Pung v. Isabella County
When a government takes a person's home to collect a tax debt and keeps all the proceeds—including any amount exceeding the debt—does that constitute an unconstitutional 'taking' of private property without just compensation under the Fifth Amendment?
Background & Facts
Timothy Scott Pung owned property in Isabella County, Michigan. When he fell behind on his property taxes, the county used Michigan's General Property Tax Act to seize and sell his property. Under Michigan law at the time, the government was entitled to keep the entire sale proceeds—even if the sale netted far more than the amount of taxes owed. The county kept the surplus beyond the tax debt, leaving Pung's estate with nothing. His personal representative, Michael Pung, sued Isabella County, arguing that keeping the surplus profit violated the Takings Clause of the Fifth Amendment, which prohibits the government from taking private property without paying 'just compensation.'
The United States Court of Appeals for the Sixth Circuit ruled against Pung, holding that no unconstitutional taking occurred because Michigan's statutory scheme defined the property rights at stake—in other words, Michigan law itself said that taxpayers had no right to the surplus equity once a tax foreclosure was complete. The Sixth Circuit reasoned that the government's retention of surplus was lawful under that framework.
The Supreme Court agreed to hear the case after granting certiorari in October 2025. This case follows closely on the heels of Tyler v. Hennepin County (2023), in which the Supreme Court unanimously held that a similarly situated Minnesota homeowner did have a constitutionally protected property interest in the equity of her home beyond the tax debt. The Court in Tyler left open important follow-on questions about the remedy, and Pung's case presses those questions in the Sixth Circuit context.
Why This Case Matters
This case has major implications for millions of American homeowners, particularly elderly and low-income individuals, who can lose their homes—and all accumulated equity—over relatively modest unpaid tax bills. Dozens of states and localities have operated tax foreclosure systems that allow governments to retain all sale proceeds, and the Court's decision will determine whether those practices violate the Constitution's Takings Clause. A ruling for the petitioner could require governments across the country to compensate former property owners for equity stripped away during foreclosure, potentially affecting billions of dollars in past and future transactions.
The case also forces the Court to clarify the scope and remedies available after its 2023 Tyler v. Hennepin County decision, which established the constitutional right but did not fully resolve what compensation is owed or how lower courts should calculate it. The extraordinary breadth of amicus participation—including the U.S. Solicitor General, numerous states, local government associations, consumer advocacy groups, and property rights organizations—reflects how consequential the ruling will be for government finance, housing policy, and constitutional property rights.
The Arguments
When Isabella County seized and sold Timothy Pung's property for unpaid taxes and kept all sale proceeds beyond the tax debt, it unconstitutionally took his property without just compensation in violation of the Fifth Amendment. The Supreme Court's 2023 decision in Tyler v. Hennepin County confirmed that a homeowner's surplus equity is a constitutionally protected property interest, and Isabella County's retention of that surplus must be compensated. Michigan cannot define away the constitutional protection by structuring its foreclosure statute to extinguish property rights before the taking occurs.
- Tyler v. Hennepin County (2023) squarely established that homeowners retain a protected property interest in equity above the tax debt, and that precedent controls here.
- The government may not use its own statutes to redefine property rights in a way that strips constitutional protections before a taking occurs—what the Court calls the 'anti-circularity' principle.
- Keeping surplus proceeds is not a legitimate method of collecting taxes; it amounts to a windfall for the government at the owner's expense.
- Just compensation requires returning the difference between the sale price and the tax debt owed, along with any applicable interest or damages.
Michigan's tax foreclosure scheme operates within constitutional limits because property owners receive extensive pre-foreclosure notice and opportunity to redeem their property, and the statutory framework governs what property rights exist at the moment of transfer. The county argues that even if Tyler v. Hennepin County applies, important questions remain about the scope of any remedy, the measure of just compensation, and whether federal or state law should govern these property-right definitions. The county contends that local governments rely on the certainty of clean title from tax foreclosures to function, and that disrupting this system retroactively would impose severe fiscal harm on municipalities.
- Michigan's robust redemption period and notice requirements protect property owners long before any sale occurs, distinguishing this scheme from an unconstitutional forfeiture.
- Even after Tyler, the measure of 'just compensation' is genuinely disputed—it is not automatically the full surplus proceeds, and courts must carefully assess fair market value and offsetting government expenditures.
- State law traditionally defines property rights, and federal courts should not lightly override a state's chosen method for resolving tax delinquency.
- A sweeping ruling requiring compensation for past foreclosures would impose massive retroactive liability on counties and municipalities that acted in good faith under settled state law.
Precedent Cases Cited
Tyler v. Hennepin County
598 U.S. 631
The Court's most recent and directly controlling precedent, which unanimously held that a homeowner's equity in her property above the tax debt is a constitutionally protected property interest that the government cannot seize without just compensation.
Knick v. Township of Scott
588 U.S. 180
Established that property owners may bring Takings Clause claims directly in federal court without first exhausting state court remedies, clearing the procedural path for suits like this one.
Stop the Beach Renourishment, Inc. v. Florida Department of Environmental Protection
560 U.S. 702
Discussed whether a state court's interpretation of property law can itself constitute a taking, relevant to the petitioner's argument that Michigan cannot use its own statutes to define away constitutional property protections.
Webb's Fabulous Pharmacies, Inc. v. Beckwith
449 U.S. 155
Stands for the principle that a state cannot define what constitutes 'property' in a way that effectively reads the Takings Clause out of the Constitution—the anti-circularity rule central to petitioner's argument.
Armstrong v. United States
364 U.S. 40
States the foundational purpose of the Takings Clause: to bar the government from forcing some individuals to bear public burdens that should be borne by the public as a whole—directly applicable to a homeowner losing equity to benefit a county treasury.
United States v. 50 Acres of Land
469 U.S. 24
Addressed how to calculate 'just compensation' when the government takes property, relevant to the disputed question of how courts should measure the compensation owed to Pung's estate after the unconstitutional retention of surplus proceeds.
Legal Terminology
Analysis & Opinions
During oral arguments in Pung v. Isabella County, the justices appeared skeptical of a constitutional challenge to foreclosure sales. While the justices seemed confident they should hear the case, they expressed doubts about the merits of the challenge to the constitutionality of the foreclosure process at issue.