Question of Fact Found on Whether Landlord Had Provided Heating System that Was "Working and in Good Repair" -- Subrogation Action Reinstated

SUBROGATION – FROZEN & BURST WATER PIPES – LANDLORD'S CONTRACTUAL DUTY TO PROVIDE "WORKING AND IN GOOD REPAIR" HEATING SYSTEM - LANDLORD'S COUNTERCLAIMS
Peerless Ins. Co. v. Michael Beshara, Inc.
(3rd Dept., decided 7/1/2010)

After paying $151,583.84 to its insured for damages caused when water pipes at the insured's restaurant froze and burst, Peerless brought this subrogation action against the insured's landlord for its alleged failure to have provided a heating system that the lease required be "working and in good repair".  Defendants interposed counterclaims against Peerless for property damage, alleging that its insured was responsible for the heating system's maintenance and agreed to indemnify defendants for any loss resulting from the bursting of pipes.  Defendants moved and Peerless plaintiff cross-moved for summary judgment.  Supreme Court, Saratoga County (Williams, J.), granted defendants' motion dismissing the complaint and, finding that the allegations underlying defendants' counterclaims only provide the basis for an affirmative defense of comparative negligence, dismissed the counterclaims as well.  The parties cross-appealed.

In MODIFYING the order appealed from to reinstate both Peerless' complaint and defendants' counterclaims, the Third Department held that Peerless had raised a genuine issue of fact as to whether the landlord fulfilled his duty of providing a heating system to Peerless' insured that was "working and in good repair" in the first instance.  As to defendants' counterclaims, the appellate court ruled:

Turning to defendants' cross appeal, we likewise find that outright dismissal of the counterclaims was improper.  It is well settled that "[a] subrogee acquires all rights, defenses and remedies of the subrogor and is subject to any claims or defenses which may be raised against the subrogor" (Servidori v Mahoney, 129 AD2d 944, 945 [1987]; see United States Fid. & Guar. Co. v Smith Co., 46 NY2d 498, 504 [1979]; Solomon v Consolidated Resistance Co. of Am., 97 AD2d 791, 792 [1983]).  Having commenced the instant action, plaintiff stepped into the shoes of Rainer's Gourmet, "succeeding to the benefits which it might bring, but chargeable to the extent of it with the liabilities of [Rainer's Gourmet]" (Seibert v Dunn, 216 NY 237, 245-246 [1915] [emphasis added]).  Despite plaintiff's contention and Supreme Court's conclusion to the contrary, defendants' claims may properly be interposed as counterclaims (see Siegel, NY Prac § 226 [4th ed]; Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C3019:5, at 210-211; see also Allstate Ins. Co. v Babylon Chrysler Plymouth, 45 AD2d 969 [1974]; cf. James Talcott, Inc. v Winco Sales Corp., 14 NY2d 227, 231-233 [1964]). However, they cannot effect an affirmative recovery against plaintiff, but rather may be maintained against plaintiff in the present action only to the extent of setting off plaintiff's claim (see Allstate Ins. Co. v Babylon Chrysler Plymouth, 45 AD2d at 969; see also Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C3019:5, at 210; Travelers Indem. Co. v Zeff Design, 23 Misc 3d 1121[A], *2 [2009]; Allstate Ins. Co. v Trans Hudson Express, Inc., 4 Misc 3d 1029[A], *2-3 [2004]).  In order to seek affirmative relief, defendants must commence an independent action against Rainer's Gourmet or implead Rainer's Gourmet on the counterclaims (see CPLR 3019 [d]; see also Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C3019:5, at 211).