Appeals court rules federal courts can hear lawsuits in property tax foreclosure cases

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SAGINAW COUNTY, Mich. (WJRT) – A legal victory for people who have lost their homes in property tax foreclosures, as federal courts can now hear these types of cases.

It was in July when the Michigan Supreme Court ruled counties can’t keep the profits from property sales resulting from tax foreclosures.

The dust is still settling on how much money counties are going to have to pay back, and to whom.

It could be billions of dollars when you combine the totals from all 83 Michigan counties.

Attorney Phil Ellison says people who had their homes taken by the government in a property tax foreclosure had to file lawsuits in state courts. That changed yesterday.

“The ruling for a long time is that you could never go to federal court regarding takings claims,” Ellison says.

But the U.S. Sixth Circuit Court of Appeals has ruled people who have had their homes taken by local governments because they failed to pay property taxes, and then the government sold their homes without passing along the profits, can now file lawsuits in federal court.

Attorney Phil Ellison began this legal crusade five years ago with Donald Freed, whose home was foreclosed on in Gratiot County after he owed about a thousand dollars in property taxes and late fees.

“There are a number of reasons people fail to pay their property taxes, some of them, in the case of Mr. Freed, he got notices in the mail, he couldn’t read them, so he didn’t know he owed,” says Ellison.

The state Supreme Court ruled its unconstitutional for counties to keep all the money from the sale of homes like Freed’s, but Ellison says now the legal playing field is a little more even.

“We want to be in federal court because we think we are going to get a better chance of making our arguments to a judge, who is a little more neutral, and a little more detached from the home counties of these particular cases,” he says.

Ellison says this latest ruling will open the flood gates for people to file claims in federal court and expects several class-action lawsuits to end up there.

“It is important to get a hold of lawyers office as soon as possible, because these federal court houses are now open, and can hear these cases, but there are time limits,” says Ellison.

I did talk to one county treasurer who did not want to comment on this new ruling, and they are still trying to determine how much money counties will eventually owe and for some counties, it could be millions of dollars.

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