Docket 25-95
Pung v. Isabella County
DecidedJun 23, 2026
8-1decision
Source: CourtListener.
Court rules tax sale price, not fair market value, sets the limit of compensation owed to homeowners
Impact6/10
What it does
The Court held that when a government conducts a tax foreclosure sale, the constitutional baseline for "just compensation" under the Fifth Amendment is the actual auction sale price — not the property's hypothetical fair market value. The government satisfies its constitutional obligation by returning to the former owner only the surplus proceeds: the difference between the sale price and the tax debt owed. The Court also held that the Eighth Amendment's Excessive Fines Clause does not require the government to pay anything beyond those surplus proceeds.
Who benefits
State and local governments that use tax foreclosure sales to collect unpaid property taxes, who are no longer constitutionally required to compensate former owners at fair market value. Purchasers at tax auctions also benefit from a clearer legal framework for these sales.
Who is affected
Property owners whose homes are seized and sold in tax foreclosure sales at auction prices below fair market value, who are limited to receiving only the surplus proceeds from the auction rather than the full assessed or market value of their property.
Practical impact
Property owners who lose their homes in tax foreclosure sales are constitutionally entitled only to the surplus proceeds from the auction — the sale price minus the tax debt — even if the auction price is far below the home's fair market value. State and local governments may continue conducting tax foreclosure auctions under their existing procedures without facing constitutional liability for the gap between auction prices and market values, as long as the sale is fairly conducted consistent with historical practice. The Court left open for the lower court on remand whether the specific procedures used in this case — including notice, the decision to sell the entire property rather than less, and the adequacy of the auction process — were themselves constitutionally fair.
Majority — Alito
Joined by: Roberts, Sotomayor, Kagan, Gorsuch, Kavanaugh, Barrett, Jackson
The majority held that hundreds of years of English and American legal history establish a consistent rule: when a government seizes and sells property to collect a tax debt, the former owner is entitled to the surplus proceeds from the sale — the amount above the debt — and nothing more. The Court traced this tradition from Magna Carta through early federal statutes, state laws at the Founding, and its own prior decisions, all of which required only the return of the "overplus" or "surplus," never fair market value. The majority reasoned that fair market value is not an appropriate measure here because property owners generally have the ability to avoid tax sales altogether — by refinancing, selling the property themselves, or paying the debt — so the situation is fundamentally different from eminent domain, where the government forces a sale the owner cannot avoid. The Court also warned that requiring fair market value would make tax sales financially unworkable: if the auction price falls below fair market value, the government would owe the delinquent taxpayer more than it collected, effectively paying a net loss to the very person who failed to pay taxes. Finally, the majority noted that the fact that tax sales have remained a common and accepted practice since the Founding — even after the Fourteenth Amendment applied the Takings Clause to the states — is strong evidence that the Clause was never understood to require fair market value compensation in this context.
Constitutional question
When a government seizes and sells a home to collect unpaid property taxes, does the Fifth Amendment's Takings Clause require the government to pay the former owner the property's full fair market value, or only the surplus proceeds from the actual auction sale? Does the Eighth Amendment's Excessive Fines Clause require anything more?
Precedent changed
Extends Tyler v. Hennepin County, 598 U.S. 631 (2023), which established the right to surplus proceeds, by clarifying that surplus proceeds from the auction price — not fair market value — is the ceiling as well as the floor of just compensation in the tax-sale context.