Chapter 11 - § 11.9 • PAYMENT, SATISFACTION, AND DISCHARGE
| Jurisdiction | Colorado |
§ 11.9.1—Discharge by Payment
Where the payment of a lien indebtedness, in no matter what form it is evidenced, is made to the holder thereof by one who is personally and primarily liable therefor and whose duty it is to pay it, such payment, no matter what form the indebtedness assumes, operates to discharge any lien.152 An unconditional tender of the amount due releases the lien of the mortgage unless the creditor establishes a justifiable and good faith reason for rejection of the tender.153 Although the underlying debt remains enforceable, the lien of the mortgage is discharged, but so long as it is unreleased upon the record, it remains a mere cloud on the title of the mortgagor, to be removed, if necessary, in an proper proceeding for that purpose.154
A bid of the full balance of unpaid principal, interest, costs, and fees at a foreclosure sale constitutes payment in full of the debt secured by the instrument foreclosed on,155 and the status previously existing of debtor and creditor ceases.156 Thus, any right of a mortgagee conferred by the mortgage, including the right of possession and rents and profits, necessarily ceases.157
When all indebtedness secured by a lien on real property has been satisfied, the creditor or holder of the indebtedness must, within 90 days after the satisfaction of the indebtedness and receipt from the debtor of the reasonable costs of procuring and recording the release documents, record with the clerk and recorder the documents necessary to release or satisfy the lien of record or, in the case of an indebtedness secured by a deed of trust to a public trustee, file with the public trustee the documents required for a release.158 A satisfaction is required before a creditor is required to file the documents necessary for a release.159 Nevertheless, a creditor is not entitled to interest after a tender of the full amount due.160
A mortgagor cannot "waive" his or her signature and thereby cancel a note and mortgage.161
§ 11.9.2—Release
C.R.S. § 38-35-124 provides:
Except as provided in articles 22 and 23 of this title,162 when all indebtedness, whether absolute or contingent, secured by a lien on real property has been satisfied, unless the debtor requests in writing that the lien not be released, the creditor or holder of the indebtedness shall, within ninety days after the satisfaction of the indebtedness and receipt from the debtor of the reasonable costs of producing and recording the release documents, record with the appropriate clerk and recorder the documents necessary to release or satisfy the lien of record or, in the case of an indebtedness secured by a deed of trust to a public trustee, file with the public trustee the documents required for a release as prescribed by section 38-39-102. . . .
This section clearly requires that upon the tender of a payment fully satisfying an obligation secured by real property, the deed of trust securing that obligation must be released.163 Failure to release a deed of trust does not render it void, nor does it require that the foreclosure of real property secured by the deed of trust be set aside.164
This section was amended in 2016 to clarify payoffs of lines of credit secured by real property:
(4)(a) For an indebtedness secured by a lien on real property where the ability of a debtor to draw upon a line of credit continues notwithstanding that all amounts outstanding under the line of credit have been paid in full, any lien on real property securing that line of credit continues, until the line of credit expires or all indebtedness, whether absolute or contingent, has been satisfied unless, before the expiration of the line of credit, all outstanding indebtedness is satisfied and the debtor relinquishes in writing all right to make any further draw upon the line of credit.
