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Future-Advance Mortgage - Priority

GHB Construction & Dev. Co. v. West Alabama Bank and Trust, [Ms. 1170484, Sept. 21, 2018] __ So. 3d __ (Ala. 2018). This plurality decision by Justice Parker reverses the Walker Circuit Court’s judgment dismissing by GHB Construction’s claim asserting that its materialman’s lien has priority over West Alabama Bank and Trust’s lien under a future-advance mortgage.

Although the future-advance mortgage was executed prior to GHB Construction providing any materials toward construction of the home, it was unclear from the complaint whether any advances were actually made to the homeowner pursuant to the future advance mortgage before the materialman provided materials. The plurality opinion concludes as a matter of first impression that “a future-advance mortgage does not create a mortgage lien until some indebtedness is incurred by the mortgagor under the future-advance mortgage.” Ms. *14.

A dissenting opinion by Justice Sellers, joined by Chief Justice Stuart and Justice Mendheim, would hold that “absent a showing that the mortgagee failed to make any advance as contemplated or had no intention of ever advancing funds, ... that a future-advance mortgage [lien] is created on the date the mortgage contract is recorded.” Ms. *26.

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