This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 538.— A bank demands security for an existing loan, which the debtor agrees to give if a further loan is made to him. This is agreed to, and he gives a mortgage to secure the whole amount. Would such a mortgage be valid, or, if invalid as to the new portion of the loan, would it be valid to the extent of the previous advance?
Answer.—If the intentions of the parties were in good faith, and the including of the new advances was done in ignorance or by oversight, the courts would probably hold the mortgage to be valid to the extent of the original loan, but not good as to the new loan. If, however, the parties knowingly and in defiance of the law included the new advances, then it is probable that the whole might be held to be tainted with illegality, and declared wholly invalid.