Amicus Curiae Brief — Geraldine Tyler, Petitioner v. Hennepin County, Minnesota, et al.

No. 22-166

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In The

Supreme Court of the United States

---------------------------------♦--------------------------------GERALDINE TYLER,

Petitioner,

v.

HENNEPIN COUNTY, MINNESOTA, ET AL.,

Respondents.

---------------------------------♦--------------------------------On Writ Of Certiorari To The

United States Court Of Appeals

For The Eighth Circuit

---------------------------------♦--------------------------------BRIEF OF ATLANTIC LEGAL FOUNDATION AS

AMICUS CURIAE IN SUPPORT OF PETITIONER

---------------------------------♦--------------------------------NANCIE G. MARZULLA

MARZULLA LAW, LLC

1150 Connecticut Ave., NW

Washington, DC 20036

(202) 822-6760

LAWRENCE S. EBNER

Counsel of Record

ATLANTIC LEGAL FOUNDATION

1701 Pennsylvania Ave., NW

Washington, DC 20006

(202) 729-6337

lawrence.ebner@

atlanticlegal.org

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i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ....................................... iii

INTEREST OF THE AMICUS CURIAE..................... 1

INTRODUCTION .......................................................... 2

SUMMARY OF ARGUMENT ...................................... 3

ARGUMENT .................................................................. 6

A. States cannot legislate away rights secured by

the Fifth Amendment .............................................. 6

1. The Just Compensation Clause limits a

State’s ability to define away constitutionally

protected property rights ................................... 7

2. States may not abrogate their constitutional

obligations by “redefining” private property as

public property .................................................. 11

3. The Court repeatedly has invalidated state

actions that run afoul of the Fifth

Amendment ....................................................... 13

B. The Eighth Circuit misunderstood and misapplied

the tax lien holdings that this Court carefully

cabined to avoid a Fifth Amendment taking ....... 18

ii

1. The Eighth Circuit misinterpreted this

Court’s holding in Nelson v. City of

New York ............................................................ 21

2. Nelson is inapposite where, as here, a state

statute precludes a property owner from

receiving the surplus proceeds from

a judicial sale ..................................................... 23

CONCLUSION............................................................. 24

iii

TABLE OF AUTHORITIES

Cases

Page(s)

