Court Opinion

ID: 3016925
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:16:19.352296+00
Date Added: 2024-06-11T11:26:08.069780
License: Public Domain

___________

                                   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 section 7426
of the Internal Revenue 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 levied upon Mr. O'Hagan's property interest in an effort
to collect his delinquent taxes, the district court enjoined the IRS from
selling Mr. O'Hagan's interest.         The IRS appeals, claiming that the
district court lacks jurisdiction to issue the preliminary injunction.      We
affirm in part and reverse in part.

I.   BACKGROUND

     The facts in this case are not in dispute.         The O'Hagans have been
married since 1988.    They own real property, which is their
principal place of residence, in Sunfish Lake, Minnesota (the homestead
property).    The O'Hagans have owned the homestead property at all times
during their marriage as joint tenants with a right of survivorship.     In
1988, the O'Hagans obtained 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 encumbering by lien each O'Hagan's
interest in the homestead property.

      In the early 1990s, the government imposed an assessment against Mr.
O'Hagan for unpaid federal 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 to
section 6331 of the IRC.    The government then advertised the sale of Mr.
O'Hagan's interest in the real estate, which sale 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 homestead property.     The government challenged the district court's
jurisdiction based on the Anti-Injunction Act, 26 U.S.C. § 7421.        The
district court determined that it had jurisdiction, 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

      The question before us is whether the district court has subject
matter jurisdiction to enjoin the government from selling Mr. O'Hagan's
interest in the homestead property.    The government

                                     -2-
contends that the district court lacks subject matter jurisdiction because
the Anti-Injunction Act precludes such an injunction and that none of the
exceptions to that Act apply in the present case.             After reviewing the
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 and
occupy the homestead property, but cannot enjoin the government from
conveying Mr. O'Hagan's survivorship interest.

     The Anti-Injunction Act (the Act) prohibits federal courts from
entertaining any action filed to restrain the assessment or collection of
taxes.     26 U.S.C. § 7421(a).         The primary purpose of the Act is to
facilitate the expeditious collection of taxes by the government.               See
Enochs v. Williams Packing & Navigation Co., Inc., 370 U.S. 1, 7 (1962).
The Act, however, contains several exceptions.           26 U.S.C. § 7421(a).   The
district    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 the Anti-Injunction Act.       Although the district court relied on the
judicially created exception set out in Enochs to support its preliminary
injunction, to the extent we affirm its decision we rely, instead, on the
statutory exception set out in section 7426.2

     1
      In Enochs, the Supreme Court held that federal courts have
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.
     2
      As we have often noted, we review judgments, not the text
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-
     The statutory exception allows a person, other than the delinquent
taxpayer, who claims an interest in or lien on the property levied upon by
the government to bring a wrongful levy action.    26 U.S.C. § 7426(a).   This
action may be brought without regard to whether the property has been
surrendered to or sold 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
     which the court determines to be superior to rights of the
     United States in such property, the court may grant an
     injunction to prohibit the enforcement of such levy or to
     prohibit such sale.

26 U.S.C. § 7426(b)(1).   To satisfy this statutory exception, therefore,
Mrs. O'Hagan must demonstrate that:      (1) she has a right in the levied
property superior to that of the government; and (2) her right would be
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 to that
of the government in the levied property, we must first determine Mr.
O'Hagan's interest in the homestead property.     It is well established that
in a levy proceeding, the IRS "`steps into the taxpayer's shoes.'"    United
States v. Rodgers, 461 U.S. 677, 691 n.16 (1983) (quoting 4 Boris I.
Bittker, Federal Taxation 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 delinquent
taxpayer, except certain exempt property which is not at issue in

                                   -4-
the present case.      26 U.S.C. § 6331.   In levying upon Mr. O'Hagan's
interest in the homestead property, however, the government could not
acquire more property rights than those already held by Mr. O'Hagan.

