Rafaeli, LLC v. Oakland Cnty., Docket No. 156849

CourtSupreme Court of Michigan
Writing for the CourtZahra, J.
Citation952 N.W.2d 434,505 Mich. 429
Decision Date17 July 2020
Docket NumberDocket No. 156849,Calendar No. 1
Parties RAFAELI, LLC, and Andre Ohanessian, Plaintiffs-Appellants, v. OAKLAND COUNTY and Andrew Meisner, Defendants-Appellees.

505 Mich. 429
952 N.W.2d 434

RAFAELI, LLC, and Andre Ohanessian, Plaintiffs-Appellants,
v.
OAKLAND COUNTY and Andrew Meisner, Defendants-Appellees.

Docket No. 156849
Calendar No. 1

Supreme Court of Michigan.

Argued November 7, 2019
Decided July 17, 2020


Zahra, J.

952 N.W.2d 440
505 Mich. 437

Plaintiff Rafaeli, LLC, owed $8.41 in unpaid property taxes from 2011, which grew to $285.81 after interest, penalties, and fees. Oakland County and its treasurer, Andrew Meisner (collectively, defendants), foreclosed on Rafaeli's property for the delinquency, sold the property at public auction for $24,500, and retained all the sale proceeds in excess of the taxes, interest, penalties, and fees. Plaintiff Andre Ohanessian owed approximately $6,000 in unpaid taxes, interest, penalties, and fees from 2011. Like Rafaeli's property, defendants foreclosed on Ohanessian's property for the delinquency, sold his property at auction for $82,000, and retained all the proceeds in excess of Ohanessian's tax debt. The issue in this case is whether defendants have committed an unconstitutional taking by retaining the surplus proceeds from the tax-foreclosure sale of Rafaeli's and Ohanessian's (collectively, plaintiffs) properties that exceed the amount plaintiffs owed in unpaid delinquent taxes, interest, penalties, and

952 N.W.2d 441

fees under the General Property Tax Act (GPTA).1 We hold that defendants’ retention of those surplus proceeds is an unconstitutional taking without just compensation under Article 10, § 2 of our 1963 Constitution. Accordingly, we reverse the judgment of the Court of Appeals and remand this case to the Oakland Circuit Court for proceedings consistent with this opinion.

505 Mich. 438

I. FACTS AND PROCEDURAL HISTORY

Rafaeli purchased a rental property in Southfield for $60,000 on August 15, 2011, but failed to pay the 2011 taxes due on the property in the amount of $536.24.2 Defendants mailed to Rafaeli notice of the delinquency on June 11, 2012. Rafaeli sent payment to defendants on August 30, 2012, yet this payment was insufficient to cover the full amount of the tax delinquency. Defendants mailed a second notice of the delinquency to Rafaeli on September 3, 2012, and Rafaeli sent another payment to defendants on January 14, 2013; however, even after Rafaeli's second payment, a deficiency of $8.41, plus $2.26 in interest, penalties, and fees remained on Rafaeli's property. On February 1, 2013, defendants sent Rafaeli a third notice of delinquency. This delinquency was never paid, and as a result, on March 1, 2013, Rafaeli's property was forfeited in the amount of the unpaid taxes, interest, penalties, and fees.

On May 16, 2013, defendants filed a petition seeking to foreclose all tax-delinquent properties that were forfeited for unpaid 2011 real-property taxes, including Rafaeli's property. On February 26, 2014, a foreclosure hearing was held in the Oakland Circuit Court. Rafaeli did not appear. After the hearing, the court entered a judgment of foreclosure that included Rafaeli's property. At the time of the foreclosure, the delinquency had grown to $285.81 because of penalties, interest, and fees. Rafaeli failed to timely redeem the property by March 31, 2014, resulting in the transfer to defendants of fee simple title to Rafaeli's property.

505 Mich. 439

On August 19, 2014, defendants sold Rafaeli's property at auction to a third party for $24,500. Defendants retained all the surplus proceeds that exceeded the $285.81 debt Rafaeli owed to defendants.

