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Church v. Van Buren County

United States Court of Appeals, Sixth Circuit

February 10, 2017

Wayside Church, an Illinois Not-For-Profit (Ecclesiastical) Corporation; Myron W. Stahl; Henderson Hodgens, individually and on behalf of a class of all others similarly situated, Plaintiffs-Appellants/Cross-Appellees,
v.
Van Buren County, in its individual Michigan municipal capacity and on behalf of a class of all other Michigan counties similarly situated; Karen Makay, in her individual official capacity as Treasurer of Van Buren County and on behalf of a class of all other Treasurers of Michigan counties similarly situated, Defendants-Appellees/Cross-Appellants.

          Argued: October 20, 2016

         Appeal from the United States District Court for the Western District of Michigan at Grand Rapids. No. 1:14-cv-01274-Paul Lewis Maloney, District Judge.

         ARGUED:

          Owen Dennis Ramey, LEWIS, REED & ALLEN PC, Kalamazoo, Michigan, for Appellants/Cross-Appellees.

          Thomas G. King, KREIS, ENDERLE, HUDGINS & BORSOS, P.C., Kalamazoo, Michigan, for Appellees/Cross-Appellants.

         ON BRIEF:

          Owen Dennis Ramey, Ronald W. Ryan, LEWIS, REED & ALLEN PC, Kalamazoo, Michigan, James Shek, Allegan, Michigan, for Appellants/Cross-Appellees.

          Thomas G. King, KREIS, ENDERLE, HUDGINS & BORSOS, P.C., Kalamazoo, Michigan, for Appellees/Cross-Appellants.

          Christina M. Martin, PACIFIC LEGAL FOUNDATION, Palm Beach Gardens, Florida, Steven C. Liedel, Ted Seitz, DYKEMA GOSSETT PLLC, Lansing, Michigan, William H. Horton, GIARMARCO MULLINS & HORTON P.C., Troy, Michigan, Daniel B. Kohrman, AARP FOUNDATION LITIGATION, Washington, D.C., for Amici Curiae.

          Before: CLAY, KETHLEDGE, and DONALD, Circuit Judges.

          CLAY, J., delivered the opinion of the court in which DONALD, J., joined. KETHLEDGE, J. (pp. 14-17), delivered a separate dissenting opinion.

          OPINION

          CLAY, Circuit Judge.

         Plaintiffs Wayside Church, Myron Stahl, and Henderson Hodgens (collectively "Plaintiffs") appeal the district court's order granting Defendants' motion to dismiss the complaint, which asserted that Defendant Van Buren County and its Treasurer, Defendant Karen Makay (collectively "Defendants"), violated Plaintiffs' Fifth Amendment rights by taking their property without just compensation. Defendants filed a cross-appeal arguing that the district court erred in determining that it could exercise jurisdiction over this case. For the reasons set forth below, we VACATE the judgment of the district court and REMAND with instructions to DISMISS the case for lack of subject matter jurisdiction.

         BACKGROUND

         Plaintiffs each owned real property in Van Buren County, Michigan in 2011 but failed to pay property taxes for that year. On March 1, 2012, pursuant to the General Property Tax Act (the "GPTA"), Mich. Comp. Laws § 211.1 et seq., these properties became subject to forfeiture and foreclosure. On April 24, 2014, the Van Buren County Circuit Court issued a foreclosure judgment, and title to these properties passed in fee simple absolute to the Defendant County.[1]A few months later, Defendant Makay, the treasurer for the Defendant County, sold these properties at an auction, pursuant to Michigan Compiled Laws § 211.78m. The minimum bid for each of the properties was calculated by totaling "[a]ll delinquent taxes, interest, penalties, and fees due on the property" plus the "expenses of administering the sale, including all preparations for the sale." Mich. Comp. Laws § 211.78m(16)(a). Plaintiff Wayside Church's former property had a minimum bid of $16, 750, but at the public auction held on August 5, 2014, the property was sold for $206, 000, meaning Defendant Van Buren County received surplus proceeds of $189, 250. The minimum bid for the property formerly owned by Plaintiff Stahl was $25, 000, but the property was sold at the same auction for $68, 750, resulting in a surplus of $43, 750. Finally, the property that had once been owned by Plaintiff Hodgens required a minimum bid of $5, 900, but was sold for $47, 750 at the same auction, meaning the Defendant County received $41, 850 in surplus proceeds.

         In this suit, Plaintiffs seek return of the surplus funds because they allegedly possessed a cognizable property interest in each of their foreclosed properties and in the surplus proceeds generated by the sales, in connection with which Defendants were required to pay just compensation pursuant to the Fifth Amendment. Plaintiffs did not seek to challenge the process by which these asserted interests were taken; instead, Plaintiffs sought a declaratory judgment from the district court that, by not returning the surplus funds to the former owner-Plaintiffs, Defendants effectuated a taking without just compensation in violation of the Fifth Amendment.

         On December 11, 2014, Plaintiffs initiated this suit in federal court by filing a complaint against Defendants asserting the following claims: Count I asserted that Defendants violated Plaintiffs' rights under the Fifth Amendment by taking their property without just compensation; Count II asserted that Plaintiffs were entitled to monetary damages, pursuant to 42 U.S.C. § 1983, for the violation of their Takings Clause rights alleged in Count I; and Count III sought a declaratory judgment that the Michigan Circuit Court failed to enter judgment in accordance with a state statute and, thus, that the redemption period should have been tolled. In addition to asserting these claims against Defendants on their own behalf, Plaintiffs also sought to represent a class of former Michigan property owners who had lost title to their property for non-payment of taxes but whose former properties were sold for significantly more than the taxes owed.

         On January 7, 2016, Defendants filed a motion to dismiss the complaint for lack of jurisdiction and for failure to state a claim upon which relief can be granted, pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6), respectively. On November 9, 2015, the district court issued an opinion denying the motion to dismiss for lack of subject matter jurisdiction but granting the motion for failure to state a claim.[2]

         Plaintiffs filed a timely appeal on November 30, 2015, arguing that the district court erred in dismissing its claims pursuant to Rule 12(b)(6). This appeal was docketed as No. 15-2463. On December 9, 2015, Defendants filed a cross-appeal, docketed as No. 15-2525, challenging the ...


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