Bank of New York Mellon v. Georg

The Bank of New York Mellon, Trustee et al. v. Heinz Otto Georg et al., No. 20, September
Term, 2017
PRINCIPLE OF JUDICIAL ESTOPPEL – STANDING – PRIVITY – DOCTRINE
OF RES JUDICATA – DOCTRINE OF COLLATERAL ESTOPPEL – FINAL
JUDGMENT – Court of Appeals held that prerequisites that must exist before judicial
estoppel may be applied were not satisfied, and, as such, trial court properly declined to
apply judicial estoppel to bar Respondents’ argument that Petitioners were in privity with
prior plaintiff. Specifically, Court of Appeals held that, because three circumstances that
must be fulfilled for application of judicial estoppel were not established, and because
standing and privity do not give rise to mutually exclusive arguments, but are instead two
different concepts, trial court properly ruled that judicial estoppel did not bar Respondents’
privity argument.
Court of Appeals also held that trial court’s ruling as to merits of case concerning mutual
mistake of fact was independent, alternative ruling, and not contingent ruling, and thus,
under circumstances of case, constituted final judgment for purposes of res judicata and
collateral estoppel, and that subsequent trial court properly determined that elements of res
judicata and collateral estoppel were satisfied, and thus barred Petitioners from bringing
claims in second lawsuit.
Circuit Court for Baltimore County
Case No. 03-C-13-013909
Argued: November 7, 2017
IN THE COURT OF APPEALS
OF MARYLAND
No. 20
September Term, 2017
______________________________________
THE BANK OF NEW YORK MELLON,
TRUSTEE ET AL.
v.
HEINZ OTTO GEORG ET AL.
______________________________________
Barbera, C.J.
Greene
Adkins
McDonald
Watts
Hotten
Getty,
JJ.
______________________________________
Opinion by Watts, J.
______________________________________
Filed: December 18, 2017
This case is, as the parties themselves acknowledge, a unique, fact-specific case
involving issues of judicial estoppel, and, specifically, whether a party’s arguments as to
standing and privity constitute inconsistent legal positions, and a determination of what
constitutes a final judgment for purposes of res judicata and collateral estoppel. To set the
legal stage for the case, we briefly describe the principle of judicial estoppel and the
doctrines of res judicata and collateral estoppel.
Judicial estoppel has been defined as “a principle that precludes a party from taking
a position in a subsequent action [that is] inconsistent with a position taken by him or her
in a previous action.” Dashiell v. Meeks, 396 Md. 149, 170, 913 A.2d 10, 22 (2006)
(citation and internal quotation marks omitted). “[J]udicial estoppel applies when it
becomes necessary to protect the integrity of the judicial system from one party who is
attempting to gain an unfair advantage over another party by manipulating the court
system.” Id. at 171, 913 A.2d at 23. To that end,
[b]efore judicial estoppel may be applied, three circumstances must exist: (1)
one of the parties takes a [] position that is inconsistent with a position it took
in previous litigation, (2) the previous inconsistent position was accepted by
a court, and (3) the party who is maintaining the inconsistent positions must
have intentionally misled the court in order to gain an unfair advantage.
Id. at 171, 913 A.2d at 22 (citation omitted).
In Powell v. Breslin, 430 Md. 52, 63-64, 59 A.3d 531, 537-38 (2013), this Court
described the doctrine of res judicata, or claim preclusion, as well as the circumstances that
must be present for the doctrine to apply, stating:
Res judicata is an affirmative defense that precludes the same parties
from relitigating any suit based upon the same cause of action because the
second suit involves a judgment that is conclusive, not only as to all matters
that have been decided in the original suit, but as to all matters which with
propriety could have been litigated in the first suit.
In Maryland, the doctrine of res judicata precludes the relitigation of
a suit if (1) the parties in the present litigation are the same or in privity with
the parties to the earlier action; (2) the claim in the current action is identical
to the one determined in the prior adjudication; and (3) there was a final
judgment on the merits in the previous action. The overarching purpose of
the res judicata doctrine is judicial economy.
(Citations and internal quotation marks omitted).
In a similar vein, this Court has described the doctrine of collateral estoppel, or issue
preclusion, as follows: “[W]hen an issue of fact or law is actually litigated and determined
by a valid and final judgment, and the determination is essential to the judgment, the
determination is conclusive in a subsequent action between the parties, whether on the
same or a different claim.” Colandrea v. Wilde Lake Cmty. Ass’n, Inc., 361 Md. 371, 387,
761 A.2d 899, 907 (2000) (citation and internal quotation marks omitted). For the doctrine
of collateral estoppel to apply, the following four-part test must be satisfied:
1. Was the issue decided in the prior adjudication identical with the one
presented in the action in question?
2. Was there a final judgment on the merits?
3. Was the party against whom the plea is asserted a party or in privity with
a party to the prior adjudication?
4. Was the party against whom the plea is asserted given a fair opportunity
to be heard on the issue?
Id. at 391, 761 A.2d at 909 (citation omitted). We have explained the relationship between
the doctrines of res judicata and collateral estoppel as follows:
Collateral estoppel is concerned with the issue implications of the earlier
litigation of a different case, while res judicata is concerned with the legal
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consequences of a judgment entered earlier in the same cause. The two
doctrines are based upon the judicial policy that the losing litigant deserves
no rematch after a defeat fairly suffered, in adversarial proceedings, on issues
raised, or that should have been raised.
Id. at 390-91, 761 A.2d at 909 (citations omitted).
Now, we briefly set the factual stage. Here, in 2010, a financial institution that was
the former owner of a note for a refinance mortgage loan sued a married couple for
reformation of the refinance deed of trust because the wife had not signed the refinance
deed of trust, and the former owner of the note was thus unable to institute foreclosure
proceedings against the couple’s property, which the couple owned as tenants by the
entirety. Significantly, the former owner of the note brought the lawsuit in its name and
on its own behalf, although it was no longer the note owner and was rather the master
servicer. Ultimately, after a bench trial, the trial court ruled in the couple’s favor and
against the former owner of the note as to the merits of the case on the issue of mutual
mistake and as to standing to bring the lawsuit. Three years later, in 2013, the current
owner of the note and the title insurer of the refinance mortgage loan sued the couple for
reformation of the refinance deed of trust. In the second lawsuit, the trial court again ruled
in the couple’s favor, concluding that the current owner of the note and the title insurer
were barred by res judicata and collateral estoppel from bringing and relitigating the claims
in the second lawsuit. In so ruling, the trial court rejected an argument that the first trial
court’s ruling on the merits of the case had been a contingent ruling and not a final
judgment. The trial court also concluded that that judicial estoppel did not apply and that
the couple was not barred from asserting an argument in the second lawsuit that the current
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owner of the note and the title insurer were in privity with the former owner of the
note/master servicer. On appeal, the Court of Special Appeals affirmed the trial court’s
judgment. Thereafter, the current owner of the note and the title insurer filed in this Court
a petition for a writ of certiorari, which this Court granted.
Against this very distinctive legal and factual backdrop, we decide whether: (I) the
trial court in the second lawsuit properly declined to apply judicial estoppel and properly
ruled that the couple was not barred by judicial estoppel from asserting that the current
owner of the note and the title insurer were in privity with the former owner of the
note/master servicer; and (II) the trial court in the second lawsuit correctly determined that
the first trial court’s ruling as to the merits of the case concerning mutual mistake was an
independent, alternative ruling, and not a contingent ruling—i.e., that the ruling on the
merits was a final judgment—and that res judicata and collateral estoppel barred the current
owner of the note and the title insurer from bringing and relitigating their claims in the
second lawsuit.
We hold that: (I) the prerequisites that must exist before judicial estoppel may be
applied are not satisfied, and, as such, the trial court properly declined to apply judicial
estoppel to bar the couple’s argument that the current owner of the note and the title insurer
were in privity with the former owner of the note. Specifically, because the three
circumstances that must be fulfilled for the application of judicial estoppel are not
established—the couple’s position with respect to privity is not inconsistent with their
position with respect to standing in the first lawsuit, as standing and privity do not give rise
to mutually exclusive arguments but are instead two different concepts—the trial court
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properly ruled that judicial estoppel did not bar the couple’s privity argument; and (II) the
first trial court’s ruling as to the merits of the case concerning mutual mistake was an
independent, alternative ruling, and not a contingent ruling, and thus, under the
circumstances of this case, constituted a final judgment for purposes of res judicata and
collateral estoppel. Accordingly, the trial court in the second lawsuit properly determined
that the elements of res judicata and collateral estoppel were satisfied and thus barred the
current owner of the note and the title insurer from bringing the claims in the second
lawsuit.
BACKGROUND
This case involves a refinance mortgage loan for real property located in
Cockeysville, Maryland (“the Property”)1 owned by Heinz Otto Georg (“Heinz”) and his
wife Susan M. Georg (“Susan”), Respondents.2 On February 15, 2002, Respondents first
acquired title to the Property, which was unimproved, as tenants by the entirety. In June
2004, Respondents entered into a contract with a builder for the Property. And, on
September 30, 2004, Respondents executed a deed of trust in favor of Chevy Chase Bank,
F.S.B. (“Chevy Chase”), with an original construction loan amount of $807,000. Almost
two years later, on September 2, 2006, Respondents executed a second deed of trust in
favor of Chevy Chase for an additional $100,000 home equity line of credit. Thereafter,
Respondents sought to refinance the construction loan and the home equity line of credit,
1
At other places in the record, the Property is described as being in Hunt Valley,
Maryland, not Cockeysville, Maryland.
2
Due to the common surname of Respondents, we shall refer to Respondents
individually by their first names as needed.
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both of which were secured by deeds of trust on the Property.
To that end, on October 26, 2006, Heinz executed a note in the principal amount of
$1,130,119 to First Horizon Home Loan Corporation (“First Horizon”), a lender, for the
purpose of refinancing the construction loan and the home equity line of credit loan (“the
Note”). The Note was secured by a deed of trust, signed that same day by Heinz, in favor
of First Horizon (“the refinance Deed of Trust”). Closing instructions for the refinance
mortgage loan—i.e., the Note and the refinance Deed of Trust—identified the sole
borrower as Heinz, and both the Note and the refinance Deed of Trust in favor of First
Horizon also identified Heinz as the sole borrower. Only Heinz signed the Note and
refinance Deed of Trust; indeed, neither document provided for Susan’s signature. In
connection with recording the refinance Deed of Trust in favor of First Horizon, however,
both Heinz and Susan executed notarized affidavits affirming that, as of October 26, 2006,
the unpaid principal balance of the construction loan secured by the first Chevy Chase deed
of trust was $807,000, and that the unpaid principal balance of the home equity line of
credit loan secured by the second Chevy Chase deed of trust was $100,000.
First Horizon apparently intended that the refinance mortgage loan would be used
to release the two deeds of trust on the Property in favor of Chevy Chase, and Old Republic
National Title Insurance Company (“Old Republic”), Petitioner, issued a title insurance
policy (“the Policy”) insuring that the refinance mortgage loan would be secured by a first
lien against the Property and protecting First Horizon against any issues that could occur
during the execution of the mortgage. In the event of a claim, the Policy provided Old
Republic the option to attempt to cure any defect in the refinance Deed of Trust or to pay
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the claim. The Policy extended to First Horizon and First Horizon’s successors and/or
assigns and insured that the refinance Deed of Trust would be executed by both Heinz and
Susan. Specifically, the “insured mortgage” covered by the Policy was described as the
“Deed of Trust from Heinz [] and Susan [] to Larry Rice, Trustee, securing First Horizon
[] in the original principal amount of $1,130,119.00 dated October 26, 2006 and recorded
November 3, 2006, in the Land Records of Baltimore County, Maryland[.]”
In December 2006, the Note and accompanying refinance Deed of Trust were
transferred to an intermediary and then to The Bank of New York Mellon (“BNYM”),
Petitioner. This transfer was completed pursuant to a “Pooling and Servicing Agreement”
dated December 1, 2006 (“the PSA”), an agreement by which BNYM purchased in bulk a
pool of notes and mortgages. BNYM purchased the Note and remains the owner of the
Note. Under the PSA, BNYM serves as Trustee for the “First Horizon Alternative
Mortgage Securities Trust 2006-FA8 Mortgage Pass-Through Certificates, Series 2006-
FA8” (“the Trust”), and First Horizon became the master servicer for the Trust.3 Pursuant
to the PSA, First Horizon received compensation for serving as master servicer. Under the
PSA, as master servicer of the refinance mortgage loan and other loans, First Horizon was
obligated to “service and administer” the pool of loans—i.e., collect payments. The PSA
also authorized First Horizon to take any action “that it may deem necessary or desirable
in connection with such servicing and administration, including . . . effectuat[ing]
foreclosure or other conversion of the ownership of the Mortgaged Property securing any
3
Effective January 16, 2014, Nationstar became the master servicer, replacing First
Horizon.
