Docket 25-95
Pung v. Isabella County
DecidedJun 23, 2026
9-0unanimous decision
Source: CourtListener.
Court rules tax-sale surplus, not fair market value, satisfies constitutional 'just compensation'
What it does
The Court holds that the constitutional baseline for "just compensation" after a tax foreclosure sale is the actual auction sale price, not the property's hypothetical fair market value, as long as the sale is fairly conducted in light of the nation's history of tax sales. It also holds that the Eighth Amendment's Excessive Fines Clause does not require any greater payment than the surplus proceeds. The case is sent back to the lower court to consider separately whether the specific procedures used here were unfair.
Who benefits
Local and state tax authorities that use foreclosure and public auction to collect delinquent property taxes benefit, because they can keep sale proceeds up to the tax debt without paying the difference between auction price and fair market value.
Who is affected
Homeowners who fall behind on property taxes and whose homes are foreclosed and sold at auction are affected, because they are only guaranteed the surplus between the sale price and the debt owed, even if that sale price is well below the home's market value.
Practical impact
Local governments across the country can continue using tax foreclosure and auction sales to collect delinquent property taxes without having to pay former owners the difference between the auction price and the home's fair market value. Homeowners facing tax delinquency retain a right only to surplus auction proceeds above their tax debt, though they may still separately challenge whether the specific procedures used against them (such as seizing more property than necessary or providing inadequate notice) were unfair, an issue left open for further litigation on remand.
Majority reasoning
Justice Alito's opinion traces a centuries-long legal tradition, from English law through early federal and state statutes to Supreme Court precedent, establishing that tax-sale debtors are entitled only to the surplus proceeds above the tax debt, not fair market value. The Court distinguished eminent-domain cases (where fair market value is the default) because tax sales are a different context: owners can generally avoid foreclosure by refinancing, borrowing against, or selling the property themselves before the sale, so fair-market-value protection isn't necessary. The majority reasoned that imposing a fair-market-value rule would make tax sales impractical or even produce net losses for governments, potentially threatening the entire system of tax-sale debt collection, which is strong evidence Pung's reading of the Constitution is wrong. The Court declined to address Pung's newly raised arguments that the specific foreclosure procedure was unfair, leaving those for the Sixth Circuit to consider on remand if preserved. On the Eighth Amendment claim, the Court found no historical or precedential support that a fairly conducted tax sale returning only surplus proceeds constitutes an excessive fine.
Constitutional question
When a government forecloses on a home for unpaid taxes and sells it at auction for less than its fair market value, does the Fifth Amendment Takings Clause (or the Eighth Amendment Excessive Fines Clause) require paying the former owner the property's fair market value, or only the surplus above the tax debt from the actual sale price?