Opinion ID: 2077530
Heading Depth: 1
Heading Rank: 11

Heading: Respondent's Other Contentions

Text: Respondent has presented three additional arguments why the Estate should be bound to the arbitration agreement in this case. First, Respondent argues that the Estate is bound by the arbitration agreement as a third-party beneficiary of that agreement. Second, Respondent contends that the principle of equitable estoppel should bind the Estate to the arbitration agreement. Third, Respondent asserts that the doctrine of unclean hands should bind Petitioner to the arbitration agreement. Each of these arguments misses the mark. The Estate cannot be bound by the arbitration agreement as a third-party beneficiary. The first problem with Respondent's argument on this point is that there was no arbitration agreement formed to which the Estate could be a third-party beneficiary. An individual is a third-party beneficiary to a contract if the contract was intended for his [or her] benefit and it . . . clearly appear[s] that the parties intended to recognize him [or her] as the primary party in interest and as privy to the promise. Shillman v. Hobstetter, 249 Md. 678, 687, 241 A.2d 570, 575 (1968) (quoting Marlboro Shirt Co. v. Am. Dis. Tel. Co., 196 Md. 565, 569, 77 A.2d 776, 777 (1951)). Despite the fact that a third-party beneficiary is not a party to the contract, he or she can bring suit to enforce the contract. Shillman, 249 Md. at 687, 241 A.2d at 575. Before one can enforce a contract, however, whether as a party to the contract or as a third-party beneficiary, there must be a contract to enforce. Respondent in this case sought to enter into an arbitration agreement with Bradley, but, as we have explained, Bradley and Respondent never formed such an agreement. [21] Respondent therefore cannot be the third-party beneficiary of this non-existent agreement. Even if the Estate were a third-party beneficiary to the arbitration agreement, the Estate would not be bound to arbitrate its claims against Respondent. As the Court of Special Appeals has explained in previous cases, a third-party beneficiary who sues to enforce a contract is bound by an arbitration agreement in that contract. Westbard v. Westwood, 181 Md.App. 37, 51, 954 A.2d 470, 478 (2007) ([A] third-party beneficiary who sued for breach of a contract to which it was not a signatory [is] bound by the arbitration clause contained therein.); Dist. Moving & Stg. v. Gardiner & Gardiner, 63 Md. App. 96, 104, 492 A.2d 319, 323 (1985) ([W]here a third party beneficiary attempts to sue a promiser, that promisor may apply the contract provisions against the third party beneficiary in the same manner available against the original promisee.), aff'd sub nom. District Moving & Stg. v. Fedco Systems, 306 Md. 286, 508 A.2d 487 (1986) ( per curiam ). This is because a third-party beneficiary takes the contract subject to the same defenses against the enforcement of the contract, as such, as exist between the original promisor and promisee. Jones v. Hyatt, 356 Md. 639, 647-48, 741 A.2d 1099, 1103 (1999) (quoting Shillman, 249 Md. at 690, 241 A.2d at 577). The Court of Special Appeals has also explained, however, that a third-party beneficiary to an arbitration agreement cannot be required to arbitrate a claim unless the third party is attempting to enforce the contract containing the arbitration agreement. Hartford v. Scarlett Harbor, 109 Md.App. 217, 292-93, 674 A.2d 106, 143 (1996) (refusing to require the plaintiff to arbitrate its contract claim against the defendant when the plaintiff was a third-party beneficiary to a different contract with the defendant), aff'd, 346 Md. 122, 695 A.2d 153 (1997). In this case, the Estate is not attempting to enforce a contract that includes an arbitration clause, but is instead suing Respondent for tort claims unrelated to the alleged contract between Bradley and Respondent. The third-party beneficiary argument is inapplicable here. Similarly, the Estate cannot be bound to the arbitration agreement by equitable estoppel. We have explained that [t]he basis of equitable estoppel is the effect of the conduct of one party on the position of the other party