The “Zero-Surplus, Zero-Taking” Doctrine:
Michigan Supreme Court’s Clarification in Yono v. County of Ingham (2025)

Introduction

On 16 July 2025, the Supreme Court of Michigan delivered a unanimous per curiam opinion in Nick Yono v. County of Ingham, resolving a recurring post-foreclosure question left open after Rafaeli, LLC v. Oakland County (2020): Does a compensable taking occur when a tax-foreclosed parcel is properly offered at public auction but fails to attract any bid at or above the statutory minimum?

Plaintiff Nick Yono, whose commercial property in Lansing had been foreclosed for unpaid 2014–2015 taxes, argued that he retained a vested equity interest equal to the property’s fair-market value (FMV) minus the delinquency and foreclosure costs. Because the Treasurer deeded the unsold parcel to the County Land Bank for a nominal $1, Yono claimed the County had unconstitutionally “taken” the net value of his property under Article 10, § 2 of the 1963 Michigan Constitution.

The circuit court rejected the claim under Rafaeli; the Court of Appeals reversed, treating the case as analogous to its earlier decision in Jackson v. Southfield Neighborhood Revitalization Initiative (2023). The Supreme Court granted oral argument on the application and, in a concise but significant ruling, reinstated summary disposition for the County.

The newly articulated rule—encapsulated here as the “Zero-Surplus, Zero-Taking” doctrine—clarifies that when a foreclosing governmental unit (FGU) complies with MCL 211.78m(2) and an auction yields no bid above the statutory minimum, no compensable taking arises because the government is deemed not to have captured any value beyond the amount lawfully owed.

Summary of the Judgment

• Holding: No taking occurs under the Michigan Takings Clause if an FGU attempts in good faith to sell foreclosed property at public auction pursuant to MCL 211.78m(2) and the property does not sell; absence of “surplus proceeds” is conclusive.
• Disposition: Reversed Court of Appeals (Part II(A)); reinstated circuit-court order granting defendants’ motion for summary disposition. The case is terminated with respect to the takings claim.
• Key Rationale:
  • Rafaeli limits the owner’s constitutional entitlement to the surplus proceeds of sale, not to FMV.
  • Statutory “minimum bid” equals the amount the FGU may legitimately retain (taxes, interest, penalties, fees).
  • Failure to reach the minimum price demonstrates that the market values the property at less than or equal to the outstanding debt; therefore, no excess value has been captured.
  • Jackson is distinguishable because there the property was never exposed to public auction; value was not market-tested.

Analysis

Precedents Cited and Their Influence

1. Rafaeli, LLC v. Oakland County, 505 Mich 429 (2020)
   
   Significance: Recognized a vested property right to surplus proceeds from tax-foreclosure sales.
   Influence: Provided the analytical template: government may collect only the amount lawfully owed; any excess must be returned. Yono applies this template to an auction that yields no excess.
2. Jackson v. Southfield NRI, ___ Mich ___ (2025)
   
   Significance: Confirmed liability where property was diverted to another governmental entity under the old “right of first refusal” without market exposure.
   Influence: Distinguished by the Court; Yono underscores that market testing is the decisive metric.
3. Federal Authorities (Tyler v. Hennepin Co., 598 U.S. 631 (2023); Hall v. Meisner, 51 F.4th 185 (6th Cir. 2022); Lawton v. United States, 110 U.S. 146 (1884))
   
   These cases illustrate federal handling of surplus-proceeds or equity-seizure disputes but did not involve unsold properties offered at valid auction. The Michigan Court acknowledged them yet found them inapposite to the present facts.
4. Lower-court and ancillary cases (Freed v. Thomas, 81 F.4th 655 (6th Cir. 2023); Howard v. Macomb County, 133 F.4th 566 (6th Cir. 2025))
   
   Cited primarily for the proposition that auction price is the best evidence of value, reinforcing the Court’s market-rate benchmark.

Core Legal Reasoning

1. Constitutional Baseline — Article 10, § 2 allows government to seize property in satisfaction of tax debts; a taking occurs only if the government retains value “in excess of what is owed.”
2. Statutory Overlay — MCL 211.78m(2) mandates:
   • Public auction between late July and early November;
   • Minimum bid must at least equal delinquent taxes + statutory costs (now codified at MCL 211.78m(16)(c));
   • Sale below minimum is prohibited.
3. Market Test Rule — Auction outcome is dispositive evidence of value; if no one pays the minimum, the retained property cannot be worth more than the debt as a matter of law. Thus zero surplus → zero constitutional compensation.
4. Distinction from Jackson — In Jackson, no auction occurred; therefore, the retained property’s value was unverified. Compensation may be required where value remains uncertain.
5. Policy Considerations — Avoids potentially burdensome FMV hearings each time property remains unsold, while still safeguarding owners’ surplus-proceeds rights when a buyer exists.

Impact of the Judgment

• Litigation Landscape — Sharply limits post-foreclosure takings actions where the statutory auction occurred but property remained unsold; attorneys must now plead statutory non-compliance or bad faith to survive summary disposition.
• County & Municipal Practices — Reinforces adherence to auction procedures; encourages FGUs to document notice, bidding environment, and proof that bids below minimum were rejected.
• Property-Owner Strategy — Owners must act pre-sale (redeem, seek hardship extensions) or post-sale (claim surplus under MCL 211.78t, when applicable). Litigation after an unsold auction is now markedly harder.
• Legislative Synergy — Compliments 2020 GPTA amendments (PA 255 & 256), particularly the crediting of “fair-market value” when governmental entities exercise right of first refusal. The doctrine may reduce pressure for further statutory reform regarding unsold parcels.
• Broader Jurisprudence — Provides a template other states may cite in reconciling auction failure with takings jurisprudence post-Tyler; distinguishes between uncompensated equity and non-existent surplus.

Complex Concepts Simplified

• Foreclosing Governmental Unit (FGU): Typically a county treasurer; holds title and conducts sale when property taxes remain unpaid for three+ years.
• Minimum Bid: Statutory floor price—sum of delinquent taxes, interest, penalties, administrative fees, and maintenance expenses. Law forbids accepting less.
• Surplus Proceeds: Money obtained at auction above the minimum bid. Under Rafaeli, belongs to the former owner.
• Fair-Market Value (FMV): Price a willing buyer would pay a willing seller in an open market. Michigan Takings Clause does not guarantee FMV recovery after tax foreclosure—only surplus proceeds.
• Right of First Refusal (ROFR): Former MCL 211.78m(1) allowed local governments to purchase foreclosed parcels for the minimum bid before auction. Amendments now require paying the greater of minimum bid or FMV if an owner files a surplus claim.

Conclusion

Yono v. County of Ingham cements a critical missing brick in Michigan’s post-Rafaeli edifice: when a duly-conducted public auction of tax-foreclosed property fails to draw a qualifying bid, the Constitution is satisfied, and the former owner is owed nothing further. By yoking “just compensation” to objectively verifiable market data— or its absence—the Court promotes certainty, curbs litigation, and delineates the precise boundary between legitimate tax collection and unconstitutional enrichment. Going forward, litigants must concentrate on auction irregularities, not on after-the-fact appraisals, if they hope to reopen the compensation question. In sum, zero surplus equals zero taking; that is the enduring lesson of Yono.