Plaintiffs seek proceeds after back taxes paid

The former owners of four properties are suing Dutchess County in response to a U.S. Supreme Court determination that municipalities cannot keep all the proceeds from properties they auction off for unpaid taxes. 

Their federal lawsuit is the kind New York counties began bracing for after the Supreme Court ruled in May 2023 that although a Minnesota county could sell for $40,000 a house it took title to for $15,000 in unpaid taxes, keeping the extra $25,000 violated the Constitution.

Based on the Fifth Amendment, which prohibits private property from being “taken for public use without just compensation,” the plaintiffs allege that Dutchess is guilty of “unjust enrichment” by keeping the proceeds left over after the back taxes are paid.

Darlene Deary, one of the plaintiffs, said in a complaint filed Feb. 23 in the U.S. District Court for the Southern District of New York that she owed $75,000 in unpaid property taxes and penalties for 21 Huyler Drive in the Town of Hyde Park when Dutchess auctioned the house for $444,000 in April 2022. 

The former owners of 21 Huyler Drive in Hyde Park are among the plaintiffs suing Dutchess County over the proceeds from its foreclosure auctions. (Absolute Auctions & Realty)
The former owners of 21 Huyler Drive in Hyde Park are among the plaintiffs suing Dutchess County over the proceeds from its foreclosure auctions. (Absolute Auctions & Realty)

That month Dutchess also auctioned, for $186,000, a home at 75 Deer Pond Road in Union Vale after Nancy and Randall Bose lost title because of $30,000 in unpaid property taxes and penalties, according to court documents. 

The plaintiffs, who name Dutchess County and its finance commissioner, Heidi Seelbach, as defendants, also include a couple who owed $30,000 when their home on Lafko Drive in the Town of Poughkeepsie was sold for $212,000; and the estate of a deceased woman whose 3-acre lot in East Fishkill was sold for $69,000 after being foreclosed on for $14,783 in back taxes.

They are seeking unspecified damages from Dutchess, which made $950,000 from its most recent auction in November 2022. The county did not hold one last year because of the Supreme Court ruling, and said it may forgo one this year. 

In Putnam County, Finance Commissioner Michael Lewis began a foreclosure proceeding on Feb. 22 in which the county is seeking title to 45 properties, including five in Philipstown. But because of the Supreme Court ruling, there are no immediate plans to auction the properties, the county said.

One pending remedy is legislation proposed by Gov. Kathy Hochul in response to the court decision that would require any proceeds remaining after overdue taxes are paid be turned over to the former owner and any lienholders.

According to the New York State Association of Counties, the legislation would give counties six months to turn over the proceeds of foreclosed properties sold between May 25, 2023 (when the Supreme Court issued its decision) and the effective date of the new rules.

For sales made before the ruling, a county would only be liable if a property owner had sued for the proceeds within four months. Protecting counties from claims by owners from previous sales is justified because they were “upholding state laws at the time,” said Mark LaVigne, deputy director for NYSAC.

Behind The Story

Type: News

News: Based on facts, either observed and verified directly by the reporter, or reported and verified from knowledgeable sources.

The Peekskill resident is a former reporter for the Times Herald-Record in Middletown, where he covered Sullivan County and later Newburgh. He holds a bachelor’s degree in English from Morgan State University and a master’s degree in journalism from the University of Maryland. Location: Cold Spring. Languages: English. Area of Expertise: General.

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