ALERT - MN High Court Decision Affects Torrens Property

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November 5, 2010

The Case and Holding
Imperial Developers, Inc. v. Calhoun Development, LLC.  The Minnesota Supreme Court held that a mortgage for Torrens property is “of record,” and has priority over subsequent mechanic’s liens, when it is filed with the Registrar, date and time stamped, and assigned a document number, regardless of when a new Torrens certificate is issued.

The Facts and Claims
BankFirst filed a mortgage for Torrens property in a new development.  The mortgage was filed with the Registrar; a new Torrens certificate was issued later.  A model home was built on the property and mechanic’s liens attached after filing but before the new Torrens certificate was issued.

The Minnesota Supreme Court held that the bank’s mortgage had priority over the mechanic’s liens, concluding that the plain language of the priority statute regarding “of record” refers to filing and not issuance of a new Torrens certificate.  The court said public policy supported the holding because a mortgagee has control over the filing date of the mortgage but not over the new certification date.

Potential lien holders, including mortgagees, need to review the Torrens certificate and conduct a search by document number to accurately determine whether there are liens against Torrens property.

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