Supreme Court appears skeptical of Michigan family's foreclosure case

The Pung’s never paid the taxes on the home and the local government sold it in a foreclosure auction for $76,000. Lawyers for the family argued the sale price of the home indicated the government imposed an unconstitutional excessive fine on the family over the unpaid tax.

The Pung family’s lawyers said the government should have sold the house for its fair market value, which was later sold for $195,000.

Several justices on the court argued that the family should have paid the taxes to avoid the home’s foreclosure. Justice Ketanji Brown Jackson said it would be unfair to American taxpayers if the government had to pay the difference between sale of the home and its fair market value.

“It seems like real unfairness to the American people that we are paying you because you didn’t pay your taxes,” Jackson said.

The justices also argued that a house would not be sold for its fair market value in the circumstances of a tax foreclosure.

Justice Sonia Sotomayor flatly disagreed with the claim that just compensation under the Fifth Amendment requires property to be sold for fair market value. She argued that there is no prior judicial evidence that points to fair market value as a determining factor.

Justice Samuel Alito pointed out that the government was required to notify the family of their procedural steps to resolve the tax issue. Therefore, he said, it did not make sense as to why they didn’t pay. He also cautioned against the court imposing in tax law proceedings.

“If we set out all these sorts of rules for these tax sales, how many years or cases will it take to flesh out all of these details?” Alito asked.

While several justices appeared skeptical of the Pung's claims, they also did not appear to fully support the government’s aggressive tax bill pursuit.

Justice Amy Coney Barrett questioned whether a property owner would be liable for foreclosure if they owed $100 debt in taxes. Lawyers for Isabella County, Michigan, argued that the equity of the house had gone down after it was bought.

“States have used the foreclosure process to recover unpaid and delinquent property taxes,” said Matthew Nelson, a lawyer for Isabella County.

The justices pointed out the apparent fair market value of the home based on its $194,000 sale to a private owner after the government foreclosed on the property.

Justice Neil Gorsuch contested the government’s claim that foreclosure of the house was an appropriate solution to recover property taxes.

“I’m just curious how an erroneously applied tax bill led to taking someone’s home for a third of what it’s worth,” Gorsuch said.

The case builds from Tyler v. Hennepin County, where the U.S. Supreme Court ruled unanimously against a Minnesota county for seizing a 94-year-old woman's home due to her $15,000 tax debt. The county kept the $25,000 profit from the sale, in violation of the takings clause, according to the high court.

Philip Ellison, a lawyer for the Pung family, said they are disappointed to lose the house but hope to find justice in recovery of their assets.

“The Pung family is devastated by the loss of this family home and what they want is the justice that hopefully the takings clause [of the Fifth Amendment] guarantees,” Ellison said.

Justices on the court are expected to issue a decision in the case by July.