Standard Fire v. Berrett

• Decision Date: 13 November 2006
• Docket Number: No. 8, Sept. Term, 2006.,8, Sept. Term, 2006.
• Citation: 395 Md. 439,910 A.2d 1072
• Parties: The STANDARD FIRE INSURANCE, CO. v. Robert C. BERRETT.
• Court: Court of Special Appeals of Maryland

910 A.2d 1072

395 Md. 439

The STANDARD FIRE INSURANCE, CO. v. Robert C. BERRETT.

No. 8, Sept. Term, 2006.

Court of Appeals of Maryland.

November 13, 2006.

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Steven M. Klepper (Kramon & Graham, P.A., on brief), Baltimore, MD, for Petitioner.

David K. Stesch (Patricia S. Steiger of Law Offices of Seymour R. Goldstein, on brief), Baltimore, MD, for Respondent.

Argued before BELL, C.J., RAKER, WILNER, CATHELL, HARRELL, BATTAGLIA and GREENE, JJ.

BATTAGLIA, Judge.

This action arises out of the refusal by the Petitioner, The Standard Fire Insurance, Co., to pay a claim on a homeowner's insurance policy taken out by Respondent, Robert Berrett, on 4305 Gallatin Street, a property which was destroyed by fire, after approval of a contract of sale on the property by a circuit court judge in guardianship proceedings for his mother, Charlotte Berrett, but before settlement. Standard Fire filed a petition for writ of certiorari seeking review of the Court of Special Appeals's judgment reversing the Circuit Court for Baltimore City's entry of summary judgment for Standard Fire and raised the following questions:

1. When a person holds an unrecorded deed, pursuant to which grantor conveys to him a vested remainder and retains a life estate, does the court-ordered sale of the property in fee simple, in an action to which the grantee is a party, extinguish the grantee's interest in the property?

2. Under the scenario described above, do the grantee's representations to the court that grantor owns the property, coupled with his failure to raise an interest in the property, estop him from claiming such an interest by virtue of the unrecorded deed or improvements to the property?

3. If a person fails to protect his economic interest in a property, does he retain an insurable interest in that property?

Standard Fire Ins. v. Berrett, 393 Md. 160, 900 A.2d 206 (2006).

We shall hold that Mr. Berrett continued to possess an economic interest in the property even after the court's approval of the contract of sale of the property, and that he was not estopped from claiming an insurable interest therein by his representations that his mother was the owner of the property during guardianship proceedings.¹

Facts

In December, 1995, Robert Berrett relocated from California, where he had been living for some twenty years, to his home state of Maryland and began residing at 4305 Gallatin Street, his family's home. In February, 1999, after having made numerous improvements to the home, he learned that it was not insured, which precipitated his application for insurance with Standard Fire. Mr. Berrett timely paid all of the premiums on the policy and, when it expired in February, 2000, renewed for another year.

In March, 2000, Mr. Berrett filed a verified petition, through counsel, in the Circuit Court for Prince George's County, to be appointed guardian over the person and property of his mother, Charlotte Berrett. He alleged that he was her primary care taker and that she was no longer able to handle her financial, business, legal, and personal matters. He also alleged that his mother "owns two parcels of real estate commonly known as 4305 Gallatin Street, Hyattsville, Maryland 20783 and 2303 Fordham Street, Hyattsville, Maryland 20783," and listed himself and his four siblings as interested parties to the proceedings. Mr. Berrett filed a verified amended petition in May, 2000, in which he again alleged that his mother owned 4305 Gallatin Street, and a verified emergency petition in June, iterating that she owned 4305 Gallatin Street. After a hearing on Mr. Berrett's petition, a judge of the Circuit Court for Prince George's County appointed Richard C. Daniels, an attorney, as the guardian of Charlotte Berrett's property, and Theresa Grant of the Prince George's Office of Aging, as guardian of her person. Shortly thereafter, Mr. Daniels petitioned the court for approval of a contract of sale for $89,000.00 for 4305 Gallatin Street, to which Mr. Berrett filed an opposition, alleging that the purchase amount was below market value, that the sale was not necessary to sustain his mother's care because he was supplementing her payments to the nursing home, and that his mother intended to reside at 4305 Gallatin Street in the future. The court overruled Mr. Berrett's opposition and on November 9, 2000, approved the contract. On November 25, 2000, fire destroyed the home before settlement and thereafter the purchaser exercised his right to rescind, pursuant to the contract's risk of loss clause, and the home was razed and the property subsequently sold to the same purchaser for a reduced price of $40,000.00.

