The Supreme Court issued a unanimous ruling in favor of a 94-year old Minnesota woman whose condominium was seized by the county for $15,000 in unpaid real estate taxes, interest and penalties, and sold for $40,000 without turning over the remainder to the taxpayer.
In the decision, handed down on May 25, the justices ruled for Geraldine Tyler after authorities in Hennepin County, Minnesota, seized her Minneapolis condo and sold it.
Tyler filed suit, alleging the county had unconstitutionally retained the excess value of her home above her tax debt in violation of the takings clause of the Fifth Amendment and the excessive fines clause of the Eighth Amendment, the justices noted.
The District Court dismissed the suit for failure to state a claim, and the Eighth Circuit Court of Appeals court affirmed that dismissal. However, the case was appealed to the Supreme Court, which held a hearing on April 26 (see story). Only about a month later, the justices on the high court handed down their unanimous decision in favor of Tyler, written by Chief Justice John Roberts.
“Tyler plausibly alleges that Hennepin County’s retention of the excess value of her home above her tax debt violated the Takings Clause,” he wrote. “The County illegally appropriated the $25,000 surplus constitutes a classic pocketbook injury sufficient to give her standing. … Even if there are debts on her home, as the County claims, Tyler still plausibly alleges a financial harm, for the County has kept $25,000 that she could have used to reduce her personal liability for those debts.”
He noted that the takings clause says “private property [shall not] be taken for public use, without just compensation,” adding that whether the remaining value from a tax sale is property protected under the takings clause depends on state law, “traditional property law principles,” historical practice, and the court’s precedents.
He contrasted that with precedents going back to the Magna Carta and cases in New York and other jurisdictions.
“Minnesota’s scheme, in comparison, provides no opportunity for the taxpayer to recover the excess value from the state,” said Roberts’ decision. “Significantly, Minnesota law itself recognizes in many other contexts that a property owner is entitled to the surplus in excess of her debt. If a bank forecloses on a mortgaged property, state law entitles the homeowner to the surplus from the sale. And in collecting past due taxes on income or personal property, Minnesota protects the taxpayer’s right to surplus. Minnesota may not extinguish a property interest that it recognizes everywhere else to avoid paying just compensation when the state does the taking.”
The court rejected the county’s argument that Tyler had no property interest in the surplus because she constructively abandoned her home by failing to pay her taxes. Abandonment requires the “surrender or relinquishment or disclaimer of” all rights in the property, he noted, referring to another local case, Rowe v. Minneapolis, pointing out that “Minnesota’s forfeiture law is not concerned about the taxpayer’s use or abandonment of the property, only her failure to pay taxes.”