Ohanessian purchased a 2.7-acre property located in the city of Orchard Lake Village in 2004. Ohanessian paid $2,510.05 to defendants to satisfy his 2010 delinquent property taxes but failed to pay his 2011 property taxes.3 After Ohanessian's property was forfeited for the amount of the unpaid taxes, interest, penalties, and fees, defendants added his property to the petition for foreclosure for unpaid 2011 real-property taxes. The same judgment of foreclosure entered on February 26, 2014, that included Rafaeli's property also included Ohanessian's property. At the time of the foreclosure, Ohanessian owed approximately

952 N.W.2d 442

$6,000 in unpaid taxes, interest, penalties, and fees. Ohanessian failed to redeem his property by March 31, 2014, and defendants obtained fee simple title to his property. On September 26, 2014, defendants sold Ohanessian's property at auction to a third party for $82,000. Defendants retained all the surplus proceeds exceeding Ohanessian's tax debts.

Plaintiffs filed this action against defendants in the Oakland Circuit Court, alleging due-process and equal-protection violations as well as an unconstitutional

505 Mich. 440

taking.4 As relevant to this case, plaintiffs specifically alleged that defendants, by selling plaintiffs’ real properties in satisfaction of their tax debts and retaining the surplus proceeds from the tax-foreclosure sale of their properties, had taken their properties without just compensation in violation of the Takings Clauses of the United States and Michigan Constitutions.

The circuit court granted summary disposition to defendants, finding that defendants did not "take" plaintiffs’ properties because plaintiffs forfeited all interests they held in their properties when they failed to pay the taxes due on the properties.5 The court determined that property properly forfeited under the GPTA and in accordance with due process is not a "taking" barred by either the United States or Michigan Constitution. Because the GPTA properly divested plaintiffs of all interests they had in their properties, the court concluded that plaintiffs did not have a property interest in the surplus proceeds generated from the tax-foreclosure sale of their properties.6 Plaintiffs appealed in the Court of Appeals. The Court

505 Mich. 441

of Appeals affirmed the circuit court and rejected plaintiffs’ argument that the GPTA's "scheme" allows for unconstitutional takings.7 Drawing on precedent from the United States Supreme Court regarding civil-asset forfeiture resulting from criminal activity, the Court of Appeals held that defendants acquired their interest in plaintiffs’ properties "by way of a statutory scheme that did not violate due process" and thus defendants were not required to compensate plaintiffs for property that was lawfully obtained.8

952 N.W.2d 443

Plaintiffs sought leave to appeal in this Court, raising the takings issue as the sole issue on appeal. We granted plaintiffs’ application, ordering the parties to address whether defendants violated the Takings Clause of the United States Constitution, the Michigan Constitution, or both by retaining the proceeds from the sale of tax-foreclosed property that exceeded the amount of the taxes, penalties, interest, and fees owed on the property.9

II. OVERVIEW OF THE GPTA

The GPTA permits the recovery of unpaid real-property taxes, penalties, interest, and fees through the foreclosure and sale of the property on which there

505 Mich. 442

is a tax delinquency. Under the current process, tax-delinquent properties are forfeited to the county treasurers; foreclosed on after a judicial foreclosure hearing; and, if not timely redeemed, sold at a public auction.10 Counties may elect to serve as the "foreclosing governmental unit"; otherwise, the state will do so.11

Real-property taxes are assessed and collected first by the city, township, or village treasurer where the

505 Mich. 443

property is located.12 When property taxes are not satisfied and become delinquent, collection is turned over to the foreclosing governmental unit.13 If the county elects to serve as the foreclosing governmental unit, it may create a "delinquent tax revolving fund" that funds local municipalities for the unpaid delinquent taxes.14 The county treasurer

952 N.W.2d 444

then attempts to collect the delinquent taxes.15

On March 1 of each tax year, taxes due in the immediately preceding year that remain unpaid are returned to the county treasurer as "delinquent."16 Notice of the delinquency, which must explain the effect of failing to pay the tax delinquency and the possibility of foreclosure, must be afforded to property

505 Mich. 444

owners throughout the next 12 months.17 On March 1 of the year following delinquency, properties with delinquent taxes are "forfeited" to the county treasurer for the amount of the tax delinquency, as well as any interest, penalties, and fees associated with the delinquency.18 Notably, the term "forfeiture," as used in the GPTA, means only that a foreclosing governmental unit may seek a judgment of foreclosure if the...

