Rafaeli LLC v. Oakland County

Michigan Supreme Court
Lansing, Michigan
Syllabus
Chief Justice: Justices:
Bridget M. McCormack Stephen J. Markman
Brian K. Zahra
Chief Justice Pro Tem:
Richard H. Bernstein
David F. Viviano Elizabeth T. Clement
Megan K. Cavanagh
This syllabus constitutes no part of the opinion of the Court but has been Reporter of Decisions:
prepared by the Reporter of Decisions for the convenience of the reader. Kathryn L. Loomis
RAFAELI, LLC v OAKLAND COUNTY
Docket No. 156849. Argued November 7, 2019 (Calendar No. 1). Decided July 17, 2020.
Rafaeli, LLC, and Andre Ohanessian brought an action in the Oakland Circuit Court
against Oakland County and its treasurer, Andrew Meisner, alleging due-process and equal-
protection violations as well as an unconstitutional taking of their properties. Rafaeli owed $8.41
in unpaid property taxes from 2011, which grew to $285.81 after interest, penalties, and fees.
Defendants foreclosed on Rafaeli’s property for the delinquency, sold the property at public
auction for $24,500, and retained all the sale proceeds in excess of the taxes, interest, penalties,
and fees. Ohanessian owed approximately $6,000 in unpaid taxes, interest, penalties, and fees
from 2011. Like Rafaeli’s property, defendants foreclosed on Ohanessian’s property for the
delinquency, sold his property at auction for $82,000, and retained all the proceeds in excess of
Ohanessian’s tax debt. Plaintiffs specifically alleged that defendants, by selling plaintiffs’ real
properties in satisfaction of their tax debts and retaining the surplus proceeds from the tax-
foreclosure sale of their properties, had taken their properties without just compensation in
violation of the Takings Clauses of the United States and Michigan Constitutions. The circuit
court, Denise K. Langford-Morris, J., granted summary disposition to defendants, finding that
defendants did not “take” plaintiffs’ properties because plaintiffs forfeited all interests they held
in their properties when they failed to pay the taxes due on the properties. The court determined
that property properly forfeited under the General Property Tax Act (GPTA), MCL 211.1 et seq.,
and in accordance with due process is not a “taking” barred by either the United States or Michigan
Constitution. Because the GPTA properly divested plaintiffs of all interests they had in their
properties, the court concluded that plaintiffs did not have a property interest in the surplus
proceeds generated from the tax-foreclosure sale of their properties. Plaintiffs appealed in the
Court of Appeals. In an unpublished per curiam opinion issued on October 24, 2017 (Docket No.
330696), the Court of Appeals, MARKEY, P.J., and METER and SHAPIRO, JJ., affirmed the circuit
court’s decision and rejected plaintiffs’ argument that the GPTA’s “scheme” allows for
unconstitutional takings. Drawing on Bennis v Michigan, 516 U.S. 442 (1996), a United States
Supreme Court case regarding civil-asset forfeiture resulting from criminal activity, the Court of
Appeals held that defendants acquired their interest in plaintiffs’ properties by way of a statutory
scheme that did not violate due process and thus that defendants were not required to compensate
plaintiffs for property that was lawfully obtained. Plaintiffs sought leave to appeal in the Supreme
Court, raising the takings issue as the sole issue on appeal. The Supreme Court granted the
application. 503 Mich. 909 (2018).
In an opinion by Justice ZAHRA, joined by Chief Justice MCCORMACK and Justices
MARKMAN, BERNSTEIN, CLEMENT, and CAVANAGH, the Supreme Court held:
Michigan’s common law recognizes a former property owner’s property right to collect the
surplus proceeds that are realized from the tax-foreclosure sale of property, and this right is vested
such that it is to remain free from unlawful governmental interference. Accordingly, when the
government takes property to satisfy an unpaid tax debt, Michigan’s Takings Clause requires the
foreclosing governmental unit to return any proceeds from the tax-foreclosure sale in excess of the
delinquent taxes, interest, penalties, and fees reasonably related to the foreclosure and sale of the
property as just compensation. To the extent the GPTA permits the government to retain these
surplus proceeds and transfer them into the county general fund, the GPTA is unconstitutional as
applied to former property owners whose properties were sold at a tax-foreclosure sale for more
than the amount owed in unpaid taxes, interest, penalties, and fees related to the forfeiture,
foreclosure, and sale of their properties. The trial court’s reliance on the term “forfeiture” in the
GPTA was incorrect, and the Court of Appeals erred by relying on Bennis to conclude that no
taking occurred in this case.
1. The trial court’s reliance on the term “forfeiture” in the GPTA was incorrect. Under
MCL 211.78(8)(b), “forfeiture” simply permits defendants to seek a judgment of foreclosure.
Forfeiture does not affect title, nor does it give the county treasurer (or the state if the state is the
foreclosing governmental unit) any rights, titles, or interests to the forfeited property. Therefore,
plaintiffs did not “forfeit” all rights, titles, and interests they had in their properties by failing to
pay their real-property taxes.
2. The Court of Appeals erred by relying on Bennis to conclude that no taking occurred in
this case. Bennis is distinguishable because the purpose of civil-asset forfeiture is different than
the purpose of the GPTA provisions at issue in this case. Bennis recognized that civil-asset
forfeiture serves, at least in part, to punish the owner of property, but the GPTA is not punitive in
nature; its aim is to encourage the timely payment of property taxes and to return tax-delinquent
properties to their tax-generating status, not necessarily to punish property owners for failing to
pay their property taxes. The Court’s holding in Bennis focused narrowly on forfeited property
that was used as an instrumentality for criminal activity and the government’s interest in deterring
illegal activity. In this case, plaintiffs did not use their properties for illicit purposes. They simply
failed to pay their property taxes, which is not a criminal offense. Accordingly, the Court of
Appeals improperly conflated the meaning of “forfeiture” in an unrelated area of law with the
meaning of “forfeiture” as expressly described under the GPTA.
3. A claim of an unconstitutional taking is distinct from a claim of property deprivation
without due process of law. The remedy for a taking of private property is just compensation,
whereas the remedy for being deprived of property without due process of law is the return of the
property. In this case, plaintiffs did not dispute the legitimacy of defendants’ authority to foreclose
on their properties, nor did plaintiffs contest the adequacy of defendants’ efforts to notify plaintiffs
of the tax delinquency, forfeiture, and foreclosure; instead, plaintiffs challenged defendants’
retention of the surplus proceeds as an unconstitutional taking. Plaintiffs’ request for a
determination of just compensation demonstrated that the nature of their claim was a taking
without just compensation, not a deprivation of property without due process of law. Therefore,
there was no legal basis to conclude that defendants’ compliance with the GPTA’s notice
provisions justified defendants’ retention of the surplus proceeds.
4. Under US Const, Am V and Const 1963, art 10, § 2, private property shall not be taken
for public use without just compensation. Michigan’s Takings Clause has been interpreted to
afford property owners greater protection than its federal counterpart when it comes to the state’s
ability to take private property for a public use under the power of eminent domain. A “taking”
for purposes of inverse condemnation means that the government has permanently deprived the
property owner of any possession or use of the property without the commencement of formalized
condemnation proceedings. When such a taking occurs, the property owner is entitled to just
compensation for the value of the property taken. In order to assert a takings claim of this nature,
a claimant must first establish a vested property right under state law. In this case, plaintiffs alleged
that they have a cognizable, vested property right to the surplus proceeds that resulted from the
tax-foreclosure sale of their properties under Michigan law that is protected by Michigan’s Takings
Clause. The primary objective in interpreting a constitutional provision is to determine the text’s
original meaning to the ratifiers, the people, at the time of ratification. The whole of Article 10,
§ 2 has a technical meaning that must be discerned by examining the purpose and history of the
power of eminent domain. People ex rel Seaman v Hammond, 1 Doug 276 (Mich, 1844), United
States v Lawton, 110 U.S. 146 (1884), and Nelson v City of New York, 352 U.S. 103 (1956), all
address a former property owner’s statutory right to recover the surplus proceeds. Seaman
recognized that the owner or claimant of the land at the time of the tax-foreclosure sale had a
statutory right to recover the surplus. Consistent with Seaman, Lawton not only recognized this
statutory right but also made it clear that a Takings Clause violation will arise when a tax-sale
statute grants a former owner an independent property interest in the surplus proceeds and the
government fails to return that surplus. Nelson, on the other hand, held that no federal Takings
Clause claim will exist when there is a statutory path to recover the surplus proceeds but the
property owners fail to avail themselves of that procedure. Read together, Lawton and Nelson
establish that the Takings Clause under the United States Constitution may afford former property
owners a remedy when a tax-sale statute provides the divested property owner an interest in the
surplus proceeds and the government does not honor that statutory interest. However, Seaman,
Lawton, and Nelson do not provide direction on what occurs when the statutes governing
foreclosure make no mention of, or expressly preclude, a divested property owner’s right to the
surplus proceeds but the divested property owner establishes a property right to the surplus
proceeds through some other legal source, such as the common law. In that instance, the failure
to provide the divested property owner an avenue for recovering the surplus proceeds would
produce an identical result to Lawton: property to which an individual is legally entitled has been
taken without recourse. Michigan’s statutory scheme under the GPTA does not recognize a former
property owner’s statutory right to collect these surplus proceeds; therefore, it had to be determined
whether plaintiffs have a vested property right to these surplus proceeds through some other legal
source, such as the common law.
5. Michigan’s common law is adopted from England; therefore, English cases and
authorities may be considered when identifying common law. A review of English common law
supported the notion that an owner of real or personal property has a right to any surplus proceeds
that remain after the property is sold to satisfy a tax debt. The Magna Carta protected property
owners from uncompensated takings and recognized that tax collectors could only seize property
to satisfy the value of the debt payable to the Crown, leaving the property owner with the excess.
Sir William Blackstone similarly explained in the context of bailments that whenever the
government seized property for delinquent taxes, it did so subject to an implied contract in law to
either return the property if the tax debt was paid or to render back the surplus if the property was
sold to satisfy the delinquent taxes. The right to collect the surplus proceeds was also firmly
established in the early years of Michigan’s statehood, and throughout Michigan’s history the
Michigan Supreme Court has held that the government’s takings power is limited to only that
property which is necessary to serve the public. These fundamental principles—that the
government shall not collect more taxes than are owed, nor shall it take more property than is
necessary to serve the public—protect taxpayers and property owners alike from government
overreach and have remained a staple in Michigan’s jurisprudence. A property owner’s right to
collect the surplus proceeds from the tax-foreclosure sale of his or her property has also withstood
the most recent ratification of the Michigan Constitution, as exemplified by Dean v Dep’t of
Natural Resources, 399 Mich. 84 (1976), which recognized a right to collect those proceeds under
the common-law claim of unjust enrichment. Dean stands for more than just a recognition of the
plaintiff’s right to bring a claim under unjust enrichment for the surplus proceeds; inherent in
Dean’s holding is Michigan’s protection under the common law of a property owner’s right to
collect the surplus proceeds that result from a tax-foreclosure sale. Accordingly, Michigan’s
common law recognizes a former property owner’s property right to collect the surplus proceeds
that are realized from the tax-foreclosure sale of property, and this right is vested such that it is to
remain free from unlawful governmental interference.
6. The amendments of the GPTA did not abrogate the common-law right to collect the
surplus proceeds. The 1963 Constitution protects a former owner’s property right to collect the
surplus proceeds following a tax-foreclosure sale under Article 10, § 2. While the Legislature is
typically free to abrogate the common law, it is powerless to override a right protected by
Michigan’s Takings Clause.
7. As the foreclosing governmental unit under the GPTA, defendants were entitled to seize
plaintiffs’ properties to satisfy the unpaid delinquent real-property taxes as well as any interest,
penalties, and fees associated with the foreclosure and sale of plaintiffs’ properties. But defendants
could only collect the amount plaintiffs owed and nothing more. Once defendants foreclosed on
plaintiffs’ properties, obtained title to those properties, and sold them to satisfy plaintiffs’ unpaid
taxes, interest, penalties, and fees related to the foreclosures, any surplus resulting from those sales
belonged to plaintiffs. Defendants’ retention of those surplus proceeds under the GPTA amounted
to a taking of a vested property right requiring just compensation. To the extent the GPTA permits
defendants to retain these surplus proceeds and transfer them into the county general fund, the
GPTA is unconstitutional as applied to former property owners whose properties were sold at a
tax-foreclosure sale for more than the amount owed in unpaid taxes, interest, penalties, and fees
related to the forfeiture, foreclosure, and sale of their properties. Defendants were required to
return the surplus proceeds to plaintiffs, and defendants’ failure to do so constituted a government
taking under the Michigan Constitution entitling plaintiffs to just compensation.
8. The remedy for a government taking is just compensation for the value of the property
taken. The property “taken” is the surplus proceeds from the tax-foreclosure sale of plaintiffs’
properties to satisfy their tax debts. Therefore, plaintiffs are entitled to the value of those surplus
proceeds as just compensation.
Reversed and remanded to the Oakland Circuit Court for further proceedings.
Justice VIVIANO, concurring, agreed with the majority’s result but disagreed with much of
its reasoning. Justice VIVIANO would interpret the Constitution by discerning the ordinary
meaning of the term “property” and applying it to the facts of this case, concluding that the property
right taken from plaintiffs was their equity in their respective properties and not any independent
interest in the surplus proceeds from the tax-foreclosure sale. The majority did not explain which
words in the Takings Clause were in need of interpretation, and the majority’s investigation of
what the ratifiers understood property to mean ultimately rested on a flawed understanding of its
original meaning. By reasoning that “property” must be defined as the particular types the ratifiers
had in mind, the majority interpreted the Takings Clause as exalting those interests above the
Legislature’s authority to modify them, raising serious concerns regarding the separation of
powers. Under the majority’s position, any property rights extant when the Constitution was
ratified would be insulated from legislative change, whereas later-developed property rights would
presumably be subject to change. The majority’s broad position would not allow the Legislature
to repeal rights that were recognized property rights at the time of ratification and thereby
preserved in the Takings Clause, and this prohibition would extend even to legislation that
prospectively modified or abrogated nonvested property rights—i.e., rights to property that
individuals might acquire in the future. Furthermore, the majority characterized the property at
issue as merely the surplus proceeds from the foreclosure sale but did not consider the property
interests that existed before the sale or how those interests affected the taxpayer’s entitlement to
anything resulting from the sale. And it was far from clear what implications the former existence
of a statutory right to surplus proceeds had in determining the application of the constitutional right
in this case. In sum, Justice VIVIANO would have characterized the property right at issue in this
case as the taxpayer’s equity in the property, which best fits the development of ownership rights
in property laden with debts and liens. The Legislature did not purport to abrogate the taxpayer’s
equity; therefore, a taking occurred when title to plaintiffs’ property was vested in the government
without any possibility of redemption, and plaintiffs were owed the surplus proceeds from the tax-
foreclosure sales.
©2020 State of Michigan
Michigan Supreme Court
Lansing, Michigan
OPINION
Chief Justice: Justices:
Bridget M. McCormack Stephen J. Markman
Brian K. Zahra
Chief Justice Pro Tem: Richard H. Bernstein
David F. Viviano Elizabeth T. Clement
Megan K. Cavanagh
FILED July 17, 2020
STATE OF MICHIGAN
SUPREME COURT
RAFAELI, LLC, and ANDRE
OHANESSIAN,
Plaintiffs-Appellants,
v No. 156849
OAKLAND COUNTY and ANDREW
MEISNER,
Defendants-Appellees.
BEFORE THE ENTIRE BENCH
ZAHRA, J.
Plaintiff Rafaeli, LLC, owed $8.41 in unpaid property taxes from 2011, which grew
to $285.81 after interest, penalties, and fees. Oakland County and its treasurer, Andrew
Meisner (collectively, defendants), foreclosed on Rafaeli’s property for the delinquency,
sold the property at public auction for $24,500, and retained all the sale proceeds in excess
of the taxes, interest, penalties, and fees. Plaintiff Andre Ohanessian owed approximately
$6,000 in unpaid taxes, interest, penalties, and fees from 2011. Like Rafaeli’s property,
defendants foreclosed on Ohanessian’s property for the delinquency, sold his property at
auction for $82,000, and retained all the proceeds in excess of Ohanessian’s tax debt. The
issue in this case is whether defendants have committed an unconstitutional taking by
retaining the surplus proceeds from the tax-foreclosure sale of Rafaeli’s and Ohanessian’s
(collectively, plaintiffs) properties that exceed the amount plaintiffs owed in unpaid
delinquent taxes, interest, penalties, and fees under the General Property Tax Act (GPTA).1
We hold that defendants’ retention of those surplus proceeds is an unconstitutional taking
without just compensation under Article 10, § 2 of our 1963 Constitution. Accordingly,
we reverse the judgment of the Court of Appeals and remand this case to the Oakland
Circuit Court for proceedings consistent with this opinion.
I. FACTS AND PROCEDURAL HISTORY
Rafaeli purchased a rental property in Southfield for $60,000 on August 15, 2011,
but failed to pay the 2011 taxes due on the property in the amount of $536.24.2 Defendants
mailed to Rafaeli notice of the delinquency on June 11, 2012. Rafaeli sent payment to
defendants on August 30, 2012, yet this payment was insufficient to cover the full amount
of the tax delinquency. Defendants mailed a second notice of the delinquency to Rafaeli
on September 3, 2012, and Rafaeli sent another payment to defendants on January 14,
2013; however, even after Rafaeli’s second payment, a deficiency of $8.41, plus $2.26 in
1
MCL 211.1 et seq.
2
In plaintiffs’ complaint, Rafaeli alleges that a tax deficiency remained on the property
despite certification from Meisner that all taxes were paid on the property from the previous
five years. This led to a tax delinquency of $496.52 plus $39.72 in penalties, fees, and
interest.
2
interest, penalties, and fees remained on Rafaeli’s property. On February 1, 2013,
defendants sent Rafaeli a third notice of delinquency. This delinquency was never paid,
and as a result, on March 1, 2013, Rafaeli’s property was forfeited in the amount of the
unpaid taxes, interest, penalties, and fees.
On May 16, 2013, defendants filed a petition seeking to foreclose all tax-delinquent
properties that were forfeited for unpaid 2011 real-property taxes, including Rafaeli’s
property. On February 26, 2014, a foreclosure hearing was held in the Oakland Circuit
Court. Rafaeli did not appear. After the hearing, the court entered a judgment of
foreclosure that included Rafaeli’s property. At the time of the foreclosure, the
delinquency had grown to $285.81 because of penalties, interest, and fees. Rafaeli failed
to timely redeem the property by March 31, 2014, resulting in the transfer to defendants of
fee simple title to Rafaeli’s property. On August 19, 2014, defendants sold Rafaeli’s
property at auction to a third party for $24,500. Defendants retained all the surplus
proceeds that exceeded the $285.81 debt Rafaeli owed to defendants.
Ohanessian purchased a 2.7-acre property located in the city of Orchard Lake
Village in 2004. Ohanessian paid $2,510.05 to defendants to satisfy his 2010 delinquent
property taxes but failed to pay his 2011 property taxes.3 After Ohanessian’s property was
forfeited for the amount of the unpaid taxes, interest, penalties, and fees, defendants added
3
According to Ohanessian, he moved to California sometime in 2011. He alleges that he
filled out an electronic change-of-address form on defendants’ website but that he stopped
receiving his tax bills when he moved. He states that he used a mailbox at a UPS store in
Eastpointe to receive his property-tax bills. Defendants claim that they used this address,
as well as Ohanessian’s former residence in Livonia, to send Ohanessian notice of the tax
delinquency in June 2013, December 2013, and February 2014. Defendants claim that they
received no response to these notices.
3
his property to the petition for foreclosure for unpaid 2011 real-property taxes. The same
judgment of foreclosure entered on February 26, 2014, that included Rafaeli’s property
also included Ohanessian’s property. At the time of the foreclosure, Ohanessian owed
approximately $6,000 in unpaid taxes, interest, penalties, and fees. Ohanessian failed to
redeem his property by March 31, 2014, and defendants obtained fee simple title to his
property. On September 26, 2014, defendants sold Ohanessian’s property at auction to a
third party for $82,000. Defendants retained all the surplus proceeds exceeding
Ohanessian’s tax debts.
Plaintiffs filed this action against defendants in the Oakland Circuit Court, alleging
due-process and equal-protection violations as well as an unconstitutional taking.4 As
relevant to this case, plaintiffs specifically alleged that defendants, by selling plaintiffs’
real properties in satisfaction of their tax debts and retaining the surplus proceeds from the
tax-foreclosure sale of their properties, had taken their properties without just
compensation in violation of the Takings Clauses of the United States and Michigan
Constitutions.
The circuit court granted summary disposition to defendants, finding that defendants
did not “take” plaintiffs’ properties because plaintiffs forfeited all interests they held in
4
Prior to filing this action, Rafaeli and a nonparty to this case filed a putative class action
against the counties of Wayne and Oakland in federal court, asserting, among other things,
an unconstitutional-takings claim. The case was dismissed for lack of subject-matter
jurisdiction. Rafaeli, LLC v Wayne Co, unpublished opinion of the United States District
Court for the Eastern District of Michigan, issued June 4, 2015 (Case No. 14-13958).
4
their properties when they failed to pay the taxes due on the properties.5 The court
determined that property properly forfeited under the GPTA and in accordance with due
process is not a “taking” barred by either the United States or Michigan Constitution.
Because the GPTA properly divested plaintiffs of all interests they had in their properties,
the court concluded that plaintiffs did not have a property interest in the surplus proceeds
generated from the tax-foreclosure sale of their properties.6 Plaintiffs appealed in the Court
of Appeals. The Court of Appeals affirmed the circuit court and rejected plaintiffs’
argument that the GPTA’s “scheme” allows for unconstitutional takings.7 Drawing on
precedent from the United States Supreme Court regarding civil-asset forfeiture resulting
from criminal activity, the Court of Appeals held that defendants acquired their interest in
plaintiffs’ properties “by way of a statutory scheme that did not violate due process” and
thus defendants were not required to compensate plaintiffs for property that was lawfully
obtained.8
5
Rafaeli, LLC v Oakland Co, unpublished opinion and order of the Oakland Circuit Court,
issued October 8, 2015 (Docket No. 15-147429-CZ), p 3.
