Phillips v. Allstate Indemnity Co.

⁷³³ KENNEY, Judge. William H. Phillips (“Phillips”) appeals from an order of the Circuit Court for Prince George’s County granting summary judgment in favor of Allstate Indemnity Company (“Allstate”). On appeal, Phillips asks three questions, which we have consolidated into one: Did the circuit court err as a matter of law in granting summary judgment in favor of Allstate? For the reasons that follow, we shall remand the case to the circuit court for the entry of a declaratory judgment in conformity with this opinion.

FACTUAL AND PROCEDURAL HISTORY The summary judgment motions, deposition testimony, and interrogatories provided the following information. On October 30, 2000, Phillips purchased a 2001 Yamaha motorcycle from Heyser Motorcycle in Laurel, Maryland for $12,054.66. Phillips obtained an insurance policy from Allstate that included protection against loss of the motorcycle. Sometime between the evening hours of November 8 and the morning hours of November 9, 2000, the motorcycle allegedly was stolen from a parking space in front of Phillips’ apartment.

On November 9, 2000, Phillips notified both the Montgomery County Police Department and Allstate of the theft. On November 19, 2000, Phillips provided John Cadigan, an employee of Allstate, with a recorded statement. In the statement, Phillips stated that he worked at a car dealership trading as Royal Auto under the supervision of Mr. Poe and earned approximately $3,000 per month. He earned additional money by gambling in Atlantic City and “detailing” automobiles.

His friend, Mike Stevens, had loaned him some of the money to purchase the motorcycle. When Allstate contacted Royal Auto to verify the information, it learned that Phillips ⁷³⁴ was neither a current nor past employee and there was no supervisor by the name of Mr. Poe. On November 24, 2000, Phillips completed an “Affidavit of Automobile Total Theft” form, as required by the policy. He answered four of the questions as follows: 4.

Are you employed? No. 5. Are you retired? N/A 6.

What type of work do you do? N/A 10. What type of business are you in? N/A He signed the affidavit, attesting that he had read, answered, and understood all of the questions and that all of the information was true and correct.

Because of inconsistencies in the information provided by Phillips, Allstate requested that he submit to an examination under oath (“EUO”). At the EUO on January 11, 2001, Allstate’s attorney did not ask Phillips any questions because, in prior discussions, Phillips’ attorney had indicated that Phillips would not provide any information about his finances. When Phillips confirmed that he would not answer any financial questions, Allstate’s attorney responded: “I’m not going to conduct the [EUO] because I feel that the refusal to answer those questions, for whatever reason, would be deemed by Allstate and myself as lack of cooperation in this claim, resulting in a denial.” Phillips’ attorney stated: Our position, given the particular and unique circumstances of this case, is, it would not be a lack of cooperation or a violation of the requirements of the policy. The particular reason is that this motorcycle was paid for in cash.

It’s not the most typical, if there is such a thing, case, where there may be suspicion that because there had been arrearages in payments that someone is simply trying to have a vehicle disappear for purposes of getting out from underneath of a debt that they owe. Therefore, the source of income for the payment of this motorcycle, in our position, is entirely irrelevant. ⁷³⁵ There’s virtually no scenario that would suggest, in my perception of this, at least, that this would be a fraudulent claim, since the motorcycle’s paid for in cash. * * # In addition, this is a case where the motorcycle disappeared at the scene, it’s not a collision type of circumstance. But he is willing—to be clear on the record, he is here and will be happy to testify regarding the circumstances of the last time he saw the motorcycle, what he had done with the motorcycle, how many miles he believes were on the motorcycle at the time. So, for those reasons, we believe that, in this particular case, exploring the financial component of his life is not relevant....

If you wanted to explore the circumstances of what he knows about the motorcycle and how it disappeared, that’s fine, and we can do that, it wouldn’t take that long to do it. But, if you believe that by not answering the financial questions, that it defeats the purpose of this procedure, then that’s certainly something that you can decide. Allstate’s attorney responded: And, just to briefly respond to that, for the record, it is my opinion as the attorney conducting the EUO, that the financial background information, in any case, is highly relevant. Financial background often in these cases produces a motive or a lack thereof.

You are advising your client and you are making a conclusion that based on what you know, it’s not relevant. And, I am not permitted to objectively make that conclusion without asking those questions. And those are questions that I ask in every examination that I’ve done. And I think that the way I read the case law, that I’m allowed to do that because that is relevant, for example, it is perhaps motive to have the vehicle stolen.

