"Subrogation" defined.

- "Subrogation" is the substitution of another person in the place of the creditor whose obligation is paid, so that the person in whose favor it is exercised succeeds to all the rights of the creditor; it is of equitable origin, being founded upon the dictates of refined justice, its basis is the doing of complete, essential, and perfect justice between the parties, and its object is the prevention of injustice. First Nat'l Bank v. American Sur. Co., 71 Ga. App. 112, 30 S.E.2d 402 (1944).

Construction by courts.

- Courts incline to extend rather than restrict the principle of subrogation. First Nat'l Bank v. American Sur. Co., 71 Ga. App. 112, 30 S.E.2d 402 (1944).

Effect of UCC.

- Uniform Commercial Code does not abrogate, modify, affect, or abridge the equitable doctrine of subrogation. Argonaut Ins. Co. v. C & S Bank, 140 Ga. App. 807, 232 S.E.2d 135 (1976); Pembroke State Bank v. Balboa Ins. Co., 144 Ga. App. 609, 241 S.E.2d 483 (1978).

Surety need not file under UCC to preserve surety's priority.

- A surety is "secured" by the surety's right of subrogation, which relates back to the issuance of the bond, to defeat intervening creditors. The Uniform Commercial Code does not abrogate, modify, affect, or abridge the equitable doctrine of subrogation, and a surety is not required to file under the UCC to preserve the surety's priority under the equitable right of subrogation. Pembroke State Bank v. Balboa Ins. Co., 144 Ga. App. 609, 241 S.E.2d 483 (1978).

Cumulative remedy.

- Only a cumulative remedy is afforded by this section as the doctrine of subrogation existed by general law prior to its adoption in the statutes. Curan v. Colbert, 3 Ga. 239, 46 Am. Dec. 427 (1847).

Section not applicable to rights under § 10-7-41. - Subrogation under O.C.G.A. § 10-7-56 is not the same thing as a guarantor's right to recoup payment of a debt from the guarantor's principal under O.C.G.A. § 10-7-41. Fabian v. Dykes, 214 Ga. App. 792, 449 S.E.2d 305 (1994).

Legal and equitable right.

- Regardless of its origin in equity, subrogation under former Code 1933, §§ 103-501 and 103-502 was now a legal as well as an equitable right. First Nat'l Bank v. American Sur. Co., 71 Ga. App. 112, 30 S.E.2d 402 (1944).

Former Code 1882, §§ 2176 and 2177 made subrogation a legal as well as an equitable right. Hull v. Myers, 90 Ga. 674, 16 S.E. 653 (1893).

What former Code 1882, §§ 2176 and 2177 did was to break down the exclusiveness of equity and carry the right of subrogation into law, so as to make equity and law concurrent and coequal with respect to this subject matter. Hull v. Myers, 90 Ga. 674, 16 S.E. 653 (1893).

Whether right is legal or equitable is now immaterial.

- Whether former Civil Code 1910, §§ 3567 and 3568 serve to convert the right of substitution from an equitable to a legal right was quite immaterial since enforcement of equitable and legal rights was permitted in the same action in a court having jurisdiction to administer both. Train v. Emerson, 141 Ga. 95, 80 S.E. 554, 49 L.R.A. (n.s.) 950 (1913); Durden v. Youmans, 37 Ga. App. 182, 139 S.E. 91 (1927).

Section reaffirms subrogation founded upon equity, not contract.

- Subrogation is not founded upon contract, express or implied, but upon principles of equity and justice. The doctrine was not limited or abrogated by this section, but positively reaffirmed. Argonaut Ins. Co. v. C & S Bank, 140 Ga. App. 807, 232 S.E.2d 135 (1976).

Legal subrogation arises as a matter of equity without any agreement to that effect. Bank of Danielsville v. Seagraves, 167 Ga. App. 135, 305 S.E.2d 790 (1983).

Origins of legal subrogation.

- Doctrine of subrogation is not founded on contract but has its origin in a sense of natural justice. The equitable principle of the surety's subrogation was incorporated into the 1863 Code as former Code 1863, §§ 2155 and 2156. Since the 1863 Code, this action is for the enforcement of a legal, as contradistinguished from an equitable, right. Fender v. Fender, 30 Ga. App. 319, 117 S.E. 676 (1923).

