Chassels v. Krepps

Panel: Woodward, C.J., Nazarian, Arthur, JJ. Nazarian, J. ⁶ This case presents an obvious wrong that lacks an obvious remedy. There is no ⁸⁹⁹ dispute that the late Melissa C. Krepps ("Mother") and her husband, Benjamin L. Krepps ("Husband"), failed to maintain a life insurance policy on Mother's life for the benefit of her minor child ("Child"). Mother's divorce and agreement with the child's father, Loren J. Chassels ("Father"), unambiguously required her to do so, and Mother and Husband let the policy lapse before she died.

As a result, the $250,000 in policy proceeds that the Child should have collected after her mother's death were not paid. The question is whether a meaningful remedy lies somewhere, and if so, against whom. Father filed a six-count complaint in the Circuit Court for Frederick County against Mother's Estate and Husband. The circuit court dismissed the complaint with leave to amend Count VI, a claim of unjust enrichment against Husband, but without leave to amend the other claims.

After Father amended, Husband moved again to dismiss, and the circuit court granted the motion, this time with prejudice. Father appeals, and we affirm the judgment as to Counts III and IV, reverse as to Counts I, II, V, and VI, and remand, a partial victory that may well prove Pyrrhic. ⁷ I. BACKGROUND Father and Mother were married, and Child was born in 2002. At the time of Child's birth, Father and Mother were both practicing doctors. The marriage eventually failed.

Father and Mother divorced on February 21, 2006 and filed a Separation Agreement ("Agreement") with the St. Louis County court in Missouri, where they lived at the time. Father retained physical custody of Child, while Mother, who later married Husband and moved to Virginia, had visitation. As part of the Agreement, Father and Mother each agreed to maintain a $250,000 life insurance policy for the benefit of Child and list the other parent as trustee beneficiary. The Agreement also provided that if "either party fails to provide life insurance for any reason, his or her estate shall be liable for the amount [of $250,000]." To that end, the Agreement directed that "[e]ach party shall at all times herein provided take whatever action is required to keep his or her insurance policy or policies in full force and effect, and shall furnish proof of such insurance coverage and compliance with the terms herein provided, if requested." Over the course of the next several years, the relationship between Mother and Father became strained.

In 2008, Mother stopped working as a doctor and became a stay-at-home mom for her and Husband's children. Husband became the sole bread-winner and took on the responsibility of paying all of the bills. This arrangement, according to Father, allegedly included the decision to funnel all of Mother's assets and funds into a joint account, then into an account titled only in Husband's name. Father alleges that in the course of marshaling the family assets, Husband contacted Father and left a voicemail confirming that Husband knew about the Agreement's life insurance requirement and other details about child support, and " that he would do whatever is necessary to make sure the settlement agreement was complied with ." (emphasis added).

In that same time frame, Father apparently requested, and received, proof that Mother was maintaining the required life insurance policy for the Child. Mother confirmed ⁸ that Husband maintained a life insurance policy for Child through his Army benefits, and Father alleged that he received a copy of Husband's paystub showing deductions for the life insurance policy. In January 2013, Mother was diagnosed with a Stage IV melanoma in her brain. ⁹⁰⁰ That same year, Mother and Husband bought and moved into a house in Maryland titled solely in Husband's name. Also around that time, Husband changed jobs and, because the premiums no longer were deducted from his paycheck at his new job, stopped paying the premiums on the life insurance policy and the policy lapsed.

Father had no notice that the premiums weren't being paid or that the policy had lapsed. Mother died in February 2015. A month later, Father contacted Husband about the life insurance policy and learned that the policy had lapsed. Father filed a complaint ("Complaint"), on behalf of Child, on March 18, 2015.

The Complaint named both Husband and the Estate of Melissa C. Krepps (the "Estate") as Defendants, 1 and stated six counts: Count I-Concealment or Non-Disclosure; Count II-Negligent Concealment or Non-Disclosure; Count III-Constructive Fraud; Count IV-Constructive Trust; Count V-Negligence; and Count VI-Unjust Enrichment. Husband filed a motion to dismiss the Complaint in December 2015. After a number of continuances, the circuit court held a hearing, took the motion under advisement, and issued an order on April 13, 2016. The order dismissed Counts I-V, but gave Father leave to amend Count VI.

