Claims Corner - United States v. Z Investment Properties, LLC.

In United States v. Z Investment Properties, LLC., 921 F.3d 696 (2019), the United States recorded a Notice of Federal Tax Lien (“Notice”) against the sole owner of a property in Lake County, Illinois. The notice contained a typographical error in the debtor’s name, identifying him as “Carrol” instead of “Carroll”. The notice only identified the property address, omitting the legal description and Permanent Index Number (“PIN”).

The property was sold. The United States then started foreclosure proceedings against the subject property. At a hearing for summary judgment, the court was asked to determine whether the lien was enforceable. The district court held that the Notice conformed to the Internal Revenue Code and therefore was enforceable.

On appeal, the Seventh Circuit Court of Appeals affirmed, holding that the lien was discoverable and therefore enforceable:  

The Government now argues, a federal tax lien does not need to perfectly identify a taxpayer, only provided constructive notice. 26 U.S.C. § 6323(i)(1); In re Spearing Tool & Mfg., 412 F.3d 653, 656 (6th Cir. 2005); United States v. Rotherham, 836 F.2d 359, 363 (7th Cir. 1988); see also In re Crane, 742 F.3d 702, 706-707 (7th Cir. 2013) (discussing constructive notice in Illinois). Id. at 700.

In their decision, the Court found that “a search for the last name ‘Raines’ with first names beginning with ‘C’ and a ‘sounds like’ search for last names like ‘Raines’ both returned the Lien.”

Additionally, the court found that “given the low cost and ease of conducting…a search, it is not unreasonable to expect an interested party to conduct a search on one or more of the aliases returned.”

Members should be mindful of US v. Z Investment Properties, LLC when conducting Judgment and Lien searches.

Posted on: Wed, 06/26/2019 - 1:02pm