1

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

LINDA K. STONE, 

Plaintiff/Counter-Defendant,

vs.

UNITED STATES OF AMERICA, 

Defendant/Counter-Plaintiff/Third-Party 

Plaintiff,

vs.

JACK L. STONE, RALPH BOGOT, BANK OF 

AMERICA, NA, DALE & GENSBURG, P.C., 

MORTGAGE ELECTRONIC REGISTRATION 

SYSTEMS, FEDERAL HOME LOAN MORTGAGE 

CORPORATION, 

Third-Party Defendants.

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

11 C 7894

Judge Feinerman

MEMORANDUM OPINION AND ORDER

In June 2011, the United States filed two Notices of Federal Tax Lien for the unpaid 

federal income tax liabilities of Jack L. Stone against a residential property (“Property”) located 

in Highland Park, Illinois. The Notices listed “Linda Stone, as Nominee of Jack Stone,” as the 

taxpayer. Linda K. Stone, Jack’s spouse, then brought this suit against the United States, 

alleging that she is the Property’s sole owner and seeking to quiet title thereto. Doc. 1. In 

response, the United States: (1) answered Linda’s complaint; (2) asserted a third-party claim 

against Jack seeking to reduce to judgment the income tax assessments against him; (3) sought 

enforcement of the tax liens against the Property to satisfy Jack’s tax liabilities; and (4) sought 

the right to sell the Property free and clear of all liens, with the net proceeds being allocated 

among the United States and Third Party-Defendants Federal Home Loan Mortgage Corporation 
2

(“Freddie Mac”), Dale & Gensburg, PC, Bank of America, N.A. (“BANA”), Ralph Bogot, and 

Mortgage Electronic Registration Systems Inc. (“MERS”), in accordance with their respective

priorities. Doc. 43.

The court granted summary judgment to the United States against Jack, finding him liable

in the amount of $246,748.54, plus interest and statutory additions accruing from and after 

January 22, 2013. Doc. 52. Dale & Gensburg and Bogot have defaulted. The United States,

BANA, MERS, and Freddie Mac have stipulated to their respective priorities. Doc. 69.

Remaining for disposition is the dispute between Linda and the United States concerning 

who lawfully owns the Property—Linda says that she is the sole owner, while the United States 

says that Linda is Jack’s nominee and therefore that Jack and Linda co-own the Property—and 

thus whether the United States may assert its lien against the Property to satisfy Jack’s tax 

liability. The court conducted a bench trial on that question. Doc. 75-76. Pursuant to Federal 

Rule of Civil Procedure 52, the court enters the following findings of fact, which are found by a 

preponderance of the evidence, and conclusions of law. To the extent that any findings of fact 

may be considered conclusions of law, they shall be deemed conclusions of law, and to the 

extent that any conclusions of law may be considered findings of fact, they shall be deemed 

findings of fact. After considering the admissible evidence and the parties’ stipulations, and 

upon assessing the witnesses’ credibility, the court finds that Linda is not the Property’s sole 

owner, that Linda and Jack co-own the Property, and therefore that the United States’s lien is 

valid. This finding disposes of Linda’s quiet title claim in favor of the United States. The court 

requests from the parties briefing on how the United States’s lien should be enforced in light of 

Linda’s interest in the Property and the interests of BANA, MERS, and Freddie Mac.
3

Findings of Fact

A. The Parties

1. Linda, born in 1949, and Jack, born in 1935, married in 1975 and remain married 

to this day. Tr. 76:14 (07/01/13);* Doc. 57 at 6; Stipulations 1, 4–5.

2. At the time of trial, Jack was 77 years old and suffered from Addison’s Disease, 

high cholesterol, and a seizure disorder. Tr. 4:1, 5:24–6:1 (07/02/13). One medication Jack was 

taking at the time of trial affects his memory. Tr. 6:22–7:3 (07/02/13). 

3. The Stones had two children together, Jennifer and Liza, who now are in their 

mid-thirties. Tr. 77:1–3 (07/01/13); Tr. 5:12–15 (07/02/13); Stipulation 7.

4. Jack has two children from a prior marriage, both now in their fifties. Tr. 5:1–11 

(07/02/13); Tr. 77:4–8 (07/01/13); Stipulation 6.

5. Linda had been a school teacher, but she did not work outside the home between 

the time she married Jack until about 1992 or 1993. Tr. 76:3–7 (07/01/13). 

6. Linda had her own source of personal wealth as a beneficiary of her uncle’s trust. 

Tr. 84:3–5 (07/01/13); Stipulation 9. She received the first distribution from this trust in 1981, 

and received two more distributions five and ten years later, the proceeds of which she invested. 

Tr. 84:3–85:2 (07/01/13); Stipulation 11; Pl. Exhs. 9, 14.

7. Linda kept her own personal checking account, and she and Jack had a joint

account that they used to pay bills. Tr. 77:22–78:19 (07/01/13).

8. Jack has been an insurance salesman since 1971. Tr. 3:16–24 (07/02/13). 

9. Until 1992, Jack had his own insurance sales company, Omni Insurance 

Consultants. Tr. 14:24–15:1 (07/02/13).