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Mortgage Loan[.]”
After executing the refinance Deed of Trust and the Note, Respondents paid
monthly mortgage payments for a number of years before they encountered financial
difficulties. In June 2009, First Horizon declared Heinz in default under the Note, and took
steps to initiate foreclosure under the refinance Deed of Trust. As a practical matter,
however, because Respondents owned the Property as tenants by the entirety, Susan’s
signature on the refinance Deed of Trust had been required to encumber the Property.
Thus, in the absence of Susan’s signature on the refinance Deed of Trust, First Horizon
could not foreclose on the Property in the event of a default on the refinance mortgage loan
by Heinz.
In a letter dated September 2, 2010, First Horizon submitted to Old Republic a title
claim under the Policy, explaining that Susan was “on title but not as a borrower on the
foreclosing” refinance Deed of Trust and that “Susan did sign the tax-property affidavit.”
First Horizon explained that this was a “defect[ that] might cause loss or damage for which
[Old Republic] may be liable[.]” First Horizon stated that it was requesting Old Republic’s
assistance to “protect the lender’s interest in accordance with the terms of the” Policy, and
that it was “most anxious to resolve th[e] matter in order to proceed with its foreclosure
sale and convey good tile.” In an e-mail dated September 15, 2010, the vice president and
claims counsel for Old Republic’s Corporate Legal Department advised First Horizon that
Old Republic “elect[ed] to retain counsel to file a lawsuit to reform the [refinance Deed of
Trust] to include Susan [] and/or to subordinate the interest of Susan[.]” To that end, Old
Republic retained Morton A. Faller, Esquire (“Faller”) to represent it.
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First Horizon Litigation (First Lawsuit)
On September 21, 2010, First Horizon, by and through its attorney, Faller, filed in
the Circuit Court for Baltimore County (“the circuit court”) a complaint seeking
reformation of the refinance Deed of Trust and other equitable relief (“the First Horizon
litigation”). Later, First Horizon, by and through its attorney, Faller, filed an amended
complaint seeking reformation of the refinance Deed of Trust, a declaration that First
Horizon had a valid first mortgage lien against the Property, an order directing Susan to
execute a confirmatory joinder of the refinance Deed of Trust, a declaration that First
Horizon had a mortgage lien through equitable subrogation on the Property, and an order
establishing an equitable mortgage against the Property under the refinance Deed of Trust.
Although BNYM had become the owner of the Note in December 2006 and First Horizon
was the master servicer of the refinance mortgage loan when the complaint and amended
complaint were filed in the First Horizon litigation, First Horizon brought the litigation not
in a representative capacity or as the servicer, but as the lender and owner of the Note. For
example, in the amended complaint, First Horizon identified itself as the “Lender” and
stated that it was “the party secured by the [refinance D]eed of [T]rust on [the P]roperty[.]”
Old Republic exercised control over aspects of the First Horizon litigation. For
example, in addition to recommending that the action be instituted, Old Republic selected,
retained, paid, and regularly communicated with Faller, who served as First Horizon’s
counsel in the First Horizon litigation. Indeed, Faller and his law firm regularly invoiced
Old Republic for costs, expenses, and attorney’s fees related to the First Horizon litigation.
And, with respect to the First Horizon litigation, Old Republic discussed and approved
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litigation strategy, selected trial witnesses, named the plaintiff, and decided whether to
appeal the circuit court’s rulings.
Trial in the First Horizon litigation was set to begin on April 23, 2012. During
discovery, and in Respondents’ request for production of documents, Respondents’ counsel
asked First Horizon’s counsel for all documents confirming that First Horizon was the
holder of the Note. In response, First Horizon’s counsel stated that First Horizon was the
holder of the Note—i.e., that it owned the refinance mortgage loan. This, however, was
incorrect, as First Horizon had assigned and sold the Note to BNYM in December 2006—
i.e., BNYM was the holder/owner of the Note.
On April 23 and 24, 2012, before the Honorable Jan M. Alexander (“Judge
Alexander”), a trial in the First Horizon litigation was held. A few days prior to trial, on
April 20, 2012, First Horizon’s counsel e-mailed to Respondents’ counsel a document titled
“Correction to Caption of Complaint and Name of Plaintiff” (“the correction to caption”)
in which First Horizon’s counsel stated, in full, the following:
Madam Clerk:
Please note that the caption of the Amended Complaint and name of
the Plaintiff, First Horizon Loans, a division of First Tennessee Bank
National Association, should be corrected to the following:
First Horizon Home Loans, a division of First Tennessee Bank
National Association, Master Servicer in its capacity as agent
for The Bank of New York Mellon, Trustee for the Holders of
the Certificates, First Horizon Mortgage Pass-Through
Certificate Series FHAMS 2006-FA8
At the start of the trial on April 23, 2012, after the case was called, First Horizon’s counsel,
Faller, asked the circuit court to approach the clerk to file the correction to caption.
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Respondents’ counsel moved to strike the correction to caption and moved to dismiss the
amended complaint on the ground that First Horizon lacked standing. In relevant part,
Respondents’ counsel argued that BNYM “for the trust itself [] would have to have sued
to reform the” refinance Deed of Trust, and that First Horizon had “no standing to be
proceeding to reform the [refinance D]eed of [T]rust and it would be as if you sold your
house and then sued someone for trespassing on your lawn after you moved out and you
transferred.” Respondents’ counsel further contended:
The attempt to substitute a new party in this case as the plaintiff is not only
strictly prohibited because now we know that First [Horizon] has no standing
to be a party in this case, but it doesn’t even follow the protocol required by
the [Maryland R]ules. If they were going to change a party, they would have
to file an amended complaint within 30 days of trial, . . . they would have to
ask leave of court to file it and filed a red line version of the complaint[.]
In response, Faller contended that he had only “recently” learned that First Horizon
was the master servicer and not the lender, and argued that the issues in the case concerned
what happened when the parties went to settlement on the refinance mortgage loan, and
that First Horizon was the lender at that time, and had been the “master servicer either
when it owned the loan or when it sold it to a securitized trust continuously from 2006 to
the present.”
Judge Alexander denied the motion to dismiss the amended complaint and recessed
to consider the correction to caption. After the recess, Judge Alexander explained that, in
his view, the correction to caption was actually a motion for substitution of plaintiff, and
Judge Alexander stated that he denied “the request to amend or substitute the plaintiff in
this case[,]” and explained that the Maryland Rules “do not allow for the substitution of a
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plaintiff unless . . . one of the original plaintiffs still remains in the case.” Immediately
thereafter, Respondents’ counsel moved to dismiss the case or, in the alternative, for
summary judgment based on lack of standing. Faller responded that First Horizon “would
intend to proceed [to] trial and prove that First Horizon as serv[ic]er has the authority.” In
other words, First Horizon argued that it had standing because it was authorized by the
PSA to seek reformation of the refinance mortgage loan on BNYM’s behalf in its own
name. Judge Alexander stated that he would reserve on the motion for summary judgment
and allow the case to proceed to trial. The trial thus proceeded with First Horizon bringing
the litigation in its own name, even though it was undisputed that, at that time, First Horizon
was the master servicer, and not the owner, of the Note and refinance Deed of Trust.
At trial, First Horizon presented its case-in-chief, calling three witnesses and
introducing numerous exhibits into evidence. First Horizon attempted to prove that Susan
knew that she was supposed to sign the refinance Deed of Trust, that she had intended to
sign the refinance Deed of Trust, and that her failure to sign the refinance Deed of Trust
was a mistake on her part. According to First Horizon, because it had also made a mistake
in failing to have Susan sign the refinance Deed of Trust, there had been a mutual mistake,
and the circuit court therefore had the power to reform the refinance Deed of Trust.
First Horizon’s third witness, Richard Stern (“Stern”), the vice president of asset
recovery for First Horizon, testified that First Horizon was the “agent and master servicer”
for BNYM, and that First Horizon started as the owner/servicer, and became the master
servicer, of the refinance mortgage loan. First Horizon’s counsel asked Stern whether First
Horizon, as master servicer, had the authority to foreclose on a loan owned by BNYM.
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Respondents’ counsel objected, and the circuit court sustained the objection, ruling that it
would “depend on what” the PSA stated. First Horizon’s counsel then handed Stern a copy
of the PSA and asked Stern to identify the document; Stern stated that it was the PSA
between First Horizon, as master servicer, and BNYM, as trustee. First Horizon’s counsel
asked Stern how the PSA related to the refinance mortgage loan. Stern asked to see the
correction to caption that the circuit court had stricken. Stern testified that, based on the
correction to caption, the refinance mortgage loan was a part of the group of loans covered
by the PSA. First Horizon’s counsel offered the PSA into evidence, and Respondents’
counsel objected. The circuit court stated that First Horizon could proffer what the PSA
stated, and, specifically, whether First Horizon could stand in BNYM’s stead—i.e.,
whether First Horizon had standing to bring suit on its own behalf. The circuit court stated
that it would give the parties the night to look at the PSA, and that it would take up the
standing issue and the PSA’s admissibility the next morning. At that point, Stern’s
testimony resumed.
The next day, April 24, 2012, trial resumed, and First Horizon’s counsel identified
the provisions in the PSA that he alleged authorized First Horizon, as master servicer, to
bring the action. After reading certain provisions of the PSA, First Horizon’s counsel
contended that those provisions “authorize[d] First Horizon in its own name and as master
servicer with respect to th[e] loan to take all action on behalf of the trust that it is the
servicer for with respect to the mortgage loans, and on that basis [it] would ask the [circuit
c]ourt to” admit the PSA into evidence. Respondents’ counsel objected again and argued,
in relevant part, that BNYM was the “proper party” to bring the action, and that First
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Horizon could have brought the action potentially only in their capacity as agent for
BNYM, contending:
As they attempted to do, which the [circuit c]ourt properly denied under the
rules, they potentially could file a suit as an agent for the trust fund to protect
those interests but this agreement does not give it the right to file on its own
behalf as a party and then attempt to have the [circuit c]ourt essentially treat
it as it if is [BNYM].
Respondents’ counsel asserted that First Horizon lacked standing because BNYM, not First
Horizon, was the party secured by the refinance Deed of Trust, and First Horizon brought
the action as a party and not as BNYM’s agent. Respondents’ counsel also argued that the
PSA was inadmissible because Schedule I, the mortgage loan schedule listing the loans
that were subject to the PSA, was not included, and, as such, “[t]here [wa]s absolutely no
way of knowing that the Georg[] loan actually applies to this agreement.” Respondents’
counsel explained that, absent Schedule I, First Horizon could not prove that the PSA
applied to the refinance mortgage loan and that they simply did not know who owned the
refinance mortgage loan.
First Horizon’s counsel responded that Stern’s testimony established that the
refinance mortgage loan was subject to the PSA, and that the circuit court had the authority
to receive the PSA solely for the purposes of establishing standing, and that First Horizon
was authorized to bring the action in its own name. First Horizon’s counsel also stated: “I
would hope that the [circuit c]ourt would be inclined to try to resolve this case on its
merits.” Judge Alexander ultimately admitted the PSA into evidence, and stated: “I think
it goes to weight as opposed to the admissibility and I will consider it in light of arguments
on both sides.”
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At that point, First Horizon rested, and Respondents’ counsel orally moved for
judgment. Respondents’ counsel argued, in pertinent part:
We don’t have the proper party, [First Horizon] do[es]n’t have standing to
bring this case. The resolution of this on its merits, to even hear further
testimony would be meaningless, a meaningless exercise.
If they can’t bring a case, they don’t have standing, it is just
fundamental 101 and this case should be dismissed on that basis solely.
Moreover, they haven’t sued the proper party in that you can’t seek what
equitable relief against [Susan] because she is not a party to the deed of trust,
not a party to the note. They can only seek reformation against the party to
a contract. There is no evidence that has been offered in the case[-]in[-]chief
by the plaintiff here that [Susan] entered into any agreement with First
Horizon. And therefore, she can’t be -- she can’t be a proper party to an
action for reformation of a contract of which there is no evidence that it was
entered into. A contract is mutual assent to agreements to the terms. They
have offered nothing. So there is nothing to reform. There is no basis upon
which to bring her into a situation in which is conceded that she wasn’t asked
to sign anything and she didn’t sign anything. Moreover, their burden, the
burden of production, the burden of proof in this case is on them. And they
have not even tossed it over to our side on production. There is absolutely
no evidence that could establish mistake of fact by [Susan].
They have offered what? They have offered the testimony of persons
who didn’t ask her to sign anything. They have offered the testimony of
persons who have agreed that she didn’t ask to sign anything, that -- and there
was no evidence that she was under mistake of any fact whatsoever during
this transaction.
