Active: Supreme Court asked to restore right to just compensation in tax foreclosure taking

The outside world came to a screeching halt for Kevin Fair in 2013. His wife, Terry, was diagnosed with multiple sclerosis and Kevin had to quit his job so he could care for her at their Scottsbluff, Nebraska, home where they’d lived for nearly two decades—the home was a wedding gift from Kevin’s mother.

Kevin has since lost his wife and his mother, and—if the government has its way—he’ll lose his home and all of his equity saved in it, too.

In the months that followed Terry’s fateful diagnosis, money became scarce. Kevin’s Social Security was their only source of income. Preoccupied and financially strapped, the couple couldn’t pay their 2014 property tax bill of $588. The county was required to list the delinquency in a small local newspaper, but the Fairs did not see the notice. Nor were they aware that in 2015, the county sold a tax lien for the Fairs’ unpaid 2014 taxes to a private investor, Continental Resources, for the amount owed, $588.

Continental quietly paid the Fairs’ 2015 and 2016 taxes, all the while tacking a 14% interest rate onto the growing tax debt. Because the county was getting the money it was owed, it stopped sending tax bills to the Fairs and gave them no warning that they were in danger of losing their home. Then in April 2018, Continental notified the Fairs that it intended to apply for a tax deed, which would give the company full ownership of the home and leave the Fairs with nothing. The only way to keep their home, said the investor, was to pay $5,268—the total value of unpaid taxes, fees, and interest—within three months’ time.

The Fairs simply didn’t have the money. They applied for loans to redeem their property but no lender approved them. The county issued a deed to the investor for the Fairs’ home—including its equity—worth around $60,000.

Nebraska law allows private tax collectors to keep such windfalls at the expense of property owners like Kevin and Terry.

Home equity is private property, however, and is just as protected as a home or land. The government may foreclose on a home to collect delinquent taxes, but it cannot take more than what is owed. Scotts Bluff County owes Kevin Fair just compensation for the additional $55,000 in home equity, which is far above the $5,268 tax debt.

In most states—and in other debt collection situations like mortgages—property is sold, the debts are paid, and the remaining proceeds are returned to the former owner. But Nebraska claims that it can ignore the value of the homes it seizes when collecting property tax debts. Scotts Bluff took the Fairs’ $60,000 home as payment for $5,200. That’s just as bad as taking $60,000 in cash as payment for a $5,200 debt.

Additionally, taking a $60,000 home and all equity in it as payment for a $5,200 debt is excessive punishment. The Eighth Amendment prohibits fines that are grossly disproportionate to the gravity of the offense. Taking a $60,000 home to punish a struggling owner like Mr. Fair is unjust and grossly disproportionate to his failure to pay his debt on time.

With help from Michael W. Meister, Jennifer Gaughan, and Mark T. Bestul from the nonprofit Legal Aid of Nebraska, the Fairs sued in state court to vindicate those rights and have Nebraska’s home equity theft laws declared unconstitutional.

Unfortunately, the Fairs lost their case, and during this time, Terry lost her battle with MS. Kevin determinedly carried on alone and appealed to the Nebraska Supreme Court. But in March 2022, the state’s highest court denied his due process, takings, and excessive fines claims.

At the moment, Kevin still lives in his home. Represented free of charge by Pacific Legal Foundation, Kevin has asked the U.S. Supreme Court to end home equity theft in Nebraska and stop government from creating windfall opportunities for private entities through private property transfers. Kevin is also receiving assistance from Legal Aid of Nebraska as local counsel.

Nebraska is the latest state in PLF’s ongoing work to defeat home equity theft across the country.

What’s At Stake?

  • Government can take property to collect unpaid property taxes, but taking more than it is owed is legalized home equity theft. They don’t get to take a $60,000 home as payment for a $5,200 debt.

Case Timeline

September 14, 2022
August 18, 2022
Petition for Writ of Certiorari
United States Supreme Court