Mortgage – Securing future obligations

Mortgage – Securing future obligations

Art. 3298. Mortgage may secure future obligations. A. A mortgage may secure obligations that may arise in the future.

B. As to all obligations, present and future, secured by the mortgage, notwithstanding the nature of such obligations or the date they arise, the mortgage has effect between the parties from the time the mortgage is established and as to third persons from the time the contract of mortgage is filed for registry.

C. A promissory note or other evidence of indebtedness secured by a mortgage need not be paraphed for identification with the mortgage and need not recite that it is secured by the mortgage.

D. The mortgage may be terminated by the mortgagor or his successor upon reasonable notice to the mortgagee when an obligation does not exist and neither the mortgagor nor the mortgagee is bound to the other or to a third person to permit an obligation secured by the mortgage to be incurred. Parties may contract with reference to what constitutes reasonable notice.

E. The mortgage continues until it is terminated by the mortgagor or his successor in the manner provided in Paragraph D of this Article, or until the mortgage is extinguished in some other lawful manner. The effect of recordation of the mortgage ceases in accordance with the provisions of Articles 3357 and 3358.

Revision Comments-1991. (a) As the Expose des Motifs more fully explains, this article, and certain supplemental legislation adopted with it (R.S. 9:5555-5557) is intended to provide a direct and convenient substitute for the so-called collateral mortgage, which in recent years has become widely used, and to permit a person to mortgage his property to secure a line of credit, or even to secure obligations that may not then be contemplated by him except in the broadest sense of expectation that he may some day incur an obligation to the mortgagee. The supplemental legislation also facilitates the granting of mortgages to secure obligations that are not evidenced by a note paraphed for identification with it. See R.S. 9:5555-5557 (1991).

(b) The expression in Paragraph A that “a mortgage may secure” is intended to emphasize that a mortgage securing future obligations is not a distinct and different form of mortgage. A mortgage may secure existing obligations; obligations contemporaneously incurred with the execution of the mortgage or specific identifiable or particular and limited future obligations; or general and indefinite future obligations; or any combination of them. The matter is one of contract, not law, and the provisions of this Title regulating mortgages are equally applicable in each case.

(c) Paragraph B declares that a mortgage securing future obligations has the same effect and priority it would have if the obligations were in existence when the con­tract of mortgage was entered into. Thus, it is effective between the parties from the date it is created by the contract of the parties (Art. 3287), and is established over future property when the property is acquired. (Art. 3292).

(d) The effect and rank of a mortgage securing future obligations thus essentially corresponds to the effect and rank that it would have if it secured a collateral note that was pledged to secure future obligations, with the exception that Article 3298 does not require that there initially be a debt or commitment in order to give vitality to the mortgage. Of course, the contract of mortgage must be in existence and, to affect third persons acquiring rights in and to the thing mortgaged, it must be recorded. Once recorded, however, it serves notice to the world that until released or cancelled, it encumbers the property it describes to secure the obligation it contemplates.