It might be a ⁷³⁶ motive that your client is charged with a crime, for example, and he needs money to pay for a lawyer. So, there’s any number of reasons that it is relevant. And I think I’m not permitted, in doing an objective investigation, to draw those conclusions that you’ve drawn for the record. In a letter dated January 11, 2001, Allstate denied Phillips’ claim, based on lack of cooperation.

On July 20, 2001, Phillips filed a complaint for breach of contract, which was amended in March 2003, adding an additional count for declaratory judgment. At a deposition on March 10, 2003, Phillips testified that, in the recorded statement, he had not provided truthful information about his employment and his friend, Mike Stevens. Phillips replied, “I plead the 5th Amendment,” when asked the following questions concerning his income and expenses: — How do you pay for college? — How do you pay [your monthly rent]? — How do you pay your monthly expenses? —- How do you pay your yearly premiums? — What is your source of income? — Where did you get the money to pay the premium [on your Cadillac Eldorado]? — Where do you get the money to deposit into [your] checking account? — Where did you get the money to pay the premium for that? — How did you get the money to pay for [the motorcycle]? — Why did you misrepresent the information [about your employment during the recorded statement]? Allstate filed a motion for summary judgment, arguing that Phillips could not pursue a claim “after making material misrepresentations, failing to cooperate ... during an EUO, and refusing to answer relevant questions during discovery.” With respect to the alleged failure to cooperate, Phillips ⁷³⁷ argued that: (1) he did not have a “duty” to provide the recorded statement; (2) he recanted the misrepresentations; (3) the misrepresentations were not material; (4) he “submitted” to the EUO, but was not required under the insurance policy to answer every question; and (5) there was no evidence that Allstate had been prejudiced.

In essence, Phillips contended that he had substantially complied with his obligations under the insurance policy. At the conclusion of the motions hearing, and without explanation, the circuit court granted judgment for Allstate. This timely appeal followed. DECLARATORY JUDGMENT Phillips filed a complaint for breach of contract, which was amended, adding an additional count for declaratory judgment.

The circuit court granted summary judgment in favor of Allstate, but did not enter a declaratory judgment. Therefore, we must remand the case to the circuit court to enter a judgment declaring the rights of the parties not inconsistent with this opinion. We explain. The Maryland Uniform Declaratory Judgments Act (“Act”), Md.Code (1974, 2002 Repl.Vol.), § 3-401 et seq. of the Courts & Judicial Proceedings Article (“CJ”), is “remedial” and its purpose is “to settle and afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations.” CJ § 3-402.

The Act further provides: Except for the District Court, a court of record within its jurisdiction may declare rights, status, and other legal relations whether or not further relief is or could be claimed. An action or proceeding is not open to objection on the ground that a declaratory judgment or decree is prayed for. CJ § 3^03(a). When it will serve to terminate the uncertainty or controversy at issue, a court may grant a declaratory judgment if: (1) An actual controversy exists between contending parties; ⁷³⁸ (2) Antagonistic claims are present between the parties involved which indicate imminent and inevitable litigation; or (3) A party asserts a legal relation, status, right, or privilege and this is challenged or denied by an adversary party, who also has or asserts a concrete interest in it.

CJ § 3-409(a). “The declaration may be affirmative or negative in form and effect and has the force and effect of a final judgment or decree.” CJ § 3-411; see Universal Underwriters Ins. Co. v. Lowe, 135 Md.App. 122, 130-31, n. 6 , 761 A.2d 997 (2000) (“ ‘While a declaratory decree need not be in any particular form, it must pass upon and adjudicate the issues raised in the proceeding, to the end that the rights of the parties are dearly delineated and the controversy terminated.’ ”) (quoting Dart Drug Corp. v. Hechinger Co., 272 Md. 15, 29 , 320 A.2d 266 (1974)). In a declaratory judgment action in which summary judgment was sought, we explained: Summary judgment is appropriate in a declaratory action, although it is “ ‘the exception rather than the rule.’ ” Nationwide Mut. Ins.

