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What Is Subrogation?
Subrogation is an equitable doctrine that allows a third party to be substituted for the creditor in a creditor-debtor situation. The party being substituted agrees to pay the original creditor for the debts, which enables the third party to assume the rights of the original creditor. The debtor will then be held liable to the substituted creditor, also called the “subrogee.”
Subrogation can be based either on operation of law, statute, or through a written contract, which is known as a “subrogation agreement." Since subrogation is an equitable remedy, all of the applicable defenses and theories in equity apply, such as laches and unclean hands.
What Are the Conditions for Subrogation?
Like other doctrines of equity, subrogation will be permitted based on the circumstances and facts of each individual case. However, several general conditions must be met in order for a court to approve of a subrogation agreement. These conditions can include:
- Payment must be rendered by the subrogee in an effort to protect or secure their own personal interests
- The subrogee must not act by mistake or as a volunteer
- The subrogee must not be originally primarily liable for the debt paid
- The debt must be paid in its entirety
- The subrogation must not cause any injustice to any of the parties
Thus, subrogation rights will not be granted if a person has simply paid a debt that he or she is already obligated to pay. Also, an intermeddler, volunteer, or stranger who interjects themselves into the debt situation will not be granted rights under subrogation without a valid written agreement. Additionally, mistakenly making payments for the debtor is not grounds for subrogation.
Do I Need to Contact a Lawyer for Subrogation issues?
If you are attempting to pay off the debts for another person, you should contact a lawyer before doing so. This will help you determine whether you can assume the various rights associated with subrogation. An experienced attorney can help you draft a subrogation agreement that meets the various conditions imposed by equitable principles. It is not wise to pay off someone else’s debts without their consent, as you may not be entitled to reimbursements.
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Last Modified: 06-05-2014 11:09 AM PDT
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