Mutual of Omaha Bank v. Watson
297 Neb. 479
| Neb. | 2017Background
- In Oct 2009 Robert and Shona Watson purchased a home (their homestead) built by Reserve Design, an LLC Watson managed; they executed two promissory notes ($417,000 and $118,414.50) and two deeds of trust to Community Bank securing those notes.
- The primary deed of trust (securing $417,000) bore notarization stating only Robert acknowledged it; the secondary deed of trust contained acknowledgments for both spouses. The same notary later submitted an undated corrective deed of trust reciting both had acknowledged the primary deed.
- Community Bank paid off a prior deed of trust held by Cattle National, which released its lien; the primary deed was assigned to TierOne Bank and ultimately to Mutual of Omaha Bank (Mutual).
- Watson defaulted; Mutual sued for judicial foreclosure claiming the primary deed of trust was a valid, first-priority lien. Watson challenged enforceability under Nebraska homestead acknowledgment statutes and asserted counterclaims against Mutual and the title insurer.
- The district court granted summary judgment finding the primary deed enforceable (reading the two deeds together and/or on equitable subrogation grounds) and entered foreclosure; Watson appealed.
Issues
| Issue | Plaintiff's Argument (Mutual) | Defendant's Argument (Watson) | Held |
|---|---|---|---|
| Validity of primary deed of trust against homestead | Primary deed valid; any missing acknowledgment is cured by reading primary and secondary deeds together and by corrective certificate | Primary deed void under homestead statutes because both spouses’ acknowledgments must appear on the instrument’s face; corrective certificate insufficient | Primary deed enforceable — purchase-money mortgage doctrine applies; spouses had no homestead until security given; deeds treated as part of same transaction |
| Whether primary and secondary deeds should be read together | Yes — executed same day, same parties, same transaction, so construed as one instrument | No — primary is fatally defective on its face and cannot be cured by reading with other instruments | Court may construe them together; appellate court upholds result on purchase-money mortgage reasoning |
| Effect of corrective deed/notary certificate | Corrective certificate supports enforceability | Corrective, undated certificate cannot validate an instrument void on its face for lack of spouse’s acknowledgment | Court rejects reliance solely on corrective certificate but finds primary enforceable under purchase-money mortgage rule |
| Watson’s counterclaims re: title insurance and collusion | N/A (Mutual sought foreclosure) | Title insurer/Mutual owed duties to Watson (he paid premiums) and insurer colluded with Mutual; seeks setoff/damages | Counterclaims dismissed; on appeal moot once primary deed held valid, so no relief from title-insurance claims |
Key Cases Cited
- Prout v. Burke, 51 Neb. 24 (1897) (purchase-money mortgage given concurrent with conveyance takes priority over homestead claim)
- Commerce Savings Lincoln v. Robinson, 213 Neb. 596 (1983) (purchase-money mortgage doctrine and treatment of deed and mortgage as simultaneous when part of same transaction)
- Blum v. Poppenhagen, 142 Neb. 5 (1942) (a deed is effective between parties though not acknowledged, except as to homestead)
- In re Estate of West, 252 Neb. 166 (1997) (instruments executed contemporaneously by same parties for same transaction may be construed together)
- Krueger v. Callies, 190 Neb. 376 (1973) (acknowledgment by both spouses is required on the face of an instrument conveying or encumbering homestead)