D istric t C o u rt re lied u p o n in g ra n tin g th e e q u itab le reli ef. F u rth er, give n that this i s a c ase o f d ispu ted f ac ts, a m inim al am o u n t of ev iden ti ary anal y s i s byt he D i s t r i ctC our ti s nece s s aryt o enabl e us t o r es ol ve ade quat el ycl ai m s of err or . T he D i s t r i ctC our t ’ s l ack of fi ndi ngs pr ecl udes m eani ngful appel l at e r evi ew of the chal l enged or der s . A ccor di ngl y , w e w i l l vaca t e the D i s t r i ctC our t ’ s Sept ember10 and O ct ober14, 2008 or der s and r emand t o gi ve the D i s t r i ctC our tan oppor tuni t yt o r emedy th e d e f i c i e n c y. 4s houl d addr es s t he Fi s hm ans ’ cl ai m thatSt at e Farm i s t i m e- barr ed fr om chal l engi ng t he

a lle g e d f ra u d u le n t tr a n s f

e rs . 10

B . I n l i ghtof ourdeci s i on t o r emand forfur t herpr ocee di ngs , w e w i l l addr es s the Fi s hm ans ’ r emai ni ng ar gum entt o pr ovi de s om e gui dance t o t he D i s t r i ctC our t . T he F ish m a n s a rg u e th a t th e D istric t C o u rt e rre d in a w a rd in g S tate F a rm a n e q u ityin ter e st in the Fi s hm ans ’ m ar i t al r es i dence . I ns t ead, theycont end, even i f St at e Farm m eti t s bur den of demonstr at i ng t hatt he Fi s hm ans ’ m or t gage pa ym ent s w er e fr audul enttr ans fer s , the p rop er rem ed yw o u ld b e a n eq u it ab le l ien a g ains t th e p rop erty . In re sp o n se, S tat e F arm ar gues t hatbeca us e Si m on Fi s hm an mi ngl ed i l l - got t en as s et s i nt o t he equi t yof hi s m ar i t al r es i dence aft erhe w as aw ar e of St at e Farm ’ s act i on agai ns thi m , i ti s ent i t l ed t o a co n stru cti v e trust an d a p rop o rt ion ate sh are o f th e re al estate. F o r sup p o rt , S tat e F arm cit es to P rov en ch er v . B erm an , 6 9 9 F . 2 d 5 6 8 , 5 6 9 -71 (1st C ir . 1 9 8 3 ), in w h ich th e C o u rt of A ppeal s fort he Fi r s tC i r cui thel d t hatw her e a c ons ci ous w r ongdoerus ed comm i ngl ed funds t o buypr opert y , t he bene fi ci aryof the r es ul t i ng cons t ruct i ve trus tm ayt ake t i t l e t o a p ro p o rtio n a te s h a re o f

th e e n tire p ro p e rty , su b jec t to th e m o rtg a g e . S tate F a rm a lso p o in ts t o § 210( 2) of the R es t at ement( Fi r s t ) of R es t i tut i on, “Effec tO f A cqui s i t i on O f O t her Pr oper tyW i t h M i ngl ed Funds , ” w hi ch s t at es that“[i ] f the w r ongdoerknew thathe w as act i ng w r ongful l y , t he otheri s ent i t l ed athi s opt i on t o a s har e of the pr oper t yi n s uch pr opor t i on as hi s m oneybor e t o t he w hol e amountof the fund. ” R es t at ement( Fi r s t ) of R e s titu tio n § 2 1 0 (2 ) ( 1 9 3 7 ).Penns y l vani a has ci t ed w i t h appr oval the pr i nci pl es i n t he R es t at ementof 5 R es t i tut i on r egar di ng s ubr ogat i on, s ee, e. g. , A s s oc. H os p. Ser v. of Phi l a. v. Pust i l ni k, 439 A .2 d 1 1 4 9 , 1 1 5 1 (P a . 1 9 8 1 ); G la d o w s k i v . F e lc z a k , 3 1 A .2 d 7 1 8 , 7 2 0 (P a . 1 9 4 3 ). 11 N e ith e r P ro v e n c h e r n o r § 2 1 0 (2 ) o f th e R e sta tem e n t ap p lies to th is c a se ; S tate Far m does notal l ege thatt he Fi s hm ans pur chas ed the mar i t al r es i dence w i t h comm i ngl ed funds . I ti s undi s put ed thatt he Fi s hm ans pur chas ed thei rr es i dence on N ovember27, 1992, appr oxi m at el ys i x y ear s befor e St at e Farm al l eged the cons pi r acyt ook pl ace . T he co u rtin P rov en ch er a w ard ed the b en ef ici aryo f th e c o n stru cti v e trust an u n d ivide d sh are of the propert yequ i valentt o the percent age o f t he p urchase pri ce (l ess m ort gag e l oan s) pai d w i th i t s funds . 699 F. 2d at570. T hatform ul a does notfi tthe fa ct s of thi s cas e – the p e rc e n tag e o f