Conventional subrogation.

- There is a well-recognized distinction between the right to sue on a claim of legal subrogation, which is of an equitable nature, and the right to sue on conventional subrogation, based on an agreement of the parties. First Nat'l Bank v. American Sur. Co., 71 Ga. App. 112, 30 S.E.2d 402 (1944).

There are known to the law two kinds of subrogation, legal and conventional. Legal subrogation arises by operation of law, when one having a liability or a right or a fiduciary relation in the premises pays a debt due by another under such circumstances that one is in equity entitled to the security or obligation held by the creditor whom one has paid. Conventional subrogation depends upon a lawful contract, and occurs when one having no interest in or relation to the matter pays the debt of another, and by agreement is entitled to the securities and rights of the creditor so paid. Erwin v. Brooke, 159 Ga. 683, 126 S.E. 777 (1925).

Subrogation is of two kinds. One is legal subrogation, which takes place as a matter of equity, without any agreement to that effect made with the person paying the debt. The other is conventional subrogation, which is applied when an agreement is made with the person paying the debt that one shall be subrogated to the rights and remedies of the original creditor. First Nat'l Bank v. American Sur. Co., 71 Ga. App. 112, 30 S.E.2d 402 (1944).

Conventional subrogation depends upon contract and upon payment of the debt of another who then is entitled to the securities and rights of the creditor so paid. Bank of Danielsville v. Seagraves, 167 Ga. App. 135, 305 S.E.2d 790 (1983).

Conventional subrogation can take effect only by agreement, and has been said to be synonymous with assignment. First Nat'l Bank v. American Sur. Co., 71 Ga. App. 112, 30 S.E.2d 402 (1944).

Conventional subrogation agreement need not be written.

- Conventional subrogation agreement is not required to be in writing. First Nat'l Bank v. American Sur. Co., 71 Ga. App. 112, 30 S.E.2d 402 (1944).

Standing to sue.

- Insurer expressly limited the insurer's subrogation rights in a settlement agreement to any other person or entity who received either directly or indirectly any of the funds or property belonging to an injured child's estate. The child's co-counsel did not receive any of the misappropriated funds; thus, because the insurer's subrogation rights did not reach co-counsel, the insurer did not have standing to sue co-counsel. Hartford Fire Ins. Co. v. Schneider, F.3d (11th Cir. Mar. 6, 2008)(Unpublished).

Subrogation under section does not depend on judicial proceeding.

- Former Code 1882, §§ 2176 and 2177 intended to effect the substitution of the surety by their own vigor and not leave it to be done by any court or any judicial proceedings. Hull v. Myers, 90 Ga. 674, 16 S.E. 653 (1893).

As soon as the debt is paid by the surety, the surety is subrogated by virtue of this section to all the rights of the creditor by vigor of the law, and not dependent upon any judicial proceedings. Sherling v. Long, 122 Ga. 797, 50 S.E. 935 (1905); Fender v. Fender, 30 Ga. App. 319, 117 S.E. 676 (1923).

Payment of debt is necessary.

- Subrogation inures only to a surety who has paid the debt of the surety's principal. Jessee v. First Nat'l Bank, 154 Ga. App. 209, 267 S.E.2d 803 (1980).

When note maker brought an action to cancel a security deed after the creditor assigned the note and security deed to the cosigner's estate when the note was paid from the cosigner's life insurance policy, the trial judge correctly refused to cancel the security deed which the creditor transferred to the cosigner's estate. Aultman v. United Bank, 259 Ga. 237, 378 S.E.2d 302 (1989).

Full amount of debt must be tendered.

- When less than the total amount of the debt is tendered, subrogation is not permitted; the reason for this rule is that if the surety upon making a partial payment became entitled to subrogation pro tanto and thereby became entitled to the position of an assignee of the property to the extent of such payment, it would operate to place such surety upon a footing of equality with the holders of the unpaid part of the debt, and, in case the property was insufficient to pay the remainder of the debt for which the guarantor was bound, the loss would logically fall proportionately upon the creditor and upon the surety. Jessee v. First Nat'l Bank, 154 Ga. App. 209, 267 S.E.2d 803 (1980).

Writing "paid" on instrument does not extinguish surety's rights.