Armstrong v. United States,

364 U.S. 40 (1960) ............................................ 13, 17

Brown v. Legal Found. of Wash.,

538 U.S. 216 (2003) ........................................ 8, 9, 16

City of New York v. Chapman Docks Co.,

149 N.Y.S. 2d 679 ................................................... 19

Dolan v. City of Tigard,

512 U.S. 374 (1994) ................................................ 24

Farnham v. Jones,

19 N.W. 83 (Minn. 1884) .................................. 5, 6, 8

Int’l Paper Co. v. United States,

282 U.S. 399 (1931) ................................................ 17

Kaiser Aetna v. United States,

444 U.S. 164 (1979) ................................................ 13

Loretto v. Teleprompter Manhattan CATV Corp.,

458 U.S. 419 (1982) .................................... 11, 12, 16

Louisville Joint Stock Land Bank v. Radford,

295 U.S. 555 (1935) ................................................ 17

Lucas v. South Carolina Coastal Council,

505 U.S. 1003 (1992) .............................................. 15

iv

Lynch v. United States,

292 U.S. 571 (1934) ................................................ 17

McCulloch v. Maryland,

17 U.S. 316 (1819) .................................................... 6

Nelson v. City of New York,

352 U.S. 103 (1956) .............. 4, 18, 19, 20, 21, 22, 23

Nixon v. United States,

978 F.2d 1269 (D.C. Cir. 1992)............................... 13

Penn Cent. Transp. Co. v. City of New York,

438 U.S. 104 (1978) ................................................ 16

Penn. Coal Co. v. Mahon,

260 U.S. 393 (1922) ............................................... 12

Phillips v. Wash. Legal Found.,

524 U.S. 156 (1998) .......................................... 10, 16

Shelden v. United States,

7 F.3d 1022 (Fed. Cir. 1993) ................................... 18

United States v. Causby,

328 U.S. 256 (1946) ................................................ 15

United States v. Fuller,

409 U.S. 488 (1972) ................................................ 13

United States v. Gen. Motors Corp.,

323 U.S. 373 (1945) ................................................ 11

v

United States v. Lawton

110 U.S. 146 (1884) .................. 3, 4, 7, 18, 19, 20, 23

Webb’s Fabulous Pharmacies, Inc. v. Beckwith,

449 U.S. 155 (1980) .......................................... 14, 15

Constitution

U.S. Const. amend. V .................................. 1, 7, 22, 23

U.S. Const. amend. XIV, § 1.............................. 1, 7, 15

Statutes

Minn. Stat. § 272.31 .................................................... 2

Minn. Stat. § 279.03 .................................................... 2

Minn. Stat. § 280.01 .................................................... 2

Minn. Stat. § 280.41 .................................................... 2

Minn. Stat. § 281.18 .................................................... 9

Minn. Stat. § 282.01 .................................................... 3

Minn. Stat. § 282.07 ................................................ 3, 9

Minn. Stat. § 282.08 .................................................... 3

Minn. Stat. § 282.18 .................................................... 3

vi

Other Authorities

James Madison, Property, 1 Nat’l Gazette 174 (1792)

(reprinted in 4 Letters and Other Writings of

James Madison 480 (1865)).. .................................. 11

Richard A. Epstein, “Home Equity Theft by the Tax

Collector,” Hoover Inst., Defining Ideas (Jan. 23,

2023). ......................................................................... 7

State Theft in Real Property Tax Foreclosure

Procedures,

54 Real Prop. Tr. & Est. L.J. 93 (2019).................. 11

1

INTEREST OF THE AMICUS CURIAE 1

Established in 1977, the Atlantic Legal Foundation

(ALF) is a national, nonprofit, nonpartisan, public interest

law firm whose mission is to advance the rule of law and

civil justice by advocating for individual liberty, free

enterprise, property rights, limited and responsible

government, sound science in judicial and regulatory

proceedings, and effective education, including parental

rights and school choice. With the benefit of guidance from

the distinguished legal scholars, corporate legal officers,

private practitioners, business executives, and prominent

scientists who serve on its Board of Directors and Advisory

Council, the Foundation pursues its mission by

participating as amicus curiae in carefully selected

appeals before the Supreme Court, federal courts of

appeals, and state supreme courts. See atlanticlegal.org.

* * *

The Fifth Amendment’s Takings Clause (also known as

the Just Compensation Clause), applicable to each State

and its political subdivisions through the Fourteenth

Amendment, recognizes that private ownership of

property, and in turn, economic liberty, is intrinsic to our

nation’s social fabric. ALF has participated as amicus

curiae in many cases where, as here, overly aggressive,

and indeed avaricious, governmental action raises serious

taking concerns. See, e.g., Br. of Atl. Legal Found., et al.

1 No counsel for a party authored this brief in whole or part, and no

party or counsel other than the amicus curiae and its counsel made a

monetary contribution intended to fund preparation or submission of

this brief.

2

As Amici Curiae In Support of Petitioners, Sackett v. U.S.

EPA, No. 21-454 (U.S. filed Apr. 14, 2022).

This is such a case. The question presented—whether

a local government violates the Just Compensation Clause

when it pockets, as authorized by a state statute, the

surplus proceeds from sale of a home that it seizes to

collect a delinquent property tax or other debt—squarely

aligns with ALF’s mission of protecting private property

from

unjust

and

uncompensated

governmental

enrichment.

