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WASHINGTON —The Supreme Court heard oral arguments Wednesday in a case where a county foreclosed on a Michigan family’s home and sold it at auction at a price far below market value in order to recoup $2,200 in taxes.

Pung v. Isabella County, challenges the High Court to expand its 2023 ruling requiring the government to pay the debtor all the proceeds from a foreclosure sale, except the taxes.  Lawyers for Michael Pung, who lost his house, argued that under the Takings Clause of the Fifth Amendment, the county should have given him the fair-market value of the home minus the taxes.

Despite justices’ clear sympathy for the homeowners, they seemed unwilling to risk making a ruling that would put the foreclosure system in jeopardy.

Associate Justice Elena Kagan expressed concern that if the government is forced to pay the fair-market value of a house minus the taxes, counties would no longer foreclose because it would be too costly to make up the difference between the fair market value and whatever they get in an auction. 

​“If you’re selling a house on foreclosure, you’re just not going to get the fair market price,” Kagan said.

Frederick Liu, assistant to the solicitor general of the Department of Justice, said a ruling requiring governments to pay the fair market value of a home minus the taxes owed by the homeowner would discourage counties from recouping taxes through foreclosures.​

“It would spell the end of tax sales in America,” Liu said. “At the end of the day, it hurts other taxpayers.”

Associate Justice Amy Coney Barrett said that it would be “a pretty dangerous road for us to go down.”

The case began when Michael Pung declined to pay about $2,200 in real estate taxes because he did not believe they were due. The county set the Pung’s property for foreclosure and sold the property at a public auction for about $76,000. The Pungs were paid the surplus funds generated by the sale, totaling just under $74,000. The individual who purchased the Pung family’s home in the auction sold it soon after for $195,000.

Although the Pungs were paid the surplus generated from the foreclosure sale, they asserted that the just compensation requirement in the Takings Clause of the Fifth Amendment requires the monetary equivalent of the property taken, an additional $118,000.

Pung also argues that the process has violated the Eighth Amendment prohibition on excessive fines, resulting in a loss of $118,800 to cover the $2,242 in tax debt he claims was never owed in the first place.

Some justices were sympathetic to the Pung family, Associate Justice Neil Gorsuch saying it has a “striking set of facts.” Associate Justice Samuel Alito said that while he understands there is an emotional attachment to a house, that is not the issue of the case.​

“Is this normally how the county does it?” Barrett asked Matthew Nelson, Isabella County’s counsel. “If the tax owed was $100, will the county still foreclose on a house?”

Kate Pomery, the media director at Pacific Legal Foundation, said Pung v. Isabella County is different from previous equity theft cases, such as the unanimous 2023 Tyler v Hennepin County case, because it goes beyond the constitutional right to surplus equity.  

“Destroying $118,000 in equity to collect (or punish a protest over) the $2,242 disputed portion of the Pungs’ 2012 tax bill is a punitive forfeiture grossly disproportional to the underlying ‘offense,” in violation of the Eighth Amendment’s Excessive Fines Clause,” she wrote in an email to Medill News Service.

A victory for the Pungs would set a precedent, forcing local governments to avoid unnecessary and unfair forced sales of homes over relatively small debts, Pomery said.  

Tia Pung, Michael’s wife, said that the case is not about property taxes but is rather about private property rights and “something taken from law-abiding taxpayers over something so stupid.”

“Somebody has to stand up for what’s right, and we’re praying that we are and we will win and that people across the country will not be taken advantage of, and put in this situation and losing copious amounts of equity in homes,” Pung said in a video statement relayed by Pomery.

The Court is expected to release a decision by summer.

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WASHINGTON — The Supreme Court on Monday confronted a question that could reshape U.S.-Cuba relations by interpreting a decades-long property rights law for the first time in 30 years.

The case, Havana Docks Corporation v. Royal Caribbean Cruises, wrangled with how U.S. courts enforce Title III of the Helms-Burton Act, a Cold War-era statute that allows U.S. nationals to sue cruise companies accused of profiting from property seized by Cuba’s communist government in 1960. The Trump administration is now the first to put Title III into effect after previous U.S. presidents repeatedly suspended the 1996 law to avoid complicating its relationship with Cuba. 

