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Silvestri v. Wells Fargo Bank Minnesota, N.A.

2005 WL 2810698 (N.J. Super. Ch. Div. 2005) (Unpublished)

MORTGAGES; DISCHARGE; FORECLOSURE—Entry of a judgment of foreclosure extinguishes the mortgage as a lien and substitutes a judgment lien; consequently, the mortgagee has no obligation to discharge to extinguished mortgage.

A foreclosure proceeding went to judgment and, before the sale was held, the mortgagor satisfied the foreclosure judgment. Then, the mortgagor sold the property and its buyer (the intermediate buyer) resold the property. In that resale, the intermediate buyer (as seller) was required by the ultimate buyer to “undertake action to remove the mortgage from the records.” Consequently, the intermediate buyer asked the foreclosing bank and its attorneys “to provide [it] with a discharge of mortgage (or the mortgage instrument endorsed for cancellation) to be recorded to remove the mortgage from the records.” It argued that it was entitled to the discharge of mortgage because the judgment had been paid in full. It also acknowledged “that as a result of the merger doctrine, the mortgage was ‘technically’ extinguished once the final judgment was entered.” Nonetheless, it argued that the merger did “not release the mortgagee from its statutory duty ... to discharge the mortgage.” It claimed to need the discharge because the recorded mortgage document remained an “open” lien on the record and was a cloud on title. The Court rejected the request for a discharge of mortgage, pointing out that “[i]t is well settled law that upon entry of a final judgment of foreclosure, a mortgage merges into the final judgment and therefore ceases to exist to exist from that date.” Because the mortgage ceased to exist on the date the final judgment of foreclosure was entered, “[i]t logically follows that plaintiff[‘s] requested relief, discharge of that mortgage [was] a practical impossibility. In other words, plaintiff[] [could not] acknowledge that the mortgage was ‘technically’ extinguished, but then ask this court to apply a statutory provision for discharge of a ‘mortgage.’” In the foreclosure process, “on the transmogrification of the mortgage into the judgment, the lender’s debt at the contract rate is extinguished in favor of one at the judgment interest rate… . And so the lender no longer obtains the benefit of its bargain. The mortgage is not now being paid, but rather a judgment if being paid. Thus, not having received the interest due on the note, the lender cannot be compelled to accept the proposition that its mortgage is now ‘redeemed, paid, and satisfied’” which is the prerequisite for requiring a mortgagee to discharge a mortgage.

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