___________ No. 95-1185

___________ Ann H. O'Hagan, * * Appellee, * * Appeal from the United States v. * District Court for the * District of Minnesota. United States of America, * * Appellant. *

___________ Submitted: November 13, 1995 Filed: June 12, 1996

___________ Before BEAM, HEANEY, and MORRIS SHEPPARD ARNOLD, Circuit Judges.

___________ BEAM, Circuit Judge.
Ann O'Hagan (Mrs. O'Hagan) filed this action pursuant to sectio n 7426 of the Internal Reven ue Code (IRC) to enjoin the Internal Revenue Service (IRS or government) from selling her husband's (Mr. O'Hagan) interest in real property which she owned with him as a joint tenant. After the IRS administratively levi ed upon Mr. O'Hagan's property interest in an effort to collect his delinq uent taxes, the district court enjoined the IRS from selling Mr. O'Hagan's interest. The IRS appeals, claiming that th e district court lacks jurisdiction to issue the p reliminary injunction. We affirm in part and reverse in part.

I. BACKGROUND

The f acts in this case are not in dispute. The O'Hagans have bee n married since 1988. They own real property, which is their

### -2-

princi pal place of residence, in Sunfish Lake, Minnesota (the homestea d property). The O'Hagans have owned the homestead property at all time s during their marriage as joint tenants with a right of survivorship. In 1988, the O'Hagans ob tained a home equity loan in the amount of $400,000. Mr. and Mrs. O'Hagan signed the note, obligating each of them to repay the $400,000. The bank received a mortgage encumber ing by lien each O'Hagan's interest in the homestead property.
In the early 1990s, the government i mposed an assessment against Mr. O'Hagan for unpaid fe deral income tax liabilities incurred in 1986, 1987, 1989, and 1991. Although Mr. O'Hagan owes the government $747,761.69 in unpaid taxes, Mrs. O' Hagan has not been assessed any income tax liability and is not obligated to pay any part of her husband's taxes.

On June 8 , 1994, the government seized the homestead property after having levied upon Mr. O'Hagan's interest in that property pursuant t o section 6331 of the IRC. The government then advertised the sale of Mr. O'Hagan's interest in the real estate, which sal e was to occur on November 21, 1994. Mrs. O'Hagan filed a motion for a temporary restraining order and preliminary injunction to enjoin the sale of Mr. O'Hagan's interest in the ho mestead property. The government challenged the district court' s jurisdicti on based on the Anti-Injunction Act, 26 U.S.C. § 7421. Th e district court determined that it had jurisdicti on, granted Mrs. O'Hagan's motion for a preliminary injunction, and enjoined the forced sale of Mr. O'Hagan's interest. The government now brings this interlocutory appeal pursuant to 28 U.S.C. § 1292(a).

II. DISCUSSION

Th e question before us is whether the district court has subjec t matter jurisdiction to enjoin the government from selling Mr. O'Hagan' s interest in the homestead property. The government

### In Enochs , the Supreme Court held that federal courts have 1 

### jurisdiction to hear cases brought by an allegedly delinquent taxpayer in which the collection or assessment of taxes would be enjoined because: (1) the government cannot prevail on the merits even if the facts and law are examined in the light most favorable to the government; and (2) equity jurisdiction would otherwise exist. 370 U.S. at 7-8. As we have often noted, we review judgments , not the text 2 

### of opinions, and thus may affirm on any ground supported by the record regardless of whether it was argued below or considered by the district court. See , e.g. , African American Voting Rights Legal Defense Fund, Inc. v. Villa , 54 F.3d 1345, 1356 (8th Cir. 1995), cert. denied , Tyus v. Bosley , 116 S. Ct. 913 (1996); United States v. Sager , 743 F.2d 1261, 1263 n.4 (8th Cir. 1984), cert. denied , 469 U.S. 1217 (1985). In the present case, however, the district court expressly recognized both the statutory exception and the Enochs exception and the government argued in its opening brief that Mrs. O'Hagan did not satisfy either exception.
-3- contends that the district court lacks subject m atter jurisdiction because the Anti-Injunction A ct precludes such an injunction and that none of the exceptions to that Act apply in the present case. After reviewing th e litany of applicable state and federal laws, we conclude that the district court has jurisdiction to enjoin the sale of Mr. O'Hagan's right to use an d occupy the homestead property, but cannot enjoin the government fro m conveying Mr. O'Hagan's survivorship interest.

