Standard Fire v. Berrett
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The Stan dard Fire In surance, C o. v. Robe rt C. Berrett, No. 8, September Term, 2006. INSURANCE LAW - INSURABLE INTEREST - CONTRACT OF SALE The Standard Fire Insurance, Co., refused to pay a claim on a homeowner s insurance policy taken out by Robert Berrett on 4305 Gallatin Street, a property which was destroyed by fire after approval of a contract of sale on the p roperty by a circuit court judge in guardianship p roceedings for M r. Berrett s mother, Charlotte Berrett, but before settlement of the sale. Mr. Berrett brought an action for breach of contract, for w hich Standard Fire was granted summary judgment on the grounds that Mr. Berrett was judicially and collaterally estopped from asserting any ownership interest in the property because he had alleged in his verified petitions for h is mother s g uardiansh ip that his mother was th e own er of 43 05 Ga llatin Stre et. The Court of Special Appeals reversed the trial court s entry for summary judgmen t, determining that Mr. B errett did poss ess an insur able interest in the property at th e time of the fire and that Mr. B errett was n either collatera lly nor judicially estopped from asserting his ownership interest therein. The Court of Appeals affirmed the Court of Special Appeals s judgment and held that Mr. Berrett did possess an ownership interest, and therefore an insurable interest, in the property at the time of the fire because the sale was never completed. The Court concluded that Mr. Berrett was not collaterally estopped from asserting his ownership interest because the issue in the guardianship proceeding was not identical to the issue before the court in the insurance claim proceeding, nor was there a final judgment on the merits as to Mr. Berrett s ownership interest. Further, the Court also determined that the allegations made by Mr. Berrett in the guardianship proceedings were not inconsistent with his assertion that he possessed an economic interest in 4305 Gallatin Street in his law suit against Standard Fire, and therefore judicial estoppel was not applicable. IN THE COURT OF APPEALS OF MARYLAND No. 8 September Term, 2006 THE STANDARD FIRE INSURANCE, CO. v. ROBERT C. BERRETT Bell, C.J. Raker Wilner Cathell Harrell Battaglia Greene, JJ. Opinion by Battaglia, J. Raker, J., D issents Filed: November 13, 2006 This action arises out of the refusal by the Petitioner, The Standard Fire Insurance, Co., to pay a claim on a hom eowner s insuranc e policy taken out by Respond ent, Robert Berrett, on 4305 G allatin Street, a property which was destroyed by fire, after approval of a contract of sale on th e property by a circuit cour t judge in gu ardianship proceedin gs for his mother, Charlotte Berrett, but before settlement. Standard Fire filed a petition for writ of certiorari seeking review of the Court of Special A ppeals s jud gment rev ersing the C ircuit Court for Baltimore City s entry of summary judgment for Standard Fire and raised the following questions: 1. When a person holds an unrecorded deed, pursuant to which grantor conveys to him a vested remainder and retains a life estate, does the court-ordered sale of the property in fee simple, in an action to which the grantee is a party, extinguish the gran tee s inter est in the p rope rty? 2. Under the scena rio described above, do the grantee s representations to the cou rt tha t grantor own s the prop erty, coupled with his failu re to raise an interest in the property, estop him from claiming such an interest by virtue of the unrecorded deed or im prov eme nts to the p rope rty? 3. If a person fails to protect his economic interest in a prop erty, does he r etain an in sura ble in teres t in th at property? Standard Fire Ins. v. B errett, 393 M d. 160, 9 00 A.2 d 206 ( 2006) . We shall hold that Mr. Berrett continued to possess an economic interest in the property even after the court s approval of the contract of sale of the property, and that he was not estopped from claiming an insurab le interest therein by his represen tations that his mother was the owner of the property during guardianship proceedings.1 1 We do not address the third question separately because it was not briefed, nor argued, as a unique issue, but incorporated in the presentation of the first issue. Facts In Decem ber, 1995, R obert Berre tt relocated fro m Califo rnia, where he had been living for some twenty years, to his home state of Maryland and began residing at 4305 Gallatin Street, his family s home. In February, 1999, after having made numerous improvem ents to the home, he learned tha t it was not ins ured, wh ich precipitate d his application for insurance with Standard Fire. Mr. Berrett timely paid all of the premiums on the polic y and, w hen it ex pired in Febru ary, 2000 , renew ed for a nother year. In March, 2000, Mr. Ber rett filed a verif ied petition, thro ugh cou nsel, in the C ircuit Court for Prince George s County, to be appointed guardian over the person and property of his mother, Charlotte Berrett. He alleged that he was her primary care taker and that she was no longer able to handle h er financial, b usiness, lega l, and personal matters. He also alleged that his mother owns two parc els of real estate c ommo nly known as 4305 G allatin Street, Hyattsville, Marylan d 2078 3 and 2 303 F ordham Street, H yattsville, M aryland 2 0783, and listed himself and his four siblings as interested parties to the proceedings. Mr. Berrett filed a verified am ended pe tition in Ma y, 2000, in wh ich he aga in alleged that his mother owned 4305 Gallatin Street, and a verified emergency petition in June, iterating that she owned 4305 Gallatin Street. After a hearing on Mr. Berrett s petition, a judge of the Circuit Court for Prince George s County ap pointed R ichard C. D aniels, an attorney, as the guardian of Charlotte Berrett s property, and Theresa Grant of the Prince George s Office of Aging, as guardian of her person. Shortly thereafter, Mr. Daniels petitioned the court for approval of a contract of sale for $89,000.00 for 4305 Gallatin Street, to which Mr. Berrett filed an -2- opposition, alleging that the purchase amount was below market value, that the sale was not necessary to sustain his mother s care because he was supplementing her payments to the nursing home, and that his mother intended to reside at 4305 Gallatin Street in the future. The court overruled Mr. Berrett s opposition and on November 9, 2000, approved the