Mutual of Omaha Bank v. Watson
297 Neb. 479
| Neb. | 2017Background
- In 2009 Robert and Shona Watson purchased a house (their homestead). To fund the purchase Community Bank made two loans: a $417,000 note (secured by the “primary” deed of trust) and an $118,414.50 note (secured by a “secondary” deed of trust).\
- Both Watsons signed both deeds of trust; the notarization on the primary deed of trust certified only Robert’s acknowledgment, while the secondary deed’s certificate showed both acknowledgments.\
- Community Bank paid off a prior deed of trust held by Cattle National; the primary deed of trust was later assigned (via TierOne) to Mutual of Omaha Bank (Mutual). Mutual sued in 2013 to foreclose after default.\
- Watson argued the primary deed was void as an encumbrance on the homestead because the primary deed’s acknowledgement did not show Shona’s acknowledgment on its face; he also asserted counterclaims tied to the title insurance.\
- The district court granted summary judgment for Mutual, treating the two deeds as one transaction and holding the primary deed had first priority; Watson appealed. The Nebraska Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument (Watson) | Defendant's Argument (Mutual) | Held |
|---|---|---|---|
| Whether the primary deed of trust is enforceable against the married couple's homestead given the primary deed’s defective acknowledgment | Primary deed is void under homestead statutes because the instrument does not show both spouses’ acknowledgments on its face | The primary and secondary deeds (and underlying notes) were part of one purchase transaction; purchase-money security interest took priority and homestead protections did not invalidate the lien | The primary deed is enforceable: because the deeds were part of the purchase-money transaction, no homestead right preceded the security interest, so the acknowledgment defect did not defeat the lien |
| Whether the primary and secondary instruments should be read together | The primary deed cannot be validated by reference to the secondary deed | Instruments executed contemporaneously for the same purpose may be construed together to reflect parties’ intent | Court may treat the instruments as part of the same transaction; reading them together supports enforcement of the primary deed |
| Whether a later undated corrective notarial certification can cure the absence of a spouse’s acknowledgment on the primary deed’s face | The corrective certification is invalid to retroactively supply the required on‑face acknowledgment | The corrective instrument and extrinsic evidence show both spouses acknowledged the transaction | The court rejected Mutual’s reliance on an undated corrective certification alone but held the purchase‑money rule rendered the homestead-acknowledgment issue immaterial |
| Whether Watson’s counterclaims (title-insurance based and collusion) defeat foreclosure or require joinder of the title insurer | Watson asserted he was entitled to relief/setoff because he paid premiums and insurer had duties; alleged collusion | Mutual argued Watson was not the insured and the policy covered only the lender; counterclaims failed as a matter of law | Counterclaims dismissed; foreclosure may proceed because primary deed is valid and Watson was not the insured under the policy |
Key Cases Cited
- Prout v. Burke, 51 Neb. 24, 70 N.W. 512 (1897) (purchase-money mortgage executed with the purchase is effective against subsequent homestead claim)\
- Commerce Savings Lincoln v. Robinson, 213 Neb. 596, 331 N.W.2d 495 (1983) (purchase-money mortgage treated as taking priority when part of same transaction as deed)\
- 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) (acknowledgment essential to convey an encumbrance on homestead unless purchase‑money exception applies)