Background
In 2013, the Michigan State Treasurer, acting as the foreclosing governmental unit (FGU) under the General Property Tax Act (GPTA), initiated foreclosure proceedings against several parcels of real property in Livingston County for unpaid taxes. In 2014, the circuit court entered judgments of foreclosure, and the properties were subsequently sold at public auction. Each sale generated surplus proceeds above the amounts owed in delinquent taxes, penalties, and fees, all of which the Treasurer retained. At that time, the GPTA expressly permitted the FGU to retain such surpluses and provided no mechanism for former owners to recover them.
In 2020, the Michigan Supreme Court decided Rafaeli, LLC v. Oakland County, 505 Mich 429 (2020), holding that former owners possess a vested constitutional right to surplus proceeds from tax-foreclosure sales, and that an FGU’s retention of those proceeds constitutes an unconstitutional taking. Following Rafaeli, the Legislature enacted MCL 211.78t, creating an exclusive statutory procedure for former owners to claim surplus proceeds. The statute also conditioned its application to pre-Rafaeli sales on the Supreme Court ordering retroactive application. In Schafer v. Kent County, 515 Mich 1 (2024), the Supreme Court held that Rafaeli applies retroactively and that MCL 211.78t governs pre-Rafaeli claims — but expressly stated that its ruling did not “revive claims that were not subject to pending litigation and were already time-barred before December 22, 2020.”
Following Schafer, the respondents — Gordon Beck, the Estate of Suzanne Josephson, Douglas and Valerie Webster, and Nicholas Roy — filed proceedings in late 2024 and early 2025 seeking disbursement of the surplus proceeds from their 2014 foreclosures. The Treasurer moved for summary disposition, arguing the claims accrued in 2014 and were extinguished by the three-year Court of Claims limitations period no later than September 2017. The trial court denied those motions, reasoning the claims did not accrue until Schafer was decided in July 2024. The Treasurer appealed.
The Court’s Holding
The Michigan Court of Appeals reversed, holding that respondents’ claims accrued in 2014 when the Treasurer retained the surplus proceeds from the foreclosure sales. The court explained that accrual turns on when all elements of the cause of action existed and the claimant could have pursued relief — not on when a particular statutory remedy became available. Because former owners had a vested constitutional right to surplus proceeds from the moment of the sales, the underlying inverse-condemnation claims were complete in 2014, well before Rafaeli, MCL 211.78t, or Schafer.
Applying the three-year limitations period governing claims against the State under MCL 600.6452(1), the court concluded the claims expired no later than approximately September 2017. Neither Rafaeli nor the enactment of MCL 211.78t revived the already-extinguished claims, and Schafer itself expressly disclaimed any such revival. The court further rejected respondents’ argument that the six-year limitations period applicable to claims against local governments should apply, noting the State was the FGU here, not a local entity.
The court also rejected respondents’ remaining defenses: class-action tolling could not resuscitate claims that had already expired before the 2019 class actions were filed; the Treasurer had standing to contest disbursement; and equitable estoppel did not apply because respondents identified no representation by the State that induced them to forgo timely filing. The case was remanded for entry of summary disposition in the Treasurer’s favor.
Key Takeaways
- Claims for surplus proceeds from Michigan tax-foreclosure sales accrued at the time of the sale, not when Rafaeli, MCL 211.78t, or Schafer were decided — former owners had a cognizable constitutional right from the moment the surplus was retained.
- Claims against the State as FGU were subject to the three-year Court of Claims limitations period under MCL 600.6452(1), not the six-year period applicable to local governments.
- Class-action tolling cannot revive claims that had already expired before the class actions were filed in 2019.
- Schafer‘s retroactive application of MCL 211.78t does not extend to claims that were time-barred before the statute’s enactment on December 22, 2020 — consistent with the Supreme Court’s own footnote 123 in that decision.
Why It Matters
This decision effectively forecloses surplus-proceeds claims for a significant class of former Michigan property owners whose foreclosures predated Rafaeli by more than three years — a group that had reason to believe Schafer‘s retroactive ruling opened the door to recovery. The court’s holding draws a firm line: constitutional rights may have existed all along, but so did the obligation to pursue them within the limitations period, even without a clear judicial or statutory roadmap.
For practitioners, the decision reinforces that accrual is tied to the underlying wrong, not to the emergence of a favorable legal theory or a new statutory vehicle. Attorneys advising clients with pre-2017 Michigan tax-foreclosure surplus claims should treat them as conclusively extinguished. Going forward, the ruling also signals that FGUs retain standing to challenge disbursement motions on limitations grounds regardless of their otherwise-administrative role under MCL 211.78t.