            If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.




                          STATE OF MICHIGAN

                           COURT OF APPEALS



KENNETH KROLCZYK and VIRGINIA                                      UNPUBLISHED
KROLCZYK,                                                          April 4, 2019

               Plaintiffs-Appellees,

v                                                                  No. 341016
                                                                   Macomb Circuit Court
CITIZENS INSURANCE COMPANY OF THE                                  LC No. 2016-002885-CZ
MIDWEST,

               Defendant-Appellant.


Before: O’BRIEN, P.J., and JANSEN and RONAYNE KRAUSE, JJ.

PER CURIAM.

        In this insurance-coverage dispute, defendant Citizens Insurance Company of the
Midwest appeals as of right the trial court’s orders denying defendant’s motion for summary
disposition, granting plaintiffs’ motion for summary disposition, and entering judgment in
plaintiffs’ favor. Plaintiffs, Kenneth Krolczyk and Virginia Krolczyk, obtained an insurance
policy from defendant for lost or stolen jewelry covering four specified pieces of jewelry.
Plaintiffs filed a claim with defendant when the jewelry went missing. Defendant sought to
avoid paying the claim due to plaintiffs’ previous involvement in a bankruptcy proceeding
several years before the policy was issued. We affirm.

                        I. FACTUAL AND PROCEDURAL HISTORY

        Between 1995 and 2002, plaintiffs purchased four pieces of jewelry, which were
collectively appraised at $44,600. The relevant pieces included: (1) a platinum wedding ring
purchased in 1995, appraised at $18,500; (2) a platinum pendant necklace bought in 1996,
appraised at $9,600; (3) a platinum basal set ring purchased in 2002, appraised at $4,000; and (4)
a platinum diamond ring with two sapphires bought in 2000, appraised at $12,500. In July of
2015, plaintiffs purchased a homeowner’s insurance policy from defendant. For an additional




                                               -1-
$825 premium, defendant individually scheduled each piece of jewelry at the appraised values. 1
In March of 2016, plaintiffs took a family trip. Shortly after returning home, plaintiffs
discovered the four pieces of jewelry missing. On April 15, 2016, plaintiffs filed a claim with
defendant for the “loss or theft” of the jewelry. The claim included the four pieces of jewelry
noted above, at a claimed value of $44,600.

        Defendant investigated the claim, and during the course of that investigation, defendant
learned that plaintiff had filed for bankruptcy in June 2009. Notably, the bankruptcy was more
than six years before obtaining the insurance policy at issue here, and nearly seven years before
the loss of their jewelry and the resulting claim. Even though the jewelry had been appraised
before the bankruptcy, perhaps as recently as a year previously, plaintiffs’ bankruptcy schedules
listed the jewelry at a combined value of only $1,000. As part of their bankruptcy, plaintiffs
submitted to a creditors’ examination, which was attended by them, their bankruptcy lawyer, a
lawyer for one of their creditors, and the bankruptcy trustee. The trustee was the only person to
ask questions throughout the examination. Although several questions were asked about the
amounts of various debts and the values of various assets, no one inquired further about the
jewelry. In July of 2009, the trustee recommended, and the bankruptcy court granted, a
discharge of plaintiffs’ debt.

       As part of the instant claim, plaintiffs both submitted to examinations under oath
conducted by defendant. Plaintiffs admitted that they had no precise explanation for telling the
bankruptcy court their jewelry was worth $1,000 when they had appraisals for higher values,
although Virginia Krolczyk noted that they relied on advice from their bankruptcy lawyer. In
addition, plaintiffs indicated that the bankruptcy was personally and emotionally troubling to
them, making it difficult for them to recall specific details about the way they completed their
forms many years after the fact. Virginia Krolczyk also testified that plaintiffs’ bankruptcy
lawyer explained to them that their jewelry was subject to exemptions as wedding jewelry, and
because it was custom-made or had sentimental value.

       There is no dispute that the theft or loss of the jewelry constituted a loss under the policy
defendant issued plaintiffs. Defendant does not assert, for example, that the loss or theft of the
jewelry happened in any other manner than that claimed by plaintiffs. Indeed, defendant does
not in any way assert that the claim is itself invalid. Rather, defendant relies solely on the
bankruptcy discrepancy as its basis for refusing to pay the claim.

