Today, the U.S. Supreme Court issued a unanimous opinion holding that a homeowner had stated a plausible claim against a county under the Takings Clause of the Fifth Amendment to the U.S. Constitution after the county foreclosed and sold the home and retained the sale funds in excess of the tax debt. Tyler v. Hennepin County.
According to the opinion, the county imposes a real estate tax on property within the county and if the tax isn’t timely paid, the county obtains a judgement against the property, which temporarily transfers title to the state. If the property is not redeemed within a three year period, the property is sold and the proceeds pay off any tax debt with the excess sale funds being split between the county, town, and school district.
In this case, the 94 year old owner of a condo failed to pay her property taxes after she moved to a senior community. The condo was seized by the county and sold for $40,000. $15,000 of the sale proceeds went to pay off the tax debt and the county kept the remainder. The homeowner filed a lawsuit against the county claiming its retention of the excess value of her home was an unconstitutional taking of her property in violation of the Fifth Amendment and also violated the excessive fines clause of the Eighth Amendment. The county filed a motion to dismiss the lawsuit, which was granted by the district court and upheld on appeal to the court of appeals.
On appeal to the U.S. Supreme Court, the Court first analyzed whether the remaining value after the sale of the foreclosed property constituted “property” under the Fifth Amendment’s takings clause. The Court said the answer to this question was yes, under a principle the Court traced back to the Magna Carta that a government cannot “take more from a taxpayer than she owes.” The Court concluded that the homeowner had plausibly alleged a taking where the county retained the excess sale revenues, and reversed the court’s dismissal of her claims against the county. The Court did not decide the excessive fines claim.