WASHINGTON, D.C. (Michigan News Source) – The U.S. Supreme Court announced on October 3 it will hear Pung v. Isabella County, a Michigan property rights case testing whether local governments can lowball homes at auction and still call it justice. The dispute began with a $2,241.93 tax debt, and ended with a $194,400 Mount Pleasant home sold by the county for just $76,008 – a jaw-dropping gap now at the center of a constitutional showdown.
The estate of the late Timothy Pung, represented by his uncle Michael, argues that Isabella County violated both the Fifth Amendment’s Takings Clause and the Eighth Amendment’s ban on excessive fines by selling the home far below market and awarding the estate “insufficient damages.” The tax lien that triggered the foreclosure stemmed from what the estate calls an alleged misapplication of a “principal residence” exemption.
Fair market value or fire-sale justice?
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Pung’s petition asks the Court to decide whether compensation should reflect the fair market value of the property – not merely the low proceeds from a forced auction. “It’s the owner’s loss, not the taker’s gain, which is the measure of the value of the property taken” the filing notes, quoting a 1946 Supreme Court decision in United States v. Causby.
According to JD Supra, a platform for professional legal analysis, the Supreme Court granted certiorari to decide two key questions:
- Whether the Takings Clause requires compensation based on fair market value of the seized property, rather than merely the surplus from a forced auction sale.
- Whether the forfeiture of substantial home equity in this context is an “excessive fine” under the Eighth Amendment.
This isn’t the Supreme Court’s first rodeo concerning tax debts and takings. In 2023, the Court unanimously sided with 94-year-old Geraldine Tyler, whose Minnesota condo was seized over a small tax debt – a move the justices called a classic “taking.” But Pung goes further, asking what happens when the government undervalues a home to begin with.
Philip Ellison of Outside Legal Counsel PLC in Hemlock, Michigan, who represents the Pung estate, told independent journalist Dave Bondy, “We’re going to argue that the Michigan tax foreclosure system is unconstitutional.” He explained that Michigan counties routinely take homeowners’ equity after foreclosures for unpaid taxes – an issue that he says affects tens of thousands of Michigan residents and could potentially involve billions of dollars nationwide.
From exemption error to constitutional clash.
Although the Michigan Supreme Court ruled in 2020 that counties must return surplus funds from tax sales, Ellison argues that still shortchanges property owners when homes are sold below fair market value.
The Sixth Circuit previously sided with Isabella County, ruling that the auction price – not market value – determines compensation. That’s precisely the precedent the Pungs are asking the nation’s highest court to overturn.
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No trial date has been set, but oral arguments are expected in early 2026. The case could determine whether counties nationwide can keep treating tax foreclosures like bargain-bin sales to recover unpaid taxes – or if the Constitution still requires them to return the full equity value of seized homes, minus the actual taxes owed, instead of fleecing homeowners under the guise of tax collection.