Co. v. Scherr, 101 Md.App. 690, 695 , 647 A.2d 1297 (1994), cert. denied, 337 Md. 214 , 652 A.2d 670 (1995) (quoting Loewenthal v. Security Ins. Co., 50 Md.App. 112, 117 , 436 A.2d 493 (1981) (holding that in an action for declaratory judgment concerning the correct interpretation of an insurance contract, “summary judgment may be warranted where there is no dispute as to the terms of an insurance contract but only as to their meaning”)). McBriety v. Commissioners of Cambridge, 127 Md.App. 59, 65-66 , 732 A.2d 296 (1999). Declaratory proceedings, however, are “ ‘not intended to and should not serve as a substitute for appellate review or as a belated appeal.’ ” Wolfe v. Anne Arundel County, 135 Md.App. 1, 25 , 761 A.2d 935 (2000) (quoting Fertitta v. Brown, 252 Md. 594, 599-600 , 251 A.2d 212 (1969) (emphasis in original)), aff'd, 374 Md. 20 , 821 A.2d 52 (2003). ⁷³⁹ “While it is permissible for trial courts to resolve matters of law by summary judgment in declaratory judgment actions, the trial court must still declare the rights of the parties.” Megonnell v. United Services Auto.

Ass’n, 368 Md. 633, 642 , 796 A.2d 758 (2002). In Harford Mut. Ins. Co. v. Woodfin Equities Corp., 344 Md. 399, 414 , 687 A.2d 652 (1997) (internal citations omitted), the Court of Appeals stated: This Court has reiterated time after time that, when a declaratory judgment action is brought, and the controversy is appropriate for resolution by declaratory judgment, “the trial court must render a declaratory judgment.” “[W]here a party requests a declaratory judgment, it is error for a trial court to dispose of the case simply with oral rulings and a grant of ... judgment in favor of the prevailing party.” The fact that the side which requested the declaratory judgment did not prevail in the circuit court does not render a written declaration of the parties’ rights unnecessary.

As this Court stated many years ago, “whether a declaratory judgment action is decided for or against the plaintiff, there should be a declaration in the judgment or decree defining the rights of the parties under the issues made.” Because the circuit court did not declare the rights of the parties, we shall remand this case to the circuit court to enter a judgment declaring the rights of the parties not inconsistent with this opinion. Nevertheless, we will address the merits of the controversy. See Bushey v. Northern Assur. Co. of Am., 362 Md. 626, 651 , 766 A.2d 598 (2001) (finding that the Court of Appeals “may, in its discretion, review the merits of the controversy and remand for the entry of an appropriate declaratory judgment by the circuit court”); Maryland Ass’n of HMO’s v. Health Servs.

Cost Review Comm’n, 356 Md. 581, 604 , 741 A.2d 483 (1999) (requiring on remand that the circuit court enter a judgment which included a declaration of the rights of the parties). But see Woodfin, supra, 344 at 415, 687 A.2d 652 (remanding the case without reaching the merits of insurance policy coverage issues). ⁷⁴⁰ DISCUSSION Phillips argues that the circuit court erroneously granted summary judgment because: (1) he was entitled to invoke his Fifth Amendment privilege against self-incrimination during the deposition; (2) he did not fail to cooperate during the EUO and his alleged lack of cooperation did not result in actual prejudice to Allstate; and (3) the misrepresentations were not material. STANDARD OF REVIEW We review a trial court’s grant of summary judgment de novo, Remsburg v. Montgomery, 376 Md. 568, 579 , 831 A.2d 18 (2003), determining whether the trial court was legally correct, Williams v. Baltimore, 359 Md. 101, 114 , 753 A.2d 41 (2000) (internal citations omitted) (quoting Baltimore Gas & Elec. Co. v. Lane, 338 Md. 34, 42-43 , 656 A.2d 307 (1995)).

If the trial court does not state its reasons for granting the motion, we will affirm the judgment so long as the record “discloses it was correct in so doing.” Casey Development Corp. v. Montgomery County, 212 Md. 138, 145 , 129 A.2d 63 (1957). We determine first, however, whether a genuine dispute of material fact exists, “and only where such dispute is absent will we proceed to review determinations of law.” Remsburg, 376 Md. at 579 , 831 A.2d 18 . In so doing, “we construe the facts properly before the court, and any reasonable inferences that may be drawn from them, in the light most favorable to the non-moving party.” Remsburg, 376 Md. at 579-80 , 831 A.2d 18 . If there is no “genuine dispute as to any material fact necessary to resolve the controversy as a matter of law, and it is shown that the movant is entitled to judgment, the entry of summary judgment is proper.” Lynx, Inc. v. Ordnance Products, Inc., 273 Md. 1, 8 , 327 A.2d 502 (1974) (citing Selected Risks Ins.

Co. v. Willis, 266 Md. 674 , 296 A.2d 424 (1972)). ⁷⁴¹ The Insurance Policy Phillips obtained an