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 with two promissory notes secured by a primary and a secondary deed of trust signed by both spouses.
The primary deed of trust’s notary certificate showed only Robert’s acknowledgment; the secondary deed of trust bore acknowledgments for both spouses. A later undated "corrective" notary statement was recorded in 2013 purporting to show both spouses had acknowledged the primary deed in 2009.
Community Bank paid off a prior developer lender (Cattle National) the day after closing; Community Bank assigned the primary deed to TierOne, which later transferred rights to Mutual of Omaha Bank (Mutual).
Mutual sued in 2013 to foreclose after default; the district court granted summary judgment that Mutual’s primary deed of trust was a valid first-priority lien and ordered foreclosure, and dismissed Watson’s counterclaims against Mutual and the title insurer.
On appeal, the Nebraska Supreme Court reviewed de novo and affirmed, holding that because the purchase-money security was part of the acquisition transaction, the homestead-acknowledgment rule did not invalidate Mutual’s lien.

Issues

Issue	Plaintiff's Argument (Mutual)	Defendant's Argument (Watson)	Held
Validity of primary deed of trust (acknowledgment defect)	The instrument is enforceable because the secondary deed and other evidence show both spouses intended to encumber the property; a corrective certificate and title policy support priority.	The primary deed is void under §40-104 because it lacks the spouse’s acknowledgment on its face, so the homestead cannot be encumbered.	Court: Primary deed enforceable — purchaser gave purchase-money security concurrently, so no homestead vested before lien; acknowledgment requirement did not defeat lien.
Whether primary and secondary deeds should be read together	Instruments executed same day for same purpose should be construed together to show intent to encumber.	The defective acknowledgment on the primary deed is fatal regardless of the secondary deed.	Court: Documents may be read together, but decision rests on purchase-money mortgage doctrine rather than solely on joint construction.
Equitable subrogation / joinder of title insurer	Mutual alternatively argued it was subrogated to first priority and corrective actions cured defects; title insurer involvement not required.	Watson argued court lacked jurisdiction to grant declaratory relief without joining the title insurer and that insurer/agent colluded with Mutual.	Court: Because primary deed is valid, subrogation analysis and insurer joinder are moot; dismissal of insurer-based counterclaims affirmed.
Dismissal of Watson’s counterclaims (title-insurance based)	Title policy covered Mutual only; Watson was not an insured and thus had no contract claim under the policy.	Watson claimed he paid premiums and was entitled to benefits or setoff; alleged collusion between Mutual and insurer.	Court: Counterclaims properly dismissed — Watson was not insured under the policy and claims dependent on invalidity of deed became moot.

Key Cases Cited

Prout v. Burke, 51 Neb. 24, 70 N.W. 512 (1897) (holding a mortgage given concurrently with acquisition for unpaid purchase money is valid against homestead claims)
Commerce Savings Lincoln v. Robinson, 213 Neb. 596, 331 N.W.2d 495 (1983) (treating purchase-money mortgage and deed as simultaneous when part of same transaction)
Farmers Investment Co. v. O’Brien, 109 Neb. 19, 189 N.W. 291 (1922) (applying the rule that contemporaneous instruments may be construed together)
Blum v. Poppenhagen, 142 Neb. 5, 5 N.W.2d 99 (1942) (discussing necessity of acknowledgment to convey homestead interests)