New 6th Circuit opinion puts the brakes on expedited tax foreclosures by county land banks
You knew the wheels were falling off the (medieval) cart when the federal 6th Circuit Court of Appeals rattled off English legal theory from the year 1470, right?
Advocates for county land banking activities in Ohio sighed wearily upon reading the appellate court’s recent holding in a Michigan case, Hall v. Meisner, that aspects of the tax foreclosure process amount to a “taking” under the federal Constitution. And the court’s citation to the Magna Carta, signed by King John in 1215, just rubbed salt in the wound.
We wrote in June 2020 of the Supreme Court of Ohio’s rejection of an activist’s effort to invalidate the state’s “expedited tax foreclosure” process. In State Ex rel. Feltner v. Cuyahoga County Board of Revision, Ohio’s highest court upheld the practice by which county Boards of Revision (BOR) could directly transfer unoccupied, tax-delinquent properties to county land banks. Although the Court’s reasoning was on limited grounds, the Feltner decision gave county land banks some comfort to proceed apace with expedited tax foreclosures of abandoned lands under Ohio law.
We followed up in May 2021, summarizing a worrisome opinion by this same 6th Circuit Court of Appeals that allowed an owner of abandoned land to raise a federal “takings” argument under the Constitution once a property is deemed abandoned and titled to a county land bank. That case, Harrison v. Montgomery County, Ohio, cited a 2019 U.S. Supreme Court decision as the basis for allowing a property owner to bring a takings claim to federal court as soon the respective county BOR adjudicated property as “abandoned” and ordered it transferred to the county land bank.
Now we have the Hall decision. Interestingly, the 6th Circuit opinion coursed its way through English and American common law concepts of the relationship between debtors and creditors – with nary a word as to the government’s taxation powers or the fact the subject properties were foreclosed on longtime tax deadbeats – in holding a county’s foreclosure of tax delinquent property amounted to a “taking” as to all the pent-up equity in the home that still belonged to the owner and had not been compensated. In this case, as to the property having been owned by Ms. Hall and foreclosed by Oakland County outside Detroit, that amounted to the difference between “close to $300,000” and the $22,262 owed in delinquent taxes by Ms. Hall, or approximately $277,700 the county “refused to refund.”
Here, the court employed the notion of equitable title to find the county took Ms. Hall’s property without just compensation, “an aberration from some 300 years of decisions by the English and American courts”. And the court employed debtor-creditor concepts to recognize the “vested property right in what is ordinarily called the equity in one’s home – meaning the property’s value beyond any liens or other encumbrances upon it,” and the conveyance of delinquent property to Oakland County without refunding such difference, as a violation of the Fifth Amendment’s Takings Clause.
The court framed the issue as whether Michigan’s General Property Tax Act disavowed traditional property interests long-defined in courts of equity. Hence the court’s expounding on debtor-creditor jurisprudence (via mortgage concepts) dating back to the 12th century. And its settling on equitable title to define a property right in the owner that cannot be extinguished by a mortgage conveyed to a lender.
Pause here: it seems a bit of a stretch to suggest a (bank) lender-taking-a-less-than-absolute-security-interest-in-a-homeowner’s-property is at all the same as the government’s power to impose, and enforce via foreclosure, real property taxes, which must be applied in an equalized manner, to yield public revenue for a public purpose. Perhaps if the court had compared and contrasted its fondness for debtor protections in this case with the government’s even longer-recognized powers of taxation, this opinion would at least generate some grumbled acceptance among land bank practitioners. But the court didn’t mention taxation in any substantive way in its holding. And some dictum thrown in at the end of the opinion – that “the Takings Clause bars the ‘Government from forcing some people alone to bear public burdens’” seems to completely disregard the equalized nature of real property taxation across all owners subject to such charges.
Oh well. Where do advocates of land banking go from here?
The pathway to continued expedited tax foreclosures, at least in the 6th Circuit, appears to require the opportunity for property owners “to force a public foreclosure sale and ‘to recover any surplus.’” Perhaps in this vein, Ohio’s land banking statutes – already the subject of a legislative reform and clarification effort in the current General Assembly – are further amended to insert an opportunity into the expedited process for a tax delinquent owner to answer, in part, by forcing a public sale of the subject property upon any adjudication by a BOR of it being “abandoned.”
 51 F.4th 185, 2022 WL 7366694, decided Oct. 13, 2022.
 See Ohio Revised Code Sections 323.65 to 323.79.
 Knick v. Township of Scott, Pennsylvania, 139 S.Ct. 2162, 2019 WL 2552486.
 Hall at 187.
 Id. at 188.
 Id. at 189.
 [emphasis added] Id. at 196, citing Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. at 163, 101 S.Ct. 446.
 Id., citing Nelson v. City of New York, 352 U.S. at 110, 77 S.Ct. 195.
This is for informational purposes only. It is not intended to be legal advice and does not create or imply an attorney-client relationship.Download PDF