Court Opinion

ID: 9489239
Source: CourtListenerOpinion
Date Created: 2023-08-05 13:09:50.545747+00
Date Added: 2024-06-11T17:53:24.785714
License: Public Domain

MORRIS SHEPPARD ARNOLD, Circuit Judge,
dissenting.
I respectfully dissent.
The court decides this ease 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, superi- or 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 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, 103 S.Ct. 2132, 2140-41, 76 L.Ed.2d 236 (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, 82 S.Ct. 1125, 8 L.Ed.2d 292 (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, 82 S.Ct. at 1128-29. But Enochs has no application to this ease.
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, 82 S.Ct. at 1129. 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 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 plaintiffs 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 *786partly 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 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 a deed either to a third party or to the grantor) in an appropriate governmental office. See Miim.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, 281 Minn. 462, 161 N.W.2d 688, 691 (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 eases 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, 230 Minn. 235, 41 N.W.2d 444, 447 (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.
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 ease held, at most, in relevant part, that the survivor-ship 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.
*787Finally, 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 survivor-ship 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 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).
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 ease 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.