Rafaeli, LLC v. Oakland County (2020)

Citation: 505 Mich 429; 952 N.W.2d 434 · Court: Michigan Supreme Court, Docket No. 156849 · Decided: July 17, 2020 · Author: Zahra, J. (majority, joined by McCormack, C.J., and Markman, Bernstein, Clement, and Cavanagh, JJ.); Viviano, J. (concurring in part, dissenting in part as to reasoning) · Vote: 6-1 on majority opinion; 7-0 on result

The landmark Michigan state constitutional decision holding that retaining tax-foreclosure sale proceeds above the tax debt is an unconstitutional taking — decided three years before tyler-v-hennepin-county resolved the same question under the federal Fifth Amendment. Rafaeli is the direct state-law precursor to Tyler and drove the Michigan Legislature’s surplus-claim reform statute, MCL 211.78t.

Facts

Rafaeli, LLC owed $8.41 in unpaid 2011 property taxes on a modest Southfield, Michigan rental property. After interest, penalties, and fees accrued, the total delinquency grew to $285.81. Oakland County, through its Treasurer, foreclosed on the property under Michigan’s General Property Tax Act (GPTA), Mich. Comp. Laws §§ 211.78 et seq., sold the property at public auction for $24,500, and retained the entire$24,500 — including the roughly $24,215 that exceeded the delinquency.

A second plaintiff, Andre Ohanessian, owed approximately $6,000 in taxes, interest, penalties, and fees. Oakland County foreclosed on his property, sold it at auction for $82,000, and likewise retained all proceeds.

Both plaintiffs argued that retaining the surplus proceeds above their tax debts constituted an unconstitutional taking of property without just compensation under the Michigan Constitution’s Takings Clause, Const 1963, art 10, § 2.

Holding

The Michigan Supreme Court reversed the lower courts and held:

Michigan’s common law recognizes a former property owner’s property right to collect the surplus proceeds that are realized from the tax-foreclosure sale of property, and when the government takes property to satisfy an unpaid tax debt, Michigan’s Takings Clause requires the foreclosing governmental unit to return any proceeds from the tax-foreclosure sale in excess of the delinquent taxes, interest, penalties, and fees reasonably related to the foreclosure and sale of the property as just compensation.

(Syllabus, 505 Mich at 429–430; see also majority opinion conclusion at 505 Mich 472.)

The introductory statement of the holding appears at 505 Mich 430: “We hold that defendants’ retention of those surplus proceeds is an unconstitutional taking without just compensation under Article 10, § 2 of our 1963 Constitution.”

Defendants’ retention of the surplus proceeds was an unconstitutional taking without just compensation under Article 10, § 2 of the Michigan Constitution of 1963.

Reasoning

The Court’s analysis rested on two pillars:

1. Michigan common law recognizes a vested property right in surplus proceeds. (505 Mich 457–461, §§ IV.C.1–2) Even after a valid tax foreclosure and sale, the former owner retains a cognizable common law property interest in whatever sale proceeds exceed the tax debt and lawful foreclosure costs. The common-law rule traces to the Magna Carta, English common law (Blackstone), early Michigan statehood (People ex rel Seaman v Hammond, 1 Doug 276 (Mich, 1844)), and was reaffirmed in Dean v Dep’t of Natural Resources, 399 Mich 84 (1976). The conclusion is stated at 505 Mich 458: “We conclude that our state’s common law recognizes a former property owner’s property right to collect the surplus proceeds that are realized from the tax-foreclosure sale of property.” The Court further held this right to be “vested” — protected against legislative abrogation — because it was commonly understood to be part of the constitutional term “property” at the time the 1963 Michigan Constitution was ratified. (505 Mich 459–461)

2. The Michigan Takings Clause compels return of the surplus as just compensation. (505 Mich 461–466, § V.A) Const 1963, art 10, § 2 provides that private property shall not be taken for public use without just compensation. The government’s authority under the GPTA extends only to satisfying the delinquent tax obligation plus lawful foreclosure costs; retaining proceeds in excess of that obligation appropriates the former owner’s vested property right — a taking requiring just compensation. The Court rejected defendants’ argument that the taxing power justified retention of the surplus. The Application section concludes at 505 Mich 466: “defendants were required to return the surplus proceeds to plaintiffs, and defendants’ failure to do so constitutes a government taking under the Michigan Constitution entitling plaintiffs to just compensation.” Just compensation is measured as the surplus proceeds themselves — no more, no less. (505 Mich 470–472, § V.C)

The majority opinion was authored by Justice Zahra and joined by Chief Justice McCormack and Justices Markman, Bernstein, Clement, and Cavanagh — a 6-justice majority on the full opinion. Justice Viviano (Chief Justice Pro Tem) concurred in the result (7-0 on the outcome — a taking occurred and plaintiffs are entitled to compensation) but disagreed with much of the majority’s reasoning, writing separately in a concurring opinion. Viviano, J. concurred in all parts of the majority except Parts IV(C), V(A), V(C), and VI, and would have identified the property right taken as the plaintiffs’ equity in the properties (not a freestanding right to surplus proceeds), applying an ordinary-meaning interpretive methodology rather than the majority’s ratifier-expectation approach. The majority expressly declined to reach the federal Fifth Amendment question, deciding the case entirely on the state constitutional provision. Michigan’s Takings Clause affords independent grounds, and Michigan courts need not wait on federal doctrine.

Practical impact

What this means for an owner / investor / surplus-recovery agent:

• For former Michigan owners: Rafaeli established the constitutional right to surplus proceeds from a pre-sale tax foreclosure in Michigan. The Legislature codified the recovery process through MCL 211.78t, enacted December 22, 2020 (effective date under Public Act 256 of 2020), which is the exclusive statutory mechanism for claiming surplus after a GPTA auction sale.

