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Corrupt Government
See other Corrupt Government Articles

Title: Home Equity Theft: How a Man’s Home Was Seized Over $8.41 in Unpaid Taxes
Source: Foundation for Economic Education
URL Source: https://fee.org/articles/home-equit ... ized-over-841-in-unpaid-taxes/
Published: Jul 27, 2019
Author: Brittany Hunter
Post Date: 2019-07-27 11:48:21 by Deckard
Keywords: None
Views: 759
Comments: 3

For three years, the pair scrimped and saved in order to fix up the four-unit property. On the weekends, Ramouldo would spend his days off making the 11-hour drive from New Jersey to Michigan to work on the house, making the much-needed repairs himself. In addition to the small complex, the family had purchased a small home next door. The plan was to renovate and rent out each unit and then use that money to help Ramouldo retire and move his family to the small home in Michigan, where the rest of their extended family resides.

Erica, who had seen her father work long hours and sacrifice to provide for her family over the years, was happy to help her father buy the property. She was eager to begin building her own financial legacy and saw the property as an excellent investment opportunity.

These plans were derailed, however, when their property was seized by Wayne County, Michigan, in 2017 and sold to a private buyer.

All because they unknowingly underpaid their tax bill—by $144.

While the father and daughter had been paying their property taxes diligently for each year they owned the property, in 2014, they unintentionally underpaid by $144. Neither knew about this miscalculation or the situation could have quickly been remedied. And without knowledge of this outstanding debt, the small amount grew as the county tacked on interest charges to the tune of $359.

To be sure, when interest was accounted for, the Perez family did owe roughly $500 in unpaid taxes to the county. County officials used this as justification to seize, sell, and then keep the $108,000 revenue earned from the sale of said property.

In the American legal system, there is a maxim: the punishment must fit the crime. But when considering the small amount by which the Perez family underpaid their property taxes, this seems like a disproportionate punishment to receive.

The government is allowed to seize property in order to settle a debt owed by an individual. However, it isn’t allowed to take more than it is owed. And in the instance of the Perez family property, Wayne County kept every penny it earned from the sale of their property—a practice known as home equity theft.

Fortunately, Pacific Legal Foundation (PLF) has stepped in and on July 9th, announced that it had filed suit on behalf of the Perez family against Wayne County and County Treasurer Eric Sabree.

Many of us have accidentally underpaid a bill before. Whether we were distracted, busy, or simply not paying enough attention to the total amount due, accidents happen to everyone. Eager to get the full amount owed, most companies will send strongly worded letters or call incessantly until you cough up the remaining amount due. It’s completely understandable as to why an entity would do this: they want what is owed.

However, if they tried to take your car away over the miscalculation of a few dollars, most people would be angry—and justifiably so.

When it comes to property taxes, if an individual underpays by even just a few dollars, there are 12 different state governments that can and will seize your property and sell it, without having to pay you a dime of the earnings. This is known as home equity theft. Unfortunately, the Perez family is not the only victim of this practice in Michigan.

In 2014, Uri Refaeli lost his home after it was foreclosed on and seized by Oakland County, Michigan. In 2011, Rafaeli purchased a small $60,000 property for his business, Rafaeli, LLC. To make matters worse for Michigan, the state also has a shady reputation for using this practice to its own benefit.

While he had paid his 2012 and 2013 property taxes in full, he discovered that he had accidentally underpaid in 2011. When he made this realization and tried to correct his mistake in 2013, he forgot to account for the interest that had accrued on his back taxes. As a result, he underpaid by a measly $8.41. The county seized and sold his property for $24,500. Rafaeli never saw a dime of this money.

When it comes to outstanding debt, just like private companies, governments are eager to get what is owed and there nothing wrong with them attempting to do so. However, when they begin to go after more than they are owed, the situation becomes troublesome.

To make matters worse for Michigan, the state also has a shady reputation for using this practice to its own benefit. According to Pacific Legal Foundation (PLF), local governments pad their budgets with the money earned from this stolen property. Each year in Detroit’s budget, there is a line with the estimated total revenue that the government is expecting to bring in from foreclosures of this very nature.

