Here’s the latest in the solved-but-not-quite-solved issue of whether the government can keep the surplus which remains after a tax-foreclosure sale (see Tyler v. Hennepin County), the Michigan Supreme Court’s opinion in Schafer v. Kent County, No. 164975 (July 29, 2024), where the court concluded that its earlier decision in Rafaeli v. Oakland County is applicable not merely going forward (prospectively) but applies to those cases which are not final and closed out.

There’s a lot there — especially on the nuances of whether judicial decisions on constitutional rights apply only prospectively, or govern cases instituted in the past — but we are focused on the opinion’s analysis of property rights and takings as matters of history and tradition. We’re not going to comment here because this case is one of ours, argued by Christina Martin and Pacific Legal Foundation’s Home Equity Theft team. That said, here’s the holding:

Respecting traditional standards of procedure and the interest of finality, Rafaeli is the rule of the law in Michigan that governs constitutional takings; it applies to all those who have been denied the surplus proceeds that remain after their property has been seized and sold as a result of tax foreclosure. There is no basis for this Court to decline application of Rafaeli to cases that are not yet final or to timely filed claims premised on events that predated our decision in Rafaeli. Therefore, Rafaeli has full retroactive effect.

Slip op. at 21 (footnote omitted).

Check it out. There’s a lot there to digest, especially what we think is the money quote:

As we explained in Rafaeli, the property right to surplus proceeds dates back to the Magna Carta, through the English common-law tradition, through Michigan’s early statehood, and into twentieth century Michigan and American jurisprudence. “[A] property owner’s right to collect the surplus proceeds from the tax-foreclosure sale of his or her property has deep roots in Michigan common law.” “Because this common-law property right is constitutionally protected by our state’s Takings Clause,” no subsequent amendment of the GPTA can abrogate this basic right. As Rafaeli demonstrated, few rights and legal principles have greater legal, historical, and constitutional pedigrees than the protection against uncompensated takings, which applies fully to the taking of surplus proceeds following a tax-foreclosure sale.

The Supreme Court of the United States recently came to the same conclusion under the United States Constitution in Tyler v Hennepin Co. In that case, the Supreme Court held that the Takings Clause of the United States Constitution prohibited the state of Minnesota from retaining surplus proceeds after a tax foreclosure without providing any opportunity for divested property owners to claim those proceeds. The Tyler Court, like this Court in Rafaeli, cited extensive historical support and thoroughly explained that a property right to surplus proceeds exists and is protected under Takings Clause jurisprudence. As this Court recognized in Rafaeli, this right dates back centuries to the very foundations of the Anglo-American legal tradition.

Slip op. at 22-23 (footnotes omitted).

Schafer v. Kent County, No. 164975 (Mich. July 29, 2024)