## Facts

- In January 1971, E. C. Thurmond III and Doris Thurmond sought construction financing from The Martin Bank to build a single-family dwelling.
- The Martin Bank agreed to make a $25,000 construction loan, with funds to be advanced in installments during construction.
- In May 1971, First Federal Savings and Loan Association of Fulton (First Federal) issued a commitment to The Martin Bank for a $25,000 permanent loan upon completion of the home, and the construction loan was to be paid from the proceeds of that permanent loan.
- The Martin Bank’s construction loan was secured by a trust deed executed by the Thurmonds and recorded in May 1971.
- The trust deed expressly secured (1) an initial disbursement of $2,500 and (2) any additional sums thereafter loaned by The Martin Bank to the Thurmonds, not to exceed a total of $25,000.
- At the time the trust deed was executed and recorded, no labor had been performed and no materials had been furnished for the project.
- After recordation, The Martin Bank advanced additional funds to the Thurmonds in installments of $7,500, $5,000, and $10,000, and all advances were used to pay costs of constructing the dwelling.
- It was undisputed that construction had commenced by the time the later installments were advanced.
- Builders Supply Company, Inc. and K–T Distributors, Inc. supplied materials for the project and later filed and perfected mechanic’s liens against the property.
- The builders argued their mechanic’s liens attached as of the commencement of work and therefore should be superior to the bank’s security interest at least as to advances made after construction began.
- The Martin Bank argued its recorded trust deed secured a total obligation up to $25,000 and had priority for the full amount, regardless of the timing of later installments.
- The court of appeals held The Martin Bank’s lien was superior, and the builders appealed.

## Issues

1. When a construction trust deed is recorded before any work or materials are furnished and it expressly secures future advances up to a stated maximum, does the trust deed have priority over later mechanic’s liens for advances disbursed after construction has commenced?

## Decision

- The court held that The Martin Bank’s recorded trust deed had priority over the builders’ later-filed mechanic’s liens for the advances made under the deed of trust, up to the stated $25,000 maximum.
- The court affirmed the judgment of the court of appeals.

## Legal Principles

- A trust deed recorded before the commencement of construction that states it secures both an initial advance and future advances up to a specified maximum gives notice that the property may be encumbered up to that amount.
- Advances made later pursuant to the recorded future-advance arrangement (and within the stated cap) retain the trust deed’s earlier priority date, even if construction has begun when those later advances are disbursed.
- Although mechanic’s liens generally attach as of the commencement of work, they do not gain priority over a previously recorded construction trust deed that, on its face, secures future construction advances up to a fixed maximum.

## Conclusion

Kemp v. Thurmond holds that a construction lender who records a trust deed before any labor or materials are furnished, and whose recorded instrument secures future advances up to a stated maximum, has a superior lien for all advances made under that instrument (within the cap) over later mechanic’s and materialmen’s liens, even when some loan installments are advanced after construction has commenced.


Kemp v. Thurmond, 521 S.W.2d 806 (1975)