MidCountry Bank v. Krueger

Brief Fact Summary.

Hinshaw appealed an appellate court judgment that she had constructive notice of a recorded mortgage when MidCountry Bank did not properly index the mortgage in the official recording system.

Synopsis of Rule of Law.

A mortgage does not have to be properly indexed in the official recording system in order for a mortgage to be properly recorded.

Facts.

The Kruegers purchased the Hinshaw property and obtained a loan from MidCountry (Bank) to purchase two other properties (the Krueger Properties). To secure the loan, the Kruegers executed a mortgage to the Bank that included the Hinshaw property and the Krueger Properties. The mortgage and the deeds were properly recorded but the index for the mortgages only listed the Krueger properties as security for the mortgage. The Krueger’s then sold the Hinshaw property to CherolynHinshaw without any recorded disclosure of the mortgage to the bank. Hinshaw executed a mortgage on the property and the bank sought foreclosure when the Krueger’s defaulted on mortgage payments. If Krueger’s mortgage was properly recorded, Hinshaw had constructive notice of the mortgage and has no claim to the property. Summary judgment was granted in favor of Hinshaw and the appellate court reversed. Hinshaw appealed.

Issue.

Whether a mortgage has to be properly indexed in the official recording system in order for a mortgage to be properly recorded?

Held.

No. The judgment of the appellate court is affirmed. The Hinshaw property was not indexed under the wrong name, nor was the property not indexed at all. The mortgage was properly recorded because a searcher could still find the mortgage through the index and find a copy of the document.

Discussion.

An index is only used to help the searcher find documents that are on file.