Mutual of Omaha Bank v. Watson
297 Neb. 479
| Neb. | 2017Background
- In October 2009 Robert and Shona Watson purchased a home previously owned by Reserve Design (an LLC Robert managed) and became its homestead. Community Bank made two loans to fund the purchase: 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 notary’s certificate on the secondary deed certified acknowledgement by both spouses, but the primary deed’s recorded acknowledgement certified only Robert’s acknowledgement. A corrective certificate purportedly attesting Shona’s earlier acknowledgement was later filed.
- Community Bank paid off the prior lender’s deed of trust and assigned the primary deed to TierOne, which later assigned it to Mutual of Omaha Bank; Mutual sued for judicial foreclosure after Watson defaulted.
- District court granted summary judgment to Mutual, ruling the primary deed of trust was valid and first-priority, construing the primary and secondary deeds together; it dismissed Watson’s title-insurance–based counterclaims.
- On appeal the Nebraska Supreme Court reviewed de novo and held that because the loans were purchase-money security instruments delivered as part of the same transaction by which the Watsons acquired title, the homestead-acknowledgment requirement did not invalidate the primary deed; the foreclosure and dismissal of counterclaims were affirmed.
Issues
| Issue | Plaintiff's Argument (Mutual) | Defendant's Argument (Watson) | Held |
|---|---|---|---|
| Whether the primary deed of trust is valid despite lacking a recorded spouse acknowledgment | Primary and secondary deeds are part of the same transaction; purchase-money security interest controls, so homestead-acknowledgment requirement does not void lien | Primary deed is void under homestead statutes because it lacks a valid acknowledgement by Shona on its face | Held: Valid. Purchase-money mortgage rule applies; no homestead right attached prior to encumbrance, so deed enforceable |
| Whether the primary and secondary deeds should be read together | Instruments executed contemporaneously for same transaction should be read together to reflect intent | Deeds are separate and the primary’s facial defect cannot be cured by reading with the secondary | Held: Court may construe contemporaneous instruments together; but decision rests on purchase-money mortgage doctrine regardless |
| Whether corrective certificate or later corrective deed could cure fatal facial defect; and related jurisdictional/joinder issue re: title insurer | Corrective certificate and equitable theories (e.g., subrogation) and lack of proof of non-acknowledgement support enforcement; title insurer need not be joined for foreclosure on valid deed | Corrective filing cannot retroactively validate a deed that fails § 40-104; title insurer should have been joined for declaratory relief | Held: Corrective filing insufficient as a standalone theory, but unnecessary because purchase-money doctrine validates the lien; joinder issue moot |
| Dismissal of Watson’s counterclaims (title-insurance–based and collusion/indemnity claims) | Mutual sought foreclosure; title insurance issues are between Mutual and insurer | Watson argued he paid premiums and thus had contractual/indemnity rights and setoff | Held: Dismissed below and affirmed as moot given lien validity; Watson was not insured under the policy and counterclaims failed |
Key Cases Cited
- Prout v. Burke, 51 Neb. 24, 70 N.W. 512 (1897) (purchase-money mortgage delivered at time of purchase is valid against homestead claim)
- Commerce Savings Lincoln v. Robinson, 213 Neb. 596, 331 N.W.2d 495 (1983) (purchase-money mortgage treated as occurring simultaneously with deed)
- Blum v. Poppenhagen, 142 Neb. 5, 5 N.W.2d 99 (1942) (deeds valid between parties though not acknowledged, except homestead)
- In re Estate of West, 252 Neb. 166, 560 N.W.2d 810 (1997) (contemporaneous instruments may be construed together)
- Krueger v. Callies, 190 Neb. 376, 208 N.W.2d 685 (1973) (homestead conveyance/encumbrance requires spousal execution and acknowledgment)