rafaeli-v-oakland-county-2020

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); Viviano, J., concurring in judgment

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\ast \ast inunpaid2011propertytaxesonamodestSouthfield,Michiganrentalproperty.Afterinterest,penalties,andfeesaccrued,thetotaldelinquencygrewto\ast \ast$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\ast \ast ,andretainedthe\ast \ast entire$24,500 — including the roughly $24,215 that exceeded the delinquency.

A second plaintiff, Andre Ohanessian, owed approximately $6,000\ast \ast intaxes,interest,penalties,andfees.OaklandCountyforeclosedonhisproperty,solditatauctionfor\ast \ast$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.

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. 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. That interest pre-dates — and is not extinguished by — the GPTA’s silence on surplus distribution.

2. The Michigan Takings Clause compels return of the surplus as just compensation. Const 1963, art 10, § 2 provides that private property shall not be taken for public use without just compensation. Because the government’s authority extends only to satisfying the delinquent tax obligation, retaining excess value beyond that obligation is a governmental appropriation of the former owner’s remaining property interest — a taking. The Court held there was no public use that justified keeping the windfall, and thus no constitutional authority to do so.

The majority opinion, authored by Justice Zahra and joined by Chief Justice McCormack and Justices Markman, Bernstein, Clement, and Cavanagh, declined to reach the federal Fifth Amendment question, deciding the case entirely on the state constitutional provision. Justice Viviano concurred in the judgment but wrote separately on the reasoning; the court’s result was unanimous (7-0) in plaintiffs’ favor. This was deliberate: the state constitution affords independent grounds to decide, 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 unanimous 7-0 result (Viviano, J., concurring in judgment separately on reasoning) has not been overruled, narrowed, or distinguished as of last_verified 2026-06-01. 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

Instrument	What it does
MCL 211.78t (PA 256 of 2020, eff. Dec. 22, 2020)	Creates the exclusive statutory process for claiming auction-sale surplus; retroactive to July 17, 2020
Schafer v. Kent County / Hathon v. State of Michigan, 511 Mich 988 (2024)	Confirms Rafaeli retroactivity; MCL 211.78t retroactive; new limitations period only prospective
In re Petition of Barry County Treasurer for Foreclosure, Docket No. 362316 (Mich. Ct. App. Feb. 2024)	MCL 211.78t is sole mechanism; no freestanding taking claim survives for owners who missed the statutory deadline
Jackson v. Southfield Neighborhood Revitalization Initiative, No. 166320 (Mich. July 16, 2025)	Rafaeli applies to ROFR/minimum-bid transfers; inverse condemnation is the remedy when no auction occurs

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-nri — 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

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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 2026-06-01.