Mutual of Omaha Bank v. Watson
297 Neb. 479
| Neb. | 2017Background
- In October 2009 Robert and Shona Watson purchased a home (their homestead) that had been built by Reserve Design, LLC; they executed two promissory notes to Community Bank to fund the purchase and to pay off a prior deed of trust held by Cattle National, which was released on payoff.
- Watson and Shona signed two deeds of trust on the same day: a primary deed of trust securing $417,000 and a secondary deed securing $118,414.50. The notary certificate on the primary deed listed only Robert as acknowledged; both spouses were acknowledged on the secondary deed.
- Community Bank assigned the primary deed to TierOne, which later (after TierOne receivership) assigned its rights to Mutual of Omaha Bank (Mutual). Mutual sued in 2013 to foreclose after default.
- Watson defended asserting the primary deed was invalid under Nebraska homestead statutes because the primary deed lacked the wife’s notarial acknowledgment on its face; he also asserted counterclaims tied to title insurance and alleged collusion. The district court dismissed Watson’s counterclaims and granted summary judgment that the primary deed had first priority; it ordered foreclosure.
- On appeal the Nebraska Supreme Court reviewed de novo and held that because the deeds and purchase-money financing were part of the same transaction, the buyers had no homestead right prior to giving the purchase-money security; therefore the homestead-acknowledgment requirement did not defeat enforcement of the primary deed of trust. The foreclosure judgment was affirmed.
Issues
| Issue | Plaintiff's Argument (Mutual) | Defendant's Argument (Watson) | Held |
|---|---|---|---|
| Validity of primary deed of trust under homestead statutes | Primary deed valid; read together with secondary deed and extrinsic evidence shows both spouses intended to encumber; purchase-money mortgage priority applies | Primary deed void because §40-104 requires both spouses’ acknowledgment appear on the instrument conveying/encumbering homestead | Held: Valid — purchase-money security given contemporaneously with acquisition prevents homestead from defeating the lien; primary deed enforceable |
| Can the primary and secondary deeds be construed together to cure defective acknowledgment | Treat contemporaneous instruments executed in same transaction as one instrument; thus acknowledgment shown by secondary deed supports intent | Defect in primary deed’s face (no spouse acknowledgment) makes it void as to homestead unless cured on face | Held: Court need not rely on reading them together; purchase-money rule independently sustains lien, so outcome affirmed |
| Effect of corrective (undated) notarization filed later | Mutual asserted corrective certificate established acknowledgment | Watson argued corrective filing cannot retroactively validate instrument lacking required on-face acknowledgment | Held: Court rejected unilateral corrective deed as sole basis but found purchase-money doctrine dispositive; corrective deed unnecessary to decision |
| Watson’s counterclaims based on title insurance and alleged collusion | Mutual (and court) contended Watson was not an insured under the lender’s title policy; Mutual could seek insurer assistance without waiving rights | Watson argued payment of premiums and ownership entitled him to policy benefits and indemnity/offsets | Held: Moot as to foreclosure because primary deed enforceable; district court correctly dismissed counterclaims on the record that Watson was not insured under the lender’s policy |
Key Cases Cited
- Prout v. Burke, 51 Neb. 24 (1897) (purchase-money mortgage delivered at time of purchase is not invalid for lack of spouse’s acknowledgment and takes priority over a subsequently attached homestead right)
- Commerce Savings Lincoln v. Robinson, 213 Neb. 596 (1983) (purchase-money mortgage treated as having been executed simultaneously with deed for priority analysis)
- In re Estate of West, 252 Neb. 166 (1997) (contemporaneous instruments executed in same transaction may be construed together)
- Blum v. Poppenhagen, 142 Neb. 5 (1942) (deed valid between parties though not lawfully acknowledged except as to homestead where statutory acknowledgment requirement applies)