United States of America v. ZINVESTMENT PROPERTIES, LLC and CHICAGO TITLE LAND TRUST COMPANY

In the
United States Court of Appeals
For the Seventh Circuit
No. 18‐1915
U NITED STATES OF A MERICA,
Plaintiff‐Appellee,
v.
Z INVESTMENT P ROPERTIES, LLC and
C HICAGO T ITLE LAND T RUST
C OMPANY ,
Defendants‐Appellants.
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 17 C 04405 — John Robert Blakey, Judge.
A RGUED NOVEMBER 9, 2018 — D ECIDED A PRIL 18, 2019
Before BAUER , BRENNAN , and SCUDDER, Circuit Judges.
BAUER , Circuit Judge. Carroll V. Raines (“Raines”) and his
wife, Lizzie Mae Raines, purchased their home in 1975 as joint
tenants and not tenants in common. When Raines’ wife died,
he became the sole owner of 18952 W. Oak Avenue,

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2 No. 18‐1915
Mundelein, Lake County, Illinois (the “Property”). Raines was
the sole owner of the Property at the time of his death in July
2009. Raines died intestate with six heirs.
In July 2007, Raines filed federal income taxes for tax years
2000, 2001, 2003, and 2004. Based on those returns, the IRS
assessed taxes, penalties, and interest in the amounts of
$7,884.80; $24,450.17; $64,272.62; and $21,080.78. These taxes
remained unpaid at the time of Raines’ death. On August 9,
2010, the United States recorded a notice of federal tax lien (the
“Notice”) against Raines with the Lake County Recorder of
Deeds for taxes and penalties in the amount of $115,022.42. The
Notice incorrectly identified “Carrol V. Raines” as the debtor,
omitting the second “l” from his first name, and failed to
include a legal description or permanent index number for the
Property, but did correctly identify it by its address—18952 W.
Oak Avenue, Mundelein, Lake County, Illinois.
In November 2010, Raines’ heirs conveyed their interest in
the Property to Chicago Title Land Trust Company (“Chicago
Title”) . Following its acquisition of the Property, Chicago Title
made improvements and capital investments in the Property.
On June 12, 2017, the Government instituted proceedings
seeking to foreclose the tax lien against the Property. The
complaint named Chicago Title, several other financial
institutions, and municipal entities. By November 2017, the
parties agreed to waive any discovery and filed cross‐motions
for summary judgment, asking the court to rule on the
enforceability of the federal tax liens and whether the affidavit
of William Bond (“Bond”) was admissible.

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No. 18‐1915 3
On April 2, 2018, the district court granted the Govern‐
ment’s motion and denied Z Investment Properties, LLC
(“Z Investments”) and Chicago Title’s (collectively, the
“Appellants”) motion. The district court found that: the
Appellants had adequate notice of the tax lien because it
conformed to the applicable provisions of the Internal Revenue
Code; and the Government could enforce the tax lien which
encumbered the Property. The district court also found Bond’s
affidavit was partially inadmissable and struck paragraphs 5‐7,
10‐12, 14, 20, and 21. Final Judgment was entered on April 9,
2018. For the reasons stated below, we agree and affirm.
A. The District Court Properly Determined that the
Affidavit of William Bond Was Inadmissible Because
it Consisted of Undeclared Expert Testimony and
Improper Legal Conclusions.
Bond is a title insurance executive who during his career
has conducted thousands of title searches and prepared
thousands of title reports, commitments, and insurance
policies. He was retained by the Appellants to provide expert
testimony about the system in place at the Lake County
Recorder’s office and the discoverability of the Notice.
The district court determined that Bond’s affidavit was
inadmissible because it consisted of previously undeclared
expert testimony and improper legal conclusions. The court
found that Appellants failed to comply with Federal Rule of
Civil Procedure 26(a)(2); they neither provided an expert
report, disclosed Bond as an expert witness, nor even disclosed
him as a witness pursuant to Rule 26(a)(1).

