In Pung v. Isabella County, a personal representative for an estate knowingly refused to pay property taxes on a house in Isabella County. The plaintiff received repeated reminders of his obligation over the course of several years, yet failed to take any steps to meet the estate’s tax obligations, which led to foreclosure.
Consistent with government practice going back centuries, the Isabella County treasurer sold the property at public auction. The treasurer paid the taxes owed to various local governmental entities and returned the surplus to the estate. The plaintiff filed a lawsuit demanding the county pay the fair market value for the house.
The Court noted in its ruling: “For hundreds of years, English and American law have allowed the seizure and sale of property as a tax-collection method, provided that the government return any surplus proceeds to the debtor. Neither history nor precedent supports Pung’s contrary argument.
“Pung’s fair-market-value theory would impose unprecedented burdens on jurisdictions that wish to collect unpaid taxes and might well make tax sales impractical. Under Pung’s rule, a tax sale would often net the government a loss, paid out to the delinquent taxpayer himself, rendering tax sales infeasible as a debt-collection mechanism.”
In his successful argument to the high court, Warner partner Matthew T. Nelson noted that members of a community share the expense of schools, police and fire protection, roads and other government functions through property taxes. People who don’t pay their taxes shift the burden for those services onto their neighbors. To avoid that problem, the law provides a lengthy process that ultimately ends in foreclosure of a property if taxes are not paid.
Experience
