This week, the U.S. Supreme Court will hear arguments in a case that could mean hundreds of millions of dollars for Michigan homeowners who lost homes to tax foreclosure.
On Wednesday, the nation’s highest court will hear oral arguments in Pung v. Isabella County. The justices are being asked to decide if the county violated the plaintiffs' Fifth and Eighth amendment rights.
The case began a decade ago over a dispute involving a special tax exemption. Despite a tax tribunal ruling in the Pung family’s favor on the exemption, the county assessor again denied it. Eventually, Isabella County sold the Pung family home to settle a $2,241.93 tax bill. The home with an estimated value of nearly $200,000 sold for just $76,000.
Lower courts have ruled the family is owed $73,000 from the sale, that the county had previously withheld.
But attorney Philip Ellison said the county owes his clients the full value of the property.
“This is what we call the stolen equity,” said Ellison. “The difference between the auction price and fair market value, about $118,000 that just vanished.”
An attorney representing the county said the family had ample time and opportunity to avoid the foreclosure and sale.
“Members of a community share the expense of schools, police and fire protection, roads and other government functions through property taxes. If a person doesn’t pay their taxes, they are shifting the burden for those services onto their neighbors. To avoid that problem, the law provides a process that ultimately ends in foreclosure of a property if taxes are not paid,” said Matthew T. Nelson, the attorney representing Isabella County.
The county has argued the fair market value theory would require local governments to pay out more than they receive at auction.
But Ellison said antiquated rules surrounding tax sales are to blame for properties selling below market value.
“These governments haven’t kept up with the times,” said Ellison. “Modern markets today don’t respond well to imposing all of these 1880 standards into the modern purchase of property.”
If the nation’s highest court finds for the Pung family, Ellison said he plans to move forward with class action lawsuits involving other Michiganders who lost homes through tax foreclosure.
Ellison said those lawsuits could results in county governments owing hundreds of millions of dollars to the former owners of properties sold to resolve outstanding tax debts.
Members of the Pung family plan to attend Wednesday’s oral arguments at the U.S. Supreme Court in Washington D.C.
The high court is not expected to deliver its ruling until the end of its current session this summer.
