Rafaeli, LLC v. Oakland Cnty.

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.
CourtMichigan Supreme Court

Zahra, J. 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 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.


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.

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 $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 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 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

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


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 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 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 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 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 property is not redeemed; it does not affect title.19

Once forfeiture occurs, the county treasurer must record a certificate of forfeiture with the county register of deeds, placing all parties with an interest in the property on notice that the property has been forfeited to the county treasurer, that the property has not been redeemed, and "that absolute title to the property will vest in the county treasurer on the March 31 immediately succeeding the entry of a judgment foreclosing the property ...."20 Forfeited property may be redeemed at any time on or before that March 31 date if the total amount of unpaid delinquent taxes, interest, penalties, and fees are paid to the county treasurer.21 Meanwhile, foreclosing governmental units must file a petition for foreclosure with the circuit court that presides over where the forfeited property is located no later than the 15th day of June following the forfeiture.22 The petition must "seek a judgment in favor of the foreclosing governmental unit for the forfeited unpaid delinquent taxes, interest, penalties, and fees listed against each parcel of property ... [and] shall request that a judgment be entered vesting absolute title to each parcel of property in the foreclosing governmental unit, without right of redemption."23

A judicial foreclosure hearing must be held in the circuit court within 30 days of March 1 of the year after the petition for foreclosure is filed.24 After the judicial foreclosure hearing, the judgment of foreclosure must be entered by March 30, with an effective date of ...

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