6
Plaintiffs moved for reconsideration and also moved to amend their complaint to add
claims of substantive due-process violations, violations of the Eighth Amendment’s
prohibition against excessive fines, and unjust enrichment. The circuit court denied
reconsideration and denied plaintiffs’ proposed amendment as futile.
7
Rafaeli, LLC v Oakland Co, unpublished per curiam opinion of the Court of Appeals,
issued October 24, 2017 (Docket No. 330696), p 5.
8
Id., citing Bennis v Michigan, 516 U.S. 442, 452; 116 S. Ct. 994; 134 L. Ed. 2d 68 (1996).
Judge SHAPIRO concurred with the majority’s conclusion that plaintiffs failed to state a
compensable takings claim but disagreed with the majority’s reliance on principles of civil-
asset forfeiture. Instead, Judge SHAPIRO relied on different authority from the United
States Supreme Court, which he concluded had rejected a similar claim to recover the
surplus proceeds from a tax-foreclosure sale. Rafaeli (SHAPIRO, J., concurring), unpub op
5
Plaintiffs sought leave to appeal in this Court, raising the takings issue as the sole
issue on appeal. We granted plaintiffs’ application, ordering the parties to address whether
defendants violated the Takings Clause of the United States Constitution, the Michigan
Constitution, or both by retaining the proceeds from the sale of tax-foreclosed property that
exceeded the amount of the taxes, penalties, interest, and fees owed on the property.9
II. OVERVIEW OF THE GPTA
The GPTA permits the recovery of unpaid real-property taxes, penalties, interest,
and fees through the foreclosure and sale of the property on which there is a tax
delinquency. Under the current process, tax-delinquent properties are forfeited to the
county treasurers; foreclosed on after a judicial foreclosure hearing; and, if not timely
at 1-2, citing Nelson v City of New York, 352 U.S. 103, 111; 77 S. Ct. 195; 1 L. Ed. 2d 171
(1956).
9
Rafaeli, LLC v Oakland Co, 503 Mich. 909 (2018).
6
redeemed, sold at a public auction.10 Counties may elect to serve as the “foreclosing
governmental unit”; otherwise, the state will do so.11
Real-property taxes are assessed and collected first by the city, township, or village
treasurer where the property is located.12 When property taxes are not satisfied and become
10
Before 1999, delinquent-tax liens were offered at annual tax-lien sales in which anyone
could purchase the tax liens. See Smith, Foreclosure of Real Property Tax Liens Under
Michigan’s New Foreclosure Process, 29 Mich Real Prop Rev 51, 51 (2002); see also
Alexander, Tax Liens, Tax Sales, and Due Process, 75 Ind L J 747, 760 (2000) (“This
transfer of the lien is distinct from the sale of the underlying property which occurs at a tax
foreclosure sale. Instead, what is transferred is the lien itself, vesting in the purchaser the
right to enforce the lien in accordance with statutory procedures.”). The tax-lien sale was
followed by a one-year redemption period. If the property was not timely redeemed, the
tax-lien purchaser, or the state if there was no tax-lien purchaser, would be deeded the
property and was responsible for the final foreclosure of the property. The former
foreclosure process could extend many years, causing properties to deteriorate and become
clouded with poor title, which often led to title-insurance companies refusing to insure
these properties. As a result, the Legislature overhauled the GPTA in 1999. See 1999 PA
123. The current scheme expedites the foreclosure process, thereby reducing the amount
of abandoned, tax-delinquent properties within the state. Given that the sole issue in this
appeal is whether a “taking” occurred, many of the GPTA’s procedures regarding the
notice and hearing requirements, which are relevant to due-process jurisprudence, are
either described briefly or omitted entirely from this general overview. For a complete
discussion of the current foreclosure process, see Michigan’s New Foreclosure Process,
29 Mich Real Prop Rev at 51. And for a comprehensive overview of the prior foreclosure
process, see Smith, Foreclosure of Real Property Tax Liens, 75 Mich B J 953 (1996).
11
MCL 211.78(8)(a). Seventy-five of Michigan’s 83 counties elect to act as the foreclosing
governmental unit. See Michigan Department of Treasury, New Law Tax Foreclosure
Archive
(accessed May 12, 2020) [https://perma.cc/L9V2-BC35].
12
MCL 211.44; MCL 211.45; see also OAG, 2014, No. 7,279 (June 11, 2014) (“[Real
property taxes] are assessed and, in the first instance, collected by the city, township, or
village treasurer.”).
7
delinquent, collection is turned over to the foreclosing governmental unit.13 If the county
elects to serve as the foreclosing governmental unit, it may create a “delinquent tax
revolving fund” that funds local municipalities for the unpaid delinquent taxes.14 The
county treasurer then attempts to collect the delinquent taxes.15
On March 1 of each tax year, taxes due in the immediately preceding year that
remain unpaid are returned to the county treasurer as “delinquent.”16 Notice of the
delinquency, which must explain the effect of failing to pay the tax delinquency and the
possibility of foreclosure, must be afforded to property owners throughout the next 12
months.17 On March 1 of the year following delinquency, properties with delinquent taxes
are “forfeited” to the county treasurer for the amount of the tax delinquency, as well as any
13
MCL 211.55.
14
MCL 211.87b. Local municipalities rely heavily on real-property taxes for revenue
streams. Thus, counties use the delinquent tax revolving fund to advance municipalities’
funds that would otherwise come from the unpaid real-property taxes. This advance allows
local municipalities to continue with their day-to-day operations without having to wait for
payment of the delinquent property taxes.
15
Any taxes, interest, penalties, and fees subsequently collected by the county treasurer are
deposited into the delinquent tax revolving fund. If delinquent property taxes are not
collected, properties are foreclosed and typically sold at a public auction known as a tax-
foreclosure sale. In disbursing the proceeds from the tax-foreclosure sale, the first priority
is to reimburse the delinquent tax revolving fund for “all taxes, interest, and fees on all of
the property . . . .” MCL 211.78m(8)(a). If the county is ultimately unable to collect the
entire amount it advanced to the municipalities, either by tax collection or foreclosure sales,
then the county can charge the municipalities back the uncollected amount. MCL
211.87b(1). When a surplus exists, the county board of commissioners may transfer the
surplus into the county’s general fund. MCL 211.78m(8)(h).
16
MCL 211.78a(2).
17
See MCL 211.78a through MCL 211.78c; MCL 211.78f.
8
interest, penalties, and fees associated with the delinquency.18 Notably, the term
“forfeiture,” as used in the GPTA, means only that a foreclosing governmental unit may
seek a judgment of foreclosure if the property is not redeemed; it does not affect title.19
Once forfeiture occurs, the county treasurer must record a certificate of forfeiture
with the county register of deeds, placing all parties with an interest in the property on
notice that the property has been forfeited to the county treasurer, that the property has not
been redeemed, and “that absolute title to the property will vest in the county treasurer on
the March 31 immediately succeeding the entry of a judgment foreclosing the
property . . . .”20 Forfeited property may be redeemed at any time on or before that March
31 date if the total amount of unpaid delinquent taxes, interest, penalties, and fees are paid
to the county treasurer.21 Meanwhile, foreclosing governmental units must file a petition
for foreclosure with the circuit court that presides over where the forfeited property is
located no later than the 15th day of June following the forfeiture.22 The petition must
“seek a judgment in favor of the foreclosing governmental unit for the forfeited unpaid
18
MCL 211.78g(1).
19
MCL 211.78(8)(b) (“ ‘Forfeited’ or ‘forfeiture’ means a foreclosing governmental unit
may seek a judgment of foreclosure under [MCL 211.78k] if the property is not redeemed
as provided under [the GPTA], but does not acquire a right to possession or any other
interest in the property.”).
20
MCL 211.78g(2).
21
MCL 211.78g(3)(a). This subsection details additional taxes, interest, and fees that must
be paid to the county treasurer in order to successfully redeem the property. MCL
211.78g(3)(b) through (d).
22
MCL 211.78h(1).
9
delinquent taxes, interest, penalties, and fees listed against each parcel of property . . . [and]
shall request that a judgment be entered vesting absolute title to each parcel of property in
the foreclosing governmental unit, without right of redemption.”23
A judicial foreclosure hearing must be held in the circuit court within 30 days of
March 1 of the year after the petition for foreclosure is filed.24 After the judicial foreclosure
hearing, the judgment of foreclosure must be entered by March 30, with an effective date
of March 31.25 Unless the delinquent taxes, interest, penalties, and fees are paid on or
before March 31, fee simple title to the property vests absolutely in the foreclosing
governmental unit without any further redemption rights available to the delinquent
taxpayer.26 Thereafter, the foreclosing governmental unit’s title to the property is not
subject to any recorded or unrecorded lien.27
After foreclosure, and assuming the state, city, village, township, or county where
the property is located does not purchase the property, the GPTA provides for one or more
auction sales beginning on the third Tuesday in July immediately succeeding the entry of
23
Id. Forfeited properties listed in the petition may be redeemed after the petition for
foreclosure is filed, in which case the properties are removed from the petition for
foreclosure. MCL 211.78h(2).
24
MCL 211.78h(5). In the meantime, the GPTA provides for various notices and hearings
that must be given before foreclosure is finalized. These include various notices by mail,
publication, recordation, and even a personal visit to the property, see MCL 211.78h
through MCL 211.78i, as well as a show cause hearing within seven days of the judicial
foreclosure hearing, see MCL 211.78j.
25
MCL 211.78k(5). The final redemption date is March 31. Id.
26
MCL 211.78k(5) and (6).
27
MCL 211.78k(6).
10
the judgment of foreclosure.28 Once sold, the foreclosing governmental unit deposits the
sale proceeds into an account designated as the “delinquent tax property sales proceeds for
the year [the taxes became delinquent]” (hereinafter, the account).29
Importantly, the account is comprised of the proceeds of all sales for that year, such
that the proceeds of a single sale are commingled with the proceeds of all the other sales.30
The foreclosing governmental unit then distributes the proceeds in the account in a specific
order of priority. The first priority is to reimburse the delinquent tax revolving fund for
the full amount of unpaid taxes, interest, and fees owed on the property.31 This is followed
by the annual costs incurred as a result of conducting foreclosure sales and general
28
MCL 211.78m(2). All property not sold on or before December 30 immediately
succeeding entry of the judgment of foreclosure is transferred to the city, village, or
township where the property is located unless the city, village, or township objects to the
transfer. MCL 211.78m(6). If the property remains unsold and is not transferred to the
city, village, or township, the foreclosing governmental unit retains the property. Id.
29
MCL 211.78m(8). Notably, this account is a subsidiary account within the delinquent
tax revolving fund. The delinquent tax revolving fund is segregated into separate accounts
for each year’s delinquent taxes. Those accounts continue to exist until all the delinquent
taxes for that tax year have been collected. See generally Michigan Department of
Treasury, 2001-5 Delinquent Tax Revolving Funds Revisions To Accounting After Public Act
123 of 1999 (February 8, 2001), available at (accessed May 13, 2020) [https://perma.cc/395W-
FWHC].
30
Money and property within the delinquent tax revolving fund, however, remain separate
from any other money, property, or assets in the custody of the county treasurer. MCL
211.87b(1).
31
MCL 211.78m(8)(a). In fact, the GPTA requires the delinquent tax revolving fund to be
reimbursed regardless of “whether or not all of the property was sold.” Id.
11
overhead in conducting the foreclosure proceedings for the year.32 The statutory scheme
for reimbursement is quite exhaustive and even includes costs for maintaining property
foreclosed under the GPTA, defending title actions, and administering the foreclosure and
the disposition of forfeited property for delinquent taxes.33
The parties acknowledge that sale proceeds are often insufficient to cover the full
amount of the delinquent taxes, interest, penalties, and fees related to the foreclosure and
sale of the property. But when there are excess proceeds from individual sales, such as the
sale of plaintiffs’ properties in this case, those proceeds are used to subsidize the costs for
all foreclosure proceedings and sales for the year of the tax delinquency, as well as any
years prior or subsequent to the delinquency.34 Then, after the required statutory
disbursements are made, surplus proceeds may be transferred to the county general fund in
cases in which the county is the foreclosing governmental unit.35 Of particular importance
here, the GPTA does not provide for any disbursement of the surplus proceeds to the former
property owner, nor does it provide former owners a right to make a claim for these surplus
proceeds. Michigan is one of nine states with a statutory scheme that requires the
32
MCL 211.78m(8)(b) and (c).
33
MCL 211.78m(8)(e), (f)(ii), and (f)(iii).
34
MCL 211.78m(8)(b) through (d); MCL 211.78m(8)(f)(i).
35
MCL 211.78m(8)(h). In cases in which the state is the foreclosing governmental unit,
“any remaining balance shall be transferred to the land reutilization fund created under
[MCL 211.78n].” MCL 211.78m(8)(g).
12
foreclosing governmental unit to disperse the surplus proceeds to someone other than the
former owner.36 It is under this framework that we review plaintiffs’ takings claim.
III. STANDARD OF REVIEW
This Court reviews a circuit court’s decision regarding a motion for summary
disposition, as well as any constitutional issues, de novo.37
IV. ANALYSIS
A. “FORFEITURE” UNDER THE GPTA AND CIVIL-ASSET FORFEITURE
Before turning to plaintiffs’ takings claim, we first address why the trial court’s
reliance on the term “forfeiture” in the GPTA was incorrect and why the panel majority
erred by relying on Bennis v Michigan, a case involving civil-asset forfeiture, to conclude
that no taking occurred in this case.
First, the GPTA makes clear that “forfeiture” simply permits defendants to seek a
judgment of foreclosure.38 Forfeiture does not affect title, nor does it give the county
36
Comment, State Theft In Real Property Tax Foreclosure Procedures, 54 Real Prop Tr &
Est L J 93, 101-102 & n 56 (2019) (explaining that Alabama, Arizona, Illinois, Indiana,
Michigan, Minnesota, Mississippi, Montana, and Oregon all require the foreclosing
governmental unit “to do something with the foreclosure sale surplus other than return it
to the original owner”).
Recent legislation has been proposed requiring the foreclosing governmental unit,
in instances in which sale of the property exceeds the minimum bid at auction, to “remit an
amount equal to that excess” to the former property owner if the property was owned and
occupied as a principal residence before the judgment of foreclosure was entered. See
2019 HB 4219.
37
Sidun v Wayne Co Treasurer, 481 Mich. 503, 508; 751 NW2d 453 (2008).
38
MCL 211.78(8)(b).
13
treasurer (or the state if the state is the foreclosing governmental unit) any rights, titles, or
interests to the forfeited property. Therefore, we reject the premise that plaintiffs
“forfeited” all rights, titles, and interests they had in their properties by failing to pay their
real-property taxes.
Second, Bennis is distinguishable because the purpose of civil-asset forfeiture is
different than the purpose of the GPTA provisions at issue here. Bennis recognized that
civil-asset forfeiture “serves, at least in part, to punish the owner” of property.39 But the
GPTA is not punitive in nature. Its aim is to encourage the timely payment of property
taxes and to return tax-delinquent properties to their tax-generating status, not necessarily
to punish property owners for failing to pay their property taxes.40 Bennis also recognized
that civil-asset forfeiture works as a deterrent, preventing property tainted with criminality
from being further used for illicit purposes.41 To this end, the Supreme Court in Bennis
stated that “[t]he government may not be required to compensate an owner for property
which it has already lawfully acquired under the exercise of governmental authority other
39
Bennis, 516 U.S. at 451-453 (quotation marks and citation omitted).
40
MCL 211.78(1) (“The legislature finds that there exists in this state a continuing need to
strengthen and revitalize the economy of this state and its municipalities by encouraging
the efficient and expeditious return to productive use of property returned for delinquent
taxes. Therefore, the powers granted in this act relating to the return of property for
delinquent taxes constitute the performance by this state or a political subdivision of this
state of essential public purposes and functions.”).
41
Bennis, 516 U.S. at 452 (“[F]orfeiture . . . serves a deterrent purpose distinct from any
punitive purpose. Forfeiture of property prevents illegal uses both by preventing further
illicit use of the property and by imposing an economic penalty, thereby rendering illegal
behavior unprofitable.”) (quotation marks, brackets, and citation omitted).
14
than the power of eminent domain.”42 We conclude that Bennis is distinguishable and
provides us little guidance as it relates to plaintiffs’ takings claim. The Court’s holding in
Bennis focused narrowly on forfeited property that was used as an instrumentality for
criminal activity and the government’s interest in deterring illegal activity.43 In this case,
plaintiffs did not use their properties for illicit purposes. They simply failed to pay their
property taxes, which is not a criminal offense.44 Accordingly, we conclude that the Court
of Appeals improperly conflated the meaning of “forfeiture” in an unrelated area of law
with the meaning of “forfeiture” as expressly described under the GPTA.
42
Id.
43
Id. at 453 (explaining that the forfeiture of the petitioner’s car used in her husband’s
criminal activity was consistent with longstanding punitive, deterrent, and remedial goals
underlying civil-asset forfeiture); id. at 455 (Thomas, J., concurring) (holding that the
forfeiture was permissible because the car was used as an instrumentality of crime and the
petitioner did not argue otherwise); id. at 458 (Ginsburg, J., concurring) (“Michigan has
decided to deter johns from using cars they own (or co-own) to contribute to neighborhood
blight, and that abatement endeavor hardly warrants this Court’s disapprobation.”).
44
As the Supreme Court of Appeals of Virginia in Martin v Snowden, 59 Va 100, 142-143
(1868), aff’d sub nom Bennett v Hunter, 76 U.S. 326 (1869), stated:
This forfeiture cannot be sustained as a forfeiture for crime . . . . In
such cases, the thing forfeited is the instrument by which the offence was
committed, or was the fruit of the offence, and is treated as being itself, in
some sort, the offender. But the land of a delinquent tax-payer cannot be
brought within the principle of this class of cases; it is neither the instrument
nor the fruit of any offence. Nor can we suppose that Congress intended to
make it a criminal, or even a quasi criminal offence, for a man not to pay his
taxes . . . .
15
B. DUE PROCESS
We also reject defendants’ argument that no taking occurred in this case because
plaintiffs were afforded the minimal protections of due process. The United States and
Michigan Constitutions dictate that before the government may take property for unpaid
taxes, it must provide the property owner sufficient notice of the delinquency and
foreclosure proceedings as well as an opportunity to contest those proceedings.45 To this
end, the GPTA explicitly states its intent to comply with minimum requirements of due
process and not create new rights beyond those prescribed in the Constitutions of our nation
or this state.46 As long as defendants comply with these due-process considerations,
plaintiffs may not contest the legitimacy of defendants’ authority to foreclose on their
properties for unpaid tax debts, nor may plaintiffs contest the sale of their properties to
third-party purchasers.47
45
US Const, Am V (“[N]or shall private property be taken for public use, without just
compensation.”); Const 1963, art 1, § 17 (“No person shall . . . be deprived of life, liberty
or property, without due process of law.”).
46
MCL 211.78(2).
47
See Jones v Flowers, 547 U.S. 220, 234; 126 S. Ct. 1708; 164 L. Ed. 2d 415 (2006) (“People
must pay their taxes, and the government may hold citizens accountable for tax
delinquency by taking their property. But before forcing a citizen to satisfy his debt by
forfeiting his property, due process requires the government to provide adequate notice of
the impending taking.”); Sidun, 481 Mich. at 509 (“Proceedings that seek to take property
from its owner must comport with due process.”).
16
A claim of an unconstitutional taking, however, is distinct from a claim of property
deprivation without due process of law.48 In Lingle v Chevron USA Inc, the United States
Supreme Court discussed the difference between these two constitutional clauses:
The [Takings] Clause expressly requires compensation where government
takes private property for public use. It does not bar government from
interfering with property rights, but rather requires compensation in the event
of otherwise proper interference amounting to a taking. Conversely, if a
government action is found to be impermissible—for instance because
it . . . is so arbitrary as to violate due process—that is the end of the inquiry.
No amount of compensation can authorize such action.[49]
As Lingle suggests, each constitutional provision protects property owners against
specific government action, offering different remedies for distinct constitutional
violations. The remedy for a taking of private property is just compensation, while the
remedy for being deprived of property without due process of law is the return of the
property.50 Notably, plaintiffs do not dispute the legitimacy of defendants’ authority to
48
Compare Const 1963, art 10, § 2 (Michigan’s Takings Clause) with Const 1963, art 1,
§ 17 (Michigan’s Due Process Clause); see also Peñalver & Strahilevitz, Judicial Takings
or Due Process?, 97 Cornell L Rev 305, 317-318 (2012) (stating that the Takings Clause
and the Due Process Clause of the Fifth Amendment “have frequently been muddled
together by courts and commentators alike,” but “grammatically they operate
independently of one another and the Supreme Court understands them to protect owners
against different kinds of government harms”) (citation omitted).
49
Lingle v Chevron USA Inc, 544 U.S. 528, 543; 125 S. Ct. 2074; 161 L. Ed. 2d 876 (2005)
(quotation marks, citation, and emphasis omitted).
50
Id.; see also Judicial Takings, 97 Cornell L Rev at 320 (“Distinguishing between the
Takings and Due Process Clauses is consistent with the text of the Constitution, but it also
provides a richer conceptual vocabulary for evaluating constitutional property
claims . . . .”). The GPTA, at one point, limited property owners to a damages action under
MCL 211.78l whenever “he or she did not receive any notice required under [the
GPTA] . . . .” Once the judgment of foreclosure was entered and the former property
owner’s interest in the property was extinguished, the former owner could not bring an
17
foreclose on their properties, nor do plaintiffs contest the adequacy of defendants’ efforts
to notify plaintiffs of the tax delinquency, forfeiture, and foreclosure. Instead, plaintiffs
challenge defendants’ retention of the surplus proceeds as an unconstitutional taking.
