• Pending US Supreme Court case stems from longstanding dispute between mid-Michigan county and a family’s estate
• Justices will consider whether a homeowner should get whatever surplus comes in a tax auction sale or the property’s fair market value
• The homeowner’s estate argues local governments should pay back the difference if the market value is higher than a foreclosure sale

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When Isabella County government sold a Michigan family’s home for nearly $120,000 below its assessed value to satisfy a $2,241 tax debt, it amounted to an excessive and unconstitutional penalty, according to a lawsuit now headed to the US Supreme Court.

The Michigan case, which justices are expected to consider next year, could set national precedent for what homeowners are entitled to if their property is seized and resold by the government.

“It’s unconstitutional to take more than what’s owed, and now (the Supreme Court) will answer the next logical question, which is, how much is due,” said Christina Martin, an attorney with the Pacific Legal Foundation, the firm representing the Pung family alongside attorney Phil Ellison.

At the heart of the case is a three-bedroom home in Isabella County, purchased by Timothy Scott Pung in 1991. Shortly after the purchase, Pung was granted an exemption for a supplemental property tax. Pung died in 2004, and after his wife died in 2008, their son and his family moved in.

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Pung’s estate, managed by Michael Pung, contends that because family members continued to live in the home, the tax exemption should have continued automatically under Michigan law.

Local and county tax assessors disagreed, denying the tax exemption. A years-long legal dispute ultimately resulted in a 2018 foreclosure over $2,242 in back taxes and fees that the family contested.

The county sold the property at a public auction for roughly $76,000. After the Pung estate sued, a federal district court in Michigan ruled the estate should get the surplus proceeds from the sale minus the tax bill. 

But attorneys for the Pung family argue that payout would still amount to an unconstitutional taking of property or an unconstitutionally excessive fine, because the county had valued the property at $194,400 at the time of foreclosure. 

Even if the family gets back the money from the government’s sale of their home, they estimate they still lost out on nearly $120,000 in equity had the property been sold in a conventional sale. 

“There have to be some backstops to prevent unnecessary foreclosures, and we think the Constitution provides that kind of backstop,” said Martin, the Pacific Legal Foundation attorney. “We’re hoping the court will help ensure that these kinds of unnecessary foreclosure sales don’t happen in the first place.”

A losing proposition?

Attorneys representing Isabella County contend the claims in the lawsuit “defy centuries of legal development” and would render tax foreclosures useless for local governments attempting to collect on unpaid taxes.

“If the former property owners are entitled to more than surplus proceeds actually yielded by the sale, tax foreclosure becomes a moneylosing proposition,” Douglas Curlew, a Livonia-based attorney representing the county, wrote in a brief filed earlier this year. 

In the brief, Curlew pointed out that the county has already paid the Pung family surplus proceeds from the auction sale. Requiring local governments to base sales or payouts on the real estate market would increase costs and work against the goal of promptly collecting tax revenue, he wrote. 

“And every foreclosure sale would be subject to costly litigation by the former owner nitpicking whether the government took all possible steps to optimize the sale result,” Curlew added, noting that governments have few alternatives to collect on unpaid property taxes. 

The US Supreme Court announced in October that it would take up the case, and oral arguments are expected in early 2026. 

It’s not the only case the nation’s highest court has considered on foreclosures in recent years. A unanimous 2023 decision in Tyler v. Hennepin County found that a government keeping any proceeds from tax-foreclosed property sales beyond what was owed violated the Fifth Amendment’s Takings Clause. 

Property tax collections have also proven controversial in some parts of Michigan. In Detroit, a recent University of Chicago study suggested Detroit is overtaxing residents in the city’s lowest-valued homes. 

When the Detroit City Council sought to address the issue by calling on the assessor’s office to shave 30% off the assessed value of low-value homes, Deputy Chief Financial Officer and Assessor Alvin Horhn said it wasn’t possible, as the deadline to appeal assessments passed on March 11.

Separately, a grassroots group is attempting to collect signatures for a 2026 ballot proposal to eliminate property taxes altogether.

Tilting the rules?

Several state and national industry groups have weighed in on the pending Supreme Court case, including the Mackinac Center Legal Foundation, which argued in a brief that current Michigan practices create an unfair double standard that “lets the state tilt the rules in its own favor.”

“The Constitution forbids government from taking more than it is owed,” Derk Wilcox, senior attorney at the Mackinac Center Legal Foundation, said in a statement. “And it can’t just sell it for well below what the property is truly worth — for a price that only covers the tax debt.”

The American Association of Retired Persons, in a separate brief, wrote that fair market value compensation protects older homeowners, who the group argued are vulnerable to tax delinquency due to limited financial resources and higher disability rates.

“When a state seizes the home of an older American (or any American) to satisfy a tax debt, it often robs the homeowner of wealth accrued over decades of hard work,” the association argued. “Protecting home equity for older Americans is not only constitutionally required but also essential for their financial security and dignity.”

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