Tax foreclosure; “Surplus proceeds”; Michigan’s Takings Clause (Const 1963, art 10, § 2); Whether there is a “taking” when a foreclosing governmental unit (FGU) attempts to sell foreclosed real property to recover delinquent property taxes & that property fails to sell at a public auction; MCL 211.78m(2); Rafaeli, LLC v Oakland Cnty; Distinguishing Jackson v Southfield Neighborhood Revitalization Initiative; Principle that when a property is sold at a public auction, the result of that sale determines the value of the property; Freed v Thomas (6th Cir); Ingham County Land Bank Fast Track Authority (the Land Bank); General Property Tax Act (GPTA)

The court held that there is no compensable taking where an FGU attempts, in conformity with MCL 211.78m(2)’s requirements, to sell foreclosed real property at a public auction and the property does not sell. Thus, it reversed the Court of Appeals’ judgment in part and reinstated the trial court’s grant of summary disposition for defendants. Defendant-Treasurer, acting as the FGU, foreclosed on plaintiff’s property for failure to pay taxes and offered it for sale at a public auction. The property failed to sell, and the Treasurer deeded it to defendant-Land Bank for $1. Plaintiff sued, claiming defendants unconstitutionally took his real property without just compensation in violation of Michigan’s Takings Clause. The trial court found “there was no taking that required just compensation because there were no ‘surplus proceeds’ from a sale of the real property.” The Court of Appeals reversed and remanded, directing the trial court “‘to calculate the “surplus” owed [to plaintiff] on the property by reference to the value of the property, less what plaintiff owed on it when the foreclosure occurred.’” On leave, the court held that “Rafaeli governs this case and, because plaintiff’s foreclosed real property did not sell at the public auction held in compliance with the GPTA, there were no ‘surplus proceeds’ and, therefore, no taking that requires just compensation.” Citing Freed, it noted that “when a property is sold at a public auction, the result of that sale determines the value of the property.” As such, “an FGU has not committed a taking requiring just compensation if there is a public auction that produces no surplus proceeds because the property failed to sell at the public auction for the minimum price of the taxes and fees owed.” The court rejected plaintiff’s argument that Rafaeli is not dispositive, and distinguished Jackson. “The distinguishing fact in Jackson is not that the real properties were never sold at a public auction, but rather that those properties were not even offered for sale at a public auction. The statutorily mandated sale of a foreclosed property to another governmental entity upon the exercise of a right of first refusal for only the amount owed in taxes plus permissible costs and fees did not fairly determine if the government appropriated a property interest that exceeded what it was owed.” The foreclosure sale here “demonstrated that the value of the property interest the government retained is less than what plaintiff owes in property taxes because the property did not sell for the minimum bid. Because there were no proceeds from the sale, plaintiff is not entitled to any compensation.”