CHABOT, Judge:
These cases were heard pursuant to section 7463. The decisions to be entered are not reviewable by any other court, and this opinion shall not be treated as a precedent for any other case. Sec. 7463(b).
Unless indicated otherwise, all section references are to sections of the Internal Revenue Code of 1986 as in effect for the years in issue, except as to sec. 7463, which is as in effect for proceedings commenced on the dates the petitions in the instant cases were filed.
Respondent determined deficiencies in Federal individual income taxes, penalties, and an addition to tax against petitioner as follows: Penalty Addition to Tax Docket No. Year Deficiency Sec. 6662 Sec. 6651(a)(1) 22122-05S 2002 $5,296 $1,059.20 -0- 2003 4,845 -0- $404.40 3462-06S 2004 8,505 1,701.00 -0-
After concessions by both sides, the issues for decision are:
(1) Whether petitioner is entitled to any deduction for:
(a) specific expenses claimed on Schedule E, Supplemental Income and Loss, and, if so, then in what amounts;
(b) Schedule E depreciation expenses and, if so, then in what amounts; and
(c) charitable contributions and, if so, then in what amounts; and
(2) whether petitioner is liable for accuracy-related penalties for 2002 and 2004 and, if so, then in what amounts.
Petitioner concedes he is not entitled to the education credits he claimed for 2002 and 2003. Both sides have made concessions regarding specific deductions on Schedule E, Supplemental Income and Loss, for each of the years in issue; these concessions are noted in the discussion infra part B.
Respondent determined that petitioner filed his 2003 tax return on June 18, 2004 (i.e., that the IRS received the tax return on that date), and that petitioner is liable for a 15-percent addition to tax for 2003 because of this late (i.e., after April 15, 2004) filing. At trial petitioner contended as follows:
We will show that Mr. Saunders justifiably relied on the expertise and the advice of his accountant. That a[n] allegedly late filing in the year 2003 was to some extent was not the fault of Mr. Saunders, but rather was the negligence of his accountant. Thank you, Your Honor.
Petitioner testified that he was reasonably sure that he received his claimed 2003 tax refund in March 2004 and so his 2003 tax return must have been filed timely. Respondent introduced evidence that IRS records showed the 2003 tax return was received on June 18, 2004, and petitioner's claimed refund was mailed on July 12, 2004. On brief petitioner does not refer to this issue and does not object to respondent's proposed findings of fact. We conclude that petitioner has abandoned his objection to imposition of the late filing addition to tax for 2003, at 15 percent, although the dollar amount of this addition to tax is to be recalculated to take account of our determinations and respondent's concessions. See Palahnuk v. Commissioner, 127 T.C. 118, 119 n. 2 (2006), affd. 544 F.3d 471 (2d Cir. 2008); Petzoldt v. Commissioner, 92 T.C. 661, 683 (1989).
Background
The instant cases were consolidated for trial, briefing, and opinion.
Petitioner resided in Pennsylvania when the petitions in the instant cases were filed.
For convenience, we will combine our findings and analysis issue by issue.
Analysis
A. In General
In general, the Commissioner's determinations as to matters of fact in the notice of deficiency are presumed to be correct, and the taxpayer has the burden of proving otherwise. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Petitioner contends that section 7491(a) applies to shift the burden of proof but does so only with regard to the deductions for charitable contributions. We deal with this matter in our discussion of the charitable contribution deductions, infra part C. We deem petitioner's lack of argument with respect to the burden of proof on the remaining disputed deductions a concession that he retains the burden of proof for those items.
Unless indicated otherwise, all Rule references are to the Tax Court Rules of Practice and Procedure.
Section 7491(c) imposes on respondent the burden of production with respect to the section 6662 penalties. This will be dealt withinfra part D. (Because we have concluded that petitioner abandoned his opposition to imposition of the section 6651(a)(1) addition to tax for 2003, see supra note 2, we conclude that section 7491(c) does not impose on respondent any burden of production with respect to that issue. If respondent had had this burden, then we would have held that respondent had carried this burden.)
B. Schedule E Deductions
Petitioner owned rental real estate in Philadelphia, Pennsylvania (hereinafter sometimes referred to as the Philadelphia Property), during each of the years in issue. The Philadelphia Property includes a three-story building, each story of which contains a separate apartment.
1. Specific Deductions for 2002
Petitioner claimed $13,468 of expense deductions on his 2002 tax return Schedule E on account of the Philadelphia Property. Respondent disallowed the entire amount.
(a) Agreed Items
The parties agree that the amounts set forth in table 1 are deductible in full for 2002. Table 1 Company Item Amount West Philadelphia Locksmith Co. Lock change $85 Weinstein Supply Plumbing 54 King Tu, Inc. Storm door 57 Tommy D's Home Improvement Compound 5 Total 201
The parties agree that the amounts set forth in table 2 are to be capitalized and depreciated under the modified accelerated cost recovery system (hereinafter sometimes referred to as MACRS). Table 2 Recovery Company Item Amount Period (Yrs.) Alarmist Security Systems Fire alarm $1,551 27.5 Southwest Vinyl Windows Windows 614 27.5 ACAR Refrigeration, Inc. Range, refrigerator 375 5.0 Total 2,540
The amounts that are deductible for 2002 are to be calculated in the computations under Rule 155. As a result of the parties' agreement, appropriate amounts (hitherto unclaimed) also will be deductible for 2003 and 2004.
