Promissory note payoff issue with title company

[Lois S.]

We are newbies to private lending.  We gave an 'interest-only' promissory note to our borrower a few years ago. Now our borrower has refinanced through a mortgage company.  The title company asked us for a payoff demand. They requested that we use their payoff statement since we held the note as trustees of our living trust. (Not sure why that matters)  The form stated:

"Total amount to pay off contract in full" $____   We filled in the principal due.

"Payoff amount good through"______

"Daily interest per diem" $________

plus wire instructions and our notarized signatures.

On the 17th of the month, they wired money to our account - in the amount of only the principal due, MINUS one day's interest!   After some back & forth with title, they are refunding the one day's interest,

However I told them the interest for this month was still due up to date of closing. ( I'm sorry we didn't use a standard form that states exactly dates of interest due from XXX to XXX.)

They can't explain how they figured the payment, but claim that's all we're entitled to.

Also, they say we must file the reconveyance ourselves with the county. 

We intend to talk with our borrower & explain the situation & hope she'll pay the interest still due. Would this be OK?

Any pros on this board care to comment on this situation?

Thanks in advance for any help.