U.S. Supreme Court Clarifies Just Compensation In Tax Foreclosure Cases

The Estate of Timothy Scott Pung v Isabella County Michigan

• Decided on June 23, 2026 (Opinion delivered by Justice Alito, 9-0 unanimous decision)

• No. 25-95

• Supreme Court of the United States

Holding: The Supreme Court of the United States held that when a tax foreclosure auction is conducted fairly, the proper baseline for measuring just compensation after a tax sale is the auction sale price, not the property’s hypothetical fair market value. The Court vacated the lower court’s decision and remanded for further proceedings consistent with its opinion.

Facts: The Pung family owed $2,241.93 in real-property taxes, which led local tax authorities in Isabella County, Michigan to initiate foreclosure proceedings. Following the foreclosure, the Pung home sold for $76,008 at public auction in Isabella County, even though the home’s was assessed value was at approximately $194,000 for tax purposes.

Michael Pung sued in federal court arguing that the Fifth Amendment’s Takings Clause required compensation based on the home’s fair market value rather than the lower foreclosure auction price. He also brought an Eighth Amendment Excessive Fines claim. The district court held Pung should only receive the surplus proceeds.

Key Appellate Holdings:

Affirmed the Sixth Circuit Court of Appeals.  

The Sixth Circuit agreed with Pung that the County had to refund the surplus proceeds of the tax sale, but they rejected that the compensation should be measured by the property’s fair market value. The court also rejected Pung’s claim under the Eighth Amendment’s Excessive Fines Clause. Just compensation was properly measured by the auction sale price, not the property’s fair market value, provided that the tax sale was fairly conducted.

Proper Baseline Under the Takings Clause and Excessive Fines Clause.  

The proper baseline under the Takings Clause was held to be the price obtained in a tax sale, at least when the sale is conducted fairly considering our country’s history of tax sales. Following a tax sale, under the Excessive Fines Clause it does not require the government to return more than the surplus proceeds. Neither the Fifth nor Eighth Amendment requires the government to compensate based on the hypothetical fair market value of the property.