Earlier this year, it was discovered that Wayne County Treasurer Eric Sabree had violated Treasurer’s office rules by funneling foreclosed properties to family members and well-established and connected businessman for a fraction of the cost.

While state Treasurer’s office rules prohibit family members from participating in these auctions, several Freedom of Information Act requests filed on behalf of a Detroit News investigation found that transfers involving Sabree's family overlap with his time in office. Since 2011, when Sabree began as deputy treasurer, Wayne County has transferred ownership of more than 1/4 of privately owned properties in Detroit as a result of back taxes—making the whole situation in Michigan even more suspicious.

Michigan is not the only state guilty of using the practice of home equity theft. In Montana, local governments have been known to sell private homes of those with back taxes to “preferred” private investors, a practice that helped get the practice of home equity theft banned statewide just a few months ago.

Eighty-year-old electrician Gary Guidotti once owned four homes in Great Falls, Montana, which he rented out to help support himself and pay his bills. When the Great Recession hit in 2007, some of his tenants were no longer able to afford rent and stopped paying altogether. And without their rent helping to support him, Guidotti stopped paying his property taxes.

In 2008, Cascade County, Montana issued a tax lien of $1,125.45 on one of his homes. Just 17 months after issuing the lien, the county ended up selling it to a well-connected private entity for pennies on the dollar at $667.20. The private company, Sunrise Financial, acquired the deed to the property in 2011 and in 2015, sold the property for $139,300. Guidotti, of course, received no compensation from the sale of his home.

“This can’t be fair,” Guidotti said. “It (the law) has to be changed, but what’s the sense in fighting? The lawyers will have it all anyway. It’s just the way it goes.”

Without his properties, Guidotti was forced to move into a motorhome parked behind one of the homes that he used to own.

Our country was founded on the fervent belief that individuals have the right to their life, liberty, and, as is especially applicable here, their property. Greatly influenced by philosopher John Locke and his Second Treatise on Government, our country’s Founders understood how important property rights were to securing individual liberty and protecting Americans against government overreach.

In chapter five of Locke’s famous essay, “On Property,” he writes:

Though the earth, and all inferior creatures, be common to all men, yet every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature hath placed it in, it hath by this labour something annexed to it, that excludes the common right of other men: for this labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to (emphasis added), at least where there is enough, and as good, left in common for others.

When a person works, like Ramouldo Perez did, and uses the fruits of his or her labor to purchase property, that property is theirs and theirs alone. This respect for the sanctity of property rights has been one of the most defining characteristics of the American idea.

Yet, practices like home equity theft and civil asset forfeiture, which allow law enforcement to strip individuals of their property without due process, have belittled this sacred principle and harmed many innocent people in the process. The confiscation of a person’s property, especially over a few dollars of unpaid taxes, is thoroughly unAmerican. Private property should be protected by the government, not seized and sold off before an individual has an opportunity to remedy the situation.

The unconstitutional practice of home equity theft has allowed individuals to be stripped of their property without fair compensation. But there is hope that this practice could soon be reined in or perhaps even stopped altogether.

In May, after diligent efforts made by PLF, Montana passed Senate Bill 253, giving property owners further protections against home equity theft.

The new law protects homeowners’ equity by requiring homes be sold to the highest bidder. Now the extra profits must be returned to the former owner after deducting taxes, interest, penalties, and costs,

Christina Martin of the Pacific Legal recently wrote.

In addition to Perez v. Wayne County, this fall, the Michigan Supreme Court will also begin hearing oral arguments for Rafaeli v. Oakland County.

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#1. To: Deckard (#0)

The new law protects homeowners’ equity by requiring homes be sold to the highest bidder. Now the extra profits must be returned to the former owner after deducting taxes, interest, penalties, and costs,

Cool. Sell your house, make a profit, and avoid the 6% realtor fees.

misterwhite  posted on  2019-07-27   11:59:06 ET  Reply   Trace   Private Reply  


#2. To: Deckard, misterwhite, A K A Stone (#0)

Home Equity Theft: How a Man’s Home Was Seized Over $8.41 in Unpaid Taxes

[...]

