Morrison, William James, III

English

University of Baltimore School of Law

University of Baltimore Law ForumVolume 17Number 1 Fall, 1986 Article 81986Recent Developments: Knill v. Knill: Husband MayNot Be Equitably Estopped to Deny Child SupportWilliam James Morrison IIIFollow this and additional works at: http://scholarworks.law.ubalt.edu/lfPart of the Law CommonsThis Article is brought to you for free and open access by ScholarWorks@University of Baltimore School of Law. It has been accepted for inclusion inUniversity of Baltimore Law Forum by an authorized editor of ScholarWorks@University of Baltimore School of Law. For more information, pleasecontact snolan@ubalt.edu.Recommended CitationMorrison, William James III (1986) "Recent Developments: Knill v. Knill: Husband May Not Be Equitably Estopped to Deny ChildSupport," University of Baltimore Law Forum: Vol. 17 : No. 1 , Article 8.Available at: http://scholarworks.law.ubalt.edu/lf/vol17/iss1/8767. After this rule, the conduct of the in-surer need no longer be opprobrious or un-conscionable in nature, but only intentional with an underlying improper purpose of inducing a client to settle directly with the insurer. The court reversed the court of special appeals but admitted that it did so only be-cause Sharrow barely alleged a claim for tortious interference with contract. Shar-row, on the basis of the broader rule, al-though lacking specificity, alleged the ele-ments necessary to sustain: the tort claim. Based on the facts and the court's analysis, it is highly unlikely that Sharrow had what was needed to prove the commission of tortious interference with contract. The court, however, supplied practitioners, who may find themselves victims of an in-terference with contract, with the ammu-nition necessary to actually prove the tort. The court emphasized that the deter-minative factor in such cases is whether there was purposeful conduct by the in-surer, or whether such conduct was by the client. If the facts of Sharrow's case showed that State Farm rather than Zorbach actu-ally initiated the settlement negotiations, the purposeful conduct of State Farm would indeed be more substantial and the tort claim more likely to succeed at trial. Also absent from Sharrow's complaint was an allegation that State Farm's purpose in ne-gotiating directly with Zorbach was for its own benefit. The presence of such an alle-gation would enhance the success of a claim alleging the commission of the tort and certainly assist in proving the same. The Sharrow case sends a message to in-surance companies to tread lightly when-ever they may be in a position of dealing with a claimant directly. The insurer's duty toward its insured, heretofore rather ambiguous, does not extend to intentional conduct, however subtle, whereby the in-surer leads a claimant to discharge his at-torney and settle his claim. -Kevin S. Anderson Knill v. Knill: HUSBAND MAY NOT BE EQUITABLY ESTOPPED TO DENY CHILD SUPPORT The Doctrine of Equitable Estoppel may not be applied to estop a husband from denying support to an illegitimate child born to his wife by another man dur-ing the marriage, unless the husband's voluntary conduct in treating the child as his own gives rise to reliance by the child upon such conduct and such conduct re-sults in the child suffering financial loss. 12-The Law Forurn/Fa/~ 1986 Knill v. Knill, 306 Md. 527, 510 A.2d 546 (1986). Charles and Cledythe Knill had been married ten years. As a result of their mar-riage, two children were born. After the birth of their children, Charles underwent surgery for a full vasectomy. However, one and a half years after the operation, Mrs. Knill bore a third child, Stephen. Both parties acknowledged that Stephen was not Charles' son. According to Cledythe, the natural father was a former co-worker. Charles apparently forgave Cledythe for her infidelity and the marriage continued for twelve years with Stephen being reared and supported as a member of the Knill family. During this twelve year period, Stephen had no knowledge of his illegiti-macy. Charles was named as Stephen's fa-ther on his birth certificate. Additionally, Stephen was treated as "one of the family" and was thereby so known in the commu-nity where the family resided. In the after-math of a family dispute, Cledythe revealed to Stephen that Charles was not his nat-ural father. Charles nevertheless con-tinued to support Stephen for two years until Cledythe sued for divorce. Among her prayers for relief, Cledythe requested child ·support for Stephen. The Circuit Court for Frederick County held,that even though Charles was not Stephen's natural father, he was estopped from asserting the illegitimacy of the child in order to avoid child support. On appeal, Charles argued that since he was not Stephen's natural father he could not be ordered to support Stephen. Mary-land law places the responsibility of child support squarely on the shoulders of nat-ural parents. MD. FAM. LAW CODE ANN. § 15-703(b)(l) (1984). See also, Bledsoe v. Bledsoe, 794 Md. 183,448 A.2d 353 (1982). Charles asserted that he stood in loco parentis during the twelve years that he voluntarily supported him. Since this relationship had been temporary in nature, he owed no legal duty to continue to sup-port Stephen. On the other hand, Cledythe contended that the doctrine of equitable estoppel should be applied to prevent an inequitable and unconscionable