Also known as: subrogation rules · subrogation
Written by attorneys — see sources below.
An equitable principle by which a party who performs an obligation owed by another succeeds to the creditor's rights against the primary obligor to prevent unjust enrichment.
Seth Shapiro promised to pay a debt owed by Sebastian Santos to a third-party creditor. When the creditor sued both, Sebastian paid the full amount. Sebastian then stepped into the creditor's position to recover from Seth, enforcing the original duty without double recovery.
Sylvia Santos held a professional liability policy issued by Sentinel Security. After the insurer paid a judgment against her firm for fiduciary breach, it asserted rights against the attorney personally to recoup the amount, treating the payment as satisfying the underlying obligation.
In 1977 Cecelia Rice retained attorney Norman Perl and his firm, DeParcq, Anderson, Perl, Hunegs & Rudquist, P.A., to represent her on a Dalkon Shield claim. Perl negotiated a $50,000 settlement with the liability insurer's adjuster. Rice later discovered that the adjuster had simultaneously been employed by Perl's firm as an investigator. Rice sued Perl and the firm, asserting claims for fraud, misrepresentation, negligence, breach of contract, civil conspiracy, violation of consumer protection statutes, breach of fiduciary duty, and punitive damages. On summary judgment, Judge McRae dismissed every claim except breach of fiduciary duty after finding that Rice had failed to prove any actual damages. The court held that Perl's nondisclosure of the conflicting relationship breached his fiduciary duty to Rice and ordered the Perl defendants to refund the $20,000 attorney fee previously paid. In June 1982 the Minnesota Supreme Court affirmed the $20,000 judgment in Rice v. Perl, 320 N.W.2d 407 (Minn. 1982). While that appeal remained pending, Perl and his firm commenced this declaratory judgment action against their malpractice carrier, St. Paul Fire and Marine Insurance Company, seeking a determination that the policy required the insurer both to defend the Rice action and to pay the $20,000 award. On January 22, 1982, Judge Durda granted partial summary judgment declaring that St. Paul Fire and Marine was obligated to defend Perl and the firm. On October 13, 1982, the same court granted further summary judgment holding that the insurer was required to pay the $20,000 damages. St. Paul Fire and Marine appealed only from the October 13 order requiring payment of the judgment.
View caseThe promisee obtains the right when the beneficiary's claim is satisfied from the promisee's assets. This allows the promisee to step into the beneficiary's position against the promisor and enforce any remaining judgment or security.
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Satisfaction of either duty reduces the other to the same extent. Subrogation preserves the promisee's ability to recover from the promisor after the promisee has paid, avoiding unjust enrichment of the promisor.
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Yes. A transferor who pays the mortgage obligation after the transferee defaults acquires an equitable right to enforce the mortgage against the land in the transferee's hands by subrogation, treating the transferor as a secondary obligor.
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…(emphasis in original); Davis v. Swedish-American National Bank , 78 Minn. 408, 418, 81 N.W. 210, 212 (1899) ("[F]or the rule is that, if an attorney is guilty of actual fraud or bad faith toward his client in the matter of his employment, he is not entitled to any pay for his services.") (emphasis added).…