Shutze v. Credithrift of America, Inc.

Hobart and Georgia Gentry owned a home subject to a mortgage held by Deposit Guaranty Mortgage Company (Deposit Guaranty). In April 1981, in exchange for a home-equity loan of $23,679.36, the Gentrys mortgaged the home for a second time with Credithrift of America, Inc. (Credithrift) (defendant). A deed of trust was executed and recorded, conveying a security interest in the Gentrys’ home to Credithrift. The deed included a dragnet clause, which provided that the conveyance covered all future advances to the Gentrys and secured all present and future debts of the Gentrys. Thereafter, a judgment in the amount of $4,541.78 was entered against the Gentrys in favor of Thomas Shutze (plaintiff), who had entered into a previous business relationship with the Gentrys. Shutze’s judgment was recorded and thereby perfected in October 1984. In 1985, pursuant to the 1981 dragnet clause, the Gentrys renewed the loan with Credithrift and received an advance of $2,784.13. The Gentrys eventually defaulted on the loan payments and left the state. Credithrift foreclosed on the home. Subsequently, Credithrift and Schutze entered into litigation in chancery court, each claiming an interest in the Gentrys’ home. The parties did not dispute that Deposit Guaranty’s first mortgage took priority. However, Shutze argued that his perfected judgment lien had priority over Credithrift’s later-in-time advance to the Gentrys. The chancery court ruled in favor of Credithrift, holding that Shutze’s judgment lien lacked priority and was extinguished by the foreclosure. Shutze appealed.