Father amended and re-filed the full six-count Complaint on May 13, 2016. Husband again moved to dismiss, and after a hearing on July 5, 2016, the circuit court granted Husband's motion to dismiss on all counts with prejudice. Father filed a timely notice of appeal. ⁹ II. DISCUSSION It seemed simple enough on the surface.

Mother agreed, as part of the divorce, to maintain a $250,000 life insurance policy on her life, with Child as the beneficiary, to provide for Child in the event of her untimely death. Mother failed to do so, then died. As such, Mother breached the Agreement, and under the terms of the Agreement itself, Father would seem to have a claim (on Child's behalf) in Mother's Estate. The problem is that there is no Estate, or at least not yet.

Father's briefs characterize Husband as willfully diverting Mother's assets into his own name before she died, leaving nothing subject to probate and thus no Estate to open, and nothing against which Father and Child can enforce Mother's failure to maintain the insurance policy. Whether Husband's financial actions in the time before Wife's death might amount to some sort of fraudulent conveyance or were otherwise improper is not before us; we don't know, and we don't speculate about, whether there might be some way for Father to open an Estate himself or otherwise create some avenue of recovery against Mother's former assets. We have before us instead Father's effort to recover from the person to whom he assigns responsibility for the policy's lapse. Stated in non-legal terms, Father blames Husband for failing to pay the premiums and for (mis)leading Father to believe that he and Mother were complying with the Agreement.

Father's challenge lies in converting this real-life sense of responsibility into viable claims at law. In two rulings, the circuit court dismissed all of Father's claims, and his four questions on appeal coalesce ultimately into one: did the circuit court err in granting Husband's motions to dismiss with prejudice? 2 Father contends that the court ⁹⁰¹ erred in ¹⁰ finding that his complaint, as filed or as amended, did not contain sufficient facts to meet basic pleading requirements or to state a claim. Husband responds that even if the facts contained in the complaint were true, they cannot state a claim upon which relief can be granted because he was neither a party to the separation agreement nor was he enriched by Mother's death. When reviewing a trial court's decision to grant a motion to dismiss, we determine whether, if true, the allegations in the complaint would "satisfy the elements necessary to obtain the relief sought." Kaye v. Wilson-Gaskins , 227 Md.App. 660 , 674, 135 A.3d 892 (2016).

We "presume the truth of all well-pleaded facts in the complaint, along with any reasonable inferences derived therefrom." Higginbotham v. Pub. Serv. Comm'n of Maryland , 171 Md.App. 254 , 264, 909 A.2d 1087 (2006) (cleaned up). 3 The six counts at issue here fall into three categories-(1) claims that require the plaintiff to allege a duty on the part of the defendant, (2) claims that require the plaintiff and the defendant to be in a special relationship, and (3) unjust enrichment-and we address them in those groupings. ¹¹ A. Father Should Have Had An Opportunity To Amend His Complaint To Attempt To Allege A Duty Between Husband And Child. The first group of claims-styled as Count I: Concealment or Non-Disclosure; Count II: Negligent Concealment or Non-Disclosure; and Count V: Negligence-all require Father to establish that the defendant, in this case Husband, owed a duty to the plaintiff, in this case Child.

With no Estate to sue, any such duty needs to flow from Husband, in his personal capacity, to Child; none arises directly from their relationship as step-parent and -child or from the Agreement. But under these circumstances, the circuit court cut off prematurely Father's opportunity at least to allege that Husband assumed duties to Child when he took on a direct role in Mother's performance of the Agreement and when he made representations to Father about Mother's ongoing compliance. It's not obvious he can state a claim, but he should at least have had the opportunity to amend his complaint to try, so we vacate the dismissal as to Counts I, II, and V and remand. To survive a motion to dismiss, all three counts in this group required Father first to allege a duty on Husband's part to do or ⁹⁰² disclose something, then to connect Husband's failure to do or disclose something to the harm suffered by Child.

Count I, Concealment or non-disclosure, required Father to allege that Husband (1) "had a duty to disclose something, (2) failed to disclose it, (3) with the intent to deceive, that (4) the failure caused Father to act in justifiable reliance on the failure, and that (5) Child suffered damage as a result. Blondell v. Littlepage , 413 Md. 96 , 119, 991 A.2d 80 (2010). Father then alleges two flavors of negligence. Negligent concealment, the title of Count II, "has [not] been recognized as a tort in Maryland," Shaw v. Brown & Williamson Tobacco Corp. , 973 F.Supp. 539 , 550 n.2 (D. Md. 1997), but the allegations in that Count track the elements of negligent misrepresentation, 4 which has, and we'll look to the substance ¹² rather than the label.