        Plaintiffs sued defendant on August 15, 2016, asserting breach of contract and a violation
of the Insurance Code of 1956, and seeking declaratory relief. After conducting discovery, the
parties filed cross motions for summary disposition. Defendant’s motion asserted that the
doctrine of judicial estoppel prevented plaintiffs from claiming that the jewelry was worth
$40,600 after having taken the position in the bankruptcy court that it was only worth $1,000,
and also asserted that the bankruptcy deprived plaintiffs of an insurable interest in the jewelry.
Plaintiffs responded that the discrepancy was explainable as a mistake or inadvertence instead of
an intentional attempt to mislead the judicial system. They also argued that if defendant was


1
    In addition to two other pieces of jewelry which are not at issue in this appeal.


                                                   -2-
correct about the import of the bankruptcy proceeding, their creditors and the bankruptcy trustee
are the aggrieved parties, not defendant, so defendant should not be relieved of its obligation
under the insurance policy. It is undisputed that defendant, on several occasions, attempted to
persuade plaintiffs’ bankruptcy trustee to intervene or reopen the bankruptcy and the trustee
declined each time.

         In their motion for summary disposition, plaintiffs argued that they were entitled to
judgment as a matter of law because the policy specifically scheduled and covered the jewelry at
issue and there was no dispute that the loss occurred. Defendant argued that, notwithstanding the
undisputed coverage and undisputed loss, plaintiffs had no insurable interest in the jewelry
because of the bankruptcy. During the hearing on the parties’ dispositive motions, the trial court
initially expressed concern about the magnitude of the discrepancy. Nevertheless, the trial court
also expressed concern that defendant was opportunistically trying to avoid its obligations by
relying on the long-closed bankruptcy. The trial court concluded that plaintiffs’ conduct in the
bankruptcy could be explained by mistake or inadvertence. The trial court therefore denied
defendant’s motion and granted plaintiff’s motion as to defendant’s liability. The parties
stipulated to the amount of damages, and the trial court entered judgment in plaintiff’s favor in
that amount. This appeal followed.

                                   II. STANDARD OF REVIEW

        “This Court reviews de novo a trial court’s decision on a motion for summary
disposition.” Spohn v Van Dyke Pub Sch, 296 Mich App 470, 479; 822 NW2d 239 (2012). The
parties’ motions were filed pursuant to MCR 2.116(C)(10), which tests the factual sufficiency of
the complaint; summary disposition is properly granted if the entirety of the record evidence,
when viewed in the light most favorable to the non-moving party, fails to establish a genuine
issue regarding any material fact, and the moving party is entitled to judgment as a matter of law.
Maiden v Rozwood, 461 Mich 109, 118-120; 597 NW2d 817 (1999). “When reviewing a grant
of equitable relief, an appellate court will set aside a trial court’s factual findings only if they are
clearly erroneous, but whether equitable relief is proper under those facts is a question of law
that an appellate court reviews de novo.” McDonald v Farm Bureau Ins Co, 480 Mich 191, 197;
747 NW2d 811 (2008). Under the “clear error” standard, “the appellate court must defer to the
trial court’s view of the facts unless the appellate court is left with the definite and firm
conviction that a mistake has been made by the trial court.” Herald Co, Inc v Eastern Mich Univ
Bd of Regents, 475 Mich 463, 472; 719 NW2d 19 (2006).

                                    III. JUDICIAL ESTOPPEL

        The equitable doctrine of judicial estoppel “ ‘generally prevents a party from prevailing
in one phase of a case on an argument and then relying on a contradictory argument to prevail in
another phase.’ ” Spohn, 296 Mich App at 479, quoting White v Wyndham Vacation Ownership,
Inc, 617 F3d 472, 476 (CA 6, 2010) (internal footnotes omitted). Our courts employ the “prior
success model” of judicial estoppel, under which “ ‘a party who has successfully and
unequivocally asserted a position in a prior proceeding is estopped from asserting an inconsistent
position in a subsequent proceeding.’ ” Spohn, 296 Mich App at 480, quoting Paschke v Retool
Indus, 445 Mich 502, 509; 519 NW2d 441 (1994). “Success” is not necessarily defined by
prevailing in the prior proceeding, but rather by the tribunal’s acceptance of the previous,

                                                  -3-
inconsistent position. Spohn, 296 Mich App at 480. Critically, however, “there must be some
indication that the court in the earlier proceeding accepted that party’s position as true.” Id.
(emphasis added). The prior position must also be “wholly inconsistent” with the one taken in
the present proceeding. Id.