 *

 Because the parties did not order an official transcript, the court cites to the pagination in the 

unedited “realtime” files created by the court reporter during trial. If an official transcript is 

prepared, its pagination will be slightly different than the “realtime” pagination.
4

B. The Property

10. On August 5, 1977, Linda and Jack were granted a deed to the Property in joint 

tenancy. Def. Exh. 2.

11. Linda and Jack bought the Property for $179,000, using $79,900 that Jack had 

inherited from his father and $100,000 from a mortgage loan. Tr. 121:10–13 (07/01/13); 

Stipulation 3. 

12. Linda and Jack moved into the Property in January 1978. Tr. 86:24–25 

(07/01/13); Stipulation 3. They both have lived at the Property ever since. Tr. 75:16–19 

(07/01/13); Tr. 2:11–14 (07/02/13); Stipulation 2. 

13. On November 11, 1992, Jack executed a quitclaim deed purporting to convey his 

interest in the Property to Linda for the “consideration of [$10] and other good and valuable 

consideration.” Def. Exh. 3; Pl. Exh. 11.

14. At the time of the conveyance, Jennifer and Liza were teenagers. Tr. 5:16–20 

(07/02/13).

15. The quitclaim deed was recorded by the Lake County Recorder of Deeds on April 

20, 1993. Def. Exh. 3.

C. Facts Pertaining to the Alleged Consideration for Jack’s Execution of the 

Quitclaim Deed

16. Jack testified that part of the reason for his making the quitclaim deed was to 

forgive debts that he had incurred to Linda before 1992. Tr. 12:14–13:8 (07/02/13). 

17. Up through 1992, Jack made almost all of the mortgage payments for the 

Property, which were about $775 per month initially, and he also paid the utility bills, all

insurance premiums and property taxes, and more than half of the landscaping costs. Tr. 123:5–

124:18 (07/01/13). Based on the figures presented at trial, the court conservatively estimates that 
5

in addition to the $79,000 paid towards the original purchase of the Property, Jack expended over 

$350,000.00 in mortgage, utility, insurance, and property tax payments from 1977 through 

November 1992.

18. From the time the house was purchased until 1992, Linda made a handful of 

mortgage payments, totaling around $7,000. Tr. 124:19–25 (07/01/13). 

19. Before 1992, Linda paid for several improvements to the Property, including 

rehabbing the family room, installing a stone fireplace and a bar, remodeling the kitchen, buying 

furniture, painting, carpeting, marble work, and a remodeling the powder room. Tr. 89:1–11

(07/01/13); Tr. 19:13–16 (07/02/13). Linda estimated that the kitchen remodeling cost 

approximately $40,000, but she could not recall how much she spent on the other improvements. 

Tr. 87:24–88:2 (07/01/13).

20. Linda provided a summary chart detailing the household expenses and 

improvements for which she paid from her own funds. Pl. Exh. 2. The chart begins in 1992. 

Ibid. The only entries that preceded the quitclaim deed are for drapery, plumbing, legal services, 

auto work, and carpet cleaning, and total $3,344.30. Ibid. 

21. At trial, Linda testified that she considered Jack’s conveyance to her of his 

interest in the Property as partial repayment for improvements to the Property for which she had 

paid. Tr. 117:14–18 (07/01/13). However, at her deposition, Linda testified that she did not 

consider the pre-1992 improvements for which she paid to be loans to Jack. Tr. 127:8–16 

(07/01/13). Given this discrepancy between her deposition and trial testimony, the court does 

not credit Linda’s trial testimony on this subject. Linda’s trial testimony that her pre-quitclaim 

deed contributions to the Property required repayment from Jack is also not worthy of credit 

because, prior to the quitclaim deed and as compared to Linda, Jack had paid the lion’s share of 
6

the total costs incurred for the purchase price, mortgage payments, utility bills, insurance 

premiums, property taxes, and landscaping for the Property.

22. Another summary chart prepared by Linda details payments made by Linda on 

Jack’s behalf; the entries list payments from 1988-2008, and total $89,596.67. Pl. Exh. 1. Check 

registers accompany the chart.

23. Linda testified that when she made the payments to Jack reflected on that chart, 

she considered them to be loans. Tr. 97:16–24 (07/01/13). Only two items on that chart predate 

the quitclaim deed: $4,590 in 1988, and $5,404 on April 10, 1989. Pl. Exh. 1. 

24. For the $4,590 amount in 1988, the check register says, “Jack—(for 1987 tax).” 

Pl. Exh. 1 (LS_3380); Tr. 142:7–22 (07/01/13). At trial, Linda initially testified that this was a 

loan for Jack’s taxes; when reminded that they had filed joint returns at that time, Linda

conceded, “It was for taxes. It wasn’t a loan. It was for taxes.” Tr. 142:16–22 (07/01/13). 

25. For the $5,404 amount in 1989, the check register says, “Jack (for 88 taxes).” 

Pl. Exh. 1 (LS_03882). Again, when pressed on cross-examination, Linda testified “that must 

have been my portion of taxes for that year.” Tr. 142:23–143:5 (07/01/13).