So there is simply no basis to even continue this case on a fundamental
issue of procedure and really jurisdiction of the [circuit c]ourt because we
don’t have parties here that can have the rights [] adjudicated before it. But
also, on the issue of the evidence, they have to prove beyond a reasonable
doubt that [Susan] was under a mistake of fact. They didn’t even call her as
a witness. What evidence is there of her state of mind that she would -- she
intended to sign this deed of trust?
First Horizon’s counsel responded “that First Horizon [could] bring th[e] action for the
reasons [] already discussed.” First Horizon’s counsel also contended that the evidence
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demonstrated that there had been a mutual mistake of fact in the execution of the refinance
Deed of Trust.
After hearing argument from the parties on the motion for judgment, Judge
Alexander granted the motion for judgment based on the merits of the case, orally ruling
from the bench as follows with respect to a lack of mutual mistake:
All right. I’m granting the motion at the close of [First Horizon]’s
case, since [First Horizon] has not produced the burden of going forward
with this matter for the reasons that I have stated from the bench. There is
no evidence that [Susan] was knowledgeable about this transaction,
knowledgeable that a mistake had been made or knowledgeable that it was
her intent to be included on this deed of trust.
I would note for the record the evidence is that all of these documents
were not prepared by [Respondent]s. They were all prepared by [First
Horizon]. No doubt there were mistakes made, but the mistakes were made
by [First Horizon] in the preparation of the documents. That cannot be
impugned to [Respondent]s and it actually works against [First Horizon].
Case law is clear against that. They were in a position of superiority in the
preparation and the conduction of this transaction. They were in complete
control. They made a mistake. They don’t get a do over unless they can
show that the mistake was mutually made by the parties and without a
showing that [Susan] knew that this mistake had taken place, I cannot allow
the case to go forward any further.
So I am granting the motion for judgment at the close of [First
Horizon]’s case.
Immediately after Judge Alexander’s oral ruling, First Horizon’s counsel asked the
circuit court to clarify two issues:
Number 1, does that mean that the [circuit c]ourt finds that there was
sufficient standing established to allow this case to be heard on the merits? I
just need to make sure the record is clear on that issue.
The second issue is has the [circuit c]ourt considered the equitable
subrogation argument which would say that there was a defective deed of
trust, . . . that there was at least the lender’s ability to step into the shoes of
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the first and second mortgages that were satisfied with the proceeds?
Because what Your Honor is doing is dealing with one issue but not
necessarily the other.
In response, Judge Alexander addressed standing, ruling that First Horizon lacked standing
and explaining:
First of all, with regard to the standing issue, the [circuit c]ourt is not satisfied
that based on documents that have been presented for the arguments made
by [Respondents’] counsel, there is a representation in the contract[, i.e., the
PSA,] of an indexing of all of the loans that have been covered by this
contract. That index is not in this contract. There is no identification of this
particular loan as being subject to this agreement. No disrespect to [] Stern’s
testimony, but it was very self[-]serving in that regard. He has no knowledge
as to whether this particular loan was included. I think it was supposition on
his part that it might have been in the same timeframe but nothing to indicate
that this contract covers this particular loan. Any identification numbers and
loan reference numbers, the attachment is not there.
So with regard to that, there is no standing. As I stated at the outset,
not allowing the substitution of parties, the amended complaint references
First Horizon Loans, not as an agent for any subsequent party, not as a
representative for any subsequent party, but as the home loan holder, the loan
holder. And that’s clearly not the case based on the evidence that has been
presented. They are not the home loan holder. If they were to have brought
this case in a representative capacity, it should have been titled as such,
should have been pled as such. All references in the document and the
complaint should have said as the representative, as the agent, as the
authorized agent or such language as that. So no, I will grant the
[Respondents’] motion in that regard as well.
Judge Alexander also stated that he did not rule in First Horizon’s favor with respect to
equitable subrogation because First Horizon could not, “as it is pled, [it is] not entitled to
that. [It] cannot step into the place of the new home loan holder, loan note holder.”
First Horizon’s counsel interjected and the following exchange occurred:
[FIRST HORIZON’S COUNSEL]: . . . Your Honor, if the [circuit c]ourt
finds there is no standing to have brought this action, the [circuit c]ourt has
gone ahead and now made fact determinations as if the trial had proceeded
- 17 -
on the merits and I’m trying to understand if there is no standing, then there
is no ability to go forward on any claims. But Your Honor is making rulings
--
THE COURT: The whole idea of the standing was subject to this document
that you were -- you just presented today and I said I would hold that under
advisement until we saw what it was.
[FIRST HORIZON’S COUNSEL]: I understand.
THE COURT: I had not read the document and it was not pointed out to me
until just a few minutes ago that it references an index of loans that it covers.
[FIRST HORIZON’S COUNSEL]: I understand. But if there is no standing,
then there is no case to go forward.
At that time, Respondents’ counsel made the following suggestion to Judge Alexander:
Grant the motion for judgment because you have heard the evidence, you
have considered the merits and the rulings on the merits are in the alternative.
So even if they had standing, because that way the issue would be ripe so that
the [circuit c]ourt’s efforts in this court in hearing what they have asked you
to hear, if the [circuit c]ourt were to review it, they can consider all of the
issues.
Judge Alexander asked Respondents’ counsel: “So you have no objection to me finding
that there is standing?” Respondents’ counsel stated:
No, I actually say in the alternative. So you can have the ruling that if the
[circuit c]ourt could say even if there was standing, I have considered the
presentation of evidence as if there was standing to, for judicial economy, so
that we don’t have to have a whole new trial.
Judge Alexander then orally issued rulings on standing and the merits, stating: “That
sounds appropriate. I will say that I do not find that they had standing, however, in the
alternative, I do not find that [First Horizon] has met its burden of production to have the
case go forward based on the evidence for the reasons previously stated.” The trial recessed
immediately thereafter.
- 18 -
On May 3, 2012, consistent with his oral ruling, Judge Alexander issued an order
granting judgment in favor of Respondents, stating, in relevant part,
Trial having taken place in this matter on April [23 and] 24, 2012,
[First Horizon] having concluded the presentation of its case, this Court finds
that [First Horizon] does not have standing to bring th[e] action against
[Respondent]s. In the alternative, this Court finds that even if [First Horizon]
had standing to pursue th[e] action, the evidence which [First Horizon]
presented was insufficient to meet its burden of production.
First Horizon appealed. On September 30, 2013, the Court of Special Appeals
issued an unreported opinion dismissing the appeal due to First Horizon’s failure to file a
timely notice of appeal.
Current Litigation (Second Lawsuit)
A couple of months after the Court of Special Appeals’s dismissal of the appeal in
the First Horizon litigation, on December 5, 2013, BNYM, as trustee, and Old Republic
initiated a second lawsuit in the circuit court by filing a complaint against Respondents.
The second lawsuit was based on the same facts and legal basis as the First Horizon
litigation was—namely, First Horizon and Susan had made a mutual mistake in failing to
include Susan on the refinance Deed of Trust. And, in the second lawsuit, Petitioners raised
substantially similar causes of action to those that were raised in the First Horizon
litigation—equitable claim for reformation of the refinance Deed of Trust, request for an
order compelling Respondents to “execute appropriate paperwork, or alternatively
reforming the existing refinance [D]eed of [T]rust[,]” equitable mortgage, equitable
subrogation, and equitable lien. And, as with the First Horizon litigation, Old Republic
paid for counsel in the second lawsuit and determined who was to be named a plaintiff. Of
- 19 -
note, Petitioners were represented by a different law firm in the second lawsuit; Faller and
his law firm were no longer counsel of record.
After discovery was completed, on June 5, 2015, Respondents filed a “Motion for
Summary Judgment, or for Judicial Decision under [Maryland] Rule 2-502,”4 arguing as
follows with respect to the issue of privity:
[T]he undisputed material facts prove that [Petitioners] are in privity with the
plaintiff in a prior lawsuit against [Respondents, the First Horizon litigation].
Moreover, the claims and issues in this lawsuit and the prior lawsuit are the
same, and the prior lawsuit resulted in a final judgment on the merits.
Accordingly, this lawsuit is barred by res judicata and collateral estoppel,
and [Respondent]s are entitled to summary judgment, or in the alternative,
for a judicial decision in their favor under [Maryland] Rule 2-502.
A few days later, on June 8, 2015, Petitioners filed a motion for partial summary judgment,
arguing that there was no dispute as to material facts relevant to the equitable subrogation
claim and that they were entitled to judgment as a matter of law with respect to the equitable
subrogation claim. Petitioners also argued that they were entitled to summary judgment
with respect to the various defenses raised by Respondents, including res judicata and
4
Maryland Rule 2-502, entitled “Separation of questions for decision by court,”
provides:
If at any stage of an action a question arises that is within the sole province
of the court to decide, whether or not the action is triable by a jury, and if it
would be convenient to have the question decided before proceeding further,
the court, on motion or on its own initiative, may order that the question be
presented for decision in the manner the court deems expedient. In resolving
the question, the court may accept facts stipulated by the parties, may find
facts after receiving evidence, and may draw inferences from these facts. The
proceedings and decisions of the court shall be on the record, and the
decisions shall be reviewable upon appeal after entry of an appealable order
or judgment.
- 20 -
collateral estoppel. By the time of the filing of the motion for partial summary judgment,
Petitioners were represented by yet another law firm. And, on July 6, 2015, Petitioners
filed an opposition to the motion for summary judgment or for judicial decision under
Maryland Rule 2-502, arguing, in pertinent part, that Respondents’ position that BNYM
was in privity with the plaintiff in the First Horizon litigation was “not only incorrect, but
also directly and unequivocally contrary to the position [that] they took in successfully
defending the First Horizon [litigation], such that they are judicially estopped from
asserting privity in this action.”
On October 30, 2015, the Honorable Julie L. Glass (“Judge Glass”) conducted a
motions hearing. After hearing extensive argument from the parties, Judge Glass advised
that she would reserve ruling. On December 9, 2015, Judge Glass entered an opinion and
order denying Petitioners’ motion for partial summary judgment and granting
Respondents’ motion for judicial decision. On December 11, 2015, Judge Glass issued an
amended opinion and order, vacated the December 9, 2015 opinion and order, and again
denied Petitioners’ motion for partial summary judgment and granted Respondents’ motion
for judicial decision; on December 28, 2015, the amended opinion and order were entered.
In the amended opinion, Judge Glass succinctly set forth the parties’ respective arguments
with respect to the First Horizon litigation, stating:
[Respondent]s argue that [Petitioner]s’ claims, in this second lawsuit,
are barred by the doctrines of res judicata and collateral estoppel, based on
the May 3, 2012 Court Order issued by [Judge] Alexander in the First
Horizon [litigation]. [Petitioner]s, in response, contend that Judge
Alexander’s Order qualifies as a contingent ruling and cannot serve as a basis
for res judicata or collateral estoppel.
- 21 -
Judge Glass first addressed res judicata, summarizing the parties’ positions and
making the following findings:
In the First Horizon [litigation], counsel for [Respondent]s argued that
First Horizon had no standing because it was not the holder of the [refinance
mortgage] Loan and had no right to assert a claim other than as the servicer.
BNYM is the successor to First Horizon’s interest in the Property. Therefore,
the Court finds that [Petitioner]s, Old Republic and BNYM, are in privity
with First Horizon, satisfying the first requirement of res judicata.
***
[Petitioner]s brought this second lawsuit based on the exact same facts
that gave rise to the First Horizon [litigation] and seeks the same relief as in
the first lawsuit – reformation of the [refinance] Deed of Trust, equitable
subrogation, and equitable mortgage. Moreover, Old Republic
acknowledged that the first and second lawsuits were based on the same
transaction of facts (i.e. the closing of the [refinance mortgage] Loan and the
[refinance] Deed of Trust). This Court notes that Schedule I of the [refinance
mortgage] Loan, which was not introduced at the First Horizon [litigation],
was presented by [Petitioner]s at the October 30, 2015 hearing. The Court
therefore finds that there are immaterial differences between the first and
second lawsuit.
. . . At the Circuit Court level, there was a full trial where [Petitioner]s
had a full and fair opportunity to bring all of its claims. The [] Court of
Special Appeals found that the Circuit Court’s judgment in the first lawsuit
became a final judgment when First Horizon dismissed the other defendants
from the case.
***
In [Petitioner]s’ view, . . . any ruling on the merits was at most a
contingent ruling which is not a final judgment on the merits and has no
preclusive effect. [Petitioner]s contend that the decision in [a prior case] is
consistent with the fundamental concept that a contingent judgment is not a
final judgment. To further support their position, [Petitioner]s, in their
Motion, discuss a Seventh Circuit Court which stated that a contingent
judgment is not final until the contingency materializes.
The Court finds that with regard to the third element of res judicata
the same issue of whether [the] PSA covers [the refinance mortgage] Loan
- 22 -
which was determined in the first lawsuit cannot be relitigated.
