At issue in this quiet title action is the validity of the title acquired by the United States in certain improved real property when the United States redeemed such property from the plaintiff pursuant to Section 7425 of the Internal Revenue Code of 1954 (26 U.S.C.). The District Court held that the Government properly exercised its right of redemption and thereby acquired all rights, title and interest in the property free and clear of any claims thereto of the plaintiff. We affirm the judgment of the District Court except as to the correctness of the amount tendered by the United States to the plaintiff in redemption of the subject property. As to such matter, the case is remanded to the District Court for further proceedings not inconsistent with this opinion.

William Little (plaintiff) commenced this action on March 23, 1981, by filing a Complaint for Temporary Restraining Order, Preliminary Injunction and Order to Quiet Title in which he sought to prevent the United States from redeeming certain real property. Little also sought a declaration that the title to the subject property rested solely on him. The property, which consists of a 28-unit apartment building, known as 1110 W. Washington Boulevard, Los Angeles, California, was acquired by Alexander Rojas by grant deed dated April 18, 1973. Thereafter, Rojas encumbered the property by a first deed of trust recorded August 25, 1978, naming Commonwealth Land Title Company as trustee with a power of sale. Rojas further encumbered the property by a second trust deed dated November 7, 1978, naming Title Insurance Trust Company trustee with a power of sale.

On July 2, 1979, the property was conveyed via a tax deed to the State of California to satisfy delinquent property taxes for the fiscal year 1973-74. This tax deed was recorded in the Office of the County Recorder for Los Angeles County on July 17, 1979. By grant deed dated May 6, 1980, Rojas transferred a one-half undivided interest in the property to Bell Builders Supply, Inc., a California corporation. The deed was duly recorded on May 8, 1980. Thereafter, on September 17, 1980, the Internal Revenue Service recorded a notice of federal tax lien with the Los Angeles County Recorder in the name of Bell Builders Supply, Inc., for unpaid federal employment taxes owed by that corporation for the tax period ended March 31, 1980, in the amount of $12,587.37. The Internal Revenue Service subsequently filed a second notice of federal tax lien against Bell Builders Supply, Inc. on November 4, 1980, for unpaid federal employment taxes due for the period ended June 30, 1980, in the total amount of $12,220.96.

On December 16, 1980, the subject property was sold by the trustee under the second deed of trust to Jess Mendoza for $23,670. The trustee's deed transferring the property to Mendoza was recorded on January 21, 1981. By grant deed dated December 17, 1980 (recorded January 28, 1981) Mendoza transferred his interest in the subject property to William Little, the plaintiff herein.

On March 19, and 20, 1981, the Internal Revenue Service seized the subject property pursuant to its previously recorded tax liens. Thereafter, plaintiff commenced this action seeking to restrain the Government from exercising its right of redemption pursuant to Section 7425(d) of the Internal Revenue Code. On April 14, 1981, the District Court entered its findings of fact and conclusions of law. The District Court held that the privilege of redeeming the subject property from the State of California by payment of the delinquent property taxes for the years 1973 and 1974 constituted sufficient "property interests" to provide plaintiff's standing to bring this action pursuant to Section 6321 of the Internal Revenue Code. In addition, the District Court held that this privilege of redemption was the interest transferred to Bell Builders Supply, Inc. to which the federal tax liens subsequently attached. The District Court also specifically held that the privilege of redemption, under California law, is transferable, has value, and, therefore, constitutes "property or rights to property" within the meaning of Section 6321 of the Internal Revenue Code. The District Court also found, however, that the plaintiff would suffer irreparable injury if the Government exercised its right to redeem the property under the Internal Revenue Code, and entered an order granting a preliminary injunction restraining the Government from exercising its right of redemption.

On April 15, 1981, the final day of the 120-day statutory period for redeeming the subject property after the December 16, 1980 sale under the second deed of trust (Section 7425(d)), this court stayed the injunctive order of the District Court pending appeal and the Government timely redeemed the subject property from the plaintiff.1 A certificate of redemption was properly recorded with the Office of the County Recorder in Los Angeles on April 17, 1981.