Christina Martin of the Pacific Legal recently wrote.

In addition to Perez v. Wayne County, this fall, the Michigan Supreme Court will also begin hearing oral arguments for Rafaeli v. Oakland County.

As the article is a tad remiss in relating what the courts stated in relation to the prior failed legal efforts. In Rafaeli, the Michigan Court of Appeals found a forfeiture; not a taking, and cited U.S. Supreme Court precedent. A forfeiture does not violate the takings clause of the Constitution. Judge Shapiro’s concurring opinion concludes, “In light of the United States Supreme Court's decision in Nelson, I conclude we must reject plaintiffs' claim despite what appears to be an obvious injustice that requires remedial action. However, until such time as the United States Supreme Court revisits the issue, it is the Legislature, and not this Court, that must take such action.”

A forfeiture is not any form of punishment, nor is it home equity theft, or any other form of theft.

In Perez, the Circuit Court for the County of Wayne [Michigan] found, “That because the Treasurer provided Romualdo and Erica Perez with notice of the foreclosure action meeting the requirements for constitutional due process, as well as for the other reasons stated on the record, this Court lacks jurisdiction to set aside the foreclosure judgment....”

In the Circuit Court for the County of Wayne [Michigan]:

ORDER DENYING ROMUALDO AND ERICA PEREZ S MOTION TO SET ASIDE AND/OR RELIEF FROM JUDGMENT OF TAX FORECLOSURE

At a session of said Court, held in the

City of Detroit, County State of Michigan, on 12/21/2017

PRESENT: HONORABLE

Robert J. Colombo, Jr. Circuit Court Judge

The Respondents, Romualdo and Erica Perez, having filed a Motion to Set Aside the Judgment of Foreclosure with respect to tax parcel no. 12008570., c/k/a 2028 24th Street, Detroit, MI (“subject property”); and Responses to the Motion having been filed by the Petitioner, Wayne County Treasurer (“Treasurer”) and Necessary Intervening Party, Cobblestone Detroit, LLC; and the Court having heard oral argument by the parties on December 21,2017 and being fully advised in the premises,

IT IS THEREFORE ORDERED:

That because the Treasurer provided Romualdo and Erica Perez with notice of the foreclosure action meeting the requirements for constitutional due process, as well as for the other reasons stated on the record, this Court lacks jurisdiction to set aside the foreclosure judgment and therefore Romualdo and Erica Perez Motion to Set Aside the Judgment of Foreclosure as to the subject property is hereby DENIED.

This Order resolves the last pending claim as to the subject property, only, and does not otherwise close this case.

IsI Robert J. Colombo, Jr. Honorable Robert J. Colombo, Jr.

16-007539-CH

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STATE OF MICHIGAN

COURT OF APPEALS

UNPUBLISHED
October 24, 2017

No. 330696
Oakland Circuit Court
LC No. 2015-147429-CZ

RAFAELI, LLC, and ANDRE OHANESSIAN,
Plaintiffs-Appellants,

v.

OAKLAND COUNTY and ANDREW MEISNER,
Defendants-Appellees.

Before: MARKEY, P.J., and METER and SHAPIRO, JJ.

PER CURIAM.

Plaintiffs, Rafaeli, LLC, and Andre Ohanessian, appeal as of right an order granting summary disposition to defendants, Oakland County and its treasurer Andrew Meisner, in this case involving the General Property Tax Act, MCL 211.1 et seq.1 We affirm.

Each plaintiff owned property on which defendants foreclosed because of tax delinquencies. Plaintiffs' lawsuit, styled as a putative class action, alleged various constitutional violations. The trial court found no such violations and ruled, in connection with a motion for summary disposition, that plaintiffs had forfeited their properties.

On appeal, plaintiffs first argue that the GPTA is unconstitutional on its face because it violates due process guarantees by prescribing insufficient steps for a governmental entity to take when it knows or has reason to know that its efforts to provide notice of tax delinquency to a taxpayer have failed.

