Members of the U.S. Supreme Court appeared skeptical of a Michigan lawsuit seeking compensation for a family that lost their home in a tax sale.
In the case (Pung v. Isabella County), the family’s home was sold to pay a $2,241.93 tax debt. The home had an estimated worth of $194,000. It sold for only $76,000.
Courts have ruled the county should pay the family the balance above the taxes owed, about $73,000.
But the attorney for the Pung family says Isabella County should compensate the family for the full fair market value of the home, or an additional $118,000.
But during arguments before the nation’s highest court on Wednesday, several justices pushed back against the plaintiff’s argument.
“I see a very clear opportunity for the taxpayer, who by the way is the original problem because he hasn’t paid the tax, to solve the problem,” said Justice Ketanji Brown Jackson.
Other justices focused on part of the government’s defense of the tax foreclosure system, that if they found in favor of the plaintiff, tax sales would become unworkable.
“If I have to give you the fair market value,” Justice Elena Kagan questioned, “Am I not going to lose money if I'm the state, on every transaction like this?”
Plaintiff’s attorney Phil Ellison told the justices that governments can use the sale of other personal property to pay off tax debts, without forcing people out of their homes and selling the property for a depressed price.
Attorneys for the government argued if the nation’s highest court sided with the plaintiffs, it would spell the end of tax sales and penalize people who pay their taxes, because they have to pay more to compensate for governments having to pay fair market value for homes that didn't fetch that much at auction.
The justices expressed consternation at one aspect of case: the family actually did not owe the taxes claimed by the government that sold their home.
A tax tribunal determined the Pung family did have a tax exemption on the home in Isabella County. But local tax officials pushed ahead with the sale nonetheless.
Justice Neil Gorsuch questioned how this happened.
“How come nobody, over the many years between there and here, said ‘Hey, wait a minute. What are we doing?” Gorsuch said from the bench.
Justice Amy Coney Barrett compared the case to the Victor Hugo classic Les Misérables, “But it was worse because Jean Valjean didn’t steal the bread.”
The U.S. Supreme Court is not expected to issue its decision in Pung v. Isabella County for several months. The decision could have far-reaching effects. If the court rules in the favor of the plaintiff, it could unleash lawsuits seeking potentially hundreds of millions of dollars in compensation for Michiganders who lost homes to tax sales. Lower court decisions have already opened the door for those seeking a greater portion of the sale of their property.
Members of the Pung family attended Wednesday’s oral arguments before the nation’s highest court in Washington D.C.
“They are devasted by the loss of this family home, “ Ellison told the court. “What they want is the justice that hopefully the just compensation clause should provide.”