INTRODUCTION

Under the Minnesota tax lien scheme at issue in this

appeal, 2 all private property owned in fee simple is held

subject to a “perpetual lien.” 3 Where, as here, a Minnesota

property owner owes back taxes and becomes delinquent,

a court administrator enters judgment against the

property, and the county auditor, on behalf of the State,

“purchases” the property “associated with an unsatisfied

judgment for an amount equal to the delinquent taxes,

penalties, costs, and interest owed” on the property. 4 This

so-called purchase vests title to the property “in the State,

‘subject only to the rights of redemption’ allowed by

statute.” 5

2 See Pet. App. 2a–4a (discussing Minn. Stat. § 279.03 et seq.).

3 Id. 2a (citing Minn. Stat. § 272.31).

4 Id. 3a-4a (quoting Minn. Stat. §280.01).

5 Id. 3a (quoting Minn. Stat. § 280.41).

3

If the property owner fails to redeem her property

under the Minnesota statute, “absolute title” vests in the

State, free and clear of any prior interests, including the

prior owner’s entire equity estate. 6 At that point, the

county can decide whether to retain the property for some

public purpose or “sell it to a private buyer for not less

than its appraised value.” 7 Once sold, the county then

distributes the net proceeds for various county public

purposes. 8

In other words, Minnesota’s “tax-forfeiture plan does

not allow the former owner to recover any proceeds of the

sale that exceed her tax debt.” 9

Here, Respondent Hennepin County, Minnesota,

following the steps prescribed under the Minnesota

forfeiture scheme, sold Petitioner Geraldine Tyler’s home

for $40,000 to collect a $15,000 tax debt, and retained the

$25,000 in surplus proceeds for itself. 10

SUMMARY OF ARGUMENT

Well over a century ago, this Court in United States v.

Lawton, 11 held that “[t]o withhold the surplus from the

owner would be to violate the Fifth Amendment to the

Constitution, and . . . take his property for public use

6 Id. 4a (Minn. Stat. §§ 282.18, 282.07).

7 Id. (quoting Minn. Stat. § 282.01).

8 Id. (Minn. Stat. § 282.08).

9 Id. 4a (emphasis added).

10 Id.

11 110 U.S. 146, 150 (1884).

4

without just compensation.” 12 The Court explained that

“so far as such owner is concerned, the surplus money is

set aside as his as fully as if it had come from a third

person.” 13

Years later, in Nelson v. City of New York, 14 the Court

narrowed the Lawton holding, explaining that Lawton

prohibits only statutes that preclude an owner from

obtaining the surplus proceeds of a judicial sale. 15

Distinguishing Lawton, the Court in Nelson stated that

we do not have here a statute which

absolutely precludes an owner from

obtaining the surplus proceeds of a judicial

sale . . . . 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 recover[] any

surplus, 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. 16

Because the Minnesota forfeiture scheme provided

Tyler with an opportunity to redeem her property before

12 Id.

13 Id.

14 352 U.S. 103 (1956).

15 Id. at 110.

16 Id.

5

absolute title vested in the State, the Eighth Circuit

asserted that “nothing in the Federal Constitution

prevents” the government from retaining the surplus

“where the record shows adequate steps were taken to

notify the owners of the charges due and the foreclosure

proceedings.” 17 According to the court of appeals, “[w]here

state law recognizes no property interest in surplus

proceeds from a tax-foreclosure sale conducted after

adequate notice to the owner, there is no unconstitutional

taking.” 18 Misinterpreting Nelson’s holding, the court

denigrated the Fifth Amendment’s protection of property

rights from substantive to merely procedural, denying just

compensation if adequate notice is rendered.

The Eighth Circuit also held that Tyler had no legal

right to the proceeds under state law: “Minnesota’s taxforfeiture plan does not allow the former owner to recover

any proceeds of the sale that exceed her tax debt.” 19 The

court of appeals disagreed with Tyler that Minnesota

common law recognizes a property interest in surplus

equity in the tax-forfeiture context: “We conclude that any

common law right to surplus equity recognized in

Farnham has been abrogated by statute.” 20

According to the court of appeals, Minnesota had

legislated away any common-law property rights that may

have existed: “[E]ven assuming Tyler had a property

17 Pet. App. 8a.

18 Id.

19 Id. 4a.

20 Id. 7a (citing Farnham v. Jones, 19 N.W. 83 (Minn. 1884)) (emphasis

added).

6

interest in surplus equity under Minnesota common law

as of 1884, she has no such property interest under

Minnesota law today.” 21 In so holding the court failed to

recognize that a State violates the Fifth Amendment if it

enacts legislation that redefines private property as public

property.

ARGUMENT

A. States cannot legislate away rights secured by

the Fifth Amendment

Former Chief Justice John Marshall once stated that

“an unlimited power to tax involves, necessarily, a power

to destroy.” 22 State laws, such as the one at issue here,

authorize a local taxing entity to take title to a privately

owned home, sell that property in foreclosure to satisfy a

tax lien, and keep for itself the surplus proceeds from the

home sale, destroying the former owner’s equity in her

home, without just compensation.