(b) Disputed Items
The parties dispute the remaining $10,727 of items. The items, and our dispositions, are set forth in table 3. We consider the items seriatim. Table 3 Company Item Claimed Allowed1 Neighborhood Spirit Homeowner's insurance $1,109 -0- Property Casualty Vincent Goffredo Plumbing repairs 2,025 $2,025 Registered Plumbing Heating, Inc. ADR Services, Inc. Bathtub refinishing 335 335 Z.T. Home Remodeling Kitchen renovation 4,800 4,800 and Repairs Chester Muhammad Accounting services 600 200 Other Other 1,858 -0- 1The $4,800 item is to be capitalized and depreciated under MACRS over a 27.5-year recovery period, with appropriate amounts deductible for 2003 and 2004. See text immediately following table 2, supra. The other allowed items are deductible in full for 2002. We note that sec. 179 (relating to election to expense certain depreciable assets) does not apply to any of the capitalized items involved in the instant cases. See LaPoint v. Commissioner, 94 T.C. 733, 735-736 (1990).
(1) Homeowner's Insurance
Petitioner contends that he paid $1,109 for homeowner's insurance for the Philadelphia Property in 2002. He relies on an exhibit that is an expiration notice from the insurance company. The notice states that the due date was February 20, 2002 (the date of the notice is February 27, 2002), but: "If payment is received within 15 days after the due date, your policy will renew without interruption of coverage." Petitioner testified:
Q [Petitioner's counsel] Okay. What is the total amount of the homeowners insurance for that property?
A [Petitioner] $1,109.31.
Q And is it your testimony today that you paid your homeowners insurance?
A Yes. What I do is, I pay it in two parts. I pay it in February, and I paid as is indicated in the last line, $561.65, and I have to pay the balance in June.
Respondent contends that (1) the one exhibit petitioner presented showed that petitioner had not paid, (2) petitioner did not present any checks or other proofs of payment, and (3) petitioner presented no evidence as to 2003 and 2004, "which leads to the inference that the policy did expire and was never renewed."
Petitioner claimed the amounts shown in table 4 on his Schedules E as insurance expenses. Table 4 Year Amount 2002 $1,250 2003 1,400 2004 1,400
Petitioner did not provide any documents (even past due notices) as to his claimed insurance expense deductions for 2003 and 2004, nor did he testify as to those years. Although on brief petitioner contends he paid $1,109 for insurance on the Philadelphia Property in 2002 (not the $1,250 he claimed on his 2002 tax return), we have not found any contention on brief as to the claimed homeowner's $1,400 insurance deductions for 2003 and 2004.
We conclude that it is more likely than not that petitioner let the insurance lapse and never made any of the claimed insurance payments on the Philadelphia Property. We so hold.
(2) Plumbing Repairs
Petitioner contends that he paid $2,025 in 2002 to Vincent Goffredo Registered Plumbing Heating, Inc. (hereinafter sometimes referred to as Goffredo), for plumbing repair work on the Philadelphia Property. Respondent contends there are flaws in the Goffredo invoice petitioner presented and that the invoice does not show that it was paid; respondent concludes the analysis as follows: "The invoice by itself does not substantiate that the claimed expenditure was actually paid."
The exhibit is labeled "Statement", and states that payment is due "Upon Receipt". The exhibit is dated "5-8-02", which respondent concedes is May 8, 2002. Next to the exhibit's description of plumbing work done in the basement and side yard of the Philadelphia Property is the date "5-1-3". At trial respondent's counsel read it as "5-1-03". On brief respondent interprets it as "May 1, 2003." It is evident that an invoice or statement dated May 8, 2002, is not requiring payment "Upon Receipt" for work to be done May 1, 2003. Also, the exhibit's description of the work is in the past tense. The obvious interpretation of "5-1-3" is that the work was done between May 1 and May 3, consistent with petitioner's testimony. Thus, we reject respondent's proposed finding of fact that "Exhibit 6-J has conflicting dates as to the year."
Respondent does not contend that this item should be capitalized.
We conclude that it is more likely than not that the work is a repair item and that petitioner paid the $2,025 stated amount in 2002. Petitioner is entitled to deduct the full $2,025 for 2002. We so hold.
(3) Bathtub Refinishing
Petitioner contends that he paid $335 to ADR Services, Inc., in 2002 for stripping and refinishing the bathtub in the third floor apartment of the Philadelphia Property. Respondent contends that petitioner has not shown documentary evidence that the ADR Services invoice was paid.
The invoice and petitioner's testimony convince us that it is more likely than not that petitioner paid the $335 invoice amount, that the work is a repair item that need not be capitalized (respondent does not contend for capitalizing), and that the full $335 is deductible for 2002. We so hold.
(4) Kitchen Renovation
On his 2002 tax return petitioner claimed a $4,800 deduction for kitchen renovation. Respondent disallowed the entire amount. On brief petitioner concedes that the $4,800 should be capitalized and depreciated under MACRS over a 27.5-year period. Respondent continues to maintain that no deduction should be allowed, but as a backup, states on brief:
If the Court determines that Exhibit 4-J is adequate substantiation for the second floor renovations, the Court should hold that the expenditure is capital in nature. The installation of a new kitchen certainly adds value to the property. Petitioner may not deduct capital expenditures as a current expense. I.R.C. § 263(a). The alleged second floor renovation is a structural upgrade to the existing residential real estate and would be depreciated under MACRS on a straight line basis with a recovery period of 27.5 years. I.R.C. § 168(b)(3)(B) and I.R.C. § 168(c).
In support of petitioner's contention he offered his own testimony and an exhibit that purports to be a "job work order" from Z.T. Home Remodeling and Repairs. The document references Zebaler Thomas, Sr., who is hereinafter sometimes referred to as Thomas. The document is hereinafter sometimes referred to as the 2002 Thomas job work order.
