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Klumpp v. Borough of Avalon

202 N.j. 390, 997 A.2d 967 (2010)

CONDEMNATION; STATUTE OF LIMITATIONS — Even though the statute of limitations to pursue an action for just compensation is governed by a six-year statute of limitations, where the condemning authority continued to insist that no taking had taken place, and then shifts gears years later to claim that there was a taking, the statute of limitations for filing an inverse condemnation action will not be enforced.

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 immediately construct a protective barrier in the form of sand dunes along the beachfront. 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 re-zoned the protected area from residential to public use. In 1997, certain owners of beachfront property within the protected area asked 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, one property owner sought to build a home on its property and applied for a DEP permit. However, DEP would not issue the permit unless the owner could demonstrate that it had access to the property. When the municipality did not respond to the owner’s requests for access, the owner sued for a declaration that it had pedestrian and vehicular access to develop the property. The municipality admitted that the owner 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 owner sued.

The lower court found that the municipality had taken functional possession of the property by including it within its dune line area and by constructing and maintaining the dunes. The lower court also found that the owner was aware that the dune project and its related resolutions and ordinances made use of the property impossible. It then ruled that the municipality had taken the property without compensation and that the taking process was “without any semblance of due process or compliance with statutory requirements” and was tantamount to an inverse condemnation. On the other hand, the lower court found that the owner was required to bring an action within six years after learning of the dune project and therefore its claim was barred.

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 owner’s 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 owner’s 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 owner, it also concluded that once it became aware of the physical occupation of the property by the municipality, the burden shifted to it to recover just compensation.

On appeal, the Supreme Court agreed that the applicable time frame for bringing an action for inverse condemnation is six years. The Court noted that for private “takings” by means of adverse possession, the statute of limitations is thirty years. However, since the government’s ability to appropriate private property is tied to its being put to public use, a thirty-year statute of limitations would undermine that purpose. The Court agreed that a sounder public policy is advanced by applying the six-year statute of limitations that is applicable to actions for trespass and injuries to private property. However, even though the Court found that the correct deadline for the owner to sue for inverse condemnation was six years from the date its property was taken for the dune project, enforcement of that statute was inappropriate in this instance. This was because the Court also found that the municipality had inconsistent positions toward the owner’s property over the years. It sent tax bills to the owner and listed the property as private property on official tax maps. While one would normally expect a property owner whose property was seized by inverse condemnation to actively pursue an action for just compensation within the six-year statute of limitations, this property owner could not do so because, for many years, the municipality denied that there was a taking at all. The Court found that the government should not be allowed to claim that there was no taking, only to shift gears years later and claim that there was a taking after the six-year statute of limitations for filing an inverse condemnation action had expired.

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