On Wednesday, PLF heads back to the Supreme Court to continue the fight against home equity theft and protect property owners’ right to just compensation. Pung v. Isabella County began with a disputed tax bill and ended with loss of a treasured family home and $118,000 in equity. Mike Pung was managing the estate of his late nephew, Scott, which included a home Scott purchased in the late 1990s. Even though the family had met all criteria for an exemption from a supplementary tax, a local tax assessor misinterpreted the law and repeatedly denied the property a tax exemption. Each time a court restored the exemption for a given year, the assessor denied it again the next year. After years of this cycle, the County seized the home over a disputed $2,000 tax bill and sold it at auction for $76,000—far below its nearly $200,000 fair market value. The County initially kept all the proceeds. On appeal, a court ordered the County to return the auction surplus proceeds—about $74,000—to satisfy the just compensation requirement in the Fifth Amendment. But just compensation means fair market value, and the auction price did not reflect that. The court below said the auction price conclusively established the amount of just compensation and refused to consider competing evidence. Should just compensation reflect a home’s true value or a government-set fire sale price? And is erasing $118,000 in equity to collect a disputed $2,000 tax debt nonpunitive? The Supreme Court will consider those questions this week. As we anticipate what the Court might say in Wednesday’s oral arguments, it is helpful to look at the oral arguments in PLF’s 2023 home equity theft case, Tyler v. Hennepin County. Tyler v. Hennepin County In Tyler, an elderly grandmother, Geraldine Tyler, had accrued a $2,300 property tax debt on her condo in Hennepin County, Minnesota. After the County started tacking on interest, fees, and other penalties, the bill ballooned to $15,000. The County seized the condo, sold it for $40,000, and kept every penny. The Fifth Amendment is clear: If government takes your property over an unpaid tax bill, they must return the remaining value of the property after the debt is satisfied. Pacific Legal Foundation brought Geraldine’s case to the Supreme Court in the spring of 2023 to argue that the County had violated the Takings Clause. We also argued that the seizure of Geraldine’s home and all its equity was an excessive fine under the Eighth Amendment. During the oral arguments, the County’s attorney Neal Katyal argued that, despite the great disproportion between the tax debt and the value of Geraldine’s condo, the seizure was constitutional. Many of the justices, however, didn’t seem to buy that argument. Justice Elena Kagan pushed back, asking Katyal whether there were ever limits to takings of this nature. If a property owner owes a $5,000 tax debt, she asked, could the County take their $5 million home and keep the surplus? By the County’s logic, the answer was yes. Justice Neil Gorsuch chimed in and asked if the County could also use a modest tax debt of $5 to seize a property worth $1 million. Again, Katyal had to concede that the County would also not consider that an unconstitutional taking. Hennepin County and the lower court both concluded that because state law classified surplus equity as county property, no taking occurred. But constitutional property rights cannot be negated at the state level. The Fourteenth Amendment ensures this. As Chief Justice John Roberts pointed out, “There is an irreducible core of what constitutes property.” He then added, “The Constitution uses a term, ‘property.’ It must have some meaning, and the Framers seem to think it was worth protecting. And I wonder if that is a concept that has carried over into state law.” During the arguments, it seemed like a majority of the justices would agree with PLF’s takings claim. But whether the Court would address the excessive fines claims was hard to say. Justice Sonia Sotomayor plainly asked why the Court would address excessive fines issue at all if the Court agreed with our Takings Clause argument. Erica L. Ross, who appeared for the Justice Department as amicus, agreed with our Takings Clause claim but urged the Court not to address the excessive fines question, arguing that the Court should avoid the Eighth Amendment where the Takings Clause provides a sufficient basis for relief. Justice Gorsuch seemed to find merit in the excessive fines claim, saying that he believed home equity theft could potentially be considered an excessive fine because it is at least partially punitive. He also questioned whether the lower court had used the correct legal test to reject the excessive fines claim. “I don’t see how that lines up under our case law as anything other than a fine, right?” he said. He continued:  We’ve said it doesn’t matter whether it’s criminal versus civil. We’ve said if it’s punitive in part, and deterrence we’ve indicated is often a hallmark of a penalty. So, what—if we were to reach the excessive fines question, why wouldn’t we just at least say that the district court’s reasoning below is wrong? So, what do these arguments mean for Pung? When looking at Tyler, what the Justice didn’t say speaks volumes. What the Tyler arguments could mean for Pung In Tyler, the Court unanimously supported our Fifth Amendment claim. But it ultimately chose not to touch on the excessive fines issue. The Court also did not address how just compensation should be calculated when property is seized to satisfy tax debts, because that calculation issue was not at play in Tyler. That question is, however, front and center in Pung. Hopefully, the justices will reject the lower court’s conclusion that an auction price is the categorical, conclusive measure of just compensation and agree with PLF that courts must consider other evidence, such as assessed value, and appraisals to discern the fair market value owed as just compensation. As for the excessive fines question, Justice Gorsuch seemed at least open to the idea of addressing the Eighth Amendment claim in Tyler. And it could be argued that the Eighth Amendment claims in Pung are even stronger. Erasing $118,000 of equity—50 times the amount allegedly due—is both grossly disproportionate and punitive. Until the latter part of the 20th century, the Court rarely had the opportunity to meaningfully address the issue of excessive fines. If they do choose to touch on it in Pung, it could add another layer of protection against home equity theft that was missing from Tyler. While we can’t know for certain what will happen on Wednesday, PLF is ready and excited to support Mike Pung in his fight and move one step closer to ending home equity theft for good. The post What can we expect as <em>Pung</em> heads to SCOTUS? <em>Tyler’s</em> oral arguments offer clues appeared first on Pacific Legal Foundation.

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