When you don’t pay property taxes, you run the risk of the government seizing and selling your property. That’s what happened to Geraldine Tyler, a then-octogenarian resident of Hennepin County, Minnesota. After she let $15,000 of unpaid taxes, interest, and penalties on her condo pile up, the county government seized her property and sold it for $40,000.
That’s fair enough, but the county unfairly kept the $25,000 surplus for itself. Eventually, Ms. Tyler sued to get her $25,000 surplus back. Today, the Supreme Court of the United States unanimously decided that Ms. Tyler – not the government – was entitled to it.
The Court decided that Ms. Tyler is protected by the Constitution’s Takings Clause, which says private property cannot “be taken for public use, without just compensation.” The Court’s opinion underscores the general principle that a creditor is entitled to be made whole, but that there is no entitlement to a surplus payment. That is, the creditor is entitled to take the debt, not some amount greater than the debt.
This principle can be seen in other areas of the law. For instance, if a bank forecloses on a house because the mortgage payment hasn’t been made, the homeowner – not the bank – gets to keep any surplus. (CEI had previously joined the Buckeye Institute’s amicus brief on this case, which argued that the Takings Clause’s application to this case was deeply rooted in American history and tradition.)
The Court expeditiously disposed of the argument that Hennepin County government used to justify keeping the extra $25,000. Hennepin County argued that Ms. Tyler had decided to abandon her property because she stopped paying taxes on it (or, more precisely, that her failure to pay property taxes should be understood as abandonment).
I suppose government lawyers must make the best argument available to them, but the County’s argument was especially weak. Fortunately, the Court thought so too. The Court explained that a lapse in property rights from abandonment can indeed take place when the owner fails to make any use of the property at all. There is a big difference, the Court emphasized, when the owner of a residence with delinquent property taxes continues to live there for years – right up to the time that the government sells the property.
The Court ended its opinion by noting it had decided the case based on the Takings Clause, so it was unnecessary to opine about the impact of the Excessive Fines clause. Justices Neil Gorsuch and Ketanji Onyika Brown Jackson presumably disagreed, since they filed a concurrence arguing that the Excessive Fines clause had been misunderstood in the analysis of the court below — while intimating that the $25,000 surplus that the government wanted to keep was, indeed, constitutionally excessive.
- View the Supreme Court ruling in Tyler v. Hennepin County