Michigan property owners ask state Supreme Court to affirm just compensation rights

Lansing, MI; October 24, 2024: Two former Michigan homeowners have asked the state’s high court to affirm that surplus proceeds from tax sales are the property of the homeowners and local governments cannot use complicated procedures to withhold those funds. Lillian Joseph and Johanna McGee petitioned the Michigan Supreme Court to hear their cases after losing their home equity to overly complicated equity claim procedures. 

Lillian Joseph, a 79-year-old on a fixed income, lost her house in Iron County over a $2,257 tax debt. Her house sold for $27,500, and the County kept everything, far more than what was owed. Before the sale, Lillian mailed Iron County notice that she obviously wanted to be paid any surplus proceeds from the sale of her foreclosed property.  

She mailed the notice via USPS Priority Mail Express to meet the County’s strict deadline. Although her notice was received by the County the morning it was due, it sat in the Iron County mailroom and was not claimed by the Treasurer until the following day. The treasurer said she “missed” the deadline, and the County kept Ms. Joseph’s $21,755 as a windfall. 

In February 2021, Johanna’s mother Jacqueline McGee passed away. Ten days later, as Johanna and her family grieved her mother’s passing, Alger County foreclosed on Jacqueline’s home because of a $3,600 tax debt. Just a few months later, before Johanna had sorted out what had happened, the County sold the house for $38,250 and kept all the money, including the equity, leaving her family with nothing. 

In 2020, the Michigan Supreme Court ruled that counties can’t keep more than what’s owed in tax foreclosures. The McGee family and Lillian Joseph are owed the surplus proceeds of the foreclosure sales. 

But in 2021, lawmakers created a complicated process that makes it hard for former owners to reclaim any extra money Lillian Joseph and the McGee family both tried to recover their equity, but because they failed to follow unfair procedures with strict deadlines, the government kept their money. 

“A process that makes it difficult for property owners to recover their own money is just a new facade on the old home equity theft system that the Michigan Supreme Court and U.S. Supreme Court struck down,” said Christina Martin, senior attorney at Pacific Legal Foundation, which represents the McGee estate and Lillian Joseph. “Government should not be allowed to take more than it’s owed. The law is clear: When the government takes private property, it must pay for it.” 

Last year, the U.S. Supreme Court unanimously held it was unconstitutional for the government to take more than what is owed in Tyler v. Hennepin County, a case litigated by PLF. As the Tyler decision said, “The taxpayer must render unto Caesar what is Caesar’s, but no more.” Yet Michigan’s Court of Appeals has now signed off on the confiscation of Lillian’s and the McGee family’s money, because they did not perfectly comply with Michigan’s process for obtaining it. 

The case is In re Petition of Alger, Iron County Treasurers for Foreclosure, and Johanna McGee and Lillian Joseph are represented free of charge by Pacific Legal Foundation.