SUBROGATION

Subrogation is the substitution of one person in the place of another with reference to a lawful claim, demand, or right, so that he or she who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies, or securities.

Rights of subrogation can arise two different ways: either automatically as a matter of law, or by agreement as part of a contract. Subrogation by contract most commonly arises in contracts of insurance. Subrogation as a matter of law is an equitable doctrine, and forms part of a wider body of law known as unjust enrichment.

The two most common areas where subrogation is relevant are insurance and sureties. 

Although the classes of subrogation rights are not fixed (or closed), and vary between different legal jurisdictions, types of subrogation are commonly divided into the following categories:

1. Indemnity insurer's subrogation rights
2. Surety's subrogation rights
3. Subrogation rights of business creditors
4. Lender's subrogation rights
5. Banker's subrogation rights 
6. Trustee's subrogation rights

In Nigeria Beloxxi & Company Limited filed a suit against the subrogation of the rights and remedies of South Trust Bank by the Export-Import Bank of United States. The Court of Appeal affirmed the jugdment of the Federal High Court affirming   the right of subrogation of Export-Import Bank of United States. Below is a summary of the appeal

BELOXXI  COMPANY LIMITED & ANOR v. SOUTH TRUST BANK & ORS

(2014) LPELR-22338(CA)

In The Court of Appeal of Nigeria

On Friday, the 28th day of February, 2014

CA/L/894/2012

Before Their Lordships

SIDI DAUDA BAGEJustice of The Court of Appeal of Nigeria

RITA NOSAKHARE PEMUJustice of The Court of Appeal of Nigeria

CHINWE EUGENIA IYIZOBAJustice of The Court of Appeal of Nigeria

Between

1. BELOXXI & COMPANY LIMITED 

2. OBI EZEUDE - Appellants

AND

1. SOUTH TRUST BANK
2. EXPORT-IMPORT BANK OF UNITED STATES
3. PRIVATE EXPORT FUNDING CORPORATION          - Respondents

Summary

This appeal is against the judgment of Archibong J. of the Federal High Court, Lagos Division in Suit No. FHC/L/CS/113/2005 delivered on the 15th day of November, 2012. 

The facts leading to the suit and the appeal may be summarized thus:

Sometime in 2003, the 1st Appellant sought and obtained a loan from the 1st Respondent for the purchase of biscuits manufacturing equipment in the sum of $2,207,600.00 (Two Million Two Hundred and Seven Thousand Six Hundred U.S, Dollars). Two types of guarantees with different consequence were provided to secure the loan.

The first type of guarantee was the personal guarantee of the 2nd Appellant who is a Managing Director/Chief Executive Officer of the 1st Appellant. The loan documentation included a Promissory Note and a Letter Agreement both dated 2nd March 2004 (Pages 16 - 25 of the Record of appeal).

The second type of guarantee was a form of insurance provided to the 1st Appellant by Export-Import Bank of the United States (the 2nd Respondent).

The 2nd Respondent is an organ of the government of the United States of America with the object of financing exports of goods and services from the United States to foreign countries.

By this second guarantee, the 2nd Respondent undertook to repay the 1st Respondent if the Appellants defaulted in paying the 1st Respondent; the 2nd Respondent will then be subrogated into the shoes of the 1st Respondents to recover the loans from the Appellants.

At some point, in the process of restructuring of the 1st Respondent, the loan was assigned to the 3rd Respondent

The Appellants defaulted on the loan and the 2nd Respondent repaid the 1st Respondent through the 3rd Respondent.

The 2nd Respondent then obtained an assignment of the loans and all the documents from the 1st Respondent.

The Appellants were aware of this arrangement at all material times of the transaction. Rather than pay back the 2nd Respondent, the Appellants as Plaintiffs sued the Respondents at the Federal High Court, Lagos division seeking a declaration that they are not entitled to repay the loan because of the assignment of the loan to the 3rd Respondent.

The 2nd Respondent then filed a statement of defence in which they counterclaimed for the loan.

The case proceeded to trial on the 24th day of September 2008 when the Appellants' first witness (the 2nd Appellant) began his testimony. In the course of the testimony, the lower court suo motu, raised the issue as to whether the Appellants have a cause of action against the Respondents and requested Counsel to address the court solely on the issue whether the Appellants' Statement of claim disclosed a cause of action having regard to the facts pleaded and the reliefs sought. Counsel addressed the court and in a considered ruling the court held that the Plaintiffs have no cause of action against the Defendants and consequently dismissed the Plaintiffs' claim and set down the Counterclaim for hearing. (Pages 184 - 196, 220-222 and 234 - 244 of the record of appeal).

The Appellants filed two appeals against two interlocutory decisions of the trial court in this matter which were dismissed by the Court of Appeal. At the conclusion of hearing, the trial court found the Plaintiffs/Appellants liable for the reliefs in the Counterclaim save for the Attorney's fees and court costs.

Dissatisfied with the judgment, the Appellants filed this appeal vide two Notices of Appeal.

In conclusion, all the issues were resolved against the appellant and the learned justice held the appeal to be lacking in merit and dismissed it accordingly.