contract. On November 25, 2000, fire destroyed the home be fore settlement and thereafter the purchaser exercised his right to rescind, pursuant to the contract s risk of loss clause, and the home was razed and the property subsequently sold to the same purchaser for a reduced price of $40,000.00. In the interim, Mr. Berrett filed a claim fo r $388,000.00 w ith Standard Fire to recover for the loss of the home. Standard Fire denied the claim, alleging that the court-approved sale of 4305 Gallatin Street extinguished Mr. Berrett s interest in the property so that he did not pos sess an insurab le interes t at the tim e of the loss. In his complaint against Standard Fire,2 Mr. Ber rett alleged tha t he had an insurable interest in 4305 Gallatin Street because his mother, in an unrecorded deed, had conveyed a remainder interest to him in the pro perty,3 while retain ing for her self a life estate, and also 2 Mr. Berrett s com plaint originally named Travelers Property Casualty, Weaver Brothers Insurance Association, Inc. and Eleanor Cruz, both individually and as the agent of Weaver Brothers, as defendants but later dismissed his claims against Weaver Brothers and Cruz. Mr. Berrett also amended his complaint to reflect the correct name of the insurance com pany as The Stand ard F ire In sura nce C omp any. 3 The deed states: This warranty D EED is made on Augus t 4, 1973 by C harlotte Helen Berrett and herein delivered to Robert Carlyle Berrett, Charlotte Berrett s address being 2304 Fordham Street, -3- because Mr. Berrett had resided in and made extensive improvements to the home between 1995 and 2000. He alleged that he never recorded the deed because, b y the deed s term s, it was not to be recorded until his mother s death. He further alleged that he did not disclose the existence of the unrecorded deed during the guardianship proceedings because he was under the imp ression that h is mo ther s life ten ancy e nabled h er to disp ose o f the prop erty. Hyattsville, Md., and Robert Berrett s address being 4305 Gallatin Street, Hyattsville, Md. In consideration of the following improvements to my real prop erty, my residence, 2304 Fordham Street, performed by my Son, Robert C arlyle Berrett, (Such improvements consisting of installation of a two bedroom apartment in the basement of my residence at 2304 Fordham Street, including installation of a code approved concrete block exterior basement entrance, installation of plumbing for a complete basement bath and kitchen, laundry room, and partitions for two bedrooms one bath, living room two closets and a mechanical room containing water heater and furnace with a drainage system and sump pump installed, and m ajor alterations to the existing heating system), I hereby and herein grant to and deliver to my son, Robert Carlyle Berrett all that property situated in Prince Geo rge s Cou nty, Md. known as 4305 Galla tin Stree t, Hyattsvil le, Md ., and described as Lot 17, Block B, 2nd Addition to Wines and Johnson Subdivision in Hyattsville, Md. I cov enan t that I wa rranty the p rope rty spe cific ally. It is further agr eed 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 o f the prop erty. It is further agreed that this DEED shall not be recorded until after my death, the death of me, Grantor of this DEED. -4- In response to Mr. Berre tt s complaint, Standard Fire filed a m otion for summa ry judgmen t, alleging that the judicial approval of the sale of 4305 Gallatin Street on November 9, sixteen days before the fire, had extinguished Berrett s insurable interest in the pro perty. Standard Fire also argued that, because Mr. Berrett alleged in his verified petitions for his mother s guardianship that his mother was the owner of 4305 Gallatin Street, that he now was precluded under both the doctrines of collateral estoppel and estoppel by admission from assertin g his cla im in the proper ty. Mr. Berrett responded by alleging that, as a rema inderman in the prope rty, he could not be divested of his interest until the property was sold and, at th e time of the fire, the sale had not been completed. He further contended that he was not collaterally estopped from asserting his insurable interest because the issue during the guardianship proceedings was whether Charlotte Berrett was disabled, whereas, in the Standard Fire proceedings, the issue was whether Mr. Berrett possessed an insurable interest in the property. Morever, Mr. Berrett maintained that his allegation that his mother was the owner of the property in the guardians hip proceedings was not inconsistent with his statement of ownership during proceedings on the insurance claim because both possessed ownership interests in the proper ty; his moth er s of a life estat e interes t, and his of a rem ainder in terest. After the hearing on Standa rd Fire s summary judgment motion, at which both parties were represented by counsel and presented oral arguments, the trial court granted summ ary judgment to Standard Fire, concluding that Mr. Ber rett was bo th collaterally and judicia lly estopped from asserting an insurab le interest in the property. M r. Berrett noted a timely -5- appeal to the Cou rt of Specia l Appeals , which de termined in a reported o pinion that, b y virtue of the unrecorded deed, Charlotte Berrett had, after retaining a life estate for herself, granted Mr. Ber rett a vested, ind efeasible re mainder in 4305 Gallatin Street, which was deemed to be an insurab le interes t. Berrett v. Standard Fire Ins. Co., 166 Md. App. 333, 338, 888 A.2d 1196, 1199 (2005). The intermediate appellate court held that the court s approval of the sale of the property did not negate Mr. Berrett s economic interest in the property because, even if the sale of the property had been completed at the time of the fire, Mr. Berrett would have had a chose in ac tion against th e guardian ship estate for his s hare in the sale proceeds as a remainderman. Thus, the Court o f Special A ppeals concluded that M r. Berrett did possess an economic, and therefore an insurable, interest in the property at the time of the fire. The court also determined that the doctrine of collateral estoppel did not apply to Mr. Berrett s action to recover from Standard Fire because the guardianship proceedings did not address the nature of Mr. Berrett s interest in 4305 Gallatin Street and that the doctrine of judicial estoppel did not apply because Mr. Berrett never took a position regarding his own inter est in the property during the guardian ship proceedings