A Michigan mother has requested the Michigan Supreme Court to affirm her constitutional right to just compensation after Manistee County foreclosed on her home, sold it, and retained $102,636 beyond what she owed.
"The government can sell property to collect unpaid taxes, but it has a duty to pay just compensation when it takes more than what is owed," said Christina Martin, senior attorney at Pacific Legal Foundation. "But Michigan uses an unusual and complicated process that is designed to fail. It is a calculated attempt by the government to avoid Supreme Court precedent so that it can unconstitutionally take property without compensation."
In 2018, Chelsea Koetter, a single mother of two boys, fell behind on her property taxes. She then mistakenly underpaid what she owed based on incorrect tax information from a local government employee. As a result, she had an outstanding tax bill that grew to $3,863 with interest, penalties, and fees.
In June 2021, after discovering she accidentally underpaid her taxes, Chelsea attempted to pay the overdue bill but missed the deadline to save her home. No one at the County Treasurer’s office informed her about the government's duty to pay for the excess property or that her deadline to preserve her right was about to expire on July 1. Chelsea found out about the claim deadline later from a family friend and submitted her claim form eight days late on July 9. The county rejected her claim form as tardy. On August 2, 2021, the county sold her home at auction for $106,500, keeping all of the profit—$102,636 more than Chelsea owed in taxes, penalties, interest, and fees.
Chelsea filed a motion in circuit court to recover the surplus proceeds; however, the court rejected the motion. When she appealed, the Michigan Court of Appeals ruled against her, stating that under state law this procedure was the only way she could collect her rightful compensation.
In 2020, after the Michigan Supreme Court affirmed it is unconstitutional for counties to keep more than they are owed when collecting property taxes, the State enacted a new procedure allowing former owners to claim—and receive—surplus proceeds from sales of their tax-foreclosed property.
However, this process is convoluted and requires homeowners to file an administrative claim before knowing how much money is at stake. Later they must figure out how to file a motion in court within a short window of time seeking payment for what is rightfully theirs. Research by Pacific Legal Foundation has found that most owners fail to navigate this unusual process effectively.
Now represented by Pacific Legal Foundation at no charge, Chelsea is asking the Michigan Supreme Court to confirm her right to just compensation without complicated claims procedures and unreasonably tight deadlines impeding justice.
The case is In re Petition of Manistee County Treasurer for Foreclosure.
Pacific Legal Foundation
Pacific Legal Foundation is a national nonprofit law firm defending Americans threatened by government overreach and abuse. Since its founding in 1973 PLF challenges governmental violations of individual liberty and constitutional rights. With active cases in 34 states plus Washington D.C., PLF represents clients in state and federal courts with 18 wins out of 20 cases litigated at the U.S. Supreme Court.