This Court reviews de novo a trial court's decision regarding a motion for summary disposition. Ardt v Titan Ins Co, 233 Mich App 685, 688; 593 NW2d 215 (1999). We likewise review de novo issues of statutory or constitutional interpretation. Janer v Barnes, 288 Mich App 735, 737; 795 NW2d 183 (2010).

The Michigan Supreme Court, recognizing the applicability of Jones v Flowers, 547 US 220, 225; 126 S Ct 1708; 164 L Ed 2d 415 (2006),2 ruled in Sidun v Wayne Co Treasurer, 481

____________________

1 Pacific Legal Foundation filed an amicus curiae brief in support of plaintiffs.

- - - - - - - - - -

Mich 503, 505; 751 NW2d 453 (2008), that, where notices of tax delinquencies were returned to a county treasurer as undeliverable, the county was not entitled to proceed with foreclosure without undertaking “reasonable follow-up methods . . . .” The Court noted that “[r]easonable follow-up measures directed at the possibility that the addressee had moved would be to post notice on the front door or to send notice addressed to ‘occupant.’” Id. at 512. The Court also pointed out that, “although the government must take reasonable additional steps to notify the owner, it is not required to go so far as to search for an owner's new address in the phonebook and other government records such as income tax rolls.” Id. (quotation marks, indications of alterations, and citation omitted).

Plaintiffs argue that the GPTA falls short of the requirements of Jones and Sidun that foreclosing governmental units take additional steps when knowing that attempts to serve notice have failed and that, therefore, the GPTA is unconstitutional on its face. However, a statutory provision is not unconstitutional on its face unless there is no set of circumstances under which it could be applied constitutionally. Bonner v City of Brighton, 495 Mich 209, 223 n 26; 848 NW2d 380 (2014); see also Judicial Attorneys Ass'n v Michigan, 459 Mich 291, 303; 586 NW2d 894 (1998). The GPTA does not authorize proceeding to foreclosure where notice consists of a single attempt at mailing known to have failed, but rather, it specifies alternative means of identifying a valid address, mandates personal visits to the subject property, and sets forth requirements for notice by publication. See MCL 211.78i. It is reasonable to presume that following the notice requirements of the GPTA usually results in providing the affected taxpayer with actual notice of foreclosure proceedings. We reject plaintiffs' claim of facial unconstitutionality.

Plaintiffs next argue that the GPTA, as applied to each plaintiff, resulted in a deprivation of constitutional due process in connection with notice.

We do not agree. We note, initially, that under MCL 211.78i(10), “The failure of the foreclosing governmental unit to comply with any provision of this section shall not invalidate any proceeding under this act if the owner of a property interest or a person to whom a tax deed was issued is accorded the minimum due process required under the state constitution of 1963 and the constitution of the United States.”

Plaintiffs' emphasis on Jones and Sidun notwithstanding, defendants did not simply rely on a mailing to an address they learned was ineffective. Rafaeli paid taxes in August 2012 and January 2013 in response to notices of deficiencies sent to its address as indicated on the subject property's deed, but a third such notice prompted no such response; apparently defendants had no reason to doubt that that address ceased to be effective but for that lack of a response. Additional steps then included a personal visit to the property, where notice was left with a tenant, plus the identification of a resident agent, and notice sent to Rafaeli at the agent's address. Plaintiffs identify no major misstep on defendants' part when they complain that notice

____________________

2 The Court in Jones stated, “We hold that when mailed notice of a tax sale is returned unclaimed, the State must take additional reasonable stops to attempt to provide notice to the property owner before selling his property, if it is practicable to do so.” Jones, 547 US at 225.

- - - - - - - - - -

sent to the corporation's identified resident agent's address was addressed to the corporation instead of the agent. Further, plaintiffs specify no additional step defendants might have taken that would have better provided Rafaeli with notice. The efforts defendants undertook to serve notice on Rafaeli satisfied the minimal requirements of due process, insofar as the notice was intended to advise the corporation of its tax liabilities and that its property would be subject to foreclosure proceedings to satisfy those liabilities.

