Chergosky v. Crosstown Bell, Inc. - 463 N.W.2d 522 (Minn. 1990)

Rule:

Under the Minnesota Recording Act, a bona fide purchaser who records first obtains rights to the property which are superior to a prior purchaser who failed to record. A bona fide purchaser is a subsequent purchaser in good faith, who paid value for the interest without actual, implied, or constructive notice of inconsistent outstanding rights of others.

Facts:

The vendee entered into a contract for deed conveying its interest in the subject property to the individual purchasers. After a telephone company attempted to exercise its lease purchase option, the subsequent purchaser acquired a 70 percent undivided interest in the subject property in exchange for past and present loans he had made to the vendee. The purchasers filed a breach of contract action against the vendee in which the subsequent purchaser asserted priority. The trial court found that the vendee and its officer (the previous record owner) were liable for breach of contract and that the subsequent purchaser's interest was inferior. The court of appeals reversed in part, finding that the subsequent purchaser's interest was superior. The purchasers appealed.

Issue:

Was the subsequent purchaser’s interest superior? 

Answer:

No.

Conclusion:

The court reversed, holding that the subsequent purchaser's interest was inferior because a person who assumed the obligations of an unrecorded contract for deed at the time he acquired an interest in the subject property could not assert priority over an unrecorded contract for deed after purchasing a mortgage on the property from a BFP who recorded the mortgage before the purchasers' contract for deed was recorded.