Mutual of Omaha Bank v. Watson
297 Neb. 479
| Neb. | 2017Background
- In October 2009 Robert and Shona Watson purchased a home that became their marital homestead; Community Bank financed the purchase by issuing two notes secured by a primary and a secondary deed of trust signed by both spouses.
- The notary certificate on the primary deed of trust showed only Robert’s acknowledgment; the secondary deed’s certificate showed both spouses’ acknowledgments. Community Bank assigned the primary deed to TierOne, and later Mutual of Omaha Bank acquired it.
- Community Bank paid off a prior deed of trust held by Cattle National so the Watsons could acquire title; title insurance issued in favor of TierOne referenced defects in notarization as a covered risk.
- Mutual sued in 2013 to foreclose the primary deed of trust after the Watsons defaulted; the district court granted summary judgment to Mutual, treating the two deeds as one transaction and declaring Mutual’s lien first priority.
- Watson argued the primary deed was void under Nebraska homestead statutes because both spouses’ acknowledgments did not appear on its face and also asserted counterclaims against Mutual and the title insurer; the court dismissed those counterclaims.
Issues
| Issue | Plaintiff's Argument (Mutual) | Defendant's Argument (Watson) | Held |
|---|---|---|---|
| Validity of primary deed of trust under homestead statutes | The primary deed is valid because it was part of the same transaction as the secondary deed (which had proper acknowledgments), and extrinsic evidence supports acknowledgment | The primary deed is void because § 40-104 requires both spouses’ acknowledgments to appear on the instrument conveying or encumbering a homestead | Court held deed enforceable: purchase-money mortgage rule applies — deed and security executed as part of same transaction, so homestead protection did not defeat the lien |
| Whether primary and secondary deeds should be read together | Treat as one instrument executed contemporaneously for same purpose; reading together reflects parties’ intent | The deeds should be considered separately; the facial lack of acknowledgment in the primary deed is fatal | Court/read together: instruments executed same day for same transaction are construed as one, supporting enforceability |
| Alternative claim: equitable subrogation / priority | Even if facial defect exists, Mutual is entitled to first priority by equitable subrogation because Community Bank paid prior lien to obtain priority | Watson contended Mutual lacked standing to claim priority without joining title insurer and facts failed to support subrogation | Court found primary deed valid on other grounds and did not need to rely on subrogation; district court’s alternative subrogation rationale rendered moot by validity ruling |
| Dismissal of Watson’s counterclaims against Mutual/title insurer | Mutual not liable to Watson under the title policy; Watson was not an insured despite paying premiums and cannot assert insurer’s rights | Watson argued he paid premiums and was the title owner, so he should be entitled to policy benefits or setoffs | Court dismissed counterclaims: Watson was not the insured under the policy and claims depended on invalidated theories; dismissal affirmed |
Key Cases Cited
- Prout v. Burke, 51 Neb. 24 (1897) (purchase-money mortgage given and delivered at time of purchase takes priority over homestead rights)
- Commerce Savings Lincoln v. Robinson, 213 Neb. 596 (1983) (treats purchase-money mortgage and deed executed as part of same transaction as simultaneous, affecting priority)
- In re Estate of West, 252 Neb. 166 (1997) (contemporaneously executed instruments by same parties for same transaction are construed together)
- Farmers Investment Co. v. O’Brien, 109 Neb. 19 (1922) (authority on enforcing instruments executed contemporaneously to reflect parties’ intent)