     We   look to state law to define Mr. O'Hagan's interest in the
homestead property.   United States v. National Bank of Commerce, 472 U.S.
713, 722 (1985) (stating that the IRC "`creates no property rights but
merely attaches consequences, federally defined, to rights created under
state law'") (quoting United States v. Bess, 357 U.S. 51, 55 (1958)).    In
the present case, it is undisputed that Mr. O'Hagan owns the homestead
property in joint tenancy with Mrs. O'Hagan.   Accordingly, we look to the
applicable state law--in this case Minnesota, where the real property is
located--to define the property rights upon which the government has
levied.

     Under 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 tenancy
property, 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.2d
688 (Minn. 1968).     Moreover, a joint tenant generally has the right to
unilaterally sever the joint tenancy, so long as the joint tenant satisfies

                                    -5-
at least one of the statutory methods for doing so.3   See Wendt v. Hane,
401

      3
      Under Minnesota law, a severance of a joint tenancy is
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-
N.W.2d 457, 459 (Minn. Ct. App. 1987).      Once the joint tenancy has been
severed it converts into a tenancy in common and extinguishes the other
joint tenant's right of survivorship.4    See Hendrickson, 161 N.W.2d at 690-
91.

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

      4
      A joint-tenant spouse who unilaterally severs a joint
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.).
      5
      According to the dissent, a spouse can unilaterally convey
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-
tenants are generally free to convey their interest in the joint tenancy,
Minn. Stat. § 500.19, subd. 4 (1996 Supp.), spouses who own homestead
property--as joint tenants or as tenants in common--are prohibited from
conveying their interest, except to the other spouse, without the other
spouse's consent, id.; Minn. Stat. § 507.02.             Furthermore, Mr. O'Hagan
would normally have the right to unilaterally sever the joint tenancy and
devise his remainder interest subject to a life estate in Mrs. O'Hagan, see
Minn. Stat. § 525.145 (1996 Supp.); but as discussed below, Mr. O'Hagan
does not have the right to unilaterally sever the joint tenancy in this
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 homestead
property,    Minnesota   law    does   not   provide   for   an   absolute   right   to
unilaterally sever a joint tenancy.          The Supreme Court of Minnesota has
expressly recognized that a joint tenant may be prevented from unilaterally
severing a joint tenancy when the other joint tenant has detrimentally
relied on its existence.       Hendrickson, 161 N.W.2d 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 unilateral
      action would not be effective to deprive the passive joint
      tenant of the rights so created.

Id.   Although sparse, the record in the present case, along with common
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 record demonstrates that Mrs.
O'Hagan, through her attorney, argued to the district court that she signed
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

                                         -8-
Hendrickson case and provided the district court with copies of the deed
that originally created the joint tenancy and referred to the $400,000 home
equity loan, dated August 24, 1988, which was signed by Mr. and Mrs.
O'Hagan.   Moreover, common sense dictates that Mrs. O'Hagan would not have
agreed to be personally liable for the full amount of the note if she
thought she might ultimately have only a one-half 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 the
joint tenancy, not the government or a complete stranger.

      Minnesota law also supports Mrs. O'Hagan's reliance on the existence
of a vested remainder interest.       Minnesota's law on the descent of
homestead interests guarantees that Mrs. O'Hagan will inherit her husband's
interest in the homestead property if no children, or issue of deceased
children, are alive at the time of his death, regardless of how Mr. O'Hagan
devises his interest.   See Minn. Stat. § 525.145 (1996 Supp.).   At the very
least, Mrs. O'Hagan is guaranteed a life-estate in the homestead property.
Id.   Furthermore, Mr. O'Hagan would not have been allowed to bring a
partition action under Minn. Stat. § 558.01.         The Supreme Court of
Minnesota long ago held that the law will not allow a spouse with an
interest in homestead property, either as a tenant in common or a joint
tenant, to do indirectly through a suit for partition something that the
spouse could not do directly through sale or conveyance.    Grace v. Grace,
104 N.W. 969, 971 (Minn. 1905).

