The three-judge panel ruled in Donald Jensen, et al. v. The City of New Albany, et al., holding that a reversionary clause in a 1960 deed was unenforceable after land was transferred to the state more than four decades ago.
Land in question was 5.82 acres known as the Fawcett property, which the original owner had left in a 1935 warranty deed to the city of New Albany for use as a municipal park and golf course. When the state began preparing to construct part of I-64 through the city, it purchased the course and Fawcett property. However, a large amount was not used and through the years was used for various recreational purposes. The state eventually executed a quitclaim deed in 2004 returning the unused I-64 land to Floyd Memorial Hospital and Community Housing Development Organization, which wanted to build houses on the property.
Appellants - six couples describing themselves as residents and park users, and some relatives of the original land owner - filed a complaint, noting the 1935 deed and reversionary clause, claiming that if the land wasn't used for its intended purpose (the park or ensuing interstate project), it would revert to the rightful heirs. The trial court denied the defendants' request for summary judgment, but it also denied appellants' request for declaratory judgment and an injunction.
In its opinion, the Court of Appeals wrote that the 1935 deed was extinguished upon the 1960 deed's execution. The decision is controlled by an Indiana Supreme Court decision - Dible v. City of Lafayette, 713 N.E.2d 269 (Ind. 1999) - which said that neither a restrictive covenant nor reversionary clause is "enforceable against an entity with the power of eminent domain."
"Appellants apparently believe that the rule in Dible is limited to those situations in which a condemning authority has actually exercised its power of eminent domain," the court wrote. "This is not the case. The question is not whether an entity condemned property, but whether the entity had the power to do so, the rationale being that if the property owner refused to sell the property, the condemning authority would simply exercise its power of eminent domain."