(CN) — A New Yorker claims the state unjustly took her property using its foreclosure law which she calls unconstitutional in a federal class action.
Ballston Spa resident Alice Steele claims her Saratoga County home was foreclosed this year due to unpaid taxes. The county then sold her property to the state at auction for $112,100, producing a surplus Steele claims was "above and beyond the amount lawfully owed by plaintiff for delinquent taxes and charges.”
New York never returned the excess to her, which she says violates the Fifth Amendment of the U.S. Constitution’s taking clause.
“The Constitution’s taking Ccause prohibits the ‘taking of property without just compensation,'" Steele claims in the lawsuit. “The prohibition is not against states enacting laws to collect taxes and other obligations, which is permitted to satisfy the citizen’s taxes. It is against taking more than is owed, as is happening in this case.”
Filed Dec. 22 but made publicly available on Tuesday, Steele’s 24-page lawsuit targets a provision of New York real property tax law that she claims allows proceeds from the sale of foreclosed property to be kept by the state, in excess of taxes owed. This not only violates the taking clause, but numerous other articles in both the U.S. and New York constitutions.
“This creates the constitutional violation here, because that the citizen’s property is foreclosed in a way that the citizen loses all right to the property, including any property value in excess of the taxes owed by the individual to the taxing entity,” Steele continues in the lawsuit, claiming New York came up with the provision to "make money for nothing."
“It foreclosed on delinquent taxes and other legitimate obligations, which it can do,” Steele says. “But then New York used this very frequent situation of foreclosures to enact a statute that ‘allowed’ it to keep all the money from the foreclosure. Not just the amount owed, but everything. Even the homeowner’s excess equity.”
Steele cites U.S. Supreme Court case Tyler v. Hennepin County, a ruling from this past May that found surplus equity to be a “fundamental right” that is “not founded solely in state law and cannot be taken away by enactment of a state statute.”
“In Tyler v. Hennepin County, the United States Supreme Court, in a 9-0 decision, declared unconstitutional state laws like New York’s that authorize and result in the practice of taking and retaining excess proceeds of tax foreclosures and tax sales,” Steele claims.
The Tyler decision involved Minnesota state law, but New York and at least 13 other states have similar laws surrounding foreclosure that could be impacted by the ruling. Steele claims it’s a “straightforward” decision that clearly applies to New York, too.
Steele also claims that New York’s foreclosure laws violate the Eighth Amendment of the U.S. Constitution, which bars “excessive fines” as government punishments. Taking excess equity is just that, Steele says, since the amounts collected “had no correlation to the amount owed to the government.”
Defendants include Saratoga County, the state of New York and Saratoga County Treasurer Andrew Jarosh. Steele brings the case on behalf of herself and all New Yorkers who were not given their excess taxes owed on their foreclosed properties in the state over the past six years. She seeks a return of the excess and an order blocking the provision.
Attorney Steven Cole of Adams Leclair in Rochester, New York, represents Steele.
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