Equitable Subrogation

What is equitable subrogation?

Equitable subrogation is a legal doctrine that allows one party to step into the shoes of another and assert the rights and remedies of the other party. In Florida, equitable subrogation is a common law principle that a claimant may use to protect the interests of a lender or an insurer in a real estate transaction.

Equitable subrogation may arise in several different contexts in Florida, but it most commonly occurs in the context of mortgage loans. For example, suppose a lender makes a loan to a borrower and takes a mortgage on the borrower’s property to secure the loan. Then a second lender comes along, makes a loan to the same borrower, and takes a junior mortgage on the property. The first lender may have the right to be subrogated to the second lender’s position if the first lender pays off the second lender’s mortgage.

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What legal issues typically arise related to equitable subrogation?

The following disputes are among the most common to equitable subrogation:

• Superior interest: For equitable subrogation to be available, the subrogated party’s interest must be superior to the party with resolved debt obligations. However, disputes may arise over the priority of interests, particularly in cases involving multiple liens or mortgages on a property.
• The amount payable: In some cases, the parties may disagree over the amount owed to the subrogated party, particularly if the subrogated party seeks to recover costs not expressly included in the agreement.
• Applicability of doctrine: Even if the claim satisfies the conditions for equitable subrogation, the parties may disagree over whether equitable subrogation is an appropriate remedy. This determination is highly fact-intensive.

What are relevant laws related to equitable subrogation in Florida?

In Florida, case law establishes the contours and requirements of equitable subrogation. Florida courts established equitable subrogation as an equitable remedy to ensure lenders are not injured when lending money to individuals or businesses.

Some examples of cases that have resulted in equitable subrogation include:

• Real estate disputes – Equitable subrogation is frequently used in the real estate market to protect mortgage loans and priority issues. Land Bank of Columbia v. Godwin, 145 So. 883, 885 (Fla. 1933).
• Insurance disputes – When an insurance company pays out a claim to the insured, the insurance company might be able to step into the insured’s shoes to recover the damages from the person who caused the original loss.
• Construction disputes – A contractor might pay the debts of a subcontractor and then pursue repayment, or vice versa. See Tank Tech, Inc. v. Valley Tank Testing, LLC, 43 Fla.L.Weekly D868a (Fla. 2d DCA 2018).

What is required to prove a case of equitable subrogation in Florida?

The Florida Supreme Court has held that equitable subrogation generally requires the satisfaction of five conditions:

• The subrogee (party seeking subrogation) must pay the debt to protect its interest;
• The subrogee must not act as a volunteer;
• The subrogee must not be primarily liable for the debt;
• The subrogee must pay off the entire amount of the debt; and
• Subrogation must not harm the rights of any third party.

When a set of facts is appropriate to meet the requirements of equitable subrogation, there are many paths a claimant may take. We are value-based attorneys at Jimerson Birr, which means we look at each action with our clients from the point of view of costs and benefits while reducing liability. Then, based on our client’s objectives, we chart a path forward to determine if equitable subrogation is an appropriate remedy.

To see what actions may be available for your unique situation, please contact our office to set up your initial consultation.

What are common defenses to equitable subrogation in Florida?

The primary defenses to equitable subrogation in Florida include the following:

• Lack of good faith: Equitable subrogation requires that the party seeking subrogation acted in good faith. If the subrogated party knew or should have known of a defect in the original obligation, it may not be able to assert the doctrine of equitable subrogation.
• Notice: The party subject to subrogation must have received notice of the claim. Without it, equitable subrogation may not be available.
• The subrogated party did not pay the debt in full: Equitable subrogation requires that the subrogated party pay the debt in full. If there is only partial payment, the subrogated party may not be entitled to assert the doctrine of equitable subrogation.
• Party seeking subrogation has an adequate remedy at law: If the party seeking subrogation has an adequate remedy at law, such as a breach of contract claim, equitable subrogation may not be available as an additional remedy.
• Unjust enrichment: If allowing the party seeking subrogation to assert the rights of another party would result in unjust enrichment, the court may not allow equitable subrogation.

To see what defenses may be available for your unique situation, please contact our office to set up your initial consultation.

Have more questions about an equitable subrogation-related situation?

Crucially, this overview of equitable subrogation does not begin to cover all the laws implicated by this issue or the factors that may compel the application of such laws. Every case is unique, and the laws can produce different outcomes depending on the individual circumstances.

Jimerson Birr attorneys guide our clients to help make informed decisions while ensuring their rights are respected and protected. Our lawyers are highly trained and experienced in the nuances of the law, so they can accurately interpret statutes and case law and holistically prepare individuals or companies for their legal endeavors. Through this intense personal investment and advocacy, our lawyers will help resolve the issue’s complicated legal problems efficiently and effectively.

Having a Jimerson Birr attorney on your side means securing a team of seasoned, multi-dimensional, cross-functional legal professionals. Whether it is a transaction, an operational issue, a regulatory challenge, or a contested legal predicament that may require court intervention, we remain a tireless advocate every step of the way. Being a value-added law firm means putting the client at the forefront of everything we do. We use our experience to help our clients navigate even the most complex problems and come out the other side triumphant.

If you want to understand your case, the merits of your claim or defense, potential monetary awards, or the amount of exposure you face, you should speak with a qualified Jimerson Birr lawyer. Our experienced team of attorneys is here to help. Call Jimerson Birr at (904) 389-0050 or use the contact form to set up a consultation.