Tax-foreclosure sale; MCL 211.78m(1); Takings claim under Const 1963 art 10, § 2; Rafaeli, LLC v Oakland Cnty; Effect of the absence of surplus proceeds; Unjust enrichment; Karaus v Bank of NY Mellon; Declaratory judgment

Given that it was undisputed there were no surplus proceeds from the tax-foreclosure sale where defendant-county purchased the property from defendant-county treasurer for the minimum bid amount, the court affirmed the dismissal of plaintiff-former property owner’s (Kakalia) takings claim. It also affirmed dismissal of the unjust enrichment claim, concluding plaintiff failed to show “the county received a ‘benefit’ from” plaintiff. Finally, plaintiff was not entitled to a declaratory judgment. Plaintiff asserted that because the county “purchased the property under the then-existing version of MCL 211.78m(1) and the property was not sold at a public auction,” plaintiff was entitled to compensation “for the fair market value of its property, less the tax liability owed[.]” It sought to distinguish its “case from Rafaeli by arguing that ‘the property improperly taken was Kakalia’s real property, not the surplus proceeds from a public auction.’” But the court found it failed to show “that its real property was improperly taken. Pursuant to MCL 211.78k(5), absolute title to the subject property vested to the Otsego County Treasurer when the foreclosure judgment became effective. Because Kakalia did not challenge the foreclosure proceedings, there is no dispute that the Otsego County Treasurer properly acquired title to the property. Once absolute title vested to the Otsego County Treasurer with no further rights of redemption, Kakalia no longer had a vested property right to the real property itself.” The court noted the Supreme Court stated in Rafaeli, albeit arguably in dictum, “that it is ‘unaware of any authority affirming a vested property right to equity held in property generally.’” In addition, Justice Viviano stated “in his concurrence that ‘the majority’s view of the case would seemingly be that if the property does not sell at auction and is simply transferred to a governmental unit, the taxpayer is out of luck: no proceeds, let alone a surplus, have been produced or retained by the government.’” The court adopted this Rafaeli dictum. As to the unjust enrichment claim, Rafaeli “made clear that a plaintiff’s only ‘property interest’ surviving a tax-foreclosure is not in the real property itself, but only in the surplus proceeds resulting from the tax-foreclosure sale, if any.” Further, there was no evidence the county “unjustly benefited by its legal purchase of the property for the minimum bid amount.”