Opinion ID: 1953826
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Heading: General Principles of Subrogation.

Text: Subrogation is substitution of one person who is not a volunteer, a subrogee, for another, a subrogor, as the result of the subrogee's payment of a debt owed to the subrogor so that the subrogee succeeds to the subrogor's right to recover the amount paid by the subrogee. Ehlers v. Perry, 242 Neb. 208, 221, 494 N.W.2d 325, 334 (1993). Generally, ``[s]ubrogation is the right of one, who has paid an obligation which another should have paid, to be indemnified by the other.'' Chadron Energy Corp. v. First Nat. Bank, 236 Neb. 173, 194, 459 N.W.2d 718, 734 (1990) (quoting J.J. Schaefer Livestock Hauling v. Gretna St. Bank, 229 Neb. 580, 428 N.W.2d 185 (1988)). Accord Ehlers v. Perry, supra . The preceding applies to subrogation based on a contract, known as conventional subrogation, as well as to subrogation arising by operation of law, that is, legal subrogation. To be entitled to subrogation, one must pay a debt for which another is liable. Ehlers v. Perry, 242 Neb. at 222, 494 N.W.2d at 335. See, also, State Auto. & Cas. Underwriters v. Farmers Ins. Exchange, 204 Neb. 414, 282 N.W.2d 601 (1979); Luikart v. Buck, 131 Neb. 866, 270 N.W. 495 (1936). Generally, subrogation is unavailable until the debt owed to a subrogor has been paid in full. See Skinkle v. Huffman, 52 Neb. 20, 71 N.W. 1004 (1897). See, generally, 73 Am.Jur.2d Subrogation § 30 n. 21 (1974). However, if a contract provides for subrogation on payment of less than the full amount of a debt or loss, partial payment of a debt or loss may be the basis for subrogation. See American Surety Co. of N.Y. v. Clarke, 94 Mont. 1, 20 P.2d 831 (1933). See, generally, 73 Am.Jur.2d, supra, § 33 n. 43. However, unless a contract specifically provides otherwise, equitable principles apply even when a subrogation right is based on contract. Westendorf by Westendorf v. Stasson, 330 N.W.2d 699 (Minn.1983); Rimes v. State Farm Mut. Auto. Ins. Co., 106 Wis.2d 263, 316 N.W.2d 348 (1982); Willard v. Automobile Underwriters, Inc., 407 N.E.2d 1192 (Ind.App.1980); Skauge v. Mountain States Tel. & Tel., 172 Mont. 521, 565 P.2d 628 (1977); Lyon v. Hartford Accident and Indemnity Company, 25 Utah 2d 311, 480 P.2d 739 (1971), overruled on other grounds, Beck v. Farmers Ins. Exchange, 701 P.2d 795 (Utah 1985). Also, if a contractual right of subrogation is merely the usual equitable right which would have existed in any event in the absence of a contract, equitable principles control subrogation. See, Willard v. Automobile Underwriters, Inc., supra ; Maryland Casualty Co. v. Southern Pac. Co., 119 F.2d 672 (9th Cir.1941). See, generally, 73 Am.Jur.2d, supra, § 33 n. 45. When a right of subrogation arises by operation of law, existence of an agreement or contract authorizing subrogation is unnecessary. Rawson v. City of Omaha, 212 Neb. 159, 322 N.W.2d 381 (1982); Cagle, Inc. v. Sammons, 198 Neb. 595, 254 N.W.2d 398 (1977). Thus, as this court acknowledged in Rawson v. City of Omaha , the right of subrogation does not rest on contract and no general rule can be laid down which will afford a test for its application in all cases. The facts and circumstances of each case determine whether the doctrine is applicable. 212 Neb. at 164, 322 N.W.2d at 384.