States’ Forfeiture Rules Are on the Line in Supreme Court Case

The Supreme Court’s upcoming arguments in Tyler v. Hennepin County will examine whether the government violates the Constitution by confiscating a home to satisfy a property tax debt, when the home is worth more than what the owner owes and the government keeps the surplus value.

The majority’s decision could have far-reaching consequences for tax forfeiture throughout the country.

Although the petitioner, 94-year-old Geraldine Tyler, who owned and lived in a condo in Minneapolis, doesn’t dispute the county’s right to take her condo to cover her tax debt, she claims it violated the Fifth Amendment by “taking” her surplus without compensation. She also claims the confiscation was effectively a punishment for failing to pay her property tax on time, amounting to an excessive fine barred by the Eighth Amendment.

A ruling for Tyler likely would invalidate—or at least call into question—at least 13 other states’ tax forfeiture laws. Tyler claims these states have unconstitutional tax forfeiture laws like Minnesota’s law. And the county claims Tyler’s theory would invalidate 25 states’ tax forfeiture laws if adopted.

Besides invalidating state laws, ruling for Tyler may create administrative and practical problems that could grind tax forfeiture to a halt. Under Tyler’s theory, the taking occurs at the moment the government takes the title, which in some states (such as Minnesota) occurs before any sale. Ruling for Tyler in theory would require those governments to pay the former owner before selling the property. It also may expose local governments to litigation over whether they did enough to maximize properties’ sale prices.

On the other hand, ruling for the county may encourage other states to switch to Minnesota’s version of tax forfeiture—a process Tyler claims is punitive and harms vulnerable property owners. Tyler argues that Minnesota’s rule effectively allows the government to confiscate entire properties of any size for even the most minimal tax debt, encouraging what she calls governmental equity theft.

In 2010, Tyler moved to senior living and stopped paying property taxes on her condo. Minnesota law allowed Tyler five years to pay off her tax debt by selling her property or through other means. But after the five-year period, Minnesota law, like the law of several other states, allowed Hennepin County to take absolute title to Tyler’s condo—even though the value of the condo exceeded the tax debt. The county sold the title to Tyler’s condo at auction for $40,000 and kept the $25,000 surplus from what she owed.

Sometimes, the Supreme Court has unified in takings cases, such as the unanimous decision in Lingle v. Chevron U.S.A. Inc. The Pacific Legal Foundation, which represents Tyler, appears to have chosen her case as a vehicle to appeal to both sides.

When it comes to questions of regulatory takings, though, the Supreme Court’s recent decisions have often split along ideological lines. The conservative justices often take a more expansive view of a property owner’s rights and advocate for rigid and clear rules to protect those rights—such as in Palazzolo v. Rhode Island and Knick v. Twp. of Scott. The liberal justices often support more a flexible approach to takings issues—such as in Murr v. Wisconsin.

Both parties in the case claim that English and American historical treatment of forfeitures and redemptions support their position. According to Tyler, English and American courts and state governments have steadily limited the rights of mortgagees and governments to effect strict foreclosure, the practice of confiscating an entire property for non-payment of a mortgage or property debt, even where the debt is a fraction of the property’s value.

The county disputes that record, however, and argues that the Supreme Court endorsed government forfeiture in Nelson v. City of New York as long as the debtor has notice and a meaningful opportunity to pay off the debt—which Tyler did.

The case is:Tyler v. Hennepin Cnty., U.S., No. 21-166, oral arguments 4/26/23

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Steven Wells is a partner at Dorsey & Whitney and a trial and appellate lawyer with over 38 years of experience. He has strategized, briefed, argued, and won appeals in state and federal courts throughout the country, including the US Supreme Court.

Nick Bullard, a partner at Dorsey & Whitney, represents clients in federal and state appellate courts across the country. Before private practice, he clerked for Judge James B. Loken of the US Court of Appeals for the Eighth Circuit.

The authors are counsel to Notre Dame Law Professor James J. Kelly Jr., who filed a brief in support of Hennepin County.

We’d love to hear your smart, original take: Write for us.