WASHINGTON (CN) — The Supreme Court seemed to have sticker shock Wednesday as the justices considered whether a Michigan foreclosure dispute could ripple through tax sales across the nation.

“I’m just curious how an erroneously applied, it seems, $2,000 tax bill led to taking someone’s home — a sale for a third of what it’s worth — and then very promptly the whole value was secured again by the person who collected it out of the foreclosure,” Justice Neil Gorsuch, a Donald Trump appointee, said. “It’s a striking set of facts. How did it happen?”

In 1991, Timothy Pung purchased a three-bedroom, 3,000-square-foot house in Isabella County, Michigan, for $125,000. He applied for and received a state property tax credit exempting owners from paying a local tax on primary residences.

Nearly two decades later, an assessor retroactively revoked that exemption for three years because Pung’s estate didn’t resubmit an affidavit that the home was a primary residence. Pung died in 2005, but his wife and children continued to live in the house.

Michael Pung, the representative of Timothy’s estate, challenged the revocation. A tax tribunal reversed the denial, but the assessor refused to apply the tax credit for the property for 2010 and 2011. The Pungs refused to pay the extra taxes arising from the denial.

Despite an administrative law judge’s decision reversing the 2010-2011 tax credit denials, the assessor again revoked the Pungs tax credit for the 2012 tax year. The Pungs say they never received a revised bill.

The assessor reported the property as delinquent, leading the county treasurer to begin foreclosure proceedings. After an extended court fight, Isabella County obtained a final foreclosure judgment on Pung’s property in 2018.

To satisfy the $2,242 tax debt, Isabella County sold the Pung home for $76,008 at auction. But the Pungs said the fair market value of the house was $194,400. The auction winner soon confirmed this claim, selling the property for $195,000.

Pung sued the county, claiming it violated his Fifth and Eighth Amendment rights. A lower court rejected the excessive fines claim, but upheld Pung’s takings claim under the Supreme Court’s 2023 ruling, Tyler v. Hennepin County .

In Tyler , the court held that a Minnesota county violated the rights of a 94-year-old woman when it took her property that was worth over double the tax debt she owed. At the Supreme Court on Wednesday, Pung asked the justices to go further, arguing that the takings clause requires just compensation in the form of fair market value.

The Supreme Court appeared befuddled by the circumstances leading up to the case before them.

“Is this always how the county does it?” Justice Amy Coney Barrett, a Trump appointee, asked. “I mean, if the tax bill were 100 bucks, you would still take a house?”

Yes, an attorney for the county replied, stipulating that very small tax bills are satisfied by properties that also have lower assessed values.

Justice Sonia Sotomayor, a Barack Obama appointee, questioned how no one else in the county thought the Pungs’ case warranted a second look.

“I find it strange here that every other tax year was paid,” Sotomayor said. “Don’t you think by the time of the sale, that the county would have said, wait a minute, every other tax bill has been paid; something went awry here?”

Despite their confusion over the Pungs’ case, the justices seemed disinterested in a broad ruling equating just compensation under the Fifth Amendment to fair market value.

“Give me a holding from a court in our 250-year history where we have said that the measure of damages on a tax foreclosure is fair market value, not the auction price,” Sotomayor said.

Justice Ketanji Brown Jackson, a Joe Biden appointee, worried that Pung’s argument would turn the government into a real estate agent with a fiduciary duty to maximize the value of his asset.

But the justices appeared likely to remand the case, giving the Pungs another chance to recoup their losses.

“We can’t affirm because none of these arguments about history were developed in the Sixth Circuit,” Gorsuch said. “They just went off on the idea that a foreclosure sale is automatically good enough.”

Miriam Becker-Cohen, an attorney with the Constitutional Accountability Center, said the justices should create a framework for how the case should proceed.

“This case presents an opportunity for the Supreme Court to set the record straight on the proper legal analysis for what constitutes a fine within the meaning of the Eighth Amendment without even reaching the question of whether the scheme at issue here is in fact a fine,” Becker-Cohen said following the argument. “It should do so.”