w hich were incons istent w ith his as sertions in the ins urance claim p roceed ings. Before this Court, S tandard F ire contend s that, under Section 12-301 (a) of the Insurance Article, Maryland Code (1997), an economic interest in property must be present in order to constitute an insurable interest therein. Standard Fire asserts that, when the contract of sale of the p roperty was approve d by the circuit court on Nov ember 9, 2000, M r. Berrett s econom ic, and theref ore insurab le, interest in the property was extinguished because -6- only Charlotte B errett would benef it from th e proce eds of the sale. Standard Fire also alleges that the court in the guardianship proceeding made a final determination that Ch arlotte Berrett was the owner of 4305 Gallatin Street, and that Mr. Berrett was a party in those proceedings. The Company maintains, as a result, that Mr. Berrett was required to assert his ownersh ip interest during the guardia nship proceedings and is now barred by the doctrine of collateral estoppel from claiming an ownership interest in the property. Standard Fire also claims that Mr. Berrett is precluded under the doctrine of judicial estoppel from alleging that he was the owner of the property because he stated in all of his verified petitions for guardi anship that his m other w as the o wner o f 4305 Gallatin Street. Con vers ely, Mr. Berrett claims that, as owner of a vested, indefeasib le remaind er in 4305 Gallatin Stre et, he posses sed an insu rable interest in the property of which he was not divested by the court s approval of the contract of sale. Mr. Berrett maintains that whether a party possesses an insurable interest in a property is determined at the time of the loss, and that, at the time of the loss in this case, the sale of 4305 Gallatin Street had not been completed and thus, his insurable interest was not e xtinguished . Mr. Berre tt also claims th at, even if the sale had been completed at the time of the fire, his remainder interest would not have been entirely lost, but instead, translated into a right to the proceeds, which constitutes a chose in action and thereby an insurab le interest. M r. Berrett further alleg es that any claim of nonmutual collateral estoppel fails because the issue of his insurable interest in the property was not fully litigated during the guardianship proceedings. Mr. Berrett also contends that judicial estoppel does not apply in this case because the doctrine requires that -7- he have taken an inconsistent position in the guardianship proceedings in order to gain an unfair adv antage in th ose proce edings, w hich he did not. Discussion The entry of sum mary judgm ent is gover ned by M aryland Rule 2-501, which provides in pertinent p art that: (f) Entry of jud gment. The court shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is e ntered is entitled to judgment as a matter of law. The question of whether the trial court properly granted summary judgment is a question of law and is subject to de novo review on app eal. Miller v. Ba y City Pro perty Owners A ss n Inc., 393 Md. 620, 632, 903 A.2d 938, 945 (2006), quoting Myers v. Kayhoe; 391 Md. 188, 203, 892 A.2 d 520, 52 9 (2006); Ross v. State Bd. of Elections, 387 Md. 649, 658, 876 A.2d 692, 697 (2005); Todd v. MTA, 373 M d. 149, 154 , 816 A.2d 930, 933 (2003); Beyer v. Morgan State Univ., 369 Md. 335 , 359, 800 A.2d 7 07, 721 (2002). If no material facts are in dispute, we must determine whether summary judgment was correctly entered as a matter of law. Ross, 387 Md. at 659, 876 A.2d at 698; Todd, 373 Md. at 155, 816 A.2d at 933; Beyer, 369 Md. at 360, 800 A.2d at 721. On appeal from an order entering summary judgmen t, we review only the grounds upon which the trial court relied in granting summ ary judgment . Ross, 387 Md. at 659, 876 A.2d at 698, quoting Eid v. Duke, 373 Md. 2, 10, 816 A.2d 844, 849 (2003), quoting in turn Lovelace v. Anderson, 366 Md. 690, 695, 785 A.2d 726, 729 (2001 ). -8- There are two issues in this case : the first, w hether the judicial approval of the contract of sale of 4305 Gallatin Street divested Mr. Berrett of his insurable interest in the property at the time of the fire, and th e second , whether M r. Berrett is estopped from asserting that interest by his actions during the guardianship proceedings for mo ther, Charlotte Berrett. We conclude that Mr. Berrett possessed an insurable interest in the property at the time of the fire and that he was not estopped from asserting that interest because of what he said and did during his mother s guardianship proceedings. A. Effect of the Court s Approval of the Contract of S ale on Mr . Berrett s Insurab le Interest Standard Fire alleges that, because the circuit court had approved the sale of 4305 Gallatin Street on November 9, 2000, Mr. Berrett no longer possessed an economic interest in the property on November 25 when the home was destroyed by fire. We disagree. Insurable interest is defined in Section 12-301 of the Insurance Article, as an actual, lawful, and substantial economic interest in the safety or preservation of the sub ject of the ins urance ag ainst loss, destruction, or pecuniary damage or impairment to the pro perty. Maryland Code (1997), Section 12-301 (a) of the Insurance Article. Whether an individual holds an insurable interest is defined statutorily at the time of the loss, rather than at the time of the contrac t. Maryland C ode (199 7), Section 1 2-301 (b) o f the Insura nce Article. M r. Berrett contends that he owned an indefeasible, vested remainder, which constitutes an insurable interest at the time of the fire. A vested, indefeasible remainder is a prese nt, fixed right to future enjoyment, and -9- is an estate which the owner can convey or devise o r which d escends in case of inte stacy to his heirs. Myers v. Myers, 185 Md. 210, 221, 44 A.2d 455, 460 (1945). A remainder interest is any future interest limited in favor of a transferee in such manner that it can become a present interest upon the expiration of all prior interests simultaneously created, and cannot divest any interest except an interest left in the transferor. 