result. For the first time in Maryland, the court of appeals had the opportunity to address the applicability of equitable estoppel to a child support proceeding. For the doc-trine's to apply that a party claiming the benefit of estoppel must have been misled to his injury and changed his position for the worse, having believed and relied on the representations of the party sought to be estopped. Dahl v. Brunswick Corp., 277 Md. 471, 356 A.2d 221 (1976). See also, 3 J. Pomeroy, Equity Jurisprudence § 804 (5th Ed. 1941). In Knill, by a 4-3 decision, the court held that a husband cannot be equitably estopped to deny a duty to support. In reaching its decision Judge Cole for .the majority re-viewed decisions from other jurisdictions which had previously addressed the issue. While a few jurisdictions had held that equitable estoppel is to be applied in order to force child support, as in Clevenger v. Clevenger, 189 Cal. App.2d 658, 11 Cal. Rptr. 707 (1961) and the Supreme Court of New Jersey in Miller v. Miller, 97 N.J. 154,478 A.2d 351 (1984), the majority for the court followed the holdings of the ma-jority of jurisdictions which do not apply the doctrine to estop a husband from deny-ing paternity and a support obligation. See e.g., Remkiewicz v. Remkiewicz, 180 Conn. 114, 479 A.2d 833 (1980); Weise v. Weise, 699 P.2d 700 (Utah 1985). The court in Knill stated that in order for the doctrine of equitable estoppel to ap-ply, the related elements of representation, reliance and detriment must be present. The Court indicated that the application of the three-element test requires that the voluntary conduct or representation of the party to be estopped must give rise to the estopped party's reliance and, in turn, result in detriment to the estopped party. In applying the elements of equitable es-toppel to the facts in Knill, the court found the elements of representation and reli-ance to be present. The facts showed that Charles represented to Stephen that he was his father and these representations were accepted and acted upon by the child. [d. at 537, 510 A.2d at 551. The facts also showed Stephen relied upon the represen-tations and treated Charles as his father, giving his love and affection to him in ig-norance of the true facts. [d. In regard to the element of detriment, the court stated, [T]he evidence in this case~ however fails to demonstrate any finimcial detri-ment incurred by Stephen as a result of Charles's course of conduct during their twelve year relationship ... if any detriment was incurred by Stephen, it was emotional and attributable to his mother ... it was she who ripped the 'cloak of legitimacy' off the boy when she revealed to him that Charles was not his father. Knill, at 537, 510 A.2d at 551. The court concluded that since the elements of equi-table estoppel were not satisfied, Charles could not be held legally responsible for child support. For the dissent, Chief Judge Murphy, opined, "I think the majority is dead wrong." Id. at 539, 510 A.2d at 552. Murphy agreed that the natural father should be considered the primary source for child support and recognized that caution must be exercised when imposing child support liability on a non-biological father. In ad-dition the dissent, like the majority, be-lieved that an estoppel may arise even when there is no intent to mislead, if the actions of one party cause a prejudicial change in the welfare of another. How-ever, the dissent disagreed with the ma-jority's reasoning that financial detriment is the only type of detriment, such being the sole reason the majority denied the ap-plication of equitable estoppel. Id. at 541, 510 A.2d at 556. The dissent concluded that emotional detriment should be sufficient to establish the element of detriment, and the facts in Knill supported a finding of emotional detriment. /d. at 547, 510 A.2d at 559. In light of the circumstances in Knill, the dis-sent observed the duration of the husband's representations to determine whether a true paternal relationship developed between Charles and Stephen. Moreover, the frus-tration of the realistic opportunity to dis-cover and establish a relationship with the natural father was considered. Finally, the dissent noted the devastating effect on a child's welfare where a long established paternal relationship has been breached resulting in the child being proclaimed a bastard and left without a father. The dis-sent ultimately determined that detriment was in fact established, and therefore Charles should have been precluded from disavowing parental responsibility for child support. Id. at 554, 510 A.2d at 560. In Knill, the court stated that since stat-ute of limitations no longer exist in pa-ternity suits Cledythe could maintain a suc-cessful paternity action against Stephen's natural father. Furthermore, even though Charles knew Stephen was not his son, the conduct which he demonstrated was con-sistent with Maryland's public policy of strengthening the family unit. Maryland encourages such conduct so long as it does not interfere or deprive the child or mother of the right or opportunity to seek legal support from the natural father. In Maryland, as in the majority of other jurisdictions that have addressed this issue, a husband may not be equitably estopped from denying child support to an illegiti-mate child. In Knill, a case of first impres-sion, the dissent would have considered whether