## Facts

- Bill and Linda Shiew obtained a 1972 home loan from First Security Bank of Utah secured by a mortgage on their Monticello home; the printed mortgage contained a broadly worded “dragnet” clause purporting to secure present and future obligations.
- In 1974, the Shiews obtained a separate $8,900 loan from a different bank branch for a cattle venture, secured by a farm products chattel mortgage/security agreement covering specified cattle and feed, including after-acquired property.
- The cattle-loan security agreement did not reference the home mortgage and stated it was the parties’ entire agreement.
- The Shiews divorced in 1975, and Linda received the home in the divorce decree.
- The bank sued Bill and Linda in 1976 on the cattle note after the livestock collateral was exhausted, seeking a deficiency judgment; the original complaint did not assert the home mortgage as security for the cattle debt.
- The home later burned; Utah Farm Bureau Insurance Company issued loss proceeds, including a check naming the bank as a payee, but the proceeds were delivered to and paid to Linda.
- The bank amended its complaint to add Utah Farm and asserted that the home mortgage dragnet clause made the insurance proceeds additional security for the cattle-loan deficiency; the trial court accepted that theory and awarded the deficiency amount against Utah Farm for wrongful disbursement.

## Issues

1. Whether a home mortgage dragnet clause secured a later, separate, and unrelated cattle loan so as to give the bank rights in fire-insurance proceeds for that later debt.
2. How dragnet clauses should be construed when subsequent obligations are separately documented and independently collateralized.

## Decision

- The Utah Supreme Court reversed and remanded with instructions to enter judgment for Utah Farm.
- The court held the home mortgage dragnet clause did not secure the later cattle loan.
- Because the later debt was not secured by the home mortgage, the bank had no right to the disputed insurance proceeds as against the insurer, and the insurer’s payment to Linda was not wrongful as to the cattle-loan deficiency.

## Legal Principles

- Dragnet clauses are disfavored and are strictly construed against the mortgagee, particularly when the later debt differs in character from the original obligation.
- A broadly worded future-advances clause will not be applied to secure a later, unrelated obligation absent clear evidence that the parties intended the mortgage to secure that specific later debt.
- Separate loan documents with specific collateral and an integration clause, combined with the absence of cross-references to the prior mortgage, are strong objective evidence that the parties did not intend additional security under the earlier mortgage.
- A lender’s contemporaneous conduct—such as suing initially on a later note as an unsecured deficiency claim without invoking the earlier mortgage—may confirm the lack of intent to treat the earlier mortgage as security for the later transaction.

## Conclusion

The court limited the reach of a mortgage dragnet clause and held that, without clear evidence of intent, a prior home mortgage does not secure a later, independently documented and collateralized cattle loan; the bank therefore could not recover fire-insurance proceeds from the insurer to satisfy the cattle-loan deficiency.


First Sec. Bank of Utah v. Shiew, 609 P.2d 952 (Utah 1980)