The Minnesota Supreme Court has squarely

recognized that under Minnesota law, “[t]he right to the

surplus” from proceeds of a tax lien sale “exists

independently of [any] statutory provision.” 23 The right to

just compensation for the taking of surplus proceeds from

a judicial sale likewise has been recognized under the

Fifth Amendment, which may not be abrogated by statute.

“To withhold the surplus from the owner would be to

21 Id. 8a.

22 McCulloch v. Maryland, 17 U.S. 316, 327 (1819).

23 See Farnham 19 N.W. at 85.

7

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.” 24 This is “yet another case in which the

government seeks to avoid serious constitutional

constraints by dubious definitional ploys.” 25

1. The Just Compensation Clause limits a

State’s

ability

to

define

away

constitutionally protected property rights

The Just Compensation Clause provides more than

procedural protections for property rights: It affirmatively

limits a State’s ability to take private property rights by

requiring that government shall not take “private

property . . . for public use, without just compensation.” 26

The Just Compensation Clause limits state actions under

the Fourteenth Amendment, which requires States to

protect rights guaranteed by the Constitution: “No State

shall make or enforce any law which shall abridge the

privileges or immunities of citizens of the United States;

nor shall any State deprive any person of life, liberty, or

property, without due process of law; nor deny to any

person within its jurisdiction the equal protection of the

laws.” 27 There is no question that the equity in one’s home

24 Lawton, 110 U.S. at 150.

25 Richard A. Epstein, “Home Equity Theft by the Tax Collector,”

Hoover Inst., Defining Ideas (Jan. 23, 2023), available at

https://www.hoover.org/research/home-equity-theft-tax-collector.

26 U.S. Const. amend. V (“nor shall private property be taken for public

use, without just compensation.”).

27 U.S. Const. amend. XIV, § 1.

8

is a recognized property right under Minnesota law. 28 For

over a century, the Minnesota Supreme Court has

recognized that “[t]he right to the surplus” from proceeds

of a tax lien sale “exists independently of [any] statutory

provision” under Minnesota law. 29

In accordance with Brown v. Legal Found. of Wash., 30

the Minnesota tax lien scheme must satisfy two

requirements to pass constitutional muster: “While [the

Fifth Amendment] confirms the State’s authority to

confiscate private property, the text of the Fifth

Amendment imposes two conditions on the exercise of

such authority: the taking must be for a ‘public use’ and

‘just compensation’ must be paid to the owner.” 31 Here,

while Hennepin County can legitimately claim a right to

recover delinquent taxes, plus any reasonable amount of

penalties and other costs associated with the collection of

delinquent taxes, under no theory of property law can the

surplus equity in Tyler’s former home be considered state

property, much less title to her property, without

triggering the Just Compensation Clause. 32

Any state law that allows a local government to take

private property, regardless of the public purpose, must

satisfy the constitutional duty to justly compensate the

owner of that property: “When the government physically

takes possession of an interest in property for some public

28 See, e.g., Farnham, 19 N.W. at 85.

29 Id.

30 538 U.S. 216 (2003).

31 Id. at 231-32.

32 See id. at 233.

9

purpose, it has a categorical duty to compensate the

former owner. . . .” 33

There is no question that Hennepin County took

Tyler’s property.

Once the county declared Tyler

delinquent in her property tax payments, it followed the

provisions outlined in the Minnesota tax forfeiture

statute, under which the State took title to Tyler’s home,

and later “absolute title” to Tyler’s home. 34 Having

acquired absolute title to Tyler’s property, the County was

then free to choose how to use its newly acquired property:

for some public use or to sell it, which the County chose to

here, retaining for itself the net proceeds of the foreclosure

sale. 35 After absolute title to the private property

transfers to the State, the Minnesota forfeiture law does

not require the government to pay former owners, such as

Tyler, any compensation for taking the fair market value

of their property taken—including the surplus proceeds

realized after the amounts owed for the tax delinquency

have been satisfied. 36

As one commentator has noted, the surplus equity

itself could also be the just compensation required for the

State’s taking of title to real property:

[T]he amount owed in taxes, interest, and

fees is often far less than the value of the

home. In those instances, cancelling the

33 Id.

34 Pet. App. 9a (citing Minn. Stat.

35 Id. at 4a.

36 Id.

§§ 281.18, 282.07).

