## Facts

- The Kochs loaned money to the Swansons and took a real estate mortgage intended to encumber the Swansons’ land in Spokane County.
- The Koch mortgage was recorded on June 30, 1965, but mistakenly described the collateral as “Tract 125.”
- The Swansons actually owned “Tract 124,” and the Kochs did not obtain a title report or otherwise verify the tract number before recording.
- In July 1965, the Swansons granted Pacific First Federal a mortgage on the same physical parcel, correctly describing it as “Tract 124,” and Pacific First Federal properly recorded its mortgage.
- The Swansons later sold Tract 124 to the Wolffs, subject to Pacific First Federal’s mortgage.
- A title search for Tract 124 did not reveal the Koch mortgage because it was recorded against Tract 125, which the Swansons did not own.
- The Kochs claimed their earlier recording should have priority because the two legal descriptions were otherwise similar and allegedly put later parties on inquiry notice.

## Issues

1. Whether a mortgage recorded under an erroneous tract number, describing property the mortgagor does not own, provides constructive or inquiry notice to subsequent mortgagees and purchasers of the mortgagor’s actual tract, thereby giving the earlier mortgage priority.

## Decision

- The Court of Appeals of Washington affirmed the trial court’s priority determination.
- The Koch mortgage, recorded against Tract 125, was outside the chain of title for Tract 124 and did not give constructive notice to Pacific First Federal or the Wolffs regarding Tract 124.
- Similarity between the descriptions (apart from the tract number) did not impose a duty of inquiry on later parties searching title to Tract 124.
- Pacific First Federal’s mortgage and the Wolffs’ interest in Tract 124 had priority over the Kochs’ claimed interest in Tract 124.

## Legal Principles

- Recording gives constructive notice only to the extent the recorded instrument is discoverable within the chain of title for the parcel being examined.
- Purchasers and lenders are not charged with notice of instruments recorded outside the chain of title for the property at issue.
- Inquiry notice arises from facts apparent in the record for the parcel being searched; it does not require searching other parcels merely because a misdescribed instrument elsewhere resembles the correct legal description.
- A mortgagee bears the risk of loss from an inaccurate legal description when it fails to verify ownership and the correct legal description before recording.

## Conclusion

A mortgage recorded with a tract-number error that places it outside the chain of title for the intended parcel neither provides constructive notice nor triggers inquiry notice for subsequent parties dealing with the correctly described tract; therefore, later properly recorded interests in the correct tract take priority.


Koch v. Swanson, 481 P.2d 915 (Wash. Ct. App. 1971)