The Supreme Court this morning decided Pung v. Isabella County, Michigan.
This case involves the Pung family and their $194,400 house in Michigan. Or, more accurately, “former house,” because in 2010 the county decided that it was a second home and retroactively changed that status for 2007 to 2011. This created an unpaid $2,241.93 property tax bill in 2012, and in 2015 the county seized the house and sold it in a sham auction for $76,008. The auction winner turned around and sold it again for $195,000.
The Pungs sued for that difference, claiming a violation of the Takings Clause of the Fifth Amendment (“nor shall private property be taken for public use, without just compensation”) and the Excessive Fines Clause of the Eighth Amendment (“nor excessive fines imposed”). We at NTUF’s Taxpayer Defense Center wrote a brief supporting the Excessive Fines argument, explaining that losing $118,000 for a $2,241 tax bill is disproportionate to the taxes owed.
In an opinion by Justice Alito, the Supreme Court today ruled against the Pungs. He writes that fair market value for the Fifth Amendment is the auction price, but concedes that only when the sale is fairly conducted. The Court does not decide what a fair sale is, and directs the lower court to figure that out. Similarly with the Eighth Amendment, while forfeiture of property can be a fine, there is no evidence that a fairly conducted tax sale is punitive.
In short, the Court holds that the Pungs are only entitled to surplus proceeds from the auction, not fair market value. The lower court must decide the auction fairness issue.
Justices Sotomayor, Gorsuch, and Jackson wrote a separate concurring opinion, where they support further remand on the auction procedural fairness issue.
Justice Thomas, in a concurrence joined by Justice Gorsuch, described the fundamental unfairness of the County’s actions and the auction procedures. Not only did the County confiscate property for a tax that the Pungs did not owe, but it confiscated real property vastly more valuable than the miniscule assessment. They chose not to seize other, more proportionate, property. Justice Thomas emphasized that the Pungs’ fight is not over, and that the lower courts should carefully scrutinize the auction proceedings, which likely did not meet constitutional standards. If so, the County still violated the Takings Clause, and the Pungs’ rights will be vindicated.
The case is Pung v. Isabella County, Michigan, No. 25-95.