Also known as: rights of subrogation · subrogation right · subrogation rights · subrogation
Written by attorneys · grounded in primary & secondary sources — see below
An equitable right by which a party who fully performs another's secured or contractual obligation succeeds to the creditor's rights against the primary obligor. The right prevents unjust enrichment and preserves the underlying claim or security interest rather than extinguishing it upon payment. It arises by operation of law when the performer acts to protect an interest or avoid loss and extends to enforcement of the obligation, any judgment, and any collateral.
Ronald Reed contracted with Riverfront Developments to construct a building and promised to pay a supplier's outstanding invoice. When the supplier demanded payment, Ronald satisfied the invoice in full. Ronald then stepped into the supplier's position and enforced the original claim directly against Riverfront Developments to recover the amount paid.
Ravi Reddy personally guaranteed a loan secured by a mortgage on property later sold to Raven Logistics. After Raven defaulted, Ravi paid the lender the full balance to prevent foreclosure. Ravi then asserted the lender's mortgage rights against the property in Raven's hands and sought foreclosure to recover the payment.
Select any source to read its text and confirm it supports the definition.
The right arises when a transferor who remains secondarily liable pays the mortgage to protect an interest in the property. Payment allows the transferor to step into the mortgagee's position and enforce the lien against the transferee's interest in the land.
Supporting sources
When a promisee satisfies the beneficiary's claim, the promisee acquires the right to enforce the beneficiary's claim against the promisor. Satisfaction of one duty reduces the other to the same extent, and subrogation prevents double recovery while allocating ultimate liability.
Supporting sources
No. Equity looks beyond the record to prevent unjust enrichment. A party who pays to avert foreclosure may still enforce the mortgage by subrogation even after a satisfaction is recorded, provided the payment preserved an interest that would otherwise produce a windfall to the current owner.
Supporting sources
…In that case, the dispute involved title to a particular piece of property. The title insurer sought to recover, by means of subrogation, money it had paid a third party. The trial court granted summary judgment in favor of the title insurer. The appellate court reversed. We first note that the American Title court…