This is a classic case that demonstrates why an owner's policy of title insurance is so important.  A county clerk made a typo in the index that may cause an Ohio family to lose their home. 

According to an article in the Columbus Dispatch, Andy Mateja bought his home for $320,000 in 2001 and has made all of his mortgage payments on time.  In August 2007, he was served with foreclosure papers.  The previous owner, Dr. Subbarayudu Koppera, had a $150,000 second mortgage to Chase that was never paid.

The Chase mortgage went on record in 1998 but due to a typo by the Muskingum County Recorder's office it was indexed as "Koppepa" instead of "Koppera."

Muskingum County Recorder Karen Vincent, whose office made the spelling mistake, testified that a correction was made in 2006. Vincent told the Dispatch that to her knowledge, it was the first time an error has been made, but she declined to comment further.

The first time?  I seriously doubt that.  Mistakes seem to be all too common these days.  I blame the computer systems that have been adopted by counties.  In the old book indexes, I doubt this lien would have been missed.  First, "Koppera" and "Koppepa" would have most likely been indexed on the same page and the abstractor would have most likely caught it, even it was spelled wrong.  Second, the method of entry in the books provided a forced error checking procedure.  The entry was made initially in the books before the volume and page had been assigned.  Then, when the volume and page was ready, a different county employee would have had to find it in the index to enter the volume and page. 

With the computer systems, that "double checking" is not being done - at least not effectively.  The first time the information is entered, the volume and page is assigned.  Someone else may "look at it" to make sure it is right, but they aren't forced to "search" for it to make sure it can be found.

Though Mateja paid for a title search, it is clear why it did not disclose the existence of the Chase mortgage.  Had he purchased an owner's policy of title insurance, it would not matter why the lien was missed - he would have had a valid claim and his clear title would have been protected.  Unfortunately, in many areas of Ohio, owner's policies are not customary - perhaps they should be.

Dr. Koppera has since moved to New Albany, Ohio where he purchased a $682,000 home in 2004.  He even modified the Chase mortgage in 2004, long after he sold the home encumbered by the lien.  Apparently he had been making payments on it for quite some time.  Unfortunately, Koppera and his wife have been slapped with several civil judgments for unpaid debts and federal, state and county taxes.  There probably isn't a good chance that he is in a position to pay Chase at this point.

He believes the title company made a mistake. "They should've known it and stopped right there so the lien was clear. Instead of me taking the cash, I would've paid the lien," Koppera said regarding the sale of the house. "They didn't do their job, and they should pay for it."

Seriously?  He failed to notify the title company that he also owed on a mortgage to Chase and he thinks the title company should pay for it now?  Even after he continued to make payments, he never contacted the title company to alert them to the fact that the mortgage was missed.  The lien was misindexed.... though it could have possibly been found, had a search been done with first few letter of the name (KOPP*), it is not the examiner's fault for failing to find a misindexed document.  "Koppera" and "Koppepa" are not idem sonans (alike sounding names). 

So, Chase has a valid mortgage and a right to foreclose on the collateral.  It is not their fault that it was misindexed and missed on the title search.  The title company did not discover the lien during the course of their title search, and I do not believe that it was due to negligence on their part.  Regardless, the new owner opted NOT to purchase an owner's policy of title insurance.  Clearly, Koppera owes Chase the money and he should pay it, but unfortunately, it appears that he is unable to do so.  Clearly the county recorder's office was negligent in their duty to properly index the mortgage.  So, to what extent may the Recorder be held liable?

In Ohio, the recorder is required to give a bond in the amount of $10,000 conditioned for the faithful discharge of the duties of his office. (ORC 317.02).  If the county recorder does or omits any other act, contrary to Sections 317.01 to 317.33 of the ORC, the recorder shall be liable solely on the recorder's bond to any party harmed by the improper conduct. (ORC 317.33).  If that covers a negligent misindexing, it would appear that the potential recovery would be limited to the $10,000 bond.

However, this is from a 1970 Attorney General's opinion that deals specifically with negligent errors and omissions.

Personally, I believe the $10,000 bond is woefully inadequate.  Typically abstractors and title agents carry limits of $500,000 to $1,000,000 on their E&O policies.  County recorders and their deputies can cause losses just as severe and often times, there mistakes render it impossible for those searching the records to ever find a misindexed document. 

This is certainly an unfortunate situation for Meteja and his family.  He does not deserve the consequences that have been befallen him.  Owner's policies should be the norm and hopefully this story will enlighten people to the value of title insurance.  Though there are many people who tell homebuyers that they do not need title insurance, such advice is reckless at the very least.

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