(Citation and record citations omitted). Judge Glass then ruled on res judicata, stating:
Because this proceeding is between the same parties or those in privity
with each other and upon the same causes of action, the principle of res
judicata applies and all matters actually litigated or that could have been
litigated are conclusive in this case and thus barred. As all [of] the elements
of res judicata have been established, the Court finds that there is a sufficient
basis based on the undisputed facts that this second lawsuit must be
dismissed.
In other words, Judge Glass rejected Petitioners’ contention that Judge Alexander’s rulings
were contingent rulings.
Next, Judge Glass made the following findings with respect to collateral estoppel:
In addressing the first element of collateral estoppel, [Respondent]s
claim that [Petitioner]s are barred from relitigating the same issues of
[Susan]’s intention and whether [Heinz] owned the [refinance mortgage]
Loan. [Respondent]s correctly assert that [Petitioner]s’ claims for equitable
subrogation, equitable mortgage, and equitable lien all center on whether
[Susan] intended to sign the [refinance] Deed of Trust. The issues sought to
be precluded by [Respondent]s are identical to those decided by Judge
Alexander in [the] First Horizon [litigation]. Therefore, as [Respondent]s
contend the same issues were “actually and fully litigated in the first lawsuit.”
With respect to the second element, [Respondent]s contend that based
on their argument set forth for res judicata regarding a final judgment on the
merits, this requirement of collateral estoppel is satisfied. In the First
Horizon [litigation] there was final judgment on the merits, namely that
judgment was entered in favor of [Respondent]s. For the reasons discussed
above, the Court hereby incorporates its findings that the first lawsuit
resulted in a final judgment on the merits.
. . . Although the doctrines of res judicata and collateral estoppel are
distinct, a requirement shared by both its privity. In the context of collateral
estoppel, privity is measured by whether the allegedly precluded party could
have appealed the adverse ruling in the prior litigation. The Court therefore
incorporates its findings described above under the privity requirement for
res judicata and finds for the reasons stated above that this element of
collateral estoppel has also been met.
- 23 -
Finally, under the fourth element of collateral estoppel, [Petitioner]s
had a full and fair opportunity to litigate the issue in the First Horizon
[litigation]. In the first lawsuit, BNYM was fully represented and could have
but cho[]se not to be joined as a named party. The Court finds that
[Petitioner]s had a full and fair opportunity to litigate [their] claim in the prior
litigation.
(Citations and record citations omitted). Judge Glass then ruled on collateral estoppel,
stating: “Having met all the elements for collateral estoppel, [Petitioner]s are precluded
from bringing their claims in this second lawsuit. The Court finds [Respondent]s’
argument for summary judgment is persuasive as there is sufficient [] evidence to invoke
the doctrine of collateral estoppel.”
Judge Glass made the following findings and ruling as to judicial estoppel:
[Petitioner]s assert that [Respondent]s have taken inconsistent positions and
made inconsistent representations in the previous litigation and in the present
case. . . .
***
At the hearing before this Court, [Respondent]s challenged
[Petitioner]s claiming that judicial estoppel is not met here since the position
urged by [Respondent]s in the first lawsuit is not inconsistent with the one
asserted in this second lawsuit.
***
This Court is not convinced that the doctrine of judicial estoppel
applies to the instant case as [Petitioner]s cannot show that [Respondent]s
took contrary positions or ever intended to mislead the Court. The Court
finds that there are insufficient facts in the instant case to support a finding
of “voluntary” conduct by BNYM to apply [Respondent]s’ defense of
estoppel. Having reviewed the alleged inconsistencies of the positions taken
by [Respondent]s in the First Horizon [litigation] and the present case, the
Court finds further that the doctrine of judicial estoppel is inapplicable under
the circumstances of this case.
- 24 -
In the conclusion of the amended opinion, Judge Glass summarized her rulings,
stating:
For the foregoing reasons, the Court finds that no genuine disputes of
material fact exist in this case and as a matter of law, [Respondent]s are
entitled to summary judgment. Accordingly, [Petitioner]s’ Motion for Partial
Summary Judgment shall be DENIED, and [Respondent]s’ Motion for
Judicial Decision under Maryland Rule 2-502 shall be GRANTED, and there
is no need to address the merits of [Respondent]s’ summary judgment claim.
However, the Court finds that had it addressed the summary judgment claim
it would have found that no material fact is in dispute and the moving party
would be able to raise summary judgment as a basis for relief.[5]
In the amended order accompanying the amended opinion, Judge Glass ordered, in
pertinent part, that Petitioners’ motion for partial summary judgment be denied, that
Respondents’ motion for judicial decision be granted, and that Respondents’ motion for
summary judgment need not be addressed.
The day after the amended opinion and order were entered, on December 29, 2015,
Petitioners noted an appeal. On March 10, 2017, in an unreported opinion, the Court of
Special Appeals affirmed the judgment of the circuit court, i.e., Judge Glass’s ruling.
Specifically, the Court of Special Appeals explained:
Because we hold that Judge Glass did not err in finding that Judge Alexander
made alternative, independent rulings in the First Horizon trial, and because
we hold that Judge Glass correctly determined that those rulings had a
preclusive effect in this subsequent second trial, we affirm Judge Glass’[s]
ruling on this issue.
The Court of Special Appeals rejected Petitioners’ argument that Judge Alexander’s two
5
Judge Glass also addressed arguments, and made findings and rulings, as to laches,
the statute of limitations, waiver, equitable subrogation, the statute of frauds and parol
evidence, failure to mitigate damages, and denial of the execution of a written instrument.
None of those findings or rulings is relevant here.
- 25 -
rulings—on standing and on the merits—were contingent on one another. And, according
to the Court of Special Appeals, “Judge Glass did not err in determining that Judge
Alexander intended his rulings in the First Horizon trial to be independent and given in the
alternative.” (Footnote omitted). The Court of Special Appeals determined that, among
other things, Judge Glass correctly concluded that there was a final judgment on the merits
in the First Horizon litigation, and, thus, Judge Glass correctly ruled that res judicata and
collateral estoppel barred Petitioners from raising the same claims that were raised and
litigated in the First Horizon litigation again in the second lawsuit. The Court of Special
Appeals also held that Judge Glass did not abuse her discretion in declining to apply the
doctrine of judicial estoppel to Respondents’ argument on the issue of privity.
Thereafter, Petitioners filed in this Court a petition for a writ of certiorari, raising
the following two issues:
1. Whether judicial estoppel requires a showing of an intention to
mislead the court apart from a demonstration that the party “has
succeeded in persuading a court to accept that party’s earlier position,
so that judicial acceptance of an inconsistent position in a later
proceeding would create ‘the perception that either the first or the
second court was misled[.]’” New Hampshire v. Maine, 532 U.S. 742,
750[] (2001).
2. Whether a ruling that a party lacked standing to assert its claims, but
subject to the caveat that if the court was found to be wrong with
regard to standing, the party failed to prove its case on the merits, is a
contingent ruling on the merits and thus not a final judgment for
purposes of res judicata and collateral estoppel, or whether the ruling
on standing and the ruling on the merits are alternative rulings, each
entitled to preclusive effect[.]
(First alteration in original). On June 21, 2017, this Court granted the petition. See Bank
of New York Mellon v. Georg, 453 Md. 355, 162 A.3d 837 (2017).
- 26 -
DISCUSSION
I. Judicial Estoppel
The Parties’ Contentions
Petitioners contend that Respondents are judicially estopped from asserting privity.
Specifically, Petitioners argue that Respondents have taken inconsistent positions by
arguing that First Horizon lacked standing in the First Horizon litigation and arguing here
that Petitioners are in privity with First Horizon. According to Petitioners, in the First
Horizon litigation, Respondents argued that only the entity that owned the refinance
mortgage loan would be the proper party to institute the action, and that First Horizon had
no standing because it did not own the loan—i.e., First Horizon was instead an agent for
the owner, and had no authority to sue in its own name. Petitioners assert that, in this case,
Respondents “reversed course” and argued that First Horizon fully represented Petitioners’
interests in the First Horizon litigation. Petitioners maintain that Respondents’ positions
on standing and privity are contrary legal positions in successive actions based on the same
facts, and that judicial estoppel applies. Petitioners argue that, by taking inconsistent legal
positions, Respondents misled either Judge Alexander or Judge Glass, and assert that Judge
Glass’s acceptance of the privity argument “creates the perception that [she] was misled.”
According to Petitioners, taking directly inconsistent legal positions in successive actions,
considered alone, demonstrates an intent to mislead.
Respondents counter that Judge Glass properly declined to bar their privity
argument under the principle of judicial estoppel because the requirements for the
application of judicial estoppel are not present. Respondents contend that they did not take
- 27 -
inconsistent positions in the First Horizon litigation and this case, and argue that their
positions on standing and privity are compatible. According to Respondents, in the First
Horizon litigation, they argued that First Horizon lacked standing because it failed to prove
that the PSA, to which both it and BNYM were parties, applied to the refinance mortgage
loan; and, in this case, Respondents argued that First Horizon and BNYM were in privity
because both were parties to the PSA, and because Old Republic controlled the prosecution
of the First Horizon litigation. Respondents argue that the issue of whether Petitioners
were in privity with First Horizon is not the same as the issue of whether the PSA covered
the refinance mortgage loan, and, thus, the positions on standing and privity were not
inconsistent. Respondents assert that their positions on standing and privity did not result
in obtainment of an unfair advantage and that there is no evidence of any intent to mislead,
and that such a finding is necessary for application of judicial estoppel to factual positions.
Additionally, Respondents contend that judicial estoppel does not apply to legal positions,
and that, accordingly, Petitioners’ argument with respect to judicial estoppel fails on that
basis as well.
Standard of Review
Neither party expressly moved for summary judgment on the basis of judicial
estoppel. At most, in a motion for partial summary judgment, Petitioners argued that they
were entitled to summary judgment with respect to the various defenses raised by
Respondents, including res judicata and collateral estoppel. And, in the motion for partial
summary judgment, Petitioners argued that “the doctrine of judicial estoppel now precludes
[Respondent]s from asserting that BNYM elected not to participate in the First Horizon”
- 28 -
litigation. Later, in opposition to Respondents’ motion for summary judgment or for
judicial decision under Maryland Rule 2-502, Petitioners raised judicial estoppel as a basis
for why Respondents should not be permitted to assert res judicata and collateral estoppel.
A trial court “shall” grant summary judgment “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 entered is entitled to judgment as a matter of law.” Md. R. 2-501(f). In
Chateau Foghorn LP v. Hosford, 455 Md. 462, 482, 168 A.3d 824, 835 (2017), we
explained that we review without deference a trial court’s grant of summary judgment:
The question of whether a trial court’s grant of summary judgment was
proper is a question of law subject to de novo review on appeal. In reviewing
a grant of summary judgment under Maryland Rule 2-501, we independently
review the record to determine whether the parties properly generated a
dispute of material fact, and, if not, whether the moving party is entitled to
judgment as a matter of law. We review the record in the light most favorable
to the nonmoving party and construe any reasonable inferences that may be
drawn from the facts against the moving party.
(Citation and brackets omitted). Similarly, we review without deference a trial court’s
ruling on legal issues. See City of Bowie v. MIE Props., Inc., 398 Md. 657, 677, 922 A.2d
509, 521 (2007) (“Review of the legal questions decided below is not so deferential. We
examine de novo issues of law as decided based on the [trial c]ourt’s sustainable findings
of fact.” (Citation omitted)).
By contrast, denial of a motion for summary judgment, based on judicial estoppel
or other grounds, is reviewed for abuse of discretion. See Dashiell, 396 Md. at 173-74,
913 A.2d at 24 (“[T]he motion judge did not abuse his discretion in denying [the
petitioner]’s motion to grant summary judgment based on judicial estoppel. . . . The trial
- 29 -
judge, based on the record that was before him at the time, did not abuse his discretion
when denying the motion for summary judgment. [The petitioner] is, however, free to
continue to assert a claim of judicial estoppel on remand and upon a more fully developed
record.” (Citation omitted)); id. at 165, 913 A.2d at 19 (“[A] trial court may [] exercise its
discretionary power to deny a motion for summary judgment when the moving party has
met the technical requirements of summary judgment. Thus, on appeal, the standard of
review for a denial of a motion for summary judgment is whether the trial judge abused his
discretion and in the absence of such a showing, the decision of the trial judge will not be
disturbed.” (Citations omitted)).
Here, the parties dispute the standard of review applicable to Judge Glass’s ruling
that judicial estoppel does not apply. Petitioners contend that Judge Glass’s decision
should be reviewed without deference for legal correctness. By contrast, Respondents
argue that Judge Glass’s decision on judicial estoppel should be reviewed for abuse of
discretion. We conclude that, under the circumstances of this case, Judge Glass’s ruling
with respect to judicial estoppel is to be reviewed without deference for legal correctness.