2 Restatement of Property § 156, at 535 (193 6). The term vested connotes that the assumption of the estate by the remainderman is not contingent upon any prerequisites, but rather the remainderman stands ready to take [the prop erty] immediately on the termination of prior . . . estates. In re Trust of Lane, 323 M d. 188, 1 95 n.4, 5 92 A.2 d 492, 4 96 n.4 (1991), quoting 1 American Law of Property § 4.2, at 408 (A. James Casner ed. 1952). Indefeasible means that the person granted the future interest cannot be dive sted of that inter est. In re Trust of Lane, 323 Md. at 197, 5 92 A.2 d at 497 (holding that remainder interest was defeasible because the interest ma y be defea ted b y a subsequent occurrence before the termination of the precedent estate ).4 4 The deed conveying an indefeasible, vested remainder in this case was never recorded pursuant to Ma ryland law . Maryland Code (1974, Repl. Vol. 1996), Section 3-101 (a) of the Real Property Article ( [N]o estate of inheritance or freehold, declaration or limitation of use, estate above seven years, or deed may pass or take effect unless the d eed grantin g it is executed and recorded. ); Maryland Code (1974, Repl. Vol. 1996), Section 3-103 of the Real Property Article (requ iring that all con veyances of real property be recorded in the county where the land affected by the deed lies). The central purpose for the recording requirement is: [T]o provide a way to give notice to purchasers, mortgagors, lien holders and the like, of the prior conveyances of, or encumbrances on, the property of a particular person. -10- We explored the insurable interests of remaindermen and life tenants in Forbes v. American International Insurance Co., 260 Md. 181, 271 A.2d 684 (19 70), when f aced with the question o f whethe r a succeed ing life tenan t was entitled to the proceeds of a fire insurance policy procured by the preceding life tenant. In explicating the general rule, we explained that: [T]he dictum found in Legge v. C anty shows rather clearly that this Court some years ago manifested a disposition to follow the general rule we re the iss ue to be presen ted to it. In that case Judge Offutt, writing for the Court, stated: Ord inarily, in the case o f a life tenan cy the life tenan t would insure his interest, and the remaindermen w ould insure their interests. Id. at 186, 271 A.2d at 686 (citations omitted), quoting Legge v. C anty, 176 Md. 283, 289, 4 A.2d 465, 468 (1939). By so stating, we a dopted the majority view that, absent a contract or fiduciary duty, neither the life tenant, nor the remainderman, is obligated to insure the other s interest, but rather, both must individually insure his or her ow n interes t. Forbes, 260 Recording and indexing was not n ecessary to dete rmine title to property as between the seller and buyer but only to determine priorities as between subsequent claimants to title inte rests, i.e., third pa rties . . . . Greenpoint Mortg. Funding, Inc. v. Schlossberg, 390 Md. 211, 230, 888 A.2d 297, 308-09 (2005). The fact that a deed was never recorded does not negate its binding effe ct, however, upon the grantor and grantee; it is still a valid contract between those two parties, and also is a bindin g contr act with respec t to third p ersons with ac tual noti ce of th e deed . Balt. Transit Employees Credit Union v. Thorne, 214 Md. 200 , 206, 134 A.2d 8 4, 86 (1957); Johnston v. Canby, 29 Md. 211, 215-16 (18 68); Hudson v. Warner, 2 H. & G. 415, 422-23 (1828). Thus, the u nrecorded deed in this c ase wou ld be effe ctive as betw een Cha rlotte Berrett and Robert Berrett and third parties with actual notice thereof. -11- Md. at 184-85, 271 A.2d at 685, quoting Thompson v. Gearheart, 119 S.E. 67, 68 (Va. 1923). Therefo re, a remaind erman do es have an insurable inte rest. Did, however, the court s approval of the contract of sale of the property in this case divest Mr. Berrett of his insurable interest as a remainderman? It is well settled in Maryland that a contract o f sale of rea l property vests e quitable title to the prope rty in the purchaser, while the seller retains legal title. We addressed this distinction in Himmighoefer v. Medallion Industries, Inc., 302 Md. 270 , 487 A.2d 282 (1985), in which a construction vendor attempted to obtain a m echanic s lien against a property after the owner had entered into a contract fo r its sale. Holdin g that the cred itor could not o btain a lien on th e pro perty, we explained that the effect of such a contract is to vest the eq uitable ownership of the property in the ve ndee, subject to the ven dor s lien fo r unpaid purchase money, and to leave only the legal title in the vendor pending the fulfilment of the contract and the formal conveyance of the estate. The right of the vendee to have the title conveyed upon full compliance with the contract of purchase is not impaired by the fact that the vend or, subseque ntly to the execution of the contract, incurred a debt upon which judgment was recovered. Id. at 279, 487 A.2d at 287, quoting Kinsey v. Drury, 146 M d. 227, 232, 126 A. 125, 127 (1924). See also Knight v. Princess Builders, Inc., 393 Md. 31, 49, 899 A.2d 156, 167 (2006); DeShields v. Broadwater, 338 Md. 422, 438, 659 A.2 d 300, 30 7 (1995); Watson v. Watson, 304 Md. 48, 60 , 497 A.2d 794 , 800 (1985). In Kingsley v. Makay, 253 Md. 24, 25 1 A.2d 585 (1 969), we addresse d whether a judgment entered against a purchaser of real property established a lien on the property where -12- the judgment was obtained after the purchaser entered into the contract of sale, and after he had assigned his interest in the prop erty to another party. In holding that the judg ment did not establish a lien on the property, we exp lained that the assignment o f the purchaser s equitable interest in the property was valid, despite never being recorded, because there was no requirement that a contract of sale be r ecorde d. Id. at 28, 251 A.2d at 587. The contract of sale, vesting equitable title in the purchaser, as w e explained, is distinguishable, how ever, from the comp letion of the s ale in that leg al title to land, of course, does not pass, other than by operation of law, until a deed is properly executed and recorded. Id. at 27, 251 A.2d at 587. See also Maryland Code (1974, Repl. Vol. 1996), Section 3-101 (a) of the Real Property Article; Childs v. Ragonese, 296 Md. 130, 139 n.8, 460 A.2d 1031, 1036 n.8 (1983) (acknowledging that in Ma ryland, legal title does not pass until the deed is executed and recorded). In the present case, settlement had not occurred, so that a dee d to the prop erty in the judicially-approved purchaser s name had not been executed, nor recorded. We have ack nowled ged that an insurer rem ains respon sible to indemnify the insured seller on losses incurred after the contract is entered into , but before the sale of the prop erty is completed. In