10

debt owed does not put the property in the

same position financially as if the property

had not been taken because the owner loses

more in home equity than the owner gains

from the debt cancelation. . . . A more just

form of compensation would be the surplus

from the tax foreclosure sale. Using this

measure of compensation, the government

would be able to collect the appropriate

amount in taxes and fees and the property

owner would not lose all of his or her home

equity. 37

Regardless of how characterized, the Minnesota tax

forfeiture scheme violates the Just Compensation Clause

and, unchecked, threatens the very concept of private

property, as it signals to States that they may appropriate

with impunity private property through the simple

process of legislating away the private property right.

The Eighth Circuit’s analysis of Tyler’s property rights

highlights this concern. The court’s analysis of the

property right (home equity) was—to be charitable—

truncated. Although correctly noting that property “is

determined by reference to existing rules or

understandings stemming from an independent source

such as state law,” 38 the court below reached the

anomalous result that the State can define away a key

component of Anglo-American heritage of property

37 Jenna Christine Foos, State Theft in Real Property Tax Foreclosure

Procedures, 54 Real Prop. Tr. & Est. L.J. 93, 125-26 (2019).

38 Pet. App. 6a. (citing Phillips v. Wash. Legal Found., 524 U.S. 156,

164 (1998)).

11

ownership: Fee ownership of physical property includes

“the rights ‘to possess, use and dispose of it.’” 39

Notably missing from the court’s analysis is any

recognition that the right to own and enjoy one’s property

is one of the fundamental, indeed inalienable, rights on

which our system of law and government rests. James

Madison wrote “as a man is said to have a right to his

property, he may be equally said to have a property in his

rights.” 40

2. States

may

not

abrogate

their

constitutional obligations by “redefining”

private property as public property

As Tyler set forth in her petition, traditional property

law has historically recognized home equity as a property

right. 41 And as the court below apparently acknowledged,

Minnesota law had, prior to enactment of the tax

forfeiture scheme, likewise recognized home equity in the

context of a tax forfeiture as a property right. 42

That Minnesota law allows Hennepin County to retain

39 Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 435

(1982) (quoting United States v. Gen. Motors Corp., 323 U.S. 373, 378

(1945)).

40 James Madison, Property, 1 Nat’l Gazette 174 (1792) (reprinted in

4 Letters and Other Writings of James Madison 480 (1865)).

41 See Pet. at 11 (“Debtors have a deeply rooted right to be paid for

their equity in property seized to pay a debt. . . . While government

may seize property to collect a tax . . . it exceeds its legitimate

authority to collect the debt when it takes more than what is owed.”).

42 Pet. App. 7a.

12

the surplus equity proceeds from delinquent tax sales, and

then use that money for public projects such as “municipal

improvements” and “environmental cleanup,” 43 is no basis

for considering the law constitutionally valid. In the

American constitutional law system, the ends do not

justify the means when individual rights are at stake. As

Justice Holmes stated in Pennsylvania Coal Co. v.

Mahon: 44 “We are in danger of forgetting that a strong

public desire to improve the public condition is not enough

to warrant achieving the desire by a shorter cut than the

constitutional way of paying for the change.” 45

Further, this Court should not be misled by the

County’s attempt to minimize the constitutional

implications of this tax forfeiture scheme by focusing on

all the procedural protections, including chances to

redeem the property. 46

This Court has previously

underscored that even de minimis invasions of private

property are to be treated as a violation of the Fifth

Amendment. 47 Here, owing taxes does not extinguish

property rights. Under the County’s theory, not being able

to pay a tax destroys the ability to rely on a right to equity

as a form of life savings.

43 Pet. App. 15a.

44 260 U.S. 393 (1922).

45 Id. at 416.

46 See Respondents’ Response To the Pet. For a Writ of Cert. at 4.

47 See, e.g., Loretto, 458 U.S. at 435-36.

13

3. The Court repeatedly has invalidated state

actions that run afoul of the Fifth

Amendment

Property rights derive from equitable concepts rooted

in common law and in the principles of equity reflected in

the Just Compensation Clause, and constitute a limit on

how far a State can go in defining away private property

rights. This Court has stated property consists of

recognized expectancies. 48 In Nixon v. United States, 49 a

case involving former President Nixon’s presidential

papers, the D.C. Circuit observed that the “essential

character of property is that it is made up of mutually

reinforcing understandings that are sufficiently well

grounded to support a claim of entitlement.” 50

The historical compact recorded in the Just

Compensation Clause is that government’s power will be

constrained by principles of fairness. “The constitutional

requirement of just compensation derives as much content

from the basic equitable principles of fairness as it does

from technical concepts of property law.” 51 While

government can, under certain circumstances, “take”

48 Kaiser Aetna v. United States, 444 U.S. 164, 179 (1979).

49 978 F.2d 1269 (D.C. Cir. 1992).

