The usual way to give notice that the note has been satisfied is to file another document in the same county as where the note was filed.
The exact details depend on what has already been done.
The county's recorder's office likely has a website that has information on the format requirements of documents to be filed. The website likely allows users to search and look at recorded documents. You can review a few documents to get samples of the verbage used.
To lessen the chance of something not being done correctly, you should review the facts with your attorney.
You should consult an attorney about your specific situation. Unless you contractually granted your friend a security interest (mortgage) on the property, he has no right to a lien.
PLEASE BE ADVISED: This answer and any information contained herein is not intended to be treated, and should not be construed, as legal advice. Rather, this answer is offered solely for general information purposes. This answer does not create an attorney-client relationship, nor does it create any kind of legal relationship, duty, or privilege. This attorney is licensed only in Washington.