This morning, the Supreme Court issued a unanimous decision in Tyler v. Hennepin County, an important Takings Clause property rights case addressing the issue of "home equity theft," a legal regime under which local governments can seize the entire value of a property in order to pay off a much smaller delinquent property tax debt. Geraldine Tyler, the plaintiff in the case, is a 94-year-old widow whose home, valued at $40,000, was seized by Hennepin County after she was unable to pay off $15,000 in property taxes, penalties, interest, and fees. The County then kept the entire $40,000 for itself, as Minnesota law allows.
Today the Supreme Court unanimously ruled that such practices qualify as takings requiring the payment of "just compensation" under the Takings Clause of the Fifth Amendment. Importantly, it also concluded that state law is not the sole source of the definition of property rights under the Takings Clause, and therefore state governments cannot seize private property without compensation simply by redefining it as the state's property.
The unanimous nature of the decision is noteworthy. Takings issues often split the justices along traditional right-left lines. In this case, however, the oral argument made clear that both conservative and liberal justices were highly skeptical of the government's position. An ideologically diverse range of groups also filed amicus briefs supporting Tyler. This broad agreement may be because the case combines traditional conservative and libertarian interest in property rights with left-liberal solicitude for the interest of the poor, the elderly, and minorities—groups that are particularly likely to be victimized by home equity theft.
While the Supreme Court decision left some notable issues unresolved, it nonetheless sets a significant precedent. Most obviously, the jurisdictions that currently authorize home equity theft—some twelve states and the District of Columbia—will no longer be allowed to do so. In addition, the holding that states cannot just redefine property rights at will has important implications for other property rights issues. It makes it harder for states to avoid takings liability.
Here are some key excerpts from Chief Justice John Roberts' majority opinion:
Hennepin County, Minnesota, sold Geraldine Tyler'shome for $40,000 to satisfy a $15,000 tax bill. Instead of returning the remaining $25,000, the County kept it for itself. The question presented is whether this constituted a taking of property without just compensation, in violation of the Fifth Amendment…..
The Takings Clause, applicable to the States through the Fourteenth Amendment, provides that "private property[shall not] be taken for public use, without just compensation…. States have long imposed taxes on property. Such taxes are not themselves a taking, but are a mandated "contribution from individuals . . . for the support of the government . . . for which they receive compensation in the protection which government affords." County of Mobile v. Kimball, 102 U. S. 691, 703 (1881). In collecting these taxes, the State may impose interest and late fees. It may also seize and sell property, including land, to recover the amount owed… Here there was money remaining after Tyler's home was seized and sold by the County to satisfy her past due taxes, along with the costs of collecting them. The question is whether that remaining value is property under the Takings Clause, protected from uncompensated appropriation by the State.
The Takings Clause does not itself define property. For that, the Court draws on "existing rules or understandings" about property rights. Phillips v. Washington Legal Foundation, 524 U. S. 156, 164 (1998). State law is one important source…. But state law cannot be the only source. Otherwise, a State could "sidestep the Takings Clause by disavowing traditional property interests" in assets it wishes to appropriate. Phillips, 524 U. S., at 167; see also… Hall v. Meisner, 51 F. 4th 185, 190 (CA6 2022) (Kethledge, J., for the Court) ("[T]he Takings Clause would be a dead letter if a state could simply exclude from its definition of property any interest that the state wished to take."). So we also look to "traditional property law principles," plus historical practice and this Court's precedents….
The principle that a government may not take more from a taxpayer than she owes can trace its origins at least as far back as Runnymeade in 1215, where King John swore in the Magna Carta that when his sheriff or bailiff came to collect any debts owed him from a dead man, they could remove property "until the debt which is evident shall be fully paid to us; and the residue shall be left to the executors to fulfil the will of the deceased….."
That doctrine became rooted in English law……
This principle made its way across the Atlantic. In collecting taxes, the new Government of the United States could seize and sell only "so much of [a] tract of land . . . as may be necessary to satisfy the taxes due thereon." Act of July 14, 1798, §13, 1 Stat. 601. Ten States adopted similar statutes shortly after the founding….
The consensus that a government could not take more property than it was owed held true through the passage of the Fourteenth Amendment. States, including Minnesota, continued to require that no more than the minimum amount of land be sold to satisfy the outstanding tax debt. The County identifies just three States that deemed delinquent property entirely forfeited for failure to pay taxes…..
The minority rule then remains the minority rule today. Thirty-six States and the Federal Government require that the excess value be returned to the taxpayer…..
Finally, Minnesota law itself recognizes that in other contexts a property owner is entitled to the surplus in excess of her debt. Under state law, a private creditor may enforce a judgment against a debtor by selling her real property, but "[n]o more shall be sold than is sufficient to satisfy" the debt, and the creditor may receive only "so much [of the proceeds] as will satisfy" the debt. Minn. Stat. §§550.20, 550.08 (2022)….