and that [t]he estopped party is therefore `absolutely precluded both at law and in equity, from asserting rights which might perhaps have otherwise existed . . . against another person, who has in good faith relied upon such conduct. . . .' Creveling v. GEICO, 376 Md. 72, 101-02, 828 A.2d 229, 246 (2003) (quoting Cunninghame v. Cunninghame, 364 Md. 266, 289, 772 A.2d 1188, 1201 (2001) (internal quotations omitted)). To assert equitable estoppel, the asserting party must have been misled to his [or her] injury and have changed his [or her] position for the worse, having believed and relied on the representations of the party sought to be estopped. Creveling, 376 Md. at 102, 828 A.2d at 246 (quoting Rubinstein v. Jefferson Nat'l Life, 268 Md. 388, 393, 302 A.2d 49, 52 (1973)). Based on this theory, Respondent argues that the Estate should be estopped from avoiding the arbitration agreement in this case because Dickerson executed the arbitration agreement and . . . [Respondent] felt confident that the parties entered into a binding and enforceable arbitration agreement. Respondent's argument suffers from two flaws. First, we see no way and Respondent has not asserted any waysin which Respondent has changed its position for the worse based on Dickerson's assertion that she was acting on Bradley's behalf when she signed the arbitration agreement. [22] This is a necessary component of an equitable estoppel defense. Creveling, 376 Md. at 101-02, 828 A.2d at 246. Second, and more importantly, Respondent is attempting to use equitable estoppel against Bradley's Estate based on actions that Dickerson took in her individual capacity. The fact that Dickerson is now the personal representative for Bradley's Estate is of no moment; we will not hold this circumstance against Bradley's Estate. Simply put, Bradley's Estate is the plaintiff in this case, and Respondent has alleged no conduct on the part of Bradley's Estate, or by Dickerson in her capacity as Personal Representative of Bradley's Estate, that has affected Respondent's position. This, too, is a necessary element of an equitable estoppel defense. Id. As a result, Respondent's equitable estoppel argument fails. Finally, the Estate cannot be bound to the arbitration agreement by the doctrine of unclean hands. We explained this equitable doctrine in Wells Fargo v. Neal : The [un]clean hands doctrine states that courts of equity will not lend their aid to anyone seeking their active interposition, who has been guilty of fraudulent, illegal, or inequitable conduct in the matter with relation to which he seeks assistance. Hlista [v. Altevogt], 239 Md. [43,] 48, 210 A.2d [153,] 156 [(1965)]; see also Hicks v. Gilbert, 135 Md.App. 394, 400, 762 A.2d 986, 989-90 (2000). The doctrine does not mandate that those seeking equitable relief must have exhibited unblemished conduct in every transaction to which they have ever been a party, but rather that the particular matter for which a litigant seeks equitable relief must not be marred by any fraudulent, illegal, or inequitable conduct. Hlista, 239 Md. at 48, 210 A.2d at 156; Hicks, 135 Md.App. at 400-01, 762 A.2d at 990 (There must be a nexus between the misconduct and the transaction, because `[w]hat is material is not that the plaintiff's hands are dirty, but that he dirties them in acquiring the right he now asserts.') (quoting Adams v. Manown, 328 Md. 463, 476, 615 A.2d 611, 617 (1992)). 398 Md. 705, 729-30, 922 A.2d 538, 552-53 (2007). The unclean hands doctrine is inapplicable in this case for the same reason as Respondent's equitable estoppel claim: the petitioner in this case is Bradley's Estate, but Respondent has alleged no improper conduct on behalf of Bradley's Estate or Dickerson in her capacity as Personal Representative of the Estate. There is no allegation that Bradley's Estate or its agent has committed inequitable conduct, nor that Bradley's Estate or its agent has committed fraudulent or illegal conduct. [23] Some conduct of this sort is required before a court may apply the doctrine of unclean hands. Wells Fargo, 398 Md. at 729-30, 922 A.2d at 552-53. Accordingly, the doctrine of unclean hands does not apply to the present case.