A Michigan homeowner owed $3,000 in taxes, but the county sold her home and kept all $23,500; an appeals court has now reopened her legal fight to recover the surplus from the foreclosure

A $3,000 tax debt ended with a Michigan homeowner losing her home and the county keeping $23,500 from its sale. Years later, her fight to recover that money is back in court. The U.S. Court of Appeals for the Sixth Circuit, in an October 5, 2026 opinion in Cunningham v. Allegan County, overturned a lower-court dismissal and sent the case back for further proceedings. The court said the lower court used the wrong legal approach when deciding whether Denise Thompson’s federal claim was filed too late. The ruling does not mean Thompson has won the $23,500; instead, it gives her lawsuit another chance to move forward.How the foreclosure dispute beganThompson’s case stems from Michigan’s former tax-foreclosure system. Counties could foreclose on properties when owners failed to pay their property taxes, sell those properties and, under the system in place at the time, keep the money left over after the tax debt was satisfied. That is what happened to Thompson, according to the Sixth Circuit. She owed about $3,000 in taxes, but Allegan County foreclosed on her home and later sold it. The county kept the entire $23,500 in sale proceeds, an amount substantially higher than the debt that triggered the foreclosure.Thompson was not the only homeowner affected. Gary and Josette Day also lost property through Allegan County foreclosures in 2013 and 2014. Their claims eventually became part of a broader legal battle over whether Michigan counties could retain surplus money generated by tax-foreclosure sales.The class-action case that changed the timelineIn December 2014, Michigan taxpayers filed a class action known as Wayside Church v. County of Van Buren. The plaintiffs argued that counties violated the Constitution’s Takings Clause by keeping surplus proceeds after selling foreclosed properties. Thompson and the Days were unnamed members of the plaintiff class, while Allegan County was initially an unnamed member of the defendant class. The lawsuit was dismissed in 2015 but reopened in 2019 after developments in the law.In July 2023, Thompson and the Days opted out of a class settlement because they wanted to pursue individual claims against Allegan County. They filed those lawsuits in March 2024. That timing became the central issue in the case.Why the county said the lawsuit was too lateAllegan County argued that Thompson and the Days had missed the deadline for bringing their federal claims. The district court agreed and dismissed the claims as time-barred. The homeowners, however, argued that their participation in the Wayside class action had paused the statute of limitations. They had remained part of that litigation for more than eight years and argued that the clock should not have been running against them throughout that entire period. The Sixth Circuit agreed that the lower court had taken the wrong approach.What the appeals court decidedJudge Amul Thapar, writing for the Sixth Circuit, said Michigan law controls the tolling issue because the homeowners brought their claims under federal civil-rights law, but such claims generally borrow the applicable state statute of limitations. The court found that Michigan’s tolling rules could apply to the Wayside litigation. It also concluded that the 2019 reopening of the class action meant the tolling period could continue rather than simply ending when the case was dismissed in 2015.That matters because, if the Wayside case paused the clock until Thompson and the Days opted out, their individual lawsuits could have been filed within the applicable deadline. But the appeals court did not decide that the claims are definitely timely.The question still left for the lower courtThe Sixth Circuit said another issue needs to be examined: whether Allegan County had sufficient notice of the claims while it was still an unnamed member of the proposed defendant class. Michigan law generally allows class-action tolling when defendants have notice of the claims and the general identities of the potential plaintiffs. But the appeals court said the existing record does not clearly establish when Allegan County received that notice.Because that question could determine whether Thompson’s claim survives, the Sixth Circuit vacated the district court’s dismissal and sent the case back for further proceedings.What happens nextThe ruling does not order Allegan County to pay Thompson the $23,500. Instead, it keeps her legal fight alive and requires the lower court to examine the notice and tolling issues again. The case also sits within a much larger Michigan dispute over foreclosure surpluses. In 2020, the Michigan Supreme Court ruled in Rafaeli, LLC v. Oakland County that counties’ retention of surplus proceeds after satisfying a property-tax debt violated the Michigan Constitution’s Takings Clause. Litigation has continued over how those principles apply to older foreclosures and how former homeowners can seek repayment.For Thompson, the immediate question is more specific: whether the earlier class action paused the legal deadline for her claim. If it did, her effort to recover the $23,500 surplus can continue.You use AI every day. Now get your AI Quotient. Take the AIQ test.