Also known as: dragnet clauses · anaconda clause · mother hubbard clause
Written by attorneys · grounded in primary & secondary sources — see below
A provision in a mortgage or security agreement that extends the security interest to future advances or other obligations owed by the debtor to the secured party. The clause permits a single recorded instrument to cover multiple loans without new documentation for each advance. Validity and priority of the secured amounts turn on the mortgage terms, any stated maximum, and state rules governing notice of intervening liens.
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Dustin Donovan borrowed five million dollars from Desert Oil to purchase a warehouse and granted a recorded mortgage that secured the initial loan plus future advances up to a six-million-dollar maximum. After an intervening mechanic's lien was recorded, Desert Oil advanced an additional two million dollars. The court limited Desert Oil's priority to the six-million-dollar cap and treated the excess as junior to the intervening lien.
Dorothy Daniels financed two vehicles through a credit union whose security agreements contained dragnet language covering any other amounts she owed the credit union. When she later defaulted on unrelated credit-union loans, the credit union claimed the vehicles as collateral for those debts. The court examined whether the dragnet clause validly attached the antecedent obligations to the vehicle collateral.
Many jurisdictions withhold priority from optional future advances made after the mortgagee receives actual notice of an intervening lien. The mortgagee loses the benefit of the original recording date for those post-notice advances. Some states still protect the advance if the mortgage made it obligatory rather than discretionary.
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A recorded maximum principal amount caps the sum that enjoys the mortgage's original priority. Advances exceeding that ceiling are typically treated as unsecured or junior to intervening liens. Later creditors may rely on the stated cap when assessing the extent of the senior encumbrance.
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Courts often limit coverage to advances arising from transactions similar to the original mortgage transaction. An advance for an unrelated purpose may fall outside the clause even if the language is literally broad enough to include it. Specific identification of the debt in the mortgage can overcome this limitation.
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A dragnet clause generally has only prospective effect and does not secure preexisting indebtedness unless the mortgage specifically identifies that debt. Courts assume the parties did not intend to secure omitted antecedent obligations when they fail to name them.
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