The United States Supreme Court has granted certiorari in Pung v. Isabella County, a landmark property rights case led by attorney Philip L. Ellison of Outside Legal Counsel PLC. The petition asks the Court to resolve what “just compensation” means after a tax-foreclosure sale and whether massive equity losses can also violate the Eighth Amendment’s Excessive Fines Clause.
What Happened at Oral Argument in Pung v. Isabella County
On February 25, 2026, the Supreme Court heard argument in Pung v. Isabella County.
The question presented sounds technical. It is not. When the government takes a home to satisfy a small tax debt, does the Constitution require payment of fair market value—or is whatever happens at a tax auction automatically “just compensation”?
OLC attorney Philip L. Ellison, arguing for the Estate of Timothy Scott Pung, began where the Fifth Amendment begins: with value. Just compensation, he told the Court, is measured by the value of what is taken, at the time it is taken—not by the after-the-fact results of a forced sale. The argument before the Court asked whether that shortcut is constitutional.
The Justices immediately pressed on history. Justice Thomas asked what to do with longstanding traditions permitting tax foreclosures. Justice Sotomayor asked for a holding in this Court’s 250-year history declaring that fair market value governs in tax foreclosure cases.
The skepticism was not subtle. Forced sales, several Justices suggested, do not produce ordinary market prices. If a foreclosure auction is conducted fairly—open bidding, notice, procedure—why isn’t that good enough? Chief Justice Roberts returned repeatedly to that question. What more, he asked, must a government do if it runs a procedurally fair sale that nonetheless yields a depressed price?
Justice Kagan framed the concern even more sharply. If foreclosure sales typically depress price, and if the Constitution demands payment of hypothetical open-market value instead, would states be forced to abandon tax foreclosures altogether?
Behind all those questions lay a structural anxiety: does the Fifth Amendment transform counties into real estate insurers? The response was simple, even if uncomfortable. Takings law does not turn on moral fault. The Constitution does not say “just compensation, unless the owner made a mistake.” Once the government elects to take more property than the debt requires, the risk of valuation error shifts to the government. That allocation was decided when the Fifth Amendment was adopted.
Justice Alito explored the practical consequences. If a county must pay fair market value, and if an auction underperforms, does the government have to cover the shortfall from the public fisc? Must it maintain properties while attempting resale? Must it pursue personal property first? Those questions underscored what the case is really about: who bears the downside risk of a forced liquidation? The former owner, or the sovereign?
A potential middle ground emerged during questioning from Justices Gorsuch and Kavanaugh. The Solicitor General suggested that auctions may suffice if the procedures are fair, but that the Sixth Circuit erred by adopting a categorical rule that surplus proceeds always equal just compensation. Justice Gorsuch observed that the lower courts relied on a rule that did not meaningfully consider procedural fairness (and even the federal government cannot support it).
A remand to allow development of fairness challenges was openly discussed. That discussion mattered. If the Court is unwilling to announce that fair market value is the constitutional baseline in all tax foreclosures, it may nonetheless reject a rule that forecloses any inquiry beyond the auction gavel.
There was also a human thread running beneath the doctrinal debate. Justice Gorsuch asked about the principal residence exemption dispute that triggered the $2,200 debt in the first place. The record reflects that an administrative law judge had ruled in Pung’s favor before the tax was ultimately assessed. The government pursued foreclosure anyway.
By the close of argument, the tension was clear. On one side stands the proposition that fair market value is the constitutional starting point whenever property is taken. On the other stands the practical reality that forced sales rarely resemble pristine market transactions. The deeper question is older than tax foreclosure law. When the sovereign takes property, does it pay what the property was worth—or only what it happened to get?
The Fifth and Eighth Amendments promise fairnesss and just compensation. The meaning of that promise, in this narrow but consequential setting, now rests with the Court.
Case Background
The case arises from a long-running dispute over Michigan’s Principal Residence Exemption (PRE) on the Pung family home. After the local assessor revoked the PRE for 2012, the then-County Treasurer, Steven Pickens, proceeded to foreclose over an alleged (but not actually owed) tax delinquency of about $2,241.93. The home — assessed at $194,400 at the time — was auctioned by Isabella County for only $76,008 and quickly resold by the purchasing speculator for approximately $195,000. The County retained the auction proceeds beyond the alleged debt, wiping out more than $118,000 in owner equity after being forced by the lower federal courts to return a portion of what was kept. Today, the home has greatly increased in value.
Michael Pung, as personal representative of the estate, filed suit under 42 U.S.C. § 1983. The district court recognized a taking but limited recovery to the “surplus proceeds” (auction price minus taxes and charges), and the Sixth Circuit affirmed thereby setting the stage for Supreme Court review.
Why This Matters
The outcome will affect homeowners and counties nationwide. Using fair market value would compensate owners for all equity taken; using surplus-only lets governments rely on depressed auctions that destroy equity while minimizing payouts. The Court’s decision will clarify the measure of compensation and whether excessive-forfeiture safeguards apply in tax-foreclosure settings.
