Mutual of Omaha Bank v. Watson
297 Neb. 479
| Neb. | 2017Background
- Robert W. Watson and his then‑wife Shona purchased a home in October 2009 that became their homestead; Community Bank funded the purchase by two notes ($417,000 and $118,414.50) secured by a primary and secondary deed of trust conveying the same property.
- Both Watson and Shona signed both deeds of trust, but the notary certificate on the primary deed indicated only Watson acknowledged it; the secondary deed showed acknowledgments for both.
- Community Bank paid off Reserve Design’s prior lender and recorded the primary deed of trust (later assigned to TierOne and then to Mutual of Omaha Bank). A title policy naming TierOne as insured issued and excluded defects in acknowledgment.
- Watson defaulted; Mutual sued for judicial foreclosure, claiming the primary deed of trust was a first‑priority lien. Watson counterclaimed alleging contractual and collusion theories tied to the title policy; the district court dismissed his counterclaims.
- The district court granted summary judgment holding the primary deed valid (reading the two deeds together) and ordered foreclosure; Watson appealed. The Nebraska Supreme Court conducted de novo review.
Issues
| Issue | Plaintiff's Argument (Mutual) | Defendant's Argument (Watson) | Held |
|---|---|---|---|
| Validity of primary deed of trust given defective notarial certificate | Deed is valid because parties intended both deeds as one transaction; secondary deed shows both acknowledgments and the instruments should be read together | Primary deed is void as to homestead because §40‑104 requires both spouses' acknowledgments to appear on the instrument’s face | Court upheld enforceability: treated transaction as purchase‑money security; homestead right did not attach before deeds executed, so acknowledgment requirement did not defeat lien |
| Whether corrective (undated) acknowledgment cured defect | Corrective certificate and extrinsic evidence show both spouses acknowledged instrument | Corrective instrument cannot retroactively validate a facially defective homestead encumbrance without proper evidence on face | Court rejected unilateral corrective deed as primary basis but found acknowledgment requirement inapplicable because deeds were purchase‑money security instruments executed as part of the acquisition |
| Priority / equitable subrogation alternative | If needed, Mutual argued equitable subrogation places its deed first because Community Bank intended to take priority when it paid off prior lender | Watson disputed priority and contended title policy obligations shift remedies | Court did not need to decide subrogation after finding deed valid; district court’s alternative subrogation analysis rendered moot |
| Dismissal of Watson’s counterclaims against title insurer/insurer agent | Mutual: Watson not insured under policy; insurer’s actions do not bar foreclosure by Mutual | Watson: having paid premiums and being title owner, he is entitled to relief or setoff; alleged collusion with insurer | Court affirmed dismissal: Watson was not the insured under the policy and his claims depended on invalidation of the deed which the court rejected |
Key Cases Cited
- Prout v. Burke, 51 Neb. 24, 70 N.W. 512 (1897) (purchase‑money mortgage given contemporaneously with deed is valid against homestead claim)
- Commerce Savings Lincoln v. Robinson, 213 Neb. 596, 331 N.W.2d 495 (1983) (purchase‑money mortgage treated as part of same transaction as deed and often takes priority)
- In re Estate of West, 252 Neb. 166, 560 N.W.2d 810 (1997) (instruments executed contemporaneously for same purpose may be construed together)
- Blum v. Poppenhagen, 142 Neb. 5, 5 N.W.2d 99 (1942) (deed not lawfully acknowledged conveys land between parties except as to homestead)