Justices Hint Homeowner Wants Too Much Tax Sale Compensation (1)

Several US Supreme Court justices appeared wary Wednesday of a former Michigan homeowner’s argument that just compensation after a tax sale should be based on the property’s fair market value.

“I don’t understand why your argument doesn’t kind of turn the government into Mr. Pung’s real estate agent with some sort of fiduciary duty to maximize the value of his asset” when he’s in this situation because he didn’t pay his taxes, Justice Ketanji Brown Jackson asked Philip Ellison of Outside Legal Counsel PLC, the attorney for the now-deceased homeowner’s estate.

“The government’s only real interest in this is covering its tax liability,” she said during oral arguments.

Justice Amy Coney Barrett acknowledged the apparent unfairness in the underlying facts—calling the tax assessor “even worse” than Inspector Javert from Les Misérables. But she said she struggled “to see how it fits into the takings framework” when none of the high court’s cases say that just compensation requires the government to pay fair market value rather than the surplus from a tax sale after the debt is satisfied.

The case gives the court the opportunity to put some flesh on the bones of its unanimous 2023 ruling in Tyler v. Hennepin County, which held that the takings clause requires governments to pay the former owner all surplus proceeds after a tax sale.

No On-Point Precedent

Timothy Pung’s estate owed $2,242 in back taxes to Isabella County, Mich., which sold the home at auction for $76,008 after determining that the principal residence exemption had expired at Timothy’s death. The county eventually returned the proceeds, minus the tax debt, to the estate after Tyler was decided.

Pung’s family argued that just compensation was actually more than $190,000, based upon the property’s fair market value. The winning bidder at the tax auction later sold the home for $195,000.

The US Court of Appeals for the Sixth Circuit disagreed, holding that the tax sale price governs what constitutes just compensation, even if the auction wasn’t designed to maximize equity recovery for the former owner. The court also rejected the family’s claim that the forced forfeiture of equity they held in the property is an excessive fine barred by the Eighth Amendment to the US Constitution.

Justice Sonia Sotomayor pushed Ellison to point to precedent supporting the family’s position. “Give me a holding from the 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,” she said.

Ellison acknowledged that there isn’t a decision exactly on point, but said the court has used market value in parallel circumstances like mortgage foreclosures.

Sotomayor cut him off: “An auction is a different, forced sale, and so it will yield a different measure.”

Justice Samuel A. Alito Jr. said the family’s position puts a large burden on governments, which have to maintain an inventory of unoccupied houses and make sure they are insured and aren’t vandalized.

He also expressed concern that an opinion laying out rules to make tax sales fairer would open a can of worms, leading to a flood of cases “to flesh out all of these details without any historical support.”

Dubious Strategy

Although the justices didn’t seem likely to adopt the family’s position, several had a problem with the county’s decision to pursue this case so aggressively.

“I know this is a bit of sideshow, for which I apologize,” Justice Neil M. Gorsuch said before asking a series of questions about why this case made it all the way to the Supreme Court. Why didn’t someone in the government stop to say: “Hey, wait a minute. What are we doing over a $2,000 tax bill?” he said.

Matthew Nelson of Warner Norcross & Judd LLP, arguing for the county, acknowledged a “couple of wrinkles” in the case’s history, including overlapping jurisdiction between the township and the county. But the homeowners didn’t take full advantage of several opportunities to argue that the tax wasn’t properly assessed, he said.

Frederick Liu, assistant to the US Solicitor General, argued in support of the federal government’s position that the auction price represents just compensation. The family’s position “would spell the end of tax sales in America,” which harms responsible taxpayers who would have to make up the shortfall, he said.

The Pacific Legal Foundation also represents the Pungs.

The case is Pung v. Isabella Cnty., U.S., No. 25-95, oral arguments held 2/25/26.