50 Id. at 1275.

51 United States v. Fuller, 409 U.S. 488, 490 (1972) (internal citations

omitted); see also Armstrong v. United States 364 U.S. 40, 49 (1960)

(“The Fifth Amendment’s guarantee that private property shall not be

taken for a public use without just compensation was designed to bar

Government from forcing some people alone to bear public burdens

which, in all fairness and justice, should be borne by the public as a

whole.”).

14

private property for public use, that taking is

unconstitutional unless it provides just or fair payment in

return.

This Court often has invalidated state laws that

attempted to define away constitutionally protected

property rights. For example—

● In Webb’s Fabulous Pharmacies, Inc. v. Beckwith, 52

the Court held unconstitutional a state law that required

a plaintiff to deposit the amount of an agreed purchase

price into an interpleader account in the state court

registry. 53 After satisfying the claims of various creditors

and withdrawing court fees, the clerk then returned the

remainder of the interpleader account to the owner, but

retained the interest the account had earned while in the

court’s possession. 54 The Court held that the retention of

the interest earned on the account was a taking of

property in violation of the Fifth Amendment. 55

Seminole County has not merely ‘adjust[ed]

the benefits and burdens of economic life to

promote the common good’. . . . Rather the

exaction is a forced contribution to general

governmental revenues, and it is not

reasonably related to the costs of using the

courts. 56

52 449 U.S. 155 (1980).

53 Id. at 157.

54 Id. at 158.

55 Id. at 164-65.

56 Id. at 163 (internal citations omitted).

15

As such, the Court held that transfer to the government

of “the interest earned on the interpleader fund while it

was in the registry of the court was a taking violative of

the Fifth and Fourteenth Amendments.” 57

In Webb’s the Court described this forced contribution

to the government’s coffers as a physical taking,

comparable to the physical appropriation of private

property seen in cases such as United States v. Causby, 58

a case in which the federal government was held to have

physically appropriated the airspace above private

property for the flight pattern of military aircraft. 59 That

analysis applies with equal force here, where Hennepin

County has, by legislative fiat, declared itself the owner

of the surplus proceeds from the sale of Tyler’s former

home.

● In Lucas v. South Carolina Coastal Council, 60 the

Court also flatly rejected the State’s argument that title

to one’s land is “somehow held subject to” an “implied

limitation” that the state may “eliminate all economically

valuable use” of that property. The Court explained that

this argument “was inconsistent” with the “historical

compact” recorded in the Fifth Amendment “that has

become part of our constitutional culture.” 61

57 Id. at 165.

58 328 U.S. 256 (1946).

59 Id. at 258.

60 505 U.S. 1003 (1992).

61 Id. at 1028.

16

● The Court has also applied the per se taking test

to cases involving the forced transfer of money (interest

earned on a lawyer’s IOLTA trust account) from private

to public use—again holding cases like this more

analogous to the physical occupation of the rooftop in

Loretto 62:

We agree that a per se approach is more

consistent with the reasoning in our Phillips

opinion than Penn Central’s ad hoc analysis.

As was made clear in Phillips, the interest

earned in the IOLTA accounts “is the

‘private property’ of the owner of the

principal.”. . . If this is so, the transfer of the

interest to the Foundation here seems more

akin to the occupation of a small amount of

rooftop space in Loretto. 63

● The Court has also used a per se analysis to

determine that the elimination of a lien to secure payment

is a taking:

The total destruction by the Government of

all value of these liens, which constitute

compensable property, has every possible

element of a Fifth Amendment ‘taking’ and

is not a mere ‘consequential incidence’ of a

valid regulatory measure. Before the liens

were destroyed, the lienholders admittedly

62 458 U.S. at 420.

63 Brown v. Legal Found. of Wash., 538 U.S. at 235 (citing Phillips v.

Wash. Legal Found., 524 U.S. 156 (1998); Penn Cent. Transp. Co. v.