      Therefore, under the facts of this case, Mr. O'Hagan does not have
the right to unilaterally sever the joint tenancy.     Accordingly, neither
the government nor a third-party purchaser could unilaterally sever the
joint tenancy.   Without the right to unilaterally sever the joint tenancy
or convey the homestead property, Mr. O'Hagan possesses:      (1) a present
right to use and occupy the property; and (2) a right of survivorship to
Mrs. O'Hagan's interest.

                                    -9-
      B.   Right to Use and Occupy the Property

      We must determine next whether Mrs. O'Hagan possesses an interest
superior to that of the government in Mr. O'Hagan's right to use and occupy
the property.   We conclude that she does.

      At least one court, in addition to the district court in the present
case, has held that the IRS cannot convey a property right that could not
have been conveyed under the applicable state law.    Elfelt v. Cooper, 485
N.W.2d 56 (Wis. 1992), cert. denied, 507 U.S. 908 (1993).         In a case
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, which
merely steps into [the tax delinquent spouse's] shoes, also cannot convey
any interest of the jointly held spousal homestead without either [the
innocent spouse's] consent or court action."        Id. at 62.    The court
concluded that "any conveyance of that interest by the IRS without [the
innocent spouse's] consent and without court action is ineffective" and
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 homestead
property, "the traditional rule that the lienholder gains only those
property rights 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.    Because 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 property because she can prohibit
any

                                   -10-
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 government 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 government also relies on our prior decision in Herndon v. United
States, 501 F.2d 1219 (8th Cir. 1974) to support its contention.                  The
government's reliance on these authorities, however, is misplaced for
several reasons.       First, we agree with the government that Mr. O'Hagan's
interest in the homestead property is not exempt from a federal tax levy.
Therefore, neither the statute nor the treasury regulation cited by the
government apply in the present case.       Second, in Herndon we held that an
Arkansas homestead law that purported to exempt homestead property from
legal process, including liens, could not be used to prevent the government
from levying upon and selling a delinquent taxpayer's interest in homestead
property.        Id.   In contrast, the homestead statute applicable to the
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, of
course,    she    consents.   Finally,    the    Minnesota   statute   that   exempts
homestead property from the collection of certain debts--which is analogous
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 under
federal law, Minnesota law nevertheless defines the extent of that property
right.    Without the right to sever the joint tenancy or to convey his
interest in the homestead property, if lawfully

                                         -11-
severed, Mr. O'Hagan's right to use and occupy the property is a limited,
personal right of possession.    See Elfelt, 485 N.W.2d at 62 (stating that
"the statutory requirement of spousal consent illustrates that the nature
of the property interest 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 homestead
property.   See Minn. Stat. § 507.02; see generally United States v. Certain
Real Property Located at 2525 Leroy Lane, 910 F.2d 343, 351 (6th Cir. 1990)
(stating that "the Government may properly acquire 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 founded
on marital union, and the Government obviously cannot assume the role of
spouse to Mrs. Marks"), cert. denied, Marks v. United States, 499 U.S. 947
(1991).     Therefore, Mr. O'Hagan's possessory interest in the homestead
property "wears out" when it is held by another party.    This would seem to
be the precise scenario contemplated by the phrase that the government
"`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 her lifetime, Mrs. O'Hagan retains the right to exclude all
people, other than Mr. O'Hagan, from the homestead property.      This right
derives from the Minnesota statute addressing homestead 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'Hagan
from using or occupying the homestead property demonstrates that her right
is superior to that of the government or a third-party purchaser who would
be attempting to exercise a possessory right that is limited and personal
to Mr. O'Hagan.    Therefore, 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

                                     -12-
government in Mr. O'Hagan's right to use and occupy the homestead property.

