Judges rules compensation to foreclosed Oakland Co. property owners limited

Pontiac — Oakland Circuit Judge Denise Langford Morris ruled Tuesday that compensation owed to property owners unjustly foreclosed upon will not be retroactive prior to a July 2020 decision of the Michigan Supreme Court.

The case filed by two homeowners against Oakland County was the flagship that helped set a new Supreme Court precedent for how counties handled tax foreclosures. So Oakland County's decision came as a blow to advocates who believed the Supreme Court's ruling would apply to a bevy of cases across the state that predated the July 2020 opinion.

The state's high court in summer 2020 had ruled then-Oakland County Treasurer Andrew Meisner was involved in an “unconstitutional taking without just compensation” under the Michigan constitution when he foreclosed on a property for $8.41 in unpaid taxes. The Southfield property at issue was later sold at county auction and the county kept all funds.

Former Oakland County Treasurer Andrew Meisner.

In its decision, the Supreme Court sent the case back to Langford Morris for "proceedings consistent with this opinion."

Langford Morris on Tuesday noted after a review of the arguments made that the Supreme Court's decision should not be retroactive because it overruled "settled precedent" and set a new standard "whose resolution was unforeseen." 

At the time of the foreclosures, Oakland County was operating under state-mandated procedures that had been followed by counties for more than 21 years, Langford Morris said.

"Prospective application will also advance the administration of justice since new legislation is about to be introduced to create an orderly process by which surplus proceeds can be claimed and paid in the future," the judge said. 

Philip Ellison, one of several attorneys involved in ongoing litigation of foreclosure compensation in state and federal courts, said Langford Morris’ interpretation will be appealed.

“We think this (Tuesday’s ruling) contains legal error,” said Ellison. “A judge in Kent County has ruled differently in another case which has now gone to the Michigan Court of Appeals.

“This is a complicated, very technical issue and Langford Morris’s ruling is just one of several we expect to see going forward," Ellison said. 

Kathy Gray, a spokesperson for County Executive David Coulter said “we are aware of the ruling and still reviewing it.”

Some believed the legal question of retroactivity was settled last year when the Supreme Court ruled that such takings of property required adequate compensation — not just repayment for the due taxes but any surplus funds.

The Oakland County case involved property taxes that went unpaid in 2011 by Uri Rafaeli and Andre Ohanessian. Rafaeli owed $8.41 in delinquent taxes on a Southfield rental property that had grown to about $285 when Meisner foreclosed on the property in 2014. The county sold it for $24,500 and kept the excess proceeds.

Ohanessian owed $6,000 in overdue taxes to Oakland County in 2014 and his home was sold for $82,000 following tax foreclosure.

Meisner subsequently suspended all property tax mortgage foreclosures due to the COVID-19 pandemic. But county commissioners like Robert Hoffman, R-Highland Township, believe it is one of hundreds of  foreclosures over several years in which Oakland — and other counties across Michigan — financially benefited in such property takings.

The county's board of commissioners sent Meisner a letter on July 21, 2020, stating his actions “exposed the county to serious risk” and asked how many properties had been foreclosed, what kind of profits were made at public auction, and how those funds were eventually spent.

Hoffman said Tuesday he had raised questions to county officials about the takings and received no response.

“I think it is wrong that the county should not adequately compensate homeowners,” said Hoffman. “It’s nothing but theft.”

Hoffman said the board established the Special Committee on Foreclosure Practices and Policies “to investigate and make recommendations to protect the Oakland County taxpayers.” Meisner formerly told commissioners that at least $30 million in property sales might have occurred since 2014, but Hoffman contends that figure is closer to $50 million dating back to 2009.

Meisner, who had to step down as treasurer when he lost to Coulter in a bid for the county executive post, insists he followed standard practices and did not break any laws.

mmartindale@detroitnews.com

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