The Anti-Injunction Act (the Act) prohibits federal courts fro m entertaining any acti on filed to restrain the assessment or collection of taxes. 26 U.S.C. § 7421(a). The primary purpose of the Act is t o facilitate the expeditious collection of taxes by the government. Se e Enochs v. Williams Packing & Navigation Co., Inc. , 370 U.S. 1, 7 (1962). The Act, however, con tains several exceptions. 26 U.S.C. § 7421(a). The distri ct court recognized both a statutory exception, 26 U.S.C. § 7426(b)(1) , and a judicially crafted exception, Enochs , 370 U.S. at 6-7, 1 to th e Anti-Injunction Act. Although the district court relied on th e judicially created ex ception set out in Enochs to support its preliminary injunction, to the ex tent we affirm its decision we rely, instead, on the statutory exception set out in section 7426. 2

### -4- The statutory exception allows a person, other than the delinquen t taxpayer, who claims an interest in or lien on t he property levied upon by the government to bring a wrongful levy action. 26 U.S.C. § 7426(a). Thi s action may be brought without regard to whether the property has bee n surrendered to or sol d by the government. Id. This statutory exception, which expressly gives the district court jurisdiction to grant injunctive relief, provides:

If a levy or sale would irreparably injure rights in property whic h the court determines to be superior to rights of th e Uni ted States in such property, the court may grant a n inj unction to prohibit the enforcement of such levy or t o prohibit such sale.

26 U.S.C. § 7426(b)(1). To satisfy this statutory exception, therefore, Mrs. O'H agan must demonstrate that: (1) she has a right in the levie d property superior to that of the government; and (2) her right would b e irreparably injured by the forced sale of the levied property.

A. Mr. O'Hagan's Rights in the Homestead Property

In order to analyze whether Mrs. O'Hagan has a right superior t o that of the gov ernment in the levied property, we must first determine Mr

. O'Hagan's interest in the homestead property. I t is well established that in a levy proceeding, the IRS "`steps into the t axpayer's shoes.'" United States v. Rodgers , 461 U.S. 677, 691 n.16 (1983) (quoting 4 Boris I

. Bittker, Federal Taxa tion of Income, Estates and Gifts ¶ 111.5.4. at 111- 102 (1981)). The administrative levy statute only authorizes the IRS to "levy upon all property and rights to property" belonging to the delinquen t taxpayer, except certain exempt property which is not at issue in

### -5-

the present case. 26 U.S.C. § 6331. In levying upon Mr. O'Hagan' s intere st in the homestead property, however, the government could no t acquire more property rights than those already held by Mr. O'Hagan.

We l ook to state law to define Mr. O'Hagan's interest in th e homestead property. United States v. National Bank of Commerce , 472 U.S. 713, 722 (1985) (stating that the IRC "`creates no property rights bu t merelyattaches consequences, federally defined, to rights created under state law'") (quoting United States v. Bess , 357 U.S. 51, 55 (1958)). In the p resent case, it is undisputed that Mr. O'Hagan owns the homestea d property in joint ten ancy with Mrs. O'Hagan. Accordingly, we look to the applicable state law--in this case Minnesota, where the real property is locate d--to define the property rights upon which the government ha s levied.

Un der Minnesota law, Mr. O'Hagan has an undivided interest, as a joint tenant with Mrs. O'Hagan, in the property. As such, Mr. O'Hagan has
a right of survivorship to Mrs. O'Hagan's interest in the joint tenanc y propert y, as well as a present right to use and occupy the real estate

. See generally Hendrickson v. Minneapolis Fed. Sav. & Loan Ass'n , 161 N.W.2 d 688 (Minn. 1968). Moreover, a joint tenant generally has the right t o unilaterally sever the joint tenancy, so long as the joint tenant satisfie s

### Under Minnesota law, a severance of a joint tenancy is 3 

### legally effective only when: (1) the instrument of severance is recorded in the office of the county recorder or the registrar of titles in the county where the real estate is situated; or (2) the instrument of severance is executed by all of the joint tenants; or (3) the severance is ordered by a court of competent jurisdiction; or (4) a severance is effected pursuant to bankruptcy of a joint tenant. A decree of dissolution of marriage severs all joint tenancy interests in real estate between the parties to the marriage, except to the extent the decree declares that the parties continue to hold an interest in real estate as joint tenants. Minn. Stat. § 500.19, subd. 5 (1996 Supp.).
-6- at least one of the statutory methods for doing so. See Wendt v. Hane , 3 401

### A joint-tenant spouse who unilaterally severs a joint 4 

### tenancy in homestead property, however, would nevertheless be precluded from conveying any interest in that homestead property. Minn. Stat. § 500.19, subd. 4 (1996 Supp.); Minn. Stat. § 507.02. Moreover, severing the joint tenancy does not completely destroy the other spouse's survivorship interest because Minnesota provides statutory protection for a joint tenant's survivorship interest in homestead property. Minn. Stat. § 525.145 (1996 Supp.). According to the dissent, a spouse can unilaterally convey 5 