     The second prong of the statutory exception to the Anti-Injunction
Act requires Mrs. O'Hagan to demonstrate irreparable 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 and
occupy the homestead property would destroy Mrs. O'Hagan's right to exclude
all persons other than Mr. O'Hagan from the homestead property.           Moreover,
as a practical matter, the sale of Mr. O'Hagan's interest would undoubtedly
diminish    the   value   of   Mrs.     O'Hagan's   property    interest.        More
fundamentally, monetary relief fails to provide adequate compensation for
an interest in real property, which by its very nature is considered
unique.    See, e.g., Shaughnessy v. Eidsmo, 23 N.W.2d 362, 368 (Minn. 1946)
(stating that when an interest in land is involved, the common-law remedy
is deemed to be inadequate); Strangis v. Metropolitan 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 homestead
[because] [r]eal property is unique, which money damages may not adequately
compensate").6    Thus, Mrs. O'Hagan would suffer irreparable injury by the
proposed forced sale of Mr. O'Hagan's possessory interest in the homestead
property.      Accordingly,    we     conclude   that   the   district   court    has
jurisdiction to enjoin the sale of Mr. O'Hagan's right to use and occupy
the homestead property.

     6
      We emphasize that even the judicial lien foreclosure
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-
      C.    Right of Survivorship

      We must next analyze whether Mrs. O'Hagan's interest is superior to
that of the government with regard to Mr. O'Hagan's right of survivorship.
We   conclude    that   although   Mrs.    O'Hagan   could    probably   prohibit   the
conveyance of Mr. O'Hagan's right of survivorship, she cannot demonstrate
irreparable injury.        Thus, the government can attempt to convey this
interest, subject to the limitations discussed below.

      As earlier noted, Mrs. O'Hagan can prohibit the conveyance of an
interest in the homestead property under Minnesota law.              See Minn. Stat.
§ 507.02.    Mrs. O'Hagan has failed to demonstrate how the conveyance of her
husband's survivorship interest would cause her irreparable injury.                  We
recognize that the applicable Minnesota statutes demonstrate a public
policy in favor of protecting a spouse's continued occupancy of the
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 adversely
affecting the right of the surviving spouse to continue in possession and
enjoyment for so long as she might live."              Id.     In the present case,
therefore, the government can levy upon and attempt to convey a single
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    attempting    to   convey     this   solitary    interest,   however,   the
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 specify the property to be sold, and the time, place, manner, and
conditions of the sale thereof").         First, the government must make it clear
that the only interest in the homestead property subject to sale is Mr.
O'Hagan's survivorship interest.        The third-party purchaser, in fact, would
simply be

                                          -14-
gambling 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, we emphasize, as the government must in the notice of sale,
that this solitary interest is subject to a further, and substantial
limitation.    Ironically, once Mr. O'Hagan's right of survivorship is
conveyed by the government to a third-party purchaser, that interest cannot
be recorded because recordation would sever the joint tenancy, thereby
extinguishing the very right of survivorship that was acquired.    See Minn.
                                        8
Stat. § 500.19, subd. 5 (1996 Supp.).       Moreover, as discussed above, Mr.
O'Hagan does not have the right to unilaterally sever the joint tenancy and
thus neither the government nor a third-party purchaser would have that
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 predecease
Mr. O'Hagan.   This fact must also be made clear to potential purchasers.
Therefore, it is vital that the government recognize and accurately
articulate the precise, and limited, nature of the interest it would be
conveying in the present case.   See Herndon, 501 F.2d at 1223 (requiring,
as a matter of fairness under the circumstances, that the government advise
all prospective purchasers that the real property is being sold subject to
the

