The case centers on a Michigan home assessed at roughly $194,400 that Isabella County foreclosed upon over a tax debt of approximately $2,200. The property sold at auction for $76,000. The county kept the tax debt and the estate of Timothy Scott Pung received the surplus proceeds. Petitioner Michael Pung, personal representative of that estate, argues the Sixth Circuit was wrong to hold categorically that surplus auction proceeds always equal just compensation under the Fifth Amendment.
Philip Ellison, arguing for the petitioner, told the Court that the constitutional calculus begins with fair market value at the time of the taking, and that the Sixth Circuit's categorical rule reducing just compensation to surplus auction proceeds in all instances was wrong. He also pressed an Eighth Amendment excessive fines argument, contending that taking a six-figure home to satisfy a small four-figure tax debt was sufficiently alleged to be grossly disproportionate to survive the pleading stage.
Frederick Liu, arguing for the United States as amicus curiae supporting neither party, urged the Court to vacate and remand. The government's position is that just compensation is the surplus proceeds so long as the sale is fairly conducted, and that the Sixth Circuit erred by relying on a categorical rule without examining whether the sale procedures met constitutional requirements rooted in history and tradition. Liu identified three minimum ingredients of a fair sale drawn from historical practice: public notice with the time, date, and property description; a public auction open to competitive bidding; and a sale to the highest bidder. He acknowledged the list is not exhaustive.
Matthew Nelson, arguing for Isabella County, defended the Sixth Circuit's approach, contending that property sold under compelled market conditions is worth what the market pays under those conditions, not what it would fetch in an idealized private sale. He argued that petitioner's fair market value theory has no foothold in historic practice, this Court's precedents, or economic reality, and that the owner-created reduction in value — resulting from the decision not to pay the tax, not to sell the property, not to obtain a statutory deferral, and not to exercise the right of redemption — does not trigger a just compensation obligation beyond the surplus.
Several justices expressed skepticism toward both the petitioner's primary position and the county's categorical rule. Justice Sotomayor pressed Ellison to identify a single holding in the Court's history measuring just compensation on a tax foreclosure by fair market value rather than auction price, and he acknowledged no such holding exists. Liu argued that requiring fair market value would spell the end of tax sales in America, because forced sales inherently yield less than fair market value — the IRS estimates approximately 60 percent of fair market value. Justice Kagan questioned whether Ellison's primary position would effectively stop states from using foreclosure sales at all. Justice Jackson questioned whether the just compensation framework is even the right analytical home for complaints about pre-taking procedures, suggesting due process might be the more appropriate rubric. Justice Gorsuch, by contrast, pressed Liu on whether history requires the government to pursue personal property before real property, and noted that a sale yielding roughly one-third of market value should prompt close scrutiny of the procedures used.
A notable factual backdrop ran through the argument: Ellison told the Court that the Pung family had previously prevailed before an administrative law judge on the principal residence exemption underlying the disputed tax, but that the township assessor later denied the exemption again and the narrow 35-day appellate window under Michigan law had already closed, leaving the family unable to challenge the reassessment. Justice Gorsuch asked why the county pursued a roughly $2,200 debt that its own ALJ had indicated was not owed, and Nelson acknowledged he did not know the township assessor's reasoning. The property was subsequently resold for approximately $195,000 — close to its assessed value — more than a year after the auction buyer acquired it, according to Nelson.