e-Journal Summary

e-Journal Number : 73451
Opinion Date : 07/17/2020
e-Journal Date : 07/21/2020
Court : Michigan Supreme Court
Case Name : Rafaeli, LLC v. Oakland Cnty.
Practice Area(s) : Real Property, Constitutional Law
Judge(s) : Zahra, McCormack, Markman, Bernstein, Clement, and Cavanagh; Concurrence – Viviano
Full Text Opinion

Whether retention of the surplus proceeds from tax-foreclosure sales constituted a taking under Article 10, § 2 of the Michigan Constitution; The General Property Tax Act (GPTA) (MCL 211.1 et seq.); Krench v. Michigan; James A. Welch Co., Inc. v. State Land Office Bd.; Meltzer v. State Land Office Bd.; Armstrong v. United States; Webb’s Fabulous Pharmacies, Inc v. Beckwith; Bogie v. Barnet (VT); Polonsky v. Bedford (NH); The taxing power; Const. 1963, art. 9, § 1; Koontz v. St. Johns River Water Mgmt. Dist.; Penn Cent. Transp. Co. v. City of NY; Michigan’s Takings Clause; Bott v. Natural Res. Comm’n; Acker v. Commissioner of Internal Revenue (6th Cir.); Just compensation; In re State Hwy. Comm’r


The court held that defendants’ retention of surplus proceeds from tax-foreclosure sales was an unconstitutional taking without just compensation under Article 10, § 2 of the Michigan Constitution. Thus, the judgment of the Court of Appeals was reversed and the case remanded to the circuit court. The issue was whether defendants committed an unconstitutional taking by retaining the surplus proceeds from the tax-foreclosure sale of plaintiffs’ properties that exceed the amount they owed in unpaid delinquent taxes, interest, penalties, and fees under the GPTA. The court concluded that as “the foreclosing governmental unit under the GPTA, defendants were entitled to seize plaintiffs’ properties.” It further determined that they “could only collect the amount plaintiffs owed and nothing more.” It also held that to “the extent the GPTA permits defendants to retain these surplus proceeds and transfer them into the county general fund, the GPTA is unconstitutional as applied to former property owners whose properties were sold at a tax-foreclosure sale for more than the amount owed in unpaid taxes, interest, penalties, and fees related to the forfeiture, foreclosure, and sale of their properties.” Defendants relied “on a line of Michigan cases to argue that plaintiffs held no rights, titles, or interests in their properties once foreclosure occurs and fee simple title vests with the state.” However, none of the decisions “involved a claim for the surplus proceeds after a foreclosure sale.” The court held that plaintiffs “have a cognizable, vested property right to the surplus proceeds resulting from the tax-foreclosure sale of their properties. This right continued to exist even after fee simple title to plaintiffs’ properties vested with defendants, and therefore, defendants’ retention and subsequent transfer of those proceeds into the county general fund amounted to a taking of plaintiffs’ properties under Article 10, § 2 of” the Michigan Constitution. Thus, they were “entitled to just compensation, which in the context of a tax-foreclosure sale is commonly understood as the surplus proceeds.”

Justice Viviano concurred with the majority’s result but disagreed with much of its reasoning. He would “interpret the Constitution in the usual manner, discerning the ordinary meaning of 'property' and applying it to the facts here. Doing so, I conclude that the property right that has been taken from the plaintiffs is their equity in their respective properties and not any independent interest in the surplus proceeds from the tax-foreclosure sale.”

Full Text Opinion