th e m a rital re sid e n c e p u rc h a se p ric e , les s m o rtg a g e lo a n s, p a id w ith S tate Far m ’ s funds i s zer o. R ather , St at e Farm ’ s al l egat i on i s thatthe Fi s hm ans us ed the c o m m in g le d f

u n d s to p a yo f

f th e irm o rt g a g e lo a n , n o t a c q u ir e th e p ro p e rt y . A ccor di ng t o t he R es t at ement( Fi r s t ) of R es t i tut i on, W hen a pe r s on w r ongful l yus es pr oper t yof anotheri n di s char gi ng an obl i gat i on of the w r ongdoert o a thi r d per s on ora l i en hel d bya thi r d per s on upon hi s pr opert y , t he otheri s ent i t l ed t o be s ubr ogat ed t o t he r i ght s w hi ch the thi r d per s on had bef or e the obl i gat i on orl i en w as di s char ged. R es t at ement( Fi r s t ) of R es t i tut i on § 207 ( 1937) ; s ee a l s o i d. § 162. T he R es t at ement 5 cl ear l ydi s t i ngui s hes betw een a w r ongdoerw ho us es i l l - got t en funds t o acqui r e the p ro p e rty(th u s e n tit lin g th e tru ste e to a c o n stru c tiv e tru st) a n d o n e w h o u se s s u c h f u n d s to di s char ge a mor t gage. I d. § 162 cmt . a ( “J us tas the es t abl i s hm entand enf or cementof a12

cons truct i ve trus ti s a met hod of gi vi ng the pl ai nt i ff r es t i tut i on w her e the def endanthas a c q u i r e d p r o p e r t y f

r o m t h e p l a i n t i f

f o rth r o u g h th e d i s p o s i t i o n o f th e p l a i n t i f

f ’ s p r o p e r ty, s o w her e pr opert yof the pl ai nt i ff i s us ed i n di s char gi ng an obl i gat i on orl i en he obt ai ns r es t i tut i on t hr ough s ubr ogat i on. ”) ; cf. I n r e Li nds ey , 296 B . R . 582 ( B ankr . D . M as s . 2003) (im p o sin g a n e q u itab le lie n in f a v o r o f c re d ito r w h e re d e b to r u se d c o m m in g led f u n d s to i m pr ove, r athert han ac qui r e, pr oper t y ) ; R es t at ement( Fi r s t ) of R es t i tut i on § 206 ( 1937) ( “W her e a pe r s on w r ongful l yus es pr oper t yof anotheri n m aki ng i m pr ovement s upon pr oper tyal r eadyow ned byw r ongdoer , the otheri s ent i t l ed t o an equi t abl e l i en buti s not ent i t l ed t o enfor ce a cons t ruct i ve trus t . ”) . A n i l l us t r at i on i n t he R es t at ementr ei nfor ces the poi ntthata cons t ruct i ve trus ti s notthe appr opr i at e equi t abl e r emedyi n t hi s cas e. A o w n s B la c k a c re w h ic h is s u b je c t to a m o rt g a g e f

o r $ 1 0 ,0 0 0 to B . A s t eal s $10, 000 fr om C and pay s the moneyt o B i n di s char ge of the m o rt g a g e . C is s u b ro g a te d to th e ri g h ts w h ic h B h a d a s m o rt g a g e e . I d. § 207 cmt . b, i l l us . 1 ( 1937) . I n the ca s e of a s ecur ed cl ai m , s uch as a mort gage, the p e rs o n e n title d to b e s u b ro g a te d to th e o ri g in a l c re d ito r o b ta in s a n e q u ita b le lie n . Id . § 162 cmt . e ( 1937) ; s ee a l s o G l adow s ki , 31 A . 2d at720 ( i m pos i ng equi t abl e l i en on pr oper tyi n favorof pl ai nt i ffs w i t h r i ghtof s ubr ogat i on t o j udgm entl i en) ; W i l l i ams v. B en zing , 5 3 P a. D . & C . 5 5 9 , 5 6 2 (P a. C o m . P l. 1 9 4 5 ) (gran ti n g eq u it ab le l ien to sec u re re p a ym e n t o f

m o n e y s u s e d to d is c h a rg e lie n s o r e n c u m b ra n c e s a g a in s t p ro p e rt y ). A ccor di ngl y , on r emand, t he D i s t r i ctC our tm us tdet erm i ne w hetherSt at e Farm has d e m o n stra ted su f

f icie n t f a c ts to e n a b le th e D istric t C o u rt to e x e rc ise its d isc re tio n to i m pos e an e qui t abl e r emedy . I f i tdeci des St at e Farm has m eti t s bur den, i ts houl d be13

g u id e d b yits u n d e rsta n d in g o f th e p rin c ip les o f

re stitu tio n a d o p ted b yP e n n sy lv a n ia c o u rts i n f a s h i o n i n g a r e m e d y. I V. Fort he r eas ons above, w e w i l l vaca t e the D i s t r i ctC our t ’ s or der s , and r emand for f u rt h e r p ro c e e d in g s c o n s is te n t w ith th is o p in io n .