632 F.Supp.3d 743
E.D. Mich.2022Background
- Plaintiff Michael Pung is personal representative of the estate of Timothy Pung; a homestead in Isabella County was foreclosed and sold at tax-foreclosure for $76,008.00 in 2018.
- Isabella County asserted roughly $2,241.93 in unpaid taxes; Plaintiff contends either no taxes were owed or, at minimum, the county must account for proceeds above the tax debt.
- The Michigan Supreme Court in Rafaeli LLC v. Oakland County held that former owners have a vested right to surplus proceeds from tax-foreclosure sales (sale price minus delinquent taxes, interest, penalties, fees).
- Judge Jonker (W.D. Mich.) previously granted summary judgment on takings liability under the Fifth and Fourteenth Amendments; this case was later transferred to the Eastern District.
- The sole contested remedial issue here was the measure of compensation: (a) Plaintiff sought full equity (fair market value less tax debt); (b) Defendants contended recovery is limited to surplus proceeds (sale price less tax debt).
- The court awarded Plaintiff surplus proceeds of $73,767.07 (i.e., $76,008.00 minus $2,241.93) plus interest from the sale date, denied recovery of full equity, dismissed excessive-fines claim and denied the motion to compel as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper measure of compensation for the taking | Entitled to full fair-market-value equity (total value at time of taking) plus interest under the Fifth Amendment | Recovery limited to surplus proceeds (sale price minus tax debt); property interest defined by state law (GPTA/Rafaeli) | Plaintiff entitled only to surplus proceeds and interest; equity claim denied |
| Whether federal relief can exceed state-law remedy (Rafaeli) | Federal §1983/Fifth Amendment is not constrained by state law; Knick allows direct federal suit and full just compensation | Fifth Amendment enforces existing property interests defined by state law; Rafaeli defines the property interest as surplus proceeds | Court treated Rafaeli as controlling on the property interest and limited federal recovery to surplus proceeds |
| Municipal (Monell) liability for following GPTA / county acting as foreclosing governmental unit | County voluntarily acted as FGU; choosing to use the statutory process constituted county policy sufficient for Monell liability | County action followed mandatory state statutory scheme (GPTA); denial of refunds was state-law driven, not county policy, so §1983 liability is limited | Court maintained prior liability determination for county; Count IV dismissed with prejudice as to Pickens (individual) and county liable for surplus proceeds |
| Excessive-fines claim & discovery motion | Sought alternative relief under Eighth Amendment; sought discovery | Defendants moved to dismiss excessive-fines alternative; discovery relevance reduced by rulings | Excessive-fines claims dismissed/denied as moot; motion to compel denied as moot |
Key Cases Cited
- Rafaeli LLC v. Oakland County, 505 Mich. 429 (Mich. 2020) (Michigan Supreme Court recognizes a vested property right in surplus proceeds from tax-foreclosure sales)
- Knick v. Township of Scott, 139 S. Ct. 2162 (2019) (property owners may bring federal §1983 takings claims without exhausting state inverse-condemnation remedies)
- Almota Farmers Elevator & Whse. Co. v. United States, 409 U.S. 470 (1973) (just compensation measured by fair market value as full monetary equivalent in eminent-domain context)
- Phillips v. Washington Legal Foundation, 524 U.S. 156 (1998) (Fifth Amendment protects existing property interests defined by independent sources such as state law)
- Leis v. Flynt, 439 U.S. 438 (1979) (the Constitution does not create property rights; it protects property interests derived from independent sources)
- Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163 (1993) (standards for pleading municipal liability under §1983)