### homestead property, thereby severing a joint tenancy, simply by recording an instrument of severance pursuant to Minn. Stat. § 500.19, subd. 5. In a case strikingly similar to the one before us, Judge Kyle expressly rejected the dissent's construction of Minn. Stat. § 507.02. Marshall v. Marshall , 921 F. Supp. 641, 645-46 (D. Minn. 1995) ("To hold that one spouse could deprive the other spouse of this interest by recording a deed after having unilaterally and wrongfully sold the homestead would defeat [the purpose of the homestead law, which is to create a property interest that could not be conveyed without the consent of both spouses]"), vacated on other grounds , 921 F. Supp. 647 (D. Minn. 1996). In light of the clear statutory language prohibiting a unilateral conveyance of homestead property without the written consent of both spouses, Minnesota case law holding that a conveyance of homestead property without the signature of both spouses is void, and the public policy justification for granting extra protection to homestead property, we leave it to Minnesota courts to adopt the dissent's counterintuitive construction of Minn. Stat. § 507.02 if they so chose. See , e.g. , Dvorak v. Maring , 285 N.W.2d 675, 677 (Minn. 1979); Renneke v. Shandorf , 371 N.W.2d 12, 14 (Minn. Ct. App. 1985).
-7- N.W.2d 457, 459 (Minn. Ct. App. 1987). Once the joint tenancy has bee n severed it converts into a tenancy in common and extinguishes the othe r joint tenant's right of survivorship. See Hendrickson , 161 N. W.2d at 690- 4 91.

Mr. O'Ha gan, however, may not convey his interest in the homestea d property without Mrs. O'Hagan's consent. Although joint 5

### -8-

tenants are generally free to convey their interest in the joint tenancy, Minn. Stat . § 500.19, subd. 4 (1996 Supp.), spouses who own homestea d proper ty--as joint tenants or as tenants in common--are prohibited fro m
con veying their interest, except to the other spouse, without the othe r spouse's consent, id. ; Minn. Stat. § 507.02. Furthermore, Mr. O'Haga n would normally have t he right to unilaterally sever the joint tenancy and devise his remainder interest subject to a life estate in Mrs. O'Hagan, se e Minn. Stat. § 525.145 (1996 Supp.); but as discussed below, Mr. O'Haga n does not have the right to unilaterally sever the joint tenancy in thi s particular case. Therefore, Mr. O'Hagan and Mrs . O'Hagan, in effect, each have a life estate with a vested remainder interest. In addition to imposing limitations upon the transfer of homestea d prope rty, Minnesota law does not provide for an absolute right t o unilaterallysever a joint tenancy. The Supreme Court of Minnesota ha s expressly recognized that a joint tenant may be prevented from unilaterall y severing a joint tenancy when the other joint tenant has detrimentall y relied on its existence. Hendrickson , 161 N.W.2 d at 692. As explained in that case:

If the survivor had taken some irrevocable action in reliance upon the creation or existence of the joint tenancy , or if some consideration was given or received when the joint tenancy was created, it would seem reasonable to insist that unilatera l act ion would not be effective to deprive the passive join t tenant of the rights so created.

Id. Alth ough sparse, the record in the present case, along with commo n
sense and Minnesota law, support our conclusion that Mrs. O'Hagan relied upon the existence of a joint tenancy when she obligated herself to repay the entire amount of the mortgage note. The rec ord demonstrates that Mrs. O'Hagan, through her attorney, argued to the district court that she signe d the mortgage note in reliance upon the existence of a joint tenancy

. Appellee's App. at 6-9. She specifically referred to the above language in the

### -9-

Hendrickson case and provided the district court with copies of the deed that originally created the joint tenancy and referred to the $400,000 hom e equity loan, dated August 24, 1988, which was signed by Mr. and Mrs

. O'Hagan. Moreover, common sense dictates that M rs. O'Hagan would not have agreed to be personally liable for the full amount of the note if sh e thought she might ultimately have only a one-hal f interest in the property she pledged as security. At a minimum, Mrs. O'Hagan certainly relied on the fact that it would be her husband making the decision to sever th e joint tenancy, not the government or a complete stranger.
Minnesota law also supports Mrs. O'H agan's reliance on the existence of a vested remainder interest. Minnesota's law on the descent o f homestead interests guarantees that Mrs. O'Hagan will inherit her husband' s interest in the homestead property if no children, or issue of decease d children, are alive at the time of his death, regardless of how Mr. O'Haga n devises his interest. See Minn. Stat. § 525.145 (1996 Supp.). At the ver y least, Mrs. O'Hagan is guaranteed a life-estate in the homestead property. Id. F urthermore, Mr. O'Hagan would not have been allowed to bring a par tition action under Minn. Stat. § 558.01. The Supreme Court o f Minnesota long ago held that the law will not allow a spouse with a n interest in homestead property, either as a tenant in common or a join t tenant, to do indirectly through a suit for partition something that the spouse could not do d irectly through sale or conveyance. Grace v. Grace , 104 N.W. 969, 971 (Minn. 1905).

Therefo re, under the facts of this case, Mr. O'Hagan does not hav e the right to unilaterally sever the joint tenancy. Accordingly, neither the go vernment nor a third-party purchaser could unilaterally sever th e joint tenancy. Witho ut the right to unilaterally sever the joint tenancy
or convey the homestead property, Mr. O'Hagan possesses: (1) a presen t right to use and occupy the property; and (2) a right of survivorship to Mrs. O'Hagan's interest.

