By Alethia Kasben
Gongwer News Service
The Rafaeli decision surrounding counties keeping surpluses gained from the selling of foreclosed properties issued by the Supreme Court in 2020 is retroactive to foreclosures not yet final at the time of the opinion, the high court ruled on Monday.
The 6-1 Rafaeli decision, issued in 2020, stated that when the foreclosing government takes property to satisfy an unpaid tax debt, Michigan’s Taking Clause requires that unit of government to return to the owner any proceeds from the sale exceeding the delinquent taxes, interest, penalties and fees as just compensation.
On Monday, the court unanimously ruled the 2020 decision has full retroactive effect in a joint opinion regarding Schafer v. Kent County and Hathon v. Michigan (MSC Docket Nos. 164975; 165219).
Schafer dealt with the 2020 Supreme Court decision while Hathon questioned the applicability of PA 256 of 2020 passed by the Legislature in light of Rafaeli.
The unanimous court also ruled PA 256 of 2020 generally applies retroactively, but portions of the law changing the statute of limitations apply prospectively.
Justice Brian Zahra wrote in the opinion that Rafaeli prospectively would “very likely only serve to delay an eventual adverse judgment,” against local governments that have kept surplus funds in a way the court has ruled unconstitutional.
“If Rafaeli were to only apply prospectively, that would mean that the decision and analysis in Rafaeli could not be cited as legal support and the law existing ‘prior to Rafaeli’ would govern,” Zahra wrote. “Yet, as explained in Rafaeli itself and in Tyler by the Supreme Court of the United States, a centuries-long line of jurisprudence recognizes a property owner’s right to surplus proceeds, and governments cannot take property without just compensation. Without on-point guidance from Rafaeli, parties and lower courts would be tasked with determining what the law is.”
Zahra wrote court decisions in Michigan are generally retroactive and only prospective when they overturn caselaw or deal with a specific set of circumstances.
“This case involves governmental violation of the constitutional rights of numerous individuals. Such profound interests weigh strongly against contrary interests advanced by Kent County and other FGUs in protecting government budgets as a result of their constitutional overreach,” he wrote.
The court also ruled PA 256 of 2020 passed by the Legislature to codify the Supreme Court ruling and set up the process for former owners to claim those proceeds, applies retroactively. The law, in part, said claimants could only bring action against a local government if the Rafaeli decision was determined to apply retroactively.
“The statute expressly identifies a date certain and specifically states that certain legal rights can be pursued, while others cannot,” Zahra wrote. “Further, the statute was enacted after Rafaeli; it must by its plain terms apply retroactively to events and occurrences that predated enactment.”
However, the portion of the law that creates a two-year statute of limitations to claim surplus proceeds and the language barring claims until the court ruled on retroactivity can only apply prospectively, the court ruled.
“Statutes cannot constitutionally eliminate relief by retroactively shortening a period of limitations without also providing a reasonable period of time for claimants to commence litigation,” Zahra wrote.
Courts must provide a “reasonable time” for individuals to now file claims after this decision while respecting the established limitations period existing at the time the claims accrued.
“We hold that claimants whose claims were cut short by the retroactive application of 2020 PA 256 will not be barred from relief under statutes of limitations if their claims are filed within the time they had remaining under the applicable statutes of limitations on December 22, 2020, the time 2020 PA 256 became law, and running from the date of this opinion,” Zahra wrote.
Zahra also wrote separately expressing concern about the Legislature’s passage of PA 256 of 2020, saying the law’s enactment was “alarming and unusual.”
He wrote the Legislature blocked relief individuals could seek by writing into law certain claims could not be brought unless the court ruled its 2020 decision was retroactive. The law was passed unanimously in both the House and Senate and was signed by Gov. Gretchen Whitmer.
“A coequal branch of government cannot leverage the availability of constitutional relief for aggrieved parties on this court’s acceptance of an application for leave to appeal and resolution of a case on the merits; such action is inherently a judicial function,” Zahra wrote. “If this court did not grant leave to consider Schafer, individuals around the state may have been denied a remedy for violations of basic constitutional rights, for which they were entitled to relief. At the very least, the attempt to close off relief in 2020 PA 256 pending discretionary action from this court risked serious uncertainty, disruption and expenditure of finite public resources in the adjudication of constitutional claims.”
