Cross motions for summary judgment.
Both must be denied.
This cause must proceed to trial.
This case involves a mixture of the unique Illinois land
holding device called a land trust,*fn1 the all-encompassing
scope of the federal tax lien, and an unreported name change.
Both the Plaintiffs and the Internal Revenue Service claim
priority interests in real property once owned by Defendant
Gillian Rongey. Between the Internal Revenue Service
(hereinafter IRS) and the Davises, there can be no real winner.
For now, though, we must postpone making the hard choice
between these two relative innocents.
Gillian Rongey has not always been known by that name; until
February of 1982, she was known as Gillian Renslow. In 1978,
Gillian Renslow and her mother purchased property at 4
Chatsford Court, Bloomington, Illinois, as joint tenants.
Thereafter the property was placed in an Illinois land trust,
which named BancMidwest as trustee. Gillian Renslow lived there
with her husband, John Renslow.
In July of 1981 the IRS made an assessment against John and
Gillian Renslow for their 1978 income taxes. A notice of
federal tax lien, filed in February 1982 with the Recorder of
Deeds for McLean County, Illinois, included the assessment for
the 1978 taxes. The notice of tax lien named "John & Gillian
Renslow" as the taxpayers, and stated that their residence was
"4 Chatsford Ct., Bloomington, IL 61701."
Gillian Renslow divorced John Renslow in April of 1981 and
married Richard Rongey on February 19, 1982. On April 23, 1986,
title to 4 Chatsford Court was transferred from the land trust
to Gillian Rongey. Later that year, on November 18, Gillian and
Richard Rongey entered into a contract for the sale of 4
Chatsford Court to Steven and Judith Davis, the Plaintiffs
here. Pursuant to the contract for sale, the Rongeys submitted
a commitment from a title insurance company that no outstanding
encumbrances, including tax liens, existed against the
property. The Davises and the Rongeys consummated the contract
for sale, and the Davises have apparently been making payments
upon the property since.
The IRS has sought to foreclose upon 4 Chatsford Court,
pursuant to its Notice of Tax Lien filed in the names of John
and Gillian Renslow. In response, the Davises filed the instant
case — which is a suit to quiet title — naming the United
States of America, Internal Revenue Service; in the
alternative, the Davises seek recovery from Gillian Rongey for
false and fraudulent misrepresentations in her sale of the
property to Plaintiffs.
The perspective of the title examiner warrants further
Using the grantor-grantee index, the title examiner would
discover that Gillian Rongey received title from the land
trust. Searching the tax liens, the examiner would find none
naming Gillian Rongey. Then, moving backward, the title
examiner would see that the land trust received its title from
the deed from Gillian Renslow and her mother back in 1978. The
title examiner would discover no notice of tax lien naming the
land trust or its trustee. The title examiner would perhaps
discover a notice of tax lien naming Gillian Renslow, but that
notice of tax lien was filed four years after Gillian Renslow
had transferred the property into the land trust. Hence, the
title examiner would find no outstanding tax liens naming any
record titleholder of 4 Chatsford Court.
It is therefore clear that the IRS thought that its lien
covered the subject real estate (withholding for the time being
any discussion of whether the IRS had notice of Gillian
Renslow's name change, and the effect such notice would have
upon the IRS's notice of lien); further, the tax examiner
— and hence the Davises — could find no outstanding
encumbrances on the property from their record search. The only
person who may have had knowledge of both the tax lien and the
name change was Gillian Renslow-Rongey, but she denies knowing
of the tax lien.
As noted at the outset, these cross motions for summary
judgment are thus brought by two relatively innocent parties to
this entire transaction.
Under Fed.R.Civ.P. 56(c), summary judgment should be entered
"if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."