### -10- B. Right to Use and Occupy the Property

We must determine next whether Mrs. O'Hagan possesses an interes t superior to that of the government in Mr. O'Hagan's right to use and occup y the property. We conclude that she does.

At least one court, in addition to t he district court in the present case, has held that t he IRS cannot convey a property right that could not have been conveyed un der the applicable state law. Elfelt v. Cooper , 485 N.W.2d 56 (Wis. 1992), cert. denied , 507 U.S. 908 (1993). In a cas e factually similar to the one before us, the Wisconsin Supreme Court held that because the tax delinquent spouse would not have been able to convey his interest in the homestead property under Wisconsin law, "the IRS, whic h merely steps into [th e tax delinquent spouse's] shoes, also cannot convey anyinterest of the jointly held spousal homestead without either [th e innocent spouse's] consent or court action." Id. at 62. The cour t concluded that "any conveyance of that interest by the IRS without [th e innoce nt spouse's] consent and without court action is ineffective" an d consequently the third-party purchasers "did not obtain and do not now own
an interest" in the homestead property. Id. ; see also Rodgers , 461 U.S. at 720 n.11 (Blackmun, J., concurring and dissenting) (stating that even if the tax lien could attach to one spouse's interest in homestea d proper ty, "the traditional rule that the lienholder gains only thos e propertyrights possessed by the debtor would have precluded a sale")

. Similarly in the present case, the government only acquires the property interests, as defined by Minnesota law, held by Mr. O'Hagan. See , e.g. , National Bank of Commerce , 472 U.S. at 722. Bec ause Mr. O'Hagan could not have conveyed any interest in the homestead property without Mrs. O'Hagan' s consent, see Minn. Stat. § 507.02, the government cannot convey Mr

. O'Hagan's interest to a third-party purchaser. Thus, under Minnesota law, Mrs. O'Hagan has a superior right in the propert y because she can prohibit any

### -11-

conveyance of Mr. O'Hagan's interest in the homestead property simply by withholding her consent. Id.
According to the government, it has the authority to convey Mr

. O'Hagan's interest under the applicable federal statutes in the IRC, which , it argues, preempt contrary state law. The gove rnment relies primarily on two federal laws that set out an exclusive list of property that is exempt from a federal tax levy. See 26 U.S.C. § 6334; 26 C.F.R. § 301.6334-1(c). The govern ment also relies on our prior decision in Herndon v. Unite d Sta tes , 501 F.2d 1219 (8th Cir. 1974) to support its contention. Th e governm ent's reliance on these authorities, however, is misplaced fo r several reasons. First, we agree with the government that Mr. O'Hagan's interest in the homes tead property is not exempt from a federal tax levy. The refore, neither the statute nor the treasury regulation cited by th e government apply in t he present case. Second, in Herndon we held that an Arkans as homestead law that purported to exempt homestead property fro m legal process, including liens, could not be used to prevent the governmen t from levying upon and selling a delinquent taxpayer's interest in homestea d prop erty. Id. In contrast, the homestead statute applicable to th e present case actually defines the nature of the property interest itself (i.e., that it is inalienable without the consent of the other spouse)

. Simply put, Mr. O'Hagan has a property right that is limited by the state' s bar against conveyance during the lifetime of his spouse, unless, o f
course , she consents. Finally, the Minnesota statute that exempt s homestead property from the collection of certain debts--which is analogou s to the homestead exemption statute analyzed in Herndon --is not before us in the present case. See Minn. Stat. § 510.01 (1996 Supp.).

Even if the government could convey Mr. O'Hagan's interest unde r federal law, Minnesota law nevertheless defines the extent of that propert y right. W ithout the right to sever the joint tenancy or to convey hi s interest in the homestead property, if lawfully

### -12-

severed, Mr. O'Hagan' s right to use and occupy the property is a limited, personal right of pos session. See Elfelt , 485 N.W.2d at 62 (stating that "the statutory requir ement of spousal consent illustrates that the nature of the property inter est owned by a spouse in a jointly held homestead is a limited interest"). Neither the government nor a third-party purchaser would be able to exercise this limited right of possession because under Minnesota law only the spouses have this possessory right in homestea d property. See Minn. Stat. § 507.02; see generally United States v. Certai n Real Property Located at 2525 Leroy Lane , 910 F.2d 343, 351 (6th Cir. 1990 ) (stating that "the Government may properly acqui re only the interest which Mr. Marks held as cotenant by the entireties . . . [but] cannot occupy the position of Mr. Marks in the entireties estate, since the estate is founde d
on marital union, and the Government obviously cannot assume the role of spouse to Mrs. Marks"), cert. denied , Marks v. U nited States , 499 U.S. 947 (1991)

. Therefore, Mr. O'Hagan's possessory interest in the homestea d property "wears out" when it is held by another party. This would seem to be the precise scenario contemplated by the phrase that the governmen t "`steps into the taxpayer's shoes but must go barefoot if the shoes wear out.'" Rodgers , 461 U.S. at 691 n.16 (quoting 4 Bittker, ¶ 111.5.4 at 111