Washing ton Fire Ins urance C o. v. Kelly, 32 Md. 421 (1 870), two insurers denied claims made after fire had destroyed the insured s property, contending, among other things, that the insuran ce contrac ts were ren dered nu ll and void b y the insured s c ontract to sell the property entered into before the time of the fire. We agreed with the insurers in tha t, [t]here is no doubt that an insurance against fire without an interest in the subject-matter insured is a wagering contract, which the law does not sanction; and it is, therefore, necessary -13- that the insured sho uld have an interest in the property insured, not only at the time of the insurance, but when the loss b y fire occurs. If the insured sell the property, and transfer all his interest therein, or assign all interest in the policy, before the loss hap pens, h e cann ot recov er . . . . Id. at 435-36 (emph asis in original). We determined , however, that to preve nt the recovery for any loss by fire, the sale or conv eyance mu st be made out full and complete. Id. at 436. To constitute a complete sale the right to the property sold and to the possession thereof, must pass from the vendor to the vendee. Id. at 436. A mere contract for the sale or conve yance, however, will not divest the title of the vendor and vesting the same in the vende e, and therefo re does not con stitute a c omple te sale. Id. We held that the sale of the property was not completed at the time of the loss, and therefo re the insured as the ven dors of the p rope rty, before the actual conveyance thereof, held an insurable interest therein. Id. at 437. Thus, a contract of sale of real property, taken alone, before settlement, will not negate the insured s ability to recover from a loss by fire.5 B. Defensive Non-mutual Collateral Estoppel and Judicial Estoppel 5 We note that this conclusion is consistent with the general rule. See Kentucky Farm Bureau Mut. Ins. Co. v. Conley, 498 S.W .2d 1 22, 1 26 (K y. 1973) (stating that [i]t is likewise the general rule that an exec utory contract o f sale does not extinguish th e vendor s insurable interest ), citing 15 Couch on Insurance 2d, § 54.227 (1984 ). Aetna Casualty & Surety Co. v. Cameron Clay Prods., Inc., 151 S.E.2d 305, 307 (W. Va. 1966) (holding that a contract to sell insured real property, even though the insured has bound himself to convey upon the performance of certain conditions does not affect the validity of the insurance, and if a loss occurs before th e cond itions are perfor med, a recove ry may be h ad by the insured . . . ), citing MacCutcheon v. Ingraham, 9 S.E. 260, 263 (W. Va. 1889) . Cf. Thurston Nat l. Ins. Co. v. Hays, 544 S.W.2d 853, 854 (Ark. 1977) (holding that purchaser had insurable interest in property at the time of the fire even though sale had not yet been completed and seller retained risk of loss until settlement). -14- 1. Defensive Non-mutual Collateral Estoppel Standard Fire claims that Mr. Berrett is barred under the doctrine of collateral estoppel from asserting his ownership interest in 4305 Gallatin Street because th e issue of o wnership was ad dressed in his m other s g uardian ship pro ceedin g, to wh ich he w as a par ty. The traditional doctrine of collateral estoppel, or issue preclusion, simply means in a second su it between the same parties, even if the cause of action is different, any determination of fact that was actually litigated and was essential to a valid and final judgment is conclusive. Rourke v. Amchem Prods., Inc., 384 M d. 329, stet, 863 A.2d 926, 933 (2004) (emphasis in original), quoting in turn Welsh v. Gerber Prods. Inc., 315 Md. 510, 516, 555 A .2d 486 , 489 (1 989). See also Colandrea v. Wilde Lake C ommun ity Ass n, 361 Md. 371, 387, 761 A.2d 899, 907 (2000), quoting Janes v. Sta te, 350 Md. 284, 295, 711 A.2d 1319, 1324 (1988), quoting in turn Murray Intl. v. Graham, 315 Md. 543, 547, 555 A.2d 502, 504 (1989) ( When an issue of fact or law is actually litigated an d determin ed by a valid and final judgment, and the determination is essen tial to the judgm ent, the determ ination is conclusive in a subsequent action between the parties, whether on the same or a different claim. ). The determination of ultimate fact underlying the judgment in a previous proceeding is the gra vame n of the doctrin e. Colanda, 361 M d. at 391, 76 1 A.2d a t 909. Its purpose is to av oid the e xpens e and v exation of mu ltiple law suits, conserve judicial resources, and foster reliance on judicial action by minimizing the possibilities of inconsistent decisions. Id. at 387, 761 A.2d a t 907, q uoting Janes, 350 Md. at 295, 711 A.2d at 13 24. O r, stated d iffe rently, collateral estoppel is based upon the judicial policy that -15- the losing litigant deserves no rematch after a defeat fairly suffered, in adversarial proceedings, on issues raised . . . . Id. at 391, 8 63 A.2 d at 909 . In its traditional form, collateral estoppel requires mutuality of parties, so that the doctrine would o nly apply when the same tw o parties in a p revious law suit are involv ed in another law su it. Rourke, 384 M d. at 340-41, 863 A.2d at 933. This traditional notion of mutuality of partie s is not alw ays required, however, if one of the parties in the original case is invo lved in relitiga ting one of th e issu es de term ined agai nst a diff eren t party in a successive suit. We explored this modification of collateral estopped in Rourke v. Amchem Products, Inc., supra, explaining: If the plaintiff in the second case seeks to foreclose the defendant from relitigating an issue that the defendant previously litigated unsu cces sfully against oth er plaintiffs, the doctrine invoked is offensive non-mu tual collateral es toppel; if the defendant seeks to preclude the plaintiff from relitigating an issue that the plaintiff previously litigated unsucce ssfully against other defen dants, the doctrine is referred to as defensive non-mu tual collateral es toppel. Id. at 341, 863 A.2d at 933 (emphasis ad ded). In the case before us, Mr. Berrett was involved in the guardianship proceedings as the petitioner, but Standard Fire was not, so that the doctrine being invoked by Standard Fire is that of defensive, non -mutual collateral estoppel. We have approved a four-part test for determining whether the doctrine of defensive, non-mutual collateral estoppel applies: 1. Was the is sue decide d in the prior a djudication identical w ith the one presented in the action in question? 