The U.S. Supreme Court has been asked to stop governments in Michigan from collecting overdue property taxes by confiscating the property, selling it and keeping the entire profit.
Lawyers for the plaintiffs, who want back the difference between their taxes owed and what the government got for their properties, warn that similar scenarios are arising in a handful of other states.
WND reported in March an appeals court decided 2-1 based on jurisdictional issues that it could not order the return of the $190,000 profit Van Buren County made when it confiscated a church’s camp property for nonpayment of taxes.
Two other plaintiffs, each of whom lost smaller parcels, are joining Wayside Church in being represented by Pacific Legal Foundation.
The third judge on the panel pulled no punches, however, in condemning the government.
“In some legal precincts that sort of behavior is called theft,” wrote Judge Raymond Kethledge in his dissent of the 2-1 6th Circuit Court of Appeals decision in favor of Van Buren County.
The case that prompted Kethledge’s criticism centers on Van Buren County’s confiscation of real estate in response to Wayside Church’s failure to pay 2011 property taxes of about $16,000.
In the 2-1 decision, Sixth Circuit Judge Eric L. Clay, joined by Judge Bernice B. Donald, determined the district court lacked jurisdiction, and the plaintiffs must pursue their claims in Michigan state court.
Kethledge contended federal jurisdiction was proper because the claims pertained to the U.S. Constitution, and Michigan courts haven’t yet determined whether a local government can be sued for taking excess tax auction proceeds.
The county, under state law, confiscated the church’s property and sold it for $206,000.
The county not only kept the $16,000 owed in property taxes, it retained the rest of the proceeds, about $190,000.
While in many jurisdictions church-owned property is exempt from property taxes, that status can be lost under certain circumstances, including disuse. And although records are not available, it appears the church had regularly used the property for its camping program.
The property previously had been used as a camp for inner-city children by the church, a historically black congregation on the South Side of Chicago.
Kethledge wrote in his dissent: “In this case the defendant Van Buren County took property worth $206,000 to satisfy a $16,750 debt, and then refused to refund the difference. In some legal precincts that sort of behavior is called theft.
“But under the Michigan General Property Tax Act, apparently, that behavior is called tax collection. The question here is – or at least in my view should be – whether the county’s action is a taking under the federal Constitution.”
County officials at the time denied to WND there was any profit, saying instead it was only money in excess of the amount of taxes owed.
Van Buren Treasurer Karen Makay has told WND, “We are not confiscating property.”
She explained the county confiscates property to take ownership, then sells a number of properties at one time.
Some may sell for more than the tax owed, some less, she explained.
“We have followed the law to the letter,” she said.
She admitted sometimes “there was more from the sales than were taxes owing.”
But she said: “We are not their real estate agent. We own the property. We can sell it for the taxes.”
See a video explaining the situation:
[jwplayer mNx2hJiI-pszPfxYQ]
Pacific Legal now is asking the U.S. Supreme Court to resolve the dispute.
“Michigan’s General Property Tax Act allows bureaucrats to take more than their due when they go after people for unpaid property taxes,” said Christina Martin of PLF. “In other words, this law transforms the foreclosure process into an engine of government sanctioned theft in order to line government coffers. That’s unjust and unconstitutional.”
The plaintiffs include Wayside Church, Myron Stahl, who lost a residential lot, and Henderson Hodgens, who lost a 20-acre farm with a home.
They fell on hard times and were unable to pay their 2011 taxes.
Van Buren County confiscated the properties, sold them and kept all the proceeds.
All told, the county made a profit of almost $275,000.
The case challenges the “government self-enrichment” as an unconstitutional taking.
“These plaintiffs have had their constitutional property rights denied, and they should not have the doors of the federal courts shut in their faces,” said Martin. “We are asking the Supreme Court to take this appeal, recognize that federal courts should be fully open to people seeking the protection of the Constitution, and issue a clear ruling that foreclosure cannot be abused to enrich government by impoverishing struggling property owners.”
The petition to the U.S. Supreme Court quotes the Fifth Amendment, which says, “nor shall private property be taken for public use, without just compensation.”
The complaint says: “This case challenges a gross injustice in the administration of Michigan’s tax laws – the local governments’ practice of filling their coffers with the surplus proceeds from the sale of tax delinquent homes and other properties. By keeping profits from property tax sales far beyond what is actually owed in taxes, local governments reap a windfall while the subject owners lose their property and any excess value – equity – and accrued during their ownership.”
“Thousands” of properties are thus confiscated each year in the state, the case explains.
“The government has no legitimate entitlement or claim to equity that exceeds the owner’s tax debt.”
Other states with similar confiscation procedures include Arizona, Minnesota, Massachusetts, North Dakota and Oregon, which is why a Supreme Court precedent is needed, the petition states.
The plaintiffs, the petition explains, are seeking “compensation for a taking of property that was greater than the taxes, penalties, fees, and interest levied on them under state law.”