Unquestionably, in determining whether a genuine issue of
material fact exists, the evidence is to be taken in the light
most favorable to the nonmoving party. Adickes v. S.H. Kress &
Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 1608-09, 26 L.Ed.2d
142 (1970). Nevertheless, the rule is also well established
that the mere existence of some factual dispute will not
frustrate an otherwise proper summary judgment. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509,
91 L.Ed.2d 202 (1986). Thus, the "preliminary question for the
judge [is] not whether there is literally no evidence, but
whether there is any upon which a jury could properly proceed
to find a verdict for the party producing it upon whom the onus
of proof is imposed." Id. at 251, 106 S.Ct. at 2511 (quoting
Improvement Co. v. Munson, 14
Wall. 442, 448, 20 L.Ed. 867 (1872)); see also Celotex Corp. v.
Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d
On these facts, both the Davises and the IRS have moved for
summary judgment pursuant to Fed.R.Civ.P. 56(c). The fact that
cross motions for summary judgment have been filed does not
per se entitle the Court to dispense with the determination of
whether questions of material fact exist. We must give no less
careful scrutiny to the facts here than we would had only one
litigant moved for summary judgment. See Lac Courte Oreilles
Band of Lake Superior Chippewa Indians v. Voigt, 700 F.2d 341,
349 (7th Cir.), cert. denied, 464 U.S. 805, 104 S.Ct. 53, 78
L.Ed.2d 72 (1983). Having done so, we conclude that genuine
issues of material fact remain, and hence this case must
proceed to trial.
Both motions for summary judgment turn upon the sufficiency
of the IRS's notice of tax lien filed in McLean County,
Illinois. The applicable sections of the Internal Revenue Code
will be set out here, at the outset, for clarity's sake.
To begin: as soon as the IRS assesses tax liability against
any person, the amount due becomes a lien in favor of the
United States upon any and all property, presently or future
owned, real or personal, belonging to the person assessed.
26 U.S.C. § 6321 (1982). This lien, however, is not valid against
"any purchaser, holder of a security interest, mechanic's
lienor, or judgment lien creditor" until a notice of the lien
is filed in the appropriate place. Id. at § 6323(a). Hence, the
IRS lien does not take priority over the delinquent taxpayer's
other lienors until its notice of tax lien is filed in the
proper form and with the proper authority. The requirements for
the notice of lien are found in § 6323(f). For real property,
the notice must be filed in the place designated by the state;
in Illinois, that is the county within which the real property
is located, here McLean County. The form of the notice of lien
is to be determined by the Secretary of the IRS; the notice is
valid regardless of any other provision of law regarding form
or content of a lien notice. The Secretary of the IRS has
promulgated rules pertaining to the proper form and content of
the notice pursuant to § 6323(f)(3); at
26 C.F.R. § 301.6323(f)-1(c), the notice of federal tax lien is required to
be filed on a "form 668, `notice of federal tax lien under
Internal Revenue laws.'" Further, "form 668" has been defined,
at § 301.6323(f)-1T(c)(2), as being a form which "must identify
the taxpayer, the tax liability giving rise to the lien, and
the date the assessment arose regardless of the method used to
file the notice of federal tax lien."*fn3
Finally, one further portion of § 6323(f) warrants
discussion, and that is subsection (4), which provides that:
It is abundantly clear that § 6323(f)(4) does not apply in
all "notice" jurisdictions, but rather only in those
jurisdictions where priority is determined as of the time of
indexing. The Davises have not argued that in Illinois indexing
is the determinative time for priority. In fact, Illinois law
appears to make the significant moment that of filing, not
indexing. See Village of
Crotty v. Domm, 338 Ill. 228, 236-37, 170 N.E. 308 (1930),
where the court stated, "where an instrument is duly filed for
recording, the same is deemed recorded for all legal purposes
from the date of such filing. . . . The purpose of recording it
is to render it accessible that all may know its provisions.
This condition exists from the time it is filed for record."
Although Domm referred to the filing of an ordinance with the
village clerk, the language employed and reasoning underlying
the decision would seem to apply to recording of real property
interests as well. Hence, the Davises' argument is not
The Davises have cited two cases to support their reading of
§ 6323(f)(4), United States v. Clark, 81-1 U.S.T.C. ¶ 9406
(S.D. Fla. 1981), and Fleet Mortgage Corp. v. U.S.
