Cumulative Maximum-Amount Mortgages: Conceptual Validity and Criteria Distinguishing Them from Joint Maximum-Amount Mortgages

A cumulative maximum-amount mortgage is similar to a consolidated maximum- amount mortgage in that multiple maximum-amount mortgages are created to secure the same claim; however, because it excludes the application of Civil Act Article 368, its very recognizability as a legal concept has been debated, and the prevailing view and case law affirm it. Case law proceeds on the premise that the presence or absence of a registration of the joint relationship is not a criterion for distinguishing the two; rather, the touchstone is whether the parties intended to establish cumulative security so as to obtain preferential payment up to the sum of the maximum amounts of the respective mortgages. Supreme Court and recent lower-court decisions on this issue include notable instances where the maximum-amount mortgage agreement expressly states that the security applies “cumulatively.” Where the nature of the mortgage is not so specified, the parties’ intent must be inferred from multiple factors, including the amount of the secured claim, the maximum amount of each individual mortgage, the aggregate of those maximum amounts, and the circumstances leading to the creation of the mortgages. However, it is appropriate to adopt a simple rule: where a registration of the joint relationship exists, treat the arrangement as a joint maximum-amount mortgage; where it does not, treat it as a cumulative maximum-amount mortgage. Accordingly, excluding Article 368 in both simultaneous and sequential distributions rests on a more solid rationale.