      7
      Furthermore, neither the government nor a third-party
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.).
      8
      This anomaly would not occur under the common-law rule,
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-
homestead interest in the other spouse and that the government inform all
prospective purchasers about the litigation in the case).                 Although we
believe it is highly improbable that a fully-informed third-party purchaser
would buy such a limited property right, we acknowledge that the government
does have a valid lien on Mr. O'Hagan's survivorship interest, which, while
held by the government, provides protection for the government without
affecting Mrs. O'Hagan's interests.          See William T. Plumb, Jr., Federal
Liens and Priorities--Agenda for the Next Decade II, 77 Yale L.J. 605, 638
(1968) (suggesting "that the tax lien, if and when it cannot be satisfied
from other sources, should be fastened to the property by appropriate
judicial   proceedings    within   the    period      of   limitations,   with   actual
enforcement   by   sale   deferred   until      the   survivorship   contingency     is
resolved").

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

     9
      Without deciding whether it is essential to this type of
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-
O'Hagan's right to use and occupy the homestead property.10   We do not
express any

     10
      Our conclusion is consistent with the Supreme Court's
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-
opinion as to the likely outcome of a judicial lien foreclosure proceeding
under section 7403 of the IRC.    See Rodgers, 461 U.S. at 703-12; United
States v. Bierbrauer, 936 F.2d 373, 375 (8th Cir. 1991).

III. CONCLUSION

     The district court has subject matter jurisdiction to enjoin the
forced sale of Mr. O'Hagan's right to use and occupy the homestead
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 opinion.     Accordingly, the district court's order granting Mrs.
O'Hagan's motion for a preliminary injunction is affirmed in part and
reversed in part.

MORRIS SHEPPARD ARNOLD, Circuit Judge, dissenting.

     I respectfully dissent.

     The court decides this case on a ground never presented to it,
namely, that the taxpayer's inability to alienate his interest in homestead
property without 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 court that the taxpayer's interest was not alienable without her
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 the

                                   -18-
taxpayer meant that the government could not convey title to the taxpayer's
interest at a tax sale.

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

      The district court accepted Mrs. O'Hagan's argument and granted her
motion for an injunction based on Enochs v. Williams Packing and Navigation
Company, Inc., 370 U.S. 1 (1962).   That case established the principle that
an injunction against a tax levy and sale can issue if (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) irreparable harm to the
property owner would ensue if the sale were allowed 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 affected third parties.       In fact, Mrs. O'Hagan conceded this
proposition 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 property
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 under
Enochs is whether the taxpayer might conceivably owe taxes, and it does not
seem to have been controverted that the taxpayer in this case owes taxes.
The district court therefore erred in relying on Enochs as

                                    -19-
a way to overcome the prohibition of the Anti-Injunction Act, 26 U.S.C.
§ 7421(a).

     Because it found Enochs applicable and satisfied, the district court
did not address the question of whether 26 U.S.C. § 7426(b)(1) might
provide a basis for an injunction.      Indeed, this possibility was never
mentioned until the government itself raised it in its brief filed in
response   to the plaintiff's brief in support of her motion for an
injunction below.     Even on appeal the plaintiff makes only one reference
in her brief to this statutory provision, and then in an attempt to
demonstrate what is plainly not so, namely, that the district court relied
on it in deciding the case.      And, more to the point, the plaintiff has
never made an effort to identify what interest she had in the taxpayer's
property that was superior to the government's, much less has she ever
asserted that that very interest was the taxpayer'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 case on a principle never presented
to it and without giving the government the opportunity to convince it to
the contrary.    Perhaps that is partly because the government, in an effort
to rebut 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
contrary, namely, that the district court misconstrued the relevant
Minnesota statutes.      But there may well be other arguments that the
government could have advanced against the court's holding, and at the
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 applicable
Minnesota law.

     In my view, Minnesota statutes do give a spouse who jointly owns
homestead property the right unilaterally to sever the joint tenancy by
conveyance.     That power is conferred by the portion of

                                    -20-
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
simply recording 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 such
severances, perhaps partly in response to Hendrickson v. Minneapolis
Federal 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 in homestead property could not be severed by a conveyance to a
third party by one of the cotenants. The provisions of Minn. Stat. Ann.
§ 500.19.4(a) are not to the contrary, because they 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 paragraph that requires spousal consent to certain kinds
of conveyances.    Any other construction of the relevant statutes would
render the first paragraph of § 507.02 difficult to comprehend.