Respondent's analysis appears to be an attack on the adequacy of the 2002 Thomas job work order as substantiation of the claimed deduction. Respondent appears to take the position that petitioner has even failed to show that there was a kitchen renovation in 2002.
Although the matter is not free from doubt, on the basis of the 2002 Thomas job work order and petitioner's testimony we conclude that it is more likely than not that petitioner paid $4,800 in 2002 for the renovation of the kitchen in the second floor apartment of the Philadelphia Property. We so hold.
We note that the effect of this resolution is to disallow substantially all of the claimed 2002 deduction.
(5) Accounting, Other
The foregoing disposes of all but $2,458 of the disallowed claimed Schedule E expenses for 2002. On his Schedule E petitioner claimed a deduction for $600 of legal and other professional fees.
Chester Muhammad (hereinafter sometimes referred to as Chester), assisted by his daughter, Chalamar Muhammad (hereinafter sometimes referred to as Chalamar), were petitioner's accountants. Chester, assisted by Chalamar, prepared petitioner's tax returns for each of the years from 1997 through the years in issue. Petitioner did not substantiate the $600 claimed deduction. Yet, he must have paid Chester or Chalamar for their business accounting services. Bearing heavily against petitioner because the inexactitude is of his own making, we conclude that he paid at least $200 for these services in 2002 and is entitled to deduct $200. See Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930). We so hold.
As to all 2002 Schedule E specific expense deductions not otherwise disposed of, we conclude that petitioner has failed to carry his burden of proving error in respondent's determinations. We so hold.
2. Specific Deductions for 2003
Petitioner claimed $12,200 of expense deductions on his 2003 tax return Schedule E on account of the Philadelphia Property. Respondent disallowed the entire amount.
Repairs of $5,000 were included in the $12,200 so claimed and disallowed.
(a) Agreed Items
The parties agree that the amounts set forth in table 5 are deductible. Table 5 Item Amount Tax Treatment 1 Unspecified repair items $681 Currently deductible ACAR Refrigeration, Inc. 350 Capitalized; MACRS; 5 yrs. Colonial Iron 1,150 Capitalized; MACRS; 15 yrs. 1As to the capitalized items, appropriate amounts (hitherto unclaimed) also will be deductible for 2004. See text immediately following table 2, supra.
(b) Disputed Items
(1) Flooring
Petitioner spent $219 for 70 square feet of porcelain tile and related materials and included the deduction in the repairs category. Petitioner contends the $219 is currently deductible. Respondent contends the $219 should be capitalized under MACRS with a 27.5-year recovery period.
Petitioner testified that the tiles and other materials were for a bathroom or kitchen floor and that such tile floors are not replaced every year. Petitioner does not explain on brief or in his testimony why the flooring cost should be deductible in full for 2003. We will not conjure up plausible possibilities for him.
We conclude that the $219 must be capitalized. Section 168(c) provides that the recovery period for residential rental property is 27.5 years. Petitioner has not suggested that any of the seven shorter recovery periods listed in section 168(c) applies. We conclude that the $219 must be capitalized under MACRS with a 27.5-year recovery period. We so hold. As with the other capitalized items, an appropriate amount (hitherto unclaimed) also will be deductible for 2004. See text immediately following table 2, supra.
(2) Accounting, Other
The foregoing disposes of all but $9,800 of the disallowed claimed Schedule E expenses. On his Schedule E petitioner claimed a deduction for $600 of legal and other professional fees.
For the reasons set forth in our analysis of 2002 expenses, we conclude that petitioner paid at least $200 for Chester's accounting services in 2003 and is entitled to deduct $200. We so hold.
As to all 2003 Schedule E specific expense deductions not otherwise disposed of, we conclude that petitioner has failed to carry his burden of proving error in respondent's determinations. We so hold.
3. Specific Deductions for 2004
Petitioner claimed $29,547 of expense deductions on his 2004 tax return Schedule E on account of the Philadelphia Property. Respondent disallowed the entire amount. Repairs of $22,000 were included in the $29,547 so claimed and disallowed, as was $1,600 described as "fire control box".
(a) Agreed Items
The parties agree that petitioner is entitled to deduct (1) $110 for the smoke detectors in the second floor apartment (we assume this is a part of the tax return's $1,600 fire control box item) and (2) $90 for a housing inspection license (which the parties have not further identified as to tax return category).
(b) Disputed Items
(1) Remodeling of Third Floor Apartment
On his tax return petitioner claimed a $22,000 deduction for repairs. On brief he concedes that the $22,000 should be capitalized and depreciated under MACRS with a recovery period of 27.5 years. Respondent contends that no deduction should be allowed, but that if we find that there was a remodeling of the third floor apartment, then the cost should be capitalized and depreciated under MACRS with a recovery period of 27.5 years.
Petitioner's concession as to capitalization disposes of substantially all of the $22,000 claimed deduction. There remains for our determination whether any deduction at all should be allowed for 2004 on account of this item.
