The substitution of one person in the place of another with reference to a lawful claim, demand, or right, so that he or she who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies, or Securities .
There are two types of subrogation: legal and conventional. Legal subrogation arises by operation of law, whereas conventional subrogation is a result of a contract.
The purpose of subrogation is to compel the ultimate payment of a debt by the party who, in Equity and good conscience, should pay it. This subrogation is an equitable device used to avoid injustice.
Legal subrogation takes place as a matter of equity, with or without an agreement. The right of legal subrogation can be either modified or extinguished through a contractual agreement. It cannot be used to displace a contract agreed upon by the parties.Conventional subrogation arises when one individual satisfies the debt of another as a result of a contractual agreement that provides that any claims or liens that exist as security for the debt be kept alive for the benefit of the party who pays the debt. It is necessary that the agreement be supported by consideration; however, it does not have to be in writing and can be either express or implied.
The facts of each case determine the issue of whether or not subrogation is applicable. In general, the remedy is broad enough to include every instance in which one party, who is not a mere volunteer, pays a debt for which a second party is primarily liable and which, in equity and good conscience, should have been discharged by the second party. Subrogation is a highly favored remedy that the courts are inclined to extend and apply liberally.
The ordinary equity maxims are applicable to subrogation, which is not permitted when there is an adequate legal remedy. The plaintiff must come into court with clean hands, and the person who seeks equity must do equity. The remedy is not available when there are equal or superior equities in other individuals who are in opposition to the party seeking subrogation. The remedy is denied when the person seeking subrogation has interfered with the rights of others, committed Fraud. or been negligent.
The right to subrogation accrues upon payment of the debt. The subrogee is generally entitled to all the creditor's rights, privileges, priorities, remedies, and judgments and is subject only to whatever limitations and conditions were binding on the creditor. He does not, however,
have any more extensive rights than the creditor.
n. assuming the legal rights of a person for whom expenses or a debt has been paid. Typically, an insurance company which pays its insured client for injuries and losses then sues the party which the injured person contends caused the damages to him/her. Example: Fred Farmer negligently builds a bonfire which gets out of control and starts a grass fire which spreads to Ned Neighbor's barn. Good Hands Insurance Co. has insured the barn, pays Neighbor his estimated cost of reconstruction of the barn, and then sues Farmer for that amount. Farmer will have all the "defenses" to the insurance company's suit that he would have had against Neighbor, including the contention that the cost of repairing the barn was less than Neighbor was paid or that Neighbor negligently got in the way of fire fighters trying to put out the grass fire. (See: subrogee. subrogor. negligence )
Associated concepts: conventional subrogation, legal subrooation, rights of subrogation See also: replacement
SUBROGATION, civil law, contracts. The act of putting by a transfer, a person in the place of another, or a thing in the place of another thing. It is the substitution (q.v.) of a new for an old creditor, and the succession to his rights, which is called subrogation; transfusio unius creditoris in alium. It is precisely the reverse of delegation. (q.v.)
2. There are three kinds of subrogation: 1. That made by the owner of a thing of his own free will; example, when be voluntarily assigns it. 2. That which arises in consequence of the law, even without the consent of the owner; example, when a man pays a debt which could not be properly called his own, but which nevertheless it was his interest to pay, or which he might have been compelled to pay for another, the law subrogates him to all the rights of the creditor. Vide 2 Binn. Rep. 382; White's L. C. in Eq.* 60- 72. 3. That which arises by the act of law joined to the act of the debtor; as, when the debtor borrows money expressly to pay off his debt, and with the intention of substituting the lender in the place of the old creditor. 7 Toull. liv. 3, t. 3, c. 5, sect. 1, Sec. 2. Vide Civ. Code of Louisiana, art. 2155 to 2158; Merl. Repert. h.t.; Dig. lib. 20; Code, lib. 8, t. 18 et 19 9 Watts. R. 451; 6 Watts & Serg. 190; 2 Bouv. Inst. n. 1413.