Facts of the Case
This case involves a dispute over the foreclosure and sale of the Pung property in Isabella County, Michigan, following the death of its owner, Timothy Scott Pung, in 2004. The property had a Principal Residence Exemption (PRE) from local school taxes. In 2010, the township tax assessor, Patricia DePriest, retroactively denied the PRE for the years 2007-2009, asserting a new owner must file an affidavit. Although the Michigan Tax Tribunal overturned this decision in 2012, holding the PRE remained valid for the estate, DePriest subsequently revoked the PRE for the 2012 tax year based on the same unfiled-affidavit rationale. This denial created an unpaid tax bill of $2,241.93. The County Treasurer, Steven Pickens, initiated foreclosure proceedings for this delinquency. After a final judgment of foreclosure, the property sold at a public auction for $76,008. Isabella County and Pickens retained the entire $76,008 from the sale, refusing to return the surplus proceeds above the tax debt to Michael Pung, the estate's representative. Michael Pung sued, alleging this retention of the surplus violated the Fifth Amendment’s Takings Clause and the Eighth Amendment’s Excessive Fines Clause.
The district court granted Pung summary judgment on the Takings Clause claim, ruling he was entitled to the surplus proceeds (the sale price minus the tax debt), but not to the greater loss in equity based on the property’s fair market value. The U.S. Court of Appeals for the Sixth Circuit affirmed the district court’s judgment on all claims, including the amount of compensation awarded.
Questions
1. When the government takes property for tax debt, does the Fifth Amendment require compensation based on the property’s true fair market value, or only on the lower amount it sold for at a tax foreclosure auction?
2. Does the Eighth Amendment’s Excessive Fines Clause prohibit the government from seizing and keeping a property worth far more than the small tax debt owed on it?
Conclusions
-
When the government sells a property at a tax foreclosure auction (a public sale to collect unpaid taxes), the Fifth Amendment's Takings Clause — which requires "just compensation" when the government takes private property — entitles the former owner only to the surplus proceeds, meaning the difference between the auction price and the tax debt, not the property's hypothetical fair market value. The Eighth Amendment's Excessive Fines Clause imposes no greater obligation. Justice Samuel Alito authored the 9-0 opinion, with all nine justices agreeing on the judgment to vacate and remand; Justice Clarence Thomas joined the majority except as to one section addressing counterarguments.
For centuries, English and American law permitted governments to seize and sell property to collect unpaid taxes, on the single condition that any surplus proceeds be returned to the debtor. Federal statutes dating to the founding era, state laws from the ratification period, and a consistent line of Supreme Court precedents all defined the owner's entitlement as the auction surplus — nothing more. That settled tradition establishes the constitutional baseline: when a tax sale is fairly conducted in light of the nation's history of such sales, the auction price is "just compensation." Applying a hypothetical fair market value standard — the price a willing buyer would pay a willing seller in a normal open-market transaction — finds no support in that history. Even in eminent domain cases, where government seizes property for a public use, the Court has refused to treat fair market value as the universal constitutional floor.
Requiring governments to compensate at fair market value would also make tax sales unworkable as a debt-collection tool. When an auction yields less than a property's estimated open-market value — which tax auctions frequently do, since they cannot wait for ideal market conditions — a fair-market-value rule would force the government to pay the delinquent taxpayer more than the sale generated, turning debt collection into a net loss. That perverse result would effectively eliminate a debt-collection practice that has existed since the founding, which itself is strong evidence that the Constitution does not demand it. The Eighth Amendment analysis follows the same logic: no historical evidence supports the conclusion that a fairly conducted tax sale constitutes a punitive "fine," and grafting fair market value onto the Eighth Amendment would produce the same practical destruction of the tax-sale system that it would under the Fifth Amendment.
Justice Sonia Sotomayor concurred, joined by Justices Neil Gorsuch and Ketanji Brown Jackson, emphasizing that the majority's "fairly conducted" standard leaves open — and does not endorse any particular view of — what procedural requirements a constitutionally adequate tax sale must satisfy, and that those questions remain available on remand.
Justice Thomas concurred in part and in the judgment, joined by Justice Neil Gorsuch (except footnote 1), agreeing that historical practice can justify departing from the usual fair-market-value rule but arguing that the historical limits on tax foreclosure sales — including requirements to exhaust personal property before seizing real property and to sell only as much property as necessary to cover the debt — likely were not followed here, making the County's conduct in his preliminary view likely unconstitutional.