In support of his contention petitioner offered his own testimony that "We redid the whole third floor", and four exhibits; the exhibits are hereinafter sometimes collectively referred to as the 2004 Thomas job work order. Three of these four exhibits, each of which is described in table 6, are Z.T. Home Remodeling and Repairs job work orders. (In the various documents and petitioner's testimony, "renovation" and "remodeling" appear to be used interchangeably. For convenience, we will use "remodeling".) Table 6 Item Exh. 22-J Exh. 23-J Exh. 24-J Date of order 2/18/04 6/1/04 6/1/04 Start date 2/20/04 6/3/04 6/3/04 Date completed 4/18/06 7/1/04 8/30/04 Materials $5,000 $800 $8,000 Labor 15,000 1,200 12,000 Total 20,000 2,000 20,000
The fourth exhibit (Exhibit 30-P) is a letter from Thomas, dated September 24, 2007, stating as follows:
To Whom It May Concern:
Please note that I completed a remodeling project at the above referenced property for $20,000 total. This amount was paid in cash per the attached invoice.
The referenced "attached invoice" is a copy of Exhibit 22-J.
Petitioner testified that the April 18, 2006, completion date shown on Exhibit 22-J was a mistake; the work was completed on April 18, 2004. He did not explain how it was that, years later when Exhibit 30-P was generated and trial preparations were under way, neither Thomas nor petitioner noticed the 2006 completion date error.
As table 6, supra, shows, Exhibits 22-J and 24-firmative statement or act, misleading the party asserting estoppel. Estoppel by silence may arise only where there is knowledge of the facts on one side and ignorance on the other. In Town Country Bank of Springfield v. James M. Canfield Contracting Co., 55 Ill. App. 3d 91, 370 N.E.2d 630 (1977), the court explained:
"`[I]f the means of knowledge are equally open to both parties, there can be no estoppel. ***
A person is not estopped by his silence where there is no positive duty and opportunity to speak, or the party is in ignorance of his rights.`"
Town Country Bank of Springfield, 55 Ill. App. 3d at 95, quoting Puterbaugh, Chancery Pleading Practice § 675, at 1372 (7th ed. 1930).
In this case, both the plaintiff and Ms. Koshiyama were ignorant of the fact that the 1997 judgment lien was invalid at the time of the bankruptcy proceedings.
The plaintiff cites Bianucci v. Prairie Production Credit Ass'n, No. 92 — 3046 (CD. Ill. August 21, 1992) (not reported in F. Supp.), aff'd sub nom In re Bianucci, 4 F.3d 526 (7th Cir. 1993), and In re Elmes, 289 B.R. 100 (Bankr. N.D. Ill. 2003). In Bianucci, the district court ruled that the debtors waited too long before moving to reopen their bankruptcy to discharge a judgment lien they failed to list in their bankruptcy proceedings. In Elmes, the court held that a lien holder did not violate the debtors' bankruptcy discharge by filing contempt action in state court against them to enforce a lien. However, the court then held that the debtors could properly avoid the lien, rejecting the lienholder's argument that the debtors had waited too long before moving to avoid the lien. Neither the facts nor the holdings in those cases support the plaintiffs estoppel arguments.
We conclude that neither judicial estoppel nor equitable estoppel barred Ms. Koshiyama from asserting that the plaintiffs 1997 judgment lien was invalid.
2. Validity of the 2004 Judgment Lien Against the Jolly Estate
The plaintiff maintains that the 2004 memorandum created a valid lien, enforceable against the Jolly estate. The defendants respond that the 2004 memorandum was void because it violated the automatic stay order entered in Ms. Koshiyama's bankruptcy case by interfering with her right of survivorship in the Harbor Drive Unit. See In re Berg, 387 B.R. 524, 564 (Bankr. N.D. Ill. 2008); but see In re Lipuma, 167 B.R. 522 (Bankr. N.D. Ill. 1994) (recognizing a split of authority among the federal circuits as to whether an act violating an automatic stay was void or voidable).
At oral argument of this case, counsel for the defendants pointed out that the 2004 memorandum specified the wrong year, 1998 instead of 1997. Therefore, under Maniez, as the 2004 memorandum failed to comply with the requirements of section 12 — 101, it failed to create a valid lien. However, following the close of Ms. Koshiyama's bankruptcy case, the plaintiff recorded the order reviving the judgment. The order contained the correct date of the judgment, and under section 12 — 101, the order qualified as a memorandum of judgment. See Maniez, 383 Ill. App. 3d at 40-41; 735 ILCS 5/12-101 (West 2004). Therefore, while the 2004 memorandum was void, the October 24, 2005, recording of the court order reviving the judgment created a valid Hen and did not violate the automatic stay because it was filed after the close of Ms. Koshiyama's bankruptcy case.
Under section 12 — 101, a memorandum includes a copy of the judgment "signed by a judge." 735 ILCS 5/12 — 101(d) (West 2004). We note that, while it contains the information required by section 12 — 101, the October 24, 2005, order does not bear the judge's signature. However, the order is stamped with the judge's name and the date. As this court has recognized, "the law has consistently interpreted `signed' to embody not only the act of subscribing a document, but also anything which can reasonably be understood to symbolize or manifest the signer's intent to adopt a writing as his or her own and be bound by it. This may be accomplished in a multitude of ways, only one of which is a handwritten subscription." Just Pants v. Wagner, 247 Ill. App. 3d 166, 173-74, 617 N.E.2d 246 (1993).
The defendants then argue that, even if the plaintiff had a valid judgment lien against the Harbor Drive Unit that he could enforce against Mr. Jolly, upon Mr. Jolly's death, the lien was not enforceable against Ms. Koshiyama, the surviving joint tenant. In Harms v. Sprague, 105 Ill. 2d 215, 473 N.E.2d 930 (1984), the supreme court held that a mortgage executed by one joint tenant did not survive as a lien on the property upon the death of the joint tenant/mortgagor. The court explained as follows:
"A surviving joint tenant succeeds to the share of the deceased joint tenant by virtue of the conveyance which created the joint tenancy, not as the successor of the deceased. [Citation.] The property right of the mortgaging joint tenant is extinguished at the moment of his death. While John Harms was alive, the mortgage existed as a lien on his interest in the joint tenancy. Upon his death, his interest ceased to exist and along with it the lien of the mortgage."
