Appeal from the Circuit Court of Du Page County. No. 94--CH--409. Honorable Bonnie M. Wheaton, Judge, Presiding.
Released for Publication June 24, 1997.
The Honorable Justice Inglis delivered the opinion of the court. Geiger, P.j., and McLAREN, J., concur.
The opinion of the court was delivered by: Inglis
JUSTICE INGLIS delivered the opinion of the court:
This action arose from a suit brought to quiet title to the beneficial interest in an Illinois land trust on which third-party defendant, the Internal Revenue Service (IRS), claims a lien for the unpaid income taxes of third-party plaintiff, Robert C. Thomas, Sr. (Thomas, Sr.). Third-party plaintiffs, Thomas, Sr., Grazyna Thomas, Robert C. Thomas, Jr., and Lynn Trotter (collectively, plaintiffs), appeal from the order of the circuit court granting the IRS' motion to dismiss for lack of jurisdiction pursuant to section 2--619(a)(1) of the Code of Civil Procedure (735 ILCS 5/2--619(a)(1) (West 1994)).
On February 25, 1977, Oak Brook Bank (Bank) and Dane and Virginia Erickson established Oak Brook Bank trust No. 8-1297 (trust). The res of the trust was a single family residence located in Hinsdale. The trust instrument provided:
"No assignment of any beneficial interest hereunder shall be binding on the Trustee until the original or a duplicate copy of the assignment, in the form as the Trustee may approve, is lodged with the Trustee and its acceptance indicated thereon, and the reasonable fees of the Trustee for the acceptance thereof paid; and every assignment of any beneficial interest hereunder, the original or duplicate of which shall not have been lodged with the trustee, shall be void as to all subsequent assignees or purchasers without notice."
On November 13, 1979, the Ericksons assigned the beneficial interest in the trust to Thomas, Sr., making him the sole beneficiary. The assignment was lodged with and acknowledged by the Bank on December 21, 1979. Thomas, Sr., amended the terms of the trust on January 31, 1980, to provide that the beneficial interest would vest in his children upon his death; Thomas, Sr., still retained the full power of direction with respect to the beneficial interest. This amendment was also lodged with and acknowledged by the Bank.
On January 19, 1988, Thomas, Sr., obtained a home equity line of credit from American National Bank which he secured by a mortgage on the res of the trust. The line of credit was for 5 years and renewable for a period of up to 15 years.
On April 21, 1990, Thomas, Sr., married his current wife, Grazyna, and assigned his entire beneficial interest in the trust to Grazyna and his children. The assignment form stated that an executed copy of the form should be lodged with the Bank as trustee and that the assignment was not binding on the trustee unless and until the assignment was lodged with the trustee and its acceptance was indicated thereon. The plaintiffs never presented the assignment form to the Bank for acceptance.
On August 6, 1990, and on September 10, 1990, the IRS made assessments against Thomas, Sr., for unpaid income taxes for the years 1984 and 1985. The IRS filed a lien against Thomas, Sr., on May 14, 1991, for the taxes assessed against him.
Thomas, Sr.'s home equity line of credit expired on January 19, 1993, and American National Bank refused to renew the line of credit because of the federal tax lien. Late in 1993 or early in 1994, Thomas, Sr., disclosed the existence of the trust and the assignment of his beneficial interest to his wife and children to the IRS during negotiations. The IRS served a notice of levy on Thomas, Sr., and the Bank on February 4, 1994, and served the Bank with a summons to testify and produce its records concerning the trust. On May 10, 1994, the IRS seized the beneficial interest in and power of direction of the trust.
On May 25, 1994, American National Bank instituted foreclosure proceedings against Thomas, Sr. and the Bank, seeking to foreclose its mortgage on the res of the trust. The next day, Grazyna and the children filed a quiet title action against the IRS, alleging that they owned the beneficial interest which the IRS was wrongfully trying to levy. Grazyna and the children and the IRS entered an agreed order on June 2, 1994, that the IRS would not sell the beneficial interest during the pendency of the litigation and on August 12, 1994, the two cases were consolidated.
The IRS informed Grazyna and the children that it believed their state action was improper and that the only way to contest the seizure was to bring a wrongful levy action in federal court. Grazyna and the children voluntarily dismissed the quiet title action without prejudice and asked the IRS to release the levy in a letter dated October 12, 1994. The IRS denied their request on November 1, 1994, by letter. The IRS' letter indicated that Grazyna and the children would have six months in which to bring suit in federal court to contest the denial of their request. They filed their ...