Plaintiffs ask this Court to reverse the decision of the Court of Appeals and remand to the
circuit court for a determination of just compensation. Plaintiffs’ request for a
determination of just compensation demonstrates that the nature of their claim is a taking
without just compensation, not a deprivation of property without due process of law.
Therefore, there is no legal basis to conclude that defendants’ compliance with the GPTA’s
notice provisions justifies defendants’ retention of the surplus proceeds.
C. OVERVIEW OF TAKINGS JURISPRUDENCE AND PLAINTIFFS’ TAKINGS
CLAIM
The Fifth Amendment of the United States Constitution, as applied to the states
through the Fourteenth Amendment, provides, in relevant part: “[N]or shall private
property be taken for public use, without just compensation.”51
Comparatively, Michigan’s Takings Clause provides, in relevant part:
Private property shall not be taken for public use without just
compensation therefore being first made or secured in a manner prescribed
action for possession. But, in In re Petition By Treasurer of Wayne Co for Foreclosure,
478 Mich. 1; 732 NW2d 458 (2007), this Court held that limitation unconstitutional. Thus,
property owners can now file a motion to set aside their judgment of foreclosure if the
foreclosing governmental unit failed to comply with due process when providing notice to
owners.
51
US Const, Am V; US Const, Am XIV; see AFT Mich v Michigan, 497 Mich. 197, 217;
866 NW2d 782 (2015) (“The Fifth Amendment is applied to the states through the
Fourteenth Amendment.”), citing Chicago, B & Q R Co v Chicago, 166 U.S. 226, 241; 17
S. Ct. 581; 41 L. Ed. 979 (1897).
18
by law. If private property consisting of an individual’s principal residence
is taken for public use, the amount of compensation made and determined
for that taking shall be not less than 125% of that property’s fair market
value, in addition to any other reimbursement allowed by law. . . .
“Public use” does not include the taking of private property for
transfer to a private entity for the purpose of economic development or
enhancement of tax revenues. Private property otherwise may be taken for
reasons of public use as that term is understood on the effective date of the
amendment to this constitution that added this paragraph.[52]
While we draw on authority discussing and interpreting both clauses, we must keep
in mind that Michigan’s Takings Clause has been interpreted to afford property owners
greater protection than its federal counterpart when it comes to the state’s ability to take
private property for a public use under the power of eminent domain.53
Plaintiffs, as the aggrieved property owners, have filed this inverse-condemnation
action alleging that defendants have taken plaintiffs’ properties without just compensation.
A “taking” for purposes of inverse condemnation means that the government has
permanently deprived the property owner of any possession or use of the property without
the commencement of formalized condemnation proceedings.54 When such a taking
52
Const 1963, art 10, § 2.
53
Compare Kelo v New London, Conn, 545 U.S. 469; 125 S. Ct. 2655; 162 L. Ed. 2d 439
(2005) (holding that the government’s condemnation and transfer of private property to a
private entity to facilitate economic development was a permissible “public use” under the
Fifth Amendment’s Takings Clause), with Wayne Co v Hathcock, 471 Mich. 445; 684
NW2d 765 (2004) (holding that a similar condemnation and transfer was not a permissible
“public use” under Michigan’s Takings Clause).
54
United States v Clarke, 445 U.S. 253, 257; 100 S. Ct. 1127; 63 L. Ed. 2d 373 (1980)
(explaining that the property owner’s right to bring an inverse-condemnation action is
derived from “the self-executing character of the constitutional provision with respect to
compensation”) (quotation marks and citation omitted).
19
occurs, the property owner is entitled to just compensation for the value of the property
taken.55 The government’s seizure of real property is the clearest form of a taking requiring
just compensation.56 But a taking can, and often does, encompass more than just the
physical deprivation of real, tangible property; it also includes the government’s
interference with one’s personal, intangible property.57
In order to assert a takings claim of this nature, a claimant must first establish a
vested property right under state law.58 “Because the Constitution protects rather than
creates property interests, the existence of a property interest is determined by reference to
existing rules or understandings that stem from an independent source such as state law.”59
Plaintiffs allege that they have a cognizable, vested property right to the surplus proceeds
55
Hart v Detroit, 416 Mich. 488, 494; 331 NW2d 438 (1982) (discussing inverse-
condemnation actions under Michigan law).
56
Horne v Dep’t of Agriculture, 576 U.S. 350; 135 S. Ct. 2419, 2425-2426; 192 L. Ed. 2d 388
(2015) (explaining that a “classic” or per se taking occurs when the government directly
appropriates private property for its own use).
57
AFT Mich, 497 Mich. at 218 (“The term ‘taking’ can encompass governmental
interference with rights to both tangible and intangible property.”), citing Ruckelshaus v
Monsanto Co, 467 U.S. 986, 1003; 104 S. Ct. 2862; 81 L. Ed. 2d 815 (1984) (“[I]ntangible
property rights protected by state law are deserving of the protection of the Taking
Clause . . . .”); see also 1 Cooley, General Principles of Constitutional Law in the United
States (1880), p 336 (explaining that the federal Takings Clause protects “anything of value
which the law recognizes as such, and in respect to which the owner is entitled to a remedy
against any one who may disturb him in its enjoyment,” regardless of “whether the property
be tangible or intangible”).
58
In re Certified Question, 447 Mich. 765, 788; 527 NW2d 468 (1994) (Fun ’N Sun RV,
Inc v Michigan).
59
Phillips v Washington Legal Foundation, 524 U.S. 156, 164; 118 S. Ct. 1925; 141 L. Ed. 2d
174 (1998) (quotation marks and citation omitted).
20
that result from the tax-foreclosure sale of their properties under Michigan law that is
protected by Michigan’s Takings Clause.
Our “primary objective” in interpreting a constitutional provision such as our state’s
Takings Clause is “to determine the text’s original meaning to the ratifiers, the people, at
the time of ratification.”60 This Court has held that “the whole of art 10, § 2 has a technical
meaning that must be discerned by examining the ‘purpose and history’ of the power of
eminent domain.”61 Accordingly, we must canvass the body of law so that we may
ascertain the “common understanding” of Article 10, § 2 and the property rights protected
thereunder.62
1. A HISTORICAL REVIEW OF CLAIMS FOR SURPLUS PROCEEDS FOLLOWING
A TAX-FORECLOSURE SALE
This is not the first time a former property owner has made a claim for the surplus
proceeds that result from the tax-foreclosure sale of the owner’s property. In People ex rel
Seaman v Hammond, the plaintiff, referred to as the “relator,” purchased land in October
1840 that was sold to satisfy the 1837 taxes.63 The relator received the county treasurer’s
certificate of sale, which, according to statute, entitled the “purchaser” to the deed to the
land within two years of the sale (October 1842) unless the land was redeemed. Before the
relator became entitled to the deed, however, the land was sold again in August 1842 to
satisfy the 1838 taxes, this time producing a surplus. According to the statute, the surplus
60
Hathcock, 471 Mich. at 468.
61
Id. at 471.
62
Id.
63
People ex rel Seaman v Hammond, 1 Doug 276 (Mich, 1844).
21
was to be deposited in the state treasury to the credit of the “owner or claimant” of the land.
After the redemption period expired for the first sale, the relator presented his deed for the
land and demanded the surplus proceeds from the second sale, but he was refused. This
Court held that the relator, as the purchaser of the land, was not entitled to receive the
surplus proceeds because, under the statute, he was not the owner or claimant of the land
at the time of the sale, explaining, in relevant part:
In that statute, whenever mention is made of the person who buys land
at a tax sale, he is denominated the purchaser, and no title whatever to the
land sold, vests in him, until, at the expiration of two years, he receives the
treasurer’s deed, “which conveyance,” says the statute, “shall vest in the
person who receives it, an absolute estate in fee simple.” Prior to that
conveyance, he has only a lien upon the land for the repayment of the amount
of the tax paid, with twenty per cent interest; he has no right to interfere with
the possession of the owner; he cannot enter upon the land for any purpose
whatever, nor can he control the rents and profits.
* * *
It is perfectly clear that the individual who has the legal title to the
land at the time of the tax sale, is the owner, entitled, under the statute, to the
surplus money, if any there be.[64]
Thirty-seven years later, the United States Supreme Court, in United States v Taylor,
addressed whether a federal statute, which permitted the federal government to conduct tax
sales to recover delinquent federal tax debts, gave property owners a right to claim the
surplus proceeds that resulted from the tax sales.65 The Court in Taylor concluded that the
64
Id. at 279-280.
65
United States v Taylor, 104 U.S. 216, 217-218; 26 L. Ed. 721 (1881). Although we decide
this case based on our state Constitution, we can look for guidance in the decisions of the
United States Supreme Court regarding surplus proceeds and the federal Takings Clause.
22
statute allowed for the recovery of the surplus proceeds. Three years later, the Court
followed Taylor in United States v Lawton.66 In Lawton, the appellee’s property was seized
for a tax delinquency of $88, which grew to $170.50 after interest, penalties, and costs.
The board of tax commissioners bought the land on behalf of the United States in
satisfaction of the appellee’s tax debt. The property was “struck off” for $1,100, leaving a
total of $929.50 in excess of the tax debt. The tax debtor sought the surplus but was
refused. The Court held that the tax debtor was entitled to the surplus proceeds, stating:
The land in the present case having been “struck off for” and “bid in” for the
United States at the sum of $1,100, we are of [the] opinion that the surplus
of that sum, beyond the $170.50 tax, penalty, interest, and costs, must be
regarded as being in the treasury of the United States, under the provisions
of section 36 of the act of 1861, for the use of the owner, in like manner as if
it were the surplus of purchase money received by the United States from a
third person on a sale of the land to such person for the non-payment of the
tax. It was unnecessary to go through any form of paying money out of the
treasury to any officer and then paying it in again to be held for the owner of
the land. But, so far as such owner is concerned, the surplus money is set
aside as his as fully as if it had come from a third person. If a third person
had bid $1,099 in this case, there would have been a surplus of $928.50 paid
into the treasury and held for the owner. It can make no difference that the
United States acquired the property by bidding one dollar more. To withhold
the surplus from the owner would be to violate the fifth amendment to the
constitution, and deprive him of his property without due process of law or
take his property for public use without just compensation. If he affirms the
propriety of selling or taking more than enough of his land to pay the tax and
penalty and interest and costs, and applies for the surplus money, he must
receive at least that.[67]
66
United States v Lawton, 110 U.S. 146; 3 S. Ct. 545; 28 L. Ed. 100 (1884).
67
Id. at 149-150 (emphasis added).
23
The Supreme Court later clarified the holding of Lawton in Nelson v City of New
York.68 In Nelson, the city of New York foreclosed on properties for water charges that
went unpaid for four years. As in Lawton, the delinquencies were far lower than the value
of the properties, yet the city kept the surplus proceeds after the properties were sold.69
The property owners challenged the city’s retention of these surplus proceeds under the
city’s tax-lien foreclosure statute. The Court concluded that it was undisputed that the
statutory notice provisions were complied with and that the application of the statute did
not deprive the plaintiffs of procedural due process.70 The Court then turned to and rejected
the plaintiffs’ takings claim. The Court explained that the plaintiffs’ reliance on Lawton
was inappropriate because the takings claim asserted in Lawton was premised on a statutory
right to the proceeds. The statute in Lawton required that the surplus proceeds be paid to
the former property owner, thus rendering the government’s failure to return those surplus
proceeds an unconstitutional taking. The statute in Nelson, in contrast, did not require the
surplus proceeds to be paid back to the property owner. Still, the city’s statute provided a
property owner a path to obtain the surplus proceeds from the sale. Specifically, the statute
68
Nelson v City of New York, 352 U.S. 103; 77 S. Ct. 195; 1 L. Ed. 2d 171 (1956).
69
The water charges for the first parcel amounted to $65. The first parcel’s property value
was assessed at $6,000, and it ultimately sold for $7,000. The water charges for the second
parcel amounted to $814.50. The second parcel’s property value was assessed at $46,000,
but the city acquired title to that parcel and retained it. Id. at 105-106.
70
Id. at 108-109 (“We conclude . . . that the City having taken steps to notify appellants of
the arrearages and the foreclosure proceedings and their agent having received such
notices, its application of the statute did not deprive appellants of procedural due
process.”). The Court also rejected the plaintiffs’ equal-protection challenge. Id. at 109.
24
permitted a property owner to file a timely answer in the foreclosure proceeding asserting
an interest in the property that exceeded the tax debt. Upon proof of the owner’s allegation,
a separate sale would be directed so that the owner could receive the surplus.71 Because
the plaintiffs failed to avail themselves of this opportunity, the Court concluded that they
were not entitled to relief. The Court explained:
What the City of New York has done is to foreclose real property for charges
four years delinquent and, in the absence of timely action to redeem or to
recovery any surplus, retain the property or the entire proceeds of its sale.
We hold that nothing in the Federal Constitution prevents this where the
record shows adequate steps were taken to notify the owners of the charges
due and the foreclosure proceedings.[72]
Significantly, Seaman, Lawton, and Nelson all address a former property owner’s
statutory right to recover the surplus proceeds. Seaman recognized that the owner or
claimant of the land at the time of the tax-foreclosure sale had a statutory right to recover
the surplus. Consistent with Seaman, Lawton not only recognized this statutory right but
also made it clear that a Takings Clause violation will arise when a tax-sale statute grants
a former owner an independent property interest in the surplus proceeds and the
government fails to return that surplus. Nelson, on the other hand, informs us that no
federal Takings Clause claim will exist when there is a statutory path to recover the surplus
proceeds but the property owners fail to avail themselves of that procedure. Read together,
Lawton and Nelson establish that the Takings Clause under the United States Constitution
may afford former property owners a remedy when a tax-sale statute provides the divested
71
Id. at 110 & n 10.
72
Id. at 110 (emphasis added).
25
property owner an interest in the surplus proceeds and the government does not honor that
statutory interest. What Seaman, Lawton, and Nelson do not tell us, however, is what
occurs when the statutes governing foreclosure make no mention of, or expressly preclude,
a divested property owner’s right to the surplus proceeds, but the divested property owner
establishes a property right to the surplus proceeds through some other legal source, such
as the common law.73 In that instance, the failure to provide the divested property owner
an avenue for recovering the surplus proceeds would produce an identical result to Lawton:
“Property to which an individual is legally entitled has been taken without recourse.”74
Michigan’s statutory scheme under the GPTA does not recognize a former property
owner’s statutory right to collect these surplus proceeds.75 Therefore, we must determine
whether plaintiffs have a vested property right to these surplus proceeds through some other
legal source, such as the common law.
2. VESTED PROPERTY RIGHTS UNDER THE COMMON LAW
Like the founders of our nation, Michigan has historically held property rights in
the highest regard. Former Michigan Supreme Court Justice Thomas M. Cooley, one of
73
And even if those cases had directly addressed the issue presented here, they would
provide only helpful guidance; our decision interpreting Michigan’s Constitution would
not be bound by them.
74
Coleman v Dist of Columbia, 70 F Supp 3d 58, 80 (D DC, 2014), citing Lawton, 110 U.S.
at 149; see also Clifford, Massachusetts Has A Problem: The Unconstitutionality of the
Tax Deed, 13 U Mass L Rev 274, 287 (2018) (“In summary, the Coleman court recognized
that once a state recognizes a property interest in the taxpayer, it cannot summarily remove
that interest.”).
75
See MCL 211.78m(8)(h) (directing that any surplus proceeds from the tax-foreclosure
sale be transferred into the county’s general fund).
26
our nation’s preeminent jurists and learned scholars, wrote that the “right to private
property is a sacred right; . . . it was the old fundamental law, springing from the original
frame and constitution of the realm.”76
[P]roperty . . . is recognized as such by the law, and nothing else is or can be.
Property and law are born and must die together. Before the laws, there was
no property; take away the laws, all property ceases.[77]
Drawing on Sir William Blackstone, Justice Cooley further recognized that the
Magna Carta “guaranteed” the protection of private property against government
overreach.78 Just as the Magna Carta guaranteed property owners due process of law, so
too did the sacred text limit the King’s ability to take his subject’s property, real or personal,
under principles of eminent domain.79 Thus, it is without surprise that private-property
76
2 Cooley, Constitutional Limitations (8th ed), p 745 (quotation marks and citation
omitted).
77
Cooley, General Principles, p 315 (quotation marks and citation omitted).
78
Cooley, Constitutional Limitations, pp 733-734, citing 4 Blackstone, Commentaries on
the Laws of England, p *424.
79
See Magna Carta, Grant 39 (1215) (“No freeman shall be . . . disseised . . . unless by the
lawful judgment of his peers, or by the law of the land.”); see also Horne, 135 S. Ct. at 2426
(discussing the history of the federal Takings Clause going as far back as the Magna Carta
and making no distinction between real or personal private property); Silver Creek Drain
Dist v Extrusions Div, Inc, 468 Mich. 367, 373, 374 & n 6; 663 NW2d 436 (2003)
(explaining that the sovereign’s power of eminent domain and its “ancient provenance”
dates back to the Magna Carta); Peterman v Dep’t of Natural Resources, 446 Mich. 177,
186-187 & 187 n 14; 521 NW2d 499 (1994) (discussing the history of eminent domain in
America).
27
rights have been protected from unlawful government takings in every version of this
state’s Constitution.80
“This state’s common law is adopted from England, and to identify such law this
Court may consider original English cases and authorities.”81 Our review of English
common law supports the notion that an owner of real or personal property has a right to
any surplus proceeds that remain after property is sold to satisfy a tax debt. Just as the
Magna Carta protected property owners from uncompensated takings, it also recognized
that tax collectors could only seize property to satisfy the value of the debt payable to the
Crown, leaving the property owner with the excess.82 In fact, although the “mode of
collecting the land tax in England was by distress,” it was a well-recognized principle that
80
See Const 1835, art 1, § 19; Const 1850, art 18, § 14; Const 1908, art 13, § 1; Const
1963, art 10, § 2.
81
People v Woolfolk, 497 Mich. 23, 25; 857 NW2d 524 (2014) (citations omitted).
82
See Johnson, The Ancient Magna Carta and the Modern Rule of Law: 1215 to 2015, 47
St Mary’s L J 1, 47 (2015), citing McKechnie, Magna Carta: A Commentary on the Great
Charter of King John (Glasgow: James Maclehose & Sons, 2d ed, 1914), p 322. Johnson
explains that when a man died, officers would seek collection of the deceased’s debts.
Ancient Magna Carta, 47 St Mary’s L J at 47. However, these officials would often seize
everything, sell the decedent’s property for an amount far in excess of the debt, and refuse
to disgorge the surplus to the decedent’s heirs. Id. As a protection against such abuse
practices, Clause 26 of the Magna Carta required that “the value of the goods seized had to
approximate the value of the debt[,] and the process had to be superintended by worthy
men whose function it was to form a check on the actions of the sheriff’s officers.” Id.
(quotation marks and citation omitted); see also Martin, 59 Va at 136 (“The summary
methods employed in England in early times for the collection of debts to the Crown seem
to have been turned to purposes of oppression, and . . . [the] Magna Charta provided for
their restraint.”).
28
any excess property sold to satisfy a tax debt would be paid back to the owner.83 Further,
Blackstone explained that in the context of bailments, whenever the government seized
property for delinquent taxes, it did so subject to “an implied contract in law” to either
return the property if the tax debt was paid or “to render back the overplus” if the property
was sold to satisfy the delinquent taxes.84
The right to collect the surplus proceeds was also firmly established in the early
years of Michigan’s statehood. In his treatise on the Law of Taxation, Justice Cooley
discusses the various methods that states used to save the surplus proceeds for the former
owner when that owner’s land was sold for unpaid taxes.85 The first of these methods was
to sell the distressed land for payment of delinquent taxes, and if the accepted bid exceeded
the delinquency, the surplus would be deposited with the local treasury “for the benefit of
the party, who shall show his right.”86 This is precisely what occurred in Seaman. While
Seaman was resolved on then-existing statutory authority, this Court’s discussion
regarding a property owner’s right to collect surplus proceeds is valuable in defining the
nature and scope of that right:
83
Martin, 59 Va at 136-137 (explaining that while land was typically only taken to satisfy
tax debts when personal property was insufficient to satisfy the debt, any surplus resulting
from the sale of the property taken, real or personal, would be paid back to the owner).
84
2 Blackstone, Commentaries on the Laws of England, p *452.
85
Cooley, Law of Taxation (3d ed), p 952.
86
Id. As support for this first method, Justice Cooley cites the Supreme Court’s decision
in Lawton for the notion that if land was sold to the United States for unpaid federal taxes,
the United States remained liable to the former owner for any surplus. Id. at 952 & n 1,
citing Lawton, 110 U.S. 146.
29
The surplus money produced by the tax sale, is the property of the
person who has the legal title to the land at the time of the sale, and the
moment the amount is ascertained and passed to his credit in the books of the
treasurer, it is as absolutely his as though it were in his own keeping; and the
right is personal—as unqualifiedly so as the ownership of any chattel; and
although the surplus spoken of is produced by the sale of land, yet the right
to receive and control it, no more follows the title to the land, than does the
ownership of the cattle and farming utensils that a man may happen to have
on his farm when it is sold for taxes, and the purchaser may, with as much
propriety, claim a right to the latter as the former.[87]
Notably, at the time Seaman was decided, a property owner’s right to redeem his
property continued after the foreclosure sale. That is, it was commonly understood that the
delinquent taxpayer would continue to be the legal owner of the property at the time of the
foreclosure sale and thus would be entitled to any surplus proceeds produced from the sale
as the “owner or claimant” of the land. This is vastly different from the current version of
the GPTA, in which a property owner’s interest in the property is extinguished well before
the tax-foreclosure sale. Thus, a fair reading of Seaman demonstrates that in the early years
of this state, it was commonly understood that the delinquent taxpayer, not the foreclosing
entity, continued to own the land at the time of the tax-foreclosure sale and would have
been entitled to any surplus, which no more followed title to the land than the former
owner’s other personal property.
