How one woman's home equity theft case made its way to the Supreme Court

The Supreme Court is hearing its last scheduled oral argument for the current term, in a case involving a 94-year-old woman's home in Minnesota. The trial could have wide-ranging effects on home equity theft and the way that at least a dozen states repurchase people's houses.

What is the case about?

Geraldine Tyler is suing Hennepin County, Minnesota, alleging that they violated the now 94-year-old's civil rights by taking her property without just compensation. The issue began back in 2010, when Tyler, then 81, moved out of her Minneapolis condo into a nursing home. Tyler admitted that she stopped paying taxes on the condo after she moved out. Between the unpaid taxes, interest, and fees, Tyler eventually accrued nearly $15,000 in debt to Hennepin County, Forbes reports.

Hennepin County eventually seized Tyler's old condo, and NPR notes that "Tyler does not dispute that the county repeatedly notified her that she risked losing the condo if she didn't pay up." After the seizure, the county sold the condo for $40,000. However, the county kept not only the $15,000 that Tyler owed, but also the $25,000 left over, leaving Tyler with nothing.

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Despite Tyler's objections, this string of events is legal in Minnesota — at least for now. This is because, when it comes to collecting government debts, Minnesota and other states are allowed to keep the profits they receive from a tax surplus, Forbes notes. As a result, Tyler sued Hennepin County, arguing that she should have received the $25,000 difference.

The Pacific Legal Foundation (PLF), which represents Tyler, argues that by keeping the full amount, Hennepin County unconstitutionally seized her property. They call this phenomenon "home equity theft." In states where this is legal, "if a property owner fails to pay or underpays his property taxes, even by just a few dollars, the local government or a private lienholder can eventually take the entire property, along with the owner's equity," PLF reports, even though the equity is typically worth much more than the debt itself.

How do the justices feel about the case?

Justices are routinely stoic during oral arguments, so it can often be hard to gauge their opinions on a particular case. However, signs seem to point to the Supreme Court swinging toward Tyler's success, based on eyewitnesses who were in the room.

The nine justices seemed to be in "broad favor" of Tyler's argument, and even conservative Justice Clarence Thomas said she was "saying the county took her property and made a profit on her surplus equity. It belongs to her," Supreme Court correspondent Mark Sherman reports for The Associated Press. Sherman notes that Justices Elena Kagan and Neil Gorsuch, despite being on opposite sides of the ideological spectrum, said Hennepin County seemed to think it could seize million-dollar properties over small tax bills.

"I mean, $5,000 tax debt; $5 million house. Take the house; don't give back the rest?" Kagan hypothetically asked the county's attorney, who essentially confirmed the justice's question.

The justices all seemed "receptive" to Tyler's argument, adds Supreme Court reporter Lawrence Hurley for NBC News. Hurley writes that the justices seemed to question the merit of limiting government power when they could seize property without giving back a surplus. "The Constitution seemed to have a different idea in mind," Chief Justice John Roberts said. The newest member of the Court, Justice Ketanji Brown Jackson, questioned whether there would even be a "real, big, practical problem" in siding with Tyler.

What's next?

The Supreme Court's decision is not expected to be released until this coming summer. However, given the justice's questioning during oral arguments, it seems likely, though not certain, that they will find in favor of Tyler.

This could potentially impact the legality of this type of home equity practice in states where it is currently legal. These laws "can have a big impact on seniors struggling to pay property taxes after retirement," USA Today writes. With the justices seemingly concerned with the state law, a potential ruling in favor of Tyler could end up forcing changes to the way that states are able to buy back property.