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REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 9 September Term, 2005

ROBERT C. BERRETT v. THE STANDARD FIRE INSURANCE CO.

Hollander, Eyler, Deborah S., Woodward, JJ. Opinion by Eyler, Deborah S., J.

Filed: December 23, 2005

The Circuit Court for Baltimore City granted summary judgment in favor of The Standard Fire Insurance Company ("Standard"), the appellee, in a breach of contract claim by Robert C. Berrett, the appellant. Berrett had alleged in his complaint that he had an

insurable interest in real property located at 4305 Gallatin Street, in Hyattsville ("the Property"); that the Property had been damaged by fire; and that Standard had wrongfully denied payment under a homeowner's insurance policy he had purchased from Standard on the Property, and that was in effect on the date of the loss. On appeal, Berrett poses two questions, which can be reduced to one: Did the circuit court err in granting summary judgment in For the following reasons, we shall reverse the

Standard's favor?1

judgment of the circuit court and remand the case for further proceedings.

FACTS AND PROCEEDINGS

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The questions as framed by Berrett are: Whether the Circuit Court erred in finding that Mr. Berrett was barred by collateral estoppel and estoppel by admission from asserting an insurable interest in the subject property because he did not raise the issue of his interest under an unrecorded deed in an earlier guardianship proceeding. Whether the Circuit Court erred in finding that collateral estoppel and estoppel by admission precluded Mr. Berrett from asserting an insurable interest in the improvements he made to the property in an action to recover for fire damage under an insurance policy because he did not raise the issue in an earlier guardianship proceeding.

A.

B.

Berrett is the son of Charlotte H. Berrett.

He has four

sisters - June Soroka, Miracle Destiny, Charlene Berrett, and Carol Berrett - who are daughters of Mrs. Berrett. According to Berrett, on August 4, 1973, Mrs. Berrett executed a deed granting the Property to him. The 1973 deed states that, in

consideration for improvements Berrett made to Mrs. Berrett's residence at 2304 Fordham Street, also in Hyattsville, I hereby and herein grant to and deliver to my son, Robert Carlyle Berrett all that property . . . known as 4305 Gallatin Street. . . . I covenant that I warranty the property specifically. It is further agreed herein and the right is reserved by me that I shall retain a life estate in the above described Gallatin Street property and that I shall for my life be entitled to all rents arising out of the property. It is further agreed that this DEED shall not be recorded until after my death, the death of me, Grantor of this DEED. In addition to being signed under seal by Mrs. Berrett, the 1973 deed was signed by Berrett and by Vivian Berrett, Mrs. Berrett's sister-in-law. From some time not clear from the record until late in 1995, Berrett lived in California. He then returned to Maryland. From

late 1995 through the Spring of 2000, he lived off and on at the Property and made various improvements to it. In February 1999, Berrett obtained a homeowner's insurance policy ("Policy") for the Property through Standard. The Policy

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was in his name alone and was in effect for one year.

It provided

coverage for, among other things, property damage caused by fire. Berrett renewed the Policy in February 2000. on the Policy. On March 22, 2000, in the Circuit Court for Prince George's County, Berrett filed an action seeking appointment of a guardian of the person and property of Mrs. Berrett. In his verified complaint, Berrett stated that Mrs. Berrett was the owner of the Property (and the Fordham Street property as well). He so stated He paid the premiums

in two subsequent verified complaints in the same action. In other filings in the guardianship action, Berrett again stated that the Property was owned by his mother. On July 24, 2000, the circuit court held a hearing and found that Mrs. Berrett was disabled and unable to care for her person or property. That same day, by order entered July 25, 2000, the court

appointed Theresa Grant, of the Prince George's County Department of Family Services, guardian of Mrs. Berrett's person; and Richard C. Daniels, Esquire, guardian of her property.2 On September 12, 2000, Daniels petitioned the court for approval for the sale of the Property. It appears that Daniels had Berrett

received an offer to purchase the Property for $89,000.

objected to the petition on the ground that the purchase price was

At some point later in the proceedings, Mrs. Berrett was moved into a nursing home. 3

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too low.

On November 8, 2000, after holding a hearing, the court

determined that "the ward ha[d] agreed to the sale" and issued an order granting Daniels the authority to sell the Property for $89,000. In the meantime, a contract had been submitted to

purchase the Property for that sum. On November 14, 2000, Berrett filed a motion opposing the court's approval of the contract of sale. He alleged that there

was no need to sell the property, as he was supplementing the payments to Mrs. Berrett's nursing home; that $89,000 was not a fair price for the property; and that Mrs. Berrett did not want to sell the Property because she intended to reside there in the future. Berrett did not inform the guardianship court or the guardians that he had an interest in the Property. He did not submit the

1973 deed to the guardianship court or the guardians, or mention its existence. All the assertions he made to the guardianship

court and the guardians were to the effect that his mother was the only person with an interest in the Property. The contract of sale for the Property provided that it was being conveyed in fee simple and that "[t]he Property is to be held at the risk of Seller until legal title has passed or possession has been given to Buyer." It further stated:

If, prior to the time legal title has passed or possession has been given to Buyer, whichever shall occur first, all or a substantial part of the Property is destroyed or damaged, without fault of Buyer, then this 4