In 1934, the Cuban government approved Havana Docks, a U.S. company, to operate piers and terminal facilities at the Port of Havana until 2004. However, when Fidel Castro became Cuba’s new communist leader in 1960, the U.S. and Cuba entered a trade war, and the Cuban government confiscated all U.S. property on the island, including Havana Docks’ piers. 

In 1996, Congress passed the Helms-Burton Act, but it wasn’t until it became fully operational in 2019 that Havana Docks filed its lawsuit against the Cuban government. The U.S. company claimed Cuba trafficked their property.

In the hour-long argument, the justices hinged on interpreting specific terms written within the law by asking attorneys to define “property” and “trafficking.”

“What exactly is the property here that has been confiscated?” Justice Clarence Thomas asked. 

Havana Docks’ attorney Richard D. Klingler said “property” should be interpreted as the rights to operate the docks, land and machinery granted in 1934 by the Cuban government, which is “the equivalent of a leasehold.” 

However, Justice Ketanji Brown Jackson pushed back, saying it’s “a little confusing” how the U.S. Circuit Court of Appeals got to redefine what it means to be “trafficking in confiscated property” in light of this statute.

Justice Elena Kagan expressed skepticism over Havana Docks’ ability to sue in the first place, since they didn’t own the docks. 

“Whatever the definition of ‘property’ is, I mean, you can’t sue for property that you’re unconnected to, right?” Kagan said. “You can’t say, ‘The Cuban government seized a piece of property across the street … I think I’ll go bring a lawsuit about it.’”

Kagan said Havana Docks could have sued at any time from 1934 until 2004, the time during which the Cuban government allowed the U.S. company to operate in the area. However, once the concession expired, Havana Docks no longer had a property interest, she said.

But Klingler said the concession with the Cuban government theoretically would have been time-limited had there been no confiscation by Cuba in 1960.  

Assistant to the Solicitor General Aimee Brown echoed Klingler’s response. She told the Court that the cruise lines paid roughly $130 million to the Cuban government to use the docks in 1934, and therefore participated in “exploitation of confiscated property” in 1960. 

But Justice Sonia Sotomayor said the company’s interpretation could expose businesses to endless lawsuits. 

“The most you would’ve been entitled to is reasonable compensation at the time,” Sotomayor said. “But what you’re seeking is totally different. It’s infinite compensation forever.”

Havana Docks is seeking an approximate total of $439 million in damages from four major cruise lines for using Havana port facilities after confiscation by the Cuban government, according to an amicus brief.

Justice Brett Kavanaugh asked why lawmakers would design a system that allows damages potentially exceeding the value of the confiscated property. 

Klingler said Congress deliberately imposed harsh penalties to deter companies from engaging with Cuba at all, calling the statute a “key part” of U.S. foreign policy pressure.

The back-and-forth intensified when Paul D. Clement, representing the foreign cruise lines, said the Court should make a narrower reading of the statute grounded in its text. 

Instead, Clement said Havana Docks is overestimating how extensive their property rights were. Liability requires a “one-to-one correspondence” between the confiscated property and what was actually trafficked, he said. Havana Docks, he argued, only had temporary ownership of the docks and is therefore not entitled to compensation.

“If you ignore the time limits on concessions or leaseholds, you end up sort of treating relatively small sticks in the bundle as if they’re the whole kit and caboodle,” Clement said.

During Clement’s argument, Justice Neil Gorsuch pressed him on what exactly had been confiscated when Cuba seized control of the Havana port.

Clement said the company’s “time-limited interests” were taken, not the docks themselves. The Cuban government already owned the physical facilities, he said, and the statute applies only to the specific legal rights Havana Docks once held. 

In their heated exchange, Gorsuch asked Clement to once again clarify whether the docks were confiscated by Cuba. 

“I can’t agree to that, with all due respect,” Clement replied. “Cuba owned the docks.”

The justices are expected to issue a decision by summer.