Mutual of Omaha Bank v. Watson
297 Neb. 479
| Neb. | 2017Background
- In October 2009 Robert and Shona Watson (then married) purchased a house built by Reserve Design, LLC; they signed two promissory notes and two deeds of trust securing the purchase money: a primary deed of trust for $417,000 and a secondary for $118,414.50.
- The notary certificate on the primary deed of trust reflected only Robert’s acknowledgment; both spouses’ acknowledgments were certified on the secondary deed of trust. A corrective deed of trust later appeared purporting to certify both acknowledgments for the primary instrument.
- Community Bank funded the purchase, paid off the prior Reserve Design lender, and assigned the primary deed of trust to TierOne, whose rights later passed to Mutual of Omaha Bank (Mutual). Title insurance was issued naming TierOne as insured.
- Watson defaulted; Mutual sued for judicial foreclosure seeking determination that the primary deed of trust was a first-priority lien and requested sale. Watson asserted counterclaims tied to the title policy and alleged collusion; the district court dismissed those counterclaims and granted summary judgment to Mutual.
- The key legal fact: whether the missing spouse acknowledgment on the primary deed of trust rendered the instrument void as an encumbrance on the homestead, or whether the purchase-money-mortgage doctrine (deed and mortgage treated as simultaneous) preserved Mutual’s lien.
Issues
| Issue | Plaintiff's Argument (Mutual) | Defendant's Argument (Watson) | Held |
|---|---|---|---|
| Validity of primary deed of trust given missing spousal acknowledgment | Primary and secondary instruments should be read together; extrinsic evidence and a corrective certificate show both spouses intended to encumber the property | Primary deed was facially defective under Neb. homestead statutes §40-104 because it lacked the wife’s acknowledgment and is therefore void as to the homestead | The primary deed is enforceable: purchase-money security rule applies so homestead had not attached prior to execution, and acknowledgment requirement did not defeat the lien |
| Whether primary and secondary deeds should be construed together | Instruments executed same day for same transaction should be read together to reflect intent to encumber | Reading them together does not cure the facial lack of acknowledgment on the primary deed | Court accepted construing documents together but the Supreme Court affirmed based on purchase-money mortgage doctrine (alternative reasoning) |
| Equitable subrogation / need to join title insurer | Mutual alternatively argued equitable subrogation to secure first priority and relied on corrective certification; joining the title insurer unnecessary to adjudicate priority | Watson argued failure to join the title insurer deprived the court of jurisdiction for declaratory relief and undermined Mutual’s alternative theory | Court held primary deed valid on purchase-money grounds, making equitable subrogation and insurer joinder moot; district court did not err in granting relief |
| Dismissal of Watson’s counterclaims (title policy and collusion) | Title policy insured Mutual, not Watson; Mutual’s foreclosure is for default, not a claim for title defects | Watson claimed he paid premiums and thus had rights under the policy and alleged collusion to force foreclosure despite defects | District court correctly dismissed counterclaims: Watson was not an insured under the policy and his claims failed; Supreme Court need not address insurer liability given enforceability of the deed |
Key Cases Cited
- Prout v. Burke, 51 Neb. 24, 70 N.W. 512 (1897) (purchase-money mortgage and deed treated as simultaneous; mortgage delivered at time of purchase not invalid for lack of spouse’s acknowledgment)
- Commerce Savs. Lincoln v. Robinson, 213 Neb. 596, 331 N.W.2d 495 (1983) (purchase-money mortgage priority and treatment of deed and security as simultaneous)
- Blum v. Poppenhagen, 142 Neb. 5, 5 N.W.2d 99 (1942) (deed valid between parties though not acknowledged; homestead exception requires spousal acknowledgment)
- Krueger v. Callies, 190 Neb. 376, 208 N.W.2d 685 (1973) (homestead conveyance/encumbrance void if not executed and acknowledged by both spouses)