26. According to Linda’s own testimony, then, the only two pre-quitclaim deed 

entries on that chart did not, in fact, reflect loans to Jack.

27. Linda testified that she kept “[v]ery good accounting” for her own personal 

records. Tr. 91:9–11 (07/01/13). She also admitted that the only way she would remember the 

purpose of an entry in her check register would be from her own contemporaneous notations on 

the register. Tr. 146:24–147:5 (07/01/13).

28. There are several post-quitclaim deed items on that chart that the check register 

does explicitly designate as loans. One item is a check written to Jack on June 28, 1996, in the 
7

amount of $6,788.78, designated in the check register as “Jack Stone loan.” Tr. 141:13–18 

(07/01/13). Another item is a check written to Jack for $15,000 on October 8, 1993, designated 

in the check register as “Jack—loan to be repaid.” Pl. Exh. 1 (LS_03788). Another item is a 

$10,000 check to Jack on August 14, 1996, designated in the check register as “Jack Stone 

LOAN.” Tr. 144:20–22 (07/01/13); Pl. Exh. 1 (LS _02216). Another item is a check to Jack for 

$759 on August 27, 1996, designated in the check register as “IRS LOAN TO JACK.” Tr. 

144:23–145:14 (07/01/13); Pl. Exh. 1 (LS_02216). 

29. Given Linda’s testimony that she keeps very good records, and given that she

expressly indicated in the above-referenced check register entries that certain checks written to 

Jack were loans, the court finds that the only actual loans from Linda to Jack reflected on that

summary chart are those designated as loans on the check register. The fact that Linda indicated 

that a relatively minor check for $759 was a loan further confirms this finding.

30. Another summary chart reflects “expenses for daughters” that Linda paid from

her personal funds. Pl. Exh. 3. The expenses were incurred from August 1994 through 

April 2002, and thus could not have been “loans” paid off by Jack with the November 1992 

quitclaim deed.

31. Another summary chart reflects wedding expenses that Linda paid from her 

personal funds. Pl. Exh. 5. The expenses were incurred from 2001–2004, and thus could not 

have been “loans” paid off by Jack with the November 1992 quitclaim deed.

32. Another summary chart reflects credit card expenses that Linda paid from her 

personal funds. Pl. Exh. 6. The expenses were incurred from 2004–2009, and thus could not 

have been “loans” paid off by Jack with the November 1992 quitclaim deed.
8

33. Another summary chart is titled “Linda Stone’s Payments for Income Taxes, IRS 

and Accountant Expenses.” Pl. Exh. 4. This chart indicates that on May 31, 1990, and 

December 21, 1990, respectively, Linda wrote checks for Jack’s taxes—the first for $15,362 to 

the IRS, and the second for $60,000 to Jack.

34. The check register entry for the $60,000 check reads “Jack Stone (my 1st pymt).” 

Pl. Exh. 4 (LS_03384). The check register entry for the $15,362 check reads “IRS (JACK 

OWES ME THIS FOR 90 TAXES).” Ibid. When asked about these entries on crossexamination, Linda testified, “To the best of my knowledge, if I made a notation like that, it was 

that Jack owed me $15,362 for his taxes, and I paid him—I paid $60,000 for my taxes?” Tr. 

143:19–25 (07/01/13). And with respect to the $60,000 check, Linda explained: “That must 

have been when I received payment from the exchange bank.” Tr. 144:2–3 (07/01/13).

35. The court finds that the $15,362 was indeed a loan from Linda to Jack because it 

was noted on the check register as such. By contrast, the court finds the $60,000 was not a loan 

because the check register does not designate it as a loan and, equally significant, Linda testified 

that amount was for her own taxes arising from a “payment” she had received in 1990. That 

“payment” likely reflected monies from Linda’s inheritance from her uncle. Tr. 137:20–138:14 

(07/01/2013); Def. Exh. 87 at 1; see also Tr. 84:5–8 (07/01/2013) (Linda testifying that she 

invested money from that inheritance with “the exchange bank and made a large return on that 

investment 10 years later”).

36. On December 31, 1992, about seven weeks after Jack made the quitclaim deed, 

Linda and Jack entered into an installment note and security agreement, under which Linda 

loaned Jack $50,000, to be repaid in installments of $500 per month, with the loan secured by 
9

stock owned by Jack. Pl. Exh. 7. Linda testified that she hired a lawyer to help her with this 

agreement because she wanted to ensure repayment. Tr. 139:5–8 (07/01/13). 

37. This loan was repaid in its entirety. Tr. 139:9–11 (07/01/13). 

38. Linda did not introduce into evidence any loan agreements for the other payments 

from her personal funds that she now claims were loans to Jack. Linda testified at her deposition 

that no loan agreements were prepared for any such payments before 1993, and that those 

payments were “part of [their] marital living. If [she] could help, [she] could help, but there 

were no formal agreements.” Tr. 140:6–15 (07/01/2013).

