Opinion ID: 2221510
Heading Depth: 1
Heading Rank: 2

Heading: The Bank's Statutory Subrogation Claim.

Text: As an alternative to its common-law subrogation claim, Heritage relies on the subrogation provisions contained in Iowa Code section 554.4407. That statute provides in part: If a payor bank has paid an item over the order of the drawer or maker to stop payment, or after an account has been closed, or otherwise under circumstances giving a basis for objection by the drawer or maker, to prevent unjust enrichment and only to the extent necessary to prevent loss to the bank by reason of its payment of the item, the payor bank is subrogated to the rights .... c. of the drawer or maker against the payee or any other holder of the item with respect to the transaction out of which the item arose. Iowa Code § 554.4407(c). It is at once apparent that this statute pertains to checks or other bills of exchange drawn on banks. It has no operative language governing electronic funds transfers. Nor may Heritage make a colorable argument involving this statute by way of analogy. Section 554.4407(c) only grants a right of subrogation against a payee or other holder of the check improperly paid by the bank. In framing an analogy that might be applied to the electronic transfer situation based on the statutory directive involving checks, the analogous persons to be claimed against would be those persons obtaining the cash or to whom the cash might be traced. Such an analogy would not permit a subrogation claim against an employer of one of those persons based on negligent hiring. In Sunshine v. Bankers Trust Co., 34 N.Y.2d 404, 358 N.Y.S.2d 113, 314 N.E.2d 860 (1974), the New York Court of Appeals discussed the application of section 554.4407(c) in situations in which the customer's account has not in fact been debited. It recognized that subrogation in that situation did not track with common-law theory but was a creature of statute. Sunshine, 358 N.Y.S.2d 113, 314 N.E.2d at 866 n. 6. Because there is no statute granting subrogation to a bank in Heritage's situation, it must depend on the common law, which grants it no rights as a subrogee. We have considered all issues presented and conclude that the judgment of the district court should be affirmed. AFFIRMED. All justices concur except SNELL, J., who takes no part.