4(b) The debtor relinquishes all right to make a further draw by either requesting in writing that the line of credit be closed by the creditor or by written notification by the debtor or by the debtor's designee that the real property is being conveyed upon payment of the indebtedness. Upon satisfaction of all indebtedness in connection with the conveyance of the real property and the notice to the creditor or holder of the conveyance, the creditor or holder shall terminate the line of credit, record the release of the lien on the real property, or in the case of a Deed of Trust, file with the Public Trustee the documents required for release, and return all papers and personal property as set forth in this section.165
C.R.S. § 38-39-102 provides, in part:
(1)(a) . . . a deed of trust to the public trustee, upon compliance with the provisions of the deed of trust, shall be released by the public trustee upon the:
(I) Receipt of a written request from the holder of the evidence of debt secured by the deed of trust, the holder's agent or attorney, or a title insurance company providing an indemnification agreement and affidavit described in paragraph (c) of subsection (3) of this section, which request shall be duly executed and acknowledged;
(II) Production of the original cancelled evidence of debt such as a note or bond as evidence that the indebtedness secured by such deed of trust has been paid; except that such production may be omitted in the circumstances contemplated in subsection (3) of this section;
(III) Receipt by the public trustee of the fee prescribed by section 38-37-104(1)(a) and the fee for recording the release;
(IV) Receipt by the public trustee of a current166 address for the original grantor, assuming party,167 or current owner168 or either a notation on the request for release of the deed of trust or a written statement from the holder of the evidence of debt secured by the deed of trust, the title insurance company licensed and qualified in Colorado, or the holder of the original evidence of debt that is a qualified holder, as defined in section 38-38-100.3(20), that they have no record of a current address that is different from the address of the property encumbered by the deed of trust being released; except that it shall be within the public trustee's discretion to release a deed of trust, upon compliance with the provisions of the deed of trust, if the public trustee has not received the information required pursuant to this subparagraph (IV); and
(V) Production of the original recorded deed of trust securing the evidence of debt or a legible copy thereof.
(b) Immediately upon execution of the release of the deed of trust by the public trustee, the public trustee shall cause the release to be recorded in the records of the county clerk and recorder.
Qualified holder: A holder of the original evidence of debt that is a qualified holder169 may request the release of a deed of trust without producing or exhibiting the original evidence of debt. A qualified holder that so requests the release of a deed of trust is deemed to have agreed170 to indemnify and defend the public trustee against any claim made within the period described in C.R.S. § 38-30-102(7)171 for damages resulting from the action of the public trustee taken in accordance with the request. The indemnity is limited to actual economic loss suffered by and any court costs and reasonable attorney fees and costs incurred in defending a claim brought as a direct and proximate result of the failure to produce the original evidence of debt, but the indemnity does not include (and no claimant is entitled to) any special, incidental, consequential, reliance, expectation, or punitive damages.172 A holder of the original evidence of debt that is a qualified holder must provide the public trustee with a current address for the original grantor, assuming party, or current owner when requesting a release of a deed of trust.173
Holder other than qualified holder: A holder of the evidence of debt may request the release of a deed of trust without producing or exhibiting the original evidence of debt. A holder that so requests the release of a deed of trust must deliver to the public trustee a corporate surety bond in an amount equal to one and one-half times the original principal amount recited in the deed of trust. The bond must remain in full force and effect for the period described in C.R.S. § 38-30-102(7).174 A holder of the evidence of debt must provide the public trustee with a current address for the original grantor, assuming party, or current owner when requesting a release of a deed of trust.175
Title insurance company: A title insurance company licensed and qualified in Colorado may request the release of a deed of trust without producing or exhibiting the original evidence of debt. A company that so requests the release of a deed of trust is deemed to have agreed to indemnify and defend the public trustee against any claim made within the period described in subsection (7) of this section176 for damages resulting from the action taken by the public trustee in accordance with the request. The indemnity is limited to actual economic loss suffered by and any court costs and reasonable attorney fees and costs incurred in defending a claim brought as a direct and proximate result of the failure to produce the original evidence of debt, but the indemnity does not include (and no claimant is entitled to) any special, incidental, consequential, reliance, expectation, or punitive damages.177 A title insurance company must provide the public trustee with a current address for the original grantor, assuming party, or current owner when requesting a release of a deed of trust.178
Obligation other than evidence of debt: A lien represented by a deed of trust to the public trustee that secures an obligation other than an evidence of debt may be released by the public trustee as to all or portions of the property encumbered by the deed upon the:
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• Receipt of a written request of the beneficiary or assignee of such deed of
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