LA GRANDE — A class-action lawsuit accuses all 36 counties in Oregon of unconstitutionally profiting from selling property in foreclosure.

Tarresa Hutchison of Arizona and Timothy Waterman of California filed the pleading on June 23 with the Deschutes County Courthouse, Bend. Hutchison owns land in that county, but the lawsuit names every county in Oregon as a defendant.

“I suspect that this lawsuit will progress through our well-established judicial system, as any lawsuit would,” Union County Commissioner Paul Anderes said. “I am concerned that Oregon will have additional policy, rules and regulations as a result of the suit that will be forced upon us by non-resident outside influences.”

Commissioners Donna Beverage and Matt Scarfo declined to comment on the lawsuit. Attorney Wyatt Baum of La Grande will represent Union County in this case.

Oregon law allows counties to foreclose on a property for unpaid taxes and retain all proceeds from the sale of the property, even if the proceeds are more than what is owed in taxes. The plaintiffs contend this action is unconstitutional under Article I, Section 18 of the Oregon Constitution and the Fifth Amendment of the U.S. Constitution.

Eugene attorney Jennifer Middleton under the Heffner Hurst law firm from Chicago represents Hutchison and Waterman, who are making the complaint on behalf of anyone who has had their home seized in tax foreclosure.

Hutchison was a minor when she inherited a 50% interest in a property in Deschutes County in 2007, according to the complaint. From 2008-12 the property taxes went unpaid, and Hutchison ended up owing $4,172.54 in delinquent taxes and fees. After the county foreclosed on the property and obtained the deed, it sold the property for $89,000 and ended up with a profit of more than $64,000.

Similarly, Waterman bought a plot of undeveloped land in Springfield in 2007, and from 2011-15, the property taxes went unpaid, according to the court document. Lane County filed for foreclosure in September 2015, and two years later the property was in the county’s possession. The total amount owned in unpaid taxes was $2,033, and the county later sold the property for $58,000 with a profit of nearly $56,000. Waterman claimed in the lawsuit he received none of that money.

Matthew Hurst, lead partner at Heffner Hurst, said counties keeping that profit is the issue.

“After the debt has been satisfied, it is fundamentally unfair and unconstitutional to take the equity as well,” he said. “This is a form of punishment and deprives people who just lost their homes of the equity they had built at the exact time they need it the most.”

The U.S. Constitution and The Oregon Constitution limit the government’s power to take property in the absence of “public use” and require “just compensation” if government takes property. According to the lawsuit, the practices of all Oregon counties when it comes to obtaining property after tax foreclosure are unconstitutional.

The lawsuit also states because the fines on the property are small compared to the profit from their sales, counties are unconstitutionally imposing excessive fines on those who lose out on the equity of their property.

Similar cases have been brought in Arizona, Illinois, Minnesota and Washington, D.C., and there was an attempt to change the ruling in the Oregon Legislature in 2019 with Oregon House Bill 3175. However, the bill did not make it past the first reading.

“After the debt has been satisfied, it is fundamentally unfair and unconstitutional to take the equity as well. This is a form of punishment and deprives people who just lost their homes of the equity they had built at the exact time they need it the most.”

— attorney Matthew Hurst