the paternal relationship did, in fact, exist. The end result in Knill is that Charles Knill, who voluntarily assumed the role as a father, has no legal duty to support Stephen. But in the final analysis Stephen will suffer the "ultimate humilia-tion of having no support from a man who for all purposes was his father for fourteen years." Brieffor Appellee at 6. - William James Momson, III United States, Petitioner fJ. American Bar Endowment et al.: SUPREME COURT FINDS CHARITABLE ORGANIZATION'S INSURANCE PROGRAM TAXABLE The Supreme Court recently upheld a tax assessment by the IRS against the American Bar Endowment (ABE) concern-ing income received from an insurance plan made available to its members. In United States, Petitioner v. American Bar Endowment et al., 106 S.Ct. 2426 (1986), the Court decided two issues related to the particular plan. First, whether income de-rived from the insurance plan constituted "unrelated business income" subject to tax under § § 511 through 513 of the Internal Revenue Code (Code), 26 U.S.C. §§511-513, and second, whether the members who participated in the plan could claim a charitable deduction for those premium payments which amounted to dividends on behalf of the ABE. The ABE is a corporation exempt from taxation because it is "organized and oper-ated exclusively for charitable ... or edu-cational purposes." 26 U.S.C. §501(c)(3). In order to fund its charitable work, the ABE provides group insurance policies to its members. By purchasing insurance as a group, the ABE has bargaining power that an individual would lack. Furthermore, the cost of the insurance to the group is less because it is based on the group's claims experiences instead of general actuarial tables. Normally, the cost of this plan to the insurance company is less than the premiums paid by the ABE, thereby en-titling the ABE to a "dividend." Instead of dispersing the amount of the dividend among the participating members, the ABE retains the whole dividend amount to aid its fund-raising efforts. Members are required to agree to this arrangement as a condition to participation in the insurance plan. They have also been advised by the ABE that relinquishment of the dividend constitutes a tax-deductible contribution to the ABE, thereby making the after-tax cost of the insurance, "less than the cost of a commercial policy with identical coverage and premium rates." 106 S.Ct. at 2429. The ABE was assessed a tax deficiency after an audit by the IRS in 1980. Its insur-ance plan was considered an "unrelated trade or business" such that any profits realized were subject to tax. 26 U.S.C. §§51l-513. The ABE paid the taxes as-sessed, and then brought an action in the Claims Court for a refund after all admin-istrative remedies had been exhausted. In-dividual participants who had not yet taken a deduction for the excess premiums paid brought an action for refunds as well. The two suits were consolidated for trial in the Claims Court. The Claims Court found in favor of the ABE in its suit, holding that its insurance plan did not constitute a "trade or busi-ness" for purposes of the tax. The court's conclusion was based on the following four factors: (1) The program was developed as a means of raising funds for the ABE's educational efforts. (2) The program's success in generat-ing dividends evidenced noncom-merical behavior. (3) Together, participants could change the program to reduce premiums. (4) The ABE was not in competition with other non-charitable com-panies because it did not under-write or act as a broker. In the individual respondent's action, the court held that they had failed to show that the insurance was purchased at a greater price ''with the intention that the excess be used to benefit a charitable enterprise," and were thus denied a charitable deduc-tion. 4 Cl.Ct. 415 (1984). On appeal, the Court of Appeals for the Federal Circuit affirmed the decision of the Claims Court as to the ABE, but reversed and remanded the decision as to the individual respon-dents for further fact-finding. The Su-preme Court granted the Government's petition for certiorari on both issues. I. In a six to one decision, the Court held that the insurance program offered by the ABE constituted a trade or business for purposes of the unrelated trade or business tax. By definition, the Code sets up a three-part test for determining whether a trade or business carried on by a tax-exempt or-ganization should be taxed. In its discus-sion, the Court found that the ABE's in-surance program is regularly carried on, that it is not substantially related to the purpose of the ABE's tax-exempt status, and that its activity is both "the sale of goods" and "the performance of services." Thus the three-part test is satisfied. Fur-thermore, the program possesses the char-acteristics of services provided by other entities for a profit. After this initial con-clusion, the Court went on to strike down three of the four factors relied on by the Claims Court in its holding. As to the program's success in generating dividends, the Court found this to be a Fal4 J986/The Law Forum -13 

Recent Developments: Knill v. Knill: Husband May Not Be Equitably Estopped to Deny Child Support

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Recent Developments: Knill v. Knill: Husband May Not Be Equitably Estopped to Deny Child Support

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