City of New York, 438 U.S. 104 (1978); and Loretto, 458 U.S. 419).

17

had compensable property. Immediately

afterwards, they had none. This was not

because their property vanished into thin

air. It was because the Government for its

own advantage destroyed the value of the

lien. . . . 64

● Similarly, the Court has applied a per se analysis

to the taking of contract rights. In Lynch v. United

States, 65 the Court held that Congress cannot reduce

expenditures by repudiating contractual obligations of

the United States. 66 And in International Paper Co. v.

United States, 67 the Court found a per se taking of a

contract to provide water to power the company’s sawmill

when the United States requisitioned all Niagara River

hydropower for war production. 68

● In Louisville Joint Stock Bank v. Radford, 69 the

Court held that a bankruptcy statute that deprived the

bank of its pre-existing contract rights under a mortgage

constituted a taking, confirming that “[t]he bankruptcy

power, like the other great substantive powers of

Congress, is subject to the Fifth Amendment.” 70

64 Armstrong, 364 U.S. at 49.

65 292 U.S. 571 (1934).

66 Id. at 843.

67 282 U.S. 399 (1931).

68 Id. at 408.

69 295 U.S. 555 (1935).

70 Id. at 589.

18

● And in Shelden v. United States, 71 the Federal

Circuit held that when the government obtained title to

Ralph Washington’s property under the criminal asset

forfeiture provisions, its consequent destruction of the

mortgage-holder’s right to repayment through foreclosure

was a taking:

When the forfeiture order transferred all of

Washington’s interest in the property to the

United States, the government took a

property interest from the Sheldens for a

public purpose . . . (“in personam forfeitures

serve the public’s interests in enforcing

penal sanctions”). In accordance with the

principles of the Fifth Amendment, the

Sheldens must be compensated. 72

B. The Eighth Circuit misunderstood and

misapplied the tax lien holdings that this

Court carefully cabined to avoid a Fifth

Amendment taking

In addressing the Court’s holding in Nelson v. City of

New York, the Eighth Circuit mischaracterized a crucial

portion of the Nelson opinion. In Nelson this Court

addressed Lawton, explaining as follows:

In affirming a judgment in favor of a

foreclosed landowner for the surplus

proceeds from the sale of his land, the Court

71 7 F.3d 1022 (Fed. Cir. 1993).

72 Id. at 1026.

19

[in Lawton] said: “To withhold the surplus

from the owner would be to violate the Fifth

Amendment to the Constitution and to

deprive him of his property without due

process of law or to take his property for

public use without just compensation.” 73

Nelson then concluded that the Fifth Amendment

violation expressed in Lawton was not implicated by the

statutory scheme challenged in Nelson:

But we do not have here a statute which

absolutely precludes an owner from

obtaining the surplus proceeds of a judicial

sale. In City of New York v. Chapman Docks

Co., 149 N.Y.S. 2d 679, an owner filed a

timely answer in a foreclosure proceeding,

asserting his property had a value

substantially exceeding the tax due. The

Appellate Division construed . . . the

statute to mean that upon proof of this

allegation a separate sale should be directed

so that the owner might receive the surplus.

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[sic] any

surplus, retain the property or the entire

proceeds of its sale. We hold that nothing in

the Federal Constitution prevents this

73 352 U.S. at 109-10 (quoting Lawton, 110 U.S. at 150).