39. Linda also testified at trial that Omni (Jack’s insurance business) made several 

deposits into her personal checking account, which she indicated were “repayment for 

something.” Tr. 150:22–152:17. In October 1992, there were four deposits from Omni into 

Linda’s personal checking account in the amount of $4,000, $3,891.13, $346.60, and $1,500. Pl. 

Exh. 9 (LS_2196-2197). On October 28, 1992, there was another deposit from Omni in the 

amount of $1,500. Pl. Exh. [9 or 14] (LS_2197). Between November 2 and November 9, 1992, 

there were deposits from Omni into Linda’s account in the amounts of $1,000, $2,000, and 

$4,000. Pl. Exh. [9 or 14] (LS_2198).

40. Linda and Jack did not have the Property appraised before the quitclaim deed was 

made. Tr. 128:5–7 (07/01/13). At her deposition, Linda testified to her view that the Property 

was worth $700,000 at the time. Tr. 111:10–17 (07/01/13). At trial, Linda testified that the 

Property was worth $400,000 at the time. Tr. 128:5–7 (07/01/13).

41. Linda and Jack did not prepare a document indicating which loans would have 

been paid off by Jack’s making of the quitclaim deed. When asked whether Jack owed her less 
10

money after the quitclaim deed, Linda testified vaguely that “it would have been taken into 

consideration.” Tr. 128:16–24. 

42. The court finds that Jack had no outstanding debt to Linda at the time of the 

quitclaim deed. Only one of the payments from Linda to Jack before November 11, 1992, was 

actually a loan; that was the $15,362 transferred on May 30, 1990. However, in 1992, Jack’s 

business made $16,737.73 in deposits into Linda’s account, which Linda admitted were 

repayments. In addition, as noted above, prior to making the quitclaim deed, Jack had paid the 

lion’s share of the total costs incurred for the purchase price, mortgage payments, utility bills, 

insurance premiums, and property taxes for the Property. Jack’s contributions in this regard far 

exceeded Linda’s personal contributions to the Property.

43. Thus, the court finds that the quitclaim deed of November 11, 1992, could not 

possibly have been for the purpose of satisfying any debt that Jack owed to Linda, as the 

evidence does not show that any debt was owed at that time. (The same finding would be made 

even if the $60,000 check had been a loan from Linda to Jack, as Jack’s contributions to the 

Property exceeded Linda’s by far more than $60,000.) This conclusion is confirmed by the fact 

that Linda and Jack did not prepare a document indicating which existing debts were paid off by 

Jack’s making the quitclaim deed. As demonstrated by the installment note they made seven 

weeks later, Linda and Jack certainly knew how to document loan transactions, and the fact that 

they did not document Jack’s “repayment” of his “debt” to Linda (scare quotes intended) speaks 

volumes.

D. Other Facts Relating to the Purpose of the Quitclaim Deed

44. Linda testified that she and Jack executed the quitclaim deed for another reason:

“There was a great deal of marital problems at the time. ... [Linda] had loaned Jack a lot of 
11

money, and [Linda] had paid for most of the major expenses in the house, maintenance and 

updates [and improvements].” She added: “Jack had two children by a previous marriage, and 

[Linda] wanted [her] children to be protected at all times. In the case of [her] death, [she] 

wanted the house to be for [her] children and not for Jack’s children from his first marriage.” Tr. 

79:16–80:3, 117:15–18 (07/01/13).

45. Linda also testified that it was her intent to divorce Jack if he would not transfer 

the Property to her. Tr. 169:12–17 (07/01/13).

46. Linda did not consult an attorney to determine what she had to do to protect 

herself in the event of a divorce. Tr. 170:2–5 (07/01/13). 

47. Jack testified almost identically on the reasons for making the quitclaim deed, but 

he could not remember if Linda had threatened to divorce him if he refused to sign it. Tr. 

10:15–11:18 (07/02/13). Jack could not remember how much money Linda had lent him before 

he made the quitclaim deed, the number of occasions on which she had lent him money, or what 

loans remained due and owing at the time of the quitclaim deed. Tr. 11:19–12:13 (07/02/13). 

48. Jack testified that, at the time of the quitclaim deed, he was not aware that 

creditors either had attempted or could attempt to collect debts owed by him or Omni. 

Tr. 17:12–15 (07/02/13).

49. Linda testified that she unaware at the time of the quitclaim deed of any creditors 

pursuing Jack, and that she also was unaware of any lawsuits that had been filed against Jack or 

that were going to be filed against him at that time. Tr. 80:4–12 (07/01/13). 

50. Linda and Jack testified that they did not enter into the quitclaim deed to shield 

Jack’s interest in the Property from creditors. Tr. 117:19–118:4 (07/01/13); Tr. 18:21–19:1 

(07/02/13).
12

51. For the following reasons, the court finds that: (1) at the time the quitclaim deed

was made, Jack was aware that he and/or Omni had liabilities and potential liabilities and that 

creditors and potential creditors soon would be trying to collect on those liabilities, and (2) part 

of the reason for the quitclaim deed’s making was to protect the Property from those creditors. 

52. In 1992, Jack decided to stop doing business as Omni and to move to a larger firm 

because “[s]mall insurance agencies were falling by the wayside.” Tr. 14:14–16 (07/02/13).