Significantly, Petitioners did not expressly move for partial summary judgment on the basis
of judicial estoppel, but rather moved for partial summary judgment with respect to the
equitable subrogation claim and with respect to the defenses raised by Respondents;
Petitioners raised judicial estoppel in the motion for partial summary judgment only to
counter Respondents’ “estoppel defense[.]” Petitioners also raised judicial estoppel in
opposition to Respondents’ motion for judicial decision or for summary judgment. Under
these circumstances, we conclude that the abuse of discretion standard, applicable where a
- 30 -
trial court denies summary judgment, does not apply in this case. Rather, as with a trial
court’s grant of summary judgment or ruling on a legal issue, we determine that Judge
Glass’s decision that judicial estoppel did not apply was a legal determination that was
based on applying the law to the facts of the case and, accordingly, is reviewed without
deference.
Law
Judicial Estoppel
As we stated at the outset, judicial estoppel is “a principle that precludes a party
from taking a position in a subsequent action inconsistent with a position taken by him or
her in a previous action.” Dashiell, 396 Md. at 170, 913 A.2d at 22 (citation and internal
quotation marks omitted). “[J]udicial estoppel applies when it becomes necessary to
protect the integrity of the judicial system from one party who is attempting to gain an
unfair advantage over another party by manipulating the court system.” Id. at 171, 913
A.2d at 23. In Standard Fire Ins. Co. v. Berrett, 395 Md. 439, 462, 910 A.2d 1072, 1086
(2006), this Court elaborated on the historical context of judicial estoppel, stating:
Maryland has long recognized the doctrine of estoppel by admission, derived
from the rule laid down by the English Court of Exchequer . . . that a man
shall not be allowed to blow hot and cold, to claim at one time and deny at
another. . . . [W]e adopted the statement of that principle[:] Generally
speaking, a party will not be permitted to maintain inconsistent positions or
to take a position in regard to a matter which is directly contrary to, or
inconsistent with, one previously assumed by him, at least where he had, or
was chargeable with, full knowledge of the facts, and another will be
prejudiced by his action.
(Citations, paragraph break, and internal quotation marks omitted). And, in Underwood-
Gary v. Mathews, 366 Md. 660, 667 n.6, 785 A.2d 708, 712 n.6 (2001), this Court noted
- 31 -
that “[j]udicial estoppel has been defined as a principle that precludes a party from taking
a position in a subsequent action [that is] inconsistent with a position taken by him or her
in a previous action.” (Citation omitted). In other words, judicial estoppel applies where
a party takes a position in subsequent litigation that is inconsistent with one that the party
took in previous litigation, not where a party takes an inconsistent position within the same
litigation.
The three circumstances that must exist for judicial estoppel to apply are as follows:
(1) one of the parties takes a [] position that is inconsistent with a position it
took in previous litigation, (2) the previous inconsistent position was
accepted by a court, and (3) the party who is maintaining the inconsistent
positions must have intentionally misled the court in order to gain an unfair
advantage.
Dashiell, 396 Md. at 171, 913 A.2d at 22 (citation omitted). As to the first circumstance,
both this Court and the Court of Special Appeals have stated that judicial estoppel applies
where a party takes inconsistent factual or legal positions; i.e., the application of judicial
estoppel is not limited to situations where a party takes inconsistent factual positions only.
For example, recently, in Lillian C. Blentlinger, LLC v. Cleanwater Linganore, Inc., ___
Md. ___, ___ A.3d ___, No. 13, Sept. Term, 2017, 2017 WL 5507725, *12 (Nov. 17, 2017),
this Court recited the three circumstances that are necessary for judicial estoppel to be
applicable, including that “one of the parties takes a position that is inconsistent with a
position it took in previous litigation[.]” (Citation and brackets omitted) In other words,
this Court did not state that judicial estoppel does not apply where a party takes inconsistent
legal positions, or otherwise limit judicial estoppel to situations where a party takes
inconsistent factual positions only.
- 32 -
In Dynacorp Ltd. v. Aramtel Ltd., 208 Md. App. 403, 472, 56 A.3d 631, 672 (2012),
cert. denied, 430 Md. 645, 62 A.3d 731 (2013), the Court of Special Appeals specifically
stated that judicial estoppel applies where a “party took an inconsistent position—either
legal or factual—in an earlier litigation[.]” (Citation omitted). In that case, the Court of
Special Appeals concluded, upon de novo review, that the appellants were judicially
estopped from contending that the appellees were prohibited from bringing derivative
counterclaims on a company’s behalf where, in earlier litigation, the appellants had
contended that the appellees were required to bring derivative claims, not direct claims, on
the company’s behalf. See id. at 471-72, 56 A.3d at 671-72. And, in Chaney Enters. Ltd.
P’ship v. Windsor, 158 Md. App. 1, 39, 854 A.2d 233, 255 (2004), the Court of Special
Appeals concluded that the Workers’ Compensation Commission “correctly found that
Chaney’s belated assertion of a special employer claim was barred under the doctrine of
estoppel; its use of the term ‘estoppel’ encompassed judicial estoppel.” (Footnote omitted).
The Court of Special Appeals explained that Chaney’s “belated attempt . . . to characterize
Genstar as a special or joint employer represents the assertion of a legal position
inconsistent with one previously advanced in a legal proceeding.” Id. at 43, 854 A.2d at
257.
In Kramer v. Globe Brewing Co., 175 Md. 461, 464-65, 471, 2 A.2d 634, 635, 638
(1938), this Court held that Globe Brewing Company was judicially estopped from taking
the position in a workers’ compensation case that Elmer Kramer (“Kramer”) was not its
employee where, in an earlier tort action, it had taken the position that Kramer was its
employee, which caused Kramer to dismiss the tort action. In that case, Kramer was injured
- 33 -
when a beer delivery truck, in which he had been riding as an assistant, overturned. See
id. at 462-63, 2 A.2d at 634. Kramer apparently had been hired by the driver, who had
acted without Globe Brewing’s authority, and had been paid by the driver. See id. at 463,
2 A.2d at 634. Kramer brought a tort action against Globe Brewing and the driver, and
Globe Brewing raised in a special plea the defense of workers’ compensation exclusivity
and averred in an amended special plea that Kramer was its employee at the time of the
accident. See id. at 463-65, 2 A.2d at 635. Kramer then voluntarily dismissed the tort
action without prejudice and sought workers’ compensation. See id. at 465, 2 A.2d at 635.
The agency that is now the Workers’ Compensation Commission denied Kramer’s claim,
and the trial court affirmed the denial. See id. at 465-66, 2 A.2d at 635-36.
In Kramer, id. at 469, 2 A.2d at 637, we explained the rationale underlying judicial
estoppel, stating:
If parties in Court were permitted to assume inconsistent positions in the trial
of their causes, the usefulness of courts of justice would in most cases be
paralyzed; the coercive process of the law, available only between those who
consented to its exercise, could be set at naught by all. But the rights of all
[people], honest and dishonest, are in the keeping of the courts, and
consistency of proceeding is therefore required of all those who come or are
brought before them. It may accordingly be laid down as a broad proposition
that one who, without mistake induced by the opposite party, has taken a
particular position deliberately in the course of litigation, must act
consistently with it; one cannot play fast and loose.
(Citations and internal quotation marks omitted). Applying that principle, this Court
observed that there could “be no doubt” that the filing of the special plea in the tort action
“was the sole reason for the dismissal of the former suit at the sole expense of” Kramer.
Id. at 469-70, 2 A.2d at 637. We observed that the filing of a special plea by an employer
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effectively bars a claimant from redress in a tort action, thereby leaving the claimant with
the option of filing a claim with what is now the Workers’ Compensation Commission.
See id. at 470, 2 A.2d at 638. Accordingly, we concluded that Kramer “was justified in
taking the action which he did take in dismissing” the tort action, and explained:
[I]t would, in our opinion, be an injustice to him 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
controversy between the same parties, and deny the facts asserted by it, or on
its behalf, in the special plea.
Id. at 471, 2 A.2d at 638.
Standing and Privity
In State Ctr., LLC v. Lexington Charles Ltd. P’ship, 438 Md. 451, 502, 92 A.3d
400, 429-30 (2014), this Court explained that Maryland has adopted a “‘cause-of-action’
approach” to standing, “which groups the traditionally distinct concepts of standing and
cause of action into a single analytical construct, labeled as ‘standing,’ to determine
whether the plaintiff has shown that he or she is entitled to invoke the judicial process in a
particular instance.” (Citations, footnote, and some internal quotation marks omitted); see
also State v. G & C Gulf, Inc., 442 Md. 716, 720 n.2, 114 A.3d 694, 696 n.2 (2015)
(“Standing refers to whether the plaintiff has shown that he or she is entitled to invoke the
judicial process in a particular instance.” (Citation, brackets, and internal quotation marks
omitted)). Indeed, “[o]ne requirement of justiciability is that the plaintiff have standing in
the sense that the person is entitled to invoke the judicial process in a particular instance.”
Adams v. Manown, 328 Md. 463, 480, 615 A.2d 611, 619 (1992) (citation omitted). Put
simply, “[a] litigant must have standing to maintain a judicial action.” Long Green Valley
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Ass’n v. Bellevale Farms, Inc., 432 Md. 292, 313, 68 A.3d 843, 855 (2013) (citation
omitted).
Privity is defined as “[t]he connection or relationship between two parties, each
having a legally recognized interest in the same subject matter (such as a transaction,
proceeding, or piece of property); mutuality of interest[.]” Privity, Black’s Law Dictionary
(10th ed. 2014). Privity is required for the application of both res judicata and collateral
estoppel. See Warner v. German, 100 Md. App. 512, 519-20, 642 A.2d 239, 243 (1994)
(“One element [that] both [the doctrines of res judicata and collateral estoppel] share,
however, is the common requirement of privity. For either doctrine to apply, the second
action must be between the same parties or those in privity with them.” (Citations,
brackets, and internal quotation marks omitted)).
For purposes of collateral estoppel, an analysis of privity “focuses on whether the
interests of the party against whom estoppel is sought were fully represented, with the same
incentives, by another party in the prior matter.” Mathews v. Cassidy Turley Md., Inc.,
435 Md. 584, 628, 80 A.3d 269, 294 (2013) (citations omitted). In Mathews, id. at 627-
28, 80 A.3d at 294, the petitioner argued that the respondent was “bound by the facts
asserted in [a] bankruptcy report on the basis of collateral estoppel because” the respondent
was a privy of a company that had declared bankruptcy. This Court rejected that argument
and explained:
[The petitioner] has not alleged that [the respondent] shared an identity of
interests with [the company] in connection with the [company’s] bankruptcy
proceeding. Indeed, we do not know from the record before us what
relationship [the respondent] had to the bankrupt estate—whether as a
creditor or otherwise. It is not self-evident that whatever contractual
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relationship existed between [the company] and [the respondent] in
connection with the marketing and sale of [tenants in common] interests
established the necessary identity of interests to bind [the respondent] by
collateral estoppel as to determinations made in the [company’s] bankruptcy
proceeding.
Id. at 628, 80 A.3d at 294. Similarly, in Warner, 100 Md. App. at 520-21, 642 A.2d at 243,
the Court of Special Appeals stated that an analysis of privity for purposes of collateral
estoppel involves examination of “the procedural rights of the party against whom the
doctrine is to be invoked[,]” and “[i]n discerning whether a party’s procedural rights have
been addressed adequately, a court may focus on the nature of the interests binding the two
parties, and, correspondingly, whether they share the same incentive in their separate
litigation attempts.” (Citations omitted).
For purposes of res judicata, privity “generally involves a person so identified in
interest with another that [the person] represents the same legal right.” FWB Bank v.
Richman, 354 Md. 472, 498, 731 A.2d 916, 930 (1999) (citation and internal quotation
marks omitted). In Ugast v. La Fontaine, 189 Md. 227, 232-33, 55 A.2d 705, 708 (1947),
this Court explained when nonparties in a prior lawsuit are in privity with a party in that
lawsuit for purposes of res judicata, stating:
It is well established that a judgment may not be pleaded as res judicata by
strangers to the action in which it was rendered, but it may be pleaded only
the parties to the action and their privies. Generally, the parties to a suit are
those persons who are entered as parties of record. But for the purpose of
the application of the rule of res judicata, the term ‘parties’ includes all
persons who have a direct interest in the subject matter of the suit, and have
a right to control the proceedings, make defense, examine the witnesses, and
appeal if an appeal lies. So, where persons, although not formal parties of
record, have a direct interest in the suit, and in the advancement of their
interest take open and substantial control of its prosecution, or they are so far
represented by another that their interests receive actual and efficient
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protection, any judgment recovered therein is conclusive upon them to the
same extent as if they had been formal parties.
(Citations omitted).
Analysis
Here, we hold that the prerequisites that must exist before judicial estoppel may be
applied are not satisfied, and, as such, Judge Glass properly declined to apply judicial
estoppel to bar Respondents’ argument that Petitioners are in privity with First Horizon.
