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Every year, schools and government agencies join the nation in observing  the week before and after Sept. 17, the anniversary of the signing of the Constitution. Federal courts participate by offering educational resources and experiences in their communities. Below, UNH associate professor of political science  pens a piece entitled "Justice Foreclosed?" To read this piece and other essays by UNH faculty around Constitution Day, click .

This essay considers the Supreme Court case Pung v. Isabella County, Michigan. .

If you’ve lived in New Hampshire for any length of time, you may have heard people complaining about their property tax bill. Twice a year, homeowners receive the dreaded missive in the mail, perhaps procrastinating for a few weeks or months before reluctantly forking over thousands of dollars to their city or town government. Even if you live in an apartment, you will see this tax reflected in your ever-increasing rent bill as your landlord, too, pays this hefty exaction. Though it may seem that residents are paying simply for the privilege of living in their own places, the fact is that the proceeds from these local taxes pay for local schools, fire departments, libraries, road maintenance and other key municipal departments and services. Moving to another state is no solution. Throughout the United States, property taxes are a ubiquitous feature of modern life. Of course, in many cases property taxes may be discounted for senior citizens, veterans, or owners who chose to put some of their property in a conservation easement, for example. Yet, for almost all of us, it is our duty as good citizens to pay up, a civic act one that helps maintain and improve our quality of life.

What happens if we don’t pay our property tax? One Michigan couple found out the hard way, with their dispute going all the way to the U.S. Supreme Court. Their dispute began in 2020. The Pungs, who had inherited their home from a deceased relation, lived full time in their dwelling and considered it their permanent home. In Michigan and numerous other states, (but not New Hampshire!), a vacation home or second property is taxed at a higher rate than a primary residence. For some disputed and unclear reasons their Isabella, Michigan county government taxed the Pungs’ home as if was a secondary property. The bill was $2,241.93. Though they attempted to clear this up, in the end the Pungs failed to persuade the tax officials that this was their primary residence. They also rejected several options offered by the county to end the stalemate. They refused to pay it. In the end, as is common throughout the states when people default on property taxes, the county foreclosed legally on the home. County officials later auctioned it off to the highest bidder for about $76,000, even though the home itself had been recently assessed as being worth $194,000. From the $76,000, the government took out the default amount, and returned the surplus, $73,766, to the Pungs. In doing so the county again complied with historical practice and state and local laws. The Pungs, having now lost their home, claimed that they should have received the surplus money from the $194,000 which was the assessed value of their home. This would have been about $192,000, much more than they received after the auction. 

Do the federal courts, applying the U.S. Constitution, have anything to say about this? Indeed they do. The Pungs were able to file their suit in federal district court, because they rested their argument on what is called a “federal question,” (i.e. a dispute about the meaning of a federal statute, a federal regulation or treaty, or the U.S. Constitution). First, they claimed that the Fourteenth Amendment’s due process clause had been violated because of the many procedural irregularities in the foreclosure procedures. For example, the Pungs claimed they did not receive the notice of foreclosure until after the county’s deadline, and that the $2,241.93 amount was not in the original tax bill that they had received. The 14th Amendment reads, “No state shall deprive any person of life, liberty or property without due process of law.” Except for being directed at the states instead of the national government, this replicates the Fifth Amendment’s provision. More important for this discussion is that the Pungs claimed the Takings Clause of the Fifth Amendment of the United States Constitution had been violated when they did not receive the surplus from a “fair market value” of the sale of their foreclosed home. That amendment reads in relevant part “[nor shall any person] be deprived of life, liberty or property without due process of law; nor shall private property be taken for public use, without just compensation.” The single district court judge, relying on various precedents, ruled against the Pungs, as did the three-judge panel of the Sixth Circuit Court of Appeals. The Pungs then appealed to the United States Supreme Court, which granted the writ of certiorari to hear the case. Like the U.S. Court of Appeals, the U.S. Supreme Court is an appellate court, whose function is to ensure that courts below did not make any errors in interpreting and applying federal law. 