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4 No. 18‐1915
i. The Standard
This court reviews a lower court’s decision to exclude
expert testimony under an abuse of discretion standard. Karum
Holdings LLC v. Loweʹs Companies, Inc., 895 F.3d 944, 950 (7th
Cir. 2018) (citing Musser v. Gentiva Health Servs., 356 F.3d 751,
755 (7th Cir. 2004)). “A court does not abuse its discretion
unless … (1) the record contains no evidence upon which the
court could have rationally based its decision; (2) the decision
is based on an erroneous conclusion of law; (3) the decision is
based on clearly erroneous factual findings; or (4) the decision
clearly appears arbitrary.” Id. at 950–51 (quoting Sherrod v.
Lingle, 223 F.3d 605, 610 (7th Cir. 2000)).
Rule 26(a)(1)(A) requires parties to disclose the names of
every witness “likely to have discoverable information.” Id.
Rule 26(a)(2) requires expert witnesses, as defined by Federal
Rule of Evidence 702, to be disclosed and provide an expert
report to the opposing party. Id. Rule 37 articulates the sanction
for failing to comply with the above discovery disclosure
requirements. Stating “[i]f a party fails to provide information
or identify a witness … the party is not allowed to use that
information or witness to supply evidence on a motion
… unless the failure was substantially justified or is harmless.”
Id. at 37(c)(1); see King v. Ford Motor Co., 872 F.3d 833, 837–39
(7th Cir. 2017) (discussing the considerations for striking an
undisclosed expert and the abuse of discretion standard).
ii. The Analysis
Appellants argue that Bond’s affidavit was submitted to
rebut the affidavit of Kunmi Ageh, an IRS paralegal, wherein
she purported to explain the various methods of searching for

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No. 18‐1915 5
IRS tax liens. They further argue that had the court not
improperly relied on the Government’s affidavit from Ageh,
and instead considered their affidavit from Bond, the court
would have reached the opposite conclusion. Neither of these
arguments discuss the abuse of discretion standard nor the
substantially justified or harmlessness exceptions to Rule 37’s
sanction.
First, Bond’s potential designation as a rebuttal witness
would not excuse Appellants’ obligation to comply with Rule
26(a)(2)’s reporting requirements, it would simply define the
time Appellants would have to make the requisite disclo‐
sures—“within 30 days after the other party’s disclosure.” Id.
at 26(a)(2)(D)(ii). However, there is nothing in the record that
indicates that Ageh was designated an expert witness, as
defined by Federal Rule of Evidence 702, instead her affidavit
simply states the results of various searches she ran against the
Lake County Recorder’s database. Her affidavit is in sharp
contrast to Bond’s, who in numerous paragraphs offers his
personal and professional opinions as an “experienced and
capable title searcher” with over thirty years of industry
experience. Accordingly, we look to see if Appellants’ failure
to comply with Rule 26 was either substantially justified or
harmless.
Next, the Appellants neither make an argument, nor can
this court imagine a reason, for the non‐disclosure of Bond
as an expert witness or why the non‐production of an expert
report would be substantially justified in these circumstances.
However, as the district court noted, and the Government
argues presently, there is obvious harm which would result
from failing to disclose an expert or produce an expert report.

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6 No. 18‐1915
The failure to disclose Bond as an expert prejudiced the
Government because it was unable to depose or disqualify him
or retain a rebuttal witness of its own. As a result, the district
court struck those paragraphs of Bond’s affidavit that did more
than recite the results of various searches conducted against
both the Lake County Recorder database and other title
databases.
The district court’s decision to strike expert testimony and
improper legal conclusions from his affidavit was appropriate.
Accordingly, we affirm that decision.
B. The District Court Properly Entered Summary Judg‐
ment Against the Appellants and for the Government
Because there Was No Dispute as to Any Issue of
Material Fact and the Government was Entitled to
Judgement as a Matter of Law.
i. The Standard
Our review of a district court’s grant of summary judgment
is de novo and all reasonable inferences are drawn in favor of
the nonmovant. Valenti v. Lawson, 889 F.3d 427, 429 (7th Cir.
2018). “Summary judgment is appropriate if there is no
genuine dispute as to any material fact, and the moving party
is entitled to judgment as a matter of law.” Dunderdale v. United
Airlines, Inc., 807 F.3d 849, 853 (7th Cir. 2015) (citing Fed. R.
Civ. P. 56(a)); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986).

