The United States Court of Appeals for the Sixth Circuit has issued a potentially significant decision finding that a Michigan county went too far when it seized an individual’s property to settle a tax debt and failed to not refund the excess to the owner. Justice Kethledge wrote for the court in Hall versus Meisner.
Here is the brief summary of Justice Kethledge’s introduction:
In that case, the Oakland County defendant took “absolute title” to plaintiff Tawanda Hall’s home – worth nearly $300,000, on the facts here alleged – to satisfy a $22 tax debt $262, then refused to refund the difference. The other plaintiffs shared a similar fate with their homes. Under Michigan law – and the law of virtually every state for the past 200 years – a creditor can only convey real estate to a debtor after a public foreclosure sale, after which any excess proceeds exceeding the debt is repaid to the debtor. The return of this excess compensates the debtor for her equitable interest in the property – which in common parlance is called “equity” in real property, and which English and American courts have for centuries called “equitable title”. “. Yet the Michigan General Property Tax Act created an exception to this rule for a single creditor: namely the state itself (or one of its counties), which alone among all creditors can take equitable title to the property. a landowner without paying it, when he collects a tax debt. In this regard, Michigan law is not only self-serving: it is also an aberration from some 300 years of English and American court decisions, which have specifically prohibited the action that Oakland County has taken. here.
The government cannot refuse to recognize long-established property interests as a way to take them. This was the effect of Michigan law as it applied to the plaintiffs here; and we agree with the plaintiffs that, on the facts here alleged, the county took their property without just compensation. We therefore reverse the District Court’s dismissal of its claim against the county under the taking possession clause of the United States Constitution.
Justice Kethledge was joined by Justices Bush and Nalbandian. The Pacific Legal Foundation represented the owners.