Parlette v. Parlette

MOTZ, Judge. Appellant, Ina Lou Parlette (“Ms. Parlette”) brought suit in the Circuit Court for Howard County against her former husband, Charles Winfield Parlette (“Mr. Parlette”), asserting that she was the intended beneficiary of their deceased son’s life insurance policy. Notwithstanding the fact that Mr. Parlette alone was listed as the beneficiary on the policy, Ms. Parlette claimed that their son, Wayne, intended his mother, not his father, to benefit from the policy. At the close of Ms. Parlette’s case before a Howard County jury, the circuit court granted Mr. Parlette’s motion for judgment as well as declaratory judgment in Mr. Parlette’s favor.

We affirm in part and reverse in part. Facts and Proceedings Below Mr. and Ms. Parlette were divorced in 1970. On January 19, 1985, Mr. Parlette, who was, and for many years had been, employed as an agent for Prudential Insurance Company of America (“Prudential”), sold a life insurance policy to their son Wayne, who was then 29. In exchange for Wayne’s monthly payment of $62.50, Prudential agreed to pay the beneficiary named in the policy fifty thousand dollars ($50,000) in the event of Wayne’s death.

The policy ⁶³² named Mr. Parlette as Wayne’s sole beneficiary 1 and included the following language: You may designate or change a beneficiary. Your request must be in writing and in a form that meets our needs. It will take effect only when we file it at our Home Office; this will be after you send the contract to us to be endorsed, if we ask you to do so. Then any previous beneficiary’s interest will end as of the date of the request.

It will end then even if the Insured is not living when we file the request. After purchasing the policy, Wayne paid the premiums each month. On March 3, 1987, Wayne Parlette was diagnosed as having cancer. He died on July 15, 1988.

Shortly after her son’s death, Ms. Parlette learned, for the first time, that Wayne owned this policy and that Mr. Parlette was his designated beneficiary. Upon being told by Wayne’s friends and brothers that Wayne actually intended her to receive the benefits of his life insurance, Ms. Parlette initiated this action against Mr. Parlette and Prudential. (In August 1989, the circuit court ordered Ms. Parlette and Mr. Parlette to settle the dispute between themselves prior to pursuing further any claim against Prudential.) Ms. Parlette’s complaint as finally amended set forth four counts. First, she sought a declaratory judgment that she was the intended third party beneficiary of the insurance policy.

Second, she charged Mr. Parlette with breach of contract, on the theory that she was the intended third party beneficiary of an oral contract between Mr. Parlette and Wayne, in which Mr. Parlette promised Wayne (and ⁶³³ thereafter breached his promise) that he would see to it that Ms. Parlette was the designated beneficiary of the policy. Third, she alleged negligence, based on Mr. Parlette’s failure to see that she was the beneficiary of the policy. Ms. Parlette’s final count asserted that Mr. Parlette acted fraudulently when he designated himself, rather than Ms. Parlette, as the policy’s beneficiary. At trial, Kenneth Robert Welk, Jr., a close friend of Wayne’s, testified that he was present at the time and place that Mr. Parlette sold Wayne the $50,000 policy.

According to Welk, Wayne bought the policy from his father at his father’s home and “instructed his father to make his mother the beneficiary and his father had no problem with that.” Welk further testified that Wayne signed a blank insurance application which Mr. Parlette then filled in — including Mr. Parlette’s own name as beneficiary — in Wayne’s absence. To support his claim, Welk pointed to the fact that all of the handwritten portions of the policy are in Mr. Parlette’s handwriting, except for Wayne’s signature. 2 Moreover, Welk asserted that, to the best of his knowledge, Wayne never saw the completed policy. Welk posited that Mr. Parlette deliberately failed to send the policy to Wayne, in order to conceal that the policy’s named beneficiary was Mr. Parlette, not Ms. Parlette. Welk and other witnesses testified that Wayne had a much closer and more loving relationship with his mother than with his father.

They also testified that the policy was not found among ⁶³⁴ Wayne’s belongings when he died. They conceded, however, that Wayne did not have a permanent residence in which he kept his belongings and that his papers were dispersed among a variety of locations, including his car. Wayne’s girlfriend and brothers each testified that, although they had not seen the policy, Wayne intended to name Ms. Parlette as his beneficiary. They testified that Wayne told them that he intended Ms. Parlette to benefit from his insurance policy, and/or that Wayne was closer to Ms. Parlette than to Mr. Parlette and that, therefore, Wayne must have intended to name Ms. Parlette as his beneficiary.

At the close of Ms. Parlette’s case, the circuit court granted Mr. Parlette’s motion for judgment as to all four counts. The basis for this decision was the lower court’s belief that Ms. Parlette could not properly bring a complaint on any of these grounds and that Wayne’s estate was the only proper plaintiff to pursue the claims. Thus, the circuit court reasoned as to the breach of contract claim: Generally the rule is that ordinarily an action on an insurance policy may be brought by the parties to the contract and third persons in privity with them ... and, of course, there must be privity; ... Frankly, there wasn’t any privity here ... there was simply no privity proven, so the court will grant judgment in the second count [breach of contract] (emphasis added).

