Mutual of Omaha Bank v. Watson
297 Neb. 479
Neb.2017Background
- Robert and Shona Watson purchased a home on October 26, 2009; the property became their homestead.
- To fund the purchase, Robert delivered a $417,000 promissory note (primary) and an $118,414.50 note (secondary) to Community Bank; corresponding primary and secondary deeds of trust were signed by both spouses.
- The notary certificate on the primary deed of trust certified only Robert’s acknowledgment; the secondary deed of trust certified acknowledgments for both spouses. A later undated "corrective deed of trust" purported to certify both spouses’ acknowledgments of the primary deed but was not signed by the Watsons.
- The lender interest in the primary deed was assigned through intermediaries to Mutual of Omaha Bank, which sued in 2013 to foreclose after loan default.
- The district court granted summary judgment holding the primary deed of trust valid and first in priority (reading the two deeds together and alternatively on equitable subrogation) and dismissed Watson’s counterclaims. The Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument (Mutual) | Defendant's Argument (Watson) | Held |
|---|---|---|---|
| Validity of primary deed of trust given defective notary certificate | Primary and secondary deeds are part of a single transaction; deeds should be read together — acknowledgment on secondary cures primary’s certificate | Primary deed is void under homestead statute because both spouses’ acknowledgments must appear on the instrument | Court held the deed enforceable: even if primary’s certificate was defective, the transaction was a purchase-money mortgage so homestead protections did not defeat the lien |
| Whether two deeds should be construed together | Both instruments were executed same day for the same purchase and thus may be construed as one instrument reflecting parties’ intent to encumber | The primary deed’s face defect makes it void regardless of the secondary deed | Court accepted the concurrent-transaction rationale (though ultimate disposition relied on purchase-money principle) |
| Applicability of homestead acknowledgment statute (§ 40‑104) to defeat the lien | Mutual: homestead limitation does not apply because buyer acquired title subject to a purchase‑money security interest executed concurrently | Watson: homestead statute requires both spouses’ acknowledgment on the face of the instrument and a defect voids the encumbrance | Held for Mutual: under Prout and related authority, purchaser has no homestead right before giving the purchase‑money security; the mortgage/deed are treated as simultaneous, so the lien survives |
| Dismissal of Watson’s counterclaims (title‑insurer related) | Mutual: Watson is not an insured under the lender’s title policy; Mutual may seek insurer assistance without waiving its rights | Watson: he paid premiums and should have contract/setoff rights; insurer and Mutual colluded | Moot after deed held enforceable; court’s dismissal affirmed because Watson was not the insured and counterclaims depended on deed invalidity |
Key Cases Cited
- Prout v. Burke, 51 Neb. 24, 70 N.W. 512 (1897) (purchase‑money mortgage given at time of purchase is not invalid for lack of spouse’s acknowledgment because deed and mortgage are treated as simultaneous)
- Commerce Savings Lincoln v. Robinson, 213 Neb. 596, 331 N.W.2d 495 (1983) (treating purchase‑money deed and mortgage as simultaneous; priority of purchase‑money mortgage)
- In re Estate of West, 252 Neb. 166, 560 N.W.2d 810 (1997) (instruments executed at same transaction may be construed together)
- Blum v. Poppenhagen, 142 Neb. 5, 5 N.W.2d 99 (1942) (acknowledgment requirement is essential for conveyance/encumbrance of homestead)