In the interim, Mr. Berrett filed a claim for $388,000.00 with Standard Fire to recover for the loss of the home. Standard Fire denied the claim, alleging that the court-approved sale of 4305 Gallatin Street extinguished Mr. Berrett's interest in the property so that he did not possess an insurable interest at the time of the loss.

In his complaint against Standard Fire,² Mr. Berrett alleged that he had an insurable interest in 4305 Gallatin Street because his mother, in an unrecorded deed, had conveyed a remainder interest to him in the property,³ while retaining for herself a life estate, and also because Mr. Berrett had resided in and made extensive improvements to the home between 1995 and 2000. He alleged that he never recorded the deed because, by the deed's terms, it was not to be recorded until his mother's death. He further alleged that he did not disclose the existence of the unrecorded deed during the guardianship proceedings because he was under the impression that his mother's life tenancy enabled her to dispose of the property.

In response to Mr. Berrett's complaint, Standard Fire filed a motion for summary judgment, alleging that the judicial approval of the sale of 4305 Gallatin Street on November 9, sixteen days before the fire, had extinguished Berrett's insurable interest in the property. Standard Fire also argued that, because Mr. Berrett alleged in his verified petitions for his mother's guardianship that his mother was the owner of 4305 Gallatin Street, that he now was precluded under both the doctrines of collateral estoppel and estoppel by admission from asserting his claim in the property.

Mr. Berrett responded by alleging that, as a remainderman in the property, he could not be divested of his interest until the property was sold and, at the time of the fire, the sale had not been completed. He further contended that he was not collaterally estopped from asserting his insurable interest because the issue during the guardianship proceedings was whether Charlotte Berrett was disabled, whereas, in the Standard Fire proceedings, the issue was whether Mr. Berrett possessed an insurable interest in the property. Moreover, Mr. Berrett maintained that his allegation that his mother was the owner of the property in the guardianship proceedings was not inconsistent with his statement of ownership during proceedings on the insurance claim because both possessed ownership interests in the property; his mother's of a life estate interest, and his of a remainder interest.

After the hearing on Standard Fire's summary judgment motion, at which both parties were represented by counsel and presented oral arguments, the trial court granted summary judgment to Standard Fire, concluding that Mr. Berrett was both collaterally and judicially estopped from asserting an insurable interest in the property. Mr. Berrett noted a timely appeal to the Court of Special Appeals, which determined in a reported opinion that, by virtue of the unrecorded deed, Charlotte Berrett had, after retaining a life estate for herself, granted Mr. Berrett a vested, indefeasible remainder in 4305 Gallatin Street, which was deemed to be an insurable interest. Berrett v. Standard Fire Ins. Co., 166 Md.App. 321, 338, 888 A.2d 1189, 1196, 1199 (2005). The intermediate appellate court held that the court's approval of the sale of the property did not negate Mr. Berrett's economic interest in the property because, even if the sale of the property had been completed at the time of the fire, Mr. Berrett would have had a chose in action against the guardianship estate for his share in the sale proceeds as a remainderman. Thus, the Court of Special Appeals concluded that Mr. Berrett did possess an economic, and therefore an insurable, interest in the property at the time of the fire. The court also determined that the doctrine of collateral estoppel did not apply to Mr. Berrett's action to recover from Standard Fire because the guardianship proceedings did not address the nature of Mr. Berrett's interest in 4305 Gallatin Street and that the doctrine of judicial estoppel did not apply because Mr. Berrett never took a position regarding his own interest in the property during the guardianship proceedings which were inconsistent with his assertions in the insurance claim proceedings.

Before this Court, Standard Fire contends that, under Section 12-301(a) of the Insurance Article, Maryland Code (1997), an economic interest in property must be present in order to constitute an insurable interest therein. Standard Fire asserts that, when the contract of sale of the property was approved by the circuit court on November 9, 2000, Mr. Berrett's economic, and therefore insurable, interest in the property was extinguished because only Charlotte Berrett would benefit from the proceeds of the sale. Standard Fire also alleges that the court in the guardianship proceeding made a final determination that Charlotte Berrett was the owner of 4305 Gallatin Street, and that Mr. Berrett was a party in those proceedings. The Company maintains, as a result, that Mr. Berrett was required to assert his ownership interest during the guardianship proceedings and is now barred by the doctrine of collateral estoppel from claiming an...