- Under former Civil Code 1910, §§ 3567 and 3568, the fact that when a note was paid by the surety and it, with the mortgage securing it, was surrendered by the creditor to the surety, the word "Paid," dated and signed, was written across the face of the note and the mortgage, amounts to nothing more than a receipt for the money by the creditor to the surety, and does not operate legally to extinguish the rights of the surety against the principal or against other creditors of the principal contending for the mortgaged property, unless it is made to appear that it was the intent that such payment by the surety should operate to satisfy and extinguish the instruments; especially would this be true when it does not appear that the contending creditor had knowledge of such entry. Dabney v. Brigman Motors Co., 32 Ga. App. 652, 124 S.E. 370 (1924).

Surety making payment to state acquires its security, not remedies.

- Right of subrogation does not apply to the remedies which the state has against a citizen, but as to the security which the state has. That security passes to the surety who pays off a debt to the state. Irby v. Livingston, 81 Ga. 281, 6 S.E. 591 (1888).

Surety acquires no greater rights than state had.

- Lien which the state had under the Motor Fuel Tax Law of 1937 (now repealed and replaced by present O.C.G.A. § 48-9-1 et seq.) upon the property of a distributor for excise taxes collected by the distributor on the sale or use of motor fuel or kerosene did not have priority over the lien of a judgment creditor, when the rights of such creditor attached prior to the time the state revenue commissioner filed notice of the state's lien in the office of the clerk of the superior court; and when a surety upon such distributor's bond to the state became subrogated to the rights of the state by payment of such taxes to the state, the surety took the position of the state and acquired no greater rights with respect thereto than the state had at the time the surety became subrogated. Royal Indem. Co. v. Mayor of Savannah, 209 Ga. 383, 73 S.E.2d 205 (1952).

Surety in a state project.

- Surety on a public contract, after assisting the contractor in completing the project, stood in the place of the contractor and was subrogated to the contractor's right of action for breach of contract against the Georgia Department of Corrections; under Ga. Const. 1983, Art. I, Sec. II, Para. IX(c), the state waived sovereign immunity for contracts. State Dep't of Corr. v. Developers Sur. & Indem. Co., 295 Ga. 741, 763 S.E.2d 868 (2014).

Section gives surety title to instrument paid off.

- This section clothes the surety with the legal title to the security which the surety pays off. By legal subrogation, the paper becomes the surety's property, and the creditor has no right to withhold it from the surety's possession. Dabney v. Brigman Motors Co., 32 Ga. App. 652, 124 S.E. 370 (1924).

Section permits surety to sue on original obligation.

- Since the adoption of former Civil Code 1910, §§ 3567 and 3568 (see now O.C.G.A. §§ 10-7-56 and10-7-57), not only can a surety paying the debt of the surety's principal maintain a suit in equity against the surety's principal upon the implied promise of indemnification, but, being legally subrogated to the rights of the creditor, the surety may sue on the original indebtedness. Fender v. Fender, 30 Ga. App. 319, 117 S.E. 676 (1923); Dabney v. Brigman Motors Co., 32 Ga. App. 652, 124 S.E. 370 (1924).

Surety entitled to contribution may sue the cosureties upon the written evidence of indebtedness or upon the implied contract raised by law in favor of one surety against the cosureties for contribution. Reed v. Liberty Nat'l Bank & Trust Co., 44 Ga. App. 544, 162 S.E. 154 (1932).

Cited in Lumpkin v. Mills, 4 Ga. 343 (1848); Foster ex rel. Tompkins v. Whitaker, 12 Ga. 57 (1852); American Nat'l Bank v. Fidelity & Deposit Co., 129 Ga. 126, 58 S.E. 867 (1907); Travis v. Sams, 23 Ga. App. 713, 99 S.E. 239 (1919); Reid v. Whisenant, 161 Ga. 503, 131 S.E. 904, 44 A.L.R. 599 (1926); McWhorter v. Bank of Menlo, 162 Ga. 627, 134 S.E. 606 (1926); Hinson v. Farmers' Bank, 41 Ga. App. 715, 154 S.E. 468 (1930); Gilbert v. United States Fid. & Guar. Co., 180 F. Supp. 794 (M.D. Ga. 1959); Betts v. Brown, 219 Ga. 782, 136 S.E.2d 365 (1964); Progressive Elec. Servs. v. Task Force Construction, Inc., 327 Ga. App. 608, 760 S.E.2d 621 (2014).

