The U.S. Supreme Court ruled 9-0 on Tuesday that Isabella County, Michigan, did not violate the Constitution when it seized and auctioned a family's home over a $2,241.93 tax bill, and kept the difference between the sale price and what the county says the property was actually worth on the open market. The ruling settles a core question about government power in tax foreclosures, and it lands squarely against the property owners.
Justice Samuel Alito, writing for the unanimous court, held that the Fifth Amendment's Takings Clause does not require local governments to compensate former homeowners based on the "hypothetical fair market value" of seized property. The constitutional baseline, Alito wrote, is the price obtained at a public tax sale, not what the home might have fetched under different circumstances.
The case, Pung v. Isabella County, centers on a family whose 3,000-square-foot home, assessed at $194,400, was sold at auction for just $76,008 after the county foreclosed over the disputed tax debt. The Pacific Legal Foundation, which represented the Pung estate, called the outcome "home equity theft." The county called it lawful debt collection after years of refusal to pay.
The dispute began when Isabella County revoked the Pung family's Principal Residence Exemption, generating a tax bill of $2,241.93. The county says Michael Pung, the family's personal representative, refused to submit paperwork to maintain the exemption, declined to appeal the assessment, and ignored years of notices and opportunities to resolve the matter.
When the bill went unpaid, the county foreclosed. The home sold at public auction for $76,008. Isabella County later returned the surplus auction proceeds, the amount above the tax debt, to the Pung estate. But the family argued the real loss was far greater: the gap between the auction price and the home's assessed value of $194,400, a difference of more than $118,000.
The family took the fight through the entire Michigan court system, Fox News Digital reported, and eventually brought the case to the Supreme Court. The legal question: Does the Constitution require governments to make property owners whole at fair market value when a tax sale brings in far less?
The answer, from all nine justices, was no.
Justice Alito framed the ruling around practical consequences. If governments had to guarantee fair market value to delinquent taxpayers, he wrote, the math would collapse.
"Under Pung's rule, a tax sale to collect $20,000 in delinquent taxes would net the government a $20,000 loss, a loss paid out to the delinquent taxpayer himself. The possibility of such a perverse result would render tax sales infeasible as a debt-collection mechanism."
Alito also grounded the decision in history, writing that "the proper baseline under the Takings Clause is the price obtained in a tax sale, at least when the sale is fairly conducted in light of our country's history of tax sales." The court noted that imposing a fair-market-value standard would place "unprecedented burdens" on local governments across the country.
Ten other states and the District of Columbia joined Isabella County's argument before the court, a sign of how broadly the case's outcome was expected to ripple. The Washington Examiner reported that the central legal question was whether the Fifth and Eighth Amendments require compensation based on fair market value rather than the auction sale price, a question the court answered firmly in the negative.
The ruling builds on the court's 2023 decision in Tyler v. Hennepin County, which barred local governments from pocketing more than the amount of unpaid taxes in a foreclosure sale. Isabella County argued that Tyler only required returning excess sale proceeds, which it said it already did.
The 9-0 vote might suggest unanimity in spirit. It does not. Justice Clarence Thomas, joined by Justice Neil Gorsuch, authored a separate opinion that struck a notably different chord. Thomas wrote bluntly about what happened to the Pung family.
"What Isabella County did to the Pungs was wrong, and, on my initial view, likely unconstitutional."
Thomas and Gorsuch did not dissent from the legal holding. But their separate opinion signaled deep discomfort with a system that allows a county to take a home worth nearly $200,000 over a tax bill just north of $2,200, even if the letter of the law permits it.
This term has produced a striking number of unanimous Supreme Court decisions, but the Thomas-Gorsuch opinion is a reminder that unanimity on the bottom line can mask sharp disagreements about what the law should tolerate.
While the court rejected the Pung family's fair-market-value theory, it did not end the litigation. The justices vacated the lower court's ruling and sent the case back to the U.S. Court of Appeals for the Sixth Circuit to reconsider procedural claims, specifically, whether the sale process itself was conducted fairly.
