Opinion ID: 2193938
Heading Depth: 1
Heading Rank: 3

Heading: Open-End Mortgage.

Text: The mortgage dated May 24, 1976, was an open-end or dragnet instrument, pledging real estate as security for future as well as present loans. The dragnet clause provided as follows: This mortgage shall stand as security for said note, and for any and all future and additional advances made to the Mortgagors by the holder of said note in such amount or amounts so that the total of such future additional advances outstanding and unpaid at any one time shall not exceed $100,000.00 and Mortgagee is hereby given authority to make such future and additional advances to Mortgagors herein, upon their signed order or receipt, and secured as the original obligation herein. The $31,000 difference between the original mortgage indebtedness of $69,000 and the total authorized indebtedness of $100,000 was quickly exhausted by a series of notes executed by Ralph alone in amounts of $6,000, $5,000, $9,000, $3,000, and $8,000. (The $8,000 note was rejected by the trial court as not being properly executed. It is not involved in this appeal.) The Mannings do not attack the validity of this mortgage as security for the $69,000 advanced at the time of its execution. They do, however, challenge the bank's claim that it also secures the series of notes later executed by Ralph but not by Florence. The bank insists the mortgage should stand as security for loans made to either Ralph or Florence. The Mannings argue its terms limit it to those loans made to both of them. The trial court held the notes signed by Ralph alone were secured by the open-end mortgage to the extent of his interest in the real estate, but that they did not encumber Florence's interest. We hold the trial court should have gone farther by saying the notes were not secured by the mortgage at all, even as to Ralph's interest. Mortgages of the type here considereddragnet mortgagesare valid but are not favored by the law. They are strictly construed against the mortgagee. Freese Leasing, Inc. v. Union Trust and Savings Bank, 253 N.W.2d 921, 925 (Iowa 1977). The instant mortgage was executed as the joint obligation of Ralph and Florence. It pledges real estate owned by them as tenants in common as security for future advances made to the mortgagors on their signed order or receipt. Nowhere does the instrument refer to advances made to only one of them. The bank relies on First v. Byrne, 238 Iowa 712, 715, 28 N.W.2d 509, 511 (1947). If only the bank and Ralph were involved, Byrne might be controlling as it appears both of them intended these loans to be secured. See Freese, 253 N.W.2d at 926. However, we must consider, too, the rights of Florence; and when we do, Byrne supports the Mannings rather than the bank. In Byrne we said: The mortgagors owned the premises as tenants in common and the mortgage was specifically given to secure their joint note. The dragnet clause would, of course, be effective to make it secure other existing and future joint indebtedness of the mortgagors to the mortgagee. But its language is broader than that:    shall stand as security for any other indebtedness    that the mortgagee may now hold or in the future   acquire against the said mortgagors, or either or any of them. Does this mean the interest of each in the mortgaged premises was intended to be absolutely pledged to secure existing and future debts of the other as well as his own? Or should it be construed to mean each mortgagor pledges his own undivided interest to secure his own individual other indebtedness and in addition only such individual debts of the other (existing or future) as he may have knowledge of and consent to have included? 238 Iowa at 715, 28 N.W.2d at 511. Later in that opinion, we added this: We construe the dragnet clause to mean that each mortgagor pledged his undivided interest in the mortgaged premises to secure, in addition to the specifically named joint indebtedness: first, any other existing or future joint indebtedness of the mortgagors to the mortgagee; second, any other existing or future individual debt of the mortgagor whose interest is sought to be foreclosed upon; and third, any existing or future debt of the other mortgagor which was known to the one whose interest is sought to be held and by him consented to or acquiesced in as being included in the lien upon his interest. This construction is reasonable and in complete harmony with the language used, the conduct of the parties, and the circumstances as they existed at the time the mortgage was executed. Id. at 720, 28 N.W.2d at 513. The Byrne case is clearly distinguishable because in that case the mortgage expressly pledged the interest of each owner as security for future indebtedness of the mortgagors or either of them. Unlike Byrne, the instant mortgage contains no such language. We recognize an owner of an interest in real estate as a tenant in common can encumber his separate interest without the consent of his co-tenant. 9 G. Thompson, Real Property § 4689 (1958); 20 Am. Jur.2d Cotenancy and Joint Ownership § 102 (1965); 86 C.J.S. Tenancy In Common § 109 (1954). However, in the present case the bank is asserting a right under an instrument which does not permit the application of that rule. By its express terms, this mortgage provides it shall stand as security on loans made to both mortgagors. Construing the terms of this instrument strictly against the bank, we hold the loans made to Ralph are not secured by the mortgage of May 24, 1976.