James W. Pfister: 'Takings clause' and state equity theft
In the recently decided case of Tyler v. Hennepin County, Minnesota, May 25, the Supreme Court halted the practice of some states, including Michigan, of taking the “equity” of prior owners whose property was sold by the state because of delinquent property taxes. The state would keep the excess, or “over-plus,” for itself of the proceeds of the sale after the delinquent taxes, along with interest and penalties, and other expenses of the sale, were paid. The prior owner would get nothing.
In the Tyler case, the property owner, Geraldine Tyler, was a 94-year-old woman who lived in a senior community but owned a condominium that had accumulated about $15,000 in unpaid property taxes, interest and penalties. The county seized the condo under state law for delinquent taxes and sold it for $40,000, keeping the $25,000 excess for itself. Tyler sued the county in federal district court claiming a violation of the “Takings Clause” of the Fifth Amendment: “private property (shall not) be taken for public use without just compensation.” The Fifth Amendment was made applicable to the states through the Due Process Clause of the 14th Amendment, known as the “incorporation doctrine.”
The Supreme Court found a violation of the said Takings Clause. The county had the power to sell the home to recover unpaid property taxes, but “it could not use the toehold of the tax debt to confiscate more property than was due.” The court stated that Tyler “has a claim under the Takings Clause and is entitled to just compensation. “
In reaching its conclusion, the court went back to basic principles in our law. It cited the Magna Carta (1215) for the proposition that once the government interest was satisfied, the remainder would go to the owner or to his estate. Parliament made this part of the law. This principle was also found in Blackstone’s Commentaries on Law of England published at the time of our Founding Fathers in the 18th century. John Marshall in a Supreme Court case in 1808 stated this principle. The court pointed out that most states today and the federal government “require that the excess value be returned to the taxpayer.”
Also significant was the fact that in other contexts Minnesota law required the over-plus be paid to the prior owner: a private creditor or bank foreclosures, or income tax seizures. The court stated: “Minnesota may not extinguish a property interest that it recognizes everywhere else to avoid paying just compensation when it is the one doing the taking…” The court concluded that the taxpayer, “must render unto Caesar what is Caesar’s, but no more.”
It is important to note that this case challenges the Erie Doctrine, based on the case on Erie Railroad Co. v. Tompkins (1938). This doctrine stated that when state subjects are concerned, federal courts should use state law and not develop a federal common law on state subjects, like property law. But here, the Court goes beyond state law to use principles of traditional English and American law. The court said that state law “cannot be the only source … ’[t]he Takings Clause would be a dead letter if a state could simply exclude from its definition of property any interest that the state wished to take’ (citing Hall v. Meister). So we also look at ‘traditional property law principles,’ plus historical practice and this Court’s precedents.”
Justice was done in this case by moving beyond the law of property of a state. A few months earlier on Oct. 13, 2022, the 6th Circuit (circuit courts are just below the Supreme Court) dealt with a Michigan case involving a taking by Oakland County: Hall v. Meisner. There, a $300,000 home was taken to satisfy a $22,262 tax debt and the over-plus kept. The 6th Circuit Court wrote: “…the Michigan statute is not only self-dealing: it is also an aberration of some 300 years of decisions by English and American courts … The government may not decline to recognize long-established interests in property as a device to take them.” The Supreme Court followed the 6th Circuit approach.
Are we returning to a federal common law to protect people from an unjust state law?
James W. Pfister, J.D. University of Toledo, Ph.D. University of Michigan (political science), retired after 46 years in the Political Science Department at Eastern Michigan University. He lives at Devils Lake and can be reached at jpfister@emich.edu.
This article originally appeared on The Daily Telegram: James Pfister: 'Takings clause' and state equity theft
