You remember our earlier posts about the issue (known as "home equity theft"). In a series of decisions mostly by state supreme courts, those courts have asked whether it is legal for a state or local government to "keep the change" after seizing and selling a tax debtor's property. For examples, see these cases:
For more on the issues, check out the video above.
Thing is, not every court so far has seen it this way. At least two have held that there's no takings or other constitutional problem. Nebraska said no, as did the U.S. Court of Appeals for the Eighth Circuit.
With a divergence in the lower courts you know what comes next, don't you? That's right, certiorari. Here are two new takings cert petitions, recently filed and docketed, asking the Supreme Court to take up the issue:
We won't go into a lot of detail because our law firm colleague Christina Martin is the lead counsel for the property owners in both of these cases. But we recommend you check out the petitions.
Here are the Questions Presented in the Tyler v. Hennepin County (Eighth Circuit) petition:
Hennepin County confiscated 93-year-old Geraldine Tyler’s former home as payment for approximately $15,000 in property taxes, penalties, interest, and costs. The County sold the home for $40,000, and, consistent with a Minnesota forfeiture statute, kept all proceeds, including the $25,000 that exceeded Tyler’s debt as a windfall for the public. In all states, municipalities may take real property and sell it to collect payment for property tax debts. Most states allow the government to keep only as much as it is owed; any surplus proceeds after collecting the debt belong to the former owner. But in Minnesota and a dozen other states, local governments take absolute title, extinguishing the owner’s equity in exchange only for cancelling a smaller tax debt, code enforcement fine, or debt to government agencies.The questions presented are:1. Whether taking and selling a home to satisfy a debt to the government, and keeping the surplus value as a windfall, violates the Takings Clause?2. Whether the forfeiture of property worth far more than needed to satisfy a debt plus, interest, penalties, and costs, is a fine within the meaning of the Eighth Amendment?
From the Fair v. Continental Resources (Nebraska) petition:
Kevin and Terry Fair fell behind on their property taxes after medical problems caused severe financial hardship. When they failed to pay $5,200 in taxes, interest, penalties, and costs by the deadline, Scotts Bluff County extinguished the Fairs’ entire interest in their $60,000 home and conveyed it to an investor who paid the tax debt. Unlike other types of debt collection, the Fairs’ foreclosed home was not sold after competitive bidding, leaving no opportunity for the Fairs to be paid for their equity from the proceeds remaining after paying the debt. Nebraska is one of only 14 states where government takes valuable real estate and all equity in that property as payment for small tax debts. Half those states, like Nebraska here, convey the windfall taken from such foreclosures to private investors. Courts have split on whether government may constitutionally take more property than necessary to pay a debt. The questions presented are:(1) Does the government violate the Takings Clause when it confiscates property worth more than the debt owed by the owner?(2) Does the forfeiture of far more property than needed to satisfy a delinquent tax debt plus interest, penalties, and costs, constitute an excessive fine within the meaning of the Eighth Amendment?
Stay tuned. Follow along on the Court's dockets here (Tyler) and here (Fair).