53. Linda knew that Jack was having trouble paying Omni’s bills because, according 

to her, she had loaned him money around the time of the quitclaim deed. Tr. 167:3–11 

(07/01/13). On October 16, 1992, Linda wrote Jack a check for $2,500 for an attorney named 

Adelman. Tr. 167:12–168:1 (07/01/2013).

54. Linda also knew that Jack was closing Omni in 1992. Tr. 31:15–17 (07/02/13). 

55. Jack had between $50,000 and $150,000 in business debts in 1992. Tr. 31:2–14 

(07/02/13).

56. Jack was questioned at trial about five lawsuits that were filed against Jack and/or 

Omni in the 1990s. Jack had no recollection of those lawsuits, though he did recognize the name 

of Norman Hafron as his attorney at the time. Tr. 33:6–9 (07/02/13).

57. The first lawsuit stemmed from a policy issued by Scottish Guarantee Insurance 

Co. to Ralph Bogot with a coverage period between July 11, 1989, and January 11, 1990. Def. 

Exh. 81 at 150-51. Bogot sued Jack and Omni (among others) for Scottish’s failure to pay a 

$225,000 loss incurred on January 14, 1990. Id. at 33-34. Although the record includes a 

complaint dated January 13, 1995, in a case with a 1995 case number, ibid., the record also 

includes an order in a case brought by Bogot against Scottish, Omni, and others with a 1990 case 

number, id. at 418-419. The order, dated January 18, 1995, was for a default judgment against 
13

Scottish. Ibid. It would appear that the 1995 case was for all practical purposes a continuation 

of the 1990 litigation against some of the original defendants (including Omni) and some new 

defendants (including Stone).

58. The Rosenfeld Rotenberg firm appeared for Jack and Omni in the 1995 case. Id. 

at 71. On July 29, 1997, a default judgment was entered against Jack in the 1995 case in the 

amount of $225,000. Id. at 482.

59. In the second lawsuit, filed on June 23, 1992, Hallmark Personnel sued Omni, 

alleging failure to pay a $2,400 placement fee for an employee placed by Hallmark in January 

1992. Def. Exh. 82 at 1, 5-6. The Rosenfeld Rotenberg firm appeared for Omni on July 8, 1992. 

Id. at 11. The case was dismissed pursuant to settlement on January 20, 1993. Id. at 15. 

60. The third suit involved a November 1990 loan agreement in which Jack borrowed 

about $46,000 from Continental Casualty Company. Def. Exh. 83 at 13. The loan was 

refinanced on November 1, 1991. Ibid. Jack testified that the loan agreement was for a 

computer system and not for money, Tr. 37:5 (07/02/13), but because Jack recalled nothing else 

about this loan, his testimony on this point will not be credited.

61. On May 16, 1994, Continental Casualty sued Omni and Jack for breach of 

contract, alleging that $32,567.92 remained due on the loan. Def. Exh. 83 at 11-12. An 

arbitration award was entered against Jack on January 8, 1996, for $30,957.51. Id. at 114.

62. The fourth lawsuit, for unpaid legal fees, was brought in November 1995 against 

Jack and Omni by the Rotenberg Rosenfeld firm. Def. Exh. 84. After a default judgment was 

entered against him, Jack sent a letter to his prior firm, indicating that he had been in the 

courtroom and therefore could not understand how the default was entered. Id. at 23; Tr. 38:21–

39:3 (07/02/13).
14

63. The fifth lawsuit concerned a consent order dated October 25, 1991, between Jack 

and the Illinois Department of Insurance. The consent order arose from the Department’s 

allegation that Jack had violated certain duties as a licensed insurance broker. Def. Exh. 85 at 9-

10. The consent order required Jack to prove that he paid $68,900.95 to Indiana Insurance 

Company within thirty days of the order’s entry. Id. at 12. A violation of the order could have 

resulted in the suspension of Jack’s insurance license. Id. at 13.

64. On June 4, 1996, Indiana Insurance sued Jack, alleging that he had not paid 

$29,382.73 of the amounts due. Id. at 5. That case settled shortly thereafter. Id. at 29-31.

65. In sum, although three of the five suits against Jack and/or Omni were filed after 

Jack made the quitclaim deed on November 9, 1992, much of Jack’s and Omni’s liabilities or 

potential liabilities—the Bogot insurance loss, the initial Bogot suit against Omni, the Hallmark 

placement fee, the legal fees owed to Rosenfeld Rotenberg in the Hallmark case, the $46,655 

loan from Continental Casualty, and the $68,900 obligation to Indiana Insurance Company—

arose before that date. At the very least, Jack undoubtedly was aware in November 1992 of the 

first Bogot suit, the loan from Continental Casualty, and the payment obligation to Indiana 

Insurance Company; the Bogot suit and the Continental Casualty and Indiana Insurance 

obligations arose in the two or so years preceding the quitclaim deed, and the Indiana Insurance 

Company obligation had been reflected in a consent order with the regulatory agency that had 

power over his insurance license.