See Gilbane Bldg. Co. v. Fed. Reserve Bank of Richmond , 80 F.3d 895 , 900 (4th Cir. 1996). To state a claim for negligent misrepresentation, Father must allege that (1) Husband, "owing a duty of care to [Child], negligently assert[ed] a false statement," (2) Husband intended Father or Child to rely on his statement, (3) Husband knew that they likely would rely and that reliance could result in loss, (4) Father or Child did rely on that statement, and (5) Child suffered injury as a result. Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl, LLP , 226 Md.App. 420 , 457-58, 130 A.3d 1024 (2016), aff'd , 451 Md. 600 , 155 A.3d 445 (2017) ; Flaherty v. Weinberg , 303 Md. 116 , 135, 492 A.2d 618 (1985).

Count V of the Complaint is a straight negligence claim, which generally requires a plaintiff to allege "the existence of four elements: a duty owed to him (or to a class of which he is a part), a breach of that duty, a legally cognizable causal relationship between the breach of duty and the harm suffered, and damages." Jacques v. First Nat'l Bank , 307 Md. 527 , 531, 515 A.2d 756 (1986). Since Husband is not Child's father or a party to the Agreement, any duty he might have to Child will have to arise ¹³ elsewhere. Stated most generally, a duty is "an obligation, to which the law will give recognition and effect, to conform to a particular standard of conduct toward another." Doe v. Pharmacia & Upjohn Co., Inc. , 388 Md. 407 , 415, 879 A.2d 1088 (2005) (cleaned up). "Whether a legal duty exists between parties is a question of law to be decided by the court." ⁹⁰³ 100 Investment Ltd. Partnership v. Columbia Town Center Title Co. , 430 Md. 197 , 211, 60 A.3d 1 (2013).

A duty can arise by statute, by contract, or by operation of a special relationship, Bobo v. State , 346 Md. 706 , 715, 697 A.2d 1371 (1997), depending on the policy the duty is meant to serve: In determining whether a duty exists, it is important to consider the policy reasons supporting a cause of action in negligence. The purpose is to discourage or encourage specific types of behavior by one party to the benefit of another party. While foreseeability is often considered among the most important of these factors, its existence alone does not suffice to establish a duty under Maryland law. Pendleton v. State , 398 Md. 447 , 462, 921 A.2d 196 (2007) (cleaned up).

A defendant may also "interject [himself]" into a prior agreement, thereby "assum [ing] a duty" through his actions. UBS Fin. Servs., Inc. v. Thompson , 217 Md.App. 500 , 518, 530, 94 A.3d 176 (2014), aff'd , Thompson v. UBS Financial Services, Inc. , 443 Md. 47 , 115 A.3d 125 (2015). In UBS Financial Services , the Court found that the appellant, Mr. Witherspoon, assumed a duty "to pay insurance premiums and notify the appellees when the premiums went unpaid." UBS Fin.

Servs., Inc. , 217 Md.App. at 518 , 94 A.3d 176 . Mr. Witherspoon assumed this duty "by taking it upon himself to receive the premium notices and coordinate the payment of the insurance premiums." Id. The Court noted that this duty was "limited in nature" and "not fiduciary," unlike the duties that arise from a confidential relationship, because the Court did not want "to expand the concept of fiduciary duty to provide appellees a remedy when a cause of action for negligence [was] available to them." Id. Instead, the scope of the ¹⁴ duty was a function of the role Mr. Witherspoon assumed in the life of the transactions at issue.

In claims for pure economic loss, a tort duty requires an intimate nexus between the parties. Jacques , 307 Md. at 534 , 515 A.2d 756 . That intimate nexus may be satisfied by contractual privity, which we don't have here, or its equivalent, id. at 534-35 , 515 A.2d 756 , which can include situations in which: (1) the defendant was aware that his assertions would be used for a particular purpose; (2) the defendant knew that his assertions were intended for a particular party; (3) and the defendant understood that the party would rely on those assertions. Balfour Beatty