Accommodation party is not surety now without express agreement.

- Since the enactment in Georgia of the former Negotiable Instruments Law in 1924 (see now O.C.G.A. § 11-3-101 et seq.), an accommodation party is no longer a surety for the party accommodated as a legal consequence of the accommodation undertaking. The rule now is that the fact of suretyship must be written in the endorsement or there must be an express agreement that the accommodation party is signing as surety. Bell v. Kleinberg, 102 Ga. 623, 117 S.E.2d 262 (1960).

Accommodation party who is not surety may now only sue on implied promise.

- Since the enactment in Georgia of the former Negotiable Instruments Law in 1924 (see now O.C.G.A. § 11-3-101 et seq.), the ruling in Hull v. Myers, 90 Ga. 674, 16 S.E. 653 (1893), to the effect that an action by an accommodation party against another party could be brought on the instrument as well as on the basis of an implied contract to reimburse, has not been the law. Bell v. Kleinberg, 102 Ga. App. 623, 117 S.E.2d 262 (1960); Reed v. Liberty Nat'l Bank & Trust Co., 44 Ga. App. 544, 162 S.E. 154 (1932)(four-year statute of limitations as to implied contracts applies and will not be followed).

Surety paying debt may collect from principal.

- When person making a payment of the debt of another pays an indebtedness for which one is surety, and is therefore under a contractual obligation to pay it, one is entitled, by subrogation to the rights of the creditor, to collect from the debtor the amount of the payment thus made. Hartley v. Hartley, 50 Ga. App. 848, 179 S.E. 245 (1935).

Surety may recover from cosurety.

- Surety who has paid the debt of the surety's principal is subrogated, both at law and in equity, to all the rights of the creditor and is entitled to recover from the cosurety (when there are only two sureties) half of the amount paid by the surety, with interest thereon and attorney's fees, provided the debt paid by the surety was past due and the statutory notice of suit was given. Reed v. Liberty Nat'l Bank & Trust Co., 44 Ga. App. 544, 162 S.E. 154 (1932).

When several persons who are directors of a banking corporation borrow money which is used for the benefit of the bank and obligate themselves to repay it, all of the obligors are equally bound to bear the common burden, and when all of the obligors except one make a payment on the obligation, which payment represents their aggregate pro rata shares, and when all of the obligors execute a promissory note for the unpaid amount of the debt which represents the proportionate share of the obligor who did not pay, which is then paid in full by all the obligors except the one who had not paid and is transferred to them by the creditor, although no suit has been filed upon it, they are sureties and are subrogated to the rights of the creditor and are entitled to recover the amount of the note against the principal, who is the obligor who had not paid. Holton v. Smith, 44 Ga. App. 832, 163 S.E. 516 (1932).

Joint action for contribution on original obligation is proper.

- Three of four sureties, who have paid the debt of their principal, may jointly sue their cosurety for contribution, founding their action upon the obligation containing the contract of suretyship, and will have the same time within which to bring suit as the creditor would have had on the same instrument. Hull v. Myers, 90 Ga. 674, 16 S.E. 653 (1893); Train v. Emerson, 141 Ga. 95, 80 S.E. 554, 49 L.R.A. (n.s.) 950 (1913).

If payment is by several, separate action is improper.

- When accommodation endorsers have paid off more than their pro rata share of a note, one of the endorsers subrogated under this section cannot sue severally on the note for that one's pro rata share of the contribution to which the surety and the coowners of the note are entitled. Hull v. Myers, 90 Ga. 674, 16 S.E. 653 (1893).

Separate action proper for amount paid and not on original indebtedness.

- When, of several endorsers for accommodation, some pay off the whole debt, though each of these has no several right of action upon the note for contribution against a coendorser who has paid nothing, yet each may sue severally for contribution to the extent of each one's own share thereof in an action for money paid for the defendant's use, payment to the creditor having been made, not out of a joint fund, but out of individual assets contributed by each paying endorser from one's own resources. Hull v. Myers, 90 Ga. 674, 16 S.E. 653 (1893).

Action is for contribution only, even if founded upon original indebtedness.