66. Linda testified that, at some point after the IRS assessed tax liabilities against 

Jack, she held money in her account for him because there the government had placed a levy on

his bank accounts. Tr. 155:21–156:7 (07/01/13).
15

67. While the court understands that Jack may have been suffering from some 

memory loss during trial, the fact that he stated affirmatively that was unaware of looming 

creditors in 1992, the year he closed Omni, calls his credibility into serious question. It is 

implausible that Jack would (purportedly) recall why he made the quitclaim deed in November 

1992, but would not recall the financial pressures he was under at the time, especially given that 

failure to make good on the Indiana Insurance obligation could have resulted in the loss of his 

insurance license.

68. The court finds that, as of November 1992, Jack was under a great deal of 

financial pressure arising from the closing of his business and the debts he owed to various 

creditors. Furthermore, the fact that Linda admitted that, years later, she held money for Jack in 

her account to protect it from the federal tax levies on Jack’s account indicates that she engages 

in and may not understand the impropriety of such shielding.

69. In sum, the court finds that Jack made the quitclaim deed to protect the Property 

from Jack’s and Omni’s creditors and potential creditors at the time.

E. Facts Pertaining to Jack’s “Dominion and Control” over the Property After 

Making the Quitclaim Deed

70. Between November 1992 and 2010 or 2011, Jack continued to make most of the 

mortgage, property tax, and insurance payments on the Property, while Linda continued to pay 

from her own personal funds for other household expenses such as capital improvements and 

maintenance. Tr. 114:11–15, 129:1–5 (07/01/13); Tr. 20:14–21:22 (07/02/13); Pl. Exh. 2.

71. During that time period. Linda made the decisions about improvements to the 

home, such as hiring contractors and decorating. Tr. 90:17–91:4 (07/01/13). 

72. Jack continued to live at the Property during that time period, and Linda did not 

charge Jack rent. Tr. 128:25–129:1 (07/01/13).
16

73. Linda and Jack never separated at any point, and Linda never placed any 

restrictions on Jack’s use of the home. Tr. 177:25–178:8 (07/01/13).

74. On November 12, 1998, Linda and Jack obtained a refinancing loan on the 

Property to pay off the earlier mortgage, and took out an additional $100,000 in equity. Tr. 

129:20–130:11 (07/01/13); Def. Exh. 6. Linda testified and averred that she asked Jack to be a 

“co-signer” on the refinancing loan because she had insufficient income. Tr. 129:20–130:11 

(07/01/13); Def. Exh. 76 at ¶ 10. However, the mortgage agreement states: “The mortgagor is 

Linda K. Stone and Jack L. Stone, wife and husband (‘Borrower’).” Def. Exh. 6 at 1. 

75. Given these facts, the court finds that nothing about Linda’s and Jack’s respective 

dominion and control over the Property changed after the quitclaim deed was made—both of 

them continued to use the premises, and to contribute to it, in much the same ways they had 

before November 1992.

F. Notice of Federal Tax Liens

76. Jack has outstanding federal tax liabilities for several tax years between 2000 and 

2008. Doc. 52; Doc. 57 at 6; Stipulation 15. 

77. In late June 2011, the IRS filed two Notices of Federal Tax Lien against the 

Property for Jack’s unpaid taxes. Pl. Exh. 10; Stipulation 14. Both Notices list the taxpayer as: 

“Linda Stone, as Nominee of Jack Stone.”

78. IRS Agent Lawrence Kagan testified that, although Jack’s name no longer was on 

the deed, he considered Linda to be holding Jack’s interest in the Property as a “nominee.” 

Kagan said that his conclusion in this regard took account of “various things. First I look at title. 

I look at consideration. I look at the taxpayer’s statements. In this case, Jack told me it was his 
17

house. ... I looked at the collection information statements[.] ... I looked if he still had full use, 

benefits, and still lived at the house.” Tr. 54:25–55:17 (07/01/13).

Conclusions of Law

In her quiet title action against the United States, Linda seeks a declaration that the 

nominee liens are invalid. Doc. 1 at ¶¶ 14, 23. “[A] suit to quiet title is functionally a form of 

declaratory-judgment action ....” Samuel C. Johnson 1988 Trust v. Bayfield Cnty., 649 F.3d 

799, 801 (7th Cir. 2011). In its counterclaim, the United States asks the court to enforce the liens 

on the Property pursuant to 26 U.S.C. § 7403. Doc. 43 at ¶ 69. The validity of the liens is 

central to both claims. The United States argues that the liens are valid under a “nominee” 

theory and a “lien-tracing” theory. Because the nominee theory has merit, the lien-tracing theory

need not be addressed. 

Generally speaking, “to satisfy a tax deficiency, the Government may impose a lien 

[under 26 U.S.C. § 6321] on any ‘property’ or ‘rights to property’ [real or personal] belonging to 

the taxpayer.” Drye v. United States, 528 U.S. 49, 55 (1999); see also United States v. Craft, 535 

U.S. 274, 276 (2002). To determine whether a federal tax lien attaches to a particular property, 

the court must “look initially to state law to determine what rights the taxpayer has in the 

property the Government seeks to reach, then to federal law to determine whether the taxpayer’s 

state-delineated rights qualify as ‘property’ or ‘rights to property’ within the compass of the 

federal tax lien legislation.” Craft, 535 U.S. at 278 (quoting Drye, 528 U.S. at 58); see also

United States v. Swan, 467 F.3d 655, 656 (7th Cir. 2006).

