Nebraska Supreme Court Rules Priority of Simultaneously Recorded Documents is Determined By the Intentions of the Parties

The Nebraska Supreme Court recently held that resolution of priority between simultaneously recorded documents is determined by reference to the intentions of the parties. Borrenpohl v. DaBeers Properties, L.L.C., 276 Neb. 426, 755 N.W.2d 39 (2008). The facts revealed that a bank mailed its deed of trust in the same envelope with a notice of commencement regarding construction liens and without any instructions directing in what order to record the two documents. The County Register of Deeds office recorded the notice of commencement five minutes before the deed of trust. Later, two different contractors filed construction liens relative to improvements they made in the property, a week apart, however, because Neb. Rev. Stat. § 52-137(2) provides "if a lien is recorded while a notice of commencement is effective . . . the lien attaches as of the time the notice is recorded," both construction liens attached as of the date the notice of commencement was recorded. The two contractors sued to foreclose their construction liens asserting they had priority over the deed of trust because the notice of commencement was recorded five minutes before the deed of trust. In response, the bank sought a determination its deed of trust was superior to the construction liens. The Court determined that where documents were delivered simultaneously without instructions, the relative priority of the interests represented by the documents is resolved by considering the intentions of the parties. In this case, the bank produced affidavits from the bank and from the landowner stating that it was the intention of the landowner when he sought and obtained the construction loan from the bank that the bank would take an interest superior to the interest of any mechanics liens related to the simultaneously filed notice of commencement. Based on this evidence, the Court ruled the bank's deed of trust had priority over the contractors' liens. The Court noted that Nebraska's notice of commencement provision was primarily adopted to provide notice to persons searching public records of a potential construction lien, thereby alleviating the problem of hidden liens, not to advance the priority of construction liens. In short, while a notice to commence gives all mechanic's liens equal priority, if the notice is filed simultaneously with a deed of trust the Court will look to the intentions of the parties to determine the priority.