Miller v. Hennen
438 N.W.2d 366 (1989)
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Rule of Law:
Under a race-notice recording act, a subsequent purchaser who has notice of recorded instruments from a stranger to the title has a duty of inquiry. If they conduct a reasonable inquiry into the title and are the first to record a complete chain of title from the record fee owner, they can qualify as a purchaser in good faith and take title free from the prior interests.
Facts:
- George and Hazel Hennen owned approximately 16 acres of land.
- On March 23, 1970, the Hennens entered into an unrecorded contract for deed for the property with Circle Holding Company.
- Circle Holding conveyed its interest to Cedar Holding Company, which then issued and recorded seven mortgages on the property in 1972. Comet Enterprises later became the assignee of some of these mortgages.
- On September 10, 1974, the Hennens issued a warranty deed for the same property to First Guaranty Corporation; this deed was lost and never recorded.
- In 1983, real estate broker Steven Coddon discovered the property and began investigating its title. He found the recorded mortgages from Cedar Holding, which was a stranger to the record title.
- Coddon contacted Hazel Hennen, who confirmed she had conveyed the property to First Guaranty and had been paid in full. He also obtained a copy of the unrecorded 1974 warranty deed from an attorney.
- Coddon and his partner, Robert Miller, acquired mortgage interests derived from the unrecorded First Guaranty deed.
- On January 12, 1987, Miller obtained a quitclaim deed for the property directly from Hazel Hennen, which he recorded on January 30, 1987, creating the first complete chain of title on record from the original owner.
Procedural Posture:
- Robert Miller initiated a quiet title action in Dakota County District Court (the court of first instance).
- The trial court ruled in favor of Miller, finding he was entitled to ownership free and clear of the interests of Comet Enterprises, Inc.
- Comet Enterprises, as appellant, appealed the decision to the Minnesota Court of Appeals (the intermediate appellate court).
- The Court of Appeals affirmed the trial court's decision, holding Miller was a good faith purchaser.
- Comet Enterprises, as appellant, petitioned for review by the Supreme Court of Minnesota (the state's highest court), which granted the petition.
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Issue:
Does a subsequent purchaser who has notice of recorded mortgages from a stranger to the chain of title qualify as a purchaser in good faith under the Minnesota Recording Act if they conduct a reasonable off-record inquiry and are the first to record a conveyance tracing back to the record fee owner?
Opinions:
Majority - Chief Justice Popovich
Yes, a subsequent purchaser under these circumstances can qualify as a purchaser in good faith. Under the Minnesota Recording Act, a subsequent purchaser prevails over a prior unrecorded interest if they purchase for valuable consideration, in good faith, and are the first to record a complete chain of title back to the record owner. The recorded mortgages held by Comet were from Cedar Holding, a stranger to the title, and thus did not provide constructive notice. However, they did provide implied notice, which triggered a duty of inquiry for Coddon (and Miller). The court found that Coddon's investigation—which included contacting the record owner, obtaining a copy of the lost deed, and physically inspecting the property—was a reasonable effort to ensure his title was legitimate. Because Miller was the first to record a complete chain of title back to the record fee owner, Hennen, his claim has priority over Comet's mortgages, which were never connected to the record title.
Analysis:
This decision clarifies the scope of the "duty of inquiry" for a subsequent purchaser under a race-notice statute. It establishes that the existence of recorded instruments from a stranger to the title (a "wild deed" or "stray mortgage") does not automatically disqualify a subsequent purchaser from being in good faith. Instead, it requires them to conduct a reasonable investigation, the adequacy of which is a question of fact. The case reaffirms the critical principle from Board of Education v. Hughes that priority under the recording act requires not just recording a single deed first, but recording the first complete and unbroken chain of title from a record owner.
