• May 22, 2010

The MidCountry v. Krueger et al. case is critical reading for those who need to examine title to property in Minnesota or determine the priority of secured creditors.  The case was described previously on Minnesota Litigator here, a post last November when Minnesota Litigator predicted affirmance of the Court of Appeals.  This week, the prediction was validated.

In the previous post, Minnesota Litigator put the issue like this:  “Caveat Recorder” or “Caveat Emptor”?  In other words, who, between the lender who initially records an interest in real property (i.e., “the recorder” (though in truth the county does the actual recording) or a subsequent purchaser (or subsequent lender (aka “emptor,” or buyer) is better positioned to “vet” whether the recording, which entails validating/verifying different data in different databases, essentially (that is, for example, grantor-grantee index, track index, consecutive index)?

“[I]mperfect indexing does not require the conclusion that the mortgage was not properly recorded for constructive notice purposes under [Minn. Stat. §] 507.32.  Our prior cases are informative and lead us to conclude that “properly recorded” is not coterminous with perfect indexing or even perfect recording.”  In other words, the traditional “caveat emptor” rule applies.

Our conclusion that the MidCountry mortgage was properly recorded for constructive notice purposes merely affirms what we believe the rule has been in this state for over 90 years: purchasers are presumed to have read and are charged with constructive notice of the entire record, including information contained in the indexes and the contents of the recorded document itself if it appears in the grantor-grantee index under the correct name.

(Incidentally, one notes in the Supreme Court’s decision that the Court dug deep into the “nitty gritty” of the recording process, actually writing about what the recorder sees on the computer system for recording and what computer keys are pushed to see particular screens.)

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