Can Government Use Inverse Condemnation To Take Property Without Compensation?

We can't figure out this Kafkaesque decision from the Appellate Division of the New Jersey Superior Court. We really can't.

In Klumpp v. Borough of Avalon, No. A-2963-07 (per curiam), the court held that the government can assert inverse condemnation in order to take property without compensation. 

If you had to read that twice to comprehend it, you're not alone. 

The Klumpps are long-time owners of a parcel in the Borough of Avalon, New Jersey; they built a summer house in 1960 which was destroyed two years later in a storm. Since that time, the Borough constructed a protective sand dune system on the Klumpp's and other properties, and enacted regulations allowing officials to enter the property and "do such acts as may be required, including removing, destroying or otherwise disposing of any property located thereon without first paying any compensation therefor." The dunes and the accompanying regulations prevented the Klumpps from rebuilding their home, and denied them access to the land, but the Borough never asserted the Klumpps didn't own the land. The property was rezoned from residential to "public use" in 1979. In 1997, the Borough acknowledged they could not rebuild, but denied the regulations took the property.

In 2003, the Klumpps applied for a development permit to build a single family home on their land, but the application could not be processed because they could not show they had access to the land. They sued, seeking a declaratory judgment that they had the access necessary to develop the property. The Borough asserted it had adversely possessed the property, or had gained an easement by prescription or under the public trust doctrine.

After the trial judge granted the Borough's motion for summary judgment, the Appellate Division reversed, holding there was no proof the Borough adversely possessed the property. On remand, the property owners amended the complaint to add claims for ejectment and trespass, and the Borough amended its counterclaim, seeking declarations that it had taken the property in 1962, and that it owned the property outright.

After a bench trial, the court determined the 1979 rezoning was a regulatory taking, but because the property owners did not demand compensation, they were not barred by the six-year statute of limitations. The ejectment and trespass claims, as "continuing offenses," also could not be time barred. The court entered judgment for the Borough, however, since it had taken the property by inverse condemnation.

The Appellate Division first discussed the inverse condemnation cause of action, correctly noting:

In an inverse condemnation case, a property owner alleges that the government took the property without the payment of just compensation. Pappas v. Bd. of Adjustment of Borough of Leonia, 254 N.J. Super. 52, 56 (App. Div.), certif. denied, 130 N.J. 9 (1992). A taking by inverse condemnation "does not occur in compliance with statutorily imposed procedures. The essence of the cause of action is a de facto taking of private property under the power of eminent domain." Van Dissel v. Jersey Cent. Power & Light Co., 152 N.J. Super. 391, 404 (Law Div. 1977), aff'd, 181 N.J. Super. 516 (App. Div. 1981), certif. denied, 89 N.J. 409 (1982), vacated on other grounds, 465 U.S. 1001, 104 S. Ct. 989, 79 L. Ed.2d 224 (1984). Inverse condemnation thus provides a remedy designed to insure that the owner whose land was taken de facto receives just compensation.

The court agreed with the trial court that the "conduct of the Borough since 1962 has made plaintiffs' property completely useless, and essentially unavailable to them for any purpose," and "that inverse condemnation has occurred, and that the Borough is the true owner of the property." Having found that the Borough inversely condemned the Klumpp's property and that it had taken their land, the next step was to award just compensation, right?  

No (and this is the part we just can't figure), the court held the Borough took the property but didn't owe anything as compensation. Even though it left the earlier decision regarding the statute of limitations and lack of prescriptive easement undisturbed:

Plaintiffs argue that the tax bills, Borough records, and recorded title ownership indicate that they continue to be the true owners of the property. These are indicia of plaintiffs' bare legal title, however, and nothing more. The conduct of the Borough since 1962 has made plaintiffs' property completely useless, and essentially unavailable to them for any purpose.

It is the taking of possession without payment that constitutes the very essence of inverse condemnation. The fact that plaintiffs have legal title does not refute that conclusion. The proposition that "only the holder of legal title can be an 'owner' of property finds no support either in our jurisprudence or in everyday conversation." Jock v. Zoning Bd. of Adjustment of Twp. of Wall, 371 N.J. Super. 547, 556 (App. Div. 2004), rev'd on other grounds, 184 N.J. 562 (2005). Once plaintiffs became aware of the physical occupation of the property by the Borough, the burden shifted to them to recover just compensation.

Not surprisingly, the property owners have petitioned the New Jersey Supreme Court for review (petition available here). We can't say it any better than they do:

The decision below is based upon a fundamental misunderstanding of the inverse condemnation cause of action.  Inverse condemnation is a remedy designed to provide just compensation to landowners whose land has been improperly taken by the government without complying with due process of law through the Eminent Domain Act. In an inverse condemnation action, the aggrieved landowner who has demonstrated a taking of land by the government obtains redress in the nature of mandamus to compel the institution of condemnation proceedings by the government, ultimately leading to the payment of just compensation.

There is no authority for the proposition, espoused by the court below, that inverse condemnation may be utilized by a municipality to take land without complying with the provisions of the Eminent Domain Act, and without paying just compensation. The inverse condemnation remedy, designed to protect landowners, cannot be used by municipalities to steal land in violation of a landowner’s constitutional rights.

Petition at 2-3 (emphasis original). We recommend reading the entirety of the petition.