Linda and Jack bought the Property in 1977 as joint tenants. FOF ¶ 10. Under Illinois 

law, a joint tenancy is defined by “the four unities which are fundamental to both the creation 

and the perpetuation of the joint tenancy. These are the unities of interest, title, time, and 
18

possession.” Harms v. Sprague, 473 N.E.2d 930, 932 (Ill. 1984). Joint tenancies convey the 

following rights: 

A joint tenancy is a present estate in all the joint tenants, with each joint tenant 

being “‘seized of the whole.’” Harms v. Sprague, 105 Ill.2d 215, 224 (1984) 

(quoting Partridge v. Berliner, 325 Ill. 253, 257 (1927)). Like other property 

owners, a joint tenant may convey his or her interest in the property without 

the knowledge or consent of the other joint tenant, thereby severing the joint 

tenancy. Sathoff v. Sutterer, 373 Ill. App. 3d 795, 797 (2007). An inherent 

feature of a joint tenancy is the right of survivorship, which is the right of the 

last surviving joint tenant to take the whole of the estate. Id. The surviving 

joint tenant does not take the share of the deceased joint tenant as a successor, 

but by rights under the conveyance that created the joint tenancy.

Snyder v. Heidelberger, 953 N.E.2d 415, 420 (Ill. 2011).

On November 11, 1992, Jack purported to convey his interest in the Property to Linda by 

making the quitclaim deed. FOF ¶ 13. If the conveyance was valid, this would have severed the 

joint tenancy. See Harms, 473 N.E.2d at 932 (“The voluntary ... destruction of any of the unities 

by one of the joint tenants will sever the joint tenancy.”). This in turn would mean that Jack has 

no interest in the Property to which the United States could attach a tax lien. See United States v. 

Towne, 406 F. Supp. 2d 928, 935 (N.D. Ill. 2005) (“[T]he record does not support a finding that 

the Townes had any rights to the Property based on Illinois law. In other words, because Illinois 

law does not recognize any interest described by the Government as ‘property’ or ‘rights to 

property,’ the Taxpayers did not have any state-delineated property rights to which the relevant 

federal tax liens could attach.”), aff’d sub nom., United States v. Swan, 467 F.3d 655 (7th Cir. 

2006).

The United States contends, however, that the quitclaim did not validly transfer to Linda 

Jack’s interest in the Property and that, instead, Linda maintains Jack’s interest as his “nominee.” 

An individual is a taxpayer’s nominee when “the taxpayer has engaged in a legal fiction by 

placing legal title to property in the hands of [that individual] while actually retaining some or all 
19

of the benefits of true ownership.” Holman v. United States, 505 F.3d 1060, 1065 (10th Cir. 

2007). “The lien that arises after a taxpayer fails to pay an assessed tax liability attaches not only 

to property belonging to the taxpayer, but also to property held by the taxpayer’s nominees—

someone who has legal title when, in substance, the taxpayer enjoys the benefits of ownership.” 

United States v. Wesselman, 406 F. App’x 64, 65 (7th Cir. 2010) (citing G.M. Leasing Corp. v. 

United States, 429 U.S. 338, 350-51 (1977); Swan, 467 F.3d at 658; Macklin v. United States, 

300 F.3d 814, 818 n.2 (7th Cir. 2002)); see also Fourth Investment LP v. United States, 720 F.3d 

1058, 1066 (9th Cir. 2013) (“The Supreme Court has interpreted section 6321 to apply to all 

property of a taxpayer, including property that is held by a third party as the taxpayer’s nominee 

or alter ego.”) (citing G.M. Leasing, 429 U.S. at 350-51). Accordingly, if Linda is Jack’s 

nominee, the tax lien attaches to the Property.

Illinois state courts have not specifically addressed the nominee theory. In the absence of 

specific guidance from Illinois law, federal courts use a multi-factor standard to determine 

whether an individual is a delinquent taxpayer’s nominee. See United States v. Cohen, 930 F. 

Supp. 2d 962, 979 (C.D. Ill. 2013); United States v. N. States Investments, Inc., 670 F. Supp. 2d 

778, 788-89 (N.D. Ill. 2009); Towne, 406 F. Supp. 2d at 937 n.2 (“The parties do not cite Illinois 

law when discussing the Government’s nominee theory. In addition, Court finds no guidance 

from the Illinois courts concerning the nominee theory ....”); see also Swan, 467 F.3d at 656, 

658 (noting that “there do not appear to be any relevant differences between state and federal 

law” regarding the nominee theory) (citing G.M. Leasing, 429 U.S. at 351; Scoville v. United 

States, 250 F.3d 1198, 1202-03 (8th Cir. 2001); Oxford Capital Corp. v. United States, 211 F.3d 

280, 282-86 (5th Cir. 2000)). The applicable standard provides as follows: 