2. Was there a final judgment on the merits? -16- 3. Was the party against whom the plea is asse rted a party or in privity with a party to the prior adjudication? 4. Was the party against whom the plea is asserted given a fa ir opportunity to be heard on the issue? Colandrea, 361 M d. at 391, 76 1 A.2d a t 909; Leeds Federal Savings and Loan Ass n v. Metcalf, 332 M d. 107, 117 -18, 630 A .2d 245, 25 0 (1993). T he gravam en of this test is that the party to be bou nd must h ave had a full and fa ir opportun ity to litigate the issues in question. When an issue was not required to be litigated and was not in fact litigated, the judgment ordinarily will not preclude its subsequent litigation. Gerber, 315 M d. at 518 , 555 A .2d at 49 0 (emp hasis ad ded). We originally espoused the doctrine of defensive, non-mutual estoppel in Pat Perusse Realty Co. v. Lingo, 249 Md. 33, 238 A.2d 100 (1968), in which a real estate broker, Perusse, entered into a co ntract to sell the h ome o f the L ongs, w ho we re divo rcing. W hen Perusse located a buyer, Mrs. L ong refu sed to con summa te the sale, and Perusse sued the Longs for the commissions he alleged were owed to him. Mrs. Long had since moved out of state, however, and could not be served with process so that Perusse only proceeded against Mr. Long. The Court determined that Perusse had failed to provide evidence of a ready, willing and able purchaser and dismissed the action against Mr. Long; Perusse subsequently sued Mrs. Long. Adopting the doctrine of defen sive, non-m utual estopp el, we held that Perusse was estopped from suing Mrs. Long because: Perusse, in its suit against [Mr. Long ], had its full day in court and full opportunity to win on its claim that it procured a buyer read y, willing and able to buy at the seller's pric e. Its claim was decided against it. The re can be n o doubt th at it sought to relitigate that precisely identical issue in the attachment against -17- [Mrs. Long]. P ublic policy aga inst repetitive ide ntical litigation, which underlies the rule of res judicata, applies here with lo gic and force to provide that Perusse s rights were satisfied by having had its day in court on an issue, and that it is not entitled to another da y in court again st a particular defendant on that issue. Id. at 45, 238 A.2d at 107-08. Further, in Welsh v. Gerber Products, Inc., supra, the Welsh s son was injured when his car seat failed to restrain him during an accident. T he Welsh es sued bo th the driver of the other vehic le involved in the accident and Gerber, the car seat manufacturer, and subseque ntly settled with the other driver for his insurance policy limits. Gerber invoked the doctrine of defen sive, non-m utual collateral estoppel, arguing that the W elshes were precluded from relitigatin g the issue o f the amo unt of their d amages b ecause th ey had accepted the policy limit of the negligent party s insurance. In answering the certified question of law from the federal district court as to whethe r a consen t judgmen t would preclude the Welsh s action against Gerber for damages, we stated: As a factual matter, a consent judg ment may, or may not, involve a determination of the amount that represents the complete equivalent of the plaintiff s damages. Where, as apparently is the case here, the parties make no attempt to agree upon or litigate the fair value o f the claim, b ut agree inste ad to accept the available insurance c overage w hile specifica lly reserving the right of the plaintiff to proceed against others for full compensation, a consent judgment entered to give effect to the agreeme nt does no t in fact repres ent the result o f litigation of the issue of damages. Id. at 518-19, 555 A.2d at 490. By comparison, in Leeds Federal Savings and Loan Ass n v. M etcalf, supra, we held -18- that the doctrine of defensive, non-mutual collateral estoppel did app ly. In that case, the Metcalfs brought simultaneous actions against Leeds Federal Savings and Loan Association and Ms. Buppert, alleging that the passport savings accounts held jointly by the Metcalfs and Ms. Lanahan was closed by Ms. Buppert without Ms. Lanahan s authority. In the action against Ms. Bupp ert, the Circuit Court for Carroll County found that she had acted under the authority of Ms. Lanahan and granted summary judgment for Ms. Buppert. In the action against Leeds in the Circuit Court for Baltimore City, the bank invoked the doctrine of defensive , non-mu tual collateral es toppel. In ap plying estoppe l, we conc luded that: In the instant case the issue sought to be relitigated by the Metcalfs . . . was essential to the decision of the Circuit Court for Carroll Coun ty, and it was reso lved adve rsely to the Metcalfs. That issue also was central in the instant case . . . . The judgmen t of the Circ uit Court for Carro ll County wa s final; the Metcalf s were pa rties to that adjudication; and the Metcalfs were given a fair opportunity to be heard on the issue in the Carroll County case. Consequently, we hold that the Metcalfs were precluded from relitigating the issue in the instant case. Id. at 120, 630 A.2d at 251. See also Attorney Grievance Comm n v. Alison, 349 Md. 623, 634, 709 A.2d 1212, 1217 (1998) (holding that the doctrine of defensive, non-mutual collateral estoppel did not apply because the issue litigated in the first law suit was not identical to the issue litigated in the subsequen t law suit). In this case, Standard Fire alleges that during the guardianship proceedings, the judge determined the ow nership of 430 5 Galla tin Stree t. We disagree. At the time of the fire, the court had not made a final determ ination as to th e nature of Charlotte B errett s prope rty interest in 4305 G allatin Street; it had m erely d etermined whether she was disabled and -19- whether she was or could have been entitled to property or benefits. Guardia nship of prope rty petitions are go verned b y the Maryland Rules of Civil Procedu re and mu st contain ve rified stateme nts concern ing, amon g others: (8) To the extent known or reasonably ascertainable, the name, address, telephone number , and nature of interest of all interested persons an d all others exercising any control over the property of the estate. *** (10) The nature, value, and location of the property of the minor or alleged d isabled pers on; (11) A brief description o f all other pro perty in which the minor or alleged disabled person has a concurrent interest with one or more individuals. Marylan d Rule 10-30 1 (c). Once the verified p etition