The opinion of the court was delivered by: Richard Mills, District Judge:
Cross motions for summary judgment.
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 facts above summarized deserve to be reiterated in a
context showing each
party's point of view. The IRS filed its tax lien, naming
Gillian Renslow, in 1982. The lien was filed in good faith, and
was intended to reach all of Gillian Renslow's property. At
that time, though, title to 4 Chatsford Court was held in an
Illinois land trust; Gillian Renslow held only a personal
property interest in the property. Later the property was
transferred from the Illinois land trust into Gillian Rongey's
name. When Gillian Rongey sold the property to the Davises, no
notice of tax lien existed which named Gillian Rongey. The
notice of tax lien, in fact, was filed before the property was
transferred into Gillian Rongey's name. Hence, when the title
searcher looked at the record to discover any encumbrances upon
the property, there was absolutely no practical way he could
have discovered that the notice of tax lien filed in 1982
covered the property at 4 Chatsford Court.*fn2
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 ...