PORTLAND, Ore. (KOIN) — A class action lawsuit filed Thursday is looking to stop Oregon counties from retaining entire tax foreclosure proceeds, arguing the practice violates the United States Constitution, according to court documents.
The lawsuit was filed in the Oregon U.S. District Court by three people whose properties were foreclosed on in Multnomah, Lane, and Yamhill counties, as first reported by The Oregonian. In addition to the three counties, Oregon Attorney General Ellen Rosenblum and Oregon Department of Revenue Director Betsy Imholt are also listed as defendants.
The plaintiffs argue that the counties violated federal law prohibiting the taking of private property without just compensation — citing the Fifth Amendment of the U.S. Constitution — along with laws against imposing excessive fines, court documents say.
The plaintiffs allege since at least May 2017, the counties retained the entirety of their foreclosure sale of properties, which they say is more than the amount of property taxes owed, rather than returning the surplus funds to the former property owners.
According to court documents, one of the plaintiffs owed over $31,000 in taxes and associated fees on his Springfield home. After Lane County foreclosed the property in March 2020, court documents say the county sold the home for around $118,500 – leaving $86,840 in surplus proceeds.
The second plaintiff owed over $11,000 on a Lafayette mobile home and after the home was foreclosed in 2019, Yamhill County sold the property for around $19,699, court documents show. The suit claims Yamhill County retained the $8,561 surplus.
According to court documents, the third plaintiff owed nearly $6,000 in taxes and associated fees on a parcel of land in Portland. After foreclosing the property, Multnomah County sold it for over $30,000 and retained a surplus of more than $24,000, court documents say.
The suit alleges the three counties retained and distributed the surplus proceeds per ORS 275.275., which directs Oregon counties to retain and distribute the surplus proceeds.
However, in court documents, the plaintiffs cite the 2023 U.S. Supreme Court decision in Tyler v. Hennepin County. In that ruling, the court held that the “practice of a government retaining surplus proceeds without providing an adequate means for the former property owners to recover the surplus proceeds is a taking of private property for public use without just compensation in violation of the United States Constitution.”
The plaintiffs seek compensation for the taking of their private property and a declaration that ORS 275.275 is unconstitutional.
Multnomah County, Lane County, and the Oregon Department of Revenue told KOIN 6 News they do not comment on pending litigation.
KOIN 6 News has also reached out to Yamhill County and Attorney General Rosenblum for comment, but has not heard back.
