Opinion ID: 895010
Heading Depth: 2
Heading Rank: 1

Heading: Third-Party Debt

Text: A right to subrogation is often asserted by one who pays a debt owed by another, [11] but we have yet to directly address what constitutes a debt owed by another. Frymire urges us to focus on the debt potentially owed in tort by Jomar to the hotel for the water damage caused by Jomar's faulty valve. Frymire contends that it satisfied Jomar's debt by paying for the damages incurred by the hotel and is thus entitled to recoup that payment through equitable subrogation. Jomar counters that the debt in question is the contractual debt owed by Frymire to the hotel. Having suffered extensive damage as a result of Frymire's work, the hotel turned to Frymire, not Jomar, for payment. Jomar claims that Frymire covered the damage according to the terms of a contract to which Jomar was not a party and of which Jomar did not have notice, thus satisfying a debt owed by Frymire. Furthermore, Jomar argues that Frymire should be prevented from asserting the rights of a party, the hotel, to which Frymire was directly indebted. Jomar correctly argues that Frymire's contractual payment fulfilled a debt owed by Frymire to the hotel; however, the satisfaction of this contractual debt does not foreclose the existence and satisfaction of another debt owed by Jomar to the hotel. We have previously permitted subrogation-based claims to proceed under similar circumstances. [12] In Keck, Mahin & Cate v. National Union Fire Insurance Co. of Pittsburgh, PA, an excess insurer, acting on behalf of its insured, settled a lawsuit against the insured according to the terms of the policy. The excess insurer then sued the primary insurer for negligence and the defending law firm for legal malpractice, asserting claims on behalf of the insured under the doctrine of equitable subrogation. [13] The underlying facts in Keck are strikingly similar to the facts highlighted by Jomar in this case. The insured relied on the excess insurer for payment and never sought to recover damages from the law firm or the primary insurer. Furthermore, the excess insurer's settlement payment fulfilled a contractual obligation owed to the insured and was made according to a policy to which the law firm and the primary insurer were not parties and of which they did not have prior notice. Nevertheless, we permitted the excess insurer's claims to proceed. [14] Jomar attempts to distinguish Keck on the basis of its context and the identity of the party receiving payment. Unlike Keck, this case does not arise in the context of excess liability insurance. Additionally, the excess insurer in Keck satisfied its contractual debt with the insured through payment to a third party whereas Frymire paid a contractual debt directly to the hotel owner. These differences do not persuade us to reach a different result here. Equitable subrogation applies in  every instance in which one person ... has paid a debt for which another was primarily liable. [15] Jomar points us to Smart v. Tower Land & Investment Co., where we refused to extend subrogation rights to a mortgage holder who had paid property taxes on behalf of the mortgage debtor, as an instance where subrogation was denied to a party seeking to assert the rights of the payee. [16] In Smart, we refused to allow the mortgage holder to assert the rights of the taxing authority against the mortgage debtor, not because the holder had paid the taxing authority directly, but because subrogation rights based in equity had been foreclosed by the terms of the mortgage contract. [17] We permitted the excess insurer's equitable subrogation claims to proceed in Keck, and, in spite of Jomar's arguments, we will permit Frymire's claims to proceed here if Frymire's indemnity payment satisfied a debt primarily owed by Jomar to the hotel owner. In response to Jomar's summary judgment motion, Frymire presented a report on the water leak from its expert, Johnie Spruiell. Spruiell inspected the Add-A-Valve at issue and concluded in his report that Frymire's employees installed the valve according to Jomar's instructions; however, when installing an adjoining ball valve, the employees may have introduced torque into the copper tubing of the water line, causing the tubing inside the Add-A-Valve to fail. According to Spruiell, once the tubing failed, the Teflon tape sealing the valve to the water line quickly gave way, resulting in the water leakage. Spruiell determined that a properly designed valve would not have failed under these circumstances. Viewing this evidence in the light most favorable to Frymire and disregarding any contrary inferences, as we must at this stage of the proceedings, [18] we conclude that Frymire satisfied its summary judgment burden to provide evidence that a design defect in Jomar's Add-A-Valve primarily caused the rupture, and therefore, that Jomar is primarily responsible for the resulting damage.