Are regression and subrogation the same thing? A basic overview from the Supreme Court in a bankruptcy case…

The Supreme Court reminded the courts about the difference between subrogation and recourse. This can determine the fate of a dispute by affecting the rules on jurisdiction and the length of the statute of limitations. In addition, in the bankruptcy case of Magnit M company, this error could have led to a change in the amount of claims: the debtor, brought to subsidiary liability and fulfilled the obligation, could collect the entire debt from the co-defendant, rather than his share (case No. A67-4006/2017).

Oksana Podkorytova, a member of Magnit M, jointly recovered damages from the former managers of the company (Stanislav Zeman, Alexei Feshchukov, Vyacheslav Surkov and Svetlana Shkurina) caused to the company.

Stanislav Zeman partially fulfilled the obligation at the expense of the borrowed funds of Magnit company. After that the bankruptcy case against the society “Magnit M” was terminated due to the satisfaction of all creditors’ claims. Stanislav Zeman appealed to the court to replace the plaintiff, the company “Magnit M”, in the enforcement proceedings to recover money from Alexei Feshchukov.

The court of the first instance, followed by the cassation supported the replacement of the creditor.

The economic panel of the Supreme Court sent the case to cassation for reconsideration. It noted that the fulfillment of an obligation by one of the joint debtors did not entail legal succession. Once the joint debtor had performed the obligation, the claims against all the joint debtors were terminated. The debtor who had performed the obligation shall have the possibility to bring a new, recourse claim against the other debtors. This is expressly stated in par. 1 п. 2, Art. 325 of the Civil Code.

The difference between subrogation and recourse is not formal. The order in which a third party applies for protection may determine the application of certain rules of jurisdiction and the running of the limitation period. Moreover, replacing the creditor by subrogation meant that Stanislaw Zeman could recover the entire amount paid from his opponent, whereas in recourse, the court would have to determine the share to be reimbursed.

The courts erred because they applied the surety rules. The guarantor is also a joint and several debtor, i.e., he is liable for the obligation along with the principal debtor. However, if the obligation is performed for the principal debtor, the entire amount of the claim passes to the guarantor. The Supreme Court pointed out that no such rule has been established in relation to a co-defendant who has fulfilled an obligation. He enjoys the right to make a recourse claim against the other co-defendants, which follows from paragraph 2 of Article 322 of the Civil Code. Therefore, the rules on suretyship could not be applied in this case.

Source: https://zakon.ru/discussion/2021/04/22/regress_i_subrogaciya_-_eto_odno_i_to_zhe_net__likbez_ot_vs_v_dele_o_bankrotstve_obschestva_magnit_m