Thus, it may happen when the creditor re ceiving payment from the third person sub rogates the payer to his right against the debtor. This must happen by express agree ment ; but no formal words are required. This sort of subrogation only takes place where there is a payment of the debt by a third party,—not where there is an assign ment, in which case subrogation results from the assignment.
This principle is recognized by the com mon law in cases where upon payment the securities are transferred to a party having an interest in the payment. Or, in case the debtor borrows money from a third party to pay a debt, he may subrogate the lender to the rights of the creditor ; for by this change the rights of the other creditors are not in juriously affected. To make this mode of subrogation valid, the borrowing and dis charge must take place before a notary ; in the borrowing it must be declared that the money has been borrowed to make payment, and in the discharge, that it has been made with money furnished by the creditor. Masse, Droit Commercial, lib. 5, tit. 1, ch. 5, fl 1, 2.
3. Legal subrogation takes place to its full extent- First, for the benefit of one who being himself a creditor pays the claim of another who has a preference over him by reason of his liens and securities. For in this case, it ia said, it is to be presumed that he pays for the purpose of securing his own debt; and this distinguishes his casc from that of a mere stranger. Domat, Civ. Law, part 1, lib. 3, tit. 1, 6, art. 6; Dig. gui pvt.
1. 16; 1. 11, 4; 1. 12, 9; 1. 17, 9. And so, at common law, if a junior mortgagor pays off the prior mortgage, he is entitled to de mand an assignment thereof.
Second, for the benefit of the purchasers of an immovable, who uses the price which he paid in paying the creditors to whom the inheritance was mortgaged. .
Third, for the benefit of him who, being held with others or for others for the payment of the debt, has an interest in discharging it.
Subrogation takes place for the benefit of co-proinisors or co-guarantors, as between themselves, and for the benefit of sureties ag_ainst their principals.
But between co-guarantors and co-promisors subrogation benefits him who pays the debt only to the extent of enabling him to recover from each separately his portion of the debt.
Whether one of four debtors who pays is subrogated in solido against the other three for their proportion, or only against each one separately for his share, is an open question.
Guyot, ub. sup. But in case of the insol vency of one of' the three, all who are sol vent must divide the loss. This doctrine is adopted in the common law under the name of contribution. See CONTRIBUTION.
4. As against his co-sureties, the surety in creasing the value of their joint security is entitled to subrogation only to the amount actually paid. 6 Ind. 857; 12 Gratt. Va. 642. Any arrangement by one co-surety with the principal enures to the benefit of all the co sureties. 26 Ala. iv. s. 280, 728.
If one of several grantees of a mortgagor pays the mortgage, the debt is discharged as to all. 7 Mass. 355.
Subrogation for the whole sum takea place only when the person who pays ought to have recourse to the principal debtor for the whole. But when the person paying ought only to have recourse for part, and is debtor without recourse and on his own account also, the subrogation will*only be for the portions for which he might have recourse. Masse, ub. sup.
Most of the cases of subrogation so called in the common law arise from transactions of principals and sureties.
Courts of equity have held sureties entitled, upon payment of the debt due by their prin cipal to the creditor, to have the full benefit of' all the collateral securities, both of a legal and equitable nature, which the creditor has taken as an additional pledge for his debt. Story, Eq. Jur. 499.
It is a settled rule that in all cases where a party only secondarily liable on an obligee tion is compelled to discharge it, he has a right in a court of equity to stand in the place of the creditor, and be subrogated to all his rights against the party previously liable. 4 Johns. Ch. N. Y. 123 ; 3 Paige, Ch. N. Y. 117; 17 Johns. N. Y. 584; 2 Call, Va. 125; 11 Ves. Ch. 12, 22; 14 id. 162; 2 Binn. Penn. 382; 3 Stor. C. C. 392; 1 Gill & J. Md. 346; 2 Yerg. Tenn. 346; 6 Rand. Va. 98; 8 Watts, Penn. 384; 2 Penn. St. 296 ; 1 IIarr. Del. 367 ; 1 Ired. Eq. No. C. 113; 11 Gnat. Va. 522; 2 M'Cord, Ch. So. C. 455; 3 Ala. s. 302 ; 25 id. 250; 5 B. Monr. Ky 393 ; 3 Humphr. Tenn. 547; 6 Gill & J. Md. 243; 3 Leigh, Va. 272; 4 Hen. & M. Va. 436; 1 Dev. Eq. No. C. 137; 2 Dev. & B. Eq. No. C. 390; 10 Yerg. Tenn. 310 ; 27 Miss. 679; 17 Conn. 575; 17 Eng. L. & Eq. 346. This is clearly the case where the surety takes an assignment of the security. 2 Me. 341.