Category: Real Estate

If the government builds on your property, don’t wait 30 years to sue

In its September 1 opinion in Walton v. Neskowin Regional Sanitary Authority, 314 Or App 124, the court of appeals reinforced a basic point of Oregon condemnation law: when the government physically invades your property, the six-year statute of limitations on your takings claim begins to run.  The court’s opinion is, however, remarkable for what it does not discuss.

With one exception, the facts are straightforward.  In 1993 or 1994, the Neskowin Regional Sanitary Authority installed an underground sewer line through the property of James Jefferson Walton, father of the three plaintiffs.  The property had a house with a septic tank.  In 2001, James Walton deeded the property to the three plaintiffs, his children.

In 2014, Neskowin told the Waltons that the septic tank had failed, and that they must connect their house to the sewer.  The Waltons told Neskowin that their father had given Neskowin permission to build the line through his property in exchange for being allowed to hook up without charge.  Neskowin denied that it had made any such agreement with James Walton.

In 2017, the Waltons sued Neskowin and asked for compensation for inverse condemnation that resulted (they said) from Neskowin building the line through their father’s property.  They also alleged that Neskowin and their father had made the agreement for a free sewer connection.

Neskowin’s primary defense was that the claim was time-barred: the statute of limitations for their claim was six years, and the Waltons had brought their claim more than six years after Neskowin had built the sewer line.  The trial court agreed with Neskowin and granted summary judgment to Neskowin.

The Waltons appealed.  Their principal argument was that the 6-year statute of limitations for an inverse condemnation claim began to run when Neskowin first refused their demand to be compensated, not when Neskowin built the sewer line.  The court of appeals rejected their argument and in a short opinion affirmed the trial court.

That’s what’s in the opinion, and it’s not particularly remarkable.  If the government starts to dig on your land, your claim accrues and the statute of limitations begins to run.  Sue promptly.  However, the opinion leaves out the answers to two questions.

The first question comes from the law of easements.  If James Walton had given permission to Neskowin to build the sewer line through his property in exchange for a free hookup, then Neskowin’s use was not adverse.  The statute of limitations for a trespass would not start to run until Neskowin’s use became adverse to the Walton family – that is, until Walton or his children asked to connect to the sewer line or told Neskowin to move the line off of their property.  The Walton children did allege that their father had given Neskowin permission to build the line, which if correct would have kept the statute of limitations on their claim from starting to run until Neskowin had denied their request for a free sewer connection.  The court’s opinion doesn’t mention that important point.

The second question is why the trial court decided the case on a motion for summary judgment.  A trial court can’t grant summary judgment if there is a disputed material fact.  Whether James Walton had given Neskowin permission to build the line was a disputed material fact: the opinion itself discloses that the Waltons alleged that their father had given Neskowin permission to build the sewer line, and Neskowin alleged that he hadn’t.  The court of appeals recognized that the fact was disputed; in a footnote it wrote “Rather, it is plaintiffs’ assertion, albeit contested by defendant, that the previous property owner – plaintiffs’ father – had allowed defendant to install the sewer line ‘by permission *** for a no-charge hookup.”  How, then, could the trial court have granted summary judgment to Neskowin?

The answer may lie in a document in the trial court file, stated to be a letter dated May 25, 2000 from one of the plaintiffs, Jeff Walton, to Neskowin.  Walton wrote: “Current circumstances: A NRSA sewer line now exists without permission or easement approximately 100’ on Walton property.”  Whether or not James Walton had given Neskowin permission in 1993 to build the line through his property, seven years later his son Jeff Walton told Neskowin that Neskowin had built the line without James Walton’s permission — enough to start the clock ticking on the six-year statute of limitations.

The ABA publishes Dean Alterman’s book “How to Draft Easements”

Dean Alterman’s second book, How to Draft Easements, came out in print this month.  It’s published by the Real Property, Trusts and Estates section of the American Bar Association and follows by six years his first book, How to Build a Real Estate Law Practice, also published by the ABA.  The book explains the basic legal doctrines behind easements and easement agreements, describes how to draft five different types of easement agreements, and concludes by listing ten ways to misdraft an easement agreement.   His goal in writing the book was to help lawyers “draft easement agreements to reduce the chance that your clients find themselves in court arguing about their rights.  Litigation is a blunt and expensive tool with which to settle a dispute.”

Champlain Towers South and insurance: uncovered dangers may become uncovered losses

Antique insurance policy

Three days after the tragic collapse of half of the 136-unit Champlain Towers South condominium in Surfside, Florida, the association’s insurer, James River Insurance Company, announced that it was paying the entire amount of its policy into court.

In matters of insurance, always read the fine print, even in news stories.  James River is paying not the amount of its coverage for building insurance, but its coverage for general liability – the coverage that we associate with visitors who slip on wet or damaged walkways.  That policy amount is reported to be $5 million, which equates to about $30,000 per condominium unit.  The association carried insurance of various sorts reported to total $48 million, which is about $300,000 per unit, and is about half the total market value of the 136 units before the collapse.

The legal dispute between Champlain South’s insurers (there are several) and the association is likely to focus on whether the policies cover the loss of the building.  That depends on the words in the policy.  Not every loss is a covered loss.

The Champlain Towers South case won’t be the first time Florida has seen this question.  In The Sandalwood Condominium Association at Wildwood, Inc. v. Allstate Insurance Company, 294 F.Supp. 2d 1315 (2003), the condominium’s policy covered “risk of direct physical loss involving collapse of a covered building or any part of a covered building caused only by one or more of the following,” including “hidden decay” and “hidden insect or vermin damage.”  In November 1998 the association discovered that termites had damaged several of the buildings.  As the association repaired the damage, it learned that the termite damage was extensive, and it filed a claim with Allstate in April 2000.  Seventeen months later Allstate denied the claim on two grounds: first, that the damage was not “collapse,” and second, that the damage was not “hidden.”   Allstate moved for summary judgment on both defenses.

The court denied both parts of Allstate’s motion.  Its explanation for rejecting Allstate’s argument that the damage was not “hidden” was not really a win for the association.  Why not?

Allstate alleged that, in the court’s words, the association “cannot claim the damage was hidden if they had prior knowledge of its existence,” and asked the court to rule that the Sandalwood association had to show that it did not know, and did not have a reason to know, that termites and decay had damaged the buildings.

The court rejected Allstate’s motion, but it adopted Allstate’s rule, saying that “in order to recover under the policy, Sandalwood must demonstrate that the damage to the structural integrity of the Complex was not visible and that Sandalwood neither knew nor should have known of the structural damage with sufficient time to allow for repairs before it reached the state of ‘collapse.'”  Because that was a question of fact and not a question of law, the court denied the motion.

Three years ago an engineering firm evaluated Champlain South. Buried in its report on page 7 is the following:  “The waterproofing below the Pool Deck & Entrance Drive as well as all of the planter waterproofing is beyond its useful life and therefore must all be completely removed and replaced.  The failed waterproofing is causing major structural damage to the concrete structural slab below these areas.  Failure to replace the waterproofing in the near future will cause the extent of the concrete deterioration to expand exponentially.”

If Champlain South’s policy reads like Sandalwood’s policy from Allstate did, be prepared for Champlain South’s insurer to argue that it doesn’t have to pay for the lost building because the association – its insured – knew about the severe damage in 2018 and had enough time to arrange for repairs, but didn’t.

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