In 2019, Isabella County, Michigan, seized the Pung family’s home over a tax debt dispute of about $2,000. This home, valued at nearly $200,000, was sold for just $76,000. It later resold for $195,000. The Pungs ended up with less than half of their home’s market value due to a small tax debt they believed they did not owe.
Recently, the U.S. Supreme Court ruled that while property owners are not automatically entitled to their home’s fair market value when seized to satisfy a debt, the process must be fair. The case was sent back to a lower court to determine if the auction met fairness standards. Justice Clarence Thomas stated the county’s actions likely violated constitutional rights.
The case raises concerns about erasing home equity, which many rely on for retirement or education funds. The Pungs argued that the Fifth Amendment mandates the government to compensate them for the lost equity. The Supreme Court, however, showed hesitance about requiring fair market compensation in every scenario. Forced sales often lead to lower sale prices, a sentiment reflected in Justice Samuel Alito’s opinion.
During court proceedings, Alito quipped about the government’s options before home seizure, suggesting other assets like personal items could be targeted. His comments highlighted the lack of clarity on what possessions should be prioritized for sale. Thomas pointed out alternatives like seizing personal property or bank accounts first, stressing that such extreme measures should be avoided, especially for minor debts.
The government admitted the home would have been sold even for minor debts, as low as $100. In one case, a Michigan home was seized for an $8 underpayment. The seizure of a person’s home for debt must align with constitutional requirements. The Pungs’ attorney compared this situation to a service provider who does not have the right to take a client’s house for unpaid bills.
The Supreme Court agreed that the process needs fairness. Michigan’s auction method seemed engineered to yield low bids, excluding previous homeowners from participation and lacking basic market safeguards. Other states implement fairer methods, like market-rate listings, minimum prices, and judicial reviews, to secure what the government is owed without unfair gains.
The court highlighted potentially unfair procedures, such as unnecessary delays during market downturns. Once the government seizes a home, constitutional standards of “just compensation” must be met. The 6th Circuit Court of Appeals will now decide if the Pungs will be compensated appropriately.
Anastasia Boden, Director of Constitutional Scholarship at Pacific Legal Foundation, represented the Pungs in this lawsuit against Isabella County.