Harms, 105 Ill. 2d at 224.
In the present case, the plaintiffs judgment against Ms. Koshiyama was discharged in bankruptcy. While Mr. Jolly was alive, the plaintiff had a judgment lien against Mr. Jolly's interest in the joint tenancy, as of October 24, 2005, when the court order reviving the judgment was recorded. As in Harms, when Mr. Jolly died in 2006, his interest ceased to exist, and Ms. Koshiyama, as the surviving joint tenant, took the property free of the plaintiffs judgment lien.
The plaintiff then asserts that the judgment lien survived the death of Mr. Jolly because the filing of the bankruptcy petition severed the joint tenancy and rendered Ms. Koshiyama and Mr. Jolly tenants-in-common. Therefore, the judgment lien remained on Mr. Jolly's undivided one-half interest in the Harbor Drive Unit because it passed to Ms. Koshiyama by inheritance, not as the surviving joint tenant. In order to resolve whether the plaintiffs judgment remained a lien on the Harbor Drive Unit upon Mr. Jolly's death, we must determine if the filing of a petition in bankruptcy severs the joint tenancy.
There is a split of authority among the courts on this issue. Some federal and state courts have concluded that the filing of a bankruptcy petition severs the joint tenancy. See Taylor v. Canterbury, 92 E3d 961 (Colo. 2004); In re Chadwick, 113 B.R. 540 (Bankr. W.D. Mo. 1990); In re Tyson, 48 B.R. 412 (Bankr. CD. Ill. 1985); In re Panholzer, 36 B.R. 647 (Bankr. D. Md. 1984); In re Lambert, 34 B.R. 41 (Bankr. D. Colo. 1983). Other courts have found that the filing of the petition does not sever the joint tenancy. See In re DeMarco, 114 B.R. 121 (Bankr. N.D. W Va. 1990); In re Anthony, 82 B.R. 386 (Bankr. WD. Pa. 1987); In re Spain, 55 B.R. 849 (Bankr. N.D. Ala. 1985).
The Bankruptcy Code ( 11 U.S.C. § 101 et seq. (2006)) does not address specifically whether the filing of a petition in bankruptcy severs the joint tenancy. The courts in the above cases arrived at their conclusions by analyzing the provisions of the Bankruptcy Code in light of their own state laws governing property interests. See Lambert, 34 B.R. at 42 (state law determines the nature, extent and effect of the debtor's interest in property). We examine first the interest of a joint tenant under Illinois law.
a. Property Interests Under Illinois Joint Tenancy Law
•6 A joint tenancy is "`a present estate in all the joint tenants, each being seized of the whole.`" Harms, 105 Ill. 2d at 224, quoting Partridge v. Berliner, 325 Ill. 253, 257, 156 N.E. 352 (1927). An inherent feature in the estate of joint tenancy is the right of survivorship, which is the right of the last survivor to take the whole of the estate. Harms, 105 Ill. 2d at 224. The creation and the perpetuation of the joint tenancy are dependent on four unities: interest, title, time, and possession. Harms, 105 Ill. 2d at 220. The voluntary or involuntary destruction of any of the unities by one of the joint tenants will sever the joint tenancy. Harms, 105 Ill. 2d at 220. The severance of the joint tenancy extinguishes the right of survivorship. Jackson v. O'Connell, 23 Ill. 2d 52, 55, 177 N.E.2d 194 (1961).
Illinois courts have held that a joint tenant can sever a joint tenancy by conveying his or her interest to a third party, even without the consent or permission of the other joint tenant. See Olney Trust Bank v. Pitts, 200 Ill. App. 3d 917, 921, 558 N.E.2d 398 (1990), citing Johnson v. Beneficial Finance Co. of Illinois, Inc., 154 Ill. App. 3d 672, 674, 506 N.E.2d 1025 (1987), and Johnson v. Johnson, 11 Ill. App. 3d 681, 684, 297 N.E.2d 285 (1973). In Olney Trust Bank, the court held that the joint tenancy was severed where one joint tenant conveyed his interest by way of a deed in lieu of foreclosure. Olney Trust Bank, 200 Ill. App. 3d at 921.
•7 Our courts have held that a lien or a mortgage on a joint tenant's interest does not sever the joint tenancy. See Harms, 105 Ill. 2d at 223; Jackson v. Lacey, 408 Ill. 530, 97 N.E.2d 839 (1951); Van Antwerp v. Horan, 390 Ill. 449, 61 N.E.2d 358 (1945). Even the making of a levy upon a joint tenant's interest does not sever the joint tenancy. As the court in Van Antwerp explained:
"Under the law and procedure in this State, it appears that the levy is just another step in the process directed toward a final sale. It is, however, not such an act as can be said to have the effect of a divestiture of title. There has not been, as yet, the destruction of identity of interest or of any other unity which must occur before we can say the estate of joint tenancy has been severed and destroyed. There does not appear to have been, by reason of the levy, such interference with, or diminution of, the interest of the one joint tenant as to enable us to say that there has been a destruction of the identity of interest; and such a destruction is necessary before we can say that there has been a termination and severance of the joint tenancy. We therefore hold that the levy of the execution upon the share of one of the joint tenants does not sever or terminate the joint tenancy."
Van Antwerp, 390 Ill. at 455.
