Case Summary

State Treasurer v. Webster, et al. — Tax foreclosure surplus claims time-barred by statute of limitations

By /
Case
In re Petition of State Treasurer for Foreclosure for Unpaid Tax; State Treasurer v. Douglas Webster, Valerie Webster; State Treasurer v. Nicholson-Brighton LLC, Roy Nicholson; State Treasurer v. Stefanie Dever (Personal Representative of Estate of Suzanne Josephson)
Court
Michigan Court of Appeals
Date Decided
July 17, 2026
Docket No.
378143, 378144, 378147 (consolidated)
Topics
Tax Foreclosure, Statute of Limitations, Takings Clause, Real Property
Source
Read the full opinion

Background

The State Treasurer initiated tax foreclosure proceedings against three properties owned by the claimants in 2013 for unpaid property taxes. Following entry of foreclosure judgments in 2014, all three properties were sold at public auction in 2014, each selling for amounts exceeding the tax debt. The State Treasurer retained the surplus proceeds from these sales.

In 2020, the Michigan Supreme Court held in Rafaeli, LLC v. Oakland Co. that a government’s retention of tax foreclosure surplus proceeds violates the Michigan Constitution’s Takings Clause. The Legislature subsequently amended the General Property Tax Act, effective December 22, 2020, enacting MCL 211.78t to create a statutory procedure for property owners to recover such proceeds. In 2024, the Supreme Court held in Schafer v. Kent Co. that Rafaeli applies retroactively to pre-Rafaeli foreclosure sales, though it cautioned that this retroactivity does not “revive claims that were not subject to pending litigation and were already time-barred before December 22, 2020.”

After Schafer, the claimants initiated proceedings under MCL 211.78t to recover their surplus proceeds. The State Treasurer moved for summary disposition, arguing that the claims were barred by the statute of limitations, asserting they accrued in 2014 when the proceeds were retained. Claimants argued their claims accrued in 2024 when Schafer was decided. The trial court denied summary disposition; the State Treasurer appealed.

The Court’s Holding

The Court of Appeals vacated the trial court’s orders and held that claimants’ claims were barred by the statute of limitations. The decision relied on a closely-related prior appellate decision (In re Petition I) decided while the current appeals were pending, which addressed the identical statute-of-limitations issue with all the same parties.

Following that binding precedent, the court held that claimants’ claims accrued in 2014, when the foreclosure sales occurred and the State Treasurer retained the surplus proceeds. At that time, claimants possessed a constitutional right to just compensation and could have pursued recovery through inverse-condemnation claims. The court emphasized that MCL 211.78t “established a statutory mechanism for vindicating that right. It did not create the substantive right itself.” Accordingly, with a three-year statute of limitations, the claims expired in 2017—well before claimants filed their 2024 proceedings.

The court rejected the claimants’ argument that the statute of limitations was tolled by Schafer’s retroactivity holding. The court noted that while Rafaeli and the statutory procedure apply retroactively to pre-Rafaeli foreclosure sales, neither “revived claims that were already time-barred.” The court remanded with instructions to enter summary disposition in favor of the State Treasurer.

Key Takeaways

  • The constitutional right to surplus tax foreclosure proceeds arose in 2014 (when Rafaeli was later decided), not when the Legislature created the statutory mechanism in 2020 or when courts held Rafaeli retroactive in 2024.
  • Rafaeli and Schafer do not resurrect claims that were already barred by the statute of limitations before the Legislature enacted MCL 211.78t.
  • The three-year statute of limitations applies to tax foreclosure surplus claims; when a 2014 foreclosure sale occurred, the claims expired in 2017.
  • The statutory mechanism created by MCL 211.78t vindicates a pre-existing constitutional right; it does not extend or restart the limitations period.

Why It Matters

This decision significantly narrows the window for property owners to recover surplus proceeds from tax foreclosures conducted before Rafaeli. While the Michigan Supreme Court held that the Takings Clause protects such proceeds retroactively, and the Legislature created a procedure to recover them, claimants who failed to act within three years of the foreclosure sale cannot recover—even though they had no statutory remedy available until 2020 and no appellate guidance that claims should survive until 2024. The decision creates a harsh clash between retroactive constitutional protection and prospective limitations periods.

For practitioners and property owners, this opinion establishes that tax foreclosure surplus claims must be pursued swiftly, well before any appellate development clarifies rights. It also raises questions about how to reconcile retroactive constitutional rights with traditional statute-of-limitations doctrine, a tension the court does not fully resolve. The decision may prompt legislative response if lawmakers believe the limitations period is too restrictive for retroactive claims.

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