MidCountry Bank v. Krueger - 782 N.W.2d 238 (Minn. 2010)

Rule:

"Properly recorded" is not coterminous with perfect indexing or even perfect recording.

Facts:

Respondent MidCountry Bank brought an action in district court to foreclose a mortgage on property owned by appellant Cherolyn Hinshaw. Appellant PHH Home Loans also held a mortgage against the Hinshaw property. MidCountry argued that its mortgage on the property was properly recorded by the Scott County Recorder's Office prior to the recording of Hinshaw's deed and PHH's mortgage, giving constructive notice to Hinshaw and PHH of the MidCountry mortgage. Hinshaw and PHH argued that MidCountry's mortgage was not properly recorded, and therefore Hinshaw and PHH could not be charged with constructive notice of its existence, they were good faith purchasers, and their interests took priority over the MidCountry mortgage. The parties submitted cross-motions for summary judgment. The district court granted summary judgment for Hinshaw and PHH, concluding that MidCountry's mortgage was not properly recorded because it did not appear in the tract index as part of the real estate county records as an encumbrance to the Hinshaw property, and thus provided no constructive notice to Hinshaw or PHH. The court then declared MidCountry's interest in the property void as against Hinshaw's and PHH's interests. MidCountry appealed and the court of appeals reversed. The court determined that MidCountry's mortgage was indexed in the grantor-grantee index and had a date and time recording stamp on it, making it properly recorded. Hinshaw and PHH filed a petition for review. 

Issue:

Was the bank’s mortgage properly recorded, thereby providing constructive notice to Hinshaw and PHH? 

Answer:

Yes.

Conclusion:

The state supreme court found that even though the bank's mortgage was imperfectly indexed, that did not mean that mortgage was not "properly recorded" as required by Minn. Stat. § 507.32 (2008) since "properly recorded" was not the same as "perfectly recorded." It then found that because the mortgage was indexed in the grantor-grantee index under the correct names, and an image of it was available through that index, it was "properly recorded" under Minn. Stat. § 507.32 (2008) despite being imperfectly indexed. As a result, it concluded that Hinshaw and PHH  had constructive notice of the bank's mortgage, which took priority over their interests in the property.