Supreme Court Hands Win to Michigan County in Tax Foreclosure Fight

The U.S. Supreme Court has ruled that homeowners whose properties are sold through tax foreclosure are not automatically entitled to receive compensation based on the home’s full market value, handing a unanimous…

Andrew PowellJun 23, 20263 min read

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Although the county returned the remaining proceeds after the tax debt was satisfied, the family argued they should also receive compensation for the difference between the auction price and the home’s estimated value, claiming they lost more than $118,000 in equity.

The Supreme Court disagreed, saying such a rule would create serious practical problems for governments trying to recover unpaid property taxes.

Alito wrote that forcing counties to pay homeowners based on appraised values instead of actual sale prices could leave governments losing money while attempting to collect relatively small tax debts, making the foreclosure system difficult to operate.

The ruling does not end the legal battle. The justices sent the case back to the U.S. Court of Appeals for the Sixth Circuit to examine separate arguments raised by the Pung family over whether the county’s foreclosure process itself was conducted fairly.

Larry Salzman, an attorney with the Pacific Legal Foundation representing the Pung estate, said the family was disappointed with the Supreme Court’s ruling on compensation but welcomed the chance to continue pursuing its remaining claims.

Two members of the court signaled they had concerns about the county’s conduct. In a separate opinion, Justice Clarence Thomas, joined by Justice Neil Gorsuch, wrote that Isabella County’s actions appeared “likely unconstitutional,” even though they agreed the procedural issues should continue in lower court.

Attorneys for Isabella County praised the decision, arguing it preserves a long-standing system that allows local governments to recover unpaid taxes while returning any surplus proceeds generated through foreclosure sales.