In Jackson, the court held that, even though there had been a sale of the joint tenant's interest, there was no conveyance until the period of redemption had passed. The court concluded that the title was not divested and, therefore, the joint tenancy was unaltered. Jackson, 408 Ill. at 533.
We conclude that Illinois requires a conveyance of the joint tenant's interest in the property to sever a joint tenancy. We now turn to the relevant sections of the Bankruptcy Code to determine if the filing of a petition in bankruptcy constitutes a conveyance of the debtor/ joint tenant's interest in the property.
b. The Bankruptcy Code
Prior to the reforms to bankruptcy law in the late 1970s, section 70a of the Bankruptcy Act (11 U.S.C. § 70a (1976)) provided that the bankruptcy trustee was vested with the title of the debtor to all his or her nonexempted property as of the date of the filing of the bankruptcy petition. Spain, 55 B.R. at 852; 4A Collier on Bankruptcy § 70, at 60 (14th ed. 1978); see Flynn v. O'Dell, 281 F.2d 810 (7th Cir. 1960) (holding that the filing of the bankruptcy petition severed the joint tenancy since the debtor's interest (title) was transferred to the trustee, distinguishing Jackson and Van Antwerp).
The 1979 Bankruptcy Code omitted section 70a. In its place, Congress enacted section 541, which provides in pertinent part as follows:
"Sec. 541. Property of the estate
(a) The commencement of a case *** creates an estate. Such estate is comprised of all of the following property, wherever located and by whomever held:
(1) *** all legal or equitable interests of the debtor in property as of the commencement of the case."
11 U.S.C. § 541(a) (1994).
In place of the title of the debtor's property passing to the trustee, the debtor's legal and equitable interests in the property become part of the bankruptcy estate.
In support of his position that filing a petition in bankruptcy severs a joint tenancy, the plaintiff relies on Tyson. The defendants respond that decisions of the federal courts are not binding on this court. See SI Securities v. Bank of Edwardsville, 362 Ill. App. 3d 925, 933, 841 N.E.2d 995 (2005). However, this court may follow federal decisions if it finds them persuasive. Baker v. Jewel Food Stores, Inc., 355 Ill. App. 3d 62, 69, 823 N.E.2d 93 (2005).
In Tyson, the bankruptcy court held that the filing of a chapter 11 bankruptcy petition severed the joint tenancy, relying on Lambert. The court in Lambert noted that while cases under the prior Bankruptcy Act held that a filing in bankruptcy severed a joint tenancy, the present Bankruptcy Code did not explicitly provide for the transfer of title of the debtor's property to the bankruptcy trustee; merely that the trustee could administer the property of the estate. The court found that the legislative history provided clarification, explaining as follows:
The debtor in Lambert filed a chapter 7 petition.
"`The debtor's interest in property also includes "title "to property, which is an interest, just as are a possessory interest, or leasehold interest, for example.' [Citation.] And further, in that same report, it is stated: `Once the estate is created, no interests in property of the estate remain in the debtor.`"
Lambert, 34 B.R. at 43, quoting S. Rep. No. 95 — 989, at 82-83 (1978),
reprinted in 1978 U.S.C.C.A.N. 5787, 5868.
While some sections of the Bankruptcy Code appeared to indicate that a joint tenancy survived the filing of a bankruptcy petition, the court in Lambert found that the same sections supported a finding that the joint tenancy was severed, further explaining as follows:
"Sec[tion] 363(h) provides in pertinent part,`. . . the trustee may sell both the estate's interest. . . and the interest of any co-owner in property which the debtor
had, immediately before the commencement of the case, an undivided interest as a . . . joint tenant. . . .' (Emphasis added.) Likewise, Sec[tion] 522(b)(2)(B) provides in
pertinent part that a debtor may exempt from property of the estate ". . . any interest in property in which the debtor
had, immediately before the commencement of the case, an interest as a . . . joint tenant. . . .' (Emphasis added.)"
Lambert, 34 B.R. at 43, quoting
11 U.S.C. §§ 363(h),
522(b)(2)(B) (1982).
Relying on Lambert, the court in Tyson held that, by filing his petition in bankruptcy, the husband lost any joint tenancy interest he may have had in real property he owned with his wife. Therefore, his bankruptcy estate had a one-half interest in the real property. Tyson, 48 B.R. at 412.
Notwithstanding their position that federal decisions are not binding on this court, the defendants maintain that the decision in Anthony demonstrates that where state law requires the severance of title and not just the possibility of a change in title, the filing of a chapter 7 bankruptcy petition will not sever the joint tenancy.
In Anthony, the debtor owned property in joint tenancy with her mother. Following the filing of the debtor's bankruptcy petition, her mother died. A creditor argued that the filing of the bankruptcy petition severed the joint tenancy, rendering the debtor and her mother tenants-in-common. The creditor further argued that the debtor "inherited" her mother's one-half interest with the judgment lien attached because she did not acquire her mother's interest by right of survivorship. The bankruptcy court held that the filing of the petition did not sever the joint tenancy.
In reaching that conclusion, the court, as did the court in Lambert, examined the language of section 363(h) of the Bankruptcy Code under which the trustee was given the authority to use, sell or lease an undivided interest in property, such as a joint tenancy. Unlike the court in Lambert, the court in Anthony did not find the use of the past tense "had "to describe the debtor's interest in the property significant. Instead, the court focused on the provision that the trustee was permitted to sell the debtor's interest only if partition were impractical, if the sale would produce significantly more than its parts and if the benefits to the estate outweighed the detriment to the co-owners. The court concluded as follows:
"The language of
11 U.S.C. § 363(h), (i), and (j) does not sound as though a joint tenancy is automatically severed by the filing of a bankruptcy petition as a federal rule of bankruptcy law. It sounds permissive, as though the trustee may sever a joint tenancy if the estate benefits and if the rights of the non-debtor/co-tenant are protected.
