The U.S.Supreme Court on Tuesday unanimously sided with Isabella County, Michigan, rejecting a family’s claim that local governments must pay homeowners the full fair market value of property seized and sold in tax foreclosures rather than the lower price obtained at public auction.In the 9-0 decision, the court ruled that under the Fifth Amendment, "the proper baseline under the Takings Clause is the price obtained in a tax sale, at least when the sale is fairly conducted in light of our country's history of tax sales."Writing for the court, Justice Samuel Alito explained that "neither the Fifth nor the Eighth Amendment requires the government to compensate former owners based on the hypothetical fair market value of their property."The high court noted that creating a fair-market-value baseline would impose "unprecedented burdens" on local governments seeking to collect unpaid taxes, making these sales "impractical."MICHIGAN FAMILY SAYS COUNTY SEIZED HOME OVER TAX BILL THEY DIDN’T OWE — CASE NOW HEADS TO THE SUPREME COURTThe Pung family home in Michigan, covered in snow, is at the center of a Supreme Court case involving allegations by the Pacific Legal Foundation that county officials seized the property over an unpaid tax bill that was never owed.
(Pacific Legal Foundation)"Under Pung’s rule, a tax sale to collect $20,000 in delinquent taxes would net the government a $20,000 loss—a loss paid out to the delinquent taxpayer himself," Alito continued."The possibility of such a perverse result would render tax sales infeasible as a debt-collection mechanism."The ruling comes amid a decade-long legal battle between Isabella County and the Pung family, over what they called "home equity theft." Isabella County foreclosed on the family's 3,000-square-foot home over a disputed $2,241.93 tax bill, subsequently selling the $194,400 property at auction for just $76,008.
Michael Pung, acting as the personal representative of the estate, disputed the bill and br...