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

Background

Robert and Shona Watson purchased a house in October 2009 that became their homestead; Community Bank funded the purchase by two notes secured by a primary and a secondary deed of trust on the same day.
The primary deed of trust (securing $417,000) bears both signatures but the notary’s certificate identified only Robert as acknowledged; the secondary deed of trust had both acknowledgments.
Community Bank paid off a prior commercial deed of trust held by Cattle National, recorded the new deeds, and assigned the primary deed to TierOne, which later passed to Mutual of Omaha Bank (Mutual).
Watson defaulted; Mutual sued for judicial foreclosure asserting the primary deed of trust is a first priority lien. Watson counterclaimed against Mutual and the title insurer; the district court dismissed the counterclaims and granted summary judgment foreclosing Watson’s interest.
On appeal, the Nebraska Supreme Court reviewed de novo whether the primary deed was enforceable despite the defective on‑its‑face acknowledgment of the spouse and whether the deeds should be read together or treated as a purchase‑money security interest.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Validity of primary deed given missing spouse acknowledgment	Mutual: deed is valid because extrinsic proof and related instruments show both spouses intended to encumber; alternatively, corrective acknowledgment suffices	Watson: §40‑104 requires both spouses’ acknowledgments appear on instrument’s face; absent that, deed is void as to homestead	Held: Primary deed is enforceable — purchase‑money security rule applies so homestead right attached only after deeds given; acknowledgment requirement did not defeat the lien
Whether primary and secondary deeds should be read together	Mutual: instruments executed same day, same parties, same transaction; read together to show intent to encumber	Watson: primary is facially defective and cannot be cured by reading with other instruments	Held: Court relied on purchase‑money precedent rather than solely on reading instruments together; outcome supports Mutual’s lien
Effectiveness of undated corrective notary certificate filed later	Mutual: corrective deed of trust/certificate confirms prior acknowledgment	Watson: unilateral corrective certificate cannot validate an instrument that is void on its face under homestead statute	Held: Court rejected corrective certificate as primary ground but held deed enforceable under purchase‑money mortgage doctrine; corrective filing unnecessary to decision
Dismissal of Watson’s counterclaims against Mutual/title insurer	Mutual: Watson is not an insured under the title policy and thus lacks contractual claims; insurer’s assistance to Mutual does not prove collusion	Watson: Having paid premiums and been owner, he was entitled to policy benefits and a setoff; insurer/Mutual colluded to force foreclosure	Held: Counterclaims dismissed as moot given deed enforceability and because Watson was not an insured under the policy; court affirmed dismissal

Key Cases Cited

Prout v. Burke, 51 Neb. 24, 70 N.W. 512 (1897) (mortgage given as part of the purchase transaction takes priority over homestead since homestead right does not attach before title acquisition)
Commerce Savings Lincoln v. Robinson, 213 Neb. 596, 331 N.W.2d 495 (1983) (purchase‑money mortgage treated same as deed executed simultaneously where intended as part of same transaction)
In re Estate of West, 252 Neb. 166, 560 N.W.2d 810 (1997) (instruments executed at same time by same parties for same purpose may be construed together)
Blum v. Poppenhagen, 142 Neb. 5, 5 N.W.2d 99 (1942) (recognizing homestead exception: deeds not properly acknowledged are invalid as to homestead)
Krueger v. Callies, 190 Neb. 376, 208 N.W.2d 685 (1973) (acknowledgment by both spouses required on face of instrument to convey or encumber homestead)