It’s already settled in Michigan (Rafaeli) that a homeowner has a property interest in the equity in her home, and that if she fails to pay the full amount of her property taxes and the government forecloses, the government can’t keep the proceeds in excess of the amount of the tax delinquency.

But that case didn’t account for those tax foreclosures already underway when the Michigan Supreme Court issued its decision in July 2020. Nor did the case account (obviously) for the subsequent legislative amendments providing a limited procedure by which the former homeowner may claim the excess proceeds.

Thus, we get Proctor v. Saginaw County Bd. of Comm’rs, No. 349557 (Jan. 6, 2022), which involves plaintiffs who

Skip over the court’s discussion of the immunity argument (unless that interests you, of course), and go to page 9 where it gets to our stuff: the takings and unjust enrichment claims. The court reversed the trial court’s entry of summary judgment in favor of the government, concluding that the claims existed before Michigan adopted its constitution:

In the present cases, defendants contend that unjust-enrichment claims lacked viability, but Rafaeli plainly indicates otherwise as a common-law right that preexisted our state Constitution and continued to exist after the Constitution’s ratification. Rafaeli clarified that an unjust-enrichment claim for recovery of the surplus proceeds following a tax-foreclosure sale is a right protected by and enforceable under our Constitution’s Takings Clause and the Legislature could not abrogate that right through amendments to the GPTA.

Defendants also contend that any relief proposed by the Rafaeli decision is not available to plaintiffs because Rafaeli, decided on July 17, 2020, should be given prospective application only, and all the foreclosure proceedings in these cases occurred before July 17, 2020. We disagree.

Slip op. at 11-12 (citations omitted).

The court also relied on County of Wayne v. Hathcock (the case in which the Michigan Supreme Court repudiated Poletown, and applied the public use ruling to pending public use challenges) to conclude that the Rafaeli rule applied to pending cases. Slip op. at 13.

Although this one might look like simply a question of the retroactivity of a court ruling, we think it is much more important because it recognizes that longstanding and preexisting property rights protected by the constitution cannot be abrogated by mere legislation. In short, these claims always existed, and Rafaeli merely confirmed what always was: a homeowner possesses a property interest in the equity in her home, and although the government may sell the property to satisfy outstanding tax obligations, it cannot pocket the difference between what is owed and the sales price. No lagniappe.  

Proctor v. Saginaw County Board of Comm’rs, No. 349557 (Mich. Ct. App. Jan 6, 2022)