Daily Development for Friday, February 13:
 Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri

Another great contribution from Ira Meislik.  The fact that it is posted on Monday has nothing to do with Ira - editorial somnolence. 

EMINENT DOMAIN; INVERSE CONDEMNATION; STATUTE OF LIMITATIONS: Even though a government entity may effectively have substantially destroyed any beneficial use that a property owner might have, resulting in inverse condemnation or a regulatory taking, the property owner may lose the right to compensation if it waits until its claim is time-barred by the six year statute of limitations.

Klumpp v. Borough of Avalon, A-2963-07T3 (N.J. Super. App. Div. 2009), Unpublished; July 31, 2009.

In 1962, a major storm obliterated numerous beachfront properties located in a municipality. In accordance with New Jersey's regulatory scheme concerning property under the purview of the United States Army Corps of Engineers, the New Jersey Department of Environmental Protection (DEP), and other funding agencies, the municipality was required to maintain the dune area. The municipality enacted a series of resolutions and ordinances authorizing it to enter upon the beachfront properties to clear debris and to construct immediately a protective barrier in the form of sand dunes along the beachfront. Apparently these ordinances and activities rendered useless the homesites for residential use. It also instituted a property-exchange program as a means of compensating property owners whose lots had been destroyed by the storm. The municipality continued to tax property owners for their lots.

In 1979, the municipality rezoned the protected area from residential to public use. In 1997, certain owners of beachfront property within the area inquired to the municipality about the adoption of the various ordinances and resolutions. The municipality acknowledged that the owners could not develop their property, but denied that the ordinances effectuated a taking, asserting instead that its ordinances merely regulated activities on the dunes for the benefit of the community. The municipality refused to compensate the owners and the owners never demanded compensation.

In 2003, the owners sought to build a home. They applied for a DEP permit. They told the municipality that the DEP would not issue the permit unless they could show access to the property. When the municipality didn't respond, the owners sued for a declaration that they had pedestrian and vehicular access to develop the property. The municipality admitted that the owners held title to the property, but then it sought title to the property by adverse possession, an easement by prescription in the public interest, or an easement under the public trust doctrine.

The lower court ruled that the municipality had been continuously in possession of the property since the early 1960's and dismissed the owner's complaint. The owners appealed.

The Appellate Division remanded the matter. First, it determined that there was insufficient evidence on the record supporting the lower court's finding of continuous possession by the municipality. Second, it found that the question of whether the municipality had the ability to provide or authorize access could not be answered without further proceedings.

On remand, the lower court held that the municipality had taken functional possession of the property by including it within its dune line area and by constructing and maintaining an engineered dune. Further, it noted that once the end of the street was vacated, access to the property was limited by fencing and vegetation. It also found that there was a footpath cutting across the property which extended from the end of the street. It further noted that due to the municipality's obligations to the DEP to maintain the dune, the municipality couldn't grant access to the owner's property. The lower court found that the owners were aware that the dune project and its related resolutions and ordinances made use of the property impossible.

The lower court then ruled that the municipality had taken the property without compensation and without definitively acknowledging that it had taken the property during the relevant period. According to the Court, the taking process was "without any semblance of due process or compliance with statutory requirements" and was tantamount to an inverse condemnation. Then, to the owner's dismay, it opined that the owners were obligated to contest the acquisition "years ago," when they first learned of the dune project and of the subsequent ordinances and resolutions and did nothing.

Additionally, the lower court ruled that the rezoning of the property in 1979 constituted a regulatory taking. Even though it held that the owner's claims for access and for damages for trespass and ejectment were not time-barred, it refused to award damages for such claims because it also held the owners' bare legal title alone could not "support" those claims. It also dismissed the municipality's counterclaims. The owners appealed again.

This time, the Appellate Division affirmed, agreeing with the lower court that there had been an inverse condemnation and that the municipality was the true owner of the property. It found that the tax bills, municipal records, and recorded title were indicia of the owners' bare legal title, but nothing more. Further, it held that a taking of possession without payment constitutes the very essence of inverse condemnation, and noted that the owners' retention of legal title did not refute that conclusion. It agreed with the owner that the proposition that "only the holder of legal title can be an 'owner' of property [has] no support either in our jurisdiction or in everyday conversation." It also agreed with the lower court that the 1979 rezoning of the property, together with the prior ordinances affecting the property, effectively barred any practical use of the property and substantially destroyed any beneficial use. Thus, it found that there had been a regulatory taking as well
. Unfortunately for the owners, it also concluded that once they became aware of the physical occupation of the property by the municipality, the burden shifted to them to recover just compensation.

In sum, the Court ruled that the municipality had taken exclusive control of the beach area years earlier, but the time period within which the property owner could have sued for compensation for the taking had long ago run out.

Editor's Comment: There is an unusual feature here in that there had apparently been some kind of "compensation/replacement" program at the time of the original dune building activities, but the two courts appear to make little of that in defense of the takings claims - perhaps because the statute of limitations holdings were more efficient.

Note that, even with the rezoning, the owners might have been able to claim damages for the prior inverse condemnation but they were far more than a day late and dollar short. It's interesting that some enterprising lawyer didn't get involved in the potential class action at the time of the inverse condemnation. Maybe the available lawyers were drying out their own properties.

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