At the same time that it was common for any surplus proceeds to be returned to the
former property owner, it was also generally understood that the government could only
collect those taxes actually owed and nothing more. Justice Cooley explained that
excessive tax levies were “beyond the jurisdiction of the officers” charged with collecting
87
Seaman, 1 Doug at 281.
30
taxes and that even de minimis amounts in excess of the taxes owed were impermissible.88
This Court recognized a similar principle in 1867, stating that “[n]o law of the land
authorizes the sale of property for any amount in excess of the tax it is legally called upon
to bear.”89 Indeed, any sale of property for unpaid taxes that was in excess of the taxes
owed was often rendered voidable at the option of the landowner.90 Rather than selling all
of a person’s land and risk the sale being voided, officers charged with selling land for
unpaid taxes often only sold that portion of the land that was needed to satisfy the tax
debt.91 That is, early in Michigan’s statehood, it was commonly understood that the
government could not collect more in taxes than what was owed, nor could it sell more
land than necessary to collect unpaid taxes.
Further, in the context of eminent domain, it was axiomatic that the government
shall take no more property than necessary for the particular public use for which the taking
was done. As Justice Cooley stated:
88
Cooley, Law of Taxation, pp 590-591 (“If the line which the legislature has established
be once passed, we know of no boundary to the discretion of the assessors.”) (quotation
marks and citation omitted).
89
Case v Dean, 16 Mich. 12, 19 (1867).
90
Cooley, Law of Taxation, p 953 (“A sale of the whole when less would pay the tax would
be such a fraud on the law as to render the sale voidable at the option of the land-
owner . . . .”).
91
Id. at 952-958. Indeed, this was another method discussed by Justice Cooley to ensure
that any “surplus moneys” remained with the landowner after the property was sold. Id. at
952-953. The other method was to require that a lien be placed on the land holding the
purchaser accountable to pay the excess back to the original owner. Id. at 952.
31
The taking of property must always be limited to the necessity of the
case, and consequently no more can be appropriated in any instance than the
proper tribunal shall adjudge to be needed for the particular use for which the
appropriation is made. When a part only of a man’s premises is needed by
the public, the necessity for the appropriation of that part will not justify the
taking of the whole, even though compensation be made therefor. The
moment the appropriation goes beyond the necessity of the case, it ceases to
be justified on the principles which underlie the right of eminent domain.[92]
This Court has consistently recognized this constitutional precept. Throughout this
state’s history, this Court has held that the government’s takings power is limited to only
that property which is necessary to serve the public.93
Accordingly, these fundamental principles—that the government shall not collect
more taxes than are owed, nor shall it take more property than is necessary to serve the
public—protect taxpayers and property owners alike from government overreach. These
92
Cooley, Constitutional Limitations, p 1147.
93
See Peterman, 446 Mich. at 201, 202 n 36 (“As an unnecessary taking of property,
defendant’s actions violated the strict dictates of the constitutional guarantee that private
property may be taken only when necessary for public purposes.”); Livonia Twp Sch Dist
v Wilson, 339 Mich. 454, 460; 64 NW2d 563 (1954) (“It is a general principle that the
legislature cannot authorize the taking of property in excess of that required for public
use.”); Cleveland v Detroit, 322 Mich. 172, 179; 33 NW2d 747 (1948) (“In acquiring
property for public use it is not permissible for the city to take additional property not
necessary for that public use for private purposes.”); Berrien Springs Water Power Co v
Berrien Circuit Judge, 133 Mich. 48, 53; 94 N.W. 379 (1903) (“[O]nly so much [land] can
be taken as is necessary to the public use.”); Bd of Health of Portage Twp v Van Hoesen,
87 Mich. 533, 537; 49 N.W. 894 (1891) (“It can never be just to take property, under pretence
of public benefit, which is not needed by the public . . . .”), citing Paul v Detroit, 32 Mich.
108, 114 (1875) (explaining that the 1850 Michigan Constitution added a provision
requiring juries to determine the necessity of a taking of private property for public use, as
well as the compensation owed for that taking, because there was “a well founded belief,
founded on experience, that private property was often taken improperly and without any
necessity”).
32
principles have remained a staple in this state’s jurisprudence well after the most recent
ratification of our Constitution in 1963.94
A property owner’s right to collect the surplus proceeds from the tax-foreclosure
sale of his or her property has also withstood the most recent ratification of our
Constitution, as exemplified by our decision in Dean v Dep’t of Natural Resources, which
recognized a right to collect those proceeds under the common-law claim of unjust
enrichment.95 In Dean, the plaintiff-property owner failed to pay her property taxes for
both the city of Flint and Genesee County in the amount of $230.68 and $146.90,
respectively. After the plaintiff failed to appear at the foreclosure hearing, the court issued
a judgment authorizing the sale of the plaintiff’s property at a tax sale and stating that if
the property was sold to the state, the state’s title would become absolute unless the plaintiff
timely redeemed the property.96 The state successfully bid on the plaintiff’s property,
starting the one-year redemption period for the plaintiff. During the redemption period,
94
Detroit v Walker, 445 Mich. 682, 701-704; 520 NW2d 135 (1994) (explaining that
citizens have a duty to pay their taxes and that the Legislature may enact procedural
schemes “to secure taxes owed”); Peterman, 446 Mich. at 184 (“ ‘[I]t can never be lawful
to compel any man to give up his property, when it is not needed, or to lose it, whether
needed or not, without being made whole.’ ”), quoting Paul, 32 Mich. at 119; see also Fidlin
v Collison, 9 Mich. App. 157, 167; 156 NW2d 53 (1967) (holding that under the GPTA’s
provision allowing seizure of personal property to satisfy unpaid taxes, the city treasurer’s
seizure of the plaintiffs’ personal property valued at $629.32 to satisfy a $10,500 tax debt
was “an excessive distraint” on their property, given that “ ‘[t]he amount of property
distrained must not be excessive and, if it is, the seizure is illegal’ ”), quoting 84 CJS,
Taxation, § 694, p 1371.
95
Dean v Dep’t of Natural Resources, 399 Mich. 84; 247 NW2d 876 (1976).
96
Notice of the hearing was published in the newspaper as required under the former
version of the GPTA. Id. at 88, citing MCL 211.66, repealed by 1999 PA 123.
33
the plaintiff paid her delinquent city-property taxes in full but mistakenly failed to pay her
delinquent county-property taxes. After she failed to timely redeem her property during
the redemption period, the State Treasurer deeded the plaintiff’s property to the state, which
received absolute title to the property and then sold it to a private investor for $10,000. The
plaintiff filed an action against the state, alleging, in relevant part, that the state had been
unjustly enriched by retaining the $10,000 following the sale of her property. The circuit
court granted summary disposition to the defendant, but this Court reversed, holding that
the plaintiff could bring her suit for unjust enrichment:
In fact, the events out of which plaintiff’s claim of unjust enrichment
arises occurred subsequent to the default judgment entered by the Genesee
County Circuit Court: the alleged good-faith attempt at redemption, the
running of the redemption period after this attempt with plaintiff under the
impression that she had in fact redeemed her home, the loss of her home, and
the sale of the property by the state for a profit of close to $10,000.[97]
Dean stands for more than just a recognition of the plaintiff’s right to bring a claim
under unjust enrichment for the surplus proceeds. Inherent in Dean’s holding is
Michigan’s protection under our common law of a property owner’s right to collect the
surplus proceeds that result from a tax-foreclosure sale. A viable claim for unjust
enrichment requires the complaining party to show that the other party retained a benefit
from the complaining party.98 In concluding that the plaintiff in Dean stated an actionable
claim for unjust enrichment, this Court did not rely on any statutory right that the plaintiff
97
Dean, 399 Mich. at 94-95.
98
Tkachik v Mandeville, 487 Mich. 38, 47-48; 790 NW2d 260 (2010) (“Unjust enrichment
is defined as the unjust retention of money or benefits which in justice and equity belong
to another. No person is unjustly enriched unless the retention of the benefit would be
unjust.”) (quotation marks and citations omitted).
34
had to collect the surplus proceeds. As is the case here, title to the plaintiff’s property in
Dean had already vested with the state. Without a statutory right, the plaintiff must have
had a common-law right to these surplus proceeds. Otherwise, her claim of unjust
enrichment would not be actionable because it could not have been said that the state
retained a benefit at her expense. In sum, Dean supports the proposition that a property
owner has a recognized common-law property right to the surplus proceeds from a tax-
foreclosure sale.99
We conclude that our state’s common law recognizes a former property owner’s
property right to collect the surplus proceeds that are realized from the tax-foreclosure sale
of property. Having originated as far back as the Magna Carta, having ingratiated itself
into English common law, and having been recognized both early in our state’s
jurisprudence and as late as our decision in Dean in 1976, 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. We also recognize this right to be “vested” such that the
right is to remain free from unlawful governmental interference. “To constitute a vested
right, the interest must be something more than such a mere expectation as may be based
upon an anticipated continuance of the present general laws; it must have become a title,
99
While Dean stands for the proposition that a claim for the surplus proceeds may be
asserted through unjust enrichment, the Court of Appeals concluded that plaintiffs
abandoned their claim of unjust enrichment by failing to develop it in their briefing below.
See Mitcham v Detroit, 355 Mich. 182, 203; 94 NW2d 388 (1959) (explaining that a party’s
failure to adequately brief an issue on appeal constitutes abandonment).
35
legal or equitable, to the present or future enjoyment of property . . . .”100 As demonstrated
by the discussion earlier, the right to collect these proceeds was beyond a mere expectancy
or claim of entitlement. It is as much an interest in property as our kitchen tables; television
sets; and, as this Court observed in Seaman, our cattle and farming utensils.101 Further, the
prohibitions against collecting excess taxes, selling more land than needed to collect such
taxes, and taking more property than necessary to serve the public all underlie a property
owner’s right to collect the surplus proceeds and were well-established legal principles
before 1963. Therefore, we hold that the ratifiers would have commonly understood this
common-law property right to be protected under Michigan’s Takings Clause at the time
of the ratification of the Michigan Constitution in 1963.102
100
Fun ’N Sun, 447 Mich. at 788 (quotation marks and citation omitted); Cooley, General
Principles, p 320 (“The test of unlawful interference with property is that vested rights are
abridged or taken away.”) (emphasis added).
101
An often-used metaphor in property law further illustrates this point. Property rights
are commonly referred to as a “bundle of sticks,” with each stick representing a distinct
right defined by state law. United States v Craft, 535 U.S. 274, 278; 122 S. Ct. 1414; 152 L
Ed 2d 437 (2002) (“A common idiom describes property as a ‘bundle of sticks’—a
collection of individual rights which, in certain combinations, constitute property. State
law determines only which sticks are in a person’s bundle.”) (citation omitted). These
sticks range from a property owner’s right to use or enjoy the property, the right to eject
others from the property, and the right to dispose of the property altogether. See Adams v
Cleveland-Cliffs Iron Co, 237 Mich. App. 51, 57; 602 NW2d 215 (1999) (“The general
concept of ‘property’ comprises various rights—a ‘bundle of sticks,’ as it is often called—
which is usually understood to include ‘[t]he exclusive right of possessing, enjoying, and
disposing of a thing.’ ”), quoting Black’s Law Dictionary (6th ed), p 1216. Unlawful
governmental interference with even one stick in that bundle constitutes a taking requiring
just compensation. Our holding today recognizes that the right to collect any surplus
proceeds that result from the sale of a person’s property for unpaid taxes is one stick in the
owner’s bundle of rights, entitled to as much protection as any other stick in that bundle.
102
Hathcock, 471 Mich. at 471.
36
Having recognized both the existence of this vested property right at common law
and that the ratifiers of the 1963 Michigan Constitution would have commonly understood
this right to be protected under Michigan’s Takings Clause at that time, the question now
becomes whether the amendments of the GPTA abrogated this common-law right.103 If it
did, there is no taking here.
The common law “is but the accumulated expressions of the various judicial
tribunals in their efforts to ascertain what is right and just . . . .”104 It is dynamic and
flexible, not static or fixed like statutory law.105 The common law is, however, incremental
in adapting to society’s changing circumstances, developing gradually to reflect our
policies, customs, norms, and values.106 Nonetheless, the Legislature may enact legislation
that abrogates or alters the common law. Of course, both legislation and the common law
are secondary to our Constitution. Article 3, § 7 of Michigan’s Constitution provides:
103
While the bulk of the revisions to the GPTA took place in 1999, the provision allowing
counties to transfer any surplus proceeds to their general funds, MCL 211.78m(8)(h), was
not added until 2006. See 2006 PA 498.
104
Price v High Pointe Oil Co, Inc, 493 Mich. 238, 242; 828 NW2d 660 (2013) (quotation
marks and citation omitted).
105
Beech Grove Investment Co v Civil Rights Comm, 380 Mich. 405, 430; 157 NW2d 213
(1968) (“The common law does not consist of definite rules which are absolute, fixed, and
immutable like the statute law . . . .”) (quotation marks and citation omitted).
106
Price, 493 Mich. at 243 (“The common law is always a work in progress and typically
develops incrementally, i.e., gradually evolving as individual disputes are decided and
existing common-law rules are considered and sometimes adapted to current needs in light
of changing times and circumstances.”).
37
The common law and the statute laws now in force, not repugnant to
this constitution, shall remain in force until they expire by their own
limitations, or are changed, amended or repealed.[107]
It is clear that our 1963 Constitution protects a former owner’s property right to
collect the surplus proceeds following a tax-foreclosure sale under Article 10, § 2. This
right existed at common law; was commonly understood to exist in the common law before
the 1963 ratification of our Constitution; and continues to exist after 1963, as our decision
in Dean demonstrates. Because this common-law property right is constitutionally
protected by our state’s Takings Clause, the Legislature’s amendments of the GPTA could
not abrogate it. While the Legislature is typically free to abrogate the common law, it is
powerless to override a right protected by Michigan’s Takings Clause.108
107
Const 1963, art 3, § 7 (emphasis added).
108
Nothing in our holding today prevents the Legislature from enacting legislation that
would require former property owners to avail themselves of certain procedural avenues to
recover the surplus proceeds. See, e.g., Nelson, 352 U.S. at 110 & n 10. We only hold that
the Legislature may not write this constitutionally protected vested property right out of
existence. See Munn v Illinois, 94 U.S. 113, 134; 24 L. Ed. 77 (1876) (“A person has no
property, no vested interest, in any rule of the common law. . . . Rights of property which
have been created by the common law cannot be taken away without due process; but the
law itself, as a rule of conduct, may be changed at the will, or even at the whim, of the
legislature, unless prevented by constitutional limitations.”) (emphasis added); see also
Mackin v Detroit-Timkin Axle Co, 187 Mich. 8, 13; 153 N.W. 49 (1915) (“Except as to vested
rights, the legislative power exists to change or abolish existing statutory and common-law
remedies.”) (emphasis added). Further, because this common-law property right existed
well before 1963, it cannot be said that our Constitution created this property right; rather,
this right was, and still is, commonly understood to be protected by Michigan’s Takings
Clause. See Phillips, 524 U.S. at 164 (“[T]he Constitution protects rather than creates
property interests . . . .”).
38
V. APPLICATION
A. DEFENDANTS’ RETENTION OF THE SURPLUS PROCEEDS WAS AN
UNCONSTITUTIONAL TAKING
As the foreclosing governmental unit under the GPTA, defendants were entitled to
seize plaintiffs’ properties to satisfy the unpaid delinquent real-property taxes as well as
any interest, penalties, and fees associated with the foreclosure and sale of plaintiffs’
properties. But defendants could only collect the amount plaintiffs owed and nothing more.
Once defendants foreclosed on plaintiffs’ properties, obtained title to those properties, and
sold them to satisfy plaintiffs’ unpaid taxes, interest, penalties, and fees related to the
foreclosures, any surplus resulting from those sales belonged to plaintiffs. That is, after
the sale proceeds are distributed in accordance with the GPTA’s order of priority, any
surplus that remains is the property of plaintiffs, and defendants were required to return
that property to plaintiffs. Defendants’ retention of those surplus proceeds under the GPTA
amounts to a taking of a vested property right requiring just compensation. To the extent
the GPTA permits defendants to retain these surplus proceeds and transfer them into the
county general fund, the GPTA is unconstitutional as applied to former property owners
whose properties were sold at a tax-foreclosure sale for more than the amount owed in
unpaid taxes, interest, penalties, and fees related to the forfeiture, foreclosure, and sale of
their properties.
Defendants rely on a line of Michigan cases to argue that plaintiffs held no rights,
titles, or interests in their properties once foreclosure occurs and fee simple title vests with
39
the state.109 None of these decisions, however, involved a claim for the surplus proceeds
after a foreclosure sale. Rather, these cases all addressed the former property owners’
ability to retain or convey an interest in the land that had been foreclosed. Indeed, one of
these cases even noted that the “primary and inducing purpose of the legislation was to
secure a portion of the unpaid taxes, rather than nothing, and to restore lands to a taxpaying
basis, instead of supinely allowing them to accumulate tax delinquencies with no hope of
ever recovering them.”110 In this case, defendants recovered the entire amount of plaintiffs’
tax debts and more by way of a surplus. Plaintiffs had a cognizable, vested property right
to collect those surplus proceeds. This vested right did not simply “vanish[] into thin
air.”111 In the same way that the foreclosure process does not eliminate the former property
owner’s interest in the personal property that sits on the foreclosed land, the vesting of fee
simple title to the real property does not extinguish the property owner’s right to collect
the surplus proceeds of the sale. This is a separate property right that survives the
109
Krench v Michigan, 277 Mich. 168, 179; 269 N.W. 131 (1936) (holding that a tax-
foreclosure sale divests the former owner of title and vests title with the state in fee simple
with a new chain of title being formed); James A. Welch Co, Inc v State Land Office Bd,
295 Mich. 85, 93-95; 294 N.W. 377 (1940) (holding that after the state received absolute title
to land that was sold for delinquent property taxes, the former owner held no greater interest
in title to the land than any other stranger); Meltzer v State Land Office Bd, 301 Mich. 541,
545; 3 NW2d 875 (1942) (affirming Krench and Welch and concluding that once absolute
title to a tax-foreclosed property vests with the state, the former owners hold “no interest
in the land at the time of the tax sale”).
110
Welch, 295 Mich. at 92 (quotation marks and citation omitted; emphasis added).
111
Armstrong v United States, 364 U.S. 40, 48; 80 S. Ct. 1563; 4 L. Ed. 2d 1554 (1960) (holding
that the government’s “total destruction” of the value of a lienholder’s lien against
government-held property was an unconstitutional taking).
40
foreclosure process. Accordingly, like any other creditor, defendants were required to
return the surplus.112
We see no reason to recharacterize these surplus proceeds as public money to be
transferred into the county general fund and used for public purposes wholly independent
of the GPTA without paying just compensation.113 While plaintiffs’ takings claim was not
compensable until their properties sold for an amount in excess of their tax debts, that lack
of an immediate right to collect the surplus proceeds does not mean that plaintiffs had no
right to collect the surplus proceeds at all.114 Indeed, a former property owner only has a
right to collect the surplus proceeds from the tax-foreclosure sale; that is, a former property
owner has a compensable takings claim if and only if the tax-foreclosure sale produces a
surplus. Once the sale produces a surplus, the former owner may make a claim for the
112
See Lawton, 110 U.S. at 150 (“[S]o far as such owner is concerned, the surplus money is
set aside as his as fully as if it had come from a third person. . . . It can make no difference
that the United States acquired the property by bidding one dollar more.”); Armstrong, 364
U.S. at 48 (“[T]he Government for its own advantage destroyed the value of the liens,
something that the Government could do because its property was not subject to suit, but
which no private purchaser could have done.”); see also Bank of America, NA v First
American Title Ins Co, 499 Mich. 74, 91; 878 NW2d 816 (2016) (“No one disputes that the
mortgagee is entitled to recover only his debt. Any surplus value belongs to others, namely,
the mortgagor or subsequent lienors.”) (quotation marks and citation omitted).
113
See Webb’s Fabulous Pharmacies, Inc v Beckwith, 449 U.S. 155, 164; 101 S. Ct. 446; 66
L. Ed. 2 358 (1980) (“[A] State, by ipse dixit, may not transform private property into public
property without compensation . . . .”).
114
Id. at 162 (explaining that creditors of a deposit account, whose statutory right to collect
a portion of the account’s interest did not accrue until distribution of the account was
ordered, had a cognizable property right despite that right not being immediately
compensable).
41
surplus proceeds. Again, this holds true even though the former owner no longer holds
title to the property.
Moreover, we are unmoved by caselaw from other states that have addressed the
disposition of surplus proceeds. Some courts that have confronted the issue whether a
cognizable takings claim can be made for the surplus proceeds have only addressed the
issue in the context of the federal Takings Clause.115 Unlike those courts, however, our
holding speaks to Michigan’s Takings Clause, which this Court has, on occasion,
interpreted as offering broader protection to property owners.116 Other courts have limited
the inquiry to whether there is statutory authority for a property owner to collect the surplus
proceeds, not whether a right existed within their states’ common law.117 Moreover, a few
115
See, e.g., Ritter v Ross, 207 Wis 2d 476, 484-485; 558 NW2d 909 (1996) (analyzing the
former property owners’ claim for the surplus proceeds under the federal Takings Clause
and holding that no taking under that clause occurred), cert den 522 U.S. 995 (1997); Auburn
v Mandarelli, 320 A2d 22, 25 (Me, 1974) (same).
116
See AFT Mich, 497 Mich. at 217 & n 9 (“Although the courts of this state have applied
the state and federal Takings Clauses coextensively in many situations, this Court has
found that [Michigan’s Takings Clause] offers broader protection than [the federal Takings
Clause].”) (citation omitted), comparing Kelo, 545 U.S. 469, with Hathcock, 471 Mich. 445.