Stated otherwise, because the three circumstances that must be fulfilled for the application
of judicial estoppel are not established, Judge Glass properly ruled that Respondents’
privity argument was not barred by judicial estoppel. In our view, Respondents’ position
with respect to privity in this case is not inconsistent with their position with respect to
standing in the First Horizon litigation, as standing and privity do not give rise to mutually
exclusive arguments, but instead are two separate concepts.
As to the first circumstance that must be present before judicial estoppel may be
applied—that a party “takes a position that is inconsistent with a position [that it] it took in
previous litigation,” Dashiell, 396 Md. at 171, 913 A.2d at 22—we conclude that
Respondents’ positions on standing in the First Horizon litigation and privity in the current
litigation are not inconsistent. Indeed, standing and privity are two distinct concepts.
Standing concerns whether a “plaintiff has shown that he or she is entitled to invoke the
judicial process in a particular instance[.]” State Ctr., 438 Md. at 502, 92 A.3d at 430
(citations, brackets, and internal quotation marks omitted). By contrast, privity concerns
“[t]he connection or relationship between two parties, each having a legally recognized
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interest in the same subject matter[.]” Privity, Black’s Law Dictionary (10th ed. 2014). In
other words, standing concerns a party’s ability to bring a lawsuit, whereas privity concerns
the relationship between two parties. Standing and privity are two distinct concepts, and
they do not give rise to mutually exclusive arguments, such that a party may make an
argument only as to standing or privity, but not as to both. A trial court’s ruling that a party
lacks standing does not preclude a party in a subsequent lawsuit from being in privity with
the party that was found to lack standing; as such, it does not follow that, because a party
lacked standing, another party in a subsequent lawsuit would be precluded from arguing
that the opposing party is in privity with the party that lacked standing.
In the First Horizon litigation, Respondents’ argument with respect to standing was
two-fold. In large part, Respondents argued that First Horizon—the party that brought the
lawsuit as lender and owner of the refinance mortgage loan—was not the proper party to
bring the lawsuit because it lacked standing, as it did not own the refinance mortgage loan,
and could not sue in its own name and on its own behalf for reformation of the refinance
Deed of Trust. Respondents also argued that First Horizon could not maintain the litigation
in its own name because, absent Schedule I of the PSA, First Horizon could not
demonstrate that the PSA even applied to the refinance mortgage loan. In this litigation,
Respondents have argued that Petitioners—the parties that brought the second lawsuit—
are barred under res judicata and collateral estoppel from bringing the second lawsuit
because they were in privity with First Horizon. Respondents contended that BNYM had
the same protected, direct interest in the First Horizon litigation as First Horizon, that
BNYM was First Horizon’s successor-in-interest, and that Old Republic completely
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controlled the prosecution of the First Horizon litigation.
Respondents’ arguments on standing in the First Horizon litigation and privity in
the current litigation are plainly not inconsistent. First Horizon’s procedural inability to
bring the First Horizon litigation in its own name and on its own behalf—i.e., First
Horizon’s lack of standing—is of no consequence to the issue of whether there is a
relationship, and ultimately privity, among First Horizon, BNYM, and Old Republic, such
that BNYM and Old Republic are precluded from bringing the second lawsuit. Put simply,
standing and privity are two different concepts, and Respondents’ arguments on those
matters are not inconsistent or otherwise contrary. Clearly, Respondents did not take a
position with respect to privity in the First Horizon litigation that is contrary to the one that
they are taking in this litigation. Indeed, privity was not even at issue in the First Horizon
litigation because there was no litigation prior to that lawsuit. Privity, and the relationship
between parties, for purposes of res judicata and collateral estoppel, obviously becomes
relevant only where there are two or more lawsuits.6
Before addressing the other two prerequisites of judicial estoppel, we pause to
consider whether Petitioners are in privity with First Horizon for purposes of res judicata
6
We agree with Petitioners, however, that Respondents’ positions on standing and
privity are legal, not factual, positions, and that judicial estoppel is applicable where a party
takes either inconsistent legal or factual positions. As discussed, standing and privity are
distinct legal concepts concerning, respectively, whether a party is entitled to invoke the
judicial process and whether the relationship between parties is such that res judicata and
collateral estoppel may be applied. And, Maryland appellate courts have stated that judicial
estoppel applies where a party took an inconsistent legal or factual position in an earlier
litigation. See Lillian C. Blentlinger, 2017 WL 5507725, at *12; Dynacorp, 208 Md. App.
at 472, 56 A.3d at 672; Chaney, 158 Md. App. at 39, 854 A.2d at 255.
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and collateral estoppel, and we determine that they are. As to BNYM, the record
demonstrates that, at the time of trial in the First Horizon litigation, First Horizon was the
master servicer of the refinance mortgage loan, but BNYM both actually owned the
refinance mortgage loan, and, under the PSA, was the successor-in-interest to First
Horizon, which owned the refinance mortgage loan before BNYM. Indeed, both BNYM
and First Horizon were parties to the PSA, and First Horizon was obligated under the PSA
to service and administer the refinance mortgage loan, and to take any necessary action in
connection with servicing and administering the refinance mortgage loan. BNYM thus had
a direct interest in the First Horizon litigation, and its interest was adequately protected by
First Horizon’s prosecution of the First Horizon litigation. See Ugast, 189 Md. at 232-33,
55 A.2d at 708 (“[W]here persons, although not formal parties of record, have a direct
interest in the suit, and . . . they are so far represented by another that their interests receive
actual and efficient protection, any judgment recovered therein is conclusive upon them to
the same extent as if they had been formal parties.” (Citations omitted)). Indeed, under
the circumstances set forth above, BNYM and First Horizon were “so identified in interest
with [one] another” that they could be said to share “the same legal right.” FWB Bank,
354 Md. at 498, 731 A.2d at 930 (citation and internal quotation marks omitted). And,
given the relationship between the two entities with respect to the PSA, with certainty,
BNYM’s interests were “fully represented, with the same incentives, by” First Horizon in
the First Horizon litigation. Mathews, 435 Md. at 628, 80 A.2d at 294 (citation omitted).
In sum, BNYM is in privity with First Horizon because it had a direct interest in First
Horizon litigation, it had the same interests in that case as First Horizon, and its interests
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were protected by First Horizon’s prosecution of litigation.
As to Old Republic, the record demonstrates that Old Republic issued the Policy
insuring that the refinance mortgage loan would be secured by a first lien against the
Property, and protecting First Horizon against any issues that could occur during the
execution of the mortgage, and that the Policy extended to First Horizon and First
Horizon’s successors and/or assigns. Additionally, significantly, the record demonstrates
that Old Republic controlled the prosecution of the First Horizon litigation—it selected and
retained Faller to file the lawsuit; it paid Faller for costs, expenses, and attorney’s fees
related to the First Horizon litigation; it regularly communicated with Faller; and it
discussed and approved litigation strategy, selected trial witnesses, named the plaintiff in
the case as First Horizon, and decided whether to appeal the circuit court’s rulings. Clearly,
Old Republic and First Horizon “share[d] the same incentive in their separate litigation
attempts[,]” Warner, 100 Md. App. at 521, 642 A.2d at 243 (citation omitted). And, Old
Republic had “a direct interest in the [First Horizon litigation], and in the advancement of
th[at] interest t[ook] open and substantial control of its prosecution[,]” Ugast, 189 Md. at
232-33, 55 A.2d at 708 (citations omitted). Like BNYM, Old Republic is in privity with
First Horizon for purposes of res judicata and collateral estoppel.
Now, returning to the circumstances that must exist for judicial estoppel to be
applicable, we examine the second prerequisite—that “the previous inconsistent position
was accepted by a court[.]” Dashiell, 396 Md. at 171, 913 A.2d at 22 (citation omitted),
and we conclude that this prerequisite is not established. To be sure, Judge Alexander
certainly accepted Respondents’ position on standing. Indeed, when pressed for a ruling
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on standing, Judge Alexander ruled that First Horizon lacked standing, stating that
Schedule I of the PSA was not included, that there was no identification of the refinance
mortgage loan being subject to the PSA, and that First Horizon was not the owner of the
refinance mortgage loan and had failed to bring the case in a representative capacity. But,
bbecause Respondents’ position on standing is not the same as its position on privity, the
second prerequisite for the application of judicial estoppel is not established. Put simply,
there was no previous inconsistent position.
Finally, there is no evidence in the record to support a conclusion that Respondents
maintained inconsistent positions to intentionally mislead either Judge Alexander or Judge
Glass to gain an unfair advantage. See Dashiell, id. at 171, 913 A.2d at 22 (The third
circumstance that must exist for judicial estoppel to apply is that “the party who is
maintaining the inconsistent positions must have intentionally misled the court in order to
gain an unfair advantage.” (Citation omitted)). To state the obvious, we have concluded
that Respondents have not maintained inconsistent positions. In any event, in both the First
Horizon litigation and this litigation, Respondents have been transparent with their
arguments on standing and privity; i.e., Respondents have not attempted to hide the
respective arguments as to standing or privity. The record simply does not contain any
evidence of an intent to mislead Judge Glass in the current litigation, whether to gain an
unfair advantage or otherwise. To that point, Judge Glass certainly never found that
Respondents intended to mislead her, and, to the contrary, in actuality, ruled that Petitioners
could not show that Respondents “ever intended to mislead the [c]ourt.” This case’s
circumstances are very different from those of Kramer, 175 Md. at 463-65, 2 A.2d at 635,
- 43 -
in which Globe Brewing averred that Kramer was its employee at the time of the accident,
thereby inducing Kramer to dismiss the tort action, and later took the position in the
workers’ compensation case that Kramer was not its employee at the time of the accident.
In Kramer, clearly, Globe Brewing sought to gain an unfair advantage by taking directly
inconsistent positions. The same simply cannot be said about the circumstances of this
case.
In sum, we conclude that the three prerequisites for the application of judicial
estoppel are not established, that Judge Glass did not err in declining to apply judicial
estoppel given the circumstances of this case, and that Respondents were not barred from
presenting their argument as to privity.
II. Res Judicata and Collateral Estoppel
The Parties’ Contentions
Petitioners contend that Judge Alexander’s ruling in the First Horizon litigation that
First Horizon lacked standing is not a final judgment on the merits for purposes of res
judicata or collateral estoppel, and that neither doctrine applies. Petitioners argue that
Maryland courts have held that a ruling on standing is not a final judgment on the merits
for purposes of res judicata or collateral estoppel. Petitioners assert that dismissal of a case
on the basis of lack of standing does not have preclusive effect for purposes of either res
judicata or collateral estoppel. Petitioners maintain that Judge Alexander’s ruling on the
merits was a contingent ruling, and not a separate and independent ruling on the merits,
and, as such, the ruling on the merits was not a final judgment and has no preclusive effect.
Respondents counter that Judge Alexander’s ruling on the issue of mutual mistake,
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i.e., the merits, is a final judgment that has preclusive effect for purposes of res judicata
and collateral estoppel. Respondents contend that Judge Alexander’s ruling on standing—
specifically the ruling that First Horizon failed to prove that the PSA applied to the
refinance mortgage loan—was also a final judgment on the merits of that issue, and has
preclusive effect as to that issue, such that Petitioners, who are in privity with First Horizon,
are barred from relitigating the issue in this case. Respondents argue that Judge Glass
properly determined that Judge Alexander’s rulings were alternative, and not contingent,
rulings, constituted final judgments, and that both rulings have preclusive effect and bar
this litigation.
In a reply brief, Petitioners contend that Judge Alexander’s ruling on the merits was
expressly contingent on reversal of his ruling on standing, which did not occur, and that,
as such, Judge Alexander’s ruling on the merits was a contingent ruling and not a final
judgment that has preclusive effect.
Standard of Review
In Crise v. Md. Gen. Hosp., Inc., 212 Md. App. 492, 519-20, 69 A.3d 536, 552
(2013), the Court of Special Appeals explained that the appropriate standard of review for
a trial court’s decision under Maryland Rule 2-502 is as follows:
[A trial] court decision under [Maryland] Rule 2-502, on a discrete issue that
is solely within the court’s province, is essentially a trial by the court on the
merits of that issue. The court may hear evidence and make factual findings
necessary to its decision of the discrete issue that is within its province to
decide. Therefore, the court’s decision on the issue is reviewed on appeal
under [Maryland] Rule 8-131(c).
(Citations omitted). In turn, Maryland Rule 8-131(c) provides:
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When an action has been tried without a jury, the appellate court will review
the case on both the law and the evidence. It will not set aside the judgment
of the trial court on the evidence unless clearly erroneous, and will give due
regard to the opportunity of the trial court to judge the credibility of the
witnesses.