- 102).
During h er lifetime, Mrs. O'Hagan retains the right to exclude al l people, other than Mr. O'Hagan, from the homestead property. This right derives from the Minnesota statute addressing ho mestead property and would apply equally to joint tenants and tenants in common. Minn. Stat. § 507.02. Mrs. O'Hagan's right to exclude all persons other than Mr. O'Haga n from using or occupying the homestead property d emonstrates that her right is superior to that of the government or a third -party purchaser who would be attempting to exer cise a possessory right that is limited and personal to Mr. O'Hagan. Ther efore, Mrs. O'Hagan satisfies the first prong of the statutory exception to the Anti-Injunction Act by demonstrating that she has a right superior to that of the

### We emphasize that even the judicial lien foreclosure 6 

### proceeding set out in 15 U.S.C. § 7403--which might enable the government to sell the entire homestead and compensate the innocent spouse with monetary damages--allows the supervising court equitable discretion as to whether it would authorize the transaction. See Rodgers , 461 U.S. at 706; United States v. Bierbrauer , 936 F.2d 373, 375 (8th Cir. 1991).
-13- government in Mr. O'Hagan's right to use and occupy the homestead property

.

The second prong of the statutory exception to the Anti-Injunctio n Act requires Mrs. O'Hagan to demonstrate irrepar able injury resulting from the forced sale of Mr. O'Hagan's interest in the homestead property

. Allowing any person other than Mr. O'Hagan to exercise his right to use an d occupy the homestead property would destroy Mrs. O'Hagan's right to exclud e all persons other than Mr. O'Hagan from the home stead property. Moreover,
as a practical matter, the sale of Mr. O'Hagan's interest would undoubtedl y dimini sh the value of Mrs. O'Hagan's property interest. Mor e fundamentally, moneta ry relief fails to provide adequate compensation for
an i nterest in real property, which by its very nature is considere d unique. See , e.g. , Shaughnessy v. Eidsmo , 23 N. W.2d 362, 368 (Minn. 1946) (stating that when aninterest in land is involved, the common-law remedy is deemed to be inadequate); Strangis v. Metropo litan Bank , 385 N.W.2d 47, 48 (Minn. Ct. App. 1986) (stating that the property owners "would suffer irreparable harm by the foreclosure of the mortgage on their homestea d [because] [r]eal property is unique, which money damages may not adequatel y compensate "). Thus, Mrs. O'Hagan would suffer irreparable injury by the 6 proposed forced sale of Mr. O'Hagan's possessory interest in the homestead proper ty. Accordingly, we conclude that the district court ha s jurisdiction to enjoin the sale of Mr. O'Hagan's right to use and occupy the homestead property.

### -14- C. Right of Survivorship

We must n ext analyze whether Mrs. O'Hagan's interest is superior to that of the government with regard to Mr. O'Haga n's right of survivorship. We con clude that although Mrs. O'Hagan could probably prohibit th e conveyance of Mr. O'H agan's right of survivorship, she cannot demonstrate irre parable injury. Thus, the government can attempt to convey thi s interest, subject to the limitations discussed below.

As earlier noted, Mrs. O'Hagan can prohibit the conveyance of a n interest in the homestead property under Minnesota law. See Minn. Stat. § 507.02. Mrs. O'Hagan has failed to demonstrate how the conveyance of he r husban d's survivorship interest would cause her irreparable injury. W e recogni ze that the applicable Minnesota statutes demonstrate a publi c policy in favor of protecting a spouse's continued occupancy of th e homestead. Hendrickson , 161 N.W.2d at 691 (citing Minn. Stat. §§ 507.02 & 525.145(1)). This public policy, however, "does not necessarily apply to the remainder interest, which can be disposed of without adversel y affecting the right o f the surviving spouse to continue in possession and
en joyment for so long as she might live." Id. In the present case , there fore, the government can levy upon and attempt to convey a singl e straw from the proverbial "bundle of interests," namely, Mr. O'Hagan' s right of survivorship to Mrs. O'Hagan's interest in the homestead property

.

In a ttempting to convey this solitary interest, however, th e government must clearly articulate the precise nature of the interest in the notice of sale. See 15 U.S.C. § 6335(b) (stating that "[s]uch notice shall spe cify the property to be sold, and the time, place, manner, an d conditions of the sale thereof"). First, the government must make it clea r that the onlyinterest in the homestead property subject to sale is Mr

. O'Hagan's survivorship interest. The third-party purchaser, in fact, woul d simply be

### Furthermore, neither the government nor a third-party 7 

### purchaser would acquire Mr. O'Hagan's statutorily protected right of survivorship in the homestead property--e.g., to a life estate--because this protection is limited to a surviving spouse . Minn. Stat. § 525.145 (1996 Supp.). This anomaly would not occur under the common-law rule, 8 

### which assumes that a conveyance severs a joint tenancy because the act of conveyance destroys at least one of the four unities (time, title, interest, or possession). In abrogating the common-law rule, Minnesota has apparently replaced the act of conveyance with the act of recordation as the triggering event that severs a joint tenancy.
-15- gamblin g that Mrs. O'Hagan will predecease Mr. O'Hagan because if Mr