Larry Salzman, the Pacific Legal Foundation attorney who represented the Pung estate, told Fox News Digital that the remand keeps the fight alive.
"It's disappointing because we believe that, at least in some cases, fair market value is demanded by the Constitution, and we're happy to see that at least Justice Thomas and Gorsuch agree on that point, but it's satisfying that we get to continue fighting the case for another day, that the case is no longer final and that the Pungs have an opportunity to remedy the harms that were done to them."
The AP reported that the court sent the case back specifically for the lower court to review whether the sale process was conducted fairly, a question the justices declined to resolve themselves.
On the other side, Isabella County's attorney Matthew T. Nelson of Warner Norcross + Judd LLP expressed confidence in a statement shared with Fox News Digital.
"We are grateful the U.S. Supreme Court rejected Pung's challenge to the constitutionality of the process governments have relied on for centuries to collect property taxes that remain unpaid for years. Isabella County and other counties throughout the state of Michigan regularly make herculean efforts to help homeowners avoid foreclosure. But at the end of the day, foreclosure is a tool that needs to remain in their toolboxes."
Nelson added that the county is "confident the process Isabella County followed in this case exceeded what the law required," noting that Pung "never challenged the adequacy of the auction procedures for the simple reason that the auction was conducted in a manner consistent with the law."
The Pung case exposed a fault line in American property rights law that the court chose to address narrowly. The family's attorneys had argued that the disproportion between the tax debt and the home's value made the seizure constitutionally excessive. National Review detailed how a Michigan tax assessor named Patricia DePriest allegedly set the entire process in motion, with the publication quoting one legal commentator who said DePriest "believed a family violated her personal vision of the law and set the wheels in motion to deprive them of their home and savings."
The Pacific Legal Foundation's Christina Martin framed the stakes in broader terms before the ruling. Just The News reported Martin's warning: "If Isabella County can with impunity confiscate the Pung's entire home over a small disputed tax bill, and force them into a decade of litigation to recover less than half of its value, any municipality could do it to anyone."
That warning still stands, even after the ruling. The court's decision means local governments retain broad authority to seize homes for unpaid taxes and sell them at auction without guaranteeing owners anything close to market value. The only constitutional floor is the sale price itself, provided the sale was "fairly conducted."
What counts as "fairly conducted" is now the open question heading to the Sixth Circuit. The court's busy term produced a clean legal rule on the main question, but left the messier factual dispute unresolved.
For property owners across the country, the practical takeaway is stark. If you fall behind on taxes and your local government forecloses, you are not entitled to the difference between what your home is worth and what it fetches at a hurried public auction. You get back whatever surplus the auction generates above your tax debt, and nothing more.
The Pung family's home was assessed at $194,400. It sold for $76,008. The family got back the surplus above the $2,241.93 tax bill. The rest, the gap between what a willing buyer might have paid and what a tax auction produced, is gone.
The court's ruling also carries weight for the broader direction of constitutional property protections this term. While the justices have expanded individual rights in several areas, they drew a firm line here: the government's power to collect taxes through property seizure remains largely intact, and the Constitution does not require governments to play real estate appraiser before selling a delinquent taxpayer's home.
Eleven states and the District of Columbia lined up behind Isabella County for a reason. Tax foreclosure is how local governments enforce the most basic obligation of property ownership. A fair-market-value mandate would have forced counties to either appraise every seized property before auction or risk constitutional liability after the fact, a burden that could paralyze the system.
The court sided with the system. Thomas and Gorsuch sided with the family's sense of injustice, even while joining the legal result. The Sixth Circuit will now decide whether the process that took the Pung family's home met the bar of fairness.
That is a question worth watching. Because a unanimous court just told every county in America that the Constitution does not require them to make property owners whole, only to play by their own rules when they take what someone else built.
When a family can lose more than $118,000 in home equity over a $2,200 tax bill and nine justices say the Constitution permits it, the question is no longer whether the law allows it. The question is whether any law that allows it deserves to stand unchanged.
