## Facts

- James and Nancy Krueger bought a parcel later referred to as the Hinshaw property and later acquired two additional parcels.
- In 2004, the Kruegers executed a single mortgage to MidCountry Bank securing all three parcels.
- The county recorder maintained both a grantor–grantee (party-name) index and a tract (legal-description) index.
- The mortgage was correctly entered in the grantor–grantee index but, due to recorder error, the Hinshaw property was omitted from the tract index entry.
- In 2006, Cherolyn Hinshaw bought the Hinshaw property from the Kruegers and conducted a title search limited to the tract index, which did not reveal MidCountry’s mortgage.
- Hinshaw granted a mortgage to PHH Home Loans, LLC; MidCountry’s mortgage was not paid off at closing.
- MidCountry sued to foreclose and asserted that Hinshaw had constructive notice because a proper search would have included the grantor–grantee index.
- The district court granted summary judgment to Hinshaw, treating her as a bona fide purchaser without notice as to the Hinshaw property.

## Issues

1. Whether a purchaser is charged with constructive notice of a mortgage that is properly recorded and appears in the grantor–grantee index, but is omitted from the tract index for the affected parcel due to recorder error.
2. Whether a purchaser who searched only the tract index can claim bona fide purchaser status against a prior mortgagee whose instrument was otherwise properly recorded.

## Decision

- The Minnesota Court of Appeals reversed the summary judgment for Hinshaw and remanded.
- The court held that Hinshaw had constructive notice of MidCountry’s mortgage because it was properly recorded and discoverable in the grantor–grantee index.
- The court concluded that omission from the tract index due to recorder error did not defeat constructive notice or Hinshaw’s duty to search the record.
- As a result, Hinshaw could not take the Hinshaw property free of MidCountry’s prior mortgage.

## Legal Principles

- An instrument is properly recorded when it is accepted by the recorder and bears the recorder’s recording stamp or endorsement; recording validity does not depend on correct indexing.
- Constructive notice arises from proper recording and is not negated by indexing errors in a tract (legal-description) index when the instrument appears in the grantor–grantee index.
- Purchasers are charged with notice of properly recorded instruments and are presumed to examine the record, including the grantor–grantee index, rather than relying solely on a tract-index search.
- A party cannot qualify as a bona fide purchaser without notice when constructive notice is imputed from a properly recorded instrument.

## Conclusion

The court held that a purchaser is charged with constructive notice of a properly recorded mortgage that appears in the grantor–grantee index even if the recorder’s tract-index entry omits the parcel, so the purchaser cannot claim bona fide purchaser status against the prior mortgage.


MidCountry Bank v. Krueger, 762 N.W.2d 278 (Minn. Ct. App. 2009)