• MCL 211.78t deadlines are strict. For foreclosures sold after July 17, 2020, a claimant must file a notice of intent with the foreclosing governmental unit (FGU) by July 1 of the year immediately following the effective date of foreclosure. The FGU must respond by January 31 after the sale; the claimant’s court motion must be filed between February 1 and May 15. Missing these windows forecloses the statutory claim. See In re Petition of Barry County Treasurer for Foreclosure, Michigan Court of Appeals (February 2024, Docket No. 362316), which held MCL 211.78t is the sole mechanism and declined to find a separate constitutional back-door to surplus for owners who missed the statutory deadlines.

• Retroactivity. Rafaeli applies retroactively to claims not yet final on July 17, 2020. The Michigan Supreme Court confirmed this in Schafer v. Kent County / Hathon v. State of Michigan, 511 Mich 988 (July 29, 2024): the Rafaeli holding was rooted in “centuries of jurisprudence,” not new law, so it reaches back. However, the new limitations period in MCL 211.78l applies only prospectively to sales after December 22, 2020.

• Right-of-first-refusal (ROFR) transfers. The surplus principle survives even when no public auction occurs. In Jackson v. Southfield Neighborhood Revitalization Initiative, No. 166320 (Mich. July 16, 2025), the Michigan Supreme Court held that when a governmental unit exercises its ROFR under former MCL 211.78m, takes property for the minimum bid, and conveys it to a non-governmental organization without an auction, the same Takings Clause obligation applies — the government cannot evade Rafaeli by routing the taking through a proxy. Former owners in that posture must pursue inverse condemnation rather than MCL 211.78t (which applies only to auction sales).

• Relationship to Tyler v. Hennepin County. Rafaeli addressed only the Michigan state constitution; it did not hold that the GPTA violated the federal Fifth Amendment. Three years later, in tyler-v-hennepin-county (2023), the U.S. Supreme Court unanimously reached the same conclusion as a matter of federal constitutional law. Michigan practitioners and researchers cite Rafaeli as the state-law precursor that informed the Tyler litigation, and Tyler subsequently created a federal floor that applies to all 56 U.S. jurisdictions. For Michigan, Tyler adds a redundant federal layer — the state constitutional right under Rafaeli is not diminished by Tyler but runs alongside it.

• For surplus-recovery operators in Michigan: The statutory claim window under MCL 211.78t is the primary vehicle. Federal §1983 / inverse-condemnation theories grounded in Tyler remain available as a backstop, particularly for pre-July 17, 2020 takings where the statutory window never opened. Document the sale price, the tax debt, and all foreclosure costs; the surplus is the difference.

Good-law status

Still good law. The 6-1 majority / 7-0 result (Viviano, J., concurring in result but disagreeing with Parts IV(C), V(A), V(C), and VI of the majority’s reasoning) has not been overruled, narrowed, or distinguished as of last_verified 2026-06-10. Its retroactivity was affirmed by the Michigan Supreme Court in Schafer/Hathon (2024). The Rafaeli principle was extended to ROFR transfers in Jackson v. Southfield NRI (2025).

Legislative and judicial progeny

Sources retrieved

1. Michigan Supreme Court official opinion PDF — Docket No. 156849, July 17, 2020: https://www.courts.michigan.gov/siteassets/case-documents/uploads/OPINIONS/FINAL/SCT/156849_143_01.pdf
2. Pacific Legal Foundation case page (litigation sponsor): https://pacificlegal.org/case/rafaeli-llc-v-oakland-county/
3. MCL 211.78t full text, Michigan Legislature official site: https://www.legislature.mi.gov/Laws/MCL?objectName=MCL-211-78T
4. Hathon v. State of Michigan / Schafer v. Kent County, 511 Mich 988 (2024): https://hallapproved.com/mi/cases/supreme/2024/10094338/
5. Jackson v. Southfield Neighborhood Revitalization Initiative, No. 166320 (Mich. July 16, 2025): https://www.courts.michigan.gov/4aa515/siteassets/case-documents/uploads/opinions/final/sct/166320_105_01.pdf
6. In re Petition of Barry County Treasurer for Foreclosure (Mich. Ct. App. 2024) — Justia summary: https://law.justia.com/cases/michigan/court-of-appeals-published/2024/362316.html
7. National Law Review — Rafaeli / Tyler retroactivity analysis: https://natlawreview.com/article/reacting-tyler-v-hennepin-county-michigan-addresses-retroactivity-legislative-fix
8. Michigan Townships Association — post-Rafaeli surplus-proceeds overview: https://michigantownships.org/msc716/

Applies in →

michigan — state constitutional holding, no direct federal application (but see tyler-v-hennepin-county for the parallel federal Fifth Amendment rule).

Related cases

• tyler-v-hennepin-county — federal Fifth Amendment parallel, decided 2023; builds on the same principle Rafaeli established at the state level
• jackson-v-southfield-2025 — 2025 Michigan Supreme Court; extends Rafaeli to ROFR/non-auction transfers needs_verification: page not yet created
• barry-county-treasurer-foreclosure-2024 — 2024 Michigan Court of Appeals; MCL 211.78t is sole mechanism needs_verification: page not yet created
• jones-v-flowers — returned certified mail triggers duty of additional notice steps
• mennonite-v-adams — mortgagees of record entitled to actual (mailed) notice

Legal information, not legal advice. This page summarizes a court decision for educational purposes and does not create an attorney-client relationship. Verify against the primary opinion and consult a licensed attorney in the relevant jurisdiction before acting. Last verified 2026-06-10.