Concerning Ohanessian, he paid taxes on his property for years before moving to California in 2011. Defendants sent notices of tax delinquencies to Ohanessian's former Michigan address in June 2013, December 2013, and February 2014. Defendants filed with their motion for summary disposition an affidavit from their chief of tax administration, who attested that notices were sent to both of the addresses on file for Ohanessian, respectively in Livonia and Eastpointe, but that the treasurer's office had no record of any California address for that taxpayer. The affidavit further reported that “the Treasurer published three notices of the properties subject to foreclosure in the 2013 foreclosure case: December 27, 2013, January 3, 2014 and January 10, 2014.”

The validity of the foreclosure depended not on perfect compliance with the GPTA, but on satisfying minimal constitutional due process requirements. MCL 211.78i(10). By pointing out that defendants' agent failed to arrange for return receipt in connection with notice sent by certified mail, plaintiffs essentially admit that defendants had no reason, but for the lack of a response, to doubt that the attempted mail service was successful. Further, plaintiffs offer no basis for doubting defendants' chief of tax administration's account of having published notice on three occasions. Here again, defendants did not simply rely on a mailing they knew was unsuccessful.

Regardless, to the extent that the United States Supreme Court's admonishment that “when mailed notice of a tax sale is returned unclaimed, the State must take additional reasonable steps to attempt to provide notice” is applicable, so is the qualification that such additional steps are required only “if it is practicable to do so.” Jones, 547 US at 225 (emphasis added). And, as was the case with regard to plaintiff Rafaeli, plaintiffs specify no additional reasonable step defendants might have taken that would have better provided Ohanessian with notice.3 For these reasons, we conclude that the efforts defendants undertook to serve notice on Ohanessian satisfied the minimal requirements of due process, insofar as the notice was intended to advise him of his tax liabilities and that his property would be subject to foreclosure proceedings to satisfy those liabilities.4

____________________

3 Although plaintiffs complain of a lack of evidence of a personal visit to Ohanessian’s property, they do not address whether it would have been practicable to do so, and stop short of stating that such a visit would have satisfactorily supplemented the unsuccessful mailings for purposes of due process.

4 Plaintiffs complain that discovery had not been completed at the time of the grant of summary disposition, yet also state that “the parties had stipulated to withholding discovery.” At any rate, there was no fair likelihood that further discovery would have yielded any information allowing

- - - - - - - - - -

Plaintiffs next argue that defendants' administration of the GPTA's show-cause hearing requirement, see MCL 211.78j, “allows them to play judge, jury, and executioner without any of the procedural safeguards required by the Due Process Clause.” Plaintiffs contend that the show­cause hearings deprive a delinquent taxpayer of a meaningful opportunity to be heard because of the way defendants conduct the hearings.

We agree with defendants that plaintiffs do not have standing to raise this issue. In Michigan, a party has standing if it has a legal cause of action, if the party is seeking declaratory relief and satisfies the requirements of the pertinent court rule, or “if the litigant has a special injury or right, or substantial interest, that will be detrimentally affected in a manner different from the citizenry at large or if the statutory scheme implies that the Legislature intended to confer standing on the litigant.” Lansing Sch Ed Ass'n v Lansing Bd of Ed, 487 Mich 349, 372; 792 NW2d 686 (2010).

Plaintiffs did not participate in any show-cause hearings below, and so suffered no injury from the manner in which such hearings are conducted. Although they put forward the attendant lost opportunity to “show cause why absolute title to that property should not vest in the foreclosing governmental unit” as required by MCL 211.78j(2) as one of the consequences of their allegedly not having received adequate notice, for purposes of this issue they object in general terms to how defendants purportedly conduct show-cause hearings. Further, plaintiffs explain neither how they came to understand how defendants normally conduct such business, nor why they are so certain that, had they appeared for their show-cause hearings, defendants would have prevented them from exercising their statutory right to show cause in fact.