Contract, at the option of the Buyer, upon written notice to Seller, shall be null and void and of no further effect . . . . On November 25, 2000, after the court had approved the

contract of sale but before settlement, a fire broke out at the Property, causing substantial damage to it. made a claim against the Policy. Standard conducted a lengthy investigation of the claim. On Thereafter, Berrett

May 10, 2002, during an examination under oath, Berrett produced the 1973 deed. Ultimately, Standard denied Berrett's claim on the ground that he did not have an insurable interest in the Property on the date of the fire. On November 24, 2003, in the Circuit Court for Baltimore City, Berrett filed suit against Standard for breach of contract.3 He alleged that Standard had issued, for consideration, the Policy, which was valid and in force on the day of the fire; that the fire loss was a covered risk; that he had an insurable interest in the Property, by virtue of the 1973 deed; that he had resided in the Property at times and had made improvements to it, and therefore had an equitable insurable interest in it as well; and that Standard had wrongfully denied his claim. Discovery ensued. Berrett's sister June testified that she His sister Miracle testified that she

knew about the 1973 deed.

Berrett also named two other defendants in the suit, and made claims against them. Ultimately, he voluntarily dismissed those claims with prejudice. 5

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did not know about the deed, and, when shown it, questioned the genuineness of her mother's signature. Vivian Berrett (whose last

name by then was Baker) testified that she recalled witnessing Mrs. Berrett's signature on the 1973 deed and that it was genuine. On November 24, 2004, Standard filed a motion for summary judgment. It argued that, because the guardianship court had

approved the contract of sale for the Property before the fire, Berrett did not have an insurable interest in the Property by the date of the fire, and hence "Maryland law prohibits recovery under the policy." Alternatively, it argued that, even if Berrett had an insurable interest in the Property on the day of the fire, he was precluded by collateral estoppel to raise that issue because the issue of ownership of the Property had been fully and finally decided in the guardianship proceeding, to which Berrett was a party and in which he had an opportunity to assert his interest. Finally, Standard argued, also alternatively, that the doctrine of estoppel by admission applied because Berrett had asserted

throughout the guardianship proceeding that Mrs. Berrett owned the Property. For purposes of summary judgment only, Standard assumed

that the 1973 deed was valid.4

In support of its motion, Standard submitted exhibits including various filings in the guardianship case, letters from Berrett to the judge in the guardianship case and to Mrs. Berrett's guardians, copies of the petition and the order to approve the contract of sale for the Property, and a transcript of Berrett's deposition. 6

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In his opposition to the motion for summary judgment, Berrett argued that he had an insurable interest in the Property under the 1973 deed and that his interest was not extinguished by the contract of sale, because the court-approved sale "had not been consummated" by then. day of the fire. Hence, he had an insurable interest on the

He further argued that he was not collaterally

estopped to assert his interest in the Property because the issue of insurable interest Finally, was not litigated "While in the who guardianship owns property

proceeding.

stating,

one

certainly has an insurable interest in said property, ownership is not the only factor in determining an insurable interest," he argued that estoppel by admission did not apply because his

"acknowledgment that his mother was the legal owner of the property in the Guardianship proceeding [was] not inconsistent with his claim made under the [P]olicy for which he is the named insured."5 In a reply memorandum, Standard argued that the 1973 deed, if effective, gave Berrett an indefeasibly vested remainder, and noted that the deed might not have been effective, as it was never recorded.

Berrett attached the following exhibits in support of his opposition: a copy of the deed; a copy of the Policy; and transcripts of the depositions of June Soroka, Vivian Baker, and Miracle Destiny. 7

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The court held a hearing on the motion for summary judgment on February 2, 2005. At the conclusion of the hearing, the court stated: [I]t seems to the Court and I so find that [Standard] is entitled to have their motion for summary judgment granted for the reasons stated in their memorandum in support of the motion that Mr. Berrett is collaterally estopped from claiming an interest in the property. In his testimony before [the guardianship court] in Prince George's County, he fully acknowledges several times throughout the proceedings, the guardianship proceedings, etc., that his mother was the owner of the property. There is nothing that says he's the owner or has any interest in the property other than an unrecorded deed which didn't give him a remainder interest, it gave him a fee simple interest. He's not claiming that he has a fee simple, had a fee simple interest in the property. He's claiming that he had, his mother had a life estate, there's no document that sets up a life estate and that he had the remainder interest. So I think that he's testified under oath too many times that his mother was the owner of the property to now come in and say no, he was the owner of the property and that's his insurable interest. So, I think he's barred by the collateral estoppel and estoppel by admission. So I will grant their motion for summary judgment. Thank you. Berrett noted a timely appeal to this Court. We shall include additional facts as pertinent to our

discussion.

DISCUSSION
By common law, and as subsequently codified in the Insurance Article, Maryland follows the insurable interest doctrine. That

doctrine is based on the public policy of discouraging insurance policies that, in effect, are wagering contracts. See Bennett v.

Mutual Fire Ins. Co., 100 Md. 337, 340 (1905) (property insurance); 8

see also Beard v. American Agency Life Ins. Co., 314 Md. 235, 257 (1988) (life insurance). With respect to property insurance, the

theory is that one who obtains an insurance policy on property he has no interest in preserving is merely wagering on its loss. Md. Code (1995, 2003 Repl. Vol.), section 12-301 of the Insurance Article ("Ins."), sets forth the insurable interest doctrine as it pertains to property insurance. An "insurable

interest" is "an actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance against loss, destruction, or pecuniary damage or impairment to the property." Id. at

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