20

where the record shows adequate steps were

taken to notify the owners of the charges

due and the foreclosure proceedings. 74

Nelson stands for the proposition that where a statute

does not “absolutely preclude[] an owner from obtaining

surplus proceeds of a judicial sale[,]” it does not violate the

Constitution. 75 But the Eighth Circuit misconstrued

Nelson’s holding

that “nothing in the Federal Constitution

prevents” the government from retaining

the surplus “where the record shows

adequate steps were taken to notify the

owners of the charges due and the

foreclosure proceedings.” 76

The New York tax lien scheme in Nelson passed

constitutional muster because it did not preclude “an

owner from obtaining the surplus proceeds of a judicial

sale,” and therefore did not take property without just

compensation in violation of the Fifth Amendment—as

Lawton warned would be the case if surplus were

withheld. 77 The Court reiterated in Nelson that “[t]o

withhold the surplus from the owner would be to violate

the Fifth Amendment to the Constitution and to deprive

74 Id. at 110.

75 Id.

76 Pet. App. 8a (quoting Nelson, 352 U.S. at 110).

77 Nelson, 352 U.S. at 109-10.

21

him of his property without due process of law or to take

his property for public use without just compensation.” 78

Unlike the New York tax lien scheme addressed in

Nelson, which allowed the plaintiffs “to file an action to

redeem the property or to recover the surplus,” 79 here, the

Minnesota tax scheme allows only redemption of the

property without the option to ever recover surplus of any

judicial sale. 80 In short, the Eighth Circuit failed to

appreciate the difference between surplus from a judicial

sale and the right of redemption, resulting in a

constitutionally unsound decision.

1. The Eighth Circuit misinterpreted this

Court’s holding in Nelson v. City of New

York

The Eighth Circuit’s decision was based on its

erroneous conflation of the right to recover the surplus

proceeds of a judicial sale with the antecedent right to

redeem property before a judicial sale is permitted.

Specifically, the Eighth Circuit asserted that

[l]ike the property owners in Nelson, Tyler

received adequate notice of the impending

forfeiture action and enjoyed multiple

chances to avoid forfeiture of the surplus.

She could have recovered the surplus by

redeeming the property and selling the

78 Id.

79 Pet. App. 8a-9a.

80 Id.

22

condominium, or by confessing judgment,

arranging a payment plan for the taxes due,

and then selling the property.

* * *

Nelson provides that once title passes to the

State under a process in which the owner

first receives adequate notice and

opportunity to take action to recover the

surplus, the governmental unit does not

offend the Takings Clause by retaining

surplus equity from a sale. That Minnesota

law required Tyler to do the work of

arranging a sale in order to retain the

surplus is not constitutionally significant. 81

The court of appeals failed to explain its conclusion that

Tyler “could have recovered the surplus” by personally

redeeming and selling the property before a judicial sale

was effectuated, and thus, before any surplus was

ascertainable. 82 Thus, the lower court’s conflation yielded

a logically fallacious interpretation: Tyler could “recover”

the “surplus” from a judicial sale before the occurrence of

a judicial sale.

81 Id. 9a (emphasis added).

82 Id.

23

2. Nelson is inapposite where, as here, a state

statute precludes a property owner from

receiving the surplus proceeds from a

judicial sale

As a result of the Eighth Circuit’s misunderstanding of

Nelson and its conflating surplus of a sale with right of

redemption, the court of appeals failed to grasp that

Lawton and Nelson stand for the proposition that surplus

proceeds from a judicial sale must be recoverable by a

homeowner to avoid violating the Fifth Amendment

prohibition against taking property without just

compensation.

The Eighth Circuit—rather than

appreciating the import of a property owner’s right to

surplus proceeds of a judicial sale under the Fifth

Amendment’s Takings Clause—instead compared the

right to surplus from a judicial sale to the right to redeem

property, characterizing any distinction as “immaterial.” 83

But this distinction could hardly be more material.

Without the right to recover surplus of a judicial sale,

the State is taking property from individuals in excess of

the tax charges against the property without just

compensation—a per se taking of their vested property

rights. This Court must not permit the relegation of

property owners’ Fifth Amendment rights in favor of a

state’s desire to squeeze as much money as possible out of

its tax lien scheme. There is “no reason why the Takings

Clause of the Fifth Amendment, as much a part of the Bill

of Rights as the First Amendment or Fourth Amendment,

83 Id.

24

should be relegated to the status of a poor relation” among

the Bill of Rights. 84

CONCLUSION

The judgment of the U.S. Court of Appeals for the

Eighth Circuit should be reversed.

Respectfully submitted,

LAWRENCE S. EBNER

Counsel of Record

ATLANTIC LEGAL FOUNDATION

1701 Pennsylvania Ave., NW

Washington, D.C. 20006

(202) 729-6337

lawrence.ebner@atlanticlegal.org

NANCIE G. MARZULLA

MARZULLA LAW, LLC

1150 Connecticut Ave., NW

Washington, DC 20036

(202) 822-6760

nancie@marzulla.com

March 2023

84 Dolan v. City of Tigard, 512 U.S. 374, 392 (1994).