Colonial Bank v. Marine Bank, N.A.

Marine Bank (Marine) appeals, arguing that optional future advances made by a first mortgagee after acquiring actual knowledge of an intervening second mortgage are not entitled to priority over the second mortgage. We conclude that although mortgages to secure future advances are valid, optional advances made by a first mortgagee with actual knowledge of a second mortgage do not have priority over the second mortgage. Accordingly, we reverse the judgment of the circuit court.

The facts are stipulated. On September 26, 1977, Colonial Bank (Colonial) recorded a mortgage against the homestead of…