       Significantly, “ ‘[t]he doctrine of judicial estoppel is to be applied with caution,’ ”
Opland v Kiesgan, 234 Mich App 352, 363-364; 594 NW2d 505 (1999), quoting Paschke, 445
Mich at 523 (GRIFFIN, J., dissenting). “It is applied against litigants because of their ‘deliberate
manipulation’ of the courts.” Opland, 234 Mich App at 364, quoting Helfand v Gerson, 105 F3d
530, 536 (CA 9, 1997). In particular, judicial estoppel is an extraordinary remedy to prevent a
miscarriage of justice, and it is not intended to defeat meritorious claims on a technicality. Id. In
other words, courts must take at least as much care to avoid misuse of the judicial estoppel
doctrine as the doctrine takes to avoid misuse of the judicial system.

       The elements for determining whether to apply judicial estoppel in a bankruptcy setting
were discussed by this Court in Spohn:

               [T]o support a finding of judicial estoppel, [a reviewing court] must find
       that: (1) [the plaintiff] assumed a position that was contrary to the one that she
       asserted under oath in the bankruptcy proceedings; (2) the bankruptcy court
       adopted the contrary position either as a preliminary matter or as part of a final
       disposition; and (3) [the plaintiff’s] omission did not result from mistake or
       inadvertence. In determining whether [the plaintiff’s] conduct resulted from
       mistake or inadvertence, [the reviewing] court considers whether: (1) [the
       plaintiff] lacked knowledge of the factual basis of the undisclosed claims; (2) [the
       plaintiff] had a motive for concealment; and (3) the evidence indicates an absence
       of bad faith. In determining whether there was an absence of bad faith, [the
       reviewing court] will look, in particular, at [the plaintiff’s] “attempts” to advise
       the bankruptcy court of [the plaintiff’s] omitted claim. [Spohn, 296 Mich App at
       480-481, quoting White, 617 F3d at 478.]

        In Spohn, the defendant sought to apply judicial estoppel based on statements the plaintiff
had made in the plaintiff’s bankruptcy. The plaintiff had filed for bankruptcy knowing she had a
workplace sexual harassment claim against the defendant. She did not, however, disclose the
existence of that claim to the bankruptcy court. Later, after the dismissal of her bankruptcy case,
she pursued her lawsuit against the defendant. This Court agreed with the defendant that judicial
estoppel should bar the plaintiff’s claim because of her prior, inconsistent assertion to the
bankruptcy court that she had no potential causes of action. Spohn, 296 Mich App at 482-483.
The bankruptcy court “adopted” that position by confirming her Chapter 13 bankruptcy plan,
which omitted any mention of her tort claim. Id. at 483. There was no reasonable dispute that
the plaintiff knew about the claim, and that she did nothing to amend her bankruptcy position to
disclose it, precluding a finding of mistake or inadvertence. Id. A significant fact in Spohn was
that the defendant was “aggrieved,” because the claim the plaintiff failed to disclose involved the
defendant. In the instant appeal, by contrast, there was no “claim” against Citizens when
plaintiffs filed for bankruptcy—indeed, the bankruptcy began and finished years before the
policy was even written.


                                                -4-
        Here, plaintiffs’ assertion in bankruptcy that their jewelry was worth $1,000 is directly
contrary to the current claim that it is worth over $40,000. The bankruptcy court did apparently
accept (or at least did not appear to reject) that assertion. It is unclear, however, whether
plaintiffs’ $1,000 valuation had any practical consequences. Defendant asserts that the $1,000
valuation enabled plaintiffs to get a discharge of their debts with no liquidation of assets. The
evidence, however, suggests otherwise. Neither the trustee nor the creditor’s lawyer inquired
into the jewelry at the creditors’ exam. Significantly, the record is clear that defendant made
many attempts to notify the bankruptcy trustee of the potential $40,000 in understated assets, and
the bankruptcy trustee was uninterested in pursuing the issue. The level of disinterest shown by
the trustee and creditor, both during the bankruptcy proceedings and after, implies that the
jewelry was of minimal importance. Additionally, the lack of any conceivable harm whatsoever
to Citizens, which charged plaintiffs for insuring the jewelry as appraised and in no way relied
on anything that happened in the bankruptcy proceeding, does not in any way suggest that any
miscarriage of justice has occurred in this matter.2

