## Facts

- Burl Brunson purchased real property in Newark, New Jersey, and recorded his deed in January 1986.
- In March 1986, Brunson borrowed $50,000 from Howard Savings Bank and granted a mortgage that was recorded on May 1, 1986.
- The recording office failed to index Howard’s recorded mortgage correctly until February 3, 1988.
- Brunson later conveyed the property to Jesus and Celeste Ijalba by deed executed October 6, 1987 and recorded November 4, 1987.
- The Ijalbas executed a mortgage to Chrysler First Financial Services Corporation on October 6, 1987, also recorded November 4, 1987.
- Prior to closing, Brunson executed an affidavit of title stating he had not created any interest affecting the property, and a title search did not reveal Howard’s mortgage because of the indexing error; Chrysler obtained a title insurance policy issued by Chicago Title Insurance Company.
- In May 1988, Howard filed a foreclosure action seeking a declaration that its earlier mortgage had priority over the Ijalba deed and the Chrysler mortgage.
- The court heard cross-motions for summary judgment limited to priority between Howard and Chrysler/the Ijalbas.

## Issues

1. Whether a mortgage that is properly recorded but improperly indexed provides constructive notice and retains priority over subsequent purchasers and mortgagees without actual notice.
2. Whether later parties who relied on a title search that did not disclose a mis-indexed, recorded mortgage can claim priority as bona fide purchasers or mortgagees.

## Decision

- The court granted summary judgment to Howard on the priority dispute between Howard and Chrysler/the Ijalbas.
- Howard’s mortgage, though mis-indexed, retained priority over the later-recorded Ijalba deed and Chrysler mortgage.
- The court treated proper recordation, not correct indexing, as controlling for constructive notice under the recording statute.
- Claims or disputes involving other mortgagees or the title insurer were not resolved in the priority ruling.

## Legal Principles

- Under New Jersey’s recording statute, an instrument that is duly recorded operates as constructive notice to subsequent purchasers and mortgagees.
- Indexing is a ministerial function of the recording office; a clerk’s indexing error does not defeat the priority of a party who properly recorded its instrument.
- Subsequent purchasers and mortgagees take subject to prior interests that were properly recorded, even if a reasonable title search would not reveal them due to an indexing mistake.
- Losses stemming from reliance on an incomplete title search may be addressed through contractual or insurance remedies, but they do not reorder statutory priority against a prior, properly recorded lienholder.

## Conclusion

The court held that Howard’s earlier mortgage had priority because it was properly recorded, and the recording office’s later correction of an indexing error did not alter constructive notice or priority as to subsequent purchasers and mortgagees.


Howard Sav. Bank v. Brunson, 244 N.J. Super. 571, 582 A.2d 1305 (Ch. Div. 1990)