The U.S. Supreme Court reversed court rulings in which local governments seized two homes over unpaid tax debts and kept sale proceeds that far exceeded the tax owed.
Critics call the practice “home equity theft.”
The nation’s highest court did not explain why it was issuing the orders. No justices dissented.
In that decision, the U.S. Supreme Court ruled that a Minnesota county wronged a 94-year-old grandmother when it forced the sale of her condominium over an unpaid tax debt and kept the sale proceeds that far exceeded the tax she owed.
Geraldine Tyler owned a modest one-bedroom condominium in Hennepin County, but after she was harassed and frightened near her home, she moved to a new apartment in a safer neighborhood. The rent on her new apartment stretched her resources and she fell into arrears on her condo’s property tax bills, accumulating about $2,300 in taxes owed, along with $12,700 in penalties, interest, and costs.
The county seized Tyler’s condo, valued at $93,000, and sold it for just $40,000. Instead of keeping the $15,000 it was owed, the county retained the full $40,000, amounting to a windfall of $25,000.
Tyler sued, arguing that the government violated the Takings Clause of the Fifth Amendment by seizing property in excess of the debt. Her lawsuit was rejected by the courts, including the U.S. Court of Appeals for the 8th Circuit, which found that the legal forfeiture of the property extinguished the owner’s property interest.
But the county went too far in keeping the windfall, the U.S. Supreme Court held.
The principle that a government is not allowed to take from a taxpayer more than she owes is based in English law and goes back at least as far as the Magna Carta of 1215. And Supreme Court precedents have long recognized that a taxpayer is entitled to the surplus in excess of the debt owed, the court stated at the time.
“The Takings Clause ‘was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole,’” Chief Justice John Roberts wrote for the court.
“A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed.”
On June 5, the U.S. Supreme Court simultaneously granted the petitions of Kevin and Terry Fair and Sandra Nieveen seeking review while skipping over the oral argument phase when the merits of the case would have been considered.
Some lawyers call this process GVR, which stands for grant, vacate, and remand.
Critics say this process is part of the so-called shadow docket, which they say lacks transparency.
In Fair v. Continental Resources (court file 22-160), Kevin and Terry Fair’s $60,000 home was taken by Scotts Bluff County, Nebraska, and Continental Resources for a $5,200 tax debt, according to the Fairs’ petition.
Under the state’s tax foreclosure statute, the county extinguished the couple’s interest in the home by conveying full title to Continental without holding an auction and without any opportunity for the couple to recover their equity.
The Fairs’ appeal to the Supreme Court of Nebraska was denied in March 2022.
In the other case, Nieveen v. Tax 106 (court file 22-237), Sandra Nieveen’s “$62,000 home was taken because she failed to pay a $3,800 debt, a punitive confiscation of property worth sixteen times the amount owed.”
The property was taken by Lancaster County, Nebraska, and a business called Tax 106.
“The beneficiary of Nieveen’s home equity beyond the tax debt and related costs is not the state but a private investor that turned a 1,631 percent windfall profit on this property alone, implicating the public use clause of the Fifth Amendment as well as the requirement of just compensation,” according to Nieveen’s petition.
Nieveen’s appeal to the Supreme Court of Nebraska was dismissed in May 2022.
Attorney Christina Martin of PLF, who argued the Tyler case before the U.S. Supreme Court, hailed the new rulings.
“The Supreme Court ruled in Tyler that when the government takes a person’s home equity to satisfy a property tax debt, it violates the Constitution’s Takings Clause. In light of that decision, it’s clear that the Nebraska tax sale process is unconstitutional.
“Now, two cases that previously upheld the Nebraska law, Fair v. Continental Resources and Nieveen v. Tax 106 will be reconsidered in light of Tyler. But there are 20 other states that allow home equity theft in some form.
“These states should be on notice: change your laws or face millions of dollars in damages in court,” Martin said in a statement provided to The Epoch Times.
The Epoch Times reached out to counsel for the various governments and investment firms involved in the two cases.
No reply was received from Eric Hamilton of the Office of the Attorney General of Nebraska nor from county attorneys in Scotts Bluff County and Lancaster County, Nebraska, as of press time.
The Epoch Times asked Continental Resources attorney Casandra Langstaff of Koley Jessen in Omaha for a comment but had not received a response at the time of publication.
Tax 106 attorney Christian Blunk of Harris and Associates Law Firm in Omaha declined to comment.
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