On May 14, 1981, the trustee under the first deed of trust filed a notice of a trustee's sale with respect to the first deed of trust to be held on May 28, 1981. At the sale, the plaintiff's assignee purchased the property for the sum of $42,611.50, thereby discharging the debt secured by the first deed of trust.2 The United States, which at that time had title to the subject property pursuant to its redemption of April 15, 1981, was not notified as to the foreclosure and sale.

Thereafter, plaintiff filed, by leave of court, his first amended and supplemental complaint.3 In his amended complaint, plaintiff again alleged that the United States did not have a federal statutory right of redemption because Bell Builders Supply, Inc. did not acquire from Rojas a "property interest" to which the federal tax lien attached. Plaintiff also asserted, in the alternative, that if the alleged right of redemption had been properly exercised, the Government failed to tender the proper amount upon redemption pursuant to 28 U.S.C. Sec. 2410(d) and Treasury Regulations on Procedure and Administration (1954 Code) Sec. 301.7425-4(b) (26 C.F.R.). Finally, plaintiff contended that if the redemption was proper, the Government acquired title to the property subject to a senior encumbrance, i.e., the first deed of trust, and that the subsequent foreclosure and sale on May 28, 1981, at which plaintiff's assignee purchased the property, divested the Government of the title it had acquired through redemption. Additionally, plaintiff offered to pay in full the remaining tax lien against Bell Builders Supply, Inc. recorded on November 4, 1980, asserting that satisfaction of that lien would remove any Government ownership or lien interest in the subject property.

Cross motions for summary judgment were filed by both parties. The District Court granted the Government's motion and, consequently, dismissed plaintiff's complaint. In its findings of fact and conclusions of law, the District Court held that the Government had properly exercised its right of redemption with respect to the real property involved in this action, and therefore, had acquired title to the property from the date of redemption by operation of Section 7425(d) of the Internal Revenue Code of 1954. The District Court also specifically rejected the plaintiff's request to quiet title to the property which was based on the foreclosure of the first deed of trust and the May 28, 1981 trustee's sale at which plaintiff allegedly acquired title to the subject property through his assignee. The District Court held, in this regard, that the Government's title to the property was derived from the enforcement of a lien, and that the nonjudicial sale of the subject property to satisfy a senior lien under the first deed of trust, without specific notice to the United States as required by Section 7425(c)(1), was made subject to and without disturbing the Government's title. Consequently, the District Court declared that the title in the United States was free and clear of any and all rights, title and interest of the plaintiff with respect to the redeemed property. From this adverse judgment plaintiff appeals.

This appeal raises three issues. First, whether, in granting summary judgment for the United States and dismissing the plaintiff's complaint, the District Court correctly held that the taxpayer (Bell Builders Supply, Inc.) had a property interest, within the meaning of Section 6321 of the Internal Revenue Code of 1954, in the subject real property and that, consequently, the Government's tax liens attached to that interest. Second, whether the District Court correctly determined that the United States properly exercised its right of redemption with respect to the subject real property and, thereby, acquired all rights, title and interest in the property free of any claims thereto of the plaintiff. Third, whether the United States, in exercising its right of redemption, tendered the proper amount to plaintiff.

First, whether, in granting summary judgment for the United States and dismissing the plaintiff's complaint, the District Court correctly held that the taxpayer (Bell Builders Supply, Inc.) had a property interest, within the meaning of Section 6321 of the Internal Revenue Code of 1954, in the subject real property and that, consequently, the Government's tax liens attached to that interest.4

Plaintiff contends that the taxpayer, Bell Builders Supply, Inc., could acquire from his predecessor in interest, Rojas, that which Rojas had to transfer, and that, since at the time of the transfer to Bell Builders Supply, Inc. the property in question had been tax-deeded to the State of California, the only interest acquired by Bell Builders Supply, Inc. was the statutory privilege of redemption. This privilege of redemption, so plaintiff contends, does not rise to the level of "property or a right to property" within the meaning of Section 6321 of the Internal Revenue Code, thereby, rendering void the Government's interest in the subject property.

