When Michigan property owners fall behind on their taxes, the state allows counties to seize and sell the land, and keep all sale proceeds–no matter how small the tax debt or how valuable the property. Van Buren County reaped a major windfall after selling three properties with relatively small tax debts, including a church. PLF believes local governments violate the Takings Clause of the Constitution when they keep the surplus, and has asked for Supreme Court review.
When Wayside Church fell behind on its 2011 property taxes on a parcel that the church had used as a youth camp, Van Buren County, Michigan took the youth camp property and sold it for $206,000 to pay the church’s $16,750 in taxes, penalties, interest, and fees. Invoking the Michigan General Property Tax Act, the County kept the surplus proceeds—$189,250 more than the debt—as a windfall. Similarly, the County sold Myron Stahl’s property, where he was building his retirement home, for $68,750 to pay a $25,000 debt. It also sold Henderson Hodgens’s farm and home for $47,750 to pay a $5,900 debt. Rather than simply keeping the amount needed to satisfy the debt and refunding the remainder to the owners, the county pocketed all the proceeds: $274,850 in after-debt profits from the three sales.
Michigan law offered no clear remedy so Wayside Church, Stahl, and Hodgens sued in federal court on the grounds that the County violated the Takings Clause of the Fifth Amendment when it kept the surplus proceeds from the sales of their foreclosed properties. The district court dismissed the suit, holding that the Takings Clause does not protect delinquent taxpayers’ right to the surplus proceeds from tax sales, because Michigan’s tax law does not recognize that right.
On appeal, a divided panel in the Sixth Circuit Court of Appeals dismissed the case for lack of jurisdiction. It held that the requirement that takings plaintiffs first seek relief in state court, created in Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City (1985), barred federal jurisdiction. Representing the taxpayers, PLF filed a petition for writ of certiorari asking the Supreme Court to protect property owners’ rights by recognizing federal jurisdiction and holding that Van Buren County violated the Takings Clause.