     Plaintiff evidently believes (and perhaps the court does too) that
§ 507.02 merely confers on a joint owner of a homestead 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 generally of a right to sever,
and the Minnesota cases quite clearly recognize, as do cases from other
common-law jurisdictions, that one way to sever a joint tenancy is for one
cotenant to 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 intended the scope of the statute to be as narrow as the plaintiff
urges, it could easily have said so.    It did not.

                                    -21-
     The court holds that even if the taxpayer had a unilateral right to
alienate his interest in the jointly held homestead, 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 tenancy
could not be destroyed by the unilateral act of one joint tenant if another
tenant had somehow acted in reliance on the continuing existence of that
survivorship feature.    Hendrickson, 161 N.W.2d at 692.     There is a good
argument that this is only dictum:   The Minnesota Supreme Court said simply
that "it would seem reasonable to insist" that this was so, id.          But
assuming arguendo that the court correctly describes the holding in
Hendrickson, it is an extraordinary holding indeed.          In fact, it is
evidently unique.

     The ordinary rule is that joint tenants take the risk that their
cotenant will alienate his or her interest and destroy their right of
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 was
based in part on the fact that the version of § 507.02 in effect when the
case was decided did not allow for unilateral severance of a joint tenancy
in a homestead property by deed to a third person.     Since it now does, and
since it contains no exceptions to the joint tenant's power to sever, the
Minnesota Supreme Court 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 know
whether Mrs. O'Hagan would have signed the mortgage note if she had
anticipated the destruction of the survivorship feature of her cotenancy
with her husband.   There is no evidence in the record one way or the other
on this point, 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

                                     -22-
survivorship.   She has the burden of proof on this 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 was
homestead, if she survives 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 arrangement.   See Minn. Stat. Ann.
§ 524.2-402(a).   Even if 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'Hagan therefore has no right in the taxpayer's property that
is superior to the government's.   What is more, she cannot carry her burden
of showing that she will be irreparably injured by a tax sale.    The court
asserts that Mrs. O'Hagan has a right to exclude anyone but Mr. O'Hagan
from the 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 possibility that a cotenant might sell is a risk that inheres in
coownership generally and freights the property rights of all cotenants
(except tenants by the entireties).

     The court also maintains that the sale of the taxpayer's interest
would undoubtedly diminish the value of Mrs. O'Hagan's interest.    This is
a dubious proposition at best.     In fact, her interest might well become
more 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 the
exclusive use of the premises, and she could invite her husband to live
with her.   Even if a sale did diminish the value of her property, that
would simply give her a right to an action for money damages under 26
U.S.C. § 7426(b)(2)(C).

                                    -23-
      The court responds that monetary relief can never provide adequate
compensation for the loss of an interest in real property.    But the court
cites only Minnesota state-law authority for this proposition, and the
relevant question is the meaning of a federal statute.   No federal case is
marshaled in support of this extraordinary proposition, because none can
be.   In fact, the principle that the court adopts would evidently be
applicable in every case under 26 U.S.C. § 7426 that involves a levy on
realty.   This takes a greater bite out of the levy statute than Congress
could possibly have intended.   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 is
that the court fails to connect Mrs. O'Hagan's alleged injuries to the
allegedly superior property interest that she has, namely, her right to
restrain the taxpayer's alienation of his interest.   The injuries that the
court identifies are injuries to her right to possess and enjoy her own
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 erred
in granting the injunction prayed for in this suit.      I would therefore
reverse the court's judgment and direct it to dismiss the motion for
injunction for lack of jurisdiction in the district court to grant it.

      A true copy.

            Attest:

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

                                   -24-