Plaintiffs insist that they are entitled to declaratory relief in this regard. According to MCR 2.605(A)(1), “In a case of actual controversy within its jurisdiction, a Michigan court of record may declare the rights and other legal relations of an interested party seeking a declaratory judgment, whether or not other relief is or could be sought or granted.” A court is thus authorized to entertain an action for declaratory judgment where “necessary to guide a plaintiff's future conduct in order to preserve the plaintiff's legal rights.” Citizens for Common Sense in Gov’t v Attorney General, 243 Mich App 43, 55; 620 NW2d 546 (2000). However, because plaintiffs did not participate in the show-cause hearing offered by defendants, their objections are based on a hypothetical scenario. See id.

In addition, plaintiffs' having missed their opportunity to participate in a show-cause hearing in connection with their respective parcels rendered moot any questions concerning how well such a hearing would have comported with the statute requiring them. “A case is moot when it presents only abstract questions of law that do not rest upon existing facts or rights.” B P 7 v Bureau of State Lottery, 231 Mich App 356, 359; 586 NW2d 117 (1998). “As a general rule, an appellate court will not decide moot issues.” Id.

____________________

for recovery by plaintiffs. Liparoto Construction, Inc v Gen Shale Brick, Inc, 284 Mich App 25, 33; 772 NW2d 801 (2009).

- - - - - - - - - -

Because plaintiffs suffered no injury relating to how defendants conduct show-cause hearings, and can only speculate concerning what might have transpired had they appeared for one and demanded their attendant statutory rights, and because their having missed that opportunity in connection with their respective property interests rendered the issue moot, we affirm the circuit court's decision not to grant relief with regard to this issue.

Plaintiffs next argue that the GPTA is unconstitutional because it mandates that governmental entities retain proceeds beyond those required to satisfy delinquent tax bills; they argue that the GPTA therefore allows unconstitutional takings. We disagree. This issue is easily resolved by reference to Bennis v Michigan, 516 US 442, 452; 116 S Ct 994; 134 L Ed 2d 68 (1996), a United States Supreme Court case that post-dates other United States Supreme Court cases cited by plaintiffs. In Bennis, id. at 443, the Court set forth the following summary: “Petitioner was a joint owner, with her husband, of an automobile in which her husband engaged in sexual activity with a prostitute. A Michigan court ordered the automobile forfeited as a public nuisance, with no offset for her interest, notwithstanding her lack of knowledge of her husband's activity. We hold that the Michigan court order did not offend the Due Process Clause of the Fourteenth Amendment or the Takings Clause of the Fifth Amendment.” With regard to the takings argument, the Court stated:

Petitioner also claims that the forfeiture in this case was a taking of private property for public use in violation of the Takings Clause of the Fifth Amendment, made applicable to the States by the Fourteenth Amendment. But if the forfeiture proceeding here in question did not violate the [due process requirement of the] Fourteenth Amendment, the property in the automobile was transferred by virtue of that proceeding from petitioner to the State. The government may not be required to compensate an owner for property which it has already lawfully acquired under the exercise of governmental authority other than the power of eminent domain. [Id. at 452.]

Defendants obtained the property by way of a statutory scheme that did not violate due process. The constitution does not require them to compensate plaintiffs for the lawfully-obtained property. Id.5 Plaintiffs' taking argument is without merit.6 The trial court did not err in granting defendants summary disposition and in denying plaintiffs' motion for reconsideration.

____________________

5 Plaintiffs attempt to distinguish Bennis by stating that it involved an “overt, intentional act of the [d]efendant in taking part in the crime of pandering.” First, the petitioner in Bennis was the wife of the person who was “pandering” and took part in no “overt, intentional act” herself. See Bennis, 516 US at 443. Second, plaintiffs here also “acted” contrary to the welfare of the state by failing to pay their taxes.