The Pungs had argued that centuries of “eminent domain” decisions, that is, instances when a state or city takes someone’s property for public use and just compensation is given, should guide the Court’s opinion. In centuries of legal opinions, the constitutional phrase “just compensation” has generally meant fair market value. An example of eminent domain would be when the state of New Jersey in the late 1960s took hundreds of houses adjacent to a stretch of the New Jersey Turnpike to widen the turnpike to accommodate increasing traffic in the late 1960s. It paid homeowners compensation based on the current, assessed value of their houses. Many homeowners were pleased with the ‘fair market value’ amount they received, as it allowed them to move to nicer homes elsewhere. If numerous judges upholding eminent domain takings have equated ‘just compensation’ with the fair market value of the property, then the same rule should apply here, they asserted. 

Unfortunately for the Pungs, the Court’s decision was unanimous, 9-0. It upheld the rulings of the two courts below on the constitutional issue surrounding the amount of the surplus. All ruled that the county had complied with the Takings Clause in returning the surplus from the foreclosed sale. The county was not constitutionally required to return a higher surplus from the assessed value of the house prior to its sale. The Court rejected the Pungs’ argument for three reasons: 1) their use of irrelevant eminent domain precedents (prior decisions involving the Takings Clause); 2) the problems the Pungs’ new constitutional rule would pose for municipal governance as well as other taxpayers; 3) the noncontroversial practice of foreclosure sales over the course of United States history. 

The Court made quick work of dismissing the eminent domain precedents, arguing that the Pungs were comparing apples to oranges. As Associate Justice Alito, writing for the Court commented, “what might be just in one context may not be just in another.’” Even in eminent domain cases, he noted, courts sometimes deviated from the fair market value rule and found different types of compensation to be “just,” for instance “when market value has been too difficult to find, or when its application would result in manifest injustice to owner or the public.” In addition, in eminent domain takings, homeowners have generally done nothing wrong, unlike delinquent taxpayers.

The second main prong of the Court’s opinion was the practical concerns of local and state government: “Tax sales are meant to collect unpaid taxes without undue delay and administrative expense.” Were towns and cities required to sell foreclosed properties the way homeowners typically do, they would either have to sell the property themselves or hire a real-estate agent. In the interim before a full value sale, which would be uncertain and likely take many months, the municipality would be deprived of the unpaid taxes. If the town or city couldn’t or wouldn’t sell the foreclosed property, the new legal rule advocated by the Pungs would mean that the municipality would still have to pay the former owners the full market value, a cost which would ultimately be shouldered by local taxpayers. This would most likely be done by increasing residents’ property tax bills! Alito writes “so for taxpayers as a group, the demise of tax sales might be a most unwelcome development.” 

The third prong of the opinion rests on the Court’s opinion of both what happened in the past with tax sales, but also what didn’t happen: “Tax sales have been an accepted means for governments to collect debts since the earliest days of our nation. If the takings clauses had rendered these sales untenable, they would have presumably faded away….”. 

Although Associate Justices Clarence Thomas and Neil Gorsuch both agreed with the main ruling, they noted some irregularities. In a concurring opinion, Justice Thomas (joined by Gorsuch in part) asserted that the Court’s opinion neglected the many traditional practices and legal norms that had historically protected debtors’ property from egregious takings, as he characterized the one here. First, he noted that it was well-established that the government had to try and sell the taxpayer’s personal property before it could try and take land or buildings. This was especially important when a small debt might conceivably put a family out of their home. If these ‘chattels’ were sufficient to discharge the tax debt, then land and homes were off limits to the government. In fact, if the government took more than what was required to discharge the debt, the property owner could sue the government for trespass or trover (a common law action to recover property or receive equal compensation of said property). In the past, judges had generally scrutinized foreclosure proceedings carefully to make sure that parties were notified in timely, complete fashion. Thomas also asserts that, in many cases, judges tried to ensure that auction prices were as close to market value as possible. Anchoring the right to property in Anglo-American political and legal thought, he cites the famous British jurist William Blackstone statement that “the law of the land… postpones even public necessity to the sacred and inviolable rights of property.” Thomas concludes: “the government exists to protect property; property does not exist to support the government.”

In the end, the Court only settled the constitutional question, which now becomes precedent, a guide for all judges around the country should they encounter a similar legal dispute between government and a property owner. It sent back down (remanded) the case back to the Sixth Circuit Court of Appeals to deal with the Pungs’ particular claims of the allegedly unfair procedures employed by Isabella County. It is certainly possible that the county will be held to have violated the “due process” that it was required to afford the Pungs under the Fourteenth Amendment. But that’s a story for another Constitution Day!