Mortgages may be discharged by any of the following methods:
1. By entry on the margin of the record of the mortgage executed by the mortgagee and witnessed by the town clerk;
2. By acknowledgement of payment by the mortgagee of record by entry on the mortgage deed and witnessed;
3. By separate instrument executed and acknowledged by the mortgagee of record;
4. By licensed attorney pursuant to affidavit per 27 VSA §464a;
5. By deed of (re)conveyance by the mortgagee to the current record title holder; or
6. By deed executed or joined in by the mortgagee, provided the joinder is for the express purpose of discharging the mortgage.
7. By discharge by an authorized person or entity acting on behalf of the Holder of the mortgage.
Comment 1 Vermont is a title theory state. The granting of a mortgage is a conveyance of legal title by the mortgagor to the mortgagee subject to the mortgagor’s right to redeem.
Comment 2 Normally, a discharge executed by a mortgagee merely evidences a record termination of the security interest, which has already occurred by operation of law as a result of the payment of the debt. Whatever extinguishes the debt, discharges the mortgage. Island Pond Natl Bank v. Lacroix, 104 Vt. 282 (1932). Once the debt has been satisfied, there is no longer any outstanding mortgage which could be enforced, whether or not it has been formally discharged. Nash v. Kelley, 50 Vt. 425, 430. However, payment of the mortgage debt is a factual issue, and, absent a discharge of mortgage executed and delivered by the holder of the mortgage, the mortgage must be judicially terminated if the mortgage is to be discharged of record. In order to make the title marketable, a discharge of the mortgage should be secured and recorded.
Comment 3 See 12 VSA §502 for the 15 year statute of limitations for the re-entry of land. See also Huntington v. McCarty, 174 Vt. 69 (2000).
Comment 4 Where a Certificate of Redemption is filed in a foreclosure action, no discharge is required. The Certificate of Redemption is conclusive evidence of satisfaction of the conditions of the mortgage.
Comment 5 Where there is a Deed in Lieu of Foreclosure in the chain of title, there is no need to obtain a discharge of any mortgage(s) in which (1) the grantor of the deed in lieu of foreclosure is the then current owner of record title and (2) the grantee of the deed in lieu is the record holder of the mortgage at the time of the deed in lieu; and the deed in lieu of foreclosure does not preserve the separation of legal and equitable title.
Comment 6 See title standard 18.2 regarding errors in the form of the discharge.
Comment 7 See 27 V.S.A. §470 for curative provisions for defective discharges.
Comment 8 Where a non-resident mortgagee dies out of state, the mortgagee’s fiduciary can discharge the mortgage without the need for ancillary administration in Vermont.
Comment 9 As to discharging a mortgage following a foreclosure action, see Standard 17.5.
September 26, 2008:
- This standard was added.September 18, 2014
- The standard was amended to add paragraph 7 and Comment 8.