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, orsecurities.
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.