Court Opinion

ID: 9686424
Source: CourtListenerOpinion
Date Created: 2023-08-24 15:46:50.702694+00
Date Added: 2024-06-11T09:43:54.914068
License: Public Domain

HEFLIN, Chief Justice
(dissenting):
In Auburn Insurance Agency v. First National Bank, 263 Ala. 30, 81 So.2d 600 (1955), a second mortgage was expressly made inferior to a first mortgage. One of the questions involved in that case was the *179priority of advancements over the claim of a second mortgage. The opinion noted that the general rule is that “if the first mortgagee has the option by the terms of the mortgage to make future advances, and does so after a second mortgage is made and with knowledge of that mortgage, those advances are ordinarily subordinate to the second mortgage,” citing 138 A.L.R. 566. (Emphasis supplied.) However, this Court, as then constituted, mentions limitations on that general rule. First, actual notice of the existence of a second mortgage would not subordinate advancements where the second mortgage was expressly made subject to the first mortgage which provided for such optional future advances, citing 138 A.L.R. at 571 (however, this was dictum). And second, when the first mortgagee can make optional advances independently of the consent of the mortgagor, such advances would not be subordinate, but if the mortgagee must obtain the consent of the mortgagor, the advances are subordinate, this on the theory “that by executing the second mortgage, the mortgagor has estopped himself from making an agreement or giving consent in derogation of the rights granted by the second mortgage,” citing 138 A.L.R. at 572.
As noted above, the first limitation to the general rule mentioned in Auburn Insurance Agency v. First National Bank, supra, was dictum. And in the A.L.R. annotation cited by this Court as then constituted, as authority for such limitation, the supportive language of cases is indeed sparse. However, the logic for such a limitation and, in addition thereto, a motivation to refrain from disturbing dictum without sound reasons persuades me to follow it.
I attach significance to the fact that one mortgage contained express language that it was subordinate to the other mortgage. Without such language, the relevant standing of mortgages must be determined by the sequence in which the mortgages are recorded. The acceptance of a mortgage which recites that it is inferior or subordinate to another mortgage is clearly an acknowledgment and agreement by the accepting mortgagee as to which mortgage is secondary regardless of the order of recordation. Thus by expressed language, the superior designated mortgage becomes a first mortgage and the inferior designated mortgage assumes the title of a second mortgage.
The self-proclaimed inferior second mortgage is an agreement and admission that the designated first mortgage shall have priority of rights over such second mortgage. Reason and prudence demand that an agreement-bound second mortgagee ascertain the terms and provisions of the designated first mortgage. Before departing with money or property and taking security therefor in the form of a mortgage which will be expressly encumbered by superior rights, such self-acknowledged second mortgagee should determine the extent and provisions of such superior rights contained in the instrument to which by agreement his rights have been subordinated.
Where there is a clear recital that a second mortgage is subordinate to a first mortgage, I feel that such reference is applicable to all features of the first mortgage, including the “future advances” clause. To hold that a second mortgage, which recites that it is inferior to a first mortgage, is subordinate to only a few aspects of the first mortgage and not to the remainder of its features would place courts in the future in the illogical and unreasonable posture of delineating which portions of a mortgage will be subordinate and which will not. Unless otherwise stated, a second mortgage which recites its own inferiority to another mortgage must be, and is, subordinate to all the features of such other mortgage.
In the instant case, the Hamptons gave the first mortgage to Gulf Federal before the Poseys conveyed the property to the mortgagors. At the time the property was conveyed, the money loaned by Gulf Federal to the Hamptons went to the sellers, the holders of the self-denominated inferior *180second mortgage. By agreement of the parties, the Poseys took a second mortgage which recited that it was subordinate to the first mortgage. The insertion of the subordination language was not just an innocuous act. Such language clearly established the priority of the mortgages under these circumstances. The first mortgage contained a limit as to the total amount, including future advances, that Gulf Federal could loan the Hamptons, as well as a time limitation during which future advances could be made. If the second mortgagees intended to make the second mortgage inferior only to a portion of the provisions of the first mortgage, excluding the future advances clause, then it would have been incumbent on them to see that such partial subordination was expressed in clear and unambiguous language.
BLOODWORTH and McCALL, JJ., concur in the above dissent.