Opinion ID: 507186
Heading Depth: 3
Heading Rank: 2

Heading: Does 26 U.S.C. Sec. 7425(b)(1) preclude the availability of equitable relief?

Text: 19 The government contends that granting equitable relief to Provident would be inconsistent with Sec. 7425(b)(1). We disagree. Before Congress enacted Sec. 7425(b)(1), some state laws allowed senior lienors to conduct nonjudicial sales without notice to junior lienors. Junior liens held by the government could be extinguished by operation of state law even though the government had not been notified of a sale. S.Rep. No. 1708, 89th Cong., 2d Sess., reprinted in 1966 U.S. Code Cong. & Admin.News 3722, 3748. To prevent the extinction of government liens under these circumstances, Congress enacted section 7425(b)(1) to assure that the government received notice of these sales so that it could review its position and determine the appropriate action.... Id. This would assure that the government could protect its interest in having a fair sale. In the event the government did not receive notice, Congress intended only to shield the government's junior liens from extinction so the government could protect its interests at a later date. 20 Granting equitable relief to Provident would not undermine Congress's intent. If Provident's lien survives the sale, the government's junior liens still are unaffected by the sale, and the government can protect its interest in having a fair sale in the future when Provident sells the property or when the government forecloses on it. Granting equitable relief also will not discourage senior lienors such as Provident from notifying the government of future sales. Senior lienors have a strong incentive to notify the government because doing so will extinguish the government's junior liens when the property is sold. See 26 U.S.C. Sec. 7425(b)(2) and Sohn v. California Pacific Title Ins. Co., 124 Cal.App.2d 757, 269 P.2d 223, 230 (1954). If notice is not given, the government's liens survive the sale, leaving an encumbrance on the property. We believe that this is the penalty that Congress intended to impose on senior lienors such as Provident. Granting equitable relief to Provident is not inconsistent with that intention. Section 7425(b)(1) therefore does not preclude the availability of equitable relief. 21