Tyler v. Hennepin County, Minnesota

WHETHER FORFEITING REAL PROPERTY AND KEEPING THE TAX SALE SURPLUS CONSTITUTES A TAKING

Tyler argues that the County violated the Takings Clause when it confiscated Tyler’s house and kept the sales surplus because both the U.S. Supreme Court’s precedents and the Anglo-American legal tradition recognize equity in real estate as private property protected by the Takings Clause of the Fifth Amendment. Brief for Petitioner, Geraldine Tyler at 8–9. Tyler claims that the Supreme Court treats real property equity—such as the $25,000 leftover proceeds after the tax sale of Tyler’s house—as private property under the Takings Clause. Id. at 11–12. Referring to the Civil War-era trilogy of cases on federally forfeited property, Bennett v. Hunter, United States v. Taylor, and United States v. Lawton, , Tyler argues that the Supreme Court has ruled that, even if the government forfeits the house for the owner’s tax delinquency and sells it, the government must return the surplus proceeds to the former owner who retains a property interest in that surplus. Id. at 12–14. Tyler also asserts that history and tradition support her argument that real estate equity counts as private property. Id. at 14. She notes that common law treaties forbid the government from collecting more debt than owed and impose on the government a fiduciary duty to pay the former owner surplus proceeds. Id. at 14, 16. In addition, Tyler claims that existing Minnesota law requires the government to return surplus proceeds to debtors in debt collections, mortgage foreclosures, or delinquent tax collections. Id. at 20–22.

Tyler further argues that the County violated the Takings Clause by confiscating Tyler’s equity without just compensation. Id. at 23–24. First, Tyler refutes the lower court’s claim that the Minnesota legislature can “abrogate” her property interest in the house or by itself redefine the house as public property. Id. at 24–25 (quoting Tyler v. Hennepin Cnty. at 793). Tyler maintains that the state may not merely exclude from the Takings Clause’s definition of property “any interest that the state wished to take.” Id. at 24. Also, Tyler rejects the lower court’s reliance on Nelson v. City of New York, where the Supreme Court allowed the government to retain a forfeiture sale’s surplus proceeds when the former owner was given an opportunity to claim the proceeds but failed to do so. Id. at 30. Tyler asserts that the takings reasoning in Nelson was nonbinding dicta and argues that the Eighth Circuit erroneously read this dicta in Nelson to shift the burden of action: from the government’s burden to compensate Tyler to Tyler’s burden to ask for the proceeds. Id. at 30–31.

In opposition, the County contends first that Tyler does not have Article III standing to bring her claim because she failed to allege that she has equity in the property and did not mention the substantial private liens encumbering the property. Brief for Respondents, Hennepin Cnty. and Daniel P. Rogan (the “County”) at 12. The County notes that the public record indicated that two separate liens from Tyler’s mortgage and her homeowner’s association substantially encumbered the property. Id. Thus, the County asserts that Tyler did not establish sufficient equity in her property to satisfy the requirements for standing. Id. at 14.

On the merits, the County argues that the forfeiture was not a taking. Id. at 14. Reaffirming Minnesota’s sovereign powers to tax and condition property rights, the County argues that Minnesota’s property tax laws correctly require forfeiture of the property and do not require just compensation. Id. at 15–16. The County contends that when an owner is tax delinquent and does not assert her interest in the property, she has neglected the property, and thus its forfeiture and sale do not count as a taking. Id. The County dismisses Tyler’s interpretation of Anglo-American legal history as incomplete and erroneous; instead, the County notes that laws and treaties from medieval England to the American Colonies and the Founding Era to the present all suggest that property owners forfeit their claims to property as a consequence of failing to pay taxes. See id. at 17–25. The County asserts that the only constitutional limit is the requirement of procedural safeguards before forfeiture. See id. at 22. Further, the County asserts that the Supreme Court’s precedents support forfeiture without returning surplus proceeds upon tax delinquency and do not consider such forfeiture as uncompensated taking. Id. at 29–31. Specifically, the County challenges Tyler’s reading of Nelson and asserts that Nelson affirms foreclosing real property and retaining surplus proceeds absent the owner’s timely action. Id. at 31–32. The County maintains that Nelson’s takings reasoning was not mere dictum because the Nelson court framed its takings discussion as a clear holding. Id. at 32. The County further points out that Minnesota gave Tyler five years to claim her equity, longer than the period in Nelson. Id. at 31–32.

WHETHER FORFEITURE VIOLATES THE EXCESSIVE FINES CLAUSE

Tyler contends that since the County’s forfeiture of her property has at least some punitive purpose, the County’s forfeiture constitutes a fine under the Excessive Fines Clause of the Eighth Amendment. Brief for Petitioner at 35–36. Tyler points to the Supreme Court’s test in Austin v. United States, which holds that even if a forfeiture can be remedial to the government, it is considered punitive when it is aimed at deterring or punishing certain behaviors. Id. at 36. Tyler argues that the forfeiture of her house must have a deterrent or retributive purpose because the lower court’s explanation that the forfeiture is primarily to compensate the government’s loss of tax revenue fails to justify the huge gap between the taxes she owed and the value of her property. Id. at 37. Tyler further argues that the lower courts erred in following the discussion in United States v. Bajakajian which reasoned that traditional in rem forfeiture is remedial rather than punitive. Id. at 41. Tyler notes that this discussion in Bajakajian is dicta. Id. Tyler cites recent scholarship that she claims supports her conclusion that in rem forfeiture is punitive. Id. at 41–42.

In contrast, the County asserts that Minnesota law does not violate the Excessive Fines Clause by providing a remedial rather than punitive fine. Brief for Respondents at 45. First, the County contends that Bajakajian authoritatively holds that a forfeiture is remedial when the purpose of such forfeiture is simply to reimburse the government for losses. Id. The County also states that punitive forfeitures require a “culpable mental state” connected to a crime and the tax forfeiture of Tyler’s home is not related to a crime. Id. at 46. Indeed, the County suggests that forfeiture for tax delinquency does not require any specific mental state and thus is purely remedial. Id. at 47. According to the County, Minnesota law intends the forfeiture and sale to remedy the loss in tax revenue and to allow recovery of maintenance costs. Id. at 46. The County notes that forfeiture ensures finality in public revenue streams since it provides the government with clean, marketable title. Id. Further, the County contends that the mere existence of a deterrent purpose does not transform forfeiture from remedial to purely punitive. Id. at 48.