In this case the trustee has not attempted to administer this property by severing or selling the whole. We hold that the filing of
a petition does not sever a joint tenancy with right of survivorship, unless the trustee actually executes against such property by attempting to sever or to sell the whole in order to liquidate such property. Pennsylvania does not sever a joint tenancy upon the entry of a judgment, but severs upon alienation, such as execution. We would go no further."
Anthony, 82 B.R. at 388.
Additional support for the defendants' position is found in Spain. There, the bankruptcy court maintained that the failure of the Code to carry forward section 70a, which transferred the title of the debtor to the trustee was an error. The court in Spain found no authority in the Code for the decisions in Panholzer and Lambert, where the courts held that the filing of the petition was a conveyance that severed the joint tenancy. The court in Spain concluded as follows:
"The debtor does not transfer his title to [section] 541 property of the estate but holds his title subject to the exercise by the trustee of his rights to sell, use or lease such property by appropriation ***. The debtor retains the full use, possession and enjoyment jointly with the trustee and the right to refuse to turn over or deliver such property in proper cases. There is no voluntary or involuntary transfer of property upon filing. It may never take place at the option of the trustee and never occurs as to wholly exempt property. The trustee has no title to property of the estate until he elects to take affirmative action and proceedings are had or orders made."
Spain, 55 B.R. at 854.
As did the court in Anthony, the court relied on section 363(h) to find that no transfer took place by the filing of the petition and that the trustee's rights were no better than those of a creditor who proceeds to levy and sale. Spain, 55 B.R. at 855.
•8 In summary, the Bankruptcy Code provides that the debtor's legal and equitable interests in property are transferred to the bankruptcy estate. However, under Illinois law, more than a transfer of the debtor's interest in property is required to sever the joint tenancy. Illinois law requires a conveyance, which does not occur until the trustee sells or otherwise disposes of the property and title passes. Therefore, in Illinois, the filing of a bankruptcy petition does not sever a joint tenancy.
•9 We conclude that the filing of Ms. Koshiyama's bankruptcy petition did not sever the joint tenancy. The October 24, 2005, recording of the court order reviving the judgment created a valid lien against Mr. Jolly's interest in the Harbor Drive Unit. But, upon his death, his interest in the property ceased to exist and with it the plaintiffs judgment lien. Harms, 105 Ill. 2d at 224. Therefore, the plaintiff does not have a judgment lien on the Harbor Drive Unit, enforceable against the Jolly estate.
II. Whether the Decision in Maniez Should Be Overruled A. Law of the Case Doctrine
•10 Under the law of the case doctrine, parties may not relitigate issues previously decided in the same case. Long v. Elborno, 397 Ill. App. 3d 982, 989, 922 N.E.2d 555 (2010). Questions of law that were decided on a previous appeal are binding on the trial court as well as on the appellate court in subsequent appeals. Long, 397 Ill. App. 3d at 989. The purpose of the doctrine is
"to protect settled expectations of the parties, ensure uniformity of decisions, maintain consistency during the course of a single case, effectuate proper administration of justice, and bring litigation to an end. [Citation.] An additional concern addressed by the law of the case doctrine is the maintenance of the prestige of the courts, for the reason that if an appellate court issues contrary opinions on the same issue in the same case, its prestige is undercut. [Citation.]"
Emerson Electric Co. v. Aetna Casualty Surety Co., 352 Ill. App. 3d 399, 417,
815 N.E.2d 924 (2004).
There are two recognized exceptions to the law of the case doctrine: (1) when a higher court makes a contrary ruling on the same issue subsequent to the lower court's decision, and (2) when a reviewing court finds that its prior decision was palpably erroneous. Long, 397 Ill. App. 3d at 989. The plaintiff asserts that the law of the case doctrine does not preclude reconsideration where the facts before the court have changed or error or injustice is manifest. See Aardvark Art, Inc. v. Lehigh/Steck-Warlick, Inc., 284 Ill. App. 3d 627, 633, 672 N.E.2d 1271 (1996).
B. Discussion
•11 The plaintiff acknowledges that this court's prior opinion in Maniez constitutes the law of the case. However, he maintains that this court may reconsider its decision under the exceptions to the law of the case doctrine.
1. The Palpably Erroneous Exception
The defendants maintain that the palpably erroneous exception applies only where the appellate court has remanded the case for a new trial on all issues. See Alwin v. Village of Wheeling, 371 Ill. App. 3d 898, 911, 864 N.E.2d 897 (2007). However, in People v. Sutton, 375 Ill. App. 3d 889, 894, 874 N.E.2d 212 (2007), this court referred to the palpably erroneous exception without the new trial qualifier. See Sutton, 375 Ill. App. 3d at 894. Recently, in People v. Jacobazzi, 398 Ill. App. 3d 890 (2009), the Second District Appellate Court reviewed the relevant case law and concluded that the new trial qualifier was not a definitive part of the palpably erroneous exception. Jacobazzi, 398 Ill. App. 3d at 931. Because its prior decision "was palpably erroneous and worked a manifest injustice," the court chose to revisit it. See Jacobazzi, 398 Ill. App. 3d at 932.
