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Under Minnesota law, property taxes become a lien against the property once they are assessed. Minn. Stat. § 272.31. If property taxes are not paid during the year in which they are due, they become delinquent the following year, at which point, a county may obtain a judgment against the property. Minn. Stat. § 279.03 subd. 1. As a matter of notice and procedure, each year, the county auditor creates a delinquent tax list, which identifies the properties on which taxes are owed, the taxpayer(s), and the amount of taxes/penalties owed. The delinquent tax list is published twice and mailed to all delinquent taxpayers. A lawsuit is commenced against delinquent taxpayers and if there is no answer, the court enters a judgment against the property.
Delinquent taxpayers have several avenues to avoid forfeiture. First, while title in the property vests in the state after judgment is entered, that title is subject to the right of redemption, which is a 3-year period during which the taxpayer may redeem the property for the amount of delinquent taxes, penalties, costs, and interest. Minn. Stat. §§ 281.01–281.02, 281.17. Second, a property owner seeking to avoid forfeiture who cannot afford to redeem the property, can make a “confession of judgment,” which then allows the property owner to consolidate the debt /tax delinquency and pay in installments over five to ten years. If a property owner fails to pursue either of these avenues, absolute title vests in the state and all outstanding taxes, penalties, interest, etc. are canceled. Even after absolute title vests, the state still provides additional procedures for the property owner to repurchase his/her property. Under Minnesota’s tax foreclosure scheme, former property owners have no way to claim any proceeds from the sale of the property in excess of the tax debt.
The Plaintiff in this case owned a condominium in Minneapolis and stopped paying taxes in 2010. At the time the County sought judgment under the aforementioned statutory scheme, the Plaintiff owed $15,000 in unpaid state property taxes, penalties, costs, and interest. The Plaintiff received the statutorily prescribed notice of foreclosure, failed to answer, and then never tried to redeem the property during the 3-year period. She also did not seek to repurchase the property. Thereafter, Hennepin County sold the property for $40,000, and kept the surplus and distributed it in a manner pursuant to state statute.
Tyler sued, claiming the County violated the Fifth Amendment’s Takings Clause and the Eighth Amendment’s Excessive Fines Clause by keeping the value of her property in excess of the tax debt that she owed. As to the Taking’s inquiry, the Eighth Circuit explained that for Tyler to succeed, she “must show that she had a property interest [under Minnesota law] in the surplus equity after the county acquired the condominium.” The Eighth Circuit found that under Minnesota law, there is no right to surplus equity in a property and “where state law recognizes no property interest in surplus proceeds from a tax-foreclosure sale conducted after adequate notice to the owner, there is no constitutional taking.”
The Eighth Circuit affirmed the district court’s holding that the County’s retention of her surplus equity was not an excessive fine under the Eighth Amendment. The district court explained that whether the forfeiture is a “fine” turns on the question of whether it is a form of punishment. The district court agreed with the County that the forfeiture at issue here was remedial as it related to helping the government recoup its costs associated with non-payment of property taxes and was therefore not a fine under the Eighth Amendment. The court rejected the argument that the forfeiture was punitive simply because the County received more than what was needed to make it whole.
Issues: (1) Whether taking and selling a home to satisfy a debt to the government, and keeping the surplus value as a windfall, violates the Fifth Amendment’s takings clause; and (2) whether the forfeiture of property worth far more than needed to satisfy a debt, plus interest, penalties, and costs, is a fine within the meaning of the Eighth Amendment.