117
See, e.g., Kelly v Boston, 348 Mass 385, 388; 204 NE2d 123 (1965) (“We think it is
clear from the above history of the tax statutes that the Legislature intended the surplus
from a sale of land taken for nonpayment of taxes, on which the right of redemption has
been foreclosed in the Land Court, to belong to the municipality.”); Automatic Art, LLC v
Maricopa Co, unpublished opinion of the United States District Court for the District of
Arizona, issued March 18, 2010 (Case No. CV 08-1484-PHX-SRB), pp 5-7 (holding that,
under Arizona’s statutory scheme governing tax foreclosures, the government’s retention
of the surplus proceeds is not an unconstitutional taking because “Arizona law does not
provide for the recovery of any funds by a previous owner after a tax sale”); Reinmiller v
Marion Co, unpublished opinion of the United States District Court for the District of
Oregon, issued October 16, 2006 (Case No. CV 05-1926-PK), pp 2-4 (holding the same
under Oregon law).
42
courts have addressed the takings issue in the context of other areas of jurisprudence,
including tax collection, forfeiture, and due process.118 That said, we note that two states,
Vermont and New Hampshire, have recognized the government’s obligation to return any
surplus proceeds to the former owner after a tax-foreclosure sale and that the failure to
return those proceeds is a taking under their state constitutions.119 Similarly, we hold that
defendants were required to return the surplus proceeds to plaintiffs and that defendants’
failure to do so constitutes a government taking under the Michigan Constitution entitling
plaintiffs to just compensation.
B. DEFENDANTS CANNOT RELY ON THE TAXING POWER TO JUSTIFY THEIR
RETENTION OF THE SURPLUS PROCEEDS
Defendants also contend that their actions are simply a matter of tax collection and
that “there can be no taking when a Michigan county foreclosures on a property for the
118
See, e.g., Balthazar v Mari Ltd, 301 F Supp 103, 105 n 6 (ND Ill, 1969) (“Rather than
taking private property for a public purpose, Illinois is here collecting taxes which are
admittedly overdue.”), aff’d 396 U.S. 114 (1969); Sheehan v Suffolk Co, 67 NY2d 52, 60;
490 NE2d 523 (1986) (“There is no constitutional prohibition against such a full
forfeiture.”); Miner v Clinton Co, 541 F3d 464, 475 (CA 2, 2008) (“The retention of any
surplus from a tax auction is constitutional because there was no violation of plaintiffs’
right to due process related to the notices of foreclosure.”).
119
See Bogie v Barnet, 129 Vt 46, 55; 270 A2d 898 (1970) (“No justification for the
withholding of this excess from the plaintiff, derived as it was from the compelled sale of
his land, has been demonstrated. Its retention by the town amounts to an unlawful taking
for public use without compensation, contrary to . . . the Vermont Constitution.”);
Polonsky v Bedford, ___ NH ___; ___ A3d ___ (2020) (Case No. 2019-0339); slip op at
12 (holding that, under New Hampshire’s Takings Clause, “the taking of property without
just compensation is unconstitutional, even when the municipality has taken the property
by tax deed due to the former owner’s failure to pay taxes,” and that the municipality’s
failure to return any excess proceeds to the former owner is an unconstitutional taking),
citing Thomas Tool Servs, Inc v Croydon, 145 NH 218, 220; 761 A2d 439 (2000).
43
nonpayment of taxes.”120 The Legislature undoubtedly has the inherent power to levy
taxes, and cities and villages also have the authority to impose taxes for public purposes.121
We recognize that municipalities rely heavily on their citizens to timely pay real-property
taxes so that local governments have a source of revenue for their operating costs.122
Nothing in this opinion impedes defendants’ right to hold citizens accountable for failing
to pay property taxes by taking citizens’ properties in satisfaction of their tax debts. What
defendants may not do under the guise of tax collection is seize property valued far in
excess of the amount owed in unpaid taxes, penalties, interest, and fees and convert that
surplus into a public benefit. The purpose of taxation is to assess and collect taxes owed,
not appropriate property in excess of what is owed. Defendants’ ability to take plaintiffs’
properties was limited by what plaintiffs actually owed as a result of failing to pay their
taxes. Thus, defendants’ retention of the surplus proceeds amounts to a taking of plaintiffs’
properties far in excess of plaintiffs’ tax debts that cannot be justified as a valid form of
tax collection.
120
Defendants’ Brief on Appeal (April 3, 2019) at 14.
121
Const 1963, art 9, § 1 (“The legislature shall impose taxes sufficient with other resources
to pay the expenses of state government.”); Const 1963, art 7, § 21 (“Each city and village
is granted power to levy other taxes for public purposes, subject to limitations and
prohibitions provided by this constitution or by law.”).
122
Walker, 445 Mich. at 702 (“Traditionally, the property tax—and in particular, the tax on
real property—has been the mainstay of municipal revenue-gathering—the largest single
source of municipal revenue.”) (quotation marks and citation omitted); see also Tax Liens,
75 Ind L J at 756 (explaining that property taxes are the primary source of revenue for local
governments and that “[t]he failure to collect even a small portion of property taxes can
have a dramatic impact on local governments”).
44
Moreover, “the power of taxation should not be confused with the power of eminent
domain . . . .”123 As Justice Cooley has explained, whereas taxation requires citizens to
bear the burden of public expenses equally and proportionally, “something exceptional” is
taken under the government’s exercise of eminent domain such that apportionment cannot
be achieved, thus requiring compensation “of a pecuniary nature” to the property owner.124
By retaining the surplus proceeds and transferring them into the county general fund to be
used for public purposes, defendants are forcing delinquent taxpayers to contribute to the
general government revenues beyond their fair share. This is not simply an adjustment of
“the benefits and burdens of economic life to promote the common good.”125 Rather, this
confiscation of the sale proceeds in excess of what is actually owed requires delinquent
taxpayers “ ‘alone to bear public burdens which, in all fairness and justice, should be borne
by the public as a whole.’ ”126 Michigan’s Takings Clause was “ ‘adopted for the
protection of and security to the rights of the individual as against the government . . . .’ ”127
123
Koontz v St. Johns River Water Mgt Dist, 570 U.S. 595, 617; 133 S. Ct. 2586; 186 L. Ed.
2d 697 (2013) (quotation marks and citation omitted).
124
Cooley, General Principles, pp 333-334.
125
See Penn Central Transp Co v City of New York, 438 U.S. 104, 124; 98 S. Ct. 2646; 57 L
Ed 2d 631 (1978); see also AFT Mich, 497 Mich. at 218 (“[G]overnmental action creating
general burdens or liabilities, i.e., merely requiring citizens to expend monies for valid
public purposes and expenditures, typically will not form the basis for a cognizable taking
claim.”).
126
Webb’s Fabulous Pharmacies, 449 U.S. at 163, quoting Armstrong, 364 U.S. at 49.
127
Bott v Natural Resources Comm, 415 Mich. 45, 81 n 43; 327 NW2d 838 (1982), quoting
Pearsall v Eaton Co Bd of Supervisors, 74 Mich. 558, 561; 42 N.W. 77 (1889).
45
To permit such forced contributions to stand would undermine the very rights our Takings
Clause seeks to protect.
Put simply, defendants’ argument that the taxing power justifies their retention of
the surplus proceeds from tax-foreclosure sales over and above property owners’ tax
liabilities is an exceedingly poor attempt at disguising a physical taking of property
requiring just compensation as an arbitrary and disproportionate tax.128
C. JUST COMPENSATION IS EQUAL TO THE AMOUNT OF SURPLUS
PROCEEDS GENERATED FROM THE TAX-FORECLOSURE SALE
Having found an unconstitutional taking, we must next decide the method by which
just compensation may be determined. This Court has stated that the remedy for a
government taking is “just compensation for the value of the property taken.”129 As our
holding today makes clear, the property “taken” is the surplus proceeds from the tax-
foreclosure sale of plaintiffs’ properties to satisfy their tax debts. While it could be said
that plaintiffs have received at least some compensation, given that they are no longer liable
for their delinquent taxes,130 satisfaction of plaintiffs’ tax debts cannot constitute just
128
See Acker v Comm’r of Internal Revenue, 258 F2d 568, 574 (CA 6, 1958) (“[D]espite
the breadth of the taxing power conferred by the Constitution, there might arise ‘a case
where, although there was a seeming exercise of the taxing power, the act complained of
was so arbitrary as to constrain to the conclusion that it was not the exertion of taxation but
a confiscation of property; that is, a taking of the same in violation of the 5th
Amendment[.]’ ”), quoting Brushaber v Union Pacific R Co, 240 U.S. 1, 24-25; 36 S. Ct.
236; 60 L. Ed. 493 (1916).
129
Hart, 416 Mich. at 494.
130
See State Theft, 54 Real Prop Tr & Est L J at 124 & nn 219-220 (“In the case of property
tax foreclosure, there is some compensation provided to the owner because the proceeds
from the property sale are used to satisfy the amount that the property owner owes the
government in taxes, interest, and fees. This is a form of compensation because after the
46
compensation for the value of the property taken, i.e., the surplus proceeds. Therefore,
plaintiffs are entitled to the value of those surplus proceeds.
Defendants submit that if plaintiffs have, in fact, pleaded a viable takings claim,
then the amount of compensation due could be more than the surplus proceeds from the
tax-foreclosure sale. Plaintiffs make this point in their postargument briefing, arguing that
a full remedy for an unconstitutional taking requires property owners to be put in as good
of position had their properties not been taken at all. That is, while the surplus proceeds
from a tax-foreclosure sale are some evidence of the value of the property and
compensation due, plaintiffs contend that it may be less than just compensation and may
instead constitute the fair market value of their properties.131
We reject the premise that just compensation requires that plaintiffs be awarded the
fair market value of their properties so as to be put in as good of position had their
properties not been taken at all. First, this would run contrary to the general principle that
just compensation is measured by the value of the property taken. In this case, the property
property is sold the former owner’s debt is canceled.”), citing Comment, Tax Foreclosure:
A Drag On Community Vitality Or A Tool For Economic Growth?, 81 U Cin L Rev 1615,
1617 (2013) (explaining that the collection of unpaid real-property taxes involves, among
other things, “liquidation of the property by public sale in order to satisfy the debt owed”).
131
Plaintiffs’ Supplemental Brief on Appeal (December 13, 2019) at 4 n 1, citing United
States v Miller, 317 U.S. 369, 373; 63 S. Ct. 276; 87 L. Ed. 336 (1943) (stating that just
compensation for a takings claim requires that the property owner “be put in as good
position pecuniarily as he would have occupied if his property had not been taken”).
47
improperly taken was the surplus proceeds, not plaintiffs’ real properties.132 Second,
plaintiffs are largely responsible for the loss of their properties’ value by failing to pay their
taxes on time and in full. If plaintiffs were entitled to collect more than the amount of the
surplus proceeds, not only would they be taking money away from the public as a whole,
but they would themselves benefit from their tax delinquency.133
Accordingly, when property is taken to satisfy an unpaid tax debt, just compensation
requires the foreclosing governmental unit to return any proceeds from the tax-foreclosure
sale in excess of the delinquent taxes, interest, penalties, and fees reasonably related to the
foreclosure and sale of the property—no more, no less.134
132
This distinction also explains why the Michigan Takings Clause’s 125% requirement
does not apply. That provision is triggered only when the property taken consists of an
individual’s principal residence. That is not the case here.
133
In re State Hwy Comm’r, 249 Mich. 530, 535; 229 N.W. 500 (1930) (“Just compensation
should neither enrich the individual at the expense of the public nor the public at the
expense of the individual.”).
134
Plaintiffs suggest that they are entitled to the equity they held in their properties before
foreclosure, but throughout their briefing they conflate equity with surplus proceeds,
suggesting that they are one in the same. See Plaintiffs’ Brief on Appeal (February 13,
2019) at 12 (“Equity is realized when property is sold. Thus, logically, common law and
statutory law have traditionally treated the surplus proceeds from the sale of foreclosed
property as representing the former owner’s equity.”). Similarly, the concurring opinion
asserts that the property right taken is the equity a former property owner held in his or her
property prior to foreclosure. The concurring opinion supports this assertion with scant
caselaw, relying primarily on the “equity of redemption” as representing an owner’s equity
interest in property. Yet the concurring opinion acknowledges that equity of redemption
and equity are distinct concepts, with the former serving to protect the latter. Further, we
are unaware of any authority affirming a vested property right to equity held in property
generally. Nor is it necessary for us to do so here. The question presented is whether a
former property owner retains the ability to collect any surplus proceeds that might result
after the government seizes title to real property for failure to pay taxes and then sells that
property for more than the tax delinquency. The earlier discussion reaffirms a former
48
VI. CONCLUSION
We hold that plaintiffs, former property owners whose properties were foreclosed
and sold to satisfy delinquent real-property taxes, have a cognizable, vested property right
to the surplus proceeds resulting from the tax-foreclosure sale of their properties. This
right continued to exist even after fee simple title to plaintiffs’ properties vested with
defendants, and therefore, defendants’ retention and subsequent transfer of those proceeds
into the county general fund amounted to a taking of plaintiffs’ properties under Article 10,
§ 2 of our 1963 Constitution. Therefore, plaintiffs are entitled to just compensation, which
in the context of a tax-foreclosure sale is commonly understood as the surplus proceeds.
Accordingly, we reverse the judgment of the Court of Appeals and remand this case to the
Oakland Circuit Court for proceedings consistent with this opinion.
Brian K. Zahra
Bridget M. McCormack
Stephen J. Markman
Richard H. Bernstein
Elizabeth T. Clement
Megan K. Cavanagh
property owner’s vested common-law property right to the surplus proceeds resulting from
a tax-foreclosure sale that is protected by our state’s Takings Clause. Thus, plaintiffs have
a compensable takings claim for the surplus proceeds, i.e., the value of the property taken.
49
STATE OF MICHIGAN
SUPREME COURT
RAFAELI, LLC, and ANDRE
OHANESSIAN,
Plaintiffs-Appellants,
v No. 156849
OAKLAND COUNTY and ANDREW
MEISNER,
Defendants-Appellees.
VIVIANO, J. (concurring).
At issue is whether defendant Oakland County’s retention of the surplus proceeds
from tax-foreclosure sales constitutes a taking under Article 10, § 2 of the 1963 Michigan
Constitution. I concur with the majority’s result but disagree with much of its reasoning.1
In its zeal to adopt a pragmatic rule in order to provide limited relief to these plaintiffs and
others similarly situated, the majority has made a number of doctrinal missteps. In
particular, the majority has applied a flawed interpretive methodology and, even more
fundamentally, has failed to identify the correct property right. These mistakes are not
without consequences. The first trenches upon the Legislature’s power to abrogate
nonvested property rights. And the second—by defining plaintiffs’ property right as the
right to surplus proceeds, instead of the right to equity more generally—would seemingly
1
I concur in all parts except Parts IV(C), V(A), V(C), and VI.
encourage and endorse many takings of a person’s equity without just compensation
whenever a foreclosure sale does not yield surplus proceeds.
I would instead interpret the Constitution in the usual manner, discerning the
ordinary meaning of “property” and applying it to the facts here. Doing so, I conclude that
the property right that has been taken from the plaintiffs is their equity in their respective
properties and not any independent interest in the surplus proceeds from the tax-foreclosure
sale.
I. INTERPRETIVE ISSUES
The majority correctly notes that “a claimant must first establish a vested property
right under state law” in order to have a takings claim and that “ ‘the existence of a property
interest is determined by reference to existing rules or understandings that stem from an
independent source such as state law.’ ”2 Then the majority recounts the familiar rule that
“[o]ur ‘primary objective’ in interpreting a constitutional provision such as our state’s
Takings Clause is ‘to determine the text’s original meaning to the ratifiers, the people, at
the time of ratification.’ ”3
However, the majority does not explain which words in the Takings Clause are in
need of interpretation.4 In fact, rather than go on to explain what the ratifiers would have
2
Phillips v Washington Legal Foundation, 524 U.S. 156, 164; 118 S. Ct. 1925; 141 L. Ed. 2d
174 (1998) (quotation marks and citation omitted).
3
Wayne Co v Hathcock, 471 Mich. 445, 468; 684 NW2d 765 (2004).
4
The Takings Clause reads, in pertinent part: “Private property shall not be taken for public
use without just compensation therefore being first made or secured in a manner prescribed
by law.” Const 1963, art 10, § 2.
2
understood any particular words in the Takings Clause to mean, the majority proceeds to
recount historical claims for surplus and a menagerie of other past cases involving vested
property rights more generally. Later, when considering whether the Legislature might
have abrogated a common-law right to the surplus, the majority explains:
It is clear that our 1963 Constitution protects a former owner’s
property right to collect the surplus proceeds following a tax-foreclosure sale
under Article 10, § 2. This right existed at common law; was commonly
understood to exist in the common law before the 1963 ratification of our
Constitution; and continues to exist after 1963, as our decision in Dean
demonstrates. Because this common-law property right is constitutionally
protected by our state’s Takings Clause, the Legislature’s amendments of the
[General Property Tax Act (GPTA), MCL 211.1 et seq.] could not abrogate
it. While the Legislature is typically free to abrogate the common law, it is
powerless to override a right protected by Michigan’s Takings Clause.[5]
Though the majority does not make it explicit, I understand its opinion as reasoning
that because various past cases and other materials appear to recognize some interest on
the part of the previous landowner in the surplus proceeds after a tax foreclosure, the
ratifiers would have understood the term “property” in the Constitution to encompass such
a property right to surplus proceeds. Consequently, that property right must be considered
frozen and inviolable under our Takings Clause. And because it is enshrined in the
Constitution, the Legislature may not abrogate that common-law right; to do so would run
afoul of the Takings Clause.
I, of course, take no issue with the general rule that when interpreting a
constitutional provision, we aim to “determine the text’s original meaning to the
5
Ante at 38.
3
ratifiers . . . .”6 Consequently, under our rules of constitutional interpretation, the
definition of “property” is determined by what the ratifiers understood “property” to mean.
But the majority’s investigation of this concept ultimately rests on a flawed understanding
of original meaning. Obviously, the majority cannot say that the constitutional term
“property” means “surplus proceeds.”7 Rather, what the majority says, at least implicitly,
is that the phrase “surplus proceeds” falls within the meaning of “property” because the
ratifiers would have considered surplus proceeds to be property at the time of ratification.
But the majority never defines the term “property.” Yet, this question—the semantic
content of “property”—should be at the center of any interpretation of a legal term or
phrase, and its absence here is telling.8 Compare this with how the United States Supreme
Court has defined “property” in the Takings Clause: “The constitutional provision is
addressed to every sort of interest the citizen may possess.”9 Whether right or wrong, this
definition at least gives the term a meaning that can be applied.
6
Hathcock, 471 Mich. at 468.
7
Cf. McGinnis & Rappaport, Original Interpretive Principles as the Core of Originalism,
24 Const Comment 371, 378 (2008) (“The original meaning of the words would not
normally be defined by the expected applications, but instead by the meaning that people
at the time would understand the words to have.”).
8
Cooley, Constitutional Limitations (5th ed), p 49 (explaining that the purpose of
interpretation is to “find[] out the true sense of any form of words”).
9
United States v Gen Motors Corp, 323 U.S. 373, 378; 65 S. Ct. 357; 89 L. Ed. 311 (1945).
4
By contrast, the majority here focuses on what res the ratifiers would have believed
were encompassed by the term “property.”10 This treats the ratifiers’ expectations about
the application of the constitutional text as binding. Such an approach has been rejected
by those who, like myself, consider courts to be bound by the Constitution’s original textual
meaning—it is the publicly accessible meaning of the text, rather than its intended or
expected applications, that binds the courts.11
10
“Res” is Latin for “thing; event, business; fact; cause; property[.]” University of Notre
Dame, William Whitaker’s Words
(accessed June 26, 2020) [https://perma.cc/5HEJ-RHSD]. Black’s Law Dictionary (11th
ed) now defines it as “n. [Latin ‘thing’] (17c) 1. An object, interest, or status, as opposed
to a person . . . .”
11
See McConnell, The Importance of Humility in Judicial Review: A Comment on Ronald
Dworkin’s “Moral Reading” of the Constitution, 65 Fordham L Rev 1269, 1284 (1997)
(“Mainstream originalists recognize that the Framers’ analysis of particular applications
could be wrong, or that circumstances could have changed and made them wrong. . . .
[T]hey believe that ‘[w]e are governed by what our lawmakers said—by the principles they
laid down—not by any information we might have about how they themselves would have
interpreted those principles or applied them in concrete cases.’ ”) (citation omitted);
Balkin, Living Originalism (Cambridge: The Belknap Press of Harvard University Press,
2011), p 13 (“Fidelity to original meaning as original semantic content does not require
that we must apply [for example] the equal protection clause the same way that people at
the time of enactment would have expected it would be applied.”); Whittington,
Constitutional Interpretation: Textual Meaning, Original Intent, and Judicial Review
(Lawrence: University Press of Kansas, 1999), p 178 (“An expectation, in and of itself, is
derived from the text and as a prediction about its effects in the future is only contingently
related to the text. . . . [T]he author has no special authority relative to expectations about
effects.”); Scalia, A Matter of Interpretation: Federal Courts and the Law (Princeton:
Princeton University Press, 1997), p 144 (“I agree with the
distinction . . . between . . . ‘semantic intention’ and the concrete expectations of
lawgivers. It is indeed the former rather than the latter that I follow.”); Rosenthal,
Originalism in Practice, 87 Ind L J 1183, 1209 (2012) (“Most originalists draw a
distinction between the original meaning of constitutional text and its originally intended
applications, arguing that only the former is interpretively binding.”) (collecting sources);
Barnett, An Originalism for Nonoriginalists, 45 Loy L Rev 611, 622 (1999) (“While some
5
The ratifiers’ understanding thus establishes the general meaning of “property” but
not necessarily which things fall within that concept. In other words, the meaning of
“property,” as defined at the time of ratification, establishes the parameters by which we
originalists still search for how the relevant generation of ratifiers expected or intended
their textual handiwork would be applied to specific cases, original meaning originalists
need not concern themselves with this, except as circumstantial evidence of what the more
technical words and phrases in the text might have meant to a reasonable listener.”).
