Justices heard arguments in a dispute over whether a homeowner is entitled to the full market value of a property seized and sold by a county to satisfy unpaid taxes.
By yourNEWS Media Newsroom
A property tax foreclosure dispute out of Michigan has reached the U.S. Supreme Court, where justices are considering whether a county violated constitutional protections when it sold a home to recover a relatively small tax debt and kept the proceeds from the sale.
Marc Pung, whose parents’ home in Isabella County, Michigan, was seized and auctioned after a property tax dispute, is asking the nation’s highest court to recognize what he says is the loss of the home’s equity after the government sold it at a steep discount. His attorneys presented arguments before the Supreme Court on Feb. 25 in a case that could influence how states and local governments handle tax-delinquent properties across the country, as detailed in reporting by Newsmax.
The dispute stems from Pung’s inheritance of his parents’ home following their deaths. When the property was originally purchased, Pung’s parents qualified for a tax exemption. After taking ownership of the property, Pung believed that exemption remained in effect.
Isabella County officials determined otherwise and issued a tax bill exceeding $2,000. Pung maintained the assessment was incorrect and challenged the charge through the state’s tax review process.
According to court records, both a Michigan tax tribunal and an administrative law judge sided with Pung in earlier proceedings related to the dispute. Despite those decisions, the county moved forward with foreclosure proceedings tied to the alleged unpaid tax debt.
The property was ultimately sold at public auction for $76,000, significantly below its assessed value of approximately $194,000. The county retained the full proceeds from the sale.
Pung’s uncle, Timothy Pung, later filed a federal lawsuit against Isabella County in the U.S. District Court for the Western District of Michigan. The lawsuit argued that the government violated constitutional protections under both the Fifth Amendment’s Takings Clause and the Eighth Amendment’s Excessive Fines Clause.
The complaint contended that Pung should have received the value of the home after subtracting the outstanding tax debt, rather than losing the entire property and its equity through the foreclosure sale.
Attorneys for Pung argued that because the county initiated the forced sale to recover a relatively small debt, it should be responsible for compensating him for the difference between the tax owed and the property’s market value.
Isabella County defended the foreclosure process by pointing to long-standing legal procedures used by governments to collect unpaid property taxes. Officials argued that tax foreclosure auctions have existed for centuries and remain a fundamental enforcement mechanism for local tax systems.
The county further contended that the Fifth Amendment’s Takings Clause requires “just compensation” for property taken by the government but does not specifically require payment based on fair market value in every context.
The federal district court initially ruled in favor of Pung, finding that the county was liable under the Takings Clause. However, the court did not determine the amount of compensation owed and transferred the issue to the U.S. District Court for the Eastern District of Michigan.
That court concluded Pung was entitled only to the surplus generated by the auction sale price rather than the property’s full market value.
The decision was later upheld by the U.S. Court of Appeals for the Sixth Circuit, which ruled that the auction price represented the most accurate measure of the property’s value in the context of a foreclosure sale.
Pung also argued that the county’s actions violated the Excessive Fines Clause of the Eighth Amendment. The Sixth Circuit rejected that claim as well.
Before the Supreme Court, Pung’s legal team is again pressing the argument that the county imposed an excessive financial penalty when it seized a home valued at nearly $194,000 to recover a tax debt of just over $2,000. According to the argument presented to the court, the difference between the value of the property and the amount paid to Pung amounted to an economic sanction more than fifty times larger than the original tax bill.
Legal scholars have also examined the case’s potential implications. Matt Charles and Sam Schoenberg, writing for Cornell Law School’s Legal Information Institute, noted that several conditions surrounding tax foreclosure auctions could artificially reduce the final sale price. These factors include restrictions preventing prospective buyers from inspecting properties and the absence of financing options for bidders, which may limit competition at auctions.
The case has attracted numerous amicus briefs from organizations supporting both sides of the dispute.
The National Tax Lien Association argued in its filing that Pung’s claim to the equity in the property is inconsistent with long-standing interpretations of the Takings Clause.
“Pung is contradicted by more than 100 years of ‘Takings Clause’ and compensatory damages jurisprudence,” the association wrote in its brief. “Pung, due to his own wrongful failure to pay taxes, was not the owner when the county sold the property.
“He is therefore not entitled to any increased value from the date he forfeited ownership of it and the resale date. Neither the tax lien system nor the Constitution are mechanisms to manipulate for personal profit at other citizens’ expense.”
The Wisconsin Association of Counties also filed a brief supporting Isabella County, arguing that requiring governments to compensate property owners based on market value would undermine the tax foreclosure system used by municipalities nationwide.
The group wrote that defining “just compensation” as the full market value of tax-foreclosed property could severely limit local governments’ ability to recover unpaid taxes.
“Adopting petitioner’s proposed rule — that a taking occurs at the time a government takes title to a tax-foreclosed property and that the just compensation owed is the fair market value of the property — would effectively eliminate the ability of local governments to use in [property] foreclosures to obtain payment of taxes when taxpayers refuse to pay what is owed,” the association said.
The Cato Institute submitted a brief supporting Pung, arguing that the Sixth Circuit’s ruling could allow governments to take property without paying adequate compensation.
“At its heart, this is a simple case,” the organization wrote. “The Takings Clause of the Fifth Amendment requires payment of ‘just compensation’ whenever the government takes ‘private property’ for ‘public use.’ In this case, the government undeniably took the property of the Pung estate and paid far less than just compensation for it.”
Legal analysts have suggested the outcome remains uncertain. Ronald Mann, writing for SCOTUSblog, said the arguments presented in the case suggest the justices may be reluctant to overturn the lower court’s ruling.
“I think Pung will have a difficult time persuading the justices to side with him,” Mann said.
The Supreme Court is expected to issue its decision in the case, Pung v. Isabella County, later this summer.
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