Mutual of Omaha Bank v. Watson, 900 N.W.2d 545

Background

Robert W. Watson and then‑spouse Shona bought a house in October 2009; both signed two deeds of trust securing two notes from Community Bank that funded the purchase and paid off prior builder liens.
The primary deed of trust secured $417,000; the secondary secured $118,414.50. Both instruments were recorded; the primary’s notary certificate omitted Shona’s acknowledgment though the secondary’s certificate showed both acknowledged.
Title insurer issued a lender policy in favor of TierOne (later assigned to Mutual of Omaha Bank), covering defects including improper acknowledgment.
Watson defaulted; Mutual sued for judicial foreclosure asserting the primary deed of trust was a first‑priority lien. Watson counterclaimed against Mutual and the title insurer.
The district court granted summary judgment for Mutual, treated the two deeds as one transaction, found the primary deed valid and first in priority, dismissed Watson’s counterclaims, and ordered foreclosure. The Nebraska Supreme Court affirmed.

Issues

Issue	Plaintiff's Argument (Mutual)	Defendant's Argument (Watson)	Held
Whether the primary deed of trust is valid and enforceable despite lacking the wife’s notarial acknowledgment on its face	The primary deed is valid because it is part of the same transaction as the secondary deed (which contains both acknowledgments); instruments executed together may be read as one	The primary deed is void under homestead statutes because §40‑104 requires both spouses’ acknowledgment on the instrument conveying/encumbering a homestead	Valid: Court upheld the deed as a purchase‑money security instrument executed as part of the purchase transaction, so homestead protection did not bar enforcement
Whether the primary and secondary deeds should be construed together	They should be read together as contemporaneous, same‑transaction instruments reflecting intent to encumber	They argue the primary is defective on its face and cannot be cured by reading instruments together or by later corrective affidavit	Yes: contemporaneous documents intended as part of one transaction may be treated together; but court relied on purchase‑money mortgage rule rather than solely on reading instruments together
Whether a homestead prevents enforcement when spouse’s acknowledgment is not on the recorded instrument	N/A (Mutual contends homestead rule does not apply because no homestead existed prior to encumbrance; purchase‑money mortgage takes priority)	The homestead statute renders the defective instrument void as to the homestead absent both spouses’ acknowledgment	Homestead statute does not defeat a purchase‑money mortgage delivered contemporaneously with acquisition of title; purchaser had no homestead interest until executing the security instruments, so deed stands
Whether Watson’s counterclaims against Mutual and the title insurer should survive	N/A for priority (Mutual had policy defenses); Mutual argued Watson was not an insured and claims fail	Watson claimed breach/indemnity/collusion by Mutual and title insurer based on premium payment and alleged insurer involvement	Moot/Denied: Because the primary deed is enforceable, district court’s dismissal of counterclaims is moot as to foreclosure; dismissal of insurance‑based counterclaims was affirmed (Watson was not an insured under the lender policy)

Key Cases Cited

Prout v. Burke, 51 Neb. 24, 70 N.W. 512 (1897) (purchase‑money mortgage delivered with purchase takes priority over homestead)
Blum v. Poppenhagen, 142 Neb. 5, 5 N.W.2d 99 (1942) (deed valid between parties though defective acknowledgment, except as to homestead)
Commerce Savings Lincoln v. Robinson, 213 Neb. 596, 331 N.W.2d 495 (1983) (treating purchaser’s deed and purchase‑money mortgage as simultaneous transactions)
In re Estate of West, 252 Neb. 166, 560 N.W.2d 810 (1997) (contemporaneous instruments may be read together)
Krueger v. Callies, 190 Neb. 376, 208 N.W.2d 685 (1973) (acknowledgment requirement for homestead conveyance/encumbrance)