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Equitable Subrogation

It happens every so often that a problem arises and there is not a clear, “traditional” legal claim which provides redress. To address such situations, cases have developed flexible equitable principles and theories which permit courts to meet the nuances of a given situation. 

Equitable subrogration is an example of such a claim that has been developed by the courts. “Subrogation” simply means the substitution of another person in the place of a creditor, so that the person in whose favor subrogation is exercised succeeds to the right of the creditor in relation to the debt. Mo. Pub. Entity Risk Mgmt. Fund v. Am. Cas. Co. of Reading, 399 S.W.3d 68, 75 (Mo. Ct. App. 2013). In other words, it is the right of one who pays anothers debt, to recover the amount paid, which in good conscience should be paid by the one primarily responsible for the loss. Id. 74. 

An example is helpful. Assume there is a contract or promissory note for $100 in which two debtors are equally responsible and one debtor pays of his/her portion ($50). Assuming the other co-debtor does not pay his/her $50, and the debtor who has already paid his/her portion must pay the remaining $50, then there may be an equitable subrogation claim. Specifically, the debtor who paid off the balance of the other non-paying debtor may be able to sue for the non-paying debtor for the amount that was paid ($50). 

Equitable subrogation is designed to prevent unjust enrichment. In the above example, a court may view it as unfair and inequitable for one person to pay off an entire debt for which two people were responsible. There is no general rule regarding when equitable subrogation applies. Ethridge v. TierOne Bank, 226 S.W.3d 127, 134 (Mo. 2007). Its application depends on the facts of the case. Id. 

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