is filed, the court may appoin t a guardian of the prop erty if the judge determine s that: (1) The pers on is unable to man age h is pro perty and affairs effectively because of physical or mental disability, disease, habitual drunkenness, addiction to drugs, imp risonmen t, compulsory hospitalization, confinement, detention by a foreign power, or disappearance; and (2) The person has or m ay be entitled to property or be nefits which re quire prop er manag ement. Maryland Code (1974, Repl. Vol. 1991), Section 13-201 (c) of the E states and T rusts Article (emph asis add ed). In the present case, by November 9, 2000, when the court approved the contract of sale, but before the fire, the judge had not made any final determination as to the nature of Charlotte Berrett s interest in 4305 G allatin Street, bu t only that whatever interest she owned -20- could be sold fo r $89,000 .00. Nor d id the judge make any determination as to M r. Berrett s remainder interest. Thus, the issue in the guardianship proceeding was not identical to the issue before the court in the insura nce claim proceed ing, nor was there a final judgment on the merits as to the issue of Mr. Ber rett s owne rship interest. C. Judicial Estoppel Standard Fire also claim s that Mr. B errett was es topped by the doctrine of judicial estoppel from asserting his ownership rights in 4305 Gallatin Stre et because he alleged in his verified guardianship petitions that his mother was the owner of the property. The doctrine of judicial estoppel, or estoppel by admission, has been elucidated in a historical context by Judge Alan Wilner, writing for this Court in Eagan v. Calhoun, 347 Md. 72, 698 A.2d 1097 (1997): Maryland has long recognized the doctrine of estoppel by admission, derived from the rule laid down by the English Cou rt of Exchequer in Cave v. M ills, that a man shall not be allowed to blow hot and cold, to claim at one time and deny at an other. In Stone v. Stone and Wilson Brothers v. Cooey, we adopted the stateme nt of tha t princip le . . . . Genera lly speaking, a party will n ot be perm itted to mainta in inconsistent positions or to take a position in regard to a matter which is directly c ontrary to , or inconsistent with, one previously assumed by him, at least where he had, or was chargeab le with, full knowledge of the facts, and another will be prejud iced by h is action . Id. at 87-8 8, 698 A .2d at 11 05 (citat ions om itted). See also Underwood-Gary v. Mathews, 366 Md. 660, 667 n.6, 785 A.2d 708, 712 n.6 (2001) (defining judicial estoppel as a principle that precludes a party from taking a position in a subsequent action inconsistent with a position taken by him o r her in a previous action ). -21- In Kramer v. Globe Brewing Co., 175 Md. 461, 2 A.2d 634 (1938), the doctrine of judicial estoppel was invoked against Globe Brewing Company by Kramer, an individual who was injured while assisting an employee of Globe Brewing. Globe Brewing, in an answer to a complaint in tort, alleged that workmen s compensation was Kramer s exclusive remedy, which prom pted Kramer to o btain a voluntary dismissal without p rejudice of his tort action and to file a worker s compensation action. In the worker s compensation action, however, Globe Brewing proffered testimony that Kramer was not its employee at the time of the accident, to which Kramer objected on the grounds that Globe Brewing was estopped by its prior allegations of exclusivity of worker s compensation remedies. We concluded that under some circumstances admissions in pleadings may be explained, while under other circumstan ces, in the intere st of sound public polic y, regardless of th eir truth or fa lsity, such admissions estop the pleader from denying their force and effect. Id. at 469, 2 A.2d at 637. We applied judicial estoppel to preclude Globe Brewing from asserting that Kramer was not its employee because Kramer was caused to change his position to his own detriment, and to the ultimate advantage of [Globe B rewing] by Globe B rewing s previous allegatio n of w orker s comp ensatio n exclu sivity. Id. We further noted, [t]here is no indication in the record before us that [Globe Brewing s] special plea was hastily filed by the attorneys who represented [Globe Brewing] in the common law action, and, to the contrary, the reasonable inference is that it was filed deliberately and with the full knowledge of its plain meaning and effect on the part of the duly accredited officials of [Globe Brewing]. Id. at 472, 2 A .2d at 638, a nd conclu ded that, -22- it would, in our opinion, be an injustice to [Kramer], in the present suit, to permit [Globe Brewing], after having availed itself of an affirmative defense in the prior suit, to appear in a subsequent proceeding involving the same matter of co ntroversy between the same parties, and deny the facts asserted by it, or on its beha lf, in the s pecial p lea. Id. at 471, 2 A.2d a t 638. See also Underwood-Gary , 366 Md. at 667 n.6, 785 A.2d at 712 n.6; WinMark Ltd. P ship v. Miles & Stockbridge, 345 Md. 614, 620, 693 A.2d 824, 826-27 (1997); Walker v. A cting Direc tor, Dept. of F orests & Parks, 284 Md. 357, 366, 396 A.2d 262, 267 (1979); Van Royen v. Lacey, 266 Md. 649, 651-52, 296 A.2d 426, 427 -28 (1972). In Pittman v. Atlantic Realty Co., 359 Md. 513, 754 A.2d 1030 (2000), we explicated the prerequisites for the application of the doctrine of judicial estoppel to be applicable in a given case: (1) [T]he assertion of a factual position inconsistent with that taken in prior litigation; (2) that the prior inconsistent position must have been accepted by the court; and (3) that the party sought to be estopped must intentionally have misled the court to gain unfair advantage. Id. at 529 n .9, 754 A .2d at 10 38-39 n.9 (em phasis a dded). In this case, M r. Berrett allege d in his verified petitions for a guardian of the person and property of Charlotte Berrett that C harlotte Be rrett possesse d an ow nership intere st in 4305 Gallatin Stre et and that h e and his four siblings were interested persons in those proceedings. Those allegations are not inconsistent with his assertion in his law suit against Standard Fire that he possessed an econom ic interest in 4305 Gallatin Street, and thereby an insurable interest, at the time of the fire because both could exist conc urrently. Also, his earlier assertion of his mother s ownership interest was not to his advantage in the -23- guardi anship procee dings; h e did no t gain an unfair a dvanta ge by his