- There is no authority which allows a cosurety to convert one's action for contribution into something else merely by founding one's action on the original evidence of indebtedness. It is still a suit to enforce contribution from cosureties, and the plaintiff is bound by the substantive rules pertaining to contribution. Todd v. Windsor, 118 Ga. App. 805, 165 S.E.2d 438 (1968).

Although a surety, after payment of the principal's debt, was subrogated to the rights and remedies of the creditor and entitled to found the surety's action for contribution directly on the original evidence of indebtedness, it does not follow that the surety is entitled to enforce these obligations against the cosureties in exactly the same manner and in the same amounts as could the creditor. The surety is bound by the substantive rules of contribution, while the creditor is not. Todd v. Windsor, 118 Ga. App. 805, 165 S.E.2d 438 (1968).

Section does not allow surety to escape part of deficiency if cosurety is insolvent.

- Former Code 1933, §§ 103-501 and 103-502 have never been construed to allow a cosurety to escape paying part of the deficiency in the share of an insolvent cosurety. Todd v. Windsor, 118 Ga. App. 805, 165 S.E.2d 438 (1968).

Section does not apply to successive sureties.

- Exception to the general rule, laid down in this section, exists when in a legal proceeding there are successive sureties. In such a case the last surety is regarded as the primary one, and if the surety pays the debt of the surety's principal, the surety has no right of subrogation against the preceding sureties. This is true whether the dispute is between successive sureties in the legal proceeding itself or between the surety given in the legal proceeding and the surety in the original transaction upon which the legal proceeding is based. National Sur. Co. v. White, 21 Ga. App. 471, 94 S.E. 589 (1917).

Section does not give subrogation when creditor has received mortgaged property in part payment.

- Rights of subrogation given the surety by this section cannot be enjoyed when the creditor, who by the same contract has personal security and a mortgage upon personal property, has after maturity of the debt received the mortgaged property by contract with the principal debtor, in part payment at more than its full value at the time the creditor received it. Marshall v. Dixon, 82 Ga. 435, 9 S.E. 167 (1889).

Joint obligor is not like a surety subrogated to the rights of the creditor, but the obligor may enforce contribution on the implied contract on the obligor's part to share the common burden. Sherling v. Long, 122 Ga. 797, 50 S.E. 935 (1905).

Surety is not bound to pay and be subrogated.

- Surety may pay up the debt and be subrogated to the rights of the creditor against the surety's principal, but the surety is not bound to do this. Curan v. Colbert, 3 Ga. 239, 46 Am. Dec. 427 (1847).

Surety may renounce right by surety's actions.

- Although a surety, if the surety so elects, may, under former Code 1882, §§ 2176 and 2177, have the right to be subrogated to the creditor's status, yet a foreclosure by the surety of the mortgage given to indemnify the surety was a renunciation of that right. Flannagan v. Forrest, 94 Ga. 685, 21 S.E. 712 (1894).

Spouse of grantor in security deed paying another debt is not subrogated.

- Under former Civil Code 1910, §§ 3558, 3567 and 3568, because the wife of the grantor in a security deed paid a debt secured by another deed, the spouse was not entitled to be subrogated to the grantee's rights. Hiers v. Exum, 158 Ga. 19, 122 S.E. 784 (1924).

Venue.

- Creditor holding a promissory note may sue the maker and sureties thereon in the county of the residence of either, and a surety paying the note succeeds to this right, and may bring action upon the note either in the county of the residence of the maker or in that of the residence of a cosurety, at the surety's option, as the surety is subrogated in law and equity to all the rights of the creditor. Anderson v. Armistead, 18 Ga. App. 387, 89 S.E. 525 (1916).

In action on conventional subrogation, subrogee need not prove superior equity.

- In this state an action based on conventional subrogation, clearly established by an agreement reduced to writing or otherwise shown, in which no equitable relief is prayed, is a legal action and is not controlled by principles of equity; and a conventional subrogee does not have the burden of showing the superior equity in itself as plaintiff to authorize a recovery. First Nat'l Bank v. American Sur. Co., 71 Ga. App. 112, 30 S.E.2d 402 (1944).

Subrogation rights inchoate until principal unable to pay.

