Rule of Law

County That Kept Tax Sale Surplus Must Face ‘Takings’ Challenge, Justices Say

“Our precedents have … recognized the principle that a taxpayer is entitled to the surplus in excess of the debt owed,” wrote Chief Justice John Roberts Jr.

A unanimous U.S. Supreme Court ruled Thursday that a former homeowner has standing under the U.S. Constitution to sue the government when it takes her property for unpaid taxes, sells it and then keeps the windfall in excess of the taxes owed.

In its 9-0 decision, the court sided with a 94-year-old woman in a dispute over money taken from the sale of her condo by a Minnesota county.

The cash was linked to the sale of Geraldine Tyler’s home after she’d accumulated about $15,000 in unpaid real estate taxes, but it was the extra $25,000 the county made in excess from the unit’s sale that led to the suit being filed.

The high court agreed with Tyler that the county’s retention of the extra funds violated the U.S.  Constitution’s takings clause.

“Our precedents have … recognized the principle that a taxpayer is entitled to the surplus in excess of the debt owed,” Chief Justice John Roberts Jr. wrote for the court. “The taxpayer must render unto Caesar what is Caesar’s, but no more.”

Roberts found wanting Hennepin County’s claim that Tyler could have sold her house to pay off her debt and keep the excess funds.

“Requiring a taxpayer to sell her house to avoid a taking is not the same as providing her an opportunity to recover the excess value of her house once the State has sold it,” Roberts wrote.

Justice Neil Gorsuch, in a concurring opinion joined by Justice Ketanji Brown Jackson, said the county overreached by essentially penalizing Tyler by keeping the sale’s profits.

“Economic penalties imposed to deter willful noncompliance with the law are fines by any other name,” Gorsuch wrote. “And the Constitution has something to say about them: They cannot be excessive.”

Pacific Legal Foundation attorney Christina Marie Martin, who represented Tyler, praised the court’s ruling.

“This decision affirms that property rights are fundamental and don’t depend solely on state law,” Martin said in a statement. “The court’s ruling makes clear that home equity theft is not only unjust, but unconstitutional.”

The opinion was also hailed by the progressive-leaning Constitutional Accountability Center.

CAC appellate Counsel Miriam Becker-Cohen said the decision, and the concurrence, should make courts think twice about okaying governmental collections that could run up against the Constitution’s Excessive Fines Clause, an issue the court did not address because it resolved the case under the Takings Clause.

“The Excessive Fines Clause applies to ‘any’ statutory scheme that serves in part to punish,” Becker-Cohen said. “This point is supported not just by a clear line of Supreme Court precedents—cases cited in our brief and that Justice Gorsuch drew upon in his concurrence—but also by the history of the Excessive Fines Clause, dating all the way back to Magna Carta.”

The outcome of the dispute was not a surprise for those who watched its oral argument late last month.

Justice Brett Kavanaugh was among those who quizzed Hogan Lovells partner Neal Katyal, who argued on behalf of the county, asking, “Why would we read the Constitution to disfavor real property?”

“That seems counterintuitive,” Kavanaugh pressed.

Roberts expressed concerns about land rights being “essential to the preservation of liberty.”

Notably the hearing was Katyal’s 50th oral argument before the high court.

Attempts to reach him for comment Thursday were not immediately returned.

The Supreme Court rendered its decision in Tyler v. Hennepin County, Minnesota.

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