Louisiana Future Advance Mortgages: A 20-Year
Retrospective
David S. Willenzik
TABLE OF CONTENTS
Introduction ..........................................................................615
I. Louisiana Collateral Mortgages ...........................................617
A. History and Purpose .......................................................618
B. How Future Advance Louisiana Collateral
Mortgages Work ............................................................621
C. 1990 Changes in Governing Law...................................623
1. Louisiana UCC Article 9 Applicable to
Post-1989 Louisiana Collateral Mortgages ..............625
2. The Louisiana Collateral Mortgage Statute .............626
D. Provisions of Revised Louisiana UCC Article 9 and
the Louisiana Collateral Mortgage Statute that
Apply to Post-1989 Collateral Mortgages .....................627
1. Definitions ................................................................627
2. Ability of Post-1989 Collateral Mortgages to
Secure Multiple Present and Future Cross-
Collateralized Debt ..................................................627
3. Possession Perfection Required: Loss of
Possession and Its Legal Consequences ..................629
4. Future Advance Priority Rights of Post-1989
Collateral Mortgages ................................................632
5. No Loss of Priority in Lapsed Credit Situations ......634
6. Effectiveness of a Collateral Mortgage in a
Delayed, Anticipatory Credit Situation When
There is No Contemporaneous Loan or Forward
Commitment to Lend at a Later Date.......................638
Copyright 2015, by DAVID S. WILLENZIK.
Special Counsel to Jones Walker, LLP, New Orleans LA, and Adjunct
Professor of Law, Louisiana State University P aul M. Hebert Law Center,
teaching the course on UC C Article 9 secured transactions. Mr. Willenzik
chaired the committee that drafted the original 1990 version of Louisiana UCC
Article 9 enacted under Act No. 135, §3, 1989 La. Acts 417, and the 1989 UCC
Implementation Act enacted under Act No. 137, 1989 La. Acts 527.
614 LOUISIANA LAW REVIEW [Vol. 75
II. Significant Collateral Mortgage Case Law Developments
Since 1994 ............................................................................642
A. Diamond Services Corporation v. Benoit .......................642
1. Facts and Disposition ...............................................643
2. The Third Circuit’s Decision in Benoit .....................643
3. The Louisiana Supreme Court’s Decision in
Benoit .......................................................................644
4. Critique of Benoit ......................................................646
5. Additional Comments ..............................................649
6. Significance of Benoit ..............................................652
B. Alaska Southern Partners v. Baxley ...............................652
C. Hibernia National Bank v. Contractor’s Equipment
& Supply, Inc. ................................................................652
D. Ellis Construction, Inc. v. Vieux Carre Resort
Properties, L.L.C. ...........................................................653
E. Gutierrez v. Baldridge ...................................................654
F. Sciortino v. Bank of Louisiana .......................................655
III. Multiple Indebtedness Mortgages ........................................655
A. History and Purpose .......................................................655
B. Ability to Secure Future Advances on a Retroactive
Priority Basis ..................................................................656
C. Comparison with Collateral Mortgages .........................659
D. Form and Content Requirements Applicable to
Multiple Indebtedness Mortgage Agreements ...............661
1. Title and Definition of Mortgagee ...........................661
2. Definition of the Secured Indebtedness ...................662
3. Grant of Mortgage ....................................................664
4. Declaration of Intent that the Mortgage Secure
Future Advances ......................................................665
5. Duration of Mortgage ..............................................666
6. Mortgage Cancellation .............................................667
7. No Ne Varietur Paraph .............................................667
IV. Significant Multiple Indebtedness Mortgage Cases ............668
A. In re Hari Aum ...............................................................668
1. Facts and Disposition ...............................................668
2. The Bankruptcy Court’s Decision............................669
3. The Fifth Circuit’s Decision ....................................673
2015] LOUISIANA FUTURE ADVANCE MORTGAGES 615
4. Significance of Hari Aum ........................................674
5. Critique of Hari Aum ...............................................675
6. Question Raised by Hari Aum: Is It Necessary
or Good Practice for the Mortgagor to Execute
an Acknowledgement of Mortgage Each Time
that an Additional Advance is Made? ......................678
B. KeyBank National Association v. Perkins
Rowe Associates, LLC ....................................................679
1. Facts and Disposition ...............................................679
2. The District Court’s Decision ..................................681
3. Significance of the KeyBank Decision .....................685
4. Question: Can Mortgage Priority Rights be
Transferred on a Naked Assignment Basis
Independently of the Secured Debt? ........................687
5. Additional Concerns ................................................692
C. JAB of Oakdale, LLC v. Oakwood Inn
Development Corp. ........................................................693
1. Facts and Disposition ...............................................693
2. The Third Circuit Decision ......................................693
V. Are Collateral Mortgages Obsolete? ....................................694
INTRODUCTION
This Article is an update and expansion of two previous 1994
articles on future advance Louisiana collateral mortgages and
multiple indebtedness mortgages: D. Willenzik, Future Advance
Priority Rights of Louisiana Collateral Mortgages: Legislative
Revisions, New Rules, and a Modern Alternative,1 and M. Rubin, D.
Willenzik, and M. Moore, Is the Collateral Mortgage Obsolete?2
Both of these articles were published at a time when the original
1990 version of Louisiana UCC Article 93 and the Louisiana
1. See generally 55 LA. L. REV. 1 (1994) [hereinafter Willenzik, Future
Advance Priority Rights or “1994 Willenzik Article”]. This article updates and
expands upon, and is intended to be read in conjunction with, the 1994
Willenzik Article.
2. See generally Michael Rubin, David Willenzik, & M. Moore, Is the
Collateral Mortgage Obsolete?, 41 LA. B.J. 529 (1994).
3. LA. REV. STAT. ANN. §§ 10:9-101 to 10:9-710 (2002). Louisiana
Revised Statutes section 10:9-101 wa s first enacted under Act No. 135, § 3,
1989 La. Acts 417, effective January 1, 1990, and was subsequently a mended
and reenacted under Act No. 128, §1, 2001 La. Acts 206, effective July 1, 2001.