Conglomerate, Inc., 166 Ill. App.3d 537, 519 N.E.2d 949 (1st
Dist.), appeal denied, 122 Ill.2d 573, 125 Ill.Dec. 216,
530 N.E.2d 244 (1984). Neither case, however, persuades the Court.
As Plaintiffs note, Clark is directly on point to the present
case. There, Mrs. Clark was assessed back taxes, and a notice
of tax lien was filed by the United States in 1973 listing her
as Carolyn Sue Clark. In 1974 Carolyn divorced, and in 1975 she
married Roger Harper and took his surname. The Internal Revenue
Service received actual notice of Carolyn's remarriage and name
change. Carolyn, as Carolyn Harper, acquired certain property
in 1975, upon which a mortgage was taken in favor of Amerifirst
Federal Savings & Loan Association as mortgagee. Hence, in
Clark as here, the subsequent purchaser (in Clark, a mortgagee)
gave value in reliance upon a record which did not indicate any
adverse interests against the prior party. The notice of tax
lien in Clark, as here, would not be discovered upon a
reasonable inspection of the real property records because the
notice was filed in the name of Clark, not Harper, whereas the
property was purchased in the name of Harper and no notice of
tax lien was ever filed in that name. The Clark case, as could
be expected, concerned a dispute between the United States and
Amerifirst over priority to the property; the court held in
favor of Amerifirst upon the basis of § 6323(f)(4), stating:
The question here — whether the government is
required to refile a Notice once it becomes aware
of a name change — does not fit precisely within
the holding of any reported decision. The language
of the Internal Revenue Code, however, provides the
answer. The government's filing of lien notices
where there is an adequate state system of indexing
real property, as there is here, must be done "in
such a manner that a reasonable inspection of
the index will reveal the existence of the lien."
I.R.C. § 6323(f)(4) (emphasis added).
Here, the remarriage of Carolyn Clark (of which
the Internal Revenue Service received notice)
resulted in a situation where there was no
reasonable opportunity for a prudent person
dealing with the delinquent taxpayer to ascertain
the existence of a federal tax lien. A "reasonable
inspection" would not reveal the lien. Thus, the
government's lien is of no effect against the
subsequent mortgagee because the Notice did not
comply with I.R.C. § 6323(f)(4).
This Court declines to follow Clark because that case
misconstrues § 6323(f)(4). Clark would require any and all
notices of tax lien filing to be discoverable upon a reasonable
inspection of the index; however, § 6323(f)(4), by its very
terms, does not apply to all filing systems, but only those
where the time of indexing is the significant time for purposes
of priority. Perhaps Florida law, under which Clark was
decided, so construes its recording act; the Illinois recording
act, as above noted, does not. Therefore Clark is not
The Fleet Mortgage case does not sway this Court, either. In
the first place, to the extent Fleet Mortgage followed Clark it
did so without analysis. Since this Court declines to follow
Clark, we obviously decline to follow Fleet Mortgage as well.
Furthermore, the Fleet Mortgage case turned at least in part
upon the fact that the IRS knew of the taxpayer's name
change, and at times used each of the various names used by the
taxpayer, but never refiled its notice of tax lien. The
Fleet Mortgage case was thus premised in part upon failure of
the IRS to provide constructive notice of the tax lien, even
though it was known by the IRS that the taxpayer used several
different names. See Tony Thornton Auction Service, Inc. v.
United States, 791 F.2d 635, 639 (8th Cir. 1986), cited in
Fleet Mortgage, 519 N.E.2d at 954.
In sum, the Davises' argument does not persuade, and
therefore their motion for summary judgment on the basis of
§ 6323(f)(4) of the Internal Revenue Code will be denied.
