The State of Minnesota sold 94-year-old grandmother Geraldine Tyler’s Minneapolis condo for $40,000 to pay off a $15,000 tax debt, and then kept Tyler’s remaining equity of $25,000. On Wednesday, the United States Supreme Court heard oral argument on whether that was constitutional or not.
The Pacific Legal Foundation, who represented Tyler at the Supreme Court, has the back story:
As an elderly woman living alone, Geraldine Tyler was doing just fine in the one-bedroom condo she owned in Minneapolis. That is, until 2010, when a rise in neighborhood crime and frightening incidents near her home alarmed Geraldine and her family and prompted her hasty move to a safer area, where she rented an apartment in a senior community.Finally Geraldine felt safe and comfortable again, surrounded by other seniors. But the property taxes on her condo started piling up. Soon Geraldine accrued a $2,300 tax debt; and the government started tacking on thousands of dollars in interest, fees, and other penalties until the total bill reached $15,000 in 2015. At that point, Hennepin County, Minnesota, seized Geraldine’s condo and sold it one year later for $40,000. Instead of keeping the $15,000 it was owed and refunding Geraldine the sale surplus, the county kept all of the $40,000.
It turns out, as both parties agreed in court, that Minnesota state law provides for just such a result. Pacific Legal reports: “State law allows Minnesota counties to keep such windfalls at the expense of property owners like Geraldine. From 2014 to 2020, 1,200 Minnesotans lost their homes and all of the equity they had invested for debts that averaged 8% of the home’s value.”
But, not so fast, said Geraldine Tyler. The Fifth Amendment to the United States Constitution, which trumps state law, says in the “Takings Clause” that “private property [shall not] be taken for public use, without just compensation.” And, Article I, Section 13 of the Minnesota State Constitution, which also trumps Minnesota state law, similarly provides that ‘[p]rivate property shall not be taken, destroyed or damaged for public use without just compensation therefor, first paid or secured.”
And not only that, the Eighth Amendment to the United States Constitution and Article I, Section 5 of the Minnesota Constitution both provide: “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.”
Geraldine Tyler thought Hennepin County keeping her $25,000 in equity was an unconstitutional “taking,” and an unconstitutional “excessive fine,” so she sued Hennepin County on both claims in federal court.
But Hennepin County fought back, moving to dismiss her case. Federal District Court Judge Patrick J. Schiltz agreed with the County and dismissed Geraldine’s case:
“[T]he United States Supreme Court has unambiguously declined to recognize a former property owner’s ‘fundamental interest in the surplus’ by virtue of her prior ownership of the forfeited property. To the contrary,…[a] former owner has a property interest in the surplus only if a provision of a constitution, statute, or municipal code creates such an interest…[but] Minnesota’s statutory scheme gives the property owner no right to the surplus.”
Judge Schiltz also ruled that Hennepin County had not imposed an unconstitutional excessive fine:
“Minnesota’s tax-forfeiture scheme bears none of the hallmarks of punishment. It is a debt-collection system whose primary purpose is plainly remedial: assisting the government in collecting past-due property taxes and compensating the government for the losses caused by the non-payment of property taxes. The Court therefore finds that the statute does not impose a ‘fine’ within the meaning of the Excessive Fines Clause of either the United States or Minnesota Constitution. Tyler’s excessive-fines claims are dismissed.”
Geraldine was not happy with that result, so she appealed Judge Schiltz’s decision to the United States Court of Appeals for the Eighth Circuit, which covers federal district courts in Minnesota and six other midwestern states. But the Eighth Circuit agreed with Judge Schiltz:
Where state law recognizes no property interest in surplus proceeds from a tax-foreclosure sale conducted after adequate notice to the owner, there is no unconstitutional taking… once title passes to the State under a process in which the owner first receives adequate notice and opportunity to take action to recover the surplus, the governmental unit does not offend the Takings Clause by retaining surplus equity from a sale.
The Eighth Circuit also agreed with Judge Schiltz that Minnesota keeping Geraldine’s $25,000 in equity was not an excessive fine:
In addition to her takings claim, Tyler argues that the county’s retention of her surplus equity is an unconstitutional excessive fine…The district court carefully analyzed Tyler’s arguments and dismissed [this] count…We agree with the district court’s well-reasoned order and affirm the dismissal of th[is] count[] on the basis of that opinion.
Once again, Geraldine was not happy, so she took her case to the United States Supreme Court; a true long shot given that “the Court [only] accepts 100-150 of the more than 7,000 cases that it is asked to review each year.” After extensive briefing including eight amicus (friend of the court) briefs supporting Geraldine’s request to be heard, the Court took her case.
Even more extensive briefing “on the merits,” or the substance of the case, ensued, with 25 amicus briefs filed supporting Geraldine Tyler, including one by all four of Minnesota’s Republican congressmen, including Tom Emmer, the House Majority Whip. Notably, none of Minnesota’s four Democrat Congressmen, including Ilhan Omar, supported Geraldine.
The United States filed a brief that it claimed supported neither party, but in it the Government supported Geraldine Tyler’s claim that Minnesota keeping her equity was a “taking” and therefore unconstitutional without just compensation. The Government also argued, however, that Minnesota’s action was not an “excessive fine.”
