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United States v. Z Investment Properties, LLC

United States Court of Appeals, Seventh Circuit

April 18, 2019

United States of America, Plaintiff-Appellee,
v.
Z Investment Properties, LLC and Chicago Title Land Trust Company, Defendants-Appellants.

          Argued November 9, 2018

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 17 C 04405 - John Robert Blakey, Judge.

          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, 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.

         On April 2, 2018, the district court granted the Government'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).

         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 ...


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