In collecting all other taxes, Minnesota protects the taxpayer's right to surplus…. Until 1935, Minnesota followed the same rule for the sale of real property. The State could sell only the "least quantity" of land sufficient to satisfy the debt, 1859 Minn. Laws p. 58, §23, and "any surplus realized from the sale must revert to the owner," Farnham, 32 Minn., at 11, 19 N. W., at 85.
The State now makes an exception only for itself, and only for taxes on real property. But "property rights cannot be so easily manipulated." Cedar Point Nursery v. Hassid, 594 U. S. ___, ___ (2021) (slip op., at 13)…. Minnesota may not extinguish a property interest that it recognizes everywhere else to avoid paying just compensation when it is the one doing the taking.
In his brief and at the oral argument, Neal Katyal, the prominent Supreme Court litgator representing Hennepin County, claimed that Tyler lacked standing to challenge the seizure of her home equity. The Court rejected his convoluted theory, pointing out (correctly) that Tyler's claim to the $25,000 in home equity "is a classic pocketbook injury sufficient to give her standing." The Court also rejected the similarly weak argument that Tyler had "constructively abandoned" her property by failing to pay the taxes and fees.
While today's ruling is an important win for property rights and sets a significant precedent, it is vague on one key point, and leaves others for future resolution by lower courts. Though the Court decisively repudiated the idea that state law is the sole source of property rights under the Takings Clause, the formulation that courts must "also look to 'traditional property law principles,' plus historical practice and this Court's precedents" is far from precise. For example, what happens if some of these factors cut in favor of the government and others in favor of the property owner? It is also not clear what qualifies as a "traditional property rights principle." Perhaps this vagueness was the price Chief Justice Roberts had to pay to generate a rare unanimous Takings Clause ruling. The justices might not have been able to agree on anything more precise. Regardless, the question of how to apply the Court's standards for identifying property rights is likely to bedevil lower courts, and may have to be clarified in a future Supreme Court case.
The Supreme Court left to lower courts the question of how to calculate compensation in home equity theft cases. During the oral argument, the justices struggled with the issue of whether Tyler should automatically get all of surplus value from the sale of her property at auction, or whether she should instead get the difference between the amount she owed the government and the value of the property at the time it was foreclosed for tax delinquency. The Court chose not to resolve this issue, which is now left to the lower courts.
Finally, in addition to her Takings claim, Tyler argued that the seizure of her home equity violated the Excessive Fines Clause of the Eighth Amendment. Because Tyler prevailed on the takings issue, the Supreme Court chose not to address the Excessive Fines Clause. However, conservative Justice Neil Gorsuch filed a concurring opinion, joined by liberal Ketanji Brown Jackson, in which they conclude that Tyler should likely have prevailed on this issue, as well, if the Court had reached it:
Given its Takings Clause holding, the Court understandably declines to pass on the question whether the Eighth Circuit committed a further error when it dismissed Ms. Tyler's claim under the Eighth Amendment's Excessive Fines Clause…. But even a cursory review of the District Court's excessive-fines analysis—which the Eighth Circuit adopted as "well-reasoned," 26 F. 4th 789, 794 (2022)—reveals that it too contains mistakes future lower courts should not be quick to emulate.
First, the District Court concluded that the Minnesota tax-forfeiture scheme is not punitive because "its primary purpose" is "remedial"—aimed, in other words, at "compensat[ing] the government for lost revenues due to the nonpayment of taxes." 505 F. Supp. 3d 879, 896 (Minn. 2020). That primary-purpose test finds no support in our law. Because "sanctions frequently serve more than one purpose," this Court has said that the Excessive Fines Clause applies to any statutory scheme that "serv[es] in part to punish." Austin v. United States, 509 U. S. 602, 610 (1993)….
Second, the District Court asserted that the Minnesota tax-forfeiture scheme cannot "be punitive because it actually confers a windfall on the delinquent taxpayer when the value of the property that is forfeited is less than the amount of taxes owed." 505 F. Supp. 3d, at 896. That observation may be factually true, but it is legally irrelevant….
Third, the District Court appears to have inferred that the Minnesota scheme is not "punitive" because it does not turn on the "culpability" of the individual property owner. 505 F. Supp. 3d, at 897. But while a focus on "culpability" can sometimes make a provision "look more like punishment," this Court has never endorsed the converse view. Austin, 509 U. S., at 619….
Economic penalties imposed to deter willful noncompliance with the law are fines by any other name. And the Constitution has something to say about them: They cannot be excessive.
In Timbs v. Indiana (2019), the Supreme Court ruled that civil asset forfeitures sometimes qualify as excessive fines under the Eighth Amendment. The question of whether other types of property seizures are also restricted by the Clause is another one that is likely to come up in future cases. Gorsuch and Jackson—justices representing opposite wings of the court—today signal that they, at least, are open to such claims.
NOTE: Geraldine Tyler is represented by the Pacific Legal Foundation, which is also my wife's employer. She, however, is not one of the attorneys working on the case. Congratulations to PLF on the impressive feat of posting two unanimous Supreme Court wins in one day—this one and Sackett v. EPA.
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