Rafaeli LLC v. Oakland County ( 2017 )

STATE OF MICHIGAN
COURT OF APPEALS
RAFAELI, LLC, and ANDRE OHANESSIAN, UNPUBLISHED
October 24, 2017
Plaintiffs-Appellants,
v No. 330696
Oakland Circuit Court
OAKLAND COUNTY and ANDREW MEISNER, LC No. 2015-147429-CZ
Defendants-Appellees.
Before: MARKEY, P.J., and METER and SHAPIRO, JJ.
SHAPIRO, J. (concurring).
I concur with my colleagues in concluding that constitutional notice was provided and
that plaintiffs lack standing to attack the hearing methodology. I also concur with my
colleagues’ conclusion that plaintiffs have failed to state a claim in their constitutional challenge
to MCL 211.78g. However, I reach that conclusion through a different analysis.
The challenged statute provides that if a property owner fails to cure a tax delinquency
within the time provided, the individual’s entire interest in the property is forfeited to the county
treasurer regardless of the amount of the deficiency and the value of the property. MCL
211.78g. Plaintiffs assert that the statute violates the Fifth Amendment’s Takings Clause, and
rely in large measure on the United States Supreme Court decision in US v Lawton, 110 U.S. 146;
3 S. Ct. 545; 28 L. Ed. 100 (1884). In that case, the heir of a person, whose property valued at
$1,110 was seized in response to a tax delinquency of $88, which with penalty, interest, and
costs had grown to $170.50, sought the difference between the value of the property and the total
tax liability. Id. at 147. The United States Supreme Court stated, “To withhold the surplus from
the owner would be to violate the fifth amendment to the constitution, and deprive him of his
property without due process of law or take his property for public use without just
compensation.” Id. at 150.
Plaintiffs’ argument fails however because the United States Supreme Court later
disavowed the constitutional aspect of Lawton, concluding that it was decided solely on statutory
grounds. Nelson v City of New York, 352 U.S. 103, 110; 77 S. Ct. 195; 1 L. Ed. 2d 171 (1956). In
Nelson, a taxpayer challenged the city’s retention of the foreclosure sale proceeds above the
amounts owed for the delinquent taxes. Id. at 109-110. The Supreme Court rejected the
challenge stating, “What the City of New York has done is to foreclose real property for charges
four years delinquent and, in the absence of timely action to redeem or to recovery any surplus,
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retain the property or the entire proceeds of its sale. We hold that nothing in the Federal
Constitution prevents this where the record shows adequate steps were taken to notify the owners
of the charges due and the foreclosure proceedings.” Id. at 110 (emphasis added). The ruling of
the United States Supreme Court rejecting a constitutional challenge to such statutes appears
clear and unequivocal.
My colleagues also affirm the dismissal of plaintiffs’ claims, but rather than relying on
Nelson, conclude, erroneously I believe, that this case is controlled by Bennis v Michigan, 516
U.S. 442, 452; 116 S. Ct. 994; 134 L. Ed. 2d 68 (1996), which addressed forfeiture of property
involved with, or resulting from, criminal activities. By resting solely on Bennis, the majority
implicitly concludes that all “forfeitures” are equal under the law, whether based upon a criminal
enterprise or a property owner’s failure to pay $8.41 in taxes. I respectfully disagree, and
suggest that the substance and not the nomenclature should control. I think that this case bears
little, if any, relation to Bennis, and that it is a mistake to conclude that Bennis addresses, let
alone controls, the issues in this case.1
Despite my concurrence, I recognize that plaintiffs’ claims call out for relief.2 Although
Rafaeli LLC’s federal court suit was dismissed on jurisdictional grounds, Judge Berg recognized
the need for some action in his opinion:
It cannot be denied that the concept of the state confiscating all of the
equity of a citizen’s property, worth between $24,500 and $70,000, and selling it
and keeping the entire proceeds—all to collect $8.41 in property taxes and
$277.40 in interest and fees, is a manifest injustice that should find redress under
the law. Property taxes must be paid, but for the County Treasurer to reap such an
overwhelming windfall by depriving a property owner of his entire interest in the
1
Looking to civil asset forfeiture as a model for enforcement of taxation laws is unsound for
other reasons. First, no other area of the law seems to draw as much advocacy for reform. See,
e.g., Ford, Due Process for Cash Civil Forfeitures in Structuring Cases, 114 Mich. L Rev 455
(2015); Kornfeld & De Corso, Uncivil Forfeitures, LA Law 39 (2003); O’Brien, “Caught in the
Crossfire”: Protecting the Innocent Owner of Real Property, 65 St John’s L Rev 521 (1991).
Second, in Bennis, the majority simply deferred to “a long and unbroken line of cases,” 516 U.S.
at 446, over the objections of four dissenting justices, while admitting that the “argument that the
Michigan forfeiture statute is unfair because it relieves prosecutors from the burden of separating
co-owners who are complicit in the wrongful use of property from innocent co-owners . . . has
considerable appeal . . . .” Id. at 453. The Bennis majority further declined to concern itself with
the potential for an asset of great value to be seized over a trivial criminal violation, on the
ground that the case before it did not present such an extreme situation. Id. at 450-451.
2
Rafaeli, LLC owed $8.41 in taxes, which with interest amounted to a delinquency of $330 on
real property that the city then sold for $24,000. Ohanessian owed approximately $8,000 in
taxes, and the city sold the property for $80,000.2
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property, and gain tens of thousands of dollars more than the tax bill ever was,
looks more like an abuse of power than like a local government’s reasonable
measures to ensure the collection of property taxes. . . . [Rafaeli, LLC v Wayne
Co unpublished opinion of the United States District Court for the Eastern District
of Michigan, issued June 4, 2015 (Docket No. 14-13958), p 3 n 2.]
Similarly, dissenting from the dismissal of a similar case on jurisdictional grounds, Chief Judge
Kethledge opined that the pertinent statute is a “gross injustice—both equitably, and from the
standpoint of the interests protected by takings law . . . .” Wayside Church v Van Buren Co, 847
F3d 812, 823 (CA 6, 2017) (KETHLEDGE, C.J., dissenting).3
In light of the United States Supreme Court’s decision in Nelson, I conclude we must
reject plaintiffs’ claim despite what appears to be an obvious injustice that requires remedial
action. However, until such time as the United States Supreme Court revisits the issue, it is the
Legislature, and not this Court, that must take such action.
/s/ Douglas B. Shapiro
3
Plaintiffs also point out that Michigan is one of only eleven states that do not return the surplus
value of the property to the taxpayer. However, plaintiffs concede that those states that do
require return of the surplus value all do so as a result of legislation, not judicial action.
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