The Michigan Supreme Court will be the final arbiter in a property-rights case in which Oakland County foreclosed upon a rental property to recover an $8.41 underpayment, sold the property at auction for $24,500, and pocketed the change.
The court on Thursday afternoon heard oral arguments on behalf of Oakland County and 83-year-old Uri Rafaeli, a retired engineer who is represented by Christina Martin, an attorney for legal nonprofit the Pacific Legal Foundation.
At issue is a three-bedroom Southfield home Rafaeli purchased as a rental property for $60,000 in early January 2012. Undisputed is the fact he underpaid his 2011 property tax bill by $496. In January 2013 he attempted to rectify the issue, but miscalculated the amount owed by $8.41. All other property taxes on the property were on time and paid in full.
Under disputed provisions of a 1999 Michigan law, the Oakland County treasurer foreclosed on the property, selling it for $35,500 less than what Rafaeli had originally paid for the home, and kept the $24,491.59 difference. Rafaeli received nothing.
Oakland County attorney John Bursch likened Rafaeli’s situation to his own children when they don’t pick up their toys after repeated warnings, a statement addressed by Martin in both her rebuttal and in comments made to The Center Square.
“It’s an analogy that fails on all levels,” she told The Center Square. In her rebuttal, she elaborated: “Government is not our parent,” she said. “Its purpose is to actually protect our rights, not police how clean we keep our room.”
Bursch warned the Supreme Court justices that a finding in favor of Rafaeli would have dire consequences for townships, counties and city governments. He said a favorable ruling for the former rental home owner would have a detrimental financial impact on “schools, roads, police, firefighters and other basic services.”
At this point, Justice Richard Bernstein commented: “I have to stop you because the interpretation you gave was very dramatic that this was going to end schools and the county’s going to crumble and society is just going to implode,” he told Bursch.
“But I mean, at the end of the day, if you could answer the contention that I’m concerned about is you have a situation where people owed $8 and they lost their house,” he said. “How is that equitable?”
Bursch noted that the Michigan legislature is currently considering a bill, House Bill 4219, that would prevent what Martin had termed an illegal taking from happening in the future. He argued the “Court should not be a competing legislative body in enacting its own rules about how surplus equity should be refunded.”
Martin responded that this argument was a red herring.
“It would help people affected by this in the future,” she said. “But it wouldn’t fix the problem of providing relief for Mr. Rafaeli,” she told The Center Square.
Bursch’s assertion prompted Justice Brian Zahra to interject, citing a 1976 Supreme Court case, Dean v. Department of Natural Resources. Zahra said that case supported Rafaeli’s arguments when it was determined at that time the DNR had unjustly enriched itself by withholding a surplus after a county foreclosed on property.
Martin noted the same principles expounded by Bursch, if upheld by the Court, would mean city governments could seize and sell personal vehicles for unpaid parking tickets.
According to Martin in remarks given to The Center Square, the Supreme Court has until July 31, 2020, to render its decision.
“I’m optimistic for a good outcome,” she said. “It’s my hope the Court puts a stop to local governments stealing equity from property owners.”