U.S. Supreme Court building. Photo: Diego M. Radzinschi/ALM

Several Supreme Court justices expressed concerns Wednesday over a practice by a handful of states of keeping the surplus from home forfeiture sales.

The court heard its final oral arguments of the October 2022 term in Tyler v. Hennepin County. The petitioner, a nonagenarian named Geraldine Tyler, claims that the Minnesota county violated her Fifth and Eighth Amendment rights by keeping all $40,000 in proceeds from the sale of her condo, when she only owed $15,000 in taxes and penalties on the property.

Around 20 states have home forfeiture schemes similar to Minnesota's, which some critics have branded "home equity theft." The Supreme Court on Wednesday examined the constitutionality of that practice in a hour-and-a-half hearing which explored the history of property rights from the Magna Carta to the present.

At arguments, the justices saved perhaps their hardest questions for attorney Neal Katyal of Hogan Lovells, who was representing Hennepin County in defense of the government's actions in the case of the 94-year-old homeowner.

Justices Elena Kagan and Neil Gorsuch pressed Katyal, who was presenting his 50th argument at the court, for a limiting principle to the idea that a state can receive a windfall to satisfy a modest tax debt.

Kagan floated a hypothetical scenario of a state keeping the proceeds of a $5 million forfeiture sale after a taxpayer had failed to pay a $5,000 debt.

Katyal held his ground and said that still is "not a taking" under the Fifth Amendment. He said the Legislature adopted the forfeiture scheme as a "harsh statute" to make property owners pay their taxes.

He met resistance from multiple members of the bench, however, when he suggested states could not keep the surplus in excess of an individual's income tax debt in the case of, say, cash sitting in a bank account. Katyal argued there is deep historical support for schemes such as Minnesota's involving real estate, as opposed to liquid cash.

Justice Elena Kagan. Credit: Steve Petteway

"What's the difference?" Kagan asked. "Why should land be treated so much more favorably that the state can just keep the whole [amount], when the state could never do that with cash?"

"It's not as much about land being different as there is a different historical tradition," Katyal replied. "There are different policy objectives that different states have."

That answer did not seem to satisfy Justice Brett Kavanaugh.

"Why would we read the Constitution to disfavor real property?" he asked. "That seems counterintuitive."

Chief Justice John Roberts Jr. had similar concerns, calling land "essential to the preservation of liberty."

"To say that there's a greater degree of protection for money as opposed to property, I think has it exactly backwards," Roberts said.

In 2015, Hennepin County extinguished Tyler's rights in the one-bedroom condo in Minneapolis after she failed to pay property taxes on it for five years. According to her brief, Tyler had left the home in 2010 at the age of 80 "out of concern for her health and safety" and moved into an apartment building for seniors.

Katyal argued Wednesday that Tyler lacks standing to bring her constitutional claims in the first place because she had outstanding debts on the condo in the form of a mortgage and liens from her homeowner's association.

"We asked, 'Why in the world would it be that Tyler walked away from her home?' Katyal said. "And the reason we think is that there was no equity in the home and that's why she walked away."

The justices, however, seemed largely uninterested in that threshold question.

"I think I'll bypass the standing [question]," Justice Clarence Thomas said.

Tough Questions for Homeowner