Michigan Counties Face New Legal Challenge at the Michigan Supreme Court Over Unconstitutional Tax Foreclosure Scheme

Outside Legal Counsel PLC today announced the filing of yet another new constitutional challenge, this time with the Michigan Supreme Court, against Michigan’s controversial property tax foreclosure statute, MCL 211.78t, asserting that the law unlawfully blocks Michigan property owners from recovering the full measure of their equity taken by local governments.

“For years, counties in Michigan have been seizing homes, selling them at auction, and keeping far more than what was owed in taxes,” said Attorney Philip L. Ellison, lead counsel for the property owners. “Section 78t is being wielded not as a remedy—but as a shield against accountability. It illegally attempts to shut the courthouse door to the federal constitutional rights of Michigan citizens.”

At the heart of the filing is whether MCL 211.78t, a statute written after the Rafaeli decision, can be used to exclude federal civil rights claims brought under 42 U.S.C. § 1983. Such federal claims allow citizens to recover full fair market value of their property, constitutionally required interest, and reimbursement of attorney fees under 42 U.S.C. § 1988.

“The Michigan Legislature wrote 78t to trick citizens in being returned with less than state-law surplus proceeds,” Ellison explained. “It was never authorized to shut down federal remedies. Yet counties are now attempting to use this statute to nullify the United States Constitution.”

The application notes that the U.S. Supreme Court has already granted review in Pung v Isabella County to decide whether property owners are entitled to more than just leftover proceeds after a tax sale. Depending on that ruling, Michigan counties could face liability far beyond what Section 78t provides.

“This is not speculation. The Supreme Court is already reviewing the exact issue of whether the federal Takings Clause requires full equity restoration,” said Ellison. “Michigan cannot be allowed to hide behind a state statute to avoid federal law. We are asking the Michigan Supreme Court to act now, before the federal courts step in and Michigan loses control over its own jurisprudence.”

Multiple appellate courts, including the U.S. Sixth Circuit Court of Appeals and the Michigan Court of Appeals, have agreed that Michigan’s former tax foreclosure scheme was unconstitutional.

“The question is no longer whether counties violated the Constitution—it is how much they are required to repay,” said Ellison. “Section 78t tries to unfairly stunt that recovery. The Constitution does not.”

Ellison asserts that "home equity is not a government gratuity—it is private property. Michigan citizens deserve every dollar taken from them without just compensation. No statute can erase that right.”