Whether a titleholder is a nominee depends on the facts and circumstances of 

each case, including whether: (1) a close personal relationship exists between 
20

the nominee and the transferor; (2) the nominee paid little or no consideration 

for the property; (3) the parties placed the property in the name of the nominee 

in anticipation of collection activity; (4) the parties did not record the 

conveyance; and (5) the transferor continues to exercise dominion and control 

over property. See United States v. Schaut, 2001 WL 1665314, at *3, 89 

A.F.T.R.2d 2002-309 (N.D. Ill. Dec. 28, 2001); United States v. McCullough, 

1994 WL 374471, at *3 (S.D. Ill. May [17,] 1994).

Towne, 406 F. Supp. 2d at 937; see also May v. United States, 2007 WL 3287513, at *3 (11th 

Cir. Nov. 8, 2007); Oxford Capital Corp., 211 F.3d at 284 n.1; United States v. Wesselman, 2010 

WL 1654899, at *3-4 (S.D. Ill. Apr. 22, 2010), aff'd, 406 F. App’x 64 (7th Cir. 2010); N. States 

Investments, Inc, 670 F. Supp. 2d at 788-89; Frese v. Smith, 1999 WL 1251856, at *3 (C.D. Ill. 

Nov. 5, 1999).

Although Linda’s proposed conclusions of law recite the Towne factors, Doc. 58 at 5-6, 

Linda’s closing argument at trial urged the court to rely on the factors set forth in Fourth 

Investment LP v. United States, supra. Tr. 87:14–88:12 (07/02/13). There is no meaningful 

difference between the factors in Towne and those in Fourth Investment. The one distinction 

concerns form, not substance, as the Ninth Circuit separates the “dominion and control” factor 

from Towne into two factors, “whether the transferor retained possession” and “whether the 

transferor continues to enjoy the benefits of the transferred property.” 720 F.3d at 1069 n.6. The 

court will address the Towne factors in turn, taking into account the gloss placed by the Ninth 

Circuit on the “dominion and control” factor.

First, a close personal relationship existed between the nominee (Linda) and the 

transferor (Jack) at the time of the quitclaim deed. Linda and Jack were a married couple who 

were co-habiting with two minor children. FOF ¶ 14. Although there was some marital discord, 

FOF ¶¶ 41-44, they never separated and neither moved out of the Property, FOF ¶ 67.
21

Second, Linda paid little or no consideration for Jack’s interest in the Property. Linda

maintains that Jack made the quitclaim deed in November 1992 to repay his debts to her. As 

detailed above, however, Jack did not owe Linda any debts as of that date, which means that 

Linda paid Jack only $10 for his interest in the Property. FOF ¶¶ 16-43.

Third, as detailed above, Jack made the quitclaim deed to protect Jack’s interest in the 

Property from existing and potential creditors. FOF ¶¶ 48-69.

Fourth, the parties recorded the quitclaim deed. FOF ¶ 15.

Fifth, from November 1992 through the present, Jack has continued to exercise dominion 

and control over the Property—that is, he has retained possession of the Property and has 

continued to enjoy the benefits thereof. As detailed above, Jack never moved out; he does not

pay rent to live there; he continued to make mortgage, property tax, and insurance payments at 

least through 2010; he held himself out as the Property’s owner for the purposes of obtaining the 

refinancing mortgage, see In re Cadwell’s Corners P’ship, 174 B.R. 744, 751-52 (Bankr. N.D. 

Ill. 1994) (“The mortgagor retains title to the mortgaged property until the court enters an order 

confirming the foreclosure sale and issues the deed, at which time title passes to the mortgagee 

(assuming that the mortgagee is the purchaser).”); and he also told Kagan that the Property was 

his home. FOF ¶¶ 70-75, 78. The fact that Linda also exercised dominion and control over the 

Property does not undermine this conclusion because Jack by all rights co-owns the Property 

with her.

Four of the five factors weigh strongly in favor of finding that Linda is Jack’s nominee. 

The only factor weighing against that finding, that the quitclaim deed was recorded, is the least 

significant factor because it is not difficult to record a quitclaim deed. The other factors cannot 

so easily be manipulated; as this case illustrates, it is difficult to disclaim a close personal 
22

relationship that actually exists, to prove that consideration was paid when none in fact was, to 

obscure the taxpayer’s actual (and, as it turned out, legitimate) fear of creditors, and to pretend 

that a taxpayer with dominion and control over a property in fact has none. The court therefore 

concludes that Linda is holding Jack’s interest in the Property as a nominee. It follows that the 

tax liens placed on the Property by the United States are valid.

Conclusion

For the foregoing reasons, judgment is entered in favor of the United States and against 

Linda on Linda’s quiet title claim. As for whether the United States can enforce the lien by 

compelling the Property’s sale, the court requests briefing on how the liens should be enforced in 

light of Linda’s interest in the Property as well as the interests held by BANA, MERS, and 

Freddie Mac. See generally United States v. Rodgers, 461 U.S. 677 (1983); United States v. 

Davenport, 103 F.3d 1333 (7th Cir. 1997). 

March 31, 2014 

United States District Judge