Section 6321 of the Internal Revenue Code of 1954 provides that if any person liable to pay any tax neglects or refuses to do so, the amount of the tax (including interest, additions, penalties or costs that may accrue) "shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person." The lien provided for in Section 6321 arises at the time the tax assessment is made and continues until the underlying liability is satisfied or becomes unenforceable by reason of lapse of time. Section 6322 of the Internal Revenue Code of 1954. The initial question in this case is whether the taxpayer (Bell Builders Supply, Inc.) had "property or rights to property" to which the Government's tax liens against the taxpayer could attach. In answering that question, resort to state law is required, for in applying a provision of the Internal Revenue Code, state law controls in determining the nature of the legal interest which the taxpayer has in the property sought to be reached by the federal statute. Aquilino v. United States, 363 U.S. 509, 512-13, 80 S. Ct. 1277, 1279-80, 4 L. Ed. 2d 1365 (1960); United States v. Bess, 357 U.S. 51, 55, 78 S. Ct. 1054, 1057, 2 L. Ed. 2d 1135 (1958); Morgan v. Commissioner, 309 U.S. 78, 82, 60 S. Ct. 424, 427, 84 L. Ed. 585 (1940). Of course, once it is determined that the taxpayer possesses property or rights to property recognizable under state law the federal tax consequences pertaining to such rights are solely a matter of federal law and, consequently, liens provided by federal statute may not be defeated by state exemption statutes. United States v. Bess, 357 U.S. at 57, 78 S.Ct. at 1058.

Resolution of the question whether Bell Builders Supply, Inc. possessed "property or rights to property" under Section 6321 involves determining whether under California law5 the interest in question is an economic asset in the sense that it has pecuniary worth and is transferable, so that a claim can be enforced against it. After a careful review of the record and California case law, we conclude that the right of redemption acquired by the taxpayer in the instant case has pecuniary worth and is transferable. See Potter v. County of Los Angeles, 251 Cal. App. 2d 280, 59 Cal. Rptr. 335 (1967); Potter v. Entler, 71 Cal. App. 2d 710, 163 P.2d 490 (1945); Graham v. Reed, 83 Cal. App. 516, 257 P. 131 (1927). The record shows that the taxpayer gave valuable (although unspecified) consideration to acquire the right. The record further shows that when the second deed of trust on the property was foreclosed in December 1980, Jess Mendoza purchased the remaining interest in the property--i.e., the right to redeem the property from the State of California--for some $23,000. Indeed, the very fact that the plaintiff instituted this action to quiet title and to, thereby, secure for himself the right to redeem the property from the State of California, establishes that the right of redemption in issue is a valuable right. Thus, the plaintiff is in the untenable position of arguing, on the one hand, that he should prevail against the Government because Bell Builders Supply, Inc. did not acquire an interest in the subject real property to which the Government's tax liens could attach, and asserting, on the other hand, that title should be quieted in him by virtue of the interest he acquired in the property at the December 1980 foreclosure sale. The only possible interest acquired by the plaintiff at that sale was the right to redeem the property from the State of California. If this right did not rise to the level of a property interest, i.e., an interest protected under state law, then plaintiff would have no basis for maintaining the instant quiet title action. If, however, the right of redemption at stake here is a valuable right to property, and we hold that it is, then there is not only standing for plaintiff's action but there is also a right to property to which the Government's tax liens attached.

