Opinion ID: 507186
Heading Depth: 4
Heading Rank: 1

Heading: Purposes of justice

Text: 24 To determine whether justice would be served by allowing Provident's lien to survive the sale, we consider how our resolution of the issue would affect the parties. We presume that Provident did not act in bad faith when it failed to discover the government's liens. If we do not grant equitable relief, Provident would lose $159,444 (the amount Provident paid for the property) because the property would be subject to tax liens totalling $534,000. The government, on the other hand, would realize $159,444 which it otherwise would not have received had Provident notified it of the sale. We recognize that any money received by the government would go towards satisfaction of legitimate tax liens. If Provident had notified the government, however, the government's junior liens would have been extinguished, 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), and the government would not have received any proceeds from the sale because the sale yielded only enough money to satisfy a portion of Provident's senior lien, see Caito v. United Calif. Bank, 20 Cal.3d 694, 144 Cal.Rptr. 751, 754, 576 P.2d 466 (1978) (junior lienor draws from proceeds only after foreclosing senior lienor paid off). Under these circumstances, the equities favor Provident, particularly since 26 U.S.C. Sec. 7425(b)(1) eliminates virtually any harm the government suffered when it did not receive notice of the sale. 25 Because Provident failed to notify the government, section 7425(b)(1) provides that the sale was made subject to and without disturbing the government's liens. Even if Provident's senior lien survives the sale, the government is virtually in the same position it was in before the sale. If Provident sells the land, or if the government forecloses on it, the proceeds from the sale first go towards satisfaction of Provident's lien and any remaining proceeds go towards satisfaction of the government's liens. 26 We therefore conclude that Provident and First American could prove a set of facts which would show that the purposes of justice would be served if equitable relief were granted. 27