The majority’s emphasis on expected applications rather than the semantic content
of the text itself fundamentally misperceives the object of interpretation as the ratifiers’
intentions rather than the original public meaning of the text. As Robert Bork described
the larger interpretive principle, the search for the “understanding of the ratifiers . . . is
actually a shorthand formulation” for what courts must interpret “because what the ratifiers
understood themselves to be enacting must be taken to be what the public of that time
would have understood the words to mean. It is important to be clear about this. The
search is not for a subjective intention.” Bork, The Tempting of America: The Political
Seduction of the Law (New York: Simon & Schuster Inc, 1990), p 144. See also Calabresi
& Fine, Two Cheers for Professor Balkin’s Originalism, 103 Nw U L Rev 663, 669 (2009)
(“What judges must be faithful to is the enacted law, not the expectations of the parties
who wrote the law. . . . The enactment into law of these texts was an open democratic
process, and every citizen was entitled to think that the words in the texts that were enacted
meant what a good dictionary in use at the time said they meant.”).
Contemporaneous expectations about how the constitutional text applied in a case
are useful only to the extent they shed light on the original public meaning. Whittington,
Originalism: A Critical Introduction, 82 Fordham L Rev 375, 385 (2013) (“[E]xpected
applications might be helpful to later interpreters in clarifying the substantive content of
the embodied constitutional rule. The Founders could be mistaken or disingenuous about
the implications of adopting a proposed rule, but the rule itself must be publicly
understandable. If examples of likely applications of the rule are regularly offered and
there is widespread agreement on such applications, then they may be reflective of the
content of the rule in question.”); Original Interpretive Principles, 24 Const Comment at
378 (noting that expected applications are not tantamount to original meaning but can
provide evidence of that meaning).
6
determine the things denoted by “property.”12 It does not necessarily establish, for all time,
what those things were.13 This is particularly the case with a broad concept like property,
which covers various classes of things that can be redefined by the Legislature.14
For these reasons, the ratifiers’ understanding of which particular res were included
in the definition of property at a particular moment in time does not dictate which res we
must recognize as “property” under the Takings Clause today. Instead, I would define the
term “property” according to its ordinary meaning at the time the Constitution was ratified.
Because this case does not turn on fine distinctions in the definitions—but it does turn on
12
See Slocum, Ordinary Meaning: A Theory of the Most Fundamental Principle of Legal
Interpretation (Chicago: University of Chicago Press, 2015), p 222.
13
Justice Thomas Cooley recognized, for example, that the same text bearing the same
meaning could, over time, come to take on a different significance because changing
circumstances (e.g., technology) could change the objects that fell within the unchanged
textual meaning: “The bounds of [constitutional] power remain the same, but the new
creations that come within its compass give it an importance which those who devised it
never dreamed of.” Cooley, The Comparative Merits of Written and Prescriptive
Constitutions, 2 Harv L Rev 341, 355 (1889); see also Dist of Columbia v Heller, 554 U.S.
570, 582; 128 S. Ct. 2738; 171 L. Ed. 2d 637 (2008) (“Some have made the argument,
bordering on the frivolous, that only those arms in existence in the 18th century are
protected by the Second Amendment. We do not interpret constitutional rights that way.
Just as the First Amendment protects modern forms of communications, . . . and the Fourth
Amendment applies to modern forms of search, . . . the Second Amendment extends, prima
facie, to all instruments that constitute bearable arms, even those that were not in existence
at the time of the founding.”); Scalia & Garner, Reading Law: The Interpretation of Legal
Texts (St. Paul: Thomson/West, 2012), p 86 (“The meaning of rules is constant. Only their
application to new situations presents a novelty. . . . Broad language can encompass the
onward march of science and technology[.]”).
14
See Black’s Law Dictionary (11th ed) (defining “property” as, “[c]ollectively, the rights
in a valued resource such as land, chattel, or an intangible” or “[a]ny external thing over
which the rights of possession, use, and enjoyment are exercised”).
7
having some definition rather than a mere example—it is sufficient for present purposes to
employ a common definition of “property” from the relevant period: “something owned or
possessed; specif : a piece of real estate”; “the exclusive right to possess, enjoy, and dispose
of a thing : OWNERSHIP”; “something to which a person has a legal title.”15
Defining property using this traditional approach to constitutional interpretation
avoids other problems raised by the majority’s reading. One such problem is that any
property rights extant when the Constitution was ratified would be insulated from
legislative change, whereas later-developed property rights would presumably be subject
to change. Though the majority might conclude that the Legislature could expand the res
in which citizens may have property interests, the majority’s broad position would not
allow the Legislature to repeal rights in the res that were recognized property rights at the
time of ratification and thereby preserved in the protective amber of the Takings Clause.16
That is not problematic if the rights the Legislature sought to abrogate were vested. The
troubling sweep of the majority’s opinion, however, would extend its prohibition even to
15
Webster’s Seventh New Collegiate Dictionary (1963); see also The American Heritage
Dictionary of the English Language (1969) (“1. Ownership. 2. A possession, or
possessions collectively. 3. Something tangible or intangible to which its owner has legal
title.”); 8 Oxford English Dictionary (1933) (“That which one owns; a thing or things
belonging to or owned by some person or persons; . . . [a] piece of land owned[.]”).
16
Cf. PruneYard Shopping Ctr v Robins, 447 U.S. 74, 93; 100 S. Ct. 2035; 64 L. Ed. 2d 741
(1980) (Marshall, J., concurring) (“Such an approach would freeze the common law as it
has been constructed by the courts, perhaps at its 19th-century state of development. It
would allow no room for change in response to changes in circumstance.”).
8
legislation that prospectively modified or abrogated nonvested property rights—i.e., rights
to property that individuals might acquire in the future.17
17
The breadth of the opinion stems, in part, from the majority’s misunderstanding about
what it means for a right to be “vested.” The majority suggests that the right to surplus
proceeds is “vested” because “the right to collect these proceeds was beyond a mere
expectancy or claim of entitlement,” apparently because the proceeds can be owned. Ante
at 35-36. In other words, the right is somehow vested irrespective of any individual
circumstances—it is vested in the ether. But that is not how it works. “To constitute a
vested right, the interest must be something more than such a mere expectation as may be
based upon an anticipated continuance of the present general laws; it must have become a
title, legal or equitable, to the present or future enjoyment of property . . . .” In re Certified
Question, 447 Mich. 765, 788; 527 NW2d 468 (1994) (quotation marks and citation
omitted). “Vested” means “[h]aving become a completed, consummated right for present
or future enjoyment; not contingent; unconditional; absolute . . . .” Black’s Law Dictionary
(11th ed). This requires a real person or entity and a real property right, not simply a
property right in the abstract. See Wylie v City Comm of Grand Rapids, 293 Mich. 571,
586; 292 N.W. 668 (1940) (noting, in the related context of due process, that “ ‘[r]ights are
“vested” when the right of enjoyment, present or prospective, has become the property of
some particular person or persons as a present interest’ ”) (citation omitted); Cooley,
Constitutional Limitations, p 438 (describing vested rights in the context of an individual’s
rights and interests); 5 Smith & Philbin, Michigan Civil Jurisprudence, Constitutional Law
(May 2020 update), § 300 (noting this definition).
For instance, I do not have a vested property right in a wild fox simply because, if I
captured one, the law would recognize my ownership of it. Cf. Pierson v Post, 3 Cai R
175; 2 Am Dec 264 (1805). If, before I even don my hunting cap, the Legislature proscribes
or limits ownership of foxes, no one would say I have been deprived of a vested property
right in the fox I never owned or caught. At best, I had an expectation or hope. In the same
way, someone who does not now own a home but would like to own one in the future does
not have any vested property right in a home. As Justice Cooley stated, “[A] mere
expectation of property in the future is not considered a vested right . . . .” Cooley,
Constitutional Limitations, p 440. And as discussed below, there is no vested right in a
mere common-law rule. See post at nn 20-21 and accompanying text. Thus, although the
majority purports to cabin its opinion to vested rights, its misconception of those rights
leads to a wider application that encompasses nonvested rights as well.
9
This would be a novel approach to legislative power over property. We have stated,
for example, that the right of redemption—which we have recognized is a property right in
the context of tax-foreclosure sales18—“is not a constitutional right but exists only as
permitted by statute, that such rights . . . are subject to abridgement by the legislature for
the reason they are remedial in nature, and that no vested rights arise . . . .”19 Other courts,
too, have recognized that the Legislature’s role in defining property rights extends to
removing items from the category of property, if done prospectively, i.e., without affecting
18
See Cobleigh v State Land Office Bd, 305 Mich. 434, 436-437; 9 NW2d 665 (1943).
19
Buckeye Union Fire Ins Co v Michigan, 383 Mich. 630, 639; 178 NW2d 476 (1970)
(discussing Baker v State Land Office Bd, 294 Mich. 587; 293 N.W. 763 (1940)); see also
Dumphey v Hilton, 121 Mich. 315, 317; 80 N.W. 1 (1899) (“It was held by the United States
Supreme Court that the right of redemption from tax sales, although it is to be regarded
favorably, does not exist, except as permitted by statute. . . . ‘While it may well be doubted
whether the legislature could enact an immediate bar to any existing right, yet it is clearly
settled that to prescribe the period within which any right may be enforced is within their
power.’ ”) (citations omitted). We had earlier said that “the equity of redemption”—which
was the redemption right at common law—“appertains to and goes with the title to the real
estate, and is in law the property of the owner of the fee. It is an interest in land . . . .”
Case v Ranney, 174 Mich. 673, 681; 140 N.W. 943 (1913).
10
vested rights.20 And, of course, even the majority recognizes that the Legislature may, at
times, abrogate the common law.21 As the United States Supreme Court has explained:
A person has no property, no vested interest, in any rule of the common law.
That is only one of the forms of municipal law, and is no more sacred than
any other. Rights of property which have been created by the common law
cannot be taken away without due process; but the law itself, as a rule of
conduct, may be changed at the will, or even at the whim, of the legislature,
unless prevented by constitutional limitations. Indeed, the great office of
statutes is to remedy defects in the common law as they are developed, and
to adapt it to the changes of time and circumstances.[22]
A vested right, therefore, cannot be divested without just compensation.23 But the
Legislature has greater scope to prospectively reshape laws establishing property rights as
20
The New York Court of Appeals held, for example, that the legislature could “extinguish
[a] property right by the simple expedient of repealing the provision which gives rise to it,”
but only prospectively and not as to property already vested. Alliance of American Insurers
v Chu, 77 NY2d 573, 585-586; 571 NE2d 672 (1991); id. at 589 (“Nothing in our decision
prevents the State from changing the law as it affects future contributions.”); 29A CJS,
Eminent Domain (June 2020 update), § 72 (“It has also been held that, just as a state
legislature has the power to statutorily create property interests, so too may it legislatively
alter or take away those same property interests, though its power to alter the rights and
obligations that attach to completed transactions is not as broad as its power to regulate
future transactions.”). It is true that these sources refer to statutorily created property rights
rather than those that arose from the common law. But this distinction is immaterial
because, as explained below, the Legislature can abrogate the common law.
21
Const 1963, art 3, § 7 (“The common law and the statute laws now in force, not repugnant
to this constitution, shall remain in force until they expire by their own limitations, or are
changed, amended or repealed.”).
22
Munn v Illinois, 94 U.S. 113, 134; 24 L. Ed. 77 (1876) (discussing due process).
23
Cf. Bank Markazi v Peterson, 578 US ___, ___; 136 S. Ct. 1310, 1324; 194 L. Ed. 2d 463
(2016) (“The Fifth Amendment’s Takings Clause prevents the Legislature (and other
government actors) from depriving private persons of vested property rights except for a
‘public use’ and upon payment of ‘just compensation.’ ”) (quotation marks and citation
omitted); In re Certified Question, 447 Mich. at 787-788 (“One who asserts an
11
long as those laws function in a way that leaves vested rights untouched.24 Such actions
are not prohibited by the Takings Clause.25 Thus, for example, the United States Supreme
Court has held that the expectation of future child-support benefits is not protected because
it is a “prospective right . . . clearly subject to modification by law, be it through judicial
decree, state legislation, or congressional enactment.”26
Moreover, as the United States Supreme Court and numerous state supreme courts
have established, “the existence of a property interest is determined by reference to existing
rules or understandings that stem from an independent source such as state law.”27 In other
uncompensated taking claim must first establish that a vested property right is affected.”)
(emphasis added).
24
See Cooley, Constitutional Limitations, p 440 (“Acts of the legislature . . . cannot be
regarded as opposed to fundamental axioms of legislation, ‘unless they impair rights which
are vested; because most civil rights are derived from public laws; and if, before the rights
become vested in particular individuals, the convenience of the State procures amendments
or repeals of those laws, those individuals have no cause of complaint.’ ”) (citation
omitted).
25
There is no need to decide in this case whether other constitutional provisions may limit
the Legislature’s ability to define property. My point is only that no such limitation may
be found in the Takings Clause.
26
Bowen v Gilliard, 483 U.S. 587, 607; 107 S. Ct. 3008; 97 L. Ed. 2d 485 (1987); see also
Peterson, The Taking Clause: In Search of Underlying Principles Part I—A Critique of
Current Takings Clause Doctrine, 77 Calif L Rev 1299, 1313 (1989) (“In a number of other
takings cases, the Court has said that unless a right created by positive law is a ‘vested
right,’ it is not property within the meaning of the takings clause. The Court’s reasoning
is that when the government grants A a legal right, it normally retains the power to change
the law to promote the general welfare, and thus no taking occurs when the government
exercises its retained power, even though the change in the law eliminates A’s rights under
the prior law. As the Court expresses it, A has not lost any ‘vested rights.’ ”).
27
Phillips, 524 U.S. at 164 (quotation marks and citation omitted; emphasis added).
12
words, “the Constitution protects rather than creates property interests . . . .”28 Citing this
rule, one federal court has reasoned that the nature of the “property” at issue in the tax-
foreclosure context would be found in local law, not the Constitution itself.29 Yet by
reasoning that “property” must be defined at least as the particular types the ratifiers had
in mind, the majority interprets the Takings Clause as exalting those interests above the
Legislature’s authority to modify them.30
28
Id. See also Kafka v Montana Dep’t of Fish, Wildlife & Parks, 348 Mont. 80, 93; 2008
MT 460; 201 P3d 8 (2008) (“Property interests themselves are not defined by the [federal]
Takings Clause, or for that matter by [the state’s taking clause]” but by “ ‘ “background
principles” and “rules and understandings” [that] focus on the nature of the citizen’s
relationship to the alleged property, such as whether the citizen had the rights to exclude,
use, transfer, or dispose of the property.’ ”) (citations omitted); Cheatham v Pohle, 789
NE2d 467, 473 (Ind, 2003) (“The plaintiff has no property to be taken except to the extent
state law creates a property right.”); Mayor & City Council of Baltimore v Bregenzer, 125
Md 78; 93 A 425, 426 (1915) (“The section of the Constitution quoted does not define
property, nor does it declare what shall be a taking. It leaves those questions to the
determination of the courts upon the facts of each particular case.”).
29
Coleman v Dist of Columbia, 70 F Supp 3d 58, 80 (D DC, 2014).
30
This result goes well beyond what the United States Supreme Court has done. Even with
regard to vested property rights, the United States Supreme Court has recognized that “the
property owner necessarily expects the uses of his property to be restricted, from time to
time, by various measures newly enacted by the State in legitimate exercise of its police
powers; ‘[a]s long recognized, some values are enjoyed under an implied limitation and
must yield to the police power.’ ” Lucas v South Carolina Coastal Council, 505 U.S. 1003,
1027; 112 S. Ct. 2886; 120 L. Ed. 2d 798 (1992), quoting Pennsylvania Coal Co v Mahon,
260 U.S. 393, 413; 43 S. Ct. 158; 67 L. Ed. 322 (1922). “And in the case of personal property,
by reason of the State’s traditionally high degree of control over commercial dealings, [the
property owner] ought to be aware of the possibility that new regulation might even render
his property economically worthless (at least if the property’s only economically
productive use is sale or manufacture for sale).” Lucas, 505 U.S. at 1027-1028. Elaborating
on these points in his Lucas dissent, Justice Stevens observed that “[a]rresting the
development of the common law” would be “a departure from our prior decisions[.]” Id.
at 1069 (Stevens, J., dissenting). Legislatures, he explained, “often revise the definition of
13
I believe that such a reading raises serious concerns regarding the separation of
powers. The Constitution provides that “the legislative power of the State of Michigan is
vested in a senate and a house of representatives.”31 This Court has recognized that the
legislative power includes the power to abrogate the common law.32 In fact, the
Constitution specifically allows the common law to be changed: Const 1963, art 3, § 7
states, “The common law and the statute laws now in force, not repugnant to this
constitution, shall remain in force until they expire by their own limitations, or are
changed, amended or repealed.”33 It is true that this Court has applied the principle that
statutes in derogation of the common law must be strictly construed.34 But the majority
now significantly limits that power by reasoning that any attempt to prospectively abrogate
property and the rights of property owners. Thus, when the Nation came to understand that
slavery was morally wrong and mandated the emancipation of all slaves, it, in effect,
redefined ‘property.’ ” Id. All of this—in both the majority and dissent—referred to the
legislature’s expansive power over property a person already owned. In this case, the
majority goes in the opposite direction and ties the Legislature’s hands in regulating
property that does not yet exist and that no one yet owns.
31
Const 1963, art 4, § 1.
32
E.g., Hoerstman Gen Contracting, Inc v Hahn, 474 Mich. 66, 74; 711 NW2d 340 (2006)
(“The Legislature has the authority to abrogate the common law.”).
33
Emphasis added.
34
E.g., Rusinek v Schultz, Snyder & Steele Lumber Co, 411 Mich. 502, 508; 309 NW2d 163
(1981) (“[S]tatutes in derogation of the common law must be strictly construed . . . .”).
14
a common-law property right in a particular object that existed in 1963, without providing
just compensation, is unconstitutional.35
II. THE PROPERTY RIGHT AT ISSUE
The majority’s flawed interpretive methodology has led it to characterize the
“property” at issue as merely the surplus proceeds from the foreclosure sale. But the
existence and scope of these proceeds are contingent upon the foreclosure sale—the
proceeds spring to life only at the end of that process. The majority does not consider the
property interests that exist before the sale or how these interests affect the taxpayer’s
entitlement to anything resulting from the sale. In starting its analysis at the end of the
process, the majority ignores the laws and history of real-property ownership and creates
problematic gaps in the process that fail to respect takings law. My analysis, by contrast,
starts at the beginning: the property owners’ preexisting interest in the real estate, or their
equity.
35
Additionally, I believe that the majority’s approach has broad implications in the realm
of regulatory takings. If the ratifiers’ understanding of which particular objects an
individual may have property rights in is now set in stone in the Constitution, I see no
reason why the ratifiers’ understanding of the scope of their property rights is also not set
in stone. In other words, under the majority’s approach, if the ratifiers believed that their
property interest entitled them to use a res in a variety of ways, each of those ways must be
read into the definition of “property” under the Takings Clause. Consequently, it would
be unconstitutional for a regulation to take away any use of a res that the ratifiers would
have understood their property rights to include.
15
A. THE MAJORITY’S MISTAKEN APPROACH
It is important, at the outset, to note the questionable basis for the majority’s
conclusion that “our state’s common law recognizes a former property owner’s property
right to collect the surplus proceeds . . . .” The majority relies, first, on the Magna Carta,
saying, “Just as the Magna Carta protected property owners from uncompensated takings,
it also recognized that tax collectors could only seize property to satisfy the value of the
debt payable to the Crown, leaving the property owner with the excess.”36 But the
provision of the Magna Carta to which the majority refers concerns collecting debts by
seizing only movable property.37 It is much more understandable to have a rule
discouraging the government from needlessly taking property in excess of the tax debt
when the government is seizing various movable goods rather than real estate—it is easier
to take the chair and leave the table than it is to take the kitchen and leave the living room.
Thus, although many of our rights can be traced to the Magna Carta, I question whether
36
Ante at 35.
37
Ante at 28. Clause 26 of the Magna Carta reads:
If at the death of a man who holds a lay ‘fee’ of the Crown, a sheriff
or royal official produces royal letters patent of summons for a debt due to
the Crown, it shall be lawful for them to seize and list movable goods found
in the lay ‘fee’ of the dead man to the value of the debt, as assessed by worthy
men. Nothing shall be removed until the whole debt is paid, when the residue
shall be given over to the executors to carry out the dead man’s will. If no
debt is due to the Crown, all the movable goods shall be regarded as the
property of the dead man, except the reasonable shares of his wife and
children. [Johnson, The Ancient Magna Carta and the Modern Rule of Law:
1215 to 2015, 47 St Mary’s L J 1, 47 (2015) (emphasis added).]
16
Clause 26 has much bearing on the seizure of real property.38 Additionally, it is not quite
true that tax collectors could only seize property to satisfy the debt—as “the value of the
goods seized had to approximate the value of the debt[.]”39 Such a rule falls short of one
that demands any surplus be returned to the previous owner.
Next, the majority turns to People ex rel Seaman v Hammond, 1 Doug 276 (Mich,
1844), noting that though Seaman held that the previous landowner was entitled to the
surplus, the statutory scheme at the time was different than the GPTA. Specifically, the
statute specified that the excess proceeds must be returned to the owner.40 The majority
appears to recognize that Seaman, and other cases involving statutes, are not particularly
instructive.41 Nevertheless, the majority concludes that “a fair reading of Seaman
38
See Baker, An Introduction to English Legal History (Dayton: LexisNexis, 2002), p 223
(“The most fundamental distinction in the English law of property was between real
property (realty) and personal property (personalty).”). Indeed, the conception of
ownership of land—real property—was only just emerging in the thirteenth century from
innovations within the feudal system. Id. at 223-237; see also Turner, The Equity of
Redemption: Its Nature, History and Connection with Equitable Estates Generally
(Cambridge: Cambridge University Press, 1931), pp 1-3. The majority’s resort to
Blackstone is similarly unavailing because Blackstone’s discussion of bailments deals with
goods rather than real property. See ante at 28-29, citing 2 Blackstone, Commentaries on
the Laws of England, p *452.
39
Ancient Magna Carta, 47 St Mary’s L J at 47.
