Opinion ID: 2232134
Heading Depth: 1
Heading Rank: 2

Heading: Doctrine of Subrogation.

Text: Plaintiff bank maintains that the facts stated in its complaint require that it be subrogated to the rights of Tessman as they existed at the time he received and cashed the $8,000 check. At that time Tessman held legal title to the farm personalty, subject to Schwoch's rights under the contract to purchase. If the bank were subrogated to Tessman's rights, it would be placed in his shoes, in so far as necessary for the recovery of its $8,000 together with interest, with respect to his right to claim the $10,224.42 escrow fund. Subrogation is an equitable doctrine invoked to avoid unjust enrichment. Kennedy-Ingalls Corp. v. Meissner (1958), 5 Wis. (2d) 100, 92 N. W. (2d) 247; Home Owners' Loan Corp. v. Papara (1942), 241 Wis. 112, 3 N. W. (2d) 730; Restatement, Restitution, p. 653, sec. 162. We have already dealt with the issue of unjust enrichment in passing on the question of whether the complaint states a cause of action for money had and received. Without a finding of unjust enrichment there is no basis afforded for invoking subrogation. If unjust enrichment of Tessman is found to have occurred, then there is no necessity for resorting to subrogation because plaintiff bank then will be entitled to a direct judgment against Tessman for $8,000 and interest. However, even if the complaint had failed to state a cause of action for money had and received, we are satisfied that it is insufficient to state a cause of action for subrogation against Tessman. Plaintiff bank relies upon Restatement, Restitution, p. 173, sec. 43 (3), which reads: (3) Where a person lends money to another who contracts to use the money for the discharge of a lien upon property which the other represents as belonging to him and where the money so lent is used for the discharge of such lien, the lender is entitled to have the lien reinstated for his benefit if, unknown to him, the property was not owned by the other or was subject to a junior lien. Typical examples of Wisconsin cases which have applied the aforequoted principle are Bank of Baraboo v. Prothero (1934), 215 Wis. 552, 255 N. W. 126, and Whalen v. Marling (1922), 176 Wis. 441, 187 N. W. 169. In both cases, the party granted subrogation was not given such remedy as a protection against the lienholder whose lien had been paid by the funds advanced, but against other persons whose rights were junior to the discharged lien. Here, if Tessman is considered to have had a vendor's lien, instead of absolute title to the farm personalty Schwoch had agreed to purchase, the placing of the bank in Tessman's shoes by invoking subrogation would defeat Tessman's own claim to the escrow fund. We are of the opinion that application of the principle stated in Restatement, Restitution, sec. 43 (3), does not permit this to be done. Its application might subrogate the bank to the remaining original lien rights of Tessman to the escrow fund after Tessman's prior right thereto has been satisfied. However, such right of subrogation would have to be asserted against the administrators of the Schwoch estate, not Tessman, and such administrators are not parties to this action. It may well be that the bank has a right of subrogation to the interest of the Schwoch estate in the escrow fund by reason of the administrators' disaffirmance of the purchase agreement. However, in order to assert this claim of subrogation, the administrators would have to be made parties defendant, which was not done. For the reasons stated we conclude that the complaint fails to state a cause of action for subrogation as against Tessman.