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Title Standard Spotlight

Articles from The Massachusetts Focus

Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Spring 2004, Volume 3, Number 2

Title Standard Spotlight
by Ward P. Graham, New England Region Counsel

In this issue of The Massachusetts Focus, the spotlight goes on the Real Estate Bar Association's ("REBA's") Title Standard No. 25, Mortgage Discharges. A seemingly simple title standard, the nuances of application can sometimes be subtle enough to provide the proverbial "trap for the unwary."

First, bear in mind that the title standard is not as encompassing as its title would imply. This title standard deals only with what discharges a mortgage and who can discharge a mortgage.

Title Standard 25 provides:

A mortgage may be discharged by an acknowledged and recorded deed of release or written acknowledgment of payment or satisfaction by the holder of record or any one of the joint holders of record, unless such joint holders hold as tenants by the entirety.

It is upon the subtleties involved with the reference to joint holders and tenants by the entirety that we will focus our spotlight.

As the Comment indicates, Title Standard 25 is basically derived from the mortgage discharge statute, G.L.c. 183, §54, which provides (in relevant part):

One of two or more joint holders of a mortgage may discharge it by a deed of release duly acknowledged and recorded. A mortgage may also be discharged by a written acknowledgement of payment or satisfaction of the debt thereby secured, or of the conditions therein contained, signed and sealed by the mortgagee, mortgage holder, mortgage servicer or note holder, his executor, administrator, successor or assignee.[1] Such instrument shall have the same effect as a deed of release, shall be valid if executed by one of two or more joint holders of a mortgage, and may be recorded when duly acknowledged or on proof of its execution in accordance with sections thirty-four to forty-one, inclusive. [Footnote added.]

Notice that there is no specific reference in the statute to holders of a mortgage who are either tenants in common or tenants by the entirety. As you might expect, the conclusion then must be that when you have tenants in common or tenants by the entirety, all must join in the discharge of the mortgage. The Comment and Caveat to the Title Standard point this out but they also point out helpful hints in reviewing situations involving discharges by only one of two or more holders of a mortgage.

As to tenants in common, the Caveat states that mortgagees are presumed to hold as joint tenants under the authority of G.L.c. 184, §7[2] and Park v. Parker, 216 Mass. 405, 103 N.E. 936 (1914). Under G.L.c. 184, §7, this results from the exception of mortgages from the provisions of the statute making a conveyance to two or more persons, including to husband and wife, result in a tenancy in common unless the instrument of conveyance expressly states that the grantees "take jointly, or as joint tenants, or in joint tenancy, or to them and the survivor of them, or unless it manifestly appears from the tenor of the instrument that it was intended to create an estate in joint tenancy."

According to the discussion of this issue in Park v. Parker, supra, there has been an exception for mortgages from the statutory provisions creating estates in common for quite some time "so that in a grant by mortgage to two or more persons to secure a joint debt, there is survivorship in the event of the death of one." Park, supra, at 406, citing Appleton v. Boyd, 7 Mass. 131 [1810]. In discussing the exception of mortgages from the provisions of G.L.c. 184, §7 in effect in the 1940s, the court in Pineo v. White, 320 Mass. 487, 70 N.E.2d 294 (1946) stated: "It is also to be noted that mortgages to two or more persons are excepted from the statute, and that the interests the mortgagees take are to be determined by the common law." Pineo, supra, at 490, citing both Appleton and Park. The Appeals Court also provided a nice discussion of this concept in the case of Bertolami v. Corsi, 27 Mass. App. Ct. 1132, 537 N.E.2d 1271 (1989) and concluded similarly that a mortgage to two or more people[3] not reciting any tenancy resulted in the mortgagees holding jointly under the exception in G.L.c. 184, §7.

What gets confusing when reading these cases, however, is when the discussion in Park and Bertolami switches over to the discussion of what happens to the proceeds of payment on the note when the survivor of the mortgagees receives payment. After discussing the tenancy under which the mortgages at issue were held, these two cases then segue into discussions about the tenancy under which the note and the payments thereunder are held. In that regard, there is discussion of a presumption that the mortgagees, who were the sellers of the property in both cases and took back the mortgages at issue, intended to hold the note obligation in the same tenancy in which they held title to the property before transfer to the mortgagor. In Park, that was as tenants in common; in Bertolami, it was as joint tenants. But in both cases, consistent with G.L.c. 184, §7, the mortgages were found to be held in joint tenancy.

What about husbands and wives, however? Well, there's a nuance to be aware of. Title Standard 25 has an exception for the ability to discharge by "any one of the joint holders of record" when it comes to joint holders who hold as husband and wife as tenants by the entirety. As the Comment points out, a mortgage held as tenants by the entirety must be discharged by both the husband and the wife. This rule was part of the discussion about tenancies under a mortgage grant in Pineo v. White, supra. In the Pineo case, only the wife had signed the discharge. As a result, even though the discharge was recorded, under the typical rules involving tenancies by the entirety,[4] no one spouse alone could effectuate the discharge and it was necessary to obtain a discharge signed by the husband as well. Accordingly, the Pineo case provides direct support for the Comment to Title Standard 25.