40
Seaman, 1 Doug at 278.
41
The majority also cites United States v Lawton, 110 U.S. 146; 3 S. Ct. 545; 28 L. Ed. 100
(1884), and Nelson v City of New York, 352 U.S. 103; 77 S. Ct. 195; 1 L. Ed. 2d 171 (1956).
See ante at 25 (“Significantly, Seaman, Lawton, and Nelson all address a former property
owner’s statutory right to recover the surplus proceeds.”). See also ante at 25-26 (“Lawton
and Nelson establish that the Takings Clause under the United States Constitution may
afford former property owners a remedy when a tax-sale statute provides the divested
17
demonstrates that in the early years of this state, it was commonly understood that the
delinquent taxpayer, not the foreclosing entity, continued to own the land at the time of the
tax-foreclosure sale and would have been entitled to any surplus, which no more followed
title to the land than the former owner’s other personal property.”42 But this is a misreading
of Seaman. To the extent that the owner’s entitlement to the surplus was “commonly
understood,” it no doubt resulted from the statute that expressly provided such a right. If
the majority means this common understanding somehow reflected a common-law right to
the surplus, I do not see how. It is just as possible that the statutory scheme provided for a
right in the surplus because the Legislature did not believe the common law recognized
such a right. Speculations on what the Legislature thought it was doing are thus unfruitful
and far afield from establishing a common-law right to the proceeds. In sum, it is far from
clear what implications the former existence of a statutory right to surplus proceeds has in
determining the application of the constitutional right in this case.
And Dean v Dep’t of Natural Resources, 399 Mich. 84; 247 NW2d 876 (1976), can
hardly be read as recognizing a longstanding vested property right in the surplus. That case
considered an unjust-enrichment claim. The key determination in that cause of action is
whether retention of the benefit is inequitable, not which party has the property right.43 In
property owner an interest in the surplus proceeds and the government does not honor that
statutory interest.”).
42
Ante at 30.
43
See also Tkachik v Mandeville, 487 Mich. 38, 47-48; 790 NW2d 260 (2010) (“Unjust
enrichment is defined as the unjust retention of ‘ “money or benefits which in justice and
18
other words, Dean involved an equitable decision based on the specific facts of the case.
Those facts, which involved “the alleged good-faith attempt at redemption, the running of
the redemption period after this attempt with plaintiff under the impression that she had in
fact redeemed her home, the loss of her home, and the sale of the property by the State for
a profit of close to $10,000,” are very different than those here.44 Dean does not indicate
that all former property owners have a property right to the surplus as a matter of course.45
B. EQUITY
In contrast to the majority’s approach, I would turn to the law of property and the
development of property interests in real estate to determine the rights at issue. The history
of equity in real estate is particularly illuminating because this property right formed in
response to foreclosure practices that raised concerns like those in the present case. Until
mortgages came into widespread use, creditors generally obtained a “gage of land” as
security in the debtor’s land, but the creditor could not recover possession of the land from
equity belong to another.” ’ ”), quoting McCreary v Shields, 333 Mich. 290, 294; 52 NW2d
853 (1952) (citation omitted).
44
Dean v Dep’t of Natural Resources, 399 Mich. 84, 94-95; 247 NW2d 876 (1976).
45
The majority also cites the brief discussion on surplus proceeds in Cooley, Law of
Taxation (3d ed), p 952. See ante at 29. But Cooley never stated the right to surplus was
of common-law origin. Instead, the treatise explained that “[v]arious methods are adopted
in different states to save, if possible, something to the owner when his land is sold.”
Cooley, Law of Taxation, p 952 (emphasis added). As the majority notes, Cooley found
support in Lawton, 110 U.S. 146, but that is another case dealing with a statutory scheme
rather than the common law. See ante at 29 n 86.
19
the debtor.46 That defect, from the creditor’s perspective, likely led to the creation of the
predominant form of common-law mortgage, in which the mortgagor conveyed the land,
usually in fee simple, to the mortgagee on the condition subsequent that it would be
reconveyed to the mortgagor when the debt was repaid at the appointed time.47
The harshness of this procedure was evident to many at the time and is similar to
harshness involved in the present case, namely that it automatically led to the full loss of
46
Sutherland, The Assize of Novel Disseisin (Oxford: Clarendon Press, 1973), pp 12, 138;
see also Hazeltine, General Preface, in Turner, The Equity of Redemption, pp xxiv-xxx
(describing the gage as a conveyance on condition precedent); 3 Holdsworth, A History of
English Law (3d ed), pp 128-129 (calling the interest a mortgage but differentiating it from
later practices and explaining that the creditor could not dispossess the debtor if the latter
had possession).
47
See An Introduction to English Legal History, pp 311-312 (“[T]he mortgagor conveyed
the fee to the mortgagee forthwith, on condition that he might re-enter (and regain the fee)
if he paid by a certain date. . . . [This] gave the mortgagee a fee simple defeasible by
condition subsequent (that is, payment).”); Simpson, An Introduction to the History of the
Land Law (London: Oxford University Press, 1961), p 225 (“[T]he mortgagor conveyed
his lands outright in fee simple to the mortgagee, with a covenant for re-conveyance if the
debt was repaid on time; this is the classical common law mortgage . . . .”); 3 Holdsworth,
p 129 (“It was probably due chiefly to the latter cause [i.e., the creditor’s inability to recover
the land from a debtor in possession] that the peculiar interest of the
mortgagee . . . disappeared. He ceased to take a peculiar interest as mortgagee, and took
instead some one of the recognized estates or interests in the land—a fee simple, a life
estate, or a term. . . . The debtor might convey the land to the creditor in fee, with a proviso
that if the debt was paid by a fixed date the land should be reconveyed[.]”); Turner, The
English Mortgage of Land as a Security, 20 Va L Rev 729, 729 (1934) (“The English
mortgage has developed from a form of conveyance in use in the 16th century comprising
an absolute conveyance to the lender with a proviso that, on the borrower repaying the
principal with interest and costs by a fixed day, the lender would reconvey the property to
him.”); Lloyd, Mortgages—The Genesis of the Lien Theory, 32 Yale L J 233, 234 (1923)
(“If the debt was not paid on the day named, the estate of the creditor became absolute.
After default no right of redemption was admitted.”).
20
the mortgagor’s interest in the property no matter how much debt was owed—no surplus
was owed or paid to the mortgagor.48 Equity courts addressed these concerns—in part
48
See Restatement Property, 3d, Mortgages, § 3.1, comment a (“The consequences of
payment default were especially harsh on the mortgagor. If for any reason the payment
was not made on law day, the borrower forfeited all interest in [the property].”); 5 Tiffany,
Real Property (3d ed, November 2019 update), § 1518 (noting that equity intervened out
of justice because “no foreclosure was necessary [under the common-law mortgage], since
the mere breach of the condition vested an absolute estate in the mortgagee”); An
Introduction to English Legal History, p 313 (explaining that equity courts began granting
relief in this situation because “[t]he moneylender was morally entitled only to the debt,
and perhaps some reasonable profit, but ought not to profit unconscionably from a penal
arrangement”); An Introduction to the History of the Land Law, pp 226-227 (“The common
law courts construed mortgage transactions strictly and unsympathetically. If the mortgage
provided that the mortgagor was to lose his land through defaulting in payment upon a
fixed day then that was that; it mattered nothing that he defaulted by a single day, or that
the property was worth infinitely more than the debt.”); 5 Holdsworth, A History of English
Law (1924), pp 330-331 (noting that equity granted relief because of the penal character of
the forfeiture); Sugarman & Warrington, Land Law, Citizenship, and the Invention of
“Englishness”: The Strange World of the Equity of Redemption, in Early Modern
Conceptions of Property (Brewer & Staves eds, 1995), p 113 (“A single day’s delay in
tendering repayment could result in the borrower losing the entire property to the lender,
even though the amount of the loan might be far less than the value of the land.”); Burkhart,
Fixing Foreclosure, 36 Yale L & Pol’y Rev 315, 320 (2018) (noting that this “process,” as
incorporated in the American colonies, “often gave lenders an especially large windfall
because land values were increasing at a greater rate than had previously occurred
anywhere”); Weinberger, Tools of Ignorance: An Appraisal of Deficiency Judgments, 72
Wash & Lee L Rev 829, 849-850 (2015) (noting that the borrower was not entitled to any
surplus and lost title and all interest in the property); Mattingly, The Shift From Power to
Process: A Functional Approach to Foreclosure Law, 80 Marq L Rev 77, 90 (1996) (“The
pendulum of power swung towards the borrower with the intervention of the Equity Courts,
which viewed the borrower’s forfeiture of any interest in the property as unduly harsh.”);
Wechsler, Through the Looking Glass: Foreclosure by Sale as De Facto Strict
Foreclosure—An Empirical Study of Mortgage Foreclosure and Subsequent Resale, 70
Cornell L Rev 850, 856 (1985) (“Equity soon recognized the injustice of the forfeiture
inherent in this situation.”).
The same points are true regarding strict foreclosures, which developed along with
the changes in mortgage law described above and, as in the present case, transfers title by
21
because the transaction functioned as an extension of a security interest in the property
rather than a true transfer of the fee—by creating the “equity of redemption,” under which
the mortgagee could redeem the property by paying off the debt after defaulting.49 The
court decree rather than automatically by extinguishment of the condition subsequent or by
foreclosure sale. In strict foreclosure, as under the common-law mortgage or the statutes
at issue here, the homeowner loses his or her equity in the property. Ghent, How Do Case
Law and Statute Differ? Lessons from the Evolution of Mortgage Law, 57 J L & Econ
1085, 1094 (2014) (“Strict foreclosure involved the lender going to an equity court and
asking it to terminate the borrower’s equity of redemption; foreclosure by sale of the
property was not permitted, and any equity the borrower had in the property would be lost
in the foreclosure.”); Tracht, Renegotiation and Secured Credit: Explaining the Equity of
Redemption, 52 Vand L Rev 599, 607 (1999) (“Under strict foreclosure (where foreclosure
vests title in the lender), there will be a forfeiture by the borrower and a windfall to the
lender if the property is worth more than the debt.”); Brabner-Smith, Economic Aspects of
the Deficiency Judgment, 20 Va L Rev 719, 720-721 n 2 (1934) (Strict foreclosure “is a
proceeding in which the decree finds that the mortgagee debt is due and has not been paid,
that title to the property therefore is absolute in the mortgagee, and that the mortgagor is
entirely divested of whatever interest he had in the premises at the time of the execution of
the mortgage. There is no sale and no resulting deficiency or surplus.”).
49
See 1 Coote, A Treatise on the Law of Mortgages (2d ed), pp 19-20 (“[Equity courts]
declared it unreasonable that [the mortgagee] should retain for his own benefit, what was
intended as a mere pledge; and they adjudged that the breach of the condition was in the
nature of a penalty, which ought to be relieved against, and that the mortgagor had an equity
to redeem on payment of principal, interest, and costs . . . .”); Sugarman & Warrington,
Equity of Redemption, p 113 (“Dating from at least the turn of the seventeenth century, the
courts of equity determined that the strict date for repayment was somewhat irrelevant.
Accordingly, the lender’s claim to the property became subject ‘to a right called the equity
of redemption, which arose from the court’s consideration that the real object of the
transaction was the creation of a security for the debt. This entitled the [borrower] to
redeem (or recover the property), even though he had failed to repay by the appointed
time.’ ”) (citation omitted; brackets in original); Waddilove, The “Mendacious” Common-
Law Mortgage, 107 Ky L J 425, 457 (2019) (“The equity of redemption . . . looked to what
it deemed to be underlying substance of the mortgage agreement and gave effect to that
over legal interpretation.”).
The mortgagor’s specific right to redeem property after foreclosure has been
codified in Michigan, and the foreclosure sale purchaser’s deed does not vest until the
22
“equity of redemption” was considered—including by this Court—a property right and
came to represent the homeowner’s interest in the property, known as “equity.”50
redemption period ends. See MCL 600.3240(1) and (2); MCL 600.3236. See also People
v March, 499 Mich. 389, 416-421; 886 NW2d 396 (2016).
50
As described in the Restatement Property, 3d, Mortgages, § 3.1, comment a, the “concept
[of equitable redemption] evolved from simply a late payment rule to connote, in addition,
the mortgagor’s ownership interest in the land prior to the satisfaction of the mortgage.
The term ‘equity’ became and is today the pervasively used term to describe this interest.”
See also Case, 174 Mich. at 681 (“As a general proposition, the equity of redemption
appertains to and goes with the title to the real estate, and is in law the property of the
owner of the fee. It is an interest in land . . . .”); An Introduction to English Legal History,
p 314 (“The equity of redemption had thus become a right inherent in the land . . . . [T]he
great landowner of the seventeenth, eighteenth and nineteenth centuries was commonly in
possession of his land (or some of it) only as the owner of an equity of redemption. The
equity could be bought and sold, settled in tail, and even mortgaged. . . . [I]t had become
an equitable estate[.]”); An Introduction to the History of the Land Law, pp 227-228 (“[T]he
equity of redemption [was] a peculiar form of property which could be dealt with by the
debtor like other forms of equitable property. . . . In the eighteenth century the final
touches were put upon the conception; the equity of redemption is spoken of as an estate
in the land, and the mortgagor is regarded as the owner in equity of the land.”); Turner, The
Equity of Redemption, pp 66-67 (“ ‘An equity of redemption is considered as an estate in
land[.] . . . The person having the equity of redemption is considered as the owner of the
land . . . . An equity of redemption, . . . unforeclosed, is the ownership of the land, or the
real estate in equity[.]’ ”) (citation omitted); 6 Holdsworth, A History of English Law
(1924), p 663 (“The result had been to make the mortgagor’s equity to redeem a right of
property. He had an equitable estate in the land; and, subject to the legal rights of the
mortgagee, was, in equity, regarded as its owner.”); 5 Holdsworth, p 332 (“[I]t became
clear that this equitable right to redeem was in substance an equitable estate in the land
which could be conveyed or settled like any other estate.”); Waddilove, Why the Equity of
Redemption?, in Land and Credit: Mortgages in the Medieval and Early Modern European
Countryside (Briggs & Zuiderduijn eds, 2018), § 5.1, pp 1-2 (“According to the equity of
redemption, a mortgagor remained the true owner of mortgaged property throughout a
mortgage despite lacking legal title; a mortgagee’s interest was mere security for a debt;
and a mortgagor was thus entitled to redeem the property at any time . . . until his or her
equity of redemption was declared foreclosed by a court.”); Sugarman & Warrington,
Equity of Redemption, pp 115-116 (noting the “shift of the equity of redemption from a
‘thing’ to an ‘estate’ in equity, that is, in conceptualizing the equity of redemption as a kind
23
Thereafter, the equity courts “developed the decree of foreclosure,” which a
mortgagee could seek in order to end the mortgagor’s period of equitable redemption; when
foreclosure by sale was permitted, “the mortgagee [took] the money owed to her/him, the
remainder going to the mortgagor.”51 Thus the creation of “equity” led to the homeowner’s
of real property rather than as a kind of chattel property,” and noting further that it was
“characterized . . . as a title in equity” and “was proprietorial”); Mortgages, 32 Yale L J at
236 (noting that chancery “treats the equity of redemption not as a mere right but as an
estate which the mortgagor may deal with in any way consistent with the rights of the
mortgagee in his security”).
Although the terms “equity” and “equity of redemption” now are “interchangeable,”
they were “not equivalent” at common law because the equity of redemption originally
could not be sold. Sabella, When Enough is Too Much: Overcollateralization as a
Fraudulent Conveyance, 9 Cardozo L Rev 773, 780 n 32 (1987). Once it could be
alienated, “the concept changed in meaning to one much closer to today’s notion of
‘equity.’ ” Id. Still, a distinction exists. In discussing the mortgagor’s interest in the
property, one treatise states, “[T]he term ‘equity of redemption’ which had previously and
appropriately been applied to the mortgagor’s right to get back his property after default
was applied somewhat inappropriately to this entirely distinct equitable ownership before
default.” 1 Nelson, Real Estate Finance Law (6th ed), § 1:3. Compare Black’s Law
Dictionary (11th ed) (defining “equity” as “[a]n ownership interest in property”), with id.
(defining “equity of redemption” as “[t]he right of a mortgagor in default to recover
property before a foreclosure sale by paying the principal, interest, and other costs that are
due”). Thus, perhaps it is more accurate to say a redemption right functions to protect a
homeowner’s equity interest. See, e.g., Note, The Big Chill: Applicability of Section
548(a)(2) of the Bankruptcy Code to Noncollusive Foreclosure Sales, 53 Fordham L Rev
813, 817 n 22, 834 (1985) (observing that the equity interest was originally called the
equity of redemption but noting that the “debtor can protect his equity interest in the
property by paying the sale price plus costs,” i.e., exercise the redemption right, and that
the equity of redemption “ordinarily would serve to preserve his equity interest”).
51
Sugarman & Warrington, Equity of Redemption, pp 113-114; see also 2 Dunaway, Law
of Distressed Real Estate (December 2019 update), § 26:29 (noting that any surplus over
the foreclosing mortgagee’s debt is paid to other liens and “[a]ny balance is distributed to
the holder of the equity of redemption”); 5 Holdsworth, p 331 (“About the same period
therefore we get the foreclosure decree . . . .”); Fixing Foreclosure, 36 Yale L & Pol’y Rev
at 319-320 (discussing the transition from strict foreclosure to foreclosure by public
24
right to surplus proceeds from foreclosure sales. Indeed, as stated in Restatement Property,
3d, Mortgages, § 7.4 , comment a, “[W]hen a surplus occurs, it represents what remains of
the equity of redemption and is, as such, a substitute res. The surplus stands in the place
of the foreclosed real estate . . . .”52
auction); How Do Case Law and Statute Differ, 57 J L & Econ at 1094-1095 (discussing
the transition from strict foreclosure to foreclosure by sale, which protected the debtor’s
equity); Through the Looking Glass, 70 Cornell L Rev at 859 (“Foreclosure by sale was
viewed as a logical way of protecting the debtor’s equity in the property . . . .”); The
English Mortgage, p 730 (“Almost as soon as the equity of redemption became established
the mortgagee was given an equitable right of foreclosure[.]”).
52
As the Missouri Court of Appeals stated:
[A] foreclosure sale surplus “retains the character of real estate for the
purpose of determining who is entitled to receive it, and goes to the person
to whom the real estate would have gone but for the conversion.” Roy v. Roy,
233 Ala. 440, 172 So. 253, 254 (1937). Such surplus represents the owner’s
equity in the real estate. Dodson v. Farm & Home Sav. Ass’n, 208 Ga. App.
568, 430 S.E.2d 880, 881 (1993). It stands in place of the foreclosed
property, subject to the same liens and interests that were attached to the land.
Timm v. Dewsnup, 86 P.3d 699, 703 (Utah 2003). Surplus “usually arises
because more land is sold . . . than is necessary to satisfy the mortgage
debt. . . . [T]he money stands for the land and the rights therein are
determined as though the court were dealing with the land itself.” Morris v.
Glaser, 106 N.J. Eq. 585, 151 A. 766, 771 (N.J.Ch.1930) aff’d mem., 110
N.J. Eq. 661, 160 A. 578 (N.J.Err. & App.1932). See also First Fed. Sav. &
Loan Ass’n v. Brown, 78 A.D.2d 119, 434 N.Y.S.2d 306, 310 (1980)
(foreclosure surplus “stands in place of the land for all purposes of
distribution among persons having vested interests or liens upon the land”);
East Atlanta Bank v. Limbert, 191 Ga. 486, 12 S.E.2d 865, 867 (1941)
(quoting Morris)[.] [Grand Teton Mountain Investments, LLC v Beach
Props, LLC, 385 S.W.3d 499, 502-503 (Mo App, 2012).]
See also Nelson, § 7:32 (“The major underlying principle is that the surplus represents the
remnant of the equity of redemption and the security that the foreclosure eliminated.
Consequently, the surplus stands in the place of the foreclosed real estate . . . .”); Tiffany,
§ 1529 (“Any surplus proceeds of sale remaining after the payment of the debt secured by
25
Given this history and caselaw, I would characterize the property right at issue here
as the taxpayer’s equity in the property. This conclusion best fits the development of
ownership rights in property laden with debts or liens. The majority’s belief that a property
right in the surplus proceeds exists apart from the interest in the equity finds no support in
the historical record. Indeed, equity formed in response to practices like those at issue here,
albeit in the private realm, and gives rise to any right in surplus proceeds. It thus constitutes
a disposable property right to the value of land above any liens or other interests in the
property.53 And it is a vested right—at least with regard to an individual who owns
the mortgage are paid to the mortgagor or, if there are subsequent purchasers or
incumbrancers, such surplus proceeds belong to them, in the order of priority in which their
rights against the land could have been asserted. In other words, the proceeds of sale are
substituted for the land itself, and become subject to outstanding liens and claims to the
same extent and in the same order as the land itself was subject thereto.”) (citations
omitted); Nelson & Whitman, Reforming Foreclosure: The Uniform Nonjudicial
Foreclosure Act, 53 Duke L J 1399, 1483 (2004) (“Sometimes a foreclosure sale yields a
surplus amount in excess of what is needed to satisfy the mortgage obligation and the
expenses of sale. In essence, when a surplus results, it represents what remains of the
debtor’s ownership or ‘equity of redemption’ and is conceptually a substitute res.”).
It is true that some courts have found that the surplus proceeds are the property
owner’s general funds rather than the real estate. See In re Schiphof, 192 NC App 696,
702; 666 SE2d 497 (2008) (“This Court stated that, ‘the surplus funds . . . did not constitute
real estate. The surplus funds represented the general funds of the plaintiffs, the owners of
the premises and the grantors in the deed of trust which was foreclosed.’ ”), quoting Smith
v Clerk of Superior Court, 5 NC App 67, 73-74; 168 SE2d 1 (1969). This does not,
however, have any bearing on a homeowner’s entitlement to the proceeds by virtue of his
or her equity in the home. As stated, “ ‘[E]quity’ is defined as ‘the value of a
property * * * above the total of the liens.’ ” Crane, 331 U.S. at 7. Whether that value,
realized in the surplus proceeds after a tax foreclosure, is thought of as representing the
real estate or general funds, it is still a result of the right to equity.
