## Facts

- The Kruegers owned three parcels, including a parcel later purchased by Cherolyn Hinshaw.
- The Kruegers executed a single mortgage to MidCountry Bank intended to encumber all three parcels.
- The mortgage was accepted by the county recorder, time-endorsed, and recorded as an imaged document; the recorded mortgage included the Hinshaw parcel’s legal description.
- The recorder’s tract-index entry for the mortgage omitted the Hinshaw parcel, though the mortgage was entered in the grantor–grantee index under the Kruegers’ names.
- Hinshaw later bought the Hinshaw parcel from the Kruegers and granted a mortgage on it to PHH Home Loans.
- Hinshaw’s title search relied on the tract index and did not search the grantor–grantee index under the Kruegers’ names, so it did not discover MidCountry’s mortgage.
- After the Kruegers defaulted, MidCountry sought to foreclose its mortgage against all three parcels, including the Hinshaw parcel.

## Issues

1. Whether the mortgage was “properly recorded” under Minn. Stat. § 507.32 despite an indexing error that omitted one parcel from the tract index.
2. Whether a subsequent purchaser and mortgagee are charged with constructive notice of a mortgage recorded and discoverable through the grantor–grantee index even if the tract index is incomplete.

## Decision

- The Minnesota Supreme Court affirmed the court of appeals.
- The court held that indexing is part of the recording process, but an omission from the tract index did not make the mortgage improperly recorded where the mortgage was otherwise recorded and entered in the grantor–grantee index.
- The court held that a purchaser is charged with constructive notice of the contents of a mortgage recorded in the county recorder’s grantor–grantee index.
- Because MidCountry’s mortgage was properly recorded and discoverable through a grantor–grantee search, Hinshaw and PHH were charged with constructive notice and could not take priority as purchasers or encumbrancers without notice.

## Legal Principles

- Under Minn. Stat. § 507.32, an instrument affecting real estate is effective against later good-faith purchasers or encumbrancers from the time it is filed for record, if properly recorded.
- Indexing is a required part of the recording system, but a recorder’s indexing mistake does not automatically negate an otherwise valid recording.
- A properly recorded mortgage appearing in the grantor–grantee index provides constructive notice to subsequent purchasers and mortgagees.
- A party who limits its search to the tract index assumes the risk of missing instruments that are properly recorded and discoverable through the grantor–grantee index.

## Conclusion

Because MidCountry’s mortgage was received, endorsed, recorded, and entered in the grantor–grantee index, it was properly recorded and provided constructive notice despite the tract-index omission; Hinshaw and PHH therefore took subject to MidCountry’s prior mortgage.


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