Dragnet Clause Law and Legal Definition
Dragnet clause is a clause in a mortgage deed stating that a mortgage secures all the debts that the mortgagor may at any time owe to the mortgagee. It is also known as Anaconda clause or Mother Hubbard clause. Clauses such as this are termed "dragnet" or "anaconda," as by their broad and general terms they enwrap the unsuspecting debtor in the folds of indebtedness embraced and secured in the mortgage which s/he did not contemplate. Courts generally construe Dragnet clauses narrowly as its coverage is very broad and the mortgagor is often unaware of their presence or implications.
The following are examples of caselaw on the clause:
California courts examine a number of factors in determining whether a broadly worded dragnet clause was mutually intended by the parties to cover preexisting or contemporaneous debts. Some of the relevant factors articulated in the case law include: (1) the language and specificity of the dragnet clause; (2) whether the parties were aware of the dragnet clause and appreciated its significance; (3) whether the other loans were of the same type or character as the primary loan; and (4) whether the bank relied upon the dragnet clause as the security for the other loans.[Fischer v. First Internat. Bank, 109 Cal. App. 4th 1433 (Cal. App. 4th Dist. 2003)]
A dragnet clause in a mortgage purports to use the real estate as security for all debts past, present and future, between the parties to a security agreement. The clause can help facilitate commercial transactions which involve ongoing advancements of funds. A literal interpretation of a dragnet clause permits the bank to turn to the real estate that is secured by the mortgage when a mortgagor is late in paying a personal loan, misses a payment on an automobile loan, or overdraws her checking account at the bank. In Florida, dragnet clauses are strictly construed against the drafter of the instrument.[United Nat'l Bank v. Tellam, 644 So. 2d 97 (Fla. Dist. Ct. App. 3d Dist. 1994)]