Michael Pung

The Supreme Court rejected a challenge to tax foreclosure rules, ruling that the practice of using auctions to collect unpaid real-estate taxes does not violate the Fifth or Eighth Amendments. The case, Pung v Isabella County, involved a home sold for significantly less than its assessed value to recover $2,200 in taxes, with the court affirming that compensation for the property owner should be based on the auction price, not its hypothetical fair market value.

The Supreme Court ruled that a Michigan county's tax sale price determines 'just compensation' for a homeowner, sending the case back to the 6th Circuit to assess procedural fairness. Michael Pung, executor of his nephew's estate, disputed the county's refusal to pay surplus proceeds based on a later higher sale price. The court emphasized historical precedent allowing tax-driven property seizures with surplus returns.

The Supreme Court reversed a lower court's decision allowing a Michigan county to seize a family home for a $2,000 tax debt, sending the case back to assess whether the auction was fairly conducted. The court ruled the takings clause requires returning surplus proceeds from tax foreclosure sales based on the actual sale price, not hypothetical fair market value.