. O'Hagan were to die first, the right acquired by the third-party purchaser would vanish in its entirety. 7

Second, w e emphasize, as the government must in the notice of sale, that this solitary interest is subject to a further, and substantia l limita tion. Ironically, once Mr. O'Hagan's right of survivorship i s conveyed by the government to a third-party purchaser, that interest canno t be rec orded because recordation would sever the joint tenancy, thereb y extinguishing the very right of survivorship tha t was acquired. See Minn. Stat. § 50 0.19, subd. 5 (1996 Supp.). Moreover, as discussed above, Mr. 8 O'Hagan does not have the right to unilaterally sever the joint tenancy an d thu s neither the government nor a third-party purchaser would have tha t right.
Finally, we note that the third-party purchaser would acquire Mr

. O'Hagan's obligations under the mortgage if Mrs. O'Hagan were to predeceas e Mr. O'Hagan. This fact must also be made clear to potential purchasers. Theref ore, it is vital that the government recognize and accuratel y articulate the precise, and limited, nature of the interest it would b e conveying in the pres ent case. See Herndon , 501 F.2d at 1223 (requiring,
as a matter of fairness under the circumstances, that the government advis e all prospective purchasers that the real propert y is being sold subject to the

### Without deciding whether it is essential to this type of 9 

### case, we conclude that the four factors normally considered in a preliminary injunction claim also have been satisfied regarding the sale of Mr. O'Hagan's right to use and occupy the homestead property. Dataphase Sys., Inc. v. C L Sys., Inc. , 640 F.2d 109, 114 (8th Cir. 1981) (en banc). In Dataphase , we held that a court considers four factors when evaluating a motion for a preliminary injunction: (1) whether there is a substantial threat that the plaintiff will suffer irreparable harm if the relief is not granted; (2) whether the irreparable harm would outweigh any potential harm in granting the preliminary injunction; (3) whether there is a substantial probability that the plaintiff will prevail on the merits; and (4) the public interest. Id.
-16- homestead interest inthe other spouse and that the government inform all prospective purchasers about the litigation in the case). Although w e believe it is highly improbable that a fully-informed third-party purchase r would buy such a limited property right, we acknowledge that the governmen t does have a valid lien on Mr. O'Hagan's survivorship interest, which, whil e held b y the government, provides protection for the government withou t aff ecting Mrs. O'Hagan's interests. See William T. Plumb, Jr., Federa l Liens and Priorities--Agenda for the Next Decade II , 77 Yale L.J. 605, 638 (1968) (suggesting "t hat the tax lien, if and when it cannot be satisfied from ot her sources, should be fastened to the property by appropriat e judicial proceedings within the period of limitations, with actua l enforcement by sale deferred until the survivorship contingency i s resolved").

Lastly, w e are not called upon to resolve the merits of the present case, except to the extent necessary to determin e whether Mrs. O'Hagan has satisfied the statutory exception to the Anti-Injunction Act. We conclude 9 that Mrs. O'Hagan has adequately demonstrated that the district court has jurisdiction to issue a preliminary injunction to prevent the sale of Mr.

### Our conclusion is consistent with the Supreme Court's 10 

### decision in Rodgers , in which the Court held that homestead property could be sold--pursuant to the judicial lien foreclosure procedure under section 7403 of the IRC--to satisfy tax obligations owed by only one spouse. The Court also acknowledged, however, that its decision did not affect the traditional rule that the homestead property rights of an unindebted spouse could not be sold pursuant to an administrative levy, such as the IRS is attempting here, to satisfy the other spouse's tax liability. Rodgers , 461 U.S. at 702-03 n.31.
-17- O'Hagan's right to use and occupy the homestead property. We do no t 10 express any

### -18-

opinion as to the likely outcome of a judicial l ien foreclosure proceeding under s ection 7403 of the IRC. See Rodgers , 461 U.S. at 703-12; Unite d States v. Bierbrauer , 936 F.2d 373, 375 (8th Cir. 1991).

III. CONCLUSION

The district court has subject matter jurisdiction to enjoin th e for ced sale of Mr. O'Hagan's right to use and occupy the homestea d property, but cannot enjoin the government from attempting to sell Mr

. O'Hagan's right of survivorship, subject to the limitations set forth in this o pinion. Accordingly, the district court's order granting Mrs

. O'Hagan 's motion for a preliminary injunction is affirmed in part an d reversed in part.
MORRIS SHEPPARD ARNOLD, Circuit Judge, dissenting.
I respectfully dissent.

The c ourt decides this case on a ground never presented to it , namely, that the taxpayer's inability to alienate his interest in homestea d propertywithout Mrs. O'Hagan's consent gives her a right in property , superior to the government's interest, that will be irreparably damaged by
a sale of the taxpayer's property. Mrs. O'Hagan did assert below and in this co urt that the taxpayer's interest was not alienable without he r consent, but not in order to demonstrate that she had an interest in the taxpayer's property superior to the government's . Rather, she did that in
an effort to show that her right to veto, as it were, any alienation by th e

### -19-

taxpayer meant that the government could not convey title to the taxpayer' s interest at a tax sale.