The California cases cited by plaintiff do not support his position that a right of redemption does not constitute property or rights to property within the meaning of Section 6321 of the Internal Revenue Code. See Potter v. County of Los Angeles, 251 Cal. App. 2d 280, 59 Cal. Rptr. 335 (1967); Mercury Herald Co. v. Moore, 22 Cal. 2d 269, 138 P.2d 673 (1943); Helvey v. Bank of America, 43 Cal. App. 2d 532, 111 P.2d 390 (1941). These cases seem to hold that the right of redemption under California law is nothing more than a personal privilege granted by statute to a delinquent taxpayer to allow him to divest the State's title in tax deeded property upon payment of all delinquent taxes. From these cases appellant argues that the right of redemption is neither a vested nor a substantial right and, accordingly, cannot meet the definitional requirements of Section 6321 of the Internal Revenue Code. We agree with the District Court's conclusion that such reasoning is myopic. Simply because an interest is classified as a "privilege" under state law should not exempt such interest from attachment by a federal tax lien if such interest represents an economic asset in the sense that it has pecuniary worth and is transferable, so that a claim can be enforced against it. As previously discussed, the interest in the instant case meets this definition and should, therefore, be considered a property interest within the meaning of Section 6321 of the Internal Revenue Code.

Second, whether the District Court correctly determined that the United States properly exercised its right of redemption with respect to the subject real property and, thereby, acquired all rights, title and interest in the property free of any claims thereto of the plaintiff.

Section 7425(b) expressly provides that a nonjudicial sale of property on which the United States has a lien, or a title derived from the enforcement of a lien, shall be made "subject to and without disturbing such lien or title " if the United States is not given notice of such sale in the manner prescribed in subsection (c)(1).6 (Emphasis added.) The record here shows that on April 15, 1981, the Internal Revenue Service timely redeemed the subject real property pursuant to Section 7425 of the Internal Revenue Code and further shows that the Government duly recorded its certificate of redemption on April 17, 1981, with the Office of the County Recorder in Los Angeles, California. Thereafter on May 28, 1981, there was a foreclosure of the first deed of trust and a nonjudicial sale of the property to the plaintiff's assignee. It is clear from the record that no notice of the May 28 sale as provided by Sections 7425(b) and (c), was given to the Internal Revenue Service. It therefore follows, under Section 7425(b), that the title acquired by the United States upon its redemption of the property was not disturbed by the subsequent foreclosure and sale of the property.

Third, whether the United States, in exercising its right of redemption, tendered the proper amount to plaintiff.

With respect to the amount to be paid by the United States upon exercise of its right of redemption, Section 7425(d)(2) provides that the redemption price shall be the amount prescribed by subsection (d) of Section 2410 of Title 28 of the United States Code.7 In addition, Treasury Regulations on Procedure and Administration (1954 Code) Sec. 301.7425-4(b)(iv) (26 C.F.R.) provide that with respect to a redemption made after December 31, 1976, the redemption price shall include the amount of payment made by a purchaser or his successor in interest after the foreclosure sale to a holder of a senior lien.

The United States upon redemption of the property, following the December 16, 1980 foreclosure and sale, tendered to plaintiff the sum of $24,136.92. This amount represented the amount paid by the purchaser at the foreclosure sale ($23,670) plus interest thereon from the date of the sale to the date of redemption. Plaintiff contends that the redemption price paid by the United States was inadequate. He asserts in this regard that following the foreclosure sale he expended some $16,000 for repairs to the property and further asserts that he paid $60,000 to obtain the beneficial interest in the first deed of trust, a senior encumbrance on the property which was not extinguished by the foreclosure sale. The United States, so plaintiff contends, was required to reimburse him for these two payments when it redeemed the property.

Plaintiff's allegations regarding amounts he expended for repairs and for satisfaction of a senior lien involve factual matters which cannot be resolved from the record as it now stands. The case was disposed of on the basis of the parties' cross motions for summary judgment. Consequently, the District Court held no evidentiary hearing with respect to plaintiff's allegations regarding the inadequacy of the amount tendered by the Government and made no specific findings regarding such allegations. In these circumstances, the question as to the correctness of the amount tendered by the Government cannot properly be resolved on appeal. The matter should be remanded to the District Court for further proceedings.

For the reasons stated above, the judgment of the District Court is affirmed, except as to the matter of the correctness of the amount tendered by the United States. As to such matter, the case is remanded to the District Court for further proceedings.