Mutual of Omaha Bank v. Watson, 297 Neb. 479

Background

In 2009 Robert and Shona Watson purchased a home that became their marital homestead; Community Bank funded the purchase by issuing two notes ($417,000 and $118,414.50) secured by a primary and secondary deed of trust on the property.
Angela Schwartz notarized both deeds, but the recorded primary deed of trust’s certificate reflected only Robert’s acknowledgment; the secondary deed’s certificate showed both spouses acknowledged.
Community Bank paid off a prior deed of trust held by Cattle National; the primary deed was assigned to TierOne and later to Mutual of Omaha Bank (Mutual); Mutual sued to foreclose after default.
Watson challenged enforceability of the primary deed, arguing Neb. homestead statutes require on-face acknowledgments by both spouses and that the primary deed’s defective certificate rendered it void.
The district court read the primary and secondary deeds together, found Mutual’s deed had first priority (also alternatively equitably subrogated), granted summary judgment to Mutual, and dismissed Watson’s counterclaims; the Nebraska Supreme Court affirmed.

Issues

Issue	Plaintiff's Argument (Mutual)	Defendant's Argument (Watson)	Held
Whether the primary deed of trust is valid/enforceable despite missing spouse acknowledgment on its face	Primary deed should be read with the secondary deed (same transaction); extrinsic evidence and corrective affidavit show both spouses acknowledged	Homestead statute (§40‑104) requires on‑face acknowledgment by both spouses; absent that, the deed is void as to the homestead	Held valid: because deeds were purchase‑money security in same transaction, purchaser had no homestead before giving security, so acknowledgment requirement did not defeat the deed
Whether the primary and secondary deeds may be construed together	Documents executed same day for same purpose should be read together to reflect intent	Cannot cure facial defect in primary deed by reading with another instrument	Court accepted reading together but Supreme Court affirmed outcome on purchase‑money mortgage principle rather than solely on joining documents
Whether Mutual needed to join the title insurer for declaratory relief / equitable subrogation claim	Not necessary to establish priority from purchase‑money mortgage; alternative equitable subrogation theory raised but not required	Failure to join insurer deprives court of jurisdiction over declaratory relief regarding title policy	Moot: Supreme Court resolved case on validity of primary deed; did not decide joinder/jurisdiction issue further
Whether Watson’s counterclaims against Mutual (re: title insurance and collusion) survive	Mutual not required to bring insurer as party; Mutual’s foreclosure seeks indebtedness, not title defect damages	Watson (payer of premiums) claims insurer duties and seeks setoff/indemnity; alleges collusion	Moot: because primary deed is enforceable, counterclaims dismissed below were unnecessary to preserve foreclosure; Supreme Court did not reach insurer liability question

Key Cases Cited

Prout v. Burke, 51 Neb. 24 (1897) (purchase‑money mortgage given as part of the acquisition transaction takes priority over subsequently arising homestead right)
Commerce Savings Lincoln v. Robinson, 213 Neb. 596 (1983) (discusses treatment of purchase‑money mortgages and their priority)
In re Estate of West, 252 Neb. 166 (1997) (instruments executed in same transaction may be construed together)
Blum v. Poppenhagen, 142 Neb. 5 (1942) (a deed is sufficient to convey land between parties but homestead exception requires acknowledgment)
Krueger v. Callies, 190 Neb. 376 (1973) (acknowledgment requirement for encumbering homestead of married person)