In oth er words, her argument was that the government can by lev y acquire no more rights in property than the taxpayer had, and, since the taxpay er could not alienate his interest without his wife's consent , neither can the government. See , e.g. , United S tates v. Rodgers , 461 U.S. 677, 690-91 (1983). That argument itself has a certain syllogistic appeal and pre sents a nice question, but, as I understand it, it is a questio n that the court does not decide today. It is, moreover, entirely irrelevan t to the case.

The distr ict court accepted Mrs. O'Hagan's argument and granted her motion for an injunction based on Enochs v. Williams Packing and Navigatio n Company, Inc. , 370 U.S. 1 (1962). That case established the principle tha t an injunction against a tax levy and sale can issue if (1) the government cannot prevail on the merits even if the facts a nd law are examined in the light most favorable to the government and (2) irreparable harm to th e property owner would ensue if the sale were allo wed to proceed. Id. at 6- 7. But Enochs has no application to this case.

First of all, the benefit of Enochs may extend only to the taxpayer, not to af fected third parties. In fact, Mrs. O'Hagan conceded thi s proposi tion at oral argument in the district court. Enochs requires , moreover, an inquiry into whether the government can prevail on the merits of the tax claim, not whether the taxpayer has any interest in the propert y that can be levied on and sold. Id. at 7. The district court therefore focused on the merits of the wrong issue. The relevant question unde r Enochs is whether the taxpayer might conceivably owe taxes, and it does no t seem to have been con troverted that the taxpayer in this case owes taxes. The district court therefore erred in relying on Enochs as

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a way to overcome the prohibition of the Anti-Injunction Act, 26 U.S.C

. § 7421(a).

Because it found Enochs applicable a nd satisfied, the district court did not address the question of whether 26 U.S.C. § 7426(b)(1) migh t provi de a basis for an injunction. Indeed, this possibility was neve r mentioned until the government itself raised it in its brief filed i n response to the plaintiff's brief in support of her motion for a n injunction below. Even on appeal the plaintiff makes only one reference in her br ief to this statutory provision, and then in an attempt t o demonstrate what is plainly not so, namely, that the district court relied
on i t in deciding the case. And, more to the point, the plaintiff ha s
never made an effort to identify what interest she had in the taxpayer's prope rtythat was superior to the government's, much less has she eve r asserted that that very interest was the taxpaye r's inability unilaterally to convey his interest in the residence. This last is a theory that the court constructed on its own.

The court therefore decides this cas e on a principle never presented to it and without giv ing the government the opportunity to convince it to the contrary. Perhaps that is partly because th e government, in an effort to re but Mrs. O'Hagan's argument that it could not sell the taxpayer' s interest in the residence, has already advanced its best argument to the contr ary, namely, that the district court misconstrued the relevan t Minnesota statutes. But there may well be other arguments that th e government could have advanced against the court's holding, and at th e least it should have been given a chance to make them. In any case, I suggest with respect that the court has indeed misread the applicabl e Minnesota law.

In my view, Minnesota statutes do give a spouse who jointly own s hom estead property the right unilaterally to sever the joint tenancy b y conveyance. That power is conferred by the portion of

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Minn. Stat. Ann. § 507.02 that allows joint owners of homesteads to make "a severance of a joint tenancy pursuant to section 500.19," that is, by simplyrecording an instrument of severance (presumably either a deed to
a third party or to the grantor) in an appropriate governmental office

. See Minn. Stat. Ann. § 500.19.5(1). Such an instrument is "valid without the signatures of both spouses." See Minn. Stat. Ann. § 507.02.

Section 507.02 was amended in 1979 specifically to allow suc h
se verances, perhaps partly in response to Hendrickson v. Minneapoli s Fed eral Savings and Loan Association , 161 N.W.2d 688, 691 (Minn. 1968) , which had held, construing the former version of the statute, that a joint tenancy i n homestead property could not be severed by a conveyance to a third par ty by one of the cotenants. The provisions of Minn. Stat. Ann

. § 500.19.4(a) are not to the contrary, because t hey must be taken to refer only to those portions of § 507.02 that require the consent of a spouse to
a conveyance. The first paragraph of § 507.02 allows unilateral severance ; it is the second para graph that requires spousal consent to certain kinds of conveyances. Any other construction of the relevant statutes woul d render the first paragraph of § 507.02 difficult to comprehend.

Plaintiff evidently believes (and perhaps the court does too) tha t § 507.02 merely confers on a joint owner of a ho mestead property the power to convert the joint tenancy into a tenancy in common. That is certainly
one way of severing a joint tenancy, or one ultimate result to which a severance may lead. But the statute speaks gene rally of a right to sever, and the Minnesota cases quite clearly recognize, as do cases from othe r common-law jurisdictions, that one way to sever a joint tenancy is for one cotenant t o convey his or her interest to a third party. See , e.g. , Application of Gau , 41 N.W.2d 444, 447 (Minn. 1950). If the legislature had inte nded the scope of the statute to be as narrow as the plaintif f urges, it could easily have said so. It did not.

