Sixth Circuit Finds Government Seizure of Home's Equitable Title to Satisfy Tax Debt Was a Taking

An important victory against "self-dealing" by state and local governments.

The U.S. Court of Appeals for the Sixth Circuit released a potentially important decision concluding that a Michigan county over-reached when it seized an individual's property to satisfy a tax debt and did not refund the surplus to the property owner. Judge Kethledge wrote for the court in Hall v. Meisner.

Here is the brief summary from Judge Kethledge's introduction:

In this case the defendant Oakland County took "absolute title" to plaintiff Tawanda Hall's home—worth close to $300,000, on the facts alleged here—to satisfy a $22,262 tax debt, and then refused to refund any of the difference. The other plaintiffs shared a similar fate with their homes. Under Michigan law—and the law of virtually every state for the past 200 years—a creditor can divest a debtor of real property only after a public foreclosure sale, after which any surplus proceeds in excess of debt are refunded to the debtor. The return of that surplus compensates the debtor for her equitable interest in the property—which in common speech is called the "equity" in real property, and which English and American courts for centuries have called "equitable title." Yet the Michigan General Property Tax Act created an exception to this rule for just a single creditor: namely, the State itself (or a county thereof), which alone among all creditors may take a landowner's equitable title without paying for it, when it collects a tax debt. In that respect the Michigan statute is not only selfdealing: it is also an aberration from some 300 years of decisions by English and American courts, which barred precisely the action that Oakland County took here.

The government may not decline to recognize long-established interests in property as a device to take them. That was the effect of the Michigan Act as applied to the plaintiffs here; and we agree with the plaintiffs that, on the facts alleged here, the County took their property without just compensation. We therefore reverse the district court's dismissal of their claim against the County under the Takings Clause of the U.S. Constitution.

Judge Kethledge was joined by Judges Bush and Nalbandian. The Pacific Legal Foundation represented the homeowners.

Comments

[Rossami]

Good. Though it's appalling that it took a federal Appeals Court to say something so obvious. The legislature who passed that law and the governor who failed to veto it should be held personally liable for triple the costs of righting this injustice.

[ah....Clem]

Triple damages? Surely that's not nearly enough. I say "To the gallows with them!!". We should not rest until they are all dead!

Of course, since the Michigan General Property Tax Act was passed in 1893, we can cool our heels on this one.

Note that the current office holders in Michigan have significantly rolled back this system: "Beginning with the 2021 foreclosure auctions, those who hold interest in property at the time of foreclosure, may file to claim leftover proceeds for parcels which sell for more than the owing delinquency."

https://www.michigan.gov/taxes/property/forfeiture-foreclosure

The recent 6th ruling should make returning the excess proceeds automatic rather than merely allowing the interested parties to merely file a claim.

[Dpethsb]

The more glaring issue and the elephant in the room is a violation of the rights of the People to own, possess, and protect their shelter aka a home. Secondly ignored, does the State have sufficient contact with the property to impose taxation to begin with. In order to impose taxation, there must exist a SITUS where the property owner has registered property in the state, through incorporating or registering to exercise a privilege aka conducting commerce. Said property also must be producing income. Great case but the question before the court should have been by what authority is the government operating under giving them authority to administer over non-commercial private property. See Am Jur Constitutional Law XIV Process of Law Sections 933, 935, 937, 954, 957

[The Margrave of Azilia]

Would this also be an excessive fine?

[Joe_dallas]

due process, etc
theft, tort,

[Jerry B.]

Can we turn government over to the Pacific Legal Foundation and the Institute for Justice, please?

[Amused Onlooker]

If we turned over the government to the PLF and IJ, who would protect us from the government?

[Jerry B.]

You might not need protection.

[bevis the lumberjack]

Hi, we’re from the government and we’re here to do whatever the hell we feel like doing.

[Enrique]

next, do the lockdowns: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3567003

[Michael D]

I think this situation was highlighted in a recent Reason Magazine article

[pts]

Actually the 6th Circuit decision answers a question left unanswered by the Michigan Supreme Court and the legislature. In Rafaeli, the Michigan Supreme Court did not hold that a taking took place when equity was confiscated. Instead, the taking took place when the SURLUS was confiscated. The legislature responded with a statutory means to apply for a refund of the SURPLUS that existed once foreclosed property was sold. However, neither the court nor the legislature dealt with what happens when the foreclosing governmental unit does not sell the property, and keeps it or deeds it away for nothing, and generates no surplus. The 6th Circuit answers that question and determines that the loss of equity (and not just the loss of a surplus) is a taking.