On Wednesday, Warner partner Matt Nelson will ask the U.S. Supreme Court to affirm the decision of the Sixth Circuit Court of Appeals in Pung v. Isabella County and maintain a critical tool local governments throughout the country rely on to ensure timely payment of property taxes.
An experienced appellate litigator, Nelson is leading the Warner team in its representation of Isabella County. The case rests on the failure of Scott Pung’s estate to pay property taxes on a house, which led to the foreclosure and sale of that house at a public auction. Isabella County reimbursed the estate for the difference between the sale of the property and the tax debt owed.
The executor of the estate, Michael Pung, sued the county and demanded to be reimbursed for the fair market value of the house. That argument, which has been rejected by lower courts and the appellate court, will be heard Wednesday in Washington, D.C. The Pung estate essentially asks the nine justices to upend centuries of established government practice to the detriment of all who pay their taxes on time.
“Members of a community share the expense of schools, police and fire protection, roads and other government functions through property taxes,” Nelson explained. “If a person doesn’t pay their taxes, they are shifting the burden for those services onto their neighbors. To avoid that problem, the law provides a process that ultimately ends in foreclosure of a property if taxes are not paid.
“That’s what happened in this case. As personal representative for the estate of his late nephew, Michael Pung had a duty to follow established Michigan law, file an affidavit and pay property taxes on the home in Isabella County. He received repeated reminders of his obligation over the course of seven years. Mr. Pung had repeated opportunities to pay the property taxes, file an affidavit or file an appeal, yet he failed to take any of these steps.”
Nelson noted that even though Michael Pung did not pay the property taxes owed, relatives living in the house continued to receive the full benefit of all the public services that were not paid for. Consistent with government practice going back centuries, the Isabella County treasurer sold the property at public auction after seven years of nonpayment. The treasurer paid the taxes owed and then returned the surplus of more than $73,000 to the estate.
“But that wasn’t good enough for Mr. Pung,” Nelson noted. “After ignoring seven years of warnings – and opportunities – to redeem the situation, Mr. Pung demanded the county pay the fair market value for the house, more than twice as much as the County actually received from selling the property.
“But that’s not how the law works. Property owners must pay the taxes on the property they own. County treasurers are patient and happy to work with individuals who are in financial distress. Mr. Pung had ample time and opportunity to avoid this foreclosure and sale. He decided not to pay the taxes due on the property even when he knew that would mean that his nephew’s family’s home would be foreclosed.
“We hope the Supreme Court, consistent with centuries of American law, will affirm the decision of the Sixth Circuit and rule that Isabella County did exactly what it was required to do by the U.S. Constitution.”
You can listen to more about the case by watching the video below.