Eight states, Utah, Arkansas, Kansas, Kentucky, Louisiana, North Dakota, Texas, and West Virginia, filed a joint amicus brief supporting Geraldine, arguing that the majority of states return equity to the homeowner after a tax sale, and that the “confiscation of surplus equity results in serious injustice in the minority of states that allow the practice,” specifically citing Massachusetts and New Jersey’s tax statutes.
Ten amicus briefs in support of Hennepin County were filed, including a joint brief filed by National Tax Lien Association, the Arizona County Treasurers Association, and the Tax Collectors & Treasurers Association of New Jersey. Also filing amicus briefs in support of Hennepin County were the Wisconsin Counties Association, the County Treasurers Association of Ohio, Oakland County, and the Minnesota and Michigan Association of Counties.
On Wednesday, April 26, 2023, the assembled Justices of the Supreme Court heard oral argument. You can listen to the oral argument as it transpired here. You can also follow along with the transcript here, so you can tell which Justice is asking a question or commenting.
Christina M. Martin, Pacific Legal senior attorney representing Geraldine Tyler, started off with a bang:
When the government takes property to satisfy a debt and takes more than what is owed, it has a constitutional duty to return or pay for the excess…By taking absolute title to Ms. Tyler’s property, including the value that exceeded the debt, the county has taken private property without just compensation…The county could have collected the debt without violating the Constitution by following the traditional common law rule still followed in most states and still followed in Minnesota in nearly every other debt collection circumstance. Under that rule, the county should have taken the property, sold it, paid the debts from the proceeds, and refunded the remainder to Ms. Tyler. Instead, the county took everything.The county apparently does not dispute that Ms. Tyler had a property interest in her former home or in its value. Instead, it asserts that the government may redefine private property by statute. The consequence of that would be an unlimited power to define away private property and to confiscate it to pay debts, no matter how valuable the property or how small the debt.
Martin also argued that “If not remedied with just compensation, then the confiscation acts as a fine punishing Ms. Tyler for the public offense of failing to timely pay her property taxes.”
Remarkably, the Justices let Attorney Martin complete her entire argument without questioning. That alone is an indication that they are at least sympathetic to Geraldine Tyler’s plight. And we aren’t the only ones who noticed.
Amy Howe at the excellent SCOTUSblog, which follows every U.S. Supreme Court case, noticed too: Justices appear likely to side with homeowner in foreclosure dispute:
Geraldine Tyler, a 94-year-old grandmother, lost her Minneapolis condo when she failed to pay the property taxes for several years. Tyler does not dispute that Hennepin County could foreclose on the $40,000 property and sell it to obtain the $15,000 in taxes and costs that she owed it. But she argued that the county violated the Constitution when it kept the $25,000 left over after the property was sold. After roughly 100 minutes of debate on Wednesday, a majority of the justices seemed inclined to agree with her.
Howe also commented on the United States’ argument, which was argued by Assistant to the Solicitor General Erica Ross, representing the Department of Justice:
Ross was equally straightforward, referring back to the government’s brief. The taking occurs, she said, when the county seizes the title to property and there is no mechanism for the property owner to recover the excess value of the property. The court, she urged, should vacate the decision by the U.S. Court of Appeals for the 8th Circuit.
Howe also noted that “[p]erhaps because the justices seemed likely to rule for Tyler on her takings clause claim, they spent relatively little time on her excessive fines claim. But Justices Neil Gorsuch and Ketanji Brown Jackson signaled that they believed that the county’s actions also violated the excessive fines clause.”
Perhaps the best indicator that the Court is likely to rule in Geraldine Tyer’s favor was Justice Kagan’s key question to Neal Katyal, attorney for Hennepin County. She asked him if there was “a $5,000 tax debt and a $5 million house. Could the government sell the house and keep the surplus?” Katyal replied in the affirmative, to which Chief Justice Roberts replied: “If that’s all true, what’s the point of the takings clause?”
Another dagger in Hennepin County’s case was “[w]hen Katyal agreed with Kagan that the government could not seize an entire bank account containing $100,000 to pay a $10,000 income tax debt,” but could, as they did here, seize all the proceeds from a real property tax sale. From SCOTUSblog’s piece:
“‘If the mind rebels,’ [Kagan] said, ‘at the idea that the government can seize a $100,000 bank account to pay a $10,000 tax debt, why should the government be allowed to rely on 13th- or 18th-century history to do essentially the same thing with real estate?'”Justice Brett Kavanaugh agreed. ‘Why,’ he asked Katyal, ‘would we read the Constitution to disfavor real property? That seems counterintuitive.’Roberts suggested that any difference between real property and other forms of property would lead to the ‘exact opposite’ conclusion from Katyal’s theory. The Supreme Court’s cases, Roberts said, characterize property as ‘essential to the preservation of liberty.’ To say that money is more deserving of constitutional protection than property, Roberts observed, ‘has it exactly backwards.'”
Hopefully the Justices will rule in Geraldine Tyler’s favor and return the $25,000 in real estate equity to her. We will update you when the Court’s opinion issues.
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