        In contrast, we are not “left with the definite and firm conviction” that the trial court
made a mistake in finding that a “mistake or inadvertence” occurred. Plaintiffs clearly knew, or
should have known, that they had misrepresented the value of their jewelry. We are sympathetic
to the fact that bankruptcy proceedings are distressing and embarrassing, but that is no excuse for
lying to a court. Nevertheless, it is not clear that plaintiffs had any real motive for concealment,
especially in light of testimony that plaintiffs’ lawyer had advised them that the custom nature of
the jewelry and the fact that it was wedding jewelry made the pieces exempt. Furthermore,
although distress and embarrassment are not excuses, they can be explanations, and it is normal
in any legal proceeding for parties to rely heavily on the advice and guidance of counsel. We
express no view as to whether that advice was accurate, and the accuracy of that advice is wholly
irrelevant to plaintiffs’ motive. In summary, defendant ignores testimony that explains the
discrepancy, and we cannot say that the trial court erred by giving that testimony credence.




2
  Our dissenting colleague accurately points out that harm to another litigant is not, strictly
speaking, an “element” of judicial estoppel, except perhaps to the United States Supreme Court.
See New Hampshire v Maine, 532 US 742, 775; 121 S Ct 1808; 149 L Ed 2d 968 (2001).
However, as noted, the need to avoid a “miscarriage of justice” unambiguously is an element.
See Opland, 234 Mich App at 364. The term “miscarriage of justice” has never been clearly
defined by the courts in Michigan, but is generally used to refer to error that is both prejudicial
and more than merely technical. See In re Markowitz, 393 Mich 6, 21; 222 NW2d 504 (1974);
People v Mateo, 453 Mich 203, 212-215; 551 NW2d 891 (1996). Prejudicial error is generally
understood to mean “harmful.” The bankruptcy court clearly does not believe itself to have
suffered harm, which we think is an assessment the bankruptcy court is in a better position to
make than are we. Consequently, unless defendant can show some kind of harm, which our
dissenting colleague appears to tacitly concede it cannot, defendant’s invocation of judicial
estoppel is simply the kind of gamesmanship that is explicitly forbidden. Opland, 234 Mich App
at 364.


                                                -5-
        Notably, this is not a situation like Spohn, where a bankruptcy is filed by a debtor who
conceals a known and existing claim, hoping to be able to bring it after the bankruptcy ends by
avoiding having it liquidated by the trustee. Plaintiffs had no claim against defendant for the
jewelry at issue, and indeed did not even obtain the policy until years after the bankruptcy ended.
Defendant also attempts to assign “bad faith” to plaintiffs for not attempting to have their
bankruptcy reopened, but the record is clear that defendant took that particular task into its own
hands, and the bankruptcy trustee apparently saw no need to revisit the issue of the jewelry’s
value. Defendant has not presented any evidence that plaintiffs would have had any more
success. We agree, therefore, with plaintiffs and the trial court that even if judicial estoppel
might otherwise apply, plaintiffs’ acts in the bankruptcy can be explained as “mistake or
inadvertence,” which, combined with the lack of possible harm to Citizens, prevents application
of judicial estoppel. We respectfully believe our dissenting colleague misapprehends or
misapplies the proper standard of review and fails to appreciate that as an error-correcting court,
we are required to afford a certain amount of deference to the trial court’s assessment of witness
credibility. McGonegal v McGonegal, 46 Mich 66, 67; 8 NW 724 (1881); Anderson v City of
Bessemer City, NC, 470 US 564, 574; 105 S Ct 1504, 1511-1512; 84 L Ed 2d 518 (1985). This
is the case even where the applicable standard of review is otherwise de novo. In re Loyd, 424
Mich 514, 535; 384 NW2d 9 (1986).

