Inverse condemnation was the issue of the day for two Indiana Court of Appeals panels, with one case raising issues regarding fraudulent concealment and the statute of limitations.

In Jeff Sagarin and Shirley Jablonski v. City of Bloomington, No. 53A01-0909-CV-454, Jeff Sagarin and Shirley Jablonski appeal the trial court’s order regarding their claims for inverse condemnation and taking without just compensation against the city of Bloomington. They claim the trial court erred in finding in city’s favor, abused its discretion by denying equitable relief, and erred in denying the award of attorney’s fees.

The city cross-appealed, claiming the trial court erred in concluding the statute of limitations had tolled by reason of the city’s fraudulent concealment and in ruling the inverse condemnation claim was not extinguished by the alternative creation of the easement by prescription or common law dedication.

Because two children were killed – one in 1964, the other in 1972 – on a nearby road, some neighbors wanted the city to install either sidewalks or a path for children walking to a nearby school. In 1972, a city employee talked with Shirley and Robert Jablonski, and Deborah Campbell – who then owned the property now owned by Jeff Sagarin – about installing a path. Neither property owner signed an easement or provided permission for the path. When Campbell refused to agree, the city said her permission wasn’t necessary because the city had the right to build the path. The Jablonskis were told that as well. In late 1972, the city installed a small asphalt footpath that ran between the Campbell and Jablonski properties and then made a dog-leg to connect with a street.

When Sagarin bought Campbell’s home in 1993, he noticed the path and the Realtor said the city had an easement for it. When the property’s title search was completed, it showed an easement for utilities only.

In 2007, the city told Sagarin it was going to widen the path to eight feet so that two-wheel chairs or two bicycles could pass one another on the path. Sagarin obtained copies of his deed and any easements related to his and Jablonski’s properties. There was no documentation that the city held an easement on the properties for the pathway.

Sagarin and Jablonski – Robert had since died – filed a complaint against the city on claims of ejectment and quiet title, inverse condemnation, and taking without just compensation. After unsuccessful attempts at mediation and summary judgment motions, the case went to bench trial.

The judge issued an order Aug. 24, 2009, entering judgment in favor of Jablonski on her inverse condemnation and taking without compensation claims but in favor of the city regarding Sagarin’s claims. The court ordered appraisers to be appointed to value the easement and to assess damages, but it did not mention attorney’s fees.

Regarding Sagarin’s appeal, the appellate court noted there is no inverse condemnation for him because the city took the easement by inverse condemnation when Campbell owned the property. Sagarin bought the property knowing of the easement, which defeats any possible economic injury because that circumstance was in implicit consideration in the negotiation for the property.

In her claim, Jablonski argued she was entitled to the equitable relief of ejecting the city from the contested easement because the state constitution doesn’t permit the government to take property by fraudulent means. The Court of Appeals noted a recent Indiana Supreme Court ruling that held inverse condemnation is the sole remedy for a landowner when a governmental entity exercises complete dominance and purported ownership of a piece of land without utilizing the proper takings procedure. Murray v. City of Lawrenceburg, 925 N.E.2d 728, 733 (Ind. 2010).

That approach “mirrors the bases of eminent domain proceeding provisions ‘designed to compensate the landowner but also to permit the public need to be satisfied relatively quickly and at no more than a fair price.’ … To allow alternative remedies would circumvent these provisions,” wrote Judge Mark Bailey.

Where there is a public necessity for an easement, there is no equitable right to prevent a public entity from a taking, the court wrote, adding that the most or least Jablonski could expect is the value of the taken land, interest, and attorney’s fees. Also, if ejectment was a possible remedy, the relief would be temporary because the city could respond to an ejectment order by implementing eminent domain proceedings.

The appellate panel agreed with Jablonski’s claims that the trial court erred when it failed to award attorney’s fees, and it remanded for the trial court to determine the fees to which she is entitled.

Regarding the city’s claims the trial court erred in finding it had committed fraud, the appellate panel wrote it didn’t need to address the allegation because injunctive relief was not awarded and fraud is not a prerequisite for the recovery of damages.

The homeowners allege the city concealed from them the fact they were entitled to compensation from the city for the easement at issue. Citing Meisenhelder v. Zipp Exp., Inc., 788 N.E.2d 924, 931 (Ind. Ct. App. 2003), the court today noted that a plaintiff must file an action within a reasonable time after “he discovers information which would lead to discovery of the cause of action.” This is now Indiana Code Section 34-11-5-1.

Because of the city engineer’s statements in 1972 prevented the homeowners from obtaining information necessary to file a claim, the court noted there is sufficient evidence to support the trial court’s conclusions the city’s action prevented the homeowners from diligent inquiry. The court also noted the six-year limitation for trespass applies to inverse condemnation actions. The basis for potentially tolling the statute of limitations in these circumstances is appropriately termed fraudulent concealment.

The appellate court also disagreed with the city’s claim that the easement was established by prescription or common law dedication. The court noted the city did not establish a prescriptive easement based on the public’s use of the path because of the city’s statements to the Jablonskis. Also, common law dedication requires an element that the owner intends to dedicate land, and it is clear Jablonski did not intend to dedicate the path to the public.

Judge Michael Barnes dissented with the majority’s conclusion that the city prevented the Jablonskis from diligent inquiry so as to toll the statute of limitations regarding their claim. He noted he was not “entirely convinced” that the city acted with malicious intent.

Because the Jablonskis were aware of what was occurring, Judge Barnes noted the fraudulent concealment claim is not sustainable and he would rule the statute of limitations bars the plaintiffs’ claims.

In another case today, Canteen Service Co. of Indianapolis, Inc. v. Indiana Dept. of Transportation, No. 82A04-0908-CV-466, the Court of Appeals ruled the state transportation department’s relocation of Canteen’s entrance because of a road project did not constitute a taking under Indiana law.

In affirming the trial court, Judge Edward Najam noted that when Canteen sold its land, the fee simple title conveyed all of its right, title, and interest in the land to the state.