Supreme Court ruling will impact state laws and case of Worcester homeowner

On May 26, 2023, the United States Supreme Court in Tyler v. Hennepin County struck down Minnesota’s tax foreclosure scheme. The Court ruled that a Minnesota homeowner who lost her home to a tax foreclosure was entitled to the surplus from the home’s sale. The unanimous ruling has put the spotlight on laws in several states that allow municipalities to sell tax liens to private parties, which then foreclose on properties, pay back taxes and fees, and then retain most or all of the remaining equity.

The Supreme Court’s ruling is expected to impact a Massachusetts case filed in U.S. Bankruptcy Court in which homeowner Carmen Rodriguez sued the City of Worcester and a tax lien buyer, Tallage Davis, LLC, seeking to invalidate a state statute that allows municipalities to confiscate people’s homes — including all the equity built up over many years — when they fall behind on their real estate taxes.  Ms. Rodriguez was represented by the Pioneer Public Interest Law Center, Morgan, Lewis & Bockius LLP and Greater Boston Legal Services.

“The Court sent a clear message, ruling unanimously that any surplus beyond the tax debt should be returned to the homeowner,” said Frank Bailey, president of Pioneer Public Interest Law Center, which filed an amicus brief in Tyler v. Hennepin County.

In the Court’s opinion, Chief Justice John Roberts wrote: The principle that a government may not take more from a taxpayer than she owes can trace its origins at least as far back as Runnymeade in 1215, where King John swore in the Magna Carta that when his sheriff or bailiff came to collect any debts owed him from a dead man, they could remove property ‘until the debt which is evident shall be fully paid to us; and the residue shall be left to the executors to fulfil the will of the deceased.'”

In the U.S. Supreme Court case, Geraldine Tyler, an elderly Minnesota woman, lost her home under that state’s statute, which tracks the Massachusetts law.  Like Ms. Rodriguez, Tyler argued that statutes such as these violate state and federal constitutional provisions that prohibit the taking of property without just compensation and the charging of unreasonable fines.  The Court found that Minnesota violated the U.S. Constitution when it took the entire value of her home for the taxes.