Kenney

This case concerns U.S. Government (“Government”) tax liens on the proceeds of the sale of a house owned by George Kenney (“Kenney”) and his former wife, Donna. They owned the house as joint tenants. The Government liens extend only to Donna’s interest in the proceeds. Over the years Kenney had made the entire payments on the notes secured by deeds of trust on the property, both his share and Donna’s share. He contends that pursuant to oral agreements with Donna those payments of her share were to be applied to diminish Donna’s interest in the house, and by the time the Government liens attached Donna had no remaining interest in the house or the proceeds of the sale of the house. Kenney and the Government also disagree on how Kenney should receive equitable subrogation for the loan payments he made; at issue is the amount of the proceeds to which the Government is entitled and whether Kenney should receive interest on his equitable subrogation. There is also an issue of entitlement to litigation costs and attorneys fees. We have jurisdiction under 28 U.S.C. § 1291 .

I. Factual Background

In December 1978, Kenney and Donna purchased a house in Fremont, California. Kenney and…