The IRS's Motion
The Internal Revenue Service's argument supporting granting
summary judgment in its favor is straightforward. The IRS
simply posits that no section of the Internal Revenue Code
requires it to refile a notice of tax lien upon learning of a
name change and concludes that the failure to refile does not
effect a loss of priority, even in favor of an innocent
purchaser who has no way of knowing of the tax lien, and even
if the IRS had actual notice and knowledge of the taxpayer's
name change. The IRS has some support for its position. In
Pioneer National Title Insurance Co. v. United States, 48
A.F.T.R.2d 81-5142 (D.N.J. 1981) [1981 WL 1816], a case in some
respects similar to this, the court rejected an argument that
the IRS should be required to file and index federal tax liens
under both the taxpayer's name and under any other name of
which the IRS is aware that the taxpayer may have at one time
purchased property. The Pioneer National Title court, noting
that the Internal Revenue Code does not require any such
filings, stated that "[i]f Congress had wished to impose upon
the Internal Revenue Service the duty to locate a deed for
every piece of real property owned by a delinquent taxpayer,
determine the name under which it was acquired, and file a
separate notice of tax lien for each such name, it would
presumably have done so." Id. at 81-5145. Likewise, in United
States v. Polk, 822 F.2d 871, 872-74 (9th Cir. 1987), the court
approved of the Pioneer National Title holding, noting that
"[i]f Congress had antended to impose upon the IRS the duty to
investigate what property is owned by a delinquent taxpayer,
record the name under which it was acquired, and file a
separate notice of tax lien for each such name, it could have
done so." Id. at 874.
Notwithstanding the broad holdings of these two cases, both
are factually dissimilar to the present case and for at least
that reason do not warrant blind adherence. In Pioneer National
Title a woman purchased property in her maiden name of
Imbergamo; later, she married Caruso and changed her surname
accordingly. Notices of tax liens were filed after her marriage
in the name of Caruso. The Carusos then sold the property,
still held in the name of Imbergamo, to one Banko; the deed was
signed by "Lauralie I. Caruso, formerly Lauralie Imbergamo . .
. and Joseph Caruso, her husband." Under such circumstances,
the contention that the IRS should have filed its tax lien
notice under both the names Imbergamo and Caruso is wholly
meritless — a proper title search would have easily revealed
the tax lien in the name of the Carusos, and since that name
appeared upon the deed, Banko was in no way misled. Likewise,
in Polk the IRS had filed a notice of tax lien against Roy
Bruce Polk. Thereafter, a mortgagee lent Mr. Polk a sum of
money, and took in exchange a note and a mortgage on Mr. Polk's
property; Polk was known to the mortgagee, and signed the deed,
mortgage and note, by the name "Bruce Polk." The mortgagee, in
making his title search, looked only for the name "Bruce Polk,"
and therefore did not discover the IRS tax lien filed under the
name of "Roy Bruce Polk." Again, the IRS had filed under the
correct name, and the contention that it must also file under
pseudonyms or nicknames has no merit.
Conversely, in the present case Plaintiffs allege that the
IRS was aware that Renslow's name had changed to Rongey;
Plaintiffs further allege that, in spite of this knowledge, the
IRS did not amend its notice of tax lien to name Mrs. Rongey.
As set out earlier, under such circumstances there was no way
possible by which a title examiner could have found the tax
lien which covered the property at 4 Chatsford Court.
Furthermore, unlike Pioneer National Title and Polk, the
subsequent purchasers here had no way of knowing of Rongey's
earlier name. Hence, this situation is far different from those
in Polk or Pioneer National Title.
The IRS maintains that the Internal Revenue Code does not
require refiling its notice of tax lien in situations such as
this, where a delinquent taxpayer has changed his or her name
following the filing of the tax lien notice, even where the IRS
has actual notice of the name change. To the contrary, the
Court finds that the entire statutory scheme under which the
IRS is granted the duty and authority to file notices of tax
liens compels a finding of a duty to refile under such
circumstances. The sine qua non of § 6323 is notice to
subsequent takers of the existence of the IRS lien.
The history of § 6323 reflects this with pristine clarity.