        Equally importantly, we share the trial court’s concern that defendant appears to be
attempting to utilize the doctrine of judicial estoppel as a “a technical defense . . . to derail [a] . . .
meritorious claim,” Opland, 234 Mich App at 364, premised on a fortuitous, after-the-fact
discovery of a years-old, long-closed bankruptcy that occurred years before defendant’s policy
was even in force. Defendant had appraised and individually scheduled each piece of the jewelry
at issue, and it charged and collected an extra premium of over $800 for it. The record does not
show that defendant was the slightest bit interested in plaintiffs’ bankruptcy history or its
potential impact on the availability for coverage when it initially issued the policy and collected
an additional premium to cover plaintiffs’ jewelry. Defendant only developed a sudden concern
for the integrity of the bankruptcy proceeding when doing so appeared to be in its direct financial
interest. Defendant was not in any way harmed by plaintiffs’ $1,000 valuation in the bankruptcy
proceeding, and neither did that valuation affect either the insurance policy or defendant’s
collection of a significant premium based on the $40,600 valuation. It appears that defendants
are not trying to avert a miscarriage of justice so much as to create one.

       The trial court properly refused to apply the doctrine of judicial estoppel under the
circumstances.

                                    IV. INSURABLE INTEREST

        Defendant also asserts that plaintiffs have no insurable interest in their jewelry because
they lost title to it when they filed for Chapter 7 bankruptcy. See Spohn, 296 Mich at 485, citing
11 USC 541(a); see also Young v Independent Bank, 294 Mich App 141, 143; 818 NW2d 406
(2011). One must have an “insurable interest” to obtain coverage for the loss of personal
property. Morrison v Secura Ins, 286 Mich App 569, 572; 781 NW2d 151 (2009). Whether one
has an insurable interest turns on “whether the insured would suffer a direct, pecuniary loss from
the property’s destruction.” AB Petro Mart, Inc v Ali T Beydoun Ins Agency, Inc, 317 Mich App
290, 300; 892 NW2d 460 (2016).

                                                   -6-
        Defendant asserts that plaintiffs’ jewelry remained part of the bankruptcy estate because
they underreported its value. A bankruptcy debtor must list all assets on the bankruptcy
schedule, and any scheduled property not administered by the trustee is considered abandoned by
the trustee back to the debtor. 11 USC § 521(a)(1); 11 USC § 554(c). In contrast, any assets not
scheduled are still considered to be part of the bankruptcy estate but cannot be deemed
abandoned even if the trustee is aware of them, and any property not administered or abandoned
remains part of the bankruptcy estate. 11 USC 554(d); Young, 294 Mich App at 144, 147-148.
Defendant apparently contends that plaintiffs’ under-valuation of the jewelry is the equivalent of
failing to schedule it; the theory, then, is that the jewelry was neither administered nor
abandoned by the trustee and now remains part of the bankruptcy estate.

          Defendant, however, provides no authority in support of the proposition that under-
valuing an asset requires the asset to be deemed unscheduled. We decline to search for any.
Mitcham v City of Detroit, 355 Mich 182, 203; 94 NW2d 388 (1959). Defendant likewise does
not provide any authority for the proposition that the jewelry needed to be individually itemized
to any particular degree. The fact is that plaintiffs did schedule their jewelry, the trustee did not
administer the jewelry, and as a consequence, the jewelry was abandoned back to plaintiffs when
the bankruptcy ended. The trustee and plaintiffs’ creditors could have, but did not, investigate
further during the creditors’ exam. The trustee never asked plaintiffs to turn over their jewelry
for appraisal or liquidation. Defendant erroneously asserts, therefore, that plaintiffs lack an
insurable interest because the bankruptcy trustee has title to the jewelry, because plaintiffs have
title to the jewelry. Thus, the trial court did not err in denying defendant summary disposition on
this basis.

                                        V. CONCLUSION

        For the foregoing reasons, we hold that the trial court properly declined to apply judicial
estoppel to bar plaintiffs’ claims. We also hold that there is no merit to defendant’s contention
that plaintiffs do not hold title to the jewelry because title has been retained by the bankruptcy
trustee. The trial court therefore properly denied defendant’s motion for summary disposition.
There is no dispute that plaintiffs suffered a loss that is otherwise covered under the insurance
policy defendant sold them, so the trial court properly granted plaintiffs motion for summary
disposition and properly entered judgment in plaintiffs’ favor based on the parties’ damages
stipulation.

       Affirmed. Plaintiffs, as the prevailing parties, may tax costs. MCR 7.219(A).

                                                              /s/ Colleen A. O'Brien
                                                              /s/ Amy Ronayne Krause




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