We review without deference, however, questions of law, such as a determination
as to the applicability of the doctrines of res judicata and collateral estoppel. See, e.g.,
Garrity v. Md. State Bd. of Plumbing, 447 Md. 359, 368, 135 A.3d 452, 458 (2016)
(“Whether it was appropriate to grant preclusive effect[, i.e., the doctrine of collateral
estoppel[,] to the [Consumer Protection Division]’s Final Order . . . is a legal conclusion
that this Court reviews de novo.” (Citation omitted)); Karsenty v. Schoukroun, 406 Md.
469, 502, 959 A.2d 1147, 1166 (2008) (“The deference shown to the trial court’s factual
findings under the clearly erroneous standard [of Maryland Rule 8-131(c)] does not, of
course, apply to legal conclusions.” (Citation and internal quotation marks omitted));
Seminary Galleria, LLC v. Dulaney Valley Imp. Ass’n, Inc., 192 Md. App. 719, 734, 995
A.2d 1068, 1077 (2010) (“We agree . . . that the issue of whether res judicata applies to [a
case] is a question of law, and that it was proper for the [trial] court—and it is appropriate
for this Court—to review the legal conclusion of the Board de novo.”); Bender v. Schwartz,
172 Md. App. 648, 664, 917 A.2d 142, 151 (2007) (“A decision under [Maryland] Rule 2-
502 is a trial on the merits, with respect to the issues decided. Thus, as in all actions tried
without a jury, we shall review questions of law de novo and shall not set aside the [trial]
court’s findings of fact unless they are clearly erroneous.” (Citation and internal quotation
marks omitted)).
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Law
In Powell, 430 Md. at 63-64, 59 A.3d at 537-38, this Court described the doctrine
of res judicata, or claim preclusion, as well as the circumstances that must be present for
the doctrine to apply, stating:
Res judicata is an affirmative defense that precludes the same parties
from relitigating any suit based upon the same cause of action because the
second suit involves a judgment that is conclusive, not only as to all matters
that have been decided in the original suit, but as to all matters which with
propriety could have been litigated in the first suit.
In Maryland, the doctrine of res judicata precludes the relitigation of
a suit if (1) the parties in the present litigation are the same or in privity with
the parties to the earlier action; (2) the claim in the current action is identical
to the one determined in the prior adjudication; and (3) there was a final
judgment on the merits in the previous action.
(Citations and internal quotation marks omitted). In Colandrea, 361 Md. at 388, 761 A.2d
at 908, we explained that, “if a proceeding between parties involves the same cause of
action as a previous proceeding between the same parties, the principle of res judicata
applies and all matters actually litigated or that could have been litigated are conclusive in
the subsequent proceeding.” (Citations omitted). Indeed,
a judgment between the same parties and their privies is a final bar to any
other suit upon the same cause of action and is conclusive, not only as to all
matters decided in the original suit, but also as to matters that could have
been litigated in the original suit.
Id. at 392, 761 A.2d at 910 (citations and emphasis omitted).
In Colandrea, id. at 387, 761 A.2d at 907, this Court also described collateral
estoppel, or issue preclusion, stating: “[W]hen an issue of fact or law is actually litigated
and determined by a valid and final judgment, and the determination is essential to the
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judgment, the determination is conclusive in a subsequent action between the parties,
whether on the same or a different claim.” (Citations and internal quotation marks
omitted). For the doctrine of collateral estoppel to apply, the following four-part test must
be satisfied:
1. Was the issue decided in the prior adjudication identical with the one
presented in the action in question?
2. Was there a final judgment on the merits?
3. Was the party against whom the plea is asserted a party or in privity with
a party to the prior adjudication?
4. Was the party against whom the plea is asserted given a fair opportunity
to be heard on the issue?
Id. at 391, 761 A.2d at 909 (citation omitted). “If a proceeding between parties does not
involve the same cause of action as a previous proceeding between the same parties, the
principle of collateral estoppel applies, and only those facts or issues actually litigated in
the previous action are conclusive in the subsequent proceeding.” Id. at 388, 761 A.2d at
908 (citations omitted). Thus, when collateral estoppel applies, “facts or issues decided in
the previous action are conclusive only if identical to facts or issues presented in the
subsequent proceeding.” Id. at 388-89, 761 A.2d at 908 (citation omitted). Stated
otherwise, “collateral estoppel may be invoked when in a second suit 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.” Shader v. Hampton
Imp. Ass’n, Inc., 443 Md. 148, 161-62, 115 A.3d 185, 193 (2015) (citation, emphasis, and
internal quotation marks omitted).
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Generally speaking, for a trial court’s ruling to constitute a final judgment, the ruling
“must, among other things, be an unqualified, final disposition of the matter in
controversy.” Addison v. Lochearn Nursing Home, LLC, 411 Md. 251, 262, 983 A.2d
138, 145 (2009) (citation and internal quotation marks omitted). In FWB Bank, 354 Md.
at 492-93, 731 A.2d at 927-28, we elaborated on what constitutes a final judgment for
purposes of res judicata, explaining:
The basic rule of claim preclusion in this context is not difficult: “A
valid and final personal judgment rendered in favor of the defendant bars
another action by the plaintiff on the same claim.” RESTATEMENT
(SECOND) OF JUDGMENTS § 19 (1982). . . .
When an earlier court has actually ruled on the matter sought to be
litigated in a second court, the “same claim” analysis is usually
straightforward. . . . It has long been established that a judgment between the
same parties or their privies upon the same cause of action is conclusive not
only as to all matters that have been decided in the original suit, but as to all
matters which with propriety could have been litigated in the first suit. In
dealing with that issue, we have adopted the “transactional” approach set
forth in § 24 of the RESTATEMENT (SECOND) OF JUDGMENTS: “When
a valid and final judgment rendered in an action extinguishes the plaintiff's
claim pursuant to the rules of merger or bar . . . the claim extinguished
includes all rights of the plaintiff to remedies against the defendant with
respect to all or any part of the transaction, or series of connected
transactions, out of which the action arose.” In deciding whether a factual
grouping constitutes a “transaction,” the RESTATEMENT directs a
pragmatic approach, “giving weight to such considerations as whether the
facts are related in time, space, origin or motivation, whether they form a
convenient trial unit, and whether their treatment as a unit conforms to the
parties' expectations or business understanding or usage.”
RESTATEMENT, supra, § 24(2).
(Some citations and internal quotation marks omitted) (last ellipsis in original).
Analysis
Here, we hold that Judge Alexander’s rulings on the merits and standing in the First
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Horizon litigation were not contingent rulings, but rather were independent, alternative
rulings, and, as such, the ruling on the merits constitutes a final judgment for purposes of
res judicata and collateral estoppel. We conclude that Judge Glass properly determined
that all of the elements of res judicata and collateral estoppel were satisfied, including the
final judgment element, and, thus, Petitioners were barred from bringing the claims in the
second lawsuit. Stated otherwise, the prerequisites for application of res judicata and
collateral estoppel have been established, and Judge Alexander’s ruling on the merits has
preclusive effect in the second lawsuit.
As an initial matter, we note that, on brief in this Court, Petitioners focus on the
final judgment element of res judicata and collateral estoppel. In other words, Petitioners
do not appear to take issue with Judge Glass’s determination that the other elements of res
judicata and collateral estoppel are satisfied. Thus, we, too, focus on the final judgment
element. As explained, for both res judicata or collateral estoppel to apply, there must be
a final judgment on the merits. See Powell, 430 Md. at 63-64, 59 A.3d at 538 (“In
Maryland, the doctrine of res judicata precludes the relitigation of a suit if . . . (3) there was
a final judgment on the merits in the previous action.” (Citation omitted)); Colandrea, 361
Md. at 391, 761 A.2d at 909 (For collateral estoppel to apply, one part of a four-part test
that must be satisfied is the existence of “a final judgment on the merits[.]” (Citation
omitted)).
As stated, we hold that Judge Alexander’s ruling on the merits of the First Horizon
litigation was an independent, alternative ruling that constitutes a final judgment for
purposes of res judicata and collateral estoppel; i.e., the ruling on the merits was not a
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contingent ruling having no force or effect. Our determination is supported by the record,
which reveals the following case-specific, unique sequence of events in the First Horizon
litigation. At the start of trial, Judge Alexander denied Respondents’ motion to dismiss the
amended complaint, but struck the correction to caption, treating it as a motion to amend
or substitute the plaintiff. Respondents’ counsel moved to dismiss the case or, in the
alternative, for summary judgment, on the ground that First Horizon lacked standing.
Judge Alexander reserved ruling on the motion for summary judgment, and allowed the
case to proceed to trial. On the second day of trial, Judge Alexander heard argument as to
the admissibility of the PSA, and Respondents’ counsel argued that First Horizon lacked
of standing. In relevant part, First Horizon’s counsel responded that First Horizon was
authorized to bring the action in its own name, and stated that he hoped that Judge
Alexander “would be inclined to try to resolve this case on its merits.” Judge Alexander
ultimately admitted the PSA into evidence.
First Horizon rested and Respondents’ counsel orally moved for judgment, arguing
that First Horizon lacked standing, and had failed to produce evidence demonstrating a
mistake of fact by Susan. After hearing argument from the parties, Judge Alexander
granted the motion for judgment based on the merits of the case, not a lack of standing.
Specifically, Judge Alexander ruled that First Horizon had failed to produce evidence
showing a mutual mistake of fact.
Although the First Horizon litigation could have concluded at that time, First
Horizon’s counsel asked Judge Alexander to clarify, in relevant part, whether Judge
Alexander found “that there was sufficient standing established to allow th[e] case to be
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heard on the merits[.]” In response, Judge Alexander ruled that First Horizon lacked
standing. First Horizon’s counsel responded that if First Horizon lacked standing, “then
there is no ability to go forward on any claims” and “there is no case to go forward.” At
that point, Respondents’ counsel suggested that Judge Alexander issue alternative rulings
as to the merits and standing.
Significantly, Respondents’ counsel made the following suggestion to Judge
Alexander:
Grant the motion for judgment because you have heard the evidence, you
have considered the merits and the rulings on the merits are in the alternative.
So even if they had standing, because that way the issue would be ripe so that
the [circuit c]ourt’s efforts in this court in hearing what they have asked you
to hear, if the [circuit c]ourt were to review it, they can consider all of the
issues.
And after Judge Alexander asked Respondents’ counsel whether he had an objection to a
ruling that there was standing, Respondents’ counsel replied:
No, I actually say in the alternative. So you can have the ruling that if the
[circuit c]ourt could say even if there was standing, I have considered the
presentation of evidence as if there was standing to, for judicial economy, so
that we don’t have to have a whole new trial.
Without objection from First Horizon’s counsel to the request that alternative
rulings should be issued to avoid “a whole new trial[,]” Judge Alexander accepted that
suggestion and orally issued alternative rulings on standing and the merits, stating: “That
sounds appropriate. I will say that I do not find that they had standing, however, in the
alternative, I do not find that [First Horizon] has met its burden of production to have the
case go forward based on the evidence for the reasons previously stated.” The trial recessed
immediately thereafter. Later, consistent with his oral ruling, Judge Alexander issued an
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order granting judgment in Respondents’ favor, stating, in relevant part,
Trial having taken place in this matter on April [23 and] 24, 2012,
[First Horizon] having concluded the presentation of its case, this Court finds
that [First Horizon] does not have standing to bring th[e] action against
[Respondent]s. In the alternative, this Court finds that even if [First Horizon]
had standing to pursue th[e] action, the evidence which [First Horizon]
presented was insufficient to meet its burden of production.
The record unmistakably demonstrates that Judge Alexander’s ruling on the merits
of the case was the initial ruling, that the ruling on standing followed, and that the two
rulings were then reiterated and expressed as “alternative” rulings in response to a request
that the rulings be issued as such to avoid the need for a new trial. Judge Alexander’s
ruling on the merits, in which he found that First Horizon had not produced evidence
showing that Susan had made a mistake of fact, was made after First Horizon presented its
case-in-chief and rested, after Respondents’ counsel moved for judgment on both standing
and the merits, and before any request for a ruling on standing, and, thus, clearly was not
contingent on his later ruling on standing. Indeed, it is evident from the trial transcript that
the ruling on the merits was intended to be a final judgment on the merits, both at the time
that Judge Alexander initially issued the ruling without addressing standing, and at the time
that Judge Alexander reiterated the ruling in response to Respondents’ counsel’s request
for a ruling “so that we don’t have to have a whole new trial.” Notably, it was only after
being prompted by First Horizon’s counsel that Judge Alexander issued a ruling on
standing. Moreover, when Judge Alexander reiterated the two rulings, both orally and in
a later-issued order, the two rulings were expressed said to be “alternative” rulings, not
contingent rulings. The sequence of the rulings in the First Horizon litigation and Judge
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Alexander’s discussion with counsel demonstrates that the ruling on the merits was
intended to be an independent, alternative ruling that constitutes a final judgment for
purposes of res judicata and collateral estoppel.7
Given the sequence of events that occurred with respect to the issuance of the rulings
in the First Horizon litigation, we find unpersuasive federal case law stating that dismissal
of a case on the basis of lack of standing does not have preclusive effect for res judicata or
collateral estoppel. To be sure, Petitioners are correct that federal case law supports the
conclusion that dismissal of a case for lack of standing or on other jurisdictional grounds
is not a final judgment for purposes of res judicata or collateral estoppel. See, e.g., Perry
v. Sheahan, 222 F.3d 309, 318 (7th Cir. 2000) (“A judgment on the merits precludes
relitigation of any ground within the compass of the suit, while a jurisdictional dismissal
precludes only relitigation of the ground of that dismissal[.] . . . The determination that
Perry lacked standing in [the first lawsuit] precludes relitigation of the same standing
argument in [the second lawsuit].” (Citation, brackets, and internal quotation marks
omitted)); Gillig v. Nike, Inc., 602 F.3d 1354, 1361 (Fed. Cir. 2010) (“To the extent that
the dismissal in the original action was for lack of standing, there is no res judicata bar to
a second action by a party with proper standing, but only a bar to another action by the
same party alleging the same basis for standing[.]” (Citation omitted)).