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45 practice notes
  • Tyler v. Hennepin Cnty., Case No. 20-CV-0889 (PJS/BRT)
    • United States
    • United States District Courts. 8th Circuit. United States District Court of Minnesota
    • December 4, 2020
    ...of the plaintiff's claim that he had a property interest in the surplus equity. Similarly, in Rafaeli, LLC v. Oakland County , 505 Mich. 429, 429–473, 952 N.W.2d 434 (2020), the Michigan Supreme Court recognized a property right in surplus equity based on state common law.Tyler argues that,......
  • Lanier v. President & Fellows of Harvard Coll., SJC-13138
    • United States
    • United States State Supreme Judicial Court of Massachusetts
    • June 23, 2022
    ...in nature;" it "calls for devising a rule that does not stray too far from the existing regime"); Rafaeli, LLC v. Oakland County, 505 Mich. 429, 472-473 (2020) ("The common law is . . . incremental in adapting to society's changing circumstances, developing gradually to reflect our policies......
  • Hall v. Meisner, Case No. 20-12230
    • United States
    • United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
    • October 4, 2021
    ...in Rafaeli, LLC v. Oakland CountyOn July 17, 2020, the Michigan Supreme Court issued its opinion in Rafaeli, LLC v. Oakland County , 505 Mich. 429, 952 N.W.2d 434 (2020). In Rafaeli , two former property owners brought an action against Oakland County and its Treasurer, Andrew Meisner, alle......
  • Cont'l Res. v. Fair, S-21-074
    • United States
    • Supreme Court of Nebraska
    • March 18, 2022
    ...debt when a tax deed is issued. Here, Fair asks us to follow the lead of the Michigan Supreme Court in Rafaeli, LLC v. Oakland County, 505 Mich. 429, 952 N.W.2d 434 (2020) (Rafaeli). In Rafaeli, the Michigan Supreme Court held that if a tax foreclosure sale yields proceeds in excess of the ......
  • Request a trial to view additional results
45 cases
  • Tyler v. Hennepin Cnty., Case No. 20-CV-0889 (PJS/BRT)
    • United States
    • United States District Courts. 8th Circuit. United States District Court of Minnesota
    • December 4, 2020
    ...of the plaintiff's claim that he had a property interest in the surplus equity. Similarly, in Rafaeli, LLC v. Oakland County , 505 Mich. 429, 429–473, 952 N.W.2d 434 (2020), the Michigan Supreme Court recognized a property right in surplus equity based on state common law.Tyler argues that,......
  • Lanier v. President & Fellows of Harvard Coll., SJC-13138
    • United States
    • United States State Supreme Judicial Court of Massachusetts
    • June 23, 2022
    ...in nature;" it "calls for devising a rule that does not stray too far from the existing regime"); Rafaeli, LLC v. Oakland County, 505 Mich. 429, 472-473 (2020) ("The common law is . . . incremental in adapting to society's changing circumstances, developing gradually to reflect our policies......
  • Hall v. Meisner, Case No. 20-12230
    • United States
    • United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
    • October 4, 2021
    ...in Rafaeli, LLC v. Oakland CountyOn July 17, 2020, the Michigan Supreme Court issued its opinion in Rafaeli, LLC v. Oakland County , 505 Mich. 429, 952 N.W.2d 434 (2020). In Rafaeli , two former property owners brought an action against Oakland County and its Treasurer, Andrew Meisner, alle......
  • Cont'l Res. v. Fair, S-21-074
    • United States
    • Supreme Court of Nebraska
    • March 18, 2022
    ...debt when a tax deed is issued. Here, Fair asks us to follow the lead of the Michigan Supreme Court in Rafaeli, LLC v. Oakland County, 505 Mich. 429, 952 N.W.2d 434 (2020) (Rafaeli). In Rafaeli, the Michigan Supreme Court held that if a tax foreclosure sale yields proceeds in excess of the ......
  • Request a trial to view additional results

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