Another important issue, and a potential trap for the unwary, comes out of the Pineo case. It is important to note that the mortgage at issue in that case was granted to the "husband and wife, as joint tenants." The mortgage didn't say anything about tenants by the entirety. Historically, this was a significant distinction. As the Pineo case discusses, at common law, a mortgage to husband and wife jointly, or as joint tenants, created a tenancy by the entirety. This nuance was addressed by an amendment to G.L.c. 184, §7 by c. 210, §1 of the Acts of 1973, which added the second paragraph to the statute. The first sentence of the second paragraph provides that a conveyance to a husband and wife "jointly, or as joint tenants, or in joint tenancy, or to them and the survivor of them" stays a joint tenancy and does not turn into a tenancy by the entirety. So, since 1973, if husband and wife want a tenancy by the entirety, their deed or mortgage will need to explicitly say so.

Be careful, though, in relying on the second paragraph of G.L.c. 184, §7 in all cases. Under §2 of the amending Act, the statutory change adding the second paragraph is only applicable to conveyances (or devises) made after the effective date of the Act (i.e., on or about July 23, 1973). Thus, as to mortgages granted prior to that date to husband and wife as joint tenants, be aware that such a mortgage will be construed to be one held as tenants by the entirety. In that event, both spouses will have to sign a discharge unless, of course, one of them has died and you're only dealing with the survivor, in which case, you may also need to obtain and record evidence of death[5] of the non-signing spouse in order to assure a valid discharge.

On the other hand, if you do have a discharge of a mortgage held by husband and wife as tenants by the entirety (either expressly or by operation of the common law rule discussed above), there is a curative statute referenced in the Comment to Title Standard 25 that can help if the discharge was recorded more than 10 years ago. G.L.c. 183, §54A provides that, after 10 years from the recording of a discharge signed by only one tenant by the entirety, no enforcement action under the mortgage or the note can be taken by the non-signing spouse unless he or she has recorded a notice identifying the mortgage and stating that rights of a tenant by the entirety may be claimed in the mortgage or the note(s). The statute also provides that a marginal reference to the notice must be made, although it doesn't say what the consequences of failing to do so would be. Fortunately, this statute, enacted in 1961, was made retroactive,[6] so you're pretty safe in relying on this statute anytime you have a discharge by a single tenant by the entirety recorded more than 10 years ago.

As you can see, even what appear to be the most straightforward and simple of title standards can have their little twists of which the careful conveyancer may need to be aware on occasion. If you do run into one of these tricky situations and have any questions about how to apply the Title Standard, feel free to seek guidance from your friendly underwriter in the Stewart Title legal department.

1 The issues that arise because of the reference in Sec. 54 to acknowledgments of payment or satisfaction by a "mortgage servicer or note holder" will be reserved for another day. [Back to Text]

2 G.L.c. 184, §7 provides: A conveyance or devise of land to two or more persons or to husband and wife, except a mortgage or a devise or conveyance in trust, shall create an estate in common and not in joint tenancy, unless it is expressed in such conveyance or devise that the grantees or devisees shall take jointly, or as joint tenants, or in joint tenancy, or to them and the survivor of them, or unless it manifestly appears from the tenor of the instrument that it was intended to create an estate in joint tenancy. A devise of land to a person and his spouse shall, if the instrument creating the devise expressly so states, vest in the devisees a tenancy by the entirety.

A conveyance or devise of land to a person and his spouse which expressly states that the grantees or devisees shall take jointly, or as joint tenants, or in joint tenancy, or to them and the survivor of them shall create an estate in joint tenancy and not a tenancy by the entirety. In a conveyance or devise to three or more persons, words creating a joint tenancy shall be construed as applying to all of the grantees, or devisees, regardless of marital status, unless a contrary intent appears from the tenor of the instrument.

A conveyance or devise of land to two persons as tenants by the entirety, who are not married to each other, shall create an estate in joint tenancy and not a tenancy in common.
[Back to Text]

3 In both Park and Bertolami, the mortgage at issue was granted to three people. [Back to Text]

4 For a good case discussing both common law incidents of tenancy by the entireties and such tenancies since the amendment of G.L.c. 209, §1 in 1979, see Coraccio v. Lowell Five Cents Savings Bank, 415 Mass. 145, 612 N.E2d 650 (1993) and Shwachman v. Meagher, 45 Mass. App. Ct. 428, 699 N.E.2d 16 (1998), rev. den., 428 Mass. 1106, 705 N.E.2d 277 (1998). [Back to Text]

5 In addition to a death certificate or probate, evidence of death should also include an M-792 Estate Tax Lien Release, and perhaps recitals in the discharge, an affidavit, etc., depending upon how reliable such recitals appear under the circumstances. [Back to Text]

6 The 1961 Act did provide for a two-year grace period for filing the required notice in the case of discharges recorded prior to its enactment, but it's not very likely you'll ever see one. [Back to Text]