§ 4-5-117 — Subrogation of issuer, applicant, and nominated person

(a) An
issuer that honors a beneficiary's presentation is subrogated to the rights of the
beneficiary to the same extent as if the issuer were a secondary obligor of the
underlying obligation owed to the beneficiary and of the applicant to the same
extent as if the issuer were the secondary obligor of the underlying obligation owed
to the applicant.

(b) An applicant that reimburses an issuer is subrogated to the rights of the
issuer against any beneficiary, presenter, or nominated person to the same extent
as if the applicant were the secondary obligor of the obligations owed to the issuer
and has the rights of subrogation of the issuer to the rights of the beneficiary
stated in subsection (a) of this section.

(c) A nominated person who pays or gives value against a draft or demand
presented under a letter of credit is subrogated to the rights of:

(1) The issuer against the applicant to the same extent as if the nominated
person were a secondary obligor of the obligation owed to the issuer by the
applicant;

(2) The beneficiary to the same extent as if the nominated person were a
secondary obligor of the underlying obligation owed to the beneficiary; and

(3) The applicant to same extent as if the nominated person were a
secondary obligor of the underlying obligation owed to the applicant.

(d) Notwithstanding any agreement or term to the contrary, the rights of
subrogation stated in subsections (a) and (b) of this section do not arise until the
issuer honors the letter of credit or otherwise pays and the rights in subsection (c)
of this section do not arise until the nominated person pays or otherwise gives
value. Until then, the issuer, nominated person, and the applicant do not derive
under this section present or prospective rights forming the basis of a claim,
defense, or excuse.

Legislative History

Source: L. 96: Entire article R&RE, p. 201, � 1, effective July 1.