6 Plaintiffs failed adequately to address an ostensible additional issue, involving the Eight Amendment of the United States Constitution, set forth in their primary brief and thus have abandoned this issue. See Wilson v Taylor, 457 Mich 232, 243; 577 NW2d 100 (1998) (discussing inadequate briefing). Plaintiffs mention the issue briefly in footnotes and then, in discussing their takings issue, plaintiffs undercut their ostensible Eight Amendment claim by

- - - - - - - - - -

Affirmed.

/s/ Jane E. Markey

/s/ Patrick M. Meter

____________________

stating: “Neither the [c]ourt nor the [t]reasurer has characterized the GPTA's forfeiture scheme as punishment for a crime. If they had, the law's application to [p]laintiffs and thousands of others would raise other constitutional issues, like the Eight Amendment's ban on excessive fines.” We reject plaintiffs’ attempt to revive the issue by way of their reply brief. Plaintiffs have also abandoned their ostensible issue regarding substantive due process by mentioning it only in passing. Id. Plaintiffs have also failed adequately to brief an issue relating to unjust enrichment. They complain that the lower court failed to provide a detailed explanation for its ruling on this issue but then provide insufficient details themselves, setting forth no rules and offering no analysis regarding the extent to which the GPTA did or did not displace the common law with regard to unjust-enrichment claims.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

In the Supreme Court of Michigan, Judge Shapiro’s concurring opinion made it unanimous:

STATE OF MICHIGAN

COURT OF APPEALS

UNPUBLISHED
October 24, 2017

No. 330696
Oakland Circuit Court
LC No. 2015-147429-CZ

RAFAELI, LLC, and ANDRE OHANESSIAN,
Plaintiffs-Appellants,

v

OAKLAND COUNTY and ANDREW MEISNER,
Defendants-Appellees.

Before: MARKEY, P.J., and METER and SHAPIRO, JJ.

SHAPIRO, J. (concurring).

I concur with my colleagues in concluding that constitutional notice was provided and that plaintiffs lack standing to attack the hearing methodology. I also concur with my colleagues' conclusion that plaintiffs have failed to state a claim in their constitutional challenge to MCL 211.78g. However, I reach that conclusion through a different analysis.

The challenged statute provides that if a property owner fails to cure a tax delinquency within the time provided, the individual's entire interest in the property is forfeited to the county treasurer regardless of the amount of the deficiency and the value of the property. MCL 211.78g. Plaintiffs assert that the statute violates the Fifth Amendment's Takings Clause, and rely in large measure on the United States Supreme Court decision in US v Lawton, 110 US 146; 3 S Ct 545; 28 L Ed 100 (1884). In that case, the heir of a person, whose property valued at $1,110 was seized in response to a tax delinquency of $88, which with penalty, interest, and costs had grown to $170.50, sought the difference between the value of the property and the total tax liability. Id. at 147. The United States Supreme Court stated, “To withhold the surplus from the owner would be to violate the fifth amendment to the constitution, and deprive him of his property without due process of law or take his property for public use without just compensation.” Id. at 150.

Plaintiffs' argument fails however because the United States Supreme Court later disavowed the constitutional aspect of Lawton, concluding that it was decided solely on statutory grounds. Nelson v City of New York, 352 US 103, 110; 77 S Ct 195; 1 L Ed 2d 171 (1956). In Nelson, a taxpayer challenged the city's retention of the foreclosure sale proceeds above the amounts owed for the delinquent taxes. Id. at 109-110. The Supreme Court rejected the challenge stating, “What the City of New York has done is to foreclose real property for charges four years delinquent and, in the absence of timely action to redeem or to recovery any surplus,

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retain the property or the entire proceeds of its sale. We hold that nothing in the Federal Constitution prevents this where the record shows adequate steps were taken to notify the owners of the charges due and the foreclosure proceedings.” Id. at 110 (emphasis added). The ruling of the United States Supreme Court rejecting a constitutional challenge to such statutes appears clear and unequivocal.

