Supreme Court Holds Retaining Excess Value Violated Takings Clause

In Tyler v. Hennepin County, 598 U.S. ____ (2023), the U.S. Supreme Court held that the government can’t keep the profits of properties sold to satisfy tax debts. Accordingly, Geraldine Tyler plausibly alleged that Hennepin County unconstitutionally retained the excess value of her home above her tax debt in violation of the Fifth Amendment’s Takings Clause.

Facts of the Case

Geraldine Tyler owned a condominium in Hennepin County, Minnesota, that accumulated about $15,000 in unpaid real estate taxes along with interest and penalties. The County seized the condo and sold it for $40,000, keeping the $25,000 excess over Tyler’s tax debt for itself pursuant to Minn. Stat. §§281.18, 282.07, 282.08.

Tyler subsequently filed suit, alleging that the County had unconstitutionally retained the excess value of her home above her tax debt in violation of the Takings Clause of the Fifth Amendment and the Excessive Fines Clause of the Eighth Amendment. The District Court dismissed the suit for failure to state a claim, and the Eighth Circuit affirmed. It held that “[w]here state law recognizes no property interest in surplus proceeds from a tax-foreclosure sale conducted after adequate notice to the owner, there is no unconstitutional taking.”

Supreme Court’s Decision

The Supreme Court reversed. It held that Tyler plausibly alleged that Hennepin County’s retention of the excess value of her home above her tax debt violated the Takings Clause. “The County had the power to sell Tyler’s home to recover the unpaid property taxes. But it could not use the toehold of the tax debt to confiscate more property than was due,” Chief Justice John Roberts wrote on behalf of the unanimous Court.

The Court first addressed the issue of standing. It held that Tyler’s claim that the County illegally appropriated the $25,000 surplus constitutes a “classic pocketbook injury sufficient to give her standing” under TransUnion LLC v. Ramirez, 594 U.S. ___, (2021). According to the Court, even if there are debts on her home, Tyler still plausibly alleged a financial harm because the County kept $25,000 that she could have used to reduce her personal liability for those debts.

The Court next turned to whether Tyler had stated a claim under the Takings Clause. In answering in the affirmative, the Court cited both history and precedent, noting that the principle that a government may not take more from a taxpayer than she owes dates back to the Magna Carta. The Court also cited Supreme Court precedents that have also recognized the principle that a taxpayer is entitled to the surplus in excess of the debt owed.

“The Takings Clause ‘was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole,’”Chief Justice Roberts wrote. “A taxpayer who loses her $40,000 house to the State to fulfill a $15,000 tax debt has made a far greater contribution to the public fisc than she owed. The taxpayer must render unto Caesar what is Caesar’s, but no more.”