Gongwer News Service
The Rafaeli decision surrounding counties keeping surpluses gained from the selling of foreclosed properties issued by the Supreme Court in 2020 is retroactive to foreclosures not yet final at the time of the opinion, the high court ruled on Monday.
The 6-1 Rafaeli decision, issued in 2020, stated that when the foreclosing government takes property to satisfy an unpaid tax debt, Michigan’s Taking Clause requires that unit of government to return to the owner any proceeds from the sale exceeding the delinquent taxes, interest, penalties and fees as just compensation.
On Monday, the court unanimously ruled the 2020 decision has full retroactive effect in a joint opinion regarding Schafer v. Kent County and Hathon v. Michigan (MSC Docket Nos. 164975; 165219).
Schafer dealt with the 2020 Supreme Court decision while Hathon questioned the applicability of PA 256 of 2020 passed by the Legislature in light of Rafaeli.
The unanimous court also ruled PA 256 of 2020 generally applies retroactively, but portions of the law changing the statute of limitations apply prospectively.
Justice Brian Zahra wrote in the opinion that Rafaeli prospectively would “very likely only serve to delay an eventual adverse judgment,” against local governments that have kept surplus funds in a way the court has ruled unconstitutional.
“If Rafaeli were to only apply prospectively, that would mean that the decision and analysis in Rafaeli could not be cited as legal support and the law existing ‘prior to Rafaeli’ would govern,” Zahra wrote. “Yet, as explained in Rafaeli itself and in Tyler by the Supreme Court of the United States, a centuries-long line of jurisprudence recognizes a property owner’s right to surplus proceeds, and governments cannot take property without just compensation. Without on-point guidance from Rafaeli, parties and lower courts would be tasked with determining what the law is.”
Zahra wrote court decisions in Michigan are generally retroactive and only prospective when they overturn caselaw or deal with a specific set of circumstances.
“This case involves governmental violation of the constitutional rights of numerous individuals. Such profound interests weigh strongly against contrary interests advanced by Kent County and other FGUs in protecting government budgets as a result of their constitutional overreach,” he wrote.
The court also ruled PA 256 of 2020 passed by the Legislature to codify the Supreme Court ruling and set up the process for former owners to claim those proceeds, applies retroactively. The law, in part, said claimants could only bring action against a local government if the Rafaeli decision was determined to apply retroactively.
“The statute expressly identifies a date certain and specifically states that certain legal rights can be pursued, while others cannot,” Zahra wrote. “Further, the statute was enacted after Rafaeli; it must by its plain terms apply retroactively to events and occurrences that predated enactment.”
However, the portion of the law that creates a two-year statute of limitations to claim surplus proceeds and the language barring claims until the court ruled on retroactivity can only apply prospectively, the court ruled.
“Statutes cannot constitutionally eliminate relief by retroactively shortening a period of limitations without also providing a reasonable period of time for claimants to commence litigation,” Zahra wrote.
Courts must provide a “reasonable time” for individuals to now file claims after this decision while respecting the established limitations period existing at the time the claims accrued.
“We hold that claimants whose claims were cut short by the retroactive application of 2020 PA 256 will not be barred from relief under statutes of limitations if their claims are filed within the time they had remaining under the applicable statutes of limitations on December 22, 2020, the time 2020 PA 256 became law, and running from the date of this opinion,” Zahra wrote.
Zahra also wrote separately expressing concern about the Legislature’s passage of PA 256 of 2020, saying the law’s enactment was “alarming and unusual.”
He wrote the Legislature blocked relief individuals could seek by writing into law certain claims could not be brought unless the court ruled its 2020 decision was retroactive. The law was passed unanimously in both the House and Senate and was signed by Gov. Gretchen Whitmer.
“A coequal branch of government cannot leverage the availability of constitutional relief for aggrieved parties on this court’s acceptance of an application for leave to appeal and resolution of a case on the merits; such action is inherently a judicial function,” Zahra wrote. “If this court did not grant leave to consider Schafer, individuals around the state may have been denied a remedy for violations of basic constitutional rights, for which they were entitled to relief. At the very least, the attempt to close off relief in 2020 PA 256 pending discretionary action from this court risked serious uncertainty, disruption and expenditure of finite public resources in the adjudication of constitutional claims.”
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