The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge
MEMORANDUM OPINION AND ORDER
Plaintiff United States of America ("United States" or the "Government") sued Defendants Jane Harris and Peter Swan (collectively "Swan") seeking to secure Thomas and Joen Townes' (the "Townes" or "Taxpayers") federal income tax liability by foreclosing federal tax liens pertaining to real property located in Libertyville, Illinois. The Court held a bench trial on November 15, 2005.*fn1 For the reasons discussed below, the Taxpayers do not have any "property" or "rights to property" to the subject property to which the relevant federal tax liens can attach. Accordingly, the Government is not entitled to foreclose on the relevant tax liens and sell the subject property.
On October 5, 2004, the Court entered judgment in the amount of $329,336.10 against the Townes for their unpaid federal income tax liabilities for tax years 1988, 1989, 1991, 1993, 1994, 1995, 1996, and 1997. (R. 14-1.) Thereafter, the Government, Citimortgage, Inc., and Swan filed Cross-Motions for Summary Judgment. The Government argued that the Townes had property rights in the subject property to which the tax liens could attach even though the Townes had not held legal title to the property since 1987. On the other hand, Defendants argued that the Townes had no property rights to the subject property under Illinois law. The Court denied the Cross-Motions for Summary Judgment due in part to the parties' undeveloped and perfunctory arguments. United States v. Towne, No. 04 C 3020, 2005 WL 1705811, 96 A.F.T.R.2d 2005-5338 (N.D. Ill. July 21, 2005).
Thomas and Joen Towne currently live in a house located at 29505 Oak Spring Lane, Libertyville, Illinois, that is the subject property (the "Property"). (R. 103-1, Stipulated Facts, ¶ 1.) Thomas Towne has lived in that Property since at least 1976, although he has not had legal title to the Property since 1987. (Id.) Home Federal Service Corporation held a mortgage on the Property and commenced a foreclosure proceeding on the Property in 1986. (Id. ¶ 2.) On March 10, 1988, Home Federal conveyed the Property's legal title to Sheldon "Jack" Shull. (Id. ¶ 3.) At the time of the conveyance, Shull and Thomas Towne were friends. (Id.)
Thomas Towne and Shull entered into a lease agreement in which Thomas Towne could remain living in the Property as long as he made certain payments. (Id. ¶ 4.) In 1999, Shull filed an eviction action against Thomas Towne in the 19th Circuit Court, Lake County, Illinois, captioned Shull v. Towne, Case No. 99-LM-2339, because Thomas Towne failed to make the lease payments. (Id. ¶ 5.) In response, Thomas Towne filed a quiet title action against Shull in the 19th Circuit Court captioned Towne v. Shull, Case No. 99-CH-1350. (Id.) On January 30, 2001, the Illinois court entered an order resolving the Shull/Towne litigation. (Id. ¶ 6.)
On March 13, 2001, Mary Sams, Joen Towne's mother, acting through the Mary V. Sams Revocable Trust ("Sams Trust"), acquired title to the Property from Shull for $219,000. (Id. ¶ 7.) The Sams Trust financed the purchase by way of a loan from Prism Mortgage that was secured by a mortgage. (Id.) On or around March 15, 2001, the Townes entered into a lease agreement with the Sams Trust relating to the Property. (R. 108-1, Defs.' Proposed Findings of Fact, ¶ 9.) On September 20, 2002, the Sams Trust filed an action in the 19th Circuit Court seeking to evict the Townes from the Property captioned Mary V. Sams, as Trustee of the Mary V. Sams Revocable Trust v. Thomas Towne, 02-LM-1920. (R. 103-1, Stipulated Facts ¶ 8.) Defendant Peter Swan represented the Townes, who were the named defendants in the state court action. (Id. ¶ 9.)
On April 3, 2003, the parties reached a settlement agreement in the state court action, which was described by the Illinois state court judge, Terrence Brady, as follows:
The first portion of the agreement is the fact that [the] Mary Sams Trust from this settlement agreement will receive the principal amount of $290,000.
To effectuate that, the Townes would be given the exclusive right to sell the subject property, market it in any manner they choose for a four-month period beginning Monday [April 7, 2003].
From that four-month marketing period and sale period, Mary Sams will be entitled to receive $290,000, plus any mortgage payments that she shall pay after June [1, 2003] ...
After that four-month period the Mary Sams Trust shall have the exclusive right to market the property, and from that, sale proceeds received for $290,000, ...