Supreme Court Rules 'Home Equity Theft' Is Still Theft Even When Your County Government Is Involved

 May 27, 2023

Thursday, the Supreme Court ruled 9-0 in favor of a 94-year-old widow in her dispute with the government of Hennepin County, Minnesota, which sold her residence for a minor tax debt and pocketed the difference.

The narrative begins in 1999, when Geralidein Tyler purchased a condominium in Minneapolis. In 2010, she decided to relocate to a retirement community for a variety of reasons, according to a report by Red State.

Tyler fell behind on her property taxes as a result of the financial burden of paying a mortgage, condo fees, and rent on her retirement apartment. In 2015, she owed $2,300 in delinquent taxes; the county added interest and penalties, bringing the total to $15,000.

The county seized Tyler's property title and sold it for $40,000 at a tax auction. The county applied $15,000 to Tyler's debt and retained the remainder. They reasoned that once the county confiscated her title, she was no longer the owner of the property and had no rights. This left Tyler responsible for a mortgage of $50,000 and condo fees of $12,000.

The Type of Theft

Tyler's situation is not reportedly uncommon. Twelve states allow local governments to sell the property at auction to resolve tax claims and collect the difference.

Tyler filed a lawsuit, asserting two claims. First, she argued that the county's confiscation of proceeds over delinquent taxes and fees violated the Fifth Amendment.

In addition, she argued that the penalties and fees for delinquent taxes, which increased a $2,300 bill to $15,000, violated the Eighth Amendment's prohibition on "excessive fines."

The district court dismissed the case because Tyler had no right to the proceeds under Minnesota law and lacked standing to contest the fines and fees.

The Takings Clause

She filed an appeal with the Eighth Circuit, which expedited the case. Tyler then addressed the Supreme Court. Thursday, the jury rendered a unanimous 9-0 verdict in favor of Tyler.

Chief Justice John Roberts, writing for the whole court, started by addressing the county's claim that Tyler didn't have a legal right, called "standing," to bring her takings claim at all.

He disagreed with the county and said that Tyler did have standing. The county said that Tyler wasn't hurt by the sale of her condo because she might have had a $49,000 mortgage on it and a $12,000 lien for unpaid homeowners' association fees.

The judges said that the county's claims were just guesses because the county had never shown proof of either the mortgage or the lien. But, Roberts added, “Tyler still plausibly alleges a financial harm: The County has kept $25,000 that belongs to her.” Roberts wrote that if Tyler had gotten that money, she could have used it to pay off some of the condo's bills.

Roberts asked the judges whether the $25,000 left over after Tyler's condo was sold to pay off her tax bill to the county is "property" for the purposes of the takings clause. This was Tyler's main argument. The county looked to a state law from 1935 that says a property owner loses her right to the property if she doesn't pay her property taxes on time. So, the county said, the government didn't have any property to take.

The court differed, saying that property rights cannot be so easily manipulated. Roberts pointed out that even Minnesota agrees that in other situations, a property owner is entitled to the amount of money that is more than her debt.

Roberts wrote that the county can sell Tyler's home to get the $15,000 she pays in back taxes. However, the county cannot use the tax debt as a foothold to take more property than was due. Roberts said that by keeping the $25,000, the county carried out a "classic taking," in which the government takes "private property for its own use."

" A free people [claim] their rights, as derived from the laws of nature."
Thomas Jefferson
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