Similarly, with regard to the negligence count, the lower court found: the negligence would, once again, be between the insured, Wayne, and the insurance company and/or its agent [Mr. Parlette] and not with the third party beneficiary; therefore, I will grant the motion on the third count, negligence (emphasis added). And with regard to the fraud count, the court found: the fraud must be between the parties involved; that is Wayne and Winfield. Of course, needless to say, that had the matter been brought by the Estate of Wayne ⁶³⁵ then that would have been something of an entirely different situation. The circuit court concluded by stating that it would “grant a motion for judgment in the declaratory judgment for the same reasons [as those on which it granted judgment in the other counts].” Legal Analysis The essential premise of the decision of the court below to grant Mr. Parlette’s motion for judgment was that Ms. Parlette was not a proper party to assert the claims set forth in her complaint.

Because that premise was erroneous, except with regard to the fraud claim, we reverse as to all counts, except the fraud count. (1) To prevail in an action for fraud, a plaintiff must show: (a) that a representation made by the defendant was false; (b) that its falsity was known to defendant; (c) that the representation was made for the purposes of defrauding the plaintiff; (d) that the plaintiff not only relied upon the representation, but had the right to do so and would not have done the thing from which the damage resulted if it had not been made; and (e) that plaintiff suffered damage directly resulting from the defendant’s misrepresentation. Martens Chevrolet, Inc. v. Seney, 292 Md. 328, 337 , 439 A.2d 534 (1982); MacGill v. Blue Cross of Maryland, Inc., 77 Md.App. 613, 621 , 551 A.2d 501 , cert. denied, 315 Md. 692 , 556 A.2d 673 (1989). The circuit court was correct in concluding that Ms. Parlette, who was not a party to any misrepresentations made by Mr. Parlette to Wayne, who never even knew of the alleged misrepresentations until after Wayne’s death, and who, therefore, could not have relied on these alleged misrepresentations, is not the proper plaintiff for this fraud claim. 3 ⁶³⁶ The only authority which Ms. Parlette offers in support of her right to assert a fraud claim here is the following language from Flaherty v. Weinberg, 303 Md. 116 , 492 A.2d 618 (1985) stating that the traditional American rule is: that a third party could recover against the attorney [for another person] only in cases involving fraud or collusion. 303 Md. at 122 , 492 A.2d 618 (citing National Savings Bank v. Ward, 100 U.S. 195, 205-06 , 25 L.Ed. 621 (1880)) (footnote omitted).

Ms. Parlette argues that this quotation “reiterated the law in Maryland which has long stated that privity is not required in cases of fraud.” In fact, “privity” is a term of contract law which has nothing to do with causes of action for fraud. Even if what Ms. Parlette means is that her injury entitles her to bring a fraud claim against Mr. Parlette, despite her being neither present at nor a recipient of the alleged misrepresentation, the language in Flaherty still does not aid her. This is so because the “fraud” to which the Flaherty court referred was deceitful representations made directly by a lawyer to a nonclient, with the intent that the nonclient rely on them; such misrepresentations are actionable by a nonclient. See, e.g., First National Bank v. Shpritz, 63 Md.App. 623, 632 , 493 A.2d 410 , cert. denied, 304 Md. 297 , 498 A.2d 1184 (1985).

When such acts are demonstrated, a third party may well be able to prove the detrimental reliance which is so critical to a fraud claim, but which is so clearly missing in the fraud claim asserted here. (2) We turn then to Ms. Parlette’s remaining causes of action: breach of contract, negligence, and declaratory judgment. ⁶³⁷ Originally at common law, even if a contract was for the benefit of a third person, privity between plaintiff and defendant was required to maintain an action on that contract. See MacKubin v. Curtiss-Wright Corp., 190 Md. 52 , 57 A.2d 318 (1948). Ever since 1866 however, Maryland, like most other jurisdictions, has recognized the doctrine of third party beneficiary.

See Small v. Schaefer, 24 Md. 143 (1866). That doctrine permits a person for whose benefit a contract is made to maintain an action on it without any privity of contract. See Marlboro Shirt Co. v. American District Tel. Co., 196 Md. 565 , 77 A.2d 776 (1951).

In order for a person to recover as a third party beneficiary, he or she must show that the parties to the contract clearly intended that the third party benefit from it. Shillman v. Hobstetter, 249 Md. 678, 687 , 241 A.2d 570 (1968) (quoting Marlboro Shirt, supra, 196 Md. at 569 , 77 A.2d 776 ). An incidental beneficiary, one who benefits from the contract although the benefit was not