Opinion ID: 901970
Heading Depth: 1
Heading Rank: 2

Heading: Satisfaction of the Mortgage

Text: [¶ 9.] There is no dispute that MERS, rather than ACT, was identified as the mortgagee in the mortgage and there was no recorded assignment of the mortgage from MERS to ACT. Because the satisfaction was executed on behalf of ACT rather than on behalf of MERS (the mortgagee), NattyMac argues that the satisfaction was ineffective and the mortgage remained valid under two recording statutes. Statutory interpretation and application are questions of law. Aspen Storage Inc. v. Flanagan, 2005 SD 107, ¶ 5, 705 N.W.2d 863, 864. We review the circuit court's conclusions of law de novo. Id. [¶ 10.] SDCL 44-8-14 is a typical recording statute, providing that in order to be discharged on the register of deeds records, a satisfaction must be signed by the mortgagee or its assignee of record: A recorded mortgage may be discharged upon the records of a register of deeds by filing for record and causing to be recorded at length a certificate signed by the mortgagee or his successor in interest by succession, assignment, representation or otherwise, acknowledged, or proved and certified as prescribed by the statutes relating to recording acts, fully stating the names of the mortgagor, the mortgagee [.] (Emphasis added.) SDCL 44-8-6 also provides that a satisfaction must show the name ... of the mortgagee or assignee. NattyMac argues that because the satisfaction did not identify the mortgagee and because it was not executed on behalf of the designated mortgagee, the mortgage has not been satisfied and remains valid. [¶ 11.] Defendants point out that under the agreements among ACT, NattyMac, and MERS, ACT was NattyMac's servicing agent for receiving loan payments and satisfying mortgage liens. Defendants also point out that there is no dispute that ACT, in its capacity as NattyMac's servicing agent, received the full loan payoff at the closing. Defendants argue that under the circumstances, the mortgage was extinguished as a matter of law notwithstanding any defects in the satisfaction. We agree. [¶ 12.] It is generally recognized that a mortgage is extinguished by the payment of the debt. The mortgagee has no property in such mortgage after such payment. Shriver v. Sims, 127 Neb. 374, 255 N.W. 60, 63 (1934). See also SDCL 44-3-8 (providing that [w]henever any mortgage ... has been satisfied either by payment, foreclosure, or other legal means, the holder of such lien shall, within thirty days of satisfaction, deliver a sworn satisfaction to the debtor) (emphasis added). [¶ 13.] This rule also applies when the payment is received by an entity other than the mortgagee if that entity is authorized to receive payment. The Nebraska Supreme Court explained: When the money for the payment of a note secured by mortgage has reached the hands of an agent authorized to collect it, the debt is paid, and the mortgagor is entitled to have the mortgage given to secure the debt canceled. Id. Furthermore, a formal recordable satisfaction is not necessary to discharge the mortgage. The payment or satisfaction of the mortgage debt avoids the mortgage deed. The failure to enter satisfaction upon the margin of the record may subject the mortgagee to penalties, but has no effect to keep the mortgage in existence. Id. The reasoning of the rule is that because [the agent is] authorized to collect the debt and ... [possess] the money which he was authorized to get, without any liability remaining for his principal, the mortgage ... is paid and extinguished. Id. See also Skott v. Bank of America Illinois, 266 Ga. 532, 533, 468 S.E.2d 359, 360 (1996) (concluding that the authorized servicing agent had authority to receive payments on the loan, including the payoff check, and that any security interest in the property by virtue of an assignment was satisfied by the payment in full to the servicing agent); Rockford Life Ins. Co. v. Rios, 128 Ill.App.2d 190, 261 N.E.2d 530, 533 (1970) (noting that [i]f payment [was] made to an authorized [servicing] agent ..., the payor is not bound to inquire into the application of such payment). [¶ 14.] The Wisconsin Supreme Court indicated that the [a]uthorities are in general accord with the proposition that payment of an indebtedness on a note secured by a mortgage on real estate extinguishes the mortgage lien without satisfaction thereof of record or in writing. Moore v. Benjamin, 228 Wis. 591, 591, 280 N.W. 340, 341 (1938). Although unpublished, Klapmeier v. Peoples Nat'l Bank of Mora, 2008 WL 2967033 (Minn.Ct.App.2008), restates the Minnesota Supreme Court's similar view: [O]nce a mortgage debt has been paid in full, and evidence thereof is surrendered to the mortgagor, the mortgage is completely extinguished because it was a mere incident of the debt. Hendricks v. Hess, 112 Minn. 252, 256, 127 N.W. 995, 997 (1910). Moreover, even if a mortgage that was paid in full was not satisfied of record, the mortgage is still completely extinguished. See id. (holding that it is well settled that an assignee of a mortgage takes it subject to the defense that it has been paid, even though not discharged of record). Id.  (emphasis added). [¶ 15.] In this case, ACT was the loan servicer under its contract with NattyMac. Pursuant to that contract, ACT received the Duimstra loan payoff from Getty at the loan closing. Therefore, even though ACT did not pay NattyMac, Getty's payment to NattyMac's servicing entity extinguished the mortgage notwithstanding the subsequent failure to comply with recording statute formalities. [¶ 16.] We acknowledge NattyMac's point that the language of the recording statutes requires identification and signature of the mortgagee. However, these statutes merely prescribe the requirements for recording satisfactions as opposed to regulating the contractual relationship between mortgagors and mortgagees. The language of the recording statutes reflects a purpose to do no more than provide third-party notification by discharging the mortgage  upon the records of a register of deeds[.] See SDCL 44-8-14 (emphasis added). Therefore, we conclude that to the extent ACT had authority to collect mortgage loan payments on behalf of NattyMac, ACT's receipt of the loan payoff satisfied the mortgage notwithstanding the subsequent failure to comply with satisfaction recording statutes.