### -22- The court holds that even if the taxpayer had a unilateral right to alienate his interest in the jointly held homest ead, that general right is restrained by the principles announced in Hendrickson . But that case held , at most, in relevant part, that the survivorship feature of a joint tenanc y could not be destroyed by the unilateral act of one joint tenant if anothe r tenant had somehow acted in reliance on the continuing existence of that survivors hip feature. Hendrickson , 161 N.W.2d at 692. There is a goo d argument that this is only dictum : The Minnesota Supreme Court said simpl y that "it w ould seem reasonable to insist" that this was so, id. Bu t assumi ng arguendo that the court correctly describes the holding i n Hendricks on , it is an extraordinary holding indeed. In fact, it i s evidently unique.

The or dinary rule is that joint tenants take the risk that thei r cotenant w ill alienate his or her interest and destroy their right o f survivorship. This circumstance alone provides some basis for believing that the Minnesota Supreme Court might overrule this aspect of Hendrickson if given the opportunity. Furthermore, the holding in Hendrickson wa s based in part on the fact that the version of § 507.02 in effect when the case was decided did not allow for unilateral se verance of a joint tenancy in a homestead property by deed to a third perso n. Since it now does, and since it contains no exceptions to the joint tenant's power to sever, the Minnesota Supreme Cou rt might well hold that the legislature had rejected the holding in Hendrickson

. Finally, an application of Hendrickson , as the court interprets it, will not lead to the result that Mrs. O'Hagan urges. We simply do not kno w whether M rs. O'Hagan would have signed the mortgage note if she ha d anticipated the destruction of the survivorship feature of her cotenancy with her husband. There is no evidence in the r ecord one way or the other
on this p oint, so there is no basis for the court's finding that Mrs

. O'Hagan acted in reliance on the continued existence of her right of

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survivorship. She has the burden of proof on th is issue, and it cannot be satisfied by conjecture. In fact, there is every reason to believe that she would have signed the note anyway, because, since the residence wa s homestead, if she sur vives her husband, she would be entitled to at least
a life estate, and perhaps to a fee simple, even without the presence of a survivorship feature in the ownership arrangem ent. See Minn. Stat. Ann. § 524.2-402(a). Evenif she eventually received only a life estate, that could be the near equivalent of a fee simple, depending on when Mrs

. O'Hagan became entitled to exclusive possession.

Mrs. O'Ha gan therefore has no right in the taxpayer's property that is superior to the government's. What is more, she cannot carry her burde n of showing that she w ill be irreparably injured by a tax sale. The court asserts t hat Mrs. O'Hagan has a right to exclude anyone but Mr. O'Haga n fromthe residence, and that the loss of this right occasioned by a sale to a third party is irreparable. But that proves too much, because such
a loss is attendant upon a sale of any commonly-held property interest

. The po ssibility that a cotenant might sell is a risk that inheres i n
coowne rship generally and freights the property rights of all cotenant s (except tenants by the entireties).

The c ourt also maintains that the sale of the taxpayer's interes t would undoubtedly dim inish the value of Mrs. O'Hagan's interest. This is
a dubious proposition at best. In fact, her interest might well becom e
mor e valuable, since it is not likely that any buyer of her husband' s interest would move in with her. Mrs. O'Hagan would thus have th e exclusive use of the premises, and she could invite her husband to liv e with her. Even if a sale did diminish the value of her property, tha t would sim ply give her a right to an action for money damages under 2 6 U.S.C. § 7426(b)(2)(C).

### -24- The court responds that monetary relief can never provide adequat e compensation for the loss of an interest in real property. But the court cites only Minnesota state-law authority for this proposition, and th e relevant question is the meaning of a federal st atute. No federal case is marshaled in support of this extraordinary proposition, because none can be. I n fact, the principle that the court adopts would evidently b e applica ble in every case under 26 U.S.C. § 7426 that involves a levy o n realty. This takes a greater bite out of the levy statute than Congress could possibly have i ntended. Reliance on a state-law equitable aphorism that supplies the basis for extraordinary relief in cases involving land contracts is simply not at home in a federal tax case.

The most fundamental objection, however, to the court's holding i s that the court fails to connect Mrs. O'Hagan's alleged injuries to th e all egedlysuperior property interest that she has, namely, her right t o restrain the taxpayer's alienation of his intere st. The injuries that the court ide ntifies are injuries to her right to possess and enjoy her ow n interest, not to her right to withhold consent to her husband's conveyance

. Such injuries do not qualify her for relief under the statute.

For the foregoing reasons, I believe that the district court erre d in granting the injunction prayed for in this suit. I would therefor e
reve rse the court's judgment and direct it to dismiss the motion fo r injunction for lack of jurisdiction in the district court to grant it.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.