53
Black’s Law Dictionary (11th ed) defines “equity” as “[a]n ownership interest in
property, esp. in a business.” See also Crane, 331 U.S. at 7 (“ ‘[E]quity’ is defined as ‘the
26
property with equity value—because it represents an estate in the land providing immediate
and future benefit.54 It thus fits the general definition of “property” at the time our
Constitution was ratified.55 If more proof were needed that “equity” is routinely considered
the relevant property right in the nondebt value of a house, one need look no further than
divorce proceedings, in which home equity is part of the property split between the
parties.56
Perhaps for these reasons, numerous courts, parties, and commentators who have
addressed similar cases in the tax-foreclosure context discuss the right to a surplus as
related to the homeowner’s equity—and none that I have found (nor any the majority cites)
holds that the right to surplus proceeds is a freestanding property interest independent of
the underlying equity interest.57 The right to equity is, in fact, the very right that plaintiffs
value of a property * * * above the total of the liens.’ ”). Of course, there might be other
liens on the property such that a landowner’s equity is less than the property value minus
what was owed in taxes. It is also true that equity may fluctuate as market values change.
But I see no reason why a fluctuation in equity would affect whether the right is vested.
Though a property owner is not guaranteed that real property will sell for a particular
amount, the owner’s interest still comes from his title and is more than a “mere
expectation.” In re Certified Question, 447 Mich. at 788.
54
See In re Certified Question, 447 Mich. at 788 (“To constitute a vested right, the interest
must be something more than such a mere expectation as may be based upon an anticipated
continuance of the present general laws; it must have become a title, legal or equitable, to
the present or future enjoyment of property . . . .”) (quotation marks and citation omitted).
55
See note 15 of this opinion.
56
See, e.g., Rogner v Rogner, 179 Mich. App. 326; 445 NW2d 232 (1989) (reviewing an
award of equity in the marital home).
57
See Dorce v City of New York, ___ F Supp 3d ___ (SD NY, 2020) (Docket No. 19-cv-
2216) (discussing the plaintiffs’ loss of “equity” in their properties in the context of a
27
takings challenge); Polonsky v Bedford, ___ NH ___; ___ A3d ___ (2020) (Docket No.
2019-0339); slip op at 2, 5 (referring to the excess “equity” owed to the taxpayer and
holding that when a tax deed is issued, a taking occurs “requiring that [the government]
provide just compensation to the former owner when, as here, the equity in the property
exceeds the amount owed”); Automatic Art, LLC v Maricopa Co, unpublished opinion of
the United States District Court for the District of Arizona, issued March 18, 2010 (Case
No. CV 08-1484-PHX-SRB), pp 2, 3, 6 (discussing the statutes and constitutional
challenges to them as affecting the property owner’s equity in the real property); Thomas
Tool Servs, Inc v Croydon, 145 NH 218, 220; 761 A2d 439 (2000) (“Assuming that the
property is worth substantially more than the $370.26 that the defendant paid for it, the
defendant has realized an enormous surplus.”); Syntax, Inc v Hall, 899 S.W.2d 189, 190 n 1
(Tex, 1995) (“The claim for excess proceeds concedes the loss of ownership and simply
seeks a return of the excess value that was received at the sale.”); First NH Bank v
Windham, 138 NH 319, 327; 639 A2d 1089 (1994) (holding that the state constitution
required notice of the tax deeding because, in part, the “tax deeding irreversibly deprives
the owner of any equity in the property,” given that no surplus proceeds were then
available); Anchorage v Thomas, 624 P2d 271, 273 (Alas, 1981) (finding a statutory right
to surplus proceeds and noting “the basic injustice inherent in requiring delinquent
taxpayers to forfeit the total value of their property far in excess of taxes due”); Auburn v
Mandarelli, 320 A2d 22, 32 (Me, 1974) (“In the absence of contrary provision by statute
or constitution, a municipality’s title to property acquired under the tax-lien-mortgage-
foreclosure statute is absolute, and the city or town has no power to part with, nor duty to
account for, any surplus value on any” equitable theory.); Bogie v Barnet, 129 Vt 46, 48,
54; 270 A2d 898 (1970) (finding a taking of the property to the extent of the difference
between the tax sale bid “and the demonstrated far greater value of the property” evidenced
by a later sale); Balthazar v Mari Ltd, 301 F Supp 103, 106 (ND Ill, 1969) (“[T]he Illinois
tax delinquency statutes allow all real estate owners to recover the surplus value of their
land.”), aff’d 396 U.S. 114 (1969); Note, Someone to Lien On: Privatization of Delinquent
Property Tax Liens and Tax Sale Surplus in Massachusetts, 61 BC L Rev 667, 670, 691-
694 (2020) (noting that “[e]normously inequitable outcomes occur as a result [of
Massachusetts’s similar tax-foreclosure law] because property owners can lose all equity
in their home” and describing caselaw as addressing whether the government must return
“surplus equity” left after the foreclosure sale); Note, State Theft in Real Property Tax
Foreclosure Procedures, 54 Real Prop Tr & Est L J 93, 105 (2019) (noting that a surplus-
retention system like ours “destroys property owners’ home equity and leaves them with
nothing”); Bartell, Tax Foreclosures as Fraudulent Transfers—Are Auctions Really
Necessary?, 93 Am Bankr L J 681, 706 (2019) (arguing that owners concerned about the
price obtainable at a tax sale should preemptively “conduct a private sale that may generate
enough proceeds to pay the taxes in full and provide the owner any extant equity”);
Clifford, Massachusetts Has a Problem: The Unconstitutionality of the Tax Deed, 13 U
28
Mass L Rev 274, 286-287 (2018) (discussing caselaw that addresses the proceeds as
“surplus equity”) (citation and quotation marks omitted); Kelly, Jr, Bringing Clarity to Title
Clearing: Tax Foreclosure and Due Process in the Internet Age, 77 U Cin L Rev 63, 72
(2008) (“The vast majority of jurisdictions rely on a combined sale and foreclosure process
to make sure both that the taxes due are paid in full and that any surplus value in the
property is made available to the stakeholders whose interests have been liquidated.”)
(emphasis added).
Courts and parties in Takings Clause challenges to Michigan’s foreclosure system
have focused on the homeowner’s deprivation of equity. See Rafaeli, LLC v Wayne Co,
unpublished opinion of the United States District Court for the Eastern District of
Michigan, issued June 4, 2015 (Case No. 14-13958), p 8 (“Plaintiffs also claim that the
excess equity in their property was taken without just compensation, in violation of the
Takings Clause of the Fifth Amendment to the United States Constitution.”); Petition for
Writ of Certiorari at 14, Wayside Church v Van Buren Co, 138 S. Ct. 380 (2017) (No. 17-
88) (“The property interest at issue here is privately generated and owned equity.”); cf.
Freed v Thomas, unpublished opinion of the United States District Court for the Eastern
District of Michigan, issued November 7, 2018 (Case No. 17-CV-13519), p 2 (“The heart
of plaintiff’s complaint is that this statutory scheme is unconstitutional because it provides
no mechanism for the return to the delinquent taxpayer of the ‘surplus equity’ (i.e., the
difference between the equity and the tax bill) or, in the event that the property is sold for
less than fair market value, for the return to the delinquent taxpayer of the difference
between the sale proceeds and the tax bill.”).
A few cases addressing whether a statute provides for surplus to the homeowner do
not mention “equity,” but these cases are not deciding whether a nonstatutory basis exists
for the property right in surplus proceeds; thus, they do not contradict the regnant
interpretation of “surplus” as stemming from equity. See, e.g., Lake Co Auditor v Burks,
802 NE2d 896 (Ind, 2004) (finding statutory avenues for recovering surplus); Kelly v
Boston, 348 Mass 385; 204 NE2d 123 (1965) (finding no statutory right to surplus). In
addition, a handful of opinions rejecting constitutional challenges to tax-foreclosure
statutes like the one here have not mentioned “equity,” but they did not examine in any
detail the potential sources of the property right at issue. See Miner v Clinton Co, 541 F3d
464, 474-475 (CA 2, 2008) (rejecting a due-process claim because the notices were
adequate and an equal-protection claim because no discrimination occurred); Reinmiller v
Marion Co, unpublished opinion of the United States District Court for the District of
Oregon, issued October 16, 2006 (Case No. CV 05-1926-PK) (rejecting a takings claim
and stating that Oregon law did not provide any property right entitling the homeowner to
the proceeds, but only discussing the relevant tax-foreclosure statutes rather than common
law). In a few cases with more detailed constitutional analyses, surplus or excess proceeds
29
rely on here to support their claim under the Takings Clause.58 One federal district court
provided an insightful discussion on the topic, first summing up the United States Supreme
Court’s caselaw—the same cases the majority here discusses—as “mak[ing] clear that a
Takings Clause violation regarding the retention of equity will not arise when a tax-sale
statute provides an avenue for recovery of the surplus equity.”59 The question in that case
was, as here, “[w]hat if the tax-sale statute does not provide a right to the surplus” or an
are mentioned without regard to the homeowner’s equity; nonetheless, the cases do not
hold that these proceeds are property without regard to equity. See Sheehan v Suffolk Co,
67 NY2d 52, 59, 60; 490 NE2d 523 (1986) (“There is no constitutional prohibition against
such a full forfeiture” of the “surplus.”); Ritter v Ross, 207 Wis 2d 476, 484; 558 NW2d
909 (App, 1996) (“We thus consider whether the Ritters had a property interest in the
excess proceeds of the foreclosure sale . . . .”); Oosterwyk v Milwaukee Co, 31 Wis 2d 513,
517; 143 NW2d 497 (1966) (rejecting an unjust-enrichment claim for surplus proceeds).
58
Plaintiffs’ brief states, “The private property interest at issue in this case is privately
generated and owned equity.” Plaintiffs’ Brief on Appeal (February 13, 2019) at 11. The
majority dismisses this argument, saying that plaintiffs “conflate equity with surplus
proceeds, suggesting that they are one in the same.” Further, the majority criticizes my
analysis as stating both that the equity of redemption represents an owner’s equity and also
acknowledging that the two are distinct. I see nothing inconsistent with noting the fact
that, on one hand, the “equity of redemption” came to represent the homeowner’s interest
in the property, i.e., the equity, but, on the other hand, that there were and are certain
distinctions between the two concepts, such as alienability, see note 50 of this opinion.
The majority goes on to say that it is unnecessary to discuss whether a property right
to equity exists here because the question is whether the former property owner may collect
surplus proceeds. However, it is necessary to begin the analysis with a vested right in the
equity because, as explained above, there is no such thing as a vested right in surplus
proceeds independent of the right to equity. Additionally, for the reasons we discuss below,
even taken on its own terms, the right to surplus proceeds set forth in the majority’s opinion
is evanescent given that it can be so easily taken away.
59
Coleman, 70 F Supp 3d at 80 (emphasis added).
30
“avenue for recover[ing]” it?60 The court continued, “A property interest in equity could
conceivably be created by some other legal source,” including caselaw—although not the
Takings Clause itself.61 Throughout the opinion, the property right was characterized as
“surplus equity.”62
In short, the relevant property right in this case is the taxpayers’ equity interest, not
some contingent right to proceeds if there is a foreclosure sale. Equity has better historical
grounding than any novel and freestanding right to proceeds—indeed, it is the reason
entitlement to proceeds may exist—and is a common enough concept that I cannot
comprehend the majority’s efforts to avoid it.
C. CONSEQUENCES
My difference of opinion with the majority on this point is no small matter.
Characterizing the property right at issue as equity has very real consequences here. For
one thing, the GPTA does not clearly abrogate any of a person’s property rights in their
real estate or in their equity generally. Instead, the GPTA simply allocates the surplus
proceeds after the tax-foreclosure sale. Accordingly, it cannot be said to have abrogated
the common-law right to equity.63
60
Id.
61
Id. at 80-81.
62
See, e.g., id.
63
Defendants have not raised the argument that the Legislature abrogated the common-law
right to equity. See Mich Gun Owners, Inc v Ann Arbor Pub Sch, 502 Mich. 695, 709-710;
918 NW2d 756 (2018) (noting that parties raise the arguments in our adversary system).
Under the regnant interpretive principle noted above, “ ‘legislative amendment of the
31
In addition, the statute contemplates—and indeed, expressly provides for—a
number of scenarios in which there will be no surplus proceeds. For our purposes, the first
key point in the process occurs when the court enters the foreclosure judgment. This must
occur before March 30, and the judgment must become effective on March 31.64 When it
becomes effective, the taxpayer loses his or her redemption rights and absolute title vests
in the government.65 The following day, April 1, the foreclosing governmental unit obtains
the right to possession.66
Afterward, the state has until the first Tuesday in July to buy the property from the
foreclosing governmental unit for the greater of either the minimum bid—which equals the
common law is not lightly presumed,’ ” and the “Legislature ‘should speak in no uncertain
terms’ when it exercises its authority to modify the common law.” Dawe v Dr Reuven Bar-
Levav & Assoc, PC, 485 Mich. 20, 28; 780 NW2d 272 (2010) (citation omitted). Like the
majority’s view that the Legislature cannot abrogate common-law property rights extant
before 1963, this principle raises separation-of-powers concerns as well. See A Matter of
Interpretation, pp 27-28. But it is longstanding, and no party has challenged it here. Under
this canon, it is reasonably apparent that the Legislature left untouched the taxpayer’s
common-law right to equity. Nothing in the statute clearly displaces that right. The same
could not be said, however, for the majority’s separate right to surplus proceeds, which the
Legislature very clearly attempted to extinguish in the GPTA. In any event, the parties’
failure to address this argument means that it should not be resolved in this case.
64
MCL 211.78k(5). These dates are for uncontested cases. The judgment in contested
cases becomes effective 10 days after the hearing, and 21 days after entry of the judgment
the taxpayer loses his or her redemption rights and absolute title vests in the government.
MCL 211.78k(5) and(6). In contested cases, the government obtains the right to possession
22 days after judgment enters. MCL 211.78g(1).
65
MCL 211.78k(5) and(6).
66
MCL 211.78g(1).
32
debt and various additional costs67—or the “fair market value.”68 This protects the
foreclosing unit, which would be certain to recoup the debt and costs if the state exercises
its right to purchase. And under this option the property might sell for a price reflecting
the debt and the equity. But if the state declines, the next series of options ensures that no
surplus will occur. Next, the “city, village, or township” where the property is located can
purchase the property “for a public purpose” at the minimum bid, meaning that no surplus
would result.69 If they pass on the purchase, then the county has the chance to buy it
(without being required to have a “public purpose” for doing so), again for the minimum
bid.70 If any of these last few governmental units—city, village, township, or county—
buys the property and subsequently sells it, any excess proceeds (less additional costs) are
distributed in various funds.71
If the property goes unpurchased after all this, the foreclosing unit holds one or more
auctions from July to November.72 Although the statute prescribes notice requirements, it
allows the foreclosing unit to “adopt procedures governing the conduct of the sale . . . .”73
67
MCL 211.78m(16)(a).
68
MCL 211.78m(1).
69
Id.
70
Id.
71
Id.
72
MCL 211.78m(2).
73
Id.
33
To sell the property, the foreclosing unit must receive at least the “minimum bid.”74 If the
property goes unpurchased after an auction, the city, village, township, or county can buy
it for the minimum bid without needing a public purpose to do so.75 At the final auction,
there is no minimum bid.76 Property that is not purchased is transferred to the city, village,
or township where it is located unless the unit objects, in which case the property goes to
the foreclosing unit.77
In light of this statutory framework, the majority’s focus on the surplus proceeds as
the relevant property, and thus the postsale retention as the taking, produces puzzling
results. Because “a property owner has a claim for a violation of the Takings Clause as
soon as a government takes his property for public use without paying for it,”78 under the
majority’s theory, no constitutional issues occur until the surplus proceeds are retained. It
does not matter that once title has vested in the government without chance of redemption,
the taxpayer’s property—his or her equity—has been taken. Consequently, the majority’s
view of the case would seemingly be that if the property does not sell at auction and is
simply transferred to a governmental unit, the taxpayer is out of luck: no proceeds, let alone
74
Id.
75
MCL 211.78m(3).
76
MCL 211.78m(5).
77
MCL 211.78m(6) and(7).
78
Knick v Scott Twp, 588 US ___, ___; 139 S. Ct. 2162, 2170; 204 L. Ed. 2d 558 (2019).
34
a surplus, have been produced or retained by the government.79 Perhaps worse still,
governmental units have numerous opportunities to purchase the property for the minimum
bid, i.e., for the debt (and costs), and thus obtain it for an amount that will usually be much
less than fair market value. Yet in those cases, too, because no surplus would result, the
majority leaves the taxpayer without a remedy.
The better view, under the law described above, is that the property taken is the
taxpayer’s equity and that this occurs when title vests in the government with no
opportunity for redemption. In that circumstance, if the government retains the property,
the taxpayer would be able to seek compensation for the deprivation of his or her equity.80
If the property is sold, any surplus represents the remaining equity in the property and is
owed as the just compensation due the taxpayer.81 Returning the surplus would usually
satisfy the Takings Clause by “leav[ing the property owner] ‘in as good as position as if
his lands had not been taken,’ ”82 i.e., by leaving the property owner with the representation
of what was taken.
79
Of course, the majority might counter that this is a question for another day because the
properties here were sold. But it is hard to imagine what the majority would do in such a
case besides either denying the takings claim under the theory it adopts here or
reconsidering whether it is based on the taxpayer’s right to the equity in his or her property.
80
See Polonsky, slip op at 5 (noting that the statutory scheme did not require the
government to sell the foreclosed property but that, in those cases, the government has
conflicts with the Takings Clause by failing to pay over the equity).
81
See note 52 of this opinion and accompanying text.
82
Dep’t of Transp v Tomkins, 481 Mich. 184, 198; 749 NW2d 716 (2008) (citation omitted).
35
To elaborate on this last point, awarding the surplus as “just compensation” only
makes sense in light of the underlying principle that the surplus represents the owner’s
equity.83 It is, of course, possible that the surplus might not capture the value of a
taxpayer’s property.84 But the “just compensation” requirement does not require local
governments to impoverish themselves.85 Thus, taxpayers seeking some speculative value
beyond the surplus realized in the tax sale might often lack meritorious claims. It is also
worth noting, in this regard, that the taxpayers would be free to conduct a private sale of
the property during the redemption period prior to title vesting in the government and, by
failing to do so, might be considered to have agreed to the value produced by the tax-
foreclosure sale.86
83
See note 52 of this opinion.
84
See State Theft, 54 Real Prop Tr & Est L J at 126 (noting that limiting the taxpayer to
the surplus might cause him or her to lose some equity but arguing that this result might be
consistent with the “just compensation” requirement).
85
See United States v Commodities Trading Corp, 339 U.S. 121, 123; 70 S. Ct. 547; 94 L. Ed.
707 (1950) (“Fair market value has normally been accepted as a just standard. But when
market value has been too difficult to find, or when its application would result in manifest
injustice to owner or public, courts have fashioned and applied other standards. . . . [T]he
dominant consideration always remains the same: What compensation is ‘just’ both to an
owner whose property is taken and to the public that must pay the bill?”) (citation omitted);
In re State Hwy Comm’r, 249 Mich. 530, 535; 229 N.W. 500 (1930) (“Just compensation
should neither enrich the individual at the expense of the public nor the public at the
expense of the individual.”).
86
See Tax Foreclosures, 93 Am Bankr L J at 706-707 (arguing that courts reviewing
whether foreclosure laws protect the debtor’s “equity” should consider that the debtor’s
“right of redemption provides to the owner of the property the opportunity to realize the
full fair market value of the property” less the taxes owed, and the debtor’s failure to avail
36
On the other hand, by limiting the compensation to the surplus (when one exists),
the majority risks depriving taxpayers of “just compensation.” As demonstrated above, the
statute gives governmental units the option to ensure that there will be no surplus. Under
the majority’s regime, a rational governmental actor is incentivized to buy properties that
have a market value above the minimum bid amount that must be paid or to take other steps
to limit or eliminate surpluses. For example, both the Legislature in constructing the
statutory framework and the foreclosing unit in prescribing sale procedures could design
rules that diminish the probability of obtaining fair market value in the tax-foreclosure sale.
Indeed, while it might be true that most sale prices now do not even cover the taxes owed,
the foreclosing unit would have little incentive to conduct a sale that earns anything more
than the delinquent tax sum.87 Consequently, I would not now rule out the possibility that
“just compensation” might require something greater than the surplus in a particular case,
especially in cases in which the government purchased the property for the minimum bid.
But we have no reason to decide that issue in this case because, although plaintiffs
nominally distinguish equity and surplus, they have offered no argument suggesting that
the tax foreclosures here failed to obtain a fair price for their properties.
themselves of this relief constitutes agreement to the “price obtained by the state
foreclosure process”).
87
The majority seems untroubled by the possibility that what it might have taken away
with one hand—i.e., the Legislature’s authority to prospectively abrogate the supposed
common-law right to surplus proceeds—it has given with the other by defining the right so
that the Legislature can shrink or erase those surplus proceeds.
37
III. CONCLUSION
Although I agree with the majority as to the ultimate disposition of this case, I
disagree with its reasoning. I would not define the constitutional term “property” by merely
citing an example of what the ratifiers might have thought would fall within the meaning
of that term. Instead, I would give the word its ordinary meaning at the time the
Constitution was ratified and then apply that meaning to the case at hand. In addition, I
would examine the relevant property right: the taxpayers’ equity in the real property.
Equity falls within the semantic scope of “property” under our Constitution. And the
Legislature did not purport to abrogate the taxpayer’s equity. Therefore, a taking occurred
when title to plaintiffs’ property was vested in the government without any possibility of
redemption. In this case, I agree with the majority that plaintiffs are owed the surplus
proceeds from the tax-foreclosure sales.
David F. Viviano
38