Under § 6321, the federal tax lien arises upon assessment of
delinquent taxes. Prior to enactment of § 6323, this "secret
lien" was good as against any and all subsequent takers,
regardless of the impossibility of obtaining notice of the
lien. Then the forerunner to § 6323 was added; the accompanying
house report indicates that the notice provision was included
to accommodate business world realities. Later, the subsection
was again amended to also protect bona fide pledgees and to
except securities; the reason for this amendment, too, was the
prior impossibility of providing notice of tax liens to
subsequent purchasers. See generally United States v. Security
Trust & Savings Bank, Executor, 340 U.S. 47, 52-53, 71 S.Ct.
111, 114-15, 95 L.Ed. 53 (1950) (Jackson, J., concurring).
Still later, in 1978, Congress again amended § 6323 by adding
subsection (f)(4); the history of this section, set out above,
shows that subsection (f)(4) was added to keep the federal tax
lien in line with other recorded instruments in the state
recording system, and once again the benchmark was the question
of notice to subsequent purchasers. Under this statutory
scheme, as illustrated by its history, it is clear that
Congress intended the IRS notice of tax lien to serve as notice
to subsequent purchasers wherever possible.
The IRS has been granted, by Congress, sole authority to
decide what information to include in the notice of tax lien.
The IRS has determined that the relevant information to be
included is the delinquent taxpayer's name (now "identity", see
26 C.F.R. § 301.6323(f)-1T(2)), and the taxpayer's place of
residence. By failing to amend the notice to provide the
taxpayer's new name, the IRS has failed to comply with its own
regulation by failing to provide the taxpayer's "name" or
"identity" as those terms are to be construed in light of §
Thus, this Court rejects the IRS's contention that there is
no duty upon it under any circumstances to refile its notice of
tax lien. To the contrary, this Court finds that, where the IRS
has notice that a delinquent taxpayer has changed his or her
name, and where the notice of tax lien was filed under the
taxpayer's original name, the IRS is under an affirmative duty
to refile the notice of tax lien to show the taxpayer's new
name. In this way the underlying purposes of the notice
provisions of the Internal Revenue Code will be furthered,
while at the same time the IRS will not be under any undue
This holding, of course, raises several questions, as the IRS
has been quick to point out. The Court, however, does not find
that these questions paint such a gray
landscape as the IRS contends. The IRS questions whether
refiling would entitle it to retain priority — it seems clear
that it would. Further, the IRS asks how soon after receiving
"notice" of a name change would the United States be required
to refile in order to maintain priority, and also wonders what
would be sufficient notice of a taxpayer name change to invoke
the refiling requirement. The Court recognizes that many
questions remain. In answer to some of these, though, the
standard will be one of reasonableness; this standard is easily
applied and adopted by the courts, and easily complied with by
administrative agencies. Therefore, after the IRS has received
reasonable notice of a name change, it will have a reasonable
amount of time within which to refile its notice of lien — the
factfinder can resolve any disputes as to whether times are
reasonable. Further, to the extent that the IRS is concerned
that this admittedly vague standard may create administrative
headaches, it should be pointed out that in the entire annals
of reported tax decisions, only once has this situation before
arisen — the Clark case discussed supra. It therefore appears
highly unlikely that this will create any particularly onerous
The IRS's motion for summary judgment is therefore denied.
Nor can the Court grant summary judgment in favor of Plaintiffs
upon the basis that the IRS had notice of the name change but
failed to refile. For one thing, as the IRS points out, the
Davises rely upon an affidavit by Mrs. Rongey stating that she
informed the IRS of her name change. Obviously Mrs. Rongey
stands to profit from such an assertion, and so her credibility
is not closed to question. Summary judgment cannot be granted
where the credibility of a witness is in issue. Furthermore,
based solely upon the submissions of the Plaintiffs, the Court
cannot determine that, as a matter of law, the IRS had
sufficient notice to invoke a requirement to refile. Hence,
this case must be tried.
Ergo, for the above reasons, the cross motions for summary
judgment filed in this case are both DENIED, and this case
shall proceed to trial.