The U.S. Supreme Court ruled 9-0 on Tuesday that local governments are not required to compensate homeowners at fair market value when seizing and selling property over unpaid taxes, handing Isabella County, Michigan, a sweeping victory in a decade-long battle over a family home taken to satisfy a $2,241.93 tax bill.
The Pung family's 3,000-square-foot home, assessed at $194,400, was foreclosed on by the county and sold at public auction for just $76,008. The family's attorneys at the Pacific Legal Foundation called it "home equity theft." The Supreme Court disagreed, but the legal fight is not over.
Justice Samuel Alito, writing for the unanimous court, held that the Constitution does not demand what the Pung estate was asking for. The baseline for compensation under the Fifth Amendment's Takings Clause, Alito wrote, is the price a property fetches at auction, not a hypothetical open-market number. The court vacated the lower court's ruling and sent the case back to the Sixth Circuit to reconsider whether the auction process itself was conducted fairly.
The case traces back years. Isabella County revoked the Principal Residence Exemption on the Pung family home, generating a disputed tax bill of $2,241.93. The county says Michael Pung, acting as personal representative of the family estate, "repeatedly refused to submit the paperwork needed to maintain the home's Principal Residence tax exemption," declined to appeal the assessment, and failed to pay despite years of notices.
The county foreclosed. The home went to auction. It sold for $76,008, less than half its assessed value. The family says that destroyed more than $118,000 in equity. Isabella County returned the surplus auction proceeds after the tax debt was satisfied, and argued that doing so met its constitutional obligations.
The Pung family, backed by the Pacific Legal Foundation, pushed a different theory. They argued that the Fifth Amendment's "just compensation" requirement, and the Eighth Amendment's ban on excessive fines, entitled them to the home's full fair market value, not just whatever a forced auction happened to produce. Ten other states and the District of Columbia lined up alongside Isabella County to oppose that standard.
Fox News Digital reported that Justice Alito grounded his opinion in the long history of American tax sales. He wrote 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."
Alito went further, warning that the Pung family's proposed rule would make the entire system of tax foreclosure unworkable:
"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."
The majority opinion also stated flatly that "neither the Fifth nor the Eighth Amendment requires the government to compensate former owners based on the hypothetical fair market value of their property."
The ruling builds on the court's 2023 unanimous decision in Tyler v. Hennepin County, which barred governments from pocketing surplus proceeds from tax foreclosure sales. But as the Washington Examiner noted, the Pung family was asking the court to go much further, requiring governments to guarantee fair market value, not just return whatever surplus an auction generates.
The court declined to take that step. It also declined to address the family's procedural arguments about how the county handled the seizure and sale, leaving those questions for the Sixth Circuit on remand.
The vote was 9-0, but the agreement was not total. Justice Clarence Thomas, joined by Justice Neil Gorsuch, wrote separately to say what the majority would not.
"What Isabella County did to the Pungs was wrong, and, on my initial view, likely unconstitutional."
Thomas and Gorsuch agreed with the legal outcome but clearly signaled discomfort with the county's conduct. Their separate opinion suggests that at least two justices believe the Constitution may demand more protection for homeowners than the majority was willing to require, even if this particular case was not the right vehicle.
The Supreme Court has delivered a string of unanimous or near-unanimous decisions this term. In another recent case, the court sided unanimously with oil companies in a Louisiana coastal damage dispute, reflecting a term where the justices have found common ground on property and procedural questions more often than observers expected.
Matthew T. Nelson, a partner at Warner Norcross + Judd LLP who represented Isabella County, praised the decision 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 was "confident the process Isabella County followed in this case exceeded what the law required." He pointed out that Pung "refused to pay the property tax due after litigating the matter through the entirety of the Michigan court system" and "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 family's attorney, Larry Salzman of the Pacific Legal Foundation, struck a different tone, disappointed but not defeated. He told Fox News Digital:
"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 remand means the legal fight continues. The Sixth Circuit must now weigh whether the auction process itself was conducted fairly, a question the Supreme Court deliberately left open.
The case had drawn national attention because of its potential to reshape how every county in America handles delinquent property taxes. PLF Senior Attorney Christina Martin framed the stakes bluntly before the ruling, as Just The News reported: "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 argument did not carry the day. But the underlying tension remains. A recent Supreme Court ruling on seized Cuban property showed the justices are willing to enforce property rights aggressively when the facts warrant it. The question in Pung was whether the Constitution requires governments to guarantee homeowners a price no forced sale can reliably deliver.
National Review reported earlier this year on the role of Patricia DePriest, the Union Township tax assessor whose "personal interpretations of the law" allegedly triggered the disputed bill in the first place. That detail, a local official's judgment call setting in motion the loss of a $200,000 home, captures the human cost that legal abstractions about "baselines" and "auction surplus" can obscure.
The county's position is straightforward: Pung had years of notices, multiple off-ramps, and every opportunity to pay, appeal, or sell the home before foreclosure. He took none of them. The county returned the surplus. The system worked as designed.
The family's position is equally direct: a $2,200 tax dispute should not cost anyone a $194,400 home. The gap between those two numbers, and the gap between the home's value and its auction price, is where the constitutional argument lives.
With the Supreme Court poised to deliver several more major rulings before the term ends, the Pung decision may not be the last word on property rights this year. But it is the clearest signal yet that the court will not require governments to guarantee fair market value in tax sales, even when the numbers look deeply unfair.
The Sixth Circuit now has the case back. The procedural questions the Supreme Court declined to touch, whether Isabella County's auction process was constitutionally adequate, will get a fresh look. If the Pungs can show the process was rigged, rushed, or conducted in bad faith, they may yet recover more than the surplus they already received.
But the broader constitutional theory is settled, at least for now. Governments that follow established auction procedures and return surplus proceeds are on solid legal ground. The Takings Clause does not require them to act as real estate agents for delinquent taxpayers.
When a county can take a home worth nearly $200,000 over a $2,200 bill and call the process constitutional, the system may be legal, but it ought to make every property owner pay closer attention to what their local tax assessor is doing.