In arguing that the decision in Maniez was palpably erroneous, the plaintiff maintains that this court should have determined that the order reviving the judgment and the recording of the order with the correct date of the judgment acted to reform the original judgment memorandum. The plaintiffs reliance on L.E. Myers Co. v. Harbor Insurance Co., 67 Ill. App. 3d 496, 384 N.E.2d 1340 (1978), is misplaced. In that case, the court held that a third party was bound by the voluntary reformation of an insurance policy to correct a mutual mistake by the contracting parties. The court determined that the third party's lack of knowledge of the mistake was not determinative because there was no reliance on the mistake. L.E. Myers Co., 67 Ill. App. 3d at 504. In the present case, the parties never agreed that there was a mutual mistake, and the plaintiff never sought reformation of the 1997 memorandum.
The plaintiffs reformation argument referred to the 2004 memorandum of judgment. As we have found that the 2004 memorandum did not create a valid judgment lien, we will consider the October 24, 2005, order, which did create a valid lien, in connection with the reformation argument.
The plaintiff then maintains that this court's decision in Maniez is erroneous because it contradicted the holding in Dillman v. Nadelhoffer, 23 Ill App. 168 (1887). In that case, the appellate court held that a judgment debtor could not defeat the execution of a judgment by showing that the judgment date was incorrect. Dillman was decided prior to 1935 and therefore lacks precedential authority. See Bryson v. News America Publications, Inc., 174 Ill. 2d 77, 95, 672 N.E.2d 1207 (1996) (appellate decisions issued prior to 1935 have no binding authority). Moreover, the plaintiffs reliance on Dillman is misplaced. In the present case, there was no issue as to the correctness of the date of the plaintiff's judgment and no question that the plaintiff could execute on his judgment, which were the issues in Dillman. Dillman did not address whether an incorrect judgment date in the recorded memorandum of judgment created a lien on real property.
The plaintiff does not address or distinguish the cases this court relied on in reaching its decision in Maniez. While maintaining that it was error to allow a scrivener's error to defeat the lien in this case, the plaintiff ignores the basis for this court's decision: that the recording of the memorandum of judgment with an incorrect judgment date did not satisfy the strict compliance standard required in complying with section 12 — 101. Maniez, 383 Ill. App. 3d at 42. Moreover, this court explained why the scrivener's error argument did not aid the plaintiff. See Maniez, 383 Ill. App. 3d at 44 ("Even if we were to agree with the plaintiff that the inclusion of the incorrect date in the memorandum of judgment was a scrivener's error, we must strictly adhere to the requirements of section 12 — 101"). Therefore, the plaintiff has failed to establish that this court's decision in Maniez was palpably erroneous.
2. Best Interest of Society and Manifest Injustice
As an alternative ground for overturning this court's decision in Maniez, the plaintiff contends that the decision was contrary to the best interests of society and resulted in a manifest injustice in this case, citing Devines v. Maier, 728 F.2d 876 (7th Cir. 1984). In that case, the court held that the law of the case doctrine should not be applied "`where the law as announced is clearly erroneous, and establishes a practice which is contrary to the best interests of society, and works a manifest injustice in a particular case.`" Devines, 728 F.2d at 880, quoting United States v. Habig, 474 E2d 57, 60 (7th Cir. 1973).
As we noted previously, federal decisions are not binding on this court. The two Illinois cases cited by the plaintiff do not reference consideration of the "best interest of society." See People v. Williams, 138 Ill. 2d 377, 391-92, 563 N.E.2d 385 (1990); Aardvark Art, Inc., 284 Ill. App. 3d at 633; see also Jacobazzi, 398 Ill. App. 3d at 931. The plaintiff's discussion of the reformation of judgments under the mortgage foreclosure law fails to consider that, because the requirements of section 12 — 101 were not strictly adhered to, no lien was created in this case. Therefore, there was nothing to be reformed or foreclosed upon. In any event, we strongly disagree with the plaintiff that the decision in Maniez was contrary to the best interests of society. As we explained in Maniez, "the purpose of recording the memorandum of judgment is not just to alert the debtor that a judgment has been entered but prospective purchasers as well." Maniez, 383 Ill. App. 3d at 43. Strict adherence to section 12 — 101 assures that the public, as well as the judgment debtor, has reliable information as to the existence of a lien on real property.
Finally, the plaintiff argues that the decision in Maniez resulted in a manifest injustice to him. He incorporates his prior arguments on judicial and equitable estoppel. As neither judicial nor equitable estoppel barred Ms. Koshiyama from asserting the invalidity of the plaintiffs lien, those arguments do not establish that an injustice occurred.
The plaintiff also argues that it would be a manifest injustice to allow Ms. Koshiyama, as the surviving joint tenant, to benefit by receiving the property free from the plaintiffs judgment lien because of a scrivener's error. As we explained in rejecting the plaintiffs palpably erroneous argument, this was not a case of scrivener's error. Moreover, if the plaintiff believed that he had a valid judgment lien on the Harbor Drive Unit property, he fails to explain why he waited almost a year after the close of Ms. Koshiyama's bankruptcy case to seek to foreclose the judgment lien. Finally, the plaintiff is not without a remedy for inaccuracy of the judgment date in the memorandums. We conclude that the plaintiff has failed to establish that the decision in Maniez resulted in a manifest injustice under the circumstances of this case.
CONCLUSION
As the plaintiff no longer had a valid judgment lien against the Harbor Drive Unit, the circuit court's dismissal of the complaint to foreclose the judgment lien was proper.
The judgment of the circuit court of Cook County is affirmed.
Affirmed.
GARCIA and LAMPKIN, JJ., concur.