In Ocean City, Owners Still Suing Over Height of Dunes

As massive waves crushed and flattened Ocean City's weaker dune systems and buried parts of the island under record-high floodwaters during Superstorm Sandy on Oct. 29, the wide and healthy dunes at the heart of Ocean City were the envy of the island.

The dunes left adjacent properties high and mostly dry, protecting homes on the beach blocks between 18th and 40th streets from the worst of the damage.

But the same dunes are part of two ongoing lawsuit appeals. Seven beachfront homeowners on the 2700 and 2800 blocks of Wesley Avenue in Ocean City are suing because the city "took" their ocean views. Another pair on the 3400 block have already been awarded damages for the same reason, and the city is appealing the decision.

Sandy illustrated the importance of healthy dune systems in protecting the barrier islands. But the lawsuits could affect future dune projects — not only will taxpayers have to pay for dunes but they potentially will have to compensate beachfront property owners when they build them.

Both lawsuits hinge on a promise made by the City of Ocean City in the early 1990s — when the city first received approval and funding for the continuing federal beach replenishment program that maintains Ocean City's dunes and wide beaches. In exchange for permission to build the dunes on private property, the city agreed to maintain the dune height at no more than three feet above the level of the bulkhead.

The promise was broken shortly after it was made.

In 1994, new state Department of Environmental Protection regulations prohibited Ocean City from altering dunes without a permit, and nature took its course.

SEVEN SEEK COMPENSATION FOR LOSS OF OCEAN VIEWS

In an ongoing appeal, seven owners of