My colleagues also affirm the dismissal of plaintiffs' claims, but rather than relying on Nelson, conclude, erroneously I believe, that this case is controlled by Bennis v Michigan, 516 US 442, 452; 116 S Ct 994; 134 L Ed 2d 68 (1996), which addressed forfeiture of property involved with, or resulting from, criminal activities. By resting solely on Bennis, the majority implicitly concludes that all “forfeitures” are equal under the law, whether based upon a criminal enterprise or a property owner's failure to pay $8.41 in taxes. I respectfully disagree, and suggest that the substance and not the nomenclature should control. I think that this case bears little, if any, relation to Bennis, and that it is a mistake to conclude that Bennis addresses, let alone controls, the issues in this case.1

Despite my concurrence, I recognize that plaintiffs' claims call out for relief.2 Although Rafaeli LLC's federal court suit was dismissed on jurisdictional grounds, Judge Berg recognized the need for some action in his opinion:

It cannot be denied that the concept of the state confiscating all of the equity of a citizen's property, worth between $24,500 and $70,000, and selling it and keeping the entire proceeds—all to collect $8.41 in property taxes and $277.40 in interest and fees, is a manifest injustice that should find redress under the law. Property taxes must be paid, but for the County Treasurer to reap such an overwhelming windfall by depriving a property owner of his entire interest in the
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1 Looking to civil asset forfeiture as a model for enforcement of taxation laws is unsound for other reasons. First, no other area of the law seems to draw as much advocacy for reform. See, e.g., Ford, Due Process for Cash Civil Forfeitures in Structuring Cases, 114 Mich L Rev 455 (2015); Kornfeld & De Corso, Uncivil Forfeitures, LA Law 39 (2003); O'Brien, “Caught in the Crossfire”: Protecting the Innocent Owner of Real Property, 65 St John's L Rev 521 (1991). Second, in Bennis, the majority simply deferred to “a long and unbroken line of cases,” 516 US at 446, over the objections of four dissenting justices, while admitting that the “argument that the Michigan forfeiture statute is unfair because it relieves prosecutors from the burden of separating co-owners who are complicit in the wrongful use of property from innocent co-owners . . . has considerable appeal . . . .” Id. at 453. The Bennis majority further declined to concern itself with the potential for an asset of great value to be seized over a trivial criminal violation, on the ground that the case before it did not present such an extreme situation. Id. at 450-451.

2 Rafaeli, LLC owed $8.41 in taxes, which with interest amounted to a delinquency of $330 on real property that the city then sold for $24,000. Ohanessian owed approximately $8,000 in taxes, and the city sold the property for $80,000.2

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property, and gain tens of thousands of dollars more than the tax bill ever was, looks more like an abuse of power than like a local government's reasonable measures to ensure the collection of property taxes. . . . [Rafaeli, LLC v Wayne Co unpublished opinion of the United States District Court for the Eastern District of Michigan, issued June 4, 2015 (Docket No. 14-13958), p 3 n 2.]

Similarly, dissenting from the dismissal of a similar case on jurisdictional grounds, Chief Judge Kethledge opined that the pertinent statute is a “gross injustice—both equitably, and from the standpoint of the interests protected by takings law . . . .” Wayside Church v Van Buren Co, 847 F3d 812, 823 (CA 6, 2017) (KETHLEDGE, C.J., dissenting).3

In light of the United States Supreme Court's decision in Nelson, I conclude we must reject plaintiffs' claim despite what appears to be an obvious injustice that requires remedial action. However, until such time as the United States Supreme Court revisits the issue, it is the Legislature, and not this Court, that must take such action.

/s/ Douglas B. Shapiro

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3 Plaintiffs also point out that Michigan is one of only eleven states that do not return the surplus value of the property to the taxpayer. However, plaintiffs concede that those states that do require return of the surplus value all do so as a result of legislation, not judicial action.

nolu chan  posted on  2019-07-27   18:19:08 ET  Reply   Trace   Private Reply  


#3. To: nolu chan (#2)

A forfeiture is not any form of punishment, nor is it home equity theft, or any other form of theft.

Well, you know that and I know that, but Deckard obviously doesn't. Then again, he calls a legal arrest "kidnapping", so there's that.

misterwhite  posted on  2019-07-28   10:30:19 ET  Reply   Trace   Private Reply  


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