![]() address either the Kilgore or the Metro Bank cases in reaching its decisions. Instead, the Court focused its attention on Morvay v. Drake, 295 Ala. 174, 325 So. 2d 165 (1976), which did not involve a future advance mortgage, but recognized that in situations between a lender and its borrower, a mortgage that does not secure an actual debt may be declared void for failure of consideration. In looking to other jurisdictions for guidance, the Alabama Supreme Court noted that other states hold that future advance mortgages do not create a mortgage lien until some indebtedness is incurred. Based on the decision in Morvay and how other states address future advance mortgages, the Alabama Supreme Court ruled that a mortgage lien is not created until some indebtedness is incurred, i.e., some loan proceeds were advanced. Therefore, the Court ruled in favor of the builder holding its Builder's Lien had priority over the Mortgage. The decision in GHB has already caused fallout with the lending industry in Alabama with the viability of future realm called into question. Counsel for the lender in GHB has filed a Motion for Rehearing on the decision. An Amicus Curiae brief has also been filed on behalf of the Alabama Bankers Association, the Alabama Land Title Association, the Mortgage Bankers Association of Alabama and the Credit Union Coalition of Alabama seeking to reverse this decision. Where this will end up, no one knows, but for now, the law in Alabama requires lenders to recognize that future advance mortgages are not "created" for priority purposes until some loan proceeds are paid out or some indebtedness arises. Whether a mortgage provides security to a lender when the mortgage is recorded or only when it actually secures some type of indebtedness could very well become an issue with other states as well. In GHB, the Alabama Supreme Court looked to see how other states determine when a future advance mortgage is created. Decisions from other states were cited for the proposition that "a mortgage is a security for a debt, and without a debt, it has no effect as a lien" Freutel v. Schmitz, 299 Ill. 320, 132 N.E. 534, 535 (1921); Guar. 113 So. 117, 120121 (1927) and that for a mortgage to secure future advances that may or may not be made, the security does not arise until some advance is made. Ladue v. Detroit & M.R. Co., 13 Mich. 380, 407 (1865). The Alabama Supreme Court even cited a treatise on mortgages, 59 C.J.S. Mortgages ` 256 (2009), for the following proposition: or advance becomes a lien from the day the loan or advance is made, but not until then, and does not create a lien if no advance is ever actually disbursed." correct in saying that "... treatises and authority from other jurisdictions that address this issue uniformly indicate that a future advance mortgage does not create a mortgage lien until some indebtedness is incurred by the mortgagor," other states, along with Alabama, will need to evaluate how its lending industry is protected in the construction realm involving future advance mortgages. |