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No. 18‐1915 7
ii. Analysis
Here, the district court concluded that the Federal Tax Lien
(the “Lien”) was valid and enforceable. Appellants argue that
the Lien is unenforceable because the Lien could not be
discovered by a reasonable search of the tax lien index. They
advocate for a strict compliance test, as is the case under the
Illinois Property Tax Code.
The Government Is Entitled to Enforce the
Federal Tax Lien Under Current Precedent
The validity of federal tax liens are governed by the Internal
Revenue Code. See 26 U.S.C. § 6323. Federal law also governs
the form, content, and notice required for federal tax liens.
26 C.F.R. § 301.6323(f)‐1. The district court thoroughly dis‐
cussed the validity of the underlying Lien and because the
Appellants acknowledge that the Lien complies with the
requisite statute, we focus our inquiry on enforceability,
specifically, whether the spelling error is so egregious as to
render the Lien unenforceable.
In instances where a bona fide purchaser acquires an
encumbered property without notice of the attached lien, the
lien does not follow the title. 26 U.S.C. § 6323(a). “Notice” in
this context is constructive notice which, as the district court
properly stated, is “determined by asking whether reasonable
inspection of the relevant local index will reveal the existence
of the lien.” United States of America v. Z Investment Properties,
LLC, et al., No. 1:17‐cv‐4405, slip op. at 11 (N. Dist. Ill. Apr. 9,
2018) (internal citations and quotations omitted).

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8 No. 18‐1915
The Notice incorrectly identified “Carrol V. Raines” as the
debtor, omitting the second “l” from Raines’ first name.
Appellants argue that this omission is so severe that they were
unable to discover the lien through a diligent search of the
pertinent records. They draw the court’s attention to myriad
cases wherein a spelling error precluded the lien holder from
enforcing a lien because the error made the lien undiscover‐
able. That is not the case here.
As the district court noted and the Government now
argues, a federal tax lien does not need to perfectly identify a
taxpayer, only provide constructive notice. 26 U.S.C.
§ 6323(i)(1); In re Spearing Tool & Mfg. Co., 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). Constructive notice
is necessary so that a potential buyer who exercises reasonable
care and diligence in a title search will be able to discover the
cloud on the title. But constructive notice also requires the
purchaser to conduct a “reasonable and diligent search” of the
relevant land records and indexes. Spearing, 412 F.3d at 656.
The district court discussed the results of the search of the
Lake County Recorder’s database for Raines, spelled correctly,
and noted that the Lien did not appear. But the search did note
Raines’ aliases, which include “C V Raines” and “Carol
Raines.” Furthermore, the district 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; also, a search conducted by the Chicago
Title Insurance Company on behalf of the IRS returned the
Notice.

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No. 18‐1915 9
The error did not make the Lien undiscoverable. We agree
with the district court that because several broader searches
returned the Lien attached to the Property, and a search for
Raines’ name returned two aliases, the Lien would have been
discovered by a reasonable search. Moreover, given the low
cost and ease of conducting such a search, it is not unreason‐
able to expect an interested party to conduct a search on one or
more of the aliases returned.
Because a reasonably diligent search of the relevant index
returned the Notice of Federal Tax Lien, even though it did not
perfectly identify Raines, the Government is entitled to enforce
the Lien against Appellants.
The Appellants argument that this court ought to imple‐
ment a strict compliance standard, as is the case under the
Illinois law, is without merit. Requiring absolute precision
would be unduly burdensome, hinder the Government’s tax
collection efforts, and be contrary to federal law and the tax
lien statute’s notice provision. 26 U.S.C. § 6323(f); see also
Spearing, 412 F.3d 656–57 (discussing the policy considerations
of constructive verses strict compliance). If Appellants wish to
advance a new standard for notice of federal tax liens, they
need to seek a legislative solution.
CONCLUSION
For the reasons listed above, we find that the district court
properly excluded the Affidavit of William Bond and properly
found the Notice of Lien sufficient under 26 U.S.C. § 6323.
Accordingly, we AFFIRM.

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