7
At oral argument, Petitioners’ counsel argued that, once Judge Alexander ruled on
standing, the ruling on the merits could have no force or effect. In our view, however, this
argument misses the mark because it glosses over the circumstances that the ruling on the
merits was the initial ruling and that the ruling on the merits was an independent ruling
intended to be a final judgment.
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However, Petitioners fail to account for the circumstance that this case does not
involve a ruling on standing alone, or even a primary ruling on standing with a secondary
or contingent ruling on the merits. As the record demonstrates, here, Judge Alexander’s
primary ruling was as to the merits of the case; it was a decisive and comprehensive ruling
addressing the heart of the merits—i.e., lack of mutual mistake—and the case could have
ended at that point. So, although federal case law indicates that, once a case is dismissed
for lack of standing, then litigation of the action by a party with standing is not barred, that
case law is not persuasive under the circumstances of this case, in which the record reflects
that Judge Alexander’s ruling on the merits when issued was intended to be the final ruling
with respect to the case.
Similarly, we are not convinced that the Restatement (Second) of Judgments § 20
(1982) leads to a different result. Restatement (Second) of Judgments § 20 provides:
(1) A personal judgment for the defendant, although valid and final, does not
bar another action by the plaintiff on the same claim:
(a) When the judgment is one of dismissal for lack of jurisdiction, for
improper venue, or for nonjoinder or misjoinder of parties;
(b) When the plaintiff agrees to or elects a nonsuit (or voluntary
dismissal) without prejudice or the court directs that the plaintiff be nonsuited
(or that the action be otherwise dismissed) without prejudice; or
(c) When by statute or rule of court the judgment does not operate as
a bar to another action on the same claim, or does not so operate unless the
court specifies, and no such specification is made.
(2) A valid and final personal judgment for the defendant, which rests on the
prematurity of the action or on the plaintiff’s failure to satisfy a precondition
to suit, does not bar another action by the plaintiff instituted after the claim
has matured, or the precondition has been satisfied, unless a second action is
precluded by operation of the substantive law.
Comment e, concerning “Alternative determinations,” provides, in pertinent part:
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A dismissal may be based on two or more determinations, each of which,
standing alone, would render the judgment a bar to another action on the
same claim. In such a case the judgment operates as a bar. . . .
A dismissal may be based on two or more determinations, at least one of
which, standing alone, would not render the judgment a bar to another action
on the same claim. In such a case, if the judgment is one rendered by a court
of first instance, it should not operate as a bar.
Notably, the Restatement (Second) of Judgments § 20 does not address the circumstance
of a trial court ruling on a motion for judgment at the conclusion of the evidence in a
plaintiff’s case, which is the circumstance here. Nor does the Restatement specifically
mention dismissal for lack of standing. Rather, the Restatement refers to dismissal for lack
of jurisdiction, improper venue, lack of joinder and improper joinder, and a dismissal for
plaintiff’s failure to satisfy preconditions that may later be satisfied. The Restatement
concerns circumstances where a trial court rules on a motion to dismiss, not where a trial
court conducts a trial with respect to the merits of the case and rules on a motion for
judgment at the conclusion of the plaintiff’s case after hearing evidence. The Restatement
does not establish that, where a trial court rules on a motion for judgment at the conclusion
of the plaintiff’s evidence, and later issues a ruling as to the plaintiff’s standing, those
rulings must be automatically contingent on one another, such that a ruling on the merits
cannot have preclusive effect. Stated otherwise, nothing in the Restatement addresses
whether a ruling on the merits after a trial court hears evidence in a case acts as a bar to
another action on the same claim where a trial court also later rules on standing; instead,
the Restatement (Second) of Judgments § 20 focuses on whether final judgments in the
form of dismissals act as a bar to future actions by the plaintiff on the same claim.
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Likewise, Petitioners’ reliance on Tower Oaks Blvd., LLC v. Procida, 219 Md. App.
376, 100 A.3d 1255 (2014), cert. dismissed, 444 Md. 691, 121 A.3d 820 (2015), for the
contention that a contingent ruling is not a separate and independent ruling on the merits
and thus has no preclusive effect is misplaced. In Tower Oaks, 219 Md. App. at 392, 100
A.3d at 1265, in addressing a motion to dismiss the appeal for mootness, the Court of
Special Appeals determined that a trial court’s rulings in denying a motion to stay and
dismiss were contingent rulings, not separate and independent rulings. In that case, the
trial court denied the motion on the ground that the appellant “had not been authorized to
take action to defend itself in the second foreclosure action, making the motion to stay and
dismiss ineffective.” Id. at 392, 100 A.3d at 1265. The trial court “then went on to address
the merits of the motion to stay and dismiss, opining that if the motion to stay and dismiss
had been authorized, the wrongful conduct [of another entity] . . . would not eliminate [that
entity’s] right to foreclose, as a matter of law or under the unclean hands doctrine.” Id. at
392, 100 A.3d at 1265 (emphasis omitted). The Court of Special Appeals determined that
the rulings were not separate and independent, explaining:
The court’s “ruling” about the merits of the motion to stay and dismiss was
not a separate and independent basis on which it denied the motion. At most,
it was a contingent ruling. The court found that [the appellant] filed an
unauthorized and therefore ineffective motion to stay and dismiss; the
consequence of that finding is that any “ruling” on the merits of the motion
is immaterial. It is not a separate basis for denying the motion, independent
of the lack of authority ruling. . . . In neither situation are the two rulings
separate and independent and in neither situation has there ceased to be a live
controversy between the parties so that the case has become moot.
Id. at 392-93, 100 A.3d at 1265.
Tower Oaks is distinguishable from this case in obvious respects. Significantly,
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Tower Oaks did not involve res judicata or collateral estoppel, let alone what constitutes a
final judgment for purposes of those doctrines. Nor did the case involve a motion for
judgment made at the end of a party’s case-in-chief. Thus, Tower Oaks provides no
guidance in determining whether Judge Alexander’s ruling on the merits is a final judgment
on the merits that has preclusive effect.8
In sum, under the distinctive circumstances of this case, we conclude that Judge
Alexander’s ruling as to the merits in the First Horizon litigation constitutes a final
judgment on the merits for purposes of res judicata and collateral estoppel. Although
Petitioners do not appear to take issue with the determination that the other elements of res
judicata and collateral estoppel are satisfied, we shall nevertheless briefly address these
elements. In doing so, we conclude that all of the elements of res judicata and collateral
estoppel are established. To reiterate, the following three circumstances must be present
for the doctrine of res judicata to apply:
(1) the parties in the present litigation are the same or in privity with the
parties to the earlier action; (2) the claim in the current action is identical to
the one determined in the prior adjudication; and (3) there was a final
judgment on the merits in the previous action.
8
We also conclude that Petitioners’ reliance on Ullery v. Fulleton, 256 P.3d 406,
409 (Wash. Ct. App. 2011) is without merit because, in that case, the trial court ruled that
a party lacked standing to sue, and then “noted” that, even if he had had standing, he had
failed to produce “sufficient evidence” as to the merits of the breach of contract claim. In
Ullery, id. at 411-12, the Court of Appeals of Washington stated that, “[h]aving found that
[the party] lacked standing, the trial court should not have proceeded to the merits[,]” and
that “prudential considerations of justiciability prevent a judgment of dismissal based on
lack of standing from constituting a judgment on the merits.” In contrast to the order of
the rulings in Ullery, in the First Horizon litigation, Judge Alexander ruled decisively on
the merits, and ruled on standing only when prompted to do so.
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Powell, 430 Md. at 63-64, 59 A.3d at 538 (citations omitted). As to the first and third
circumstances, as we have explained, Petitioners are in privity with First Horizon and there
was a final judgment on the merits in the First Horizon litigation.
As to the second circumstance that is necessary for the application of res judicata,
in Colandrea, 361 Md. at 388, 761 A.2d at 908, we explained that, “if a proceeding between
parties involves the same cause of action as a previous proceeding between the same
parties, the principle of res judicata applies and all matters actually litigated or that could
have been litigated are conclusive in the subsequent proceeding.” (Citations omitted).
Here, the record unequivocally demonstrates that the claims, or causes of action, in this
case are identical to the claims, or causes of actions, that were determined in the First
Horizon litigation. In the First Horizon litigation, in an amended complaint, First Horizon
sought reformation of the refinance Deed of Trust, a declaration that First Horizon had a
valid first mortgage lien against the Property, an order directing Susan to execute a
confirmatory joinder of the refinance Deed of Trust, a declaration that First Horizon had a
mortgage lien through equitable subrogation on the Property, and an order establishing an
equitable mortgage against the Property under the refinance Deed of Trust. In the second
lawsuit, Petitioners raised identical causes of action for reformation of the refinance Deed
of Trust, an order compelling Respondents to “execute appropriate paperwork, or
alternatively reforming the existing refinance [D]eed of [T]rust[,]” equitable subrogation,
and an equitable mortgage. And, significantly, the second lawsuit was based on the same
facts and legal grounds as the First Horizon litigation—namely, that First Horizon and
Susan had made a mutual mistake in failing to include Susan on the refinance Deed of
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Trust. Because the second lawsuit involves the same causes of action as in the First
Horizon litigation between the same parties or their privies, a final judgment on the merits
“is conclusive, not only as to all matters decided in the [First Horizon litigation], but also
as to matters that could have been litigated in the [First Horizon litigation].” Id. at 392,
761 A.2d at 910 (citations and emphasis omitted).9
Similarly, for the doctrine of collateral estoppel to apply, the following four-part
test must be satisfied:
1. Was the issue decided in the prior adjudication identical with the one
presented in the action in question?
2. Was there a final judgment on the merits?
3. Was the party against whom the plea is asserted a party or in privity with
a party to the prior adjudication?
4. Was the party against whom the plea is asserted given a fair opportunity
to be heard on the issue?
Colandrea, 361 Md. at 391, 761 A.2d at 909 (citation omitted). As to the second and third
circumstances, for the reasons explained above, there was a final judgment on the merits
in the First Horizon litigation, and Petitioners are in privity with First Horizon.
As to the first circumstance necessary for application of collateral estoppel, the
record demonstrates that the issue of mutual mistake of fact was “actually litigated and
determined by a valid and final judgment,” and that that “determination is conclusive in”
the second lawsuit. Id. at 387, 761 A.2d at 907 (citations and internal quotation marks
9
Thus, any other causes of action that were added by Petitioners in the second
lawsuit based on the same set of facts would necessarily be barred by application of res
judicata, as the causes of action could have been brought in the First Horizon litigation.
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omitted). Stated differently, the issue decided in the First Horizon litigation—i.e., whether
there was a mutual mistake of fact in failing to have Susan sign the refinance Deed of Trust,
and, specifically, whether Susan had the requisite knowledge and intent with respect to the
execution of the refinance Deed of Trust—is identical to the issue that was presented in the
second lawsuit brought by Petitioners. Finally, as to the fourth prerequisite for application
of collateral estoppel, Petitioners had a full and fair opportunity to be heard in the First
Horizon litigation through their privy, First Horizon; indeed, in the First Horizon litigation,
First Horizon presented its entire case-in-chief, presenting witness testimony and
introducing exhibits into evidence. Accordingly, all four circumstances necessary for the
application of collateral estoppel have been established.
Because all of the elements of res judicata and collateral estoppel are satisfied, we
conclude that Judge Glass correctly determined that, under the circumstances of this case,
the two doctrines applied, and Petitioners were precluded from bringing the second lawsuit
containing causes of action and issues identical to those that were brought and litigated, or
that could have been litigated, in the First Horizon litigation. Accordingly, Judge Glass’s
judgment was properly affirmed by the Court of Special Appeals, whose judgment we, in
turn, affirm.
JUDGMENT OF THE COURT OF SPECIAL
APPEALS AFFIRMED. PETITIONERS TO PAY
COSTS.
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