- Contractor's surety has subrogation rights with respect to any funds earned and paid to the contractor and still in the contractor's hands. Until the surety is called upon to perform the surety's obligation under a payment or performance bond, however, the right of subrogation is an inchoate one, which becomes choate only upon the maturing and performance of the obligation to pay, which occurs only when the principal finds itself unable to pay and calls upon the surety to pay in accordance with the terms of the bond. Cotton States Mut. Ins. Co. v. Citizens & S. Nat'l Bank, 168 Ga. App. 83, 308 S.E.2d 199 (1983).

Obtaining rights under negotiable promissory notes.

- Fidelity bond insurer who paid insured's claim for loss based on the employee's improper receipt of a personal loan would not obtain subrogation rights under negotiable promissory notes bank received from an employee at the time of loan until the notes were negotiated to the insurer. Bank of Danielsville v. Seagraves, 167 Ga. App. 135, 305 S.E.2d 790 (1983).

Applicability in bankruptcy proceedings.

- Assignment of a creditor's security interest to a co-debtor who paid the debt of a principal did not amount to inequitable conduct justifying subordination of the co-debtor's secured claim in bankruptcy proceedings, because the co-debtor had a clear right, under both state and federal law, to succeed to the creditor's position. Even in the absence of the assignment, the co-debtor would have been subrogated to the rights of the creditor. Estes v. Cranshaw (In re N & D Properties, Inc.), 54 Bankr. 590 (N.D. Ga. 1985), aff'd in part and rev'd in part on other grounds, 799 F.2d 726 (11th Cir. 1986).

Genuine issues of material fact existed as to whether equitable subrogation applied.

- In a declaratory judgment action brought by a senior lienholder against a junior lienholder of certain real property, a trial court erred by granting summary judgment to the senior lienholder based on equitable subrogation as, although the senior lienholder met the prima facie requirements for equitable subrogation, material issues of fact existed as to whether equitable subrogation applied to the case. Secured Equity Fin., LLC v. Washington Mut. Bank, F. A., 293 Ga. App. 50, 666 S.E.2d 554 (2008).

Am. Jur. 2d.

- 74 Am. Jur. 2d, Suretyship, §§ 119, 171.

23 Am. Jur. Pleading and Practice Forms, Subrogation, § 2.

ALR.

- Right of surety on warehouseman's bond to be subrogated to rights of owner of property stored as against third person, 4 A.L.R. 518.

Payment of entire claim of third person as condition of subrogation, 9 A.L.R. 1596, 32 A.L.R. 568; 46 A.L.R. 857; 53 A.L.R. 304; 91 A.L.R. 855.

Right of surety who discharges obligation due to government, to be subrogated to rights of latter against third persons, 24 A.L.R. 1523.

Right of building contractor's surety who completes contract to money earned by contractor but unpaid before default, 45 A.L.R. 379; 134 A.L.R. 738; 164 A.L.R. 613.

Adjudication as essential to right of surety or endorser to be subrogated to payee's rights in collateral, 62 A.L.R. 551.

Right as between surety on contractor's bond and assignee of money to become due on contract, 76 A.L.R. 917.

Right of surety on supersedeas or appeal bond to subrogation, 77 A.L.R. 452.

Right of a third person who has paid corporation's indebtedness to be subrogated to creditors' right to enforce stockholders' statutory liability, 78 A.L.R. 611.

Right of surety on fidelity bond to be subrogated to obligee's right as against third person who caused or contributed to loss or failed in his duty to discover it, 95 A.L.R. 269.

Right of subrogation of fiduciary's surety to claim of the estate against third person who knew or was chargeable with notice that fiduciary's transaction with him involved breach of fiduciary's obligation, 134 A.L.R. 997.

Surety's right to be subrogated to obligee's right against third person as affected by equities in favor of latter which are insufficient to prevent his liability to obligee, 137 A.L.R. 700.

Right of one cojudgment debtor who pays judgment to be subrogated thereto as against the other cojudgment debtors, 157 A.L.R. 495.

Right of surety who has not paid debt to judicial protection of right of subrogation to creditor's securities, 160 A.L.R. 421.

Rights and remedies incident to subrogation to one but not both elements of a single cause of action for injury to person and damage to property, 166 A.L.R. 870.

Right of indemnitee's insurer defending action against indemnitee, to recover costs and attorneys' fees from indemnitor, 77 A.L.R.2d 1143.