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

Background

In October 2009 Robert and Shona Watson purchased a home that became their marital homestead; they executed two promissory notes to Community Bank and signed a primary deed of trust (securing $417,000) and a secondary deed of trust (securing $118,414.50) on the same property.
The notary’s certificate on the primary deed of trust stated only Robert acknowledged it; the secondary deed of trust showed acknowledgments for both spouses. A later undated "Corrective Deed of Trust" purported to certify both acknowledgments for the primary instrument.
Community Bank wired payoff funds to the prior lienholder (Cattle National) the day after closing; the primary deed of trust was assigned to TierOne and later to Mutual of Omaha Bank (Mutual).
Mutual sued for judicial foreclosure after default; the district court granted summary judgment holding the primary deed of trust a valid, first-priority lien and ordered foreclosure, dismissing Watson’s counterclaims against Mutual and the title insurer.
On appeal, the Nebraska Supreme Court reviewed de novo whether the primary deed of trust was enforceable despite the flawed acknowledgment and whether the homestead statutes barred enforcement.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the primary deed of trust is invalid under Nebraska’s homestead acknowledgment statutes because Shona’s acknowledgment does not appear on its face	Mutual: primary deed is valid; corrective certification and contemporaneous secondary deed support enforceability	Watson: §40‑104 requires both spouses’ acknowledgments on the face of the instrument; absence renders it void	Held: Valid — purchase‑money mortgage rule applies; spouses had no homestead before giving security, so acknowledgment requirement did not defeat lien
Whether primary and secondary deeds should be read together as one transaction	Mutual: instruments executed same day, same parties, same transaction; read together to reflect intent	Watson: defective acknowledgment in primary cannot be cured by reading instruments together	Held: Court may consider them together, but resolution rests on purchase‑money mortgage doctrine rather than solely on joint construction
Whether Mutual’s alternative equitable subrogation theory and declaratory relief required joinder of the title insurer	Mutual: not necessary to determine priority of the deed	Watson: failure to join title insurer deprived court of jurisdiction for declaratory relief and equitable subrogation	Held: Moot — primary deed enforceable; court did not need to resolve joinder issue for final result
Whether dismissal of Watson’s counterclaims (title‑insurer claims, collusion, setoff) was error	Watson: paid premiums and is entitled to benefits / remedies; insurer and Mutual had duties	Mutual: Watson is not an insured under the lender’s title policy; claims fail	Held: Dismissal affirmed as resolution of enforceability of deed renders counterclaims moot or unsupported

Key Cases Cited

Prout v. Burke, 51 Neb. 24 (mortgage delivered with purchase is enforceable against homestead; deed and mortgage treated as simultaneous)
Commerce Savings Lincoln v. Robinson, 213 Neb. 596 (purchase‑money mortgage treated same as buyer’s mortgage; priority rules)
Blum v. Poppenhagen, 142 Neb. 5 (a deed not properly acknowledged is void only as to homestead exception)
In re Estate of West, 252 Neb. 166 (instruments executed contemporaneously may be construed together)
Krueger v. Callies, 190 Neb. 376 (acknowledgment by both spouses is generally required to convey or encumber homestead)