a verme nts. We therefore conclude that, because the sale of 4305 Gallatin Street was not comp lete at the time of th e fire, Mr. Berrett ow ned an ec onomic in terest, and ther efore an in surable interest, in the property at the time of the loss. Mr. Berrett also did not litigate the nature of his interest during the guardianship proceedings for his mother, Charlotte Berrett, and therefore the doctrine of defensive, non -mutual estoppel does n ot apply. Finally, Mr. Berrett is not judicially estopped by his representations to the court in his verified petitions for a guardian of Charlotte B errett. We the refore aff irm the judg ment of th e Court of Special Appeals. JUDGMENT OF THE COURT OF SPECIAL APPEALS AFFIRMED; COSTS IN THIS COURT AND THE COURT OF SPECIAL APPEALS TO BE PAID BY THE PETITIONER. -24- IN THE COURT OF APPEALS OF MARYLAND No. 8 September Term, 2006 THE STANDARD FIRE INSURANCE COMPANY v. ROBERT C. BERRETT Bell, C.J. Raker Wilner Cathell Harrell Battaglia Greene, JJ. Dissenting Opinion by Raker, J. Filed: November 13, 2006 Raker, J., dissenting: I would reverse the judgment of the Court of Special Appeals and affirm, on grounds of judicial estoppel, the judgment of the Circuit Court for Baltimore City granting summary judgment in favor of petitioner. The position respondent took in the earlier guardianship proceeding and subsequent litigation challen ging the res ults of that proceeding is inconsistent with the position he asserts in this action. Under the doctrine of judicial estoppel, he cannot do so and should be barred from claiming that he possessed a vested remainder in the property at issue. Judicial estoppel has been defined as a principle that precludes a party from taking a position in a subsequ ent action inco nsistent with a p osition ta ken by h im or he r in a pre vious a ction. Underwood-Gary v. Mathews, 366 Md. 660, 667 n. 6, 785 A.2d 70 8, 712 n. 6 (2001). This Court has explained that the policy un derlying judicial e stoppel is to p reserve the in tegrity of the judicial system. Winmark v. Miles & Stockbridge, 345 Md. 614, 628, 693 A.2d 824, 830 (1997). We stated as follows: The policy underlying judicial estoppel and underlying the clean hands doctrine is the same. The clean hands doctrine is not applied for the protection of the parties nor as a punishmen t to the wrongdoer; rather, the doctrine is intended to protect the courts from having to endorse or reward inequitable co nduct. Id. (quoting Adams v. Manown, 328 Md. 463 , 474-75, 615 A .2d 611, 616 (199 2)). On March 22, 2000, respondent filed in the Circuit Court for P rince Ge orge s Co unty a Complaint for Guardiansh ip of the Person and Property of Charlotte Berrett, In the Matter of Charlotte Berrett, Case N o. CAE 00-0659 7, in which he stated un der oath tha t his mother owns two parcels of real estate commonly known as 4305 Gallatin Street, Hyattsville, Maryland 20781 and 230 4 Fordha m Street, Hyattsville, Maryland 20783. These rep resentations w ere repeated in two subsequent petitions he filed in the Circuit Court. In each of these actions, respondent never mentioned or identified any interest he may have held in these properties. A critical representation in a guardianship of the property proceeding is the list of any property owned by the subject of the petition and the nature of the interest owned. Maryland R ule 10-301 addresses the petition for a guardian over the property of alleged disabled persons and minors. Section 301(c)(8) and (10) of Rule 10-301 require that the petition contain information as to the nature, value, and location of the property of the alleged disabled person, and to the extent known or reasonably ascertainable, the nam e, address, telephone num ber, and nature of the interest of all interested pe rsons and all others exe rcising any con trol over the p roperty of the e state. Respondent drafted the deed related to the property at issue, and he knew of its existence during these proceedings. The guardianship judge, Judge G. R. Hovey Johnson, necessarily relied upon respondent s representation that his mother owned the property. Respondent never listed in the petition any purp orted in terest he may hav e held in the pro perty. The majority misreads the petition when it states th at M r. Berre tt alleged in his ve rified p etition . . . that Charlotte Berrett possessed an ownersh ip interest in 43 05 Gallatin Street. Maj. op. at 23. Respondent did not merely suggest an ownersh ip interest. Re sponden t averred tha t [Charlotte] Berre tt owns two parcels of real estate . . . In the pres ent ma tter, the Circuit Court, Judge Joseph H. H. Kaplan , granted summary judgment in favor of petitioner. He stated as follows: As I indicated, co unsel, I reviewed the file befo re today s proceeding and it seems to the Court and I so find that [Standard Fire] is entitled to have their motion for summary judgment granted for the reasons stated in their mem orandum in support o f the motio n that M r. Berrett is collaterally estopped from claiming an interest in the prope rty. In his testimony before Hovey Johnson in Prince George s County, he f ully acknowledges several times throughout the proceedings, the guardians hip procee dings, e tc., that his mother was the owner of the prop erty. 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 h im a fee simp le interest. He s not claiming that he has a fee simple, ha d a fee simple interest in the prop erty. He s -2- 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 collate ral estop pel and estopp el by adm ission. Judge Kaplan was correct when he found that respondent s previous statements estopped him from claimin g a prop rietary inter est in the proper ty in the pre sent cas e. The Court of Special Appeals basis for excusing respondent s inconsistent position is not persuasive. The fac t that Berrett m ay not have b een repres ented by cou nsel should make no difference in the ana lysis. An unrepresented layperson is held to the same standard as a litigant who is represented by counsel; neither litigant may take an inconsistent position. Moreove r, it appears that Berrett was represented by counsel when the guardianship petition was filed and the property owned by his mother was listed in the petition. Fin ally, Berrett apparently studied law and received a juris doctor degree in 1992. Judicial estoppel should bar respondent from claiming that he possessed an interest over the property in question. -3-
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