Before we go on, a disclosure: this is one of ours (we filed an amicus brief in support of the property owners).
In Walton v. Newkowin Regional Sanitary Authority, No. S069004 (May 23, 2024), the Oregon Supreme Court held that the six-year state statute of limitations applicable to physical invasion inverse condemnation claims (under both the Oregon and U.S. Constitutions) begins to run at the time of the invasion, and not when subsequent events show that the invasion was adverse to the owner's property rights.
This case went up the appeals chain after the trial court granted the Authority's motion for summary judgment. The background of the case is that back in the day (1995, although some of us actually remember that far back), the Authority installed two sewer lines on land belonging to the plaintiffs' father. This was done without the owner's permission. Slip op. at 3.
But three years later, the Authority entered into an agreement with the plaintiffs' father under which the Authority was granted an easement, provided that if the Authority ever required the landowner to connect to the sewer system, the owner could do so for free. "But [the Authority] 'never prepared an easement document' and 'never recorded an easement.'" Id.
Flash forward to 2014. By now, father was no longer the owner, and the kids had it. The Authority informed them that their septic system had failed and "they needed to connect to the sewer system." Id. No sweat they thought, the Authority agreed with dad that if required, it would be a free hook up. Well you guessed it, after the kids asked the Authority, it said no. Slip op. at 4.
Next stop (2017): an Oregon trial court on state and federal inverse claims (the kids did not assert a breach of contract claim). They alleged that the Authority installed the sewer lines without acquiring an easement by agreement or by eminent domain, and sought just compensation. What about the fact that the physical invasion was in 1995, well beyond any statute of limitations? The kids asserted that a state statute cannot limit the right to seek compensation for a taking. "In other words, plaintiffs asserted that their claim could not be subject to a statute of limitations." Slip op. at 5.
The Authority responded by agreeing that it installed its sewer lines in 1995 without the owner's permission, but denied that it ever agreed with father for a free hook up if later required. And if there was an oral agreement, it wasn't in writing so therefore could not be enforced (statute of frauds). And yeah, the inverse claim was subject to Oregon's six-year statute of limitations for "waste or trespass upon or for interference with or injury to any interest of another in real property," and the SOL long ago ran, with the lawsuit window opening when the Authority installed the sewage lines in 1995. Slip op. at 6. It sought, and the trial court granted, a motion for summary judgment "on the ground that plaintiffs' inverse condemnation claim was untimely." Id. The court of appeals affirmed.
After some background on inverse condemnation doctrine (both Oregon and federal - see pages 9-17), the court noted this is a physical and not a regulatory takings claim. It reviewed and rejected each of the kids' arguments that the six-year SOL did not stand in the way of the 2017 complaint.
First, the court rejected the argument that just compensation claims generally are beyond the reach of a legislature's ability to place a time limit on them. Yes, it is a constitutional obligation to provide just compensation when property is taken, but the U.S. Supreme Court and other state courts have at least implicitly applied legislative time limits to compensation claims. See slip op. at 18. Statutes of limitations are part of the "processes for obtaining such compensation," and must be complied with. Slip op. at 21.
Second, the court rejected the argument that physical takings claims cannot be subject to time limits. Nope, these are just a subspecies of just comp claims noted above.
Third, the court rejected the argument that the trigger for the statute beginning to run is not the physical occupation, but when the government refuses to provide compensation. The kids argued that merely taking property is not unconstitutional, and as the U.S. Supreme Court has emphasized, the bad act is the failure to provide just compensation. If that's so, the statute didn't begin to run until the Authority denied that it owed anything, which didn't occur until 2014. Not so, held the court. The SOL starts to run when the aggrieved party can sue on it (noting that federal law puts it as when the cause of action is complete and present). Slip op. at 26. And owners can bring inverse claims "when the physical occupation occurs." Id. The court differentiated between Oregon law (which says that it is ok to take and not pay, as long as there's a subsequent process available for the owner to obtain compensation), and federal law says the same thing (but in a different way).
The court rejected the kids' argument that Knick suggests otherwise, concluding that the U.S. Supreme Court has concluded that owners can't stop takings merely because compensation isn't provided contemporaneously. "Therefore, the Court continued, as long as post-taking compensation is available, prospectively preventing the government from committing the violation in the first place is unwarranted." Slip op. at 30 (citing Knick, 588 U.S. at 202). Compensation is a remedy for a taking, not a condition precedent.
Having rejected each of the owner's arguments, the court had little difficulty holding that the statute started to run when the Authority placed its sewer lines in 1995. That's when "plaintiffs' father could have initiated a takings claim." Slip op. at 34.
But what about that (alleged) oral agreement that father said he entered into with the Authority? Even assuming there was such an agreement, it only mattered if the agreement "somehow tolled the running of the limitations period." Id. But, the court concluded, "the plaintiffs have not made a tolling argument." Id. Moreover, even if there were such an agreement for a free hook up, the occupation by the Authority was permissive, and the remedy for the Authority breaching the agreement is in contract, not takings. Slip op. at 36 ("The [owner's] concern related to the breach of an agreement; it was not a claim that his property had been taken without his consent. Consequently, he needed to bring a contract or quasi-contract claim, not an inverse condemnation claim.").
We'll wrap this post up with this, from our amicus brief:
The Court of Appeals’ categorical rule has resulted in an absurdity: the only timely physical takings claim the Waltons could have asserted must have been filed at a time when they believed the Authority’s sewer line was on their property with their permission. They obviously did not know at that time that, decades later, the Authority would assert that the free hook-up agreement never existed. The Court of Appeals’ rule would require the Waltons to have brought their physical invasion takings claim in the early 2000’s, long before they even sought to connect to the Authority’s sewer line.
As we've noted previously, statutes of limitations cases can be difficult if not impossible to navigate for property owners. First, if an owner doesn't sue early and often, she is subject to government claims that she waited too long. But if the owner sues at what appears to be the first opportunity, she is very frequently met with government's claim that it is too early to sue because the claim isn't fully developed yet (ripeness). In some cases, the government actually argues that the lawsuit is both too early and too late. And courts eager to get rid of these cases are mostly just fine with it.
Walton v. Neskowin Regional Sanitary Authority, No. S069004 (Or. May 23, 2024)