3 months ago

PLF asks the Supreme Court to stop government theft in tax-foreclosure case

By Christina M. Martin Attorney

This week, we filed our reply brief in Wayside Church v. Van Buren County, a case we are asking the Supreme Court to review.  This case began in 2014, when Van Buren County, Michigan foreclosed and auctioned properties belonging to Wayside Church, Myron Stahl, and Henderson Hodgens.  Each property sold for tens of thousands of dollars more than each party’s debts, but the County did not refund the surplus proceeds to the former owners.  Instead, the County pocketed the extra money from each sale as a windfall at the expense of our clients.  Michigan law actually requires Counties across the state to steal this extra money from struggling property owners.

PLF client Henderson Hodgens

This seems like an obvious violation of the Constitution.  The Fifth Amendment provides that government cannot take private property unless it pays just compensation.  Logically, that should mean that government may take and sell the property and keep what it is owed, but no more. It must refund the surplus value that it took from the property owner.

In July, PLF filed a petition with the Supreme Court asking the Court to reverse a Sixth Circuit decision that held that federal courts could not hear our clients’ takings claim.  PLF is asking the Supreme Court to open federal courthouse doors to takings plaintiffs, so that people are able to enforce their Constitutional property rights in federal court, just like they could any other constitutional right.  But the biggest issue that PLF asked the Court to review is whether the County violated the Takings Clause in the Fifth Amendment by refusing to refund the surplus from the tax sales.

Two weeks ago, the County responded to our petition by downplaying the scope of the problem, and by arguing that what happened to our clients was really “voluntary” because they could have sold their property or leveraged it for a loan before losing it to foreclosure.  As we explain in our reply brief, the county’s actions are neither rare nor voluntary. Counties across Michigan and in other states are capitalizing on the misfortune of residents, pocketing collectively large profits from the sale of tax-distressed properties and using it to boost local budgets.  This is happening to thousands of property owners every year.

The taking was also not voluntary.  The implication of the County’s argument is that if you are not savvy enough to sell your property before the imposed deadline, then the government may ignore the protections of the Constitution and take and keep more than it is owed. But the Constitution does not only protect the clever, deserving, and the diligent; it protects the weak, poor, and the unfortunate alike from uncompensated takings.  Moreover, the Supreme Court has already rejected similar arguments in other takings cases. For example in Horne v. Department of Agriculture, the Supreme Court rejected arguments that the grape growers could have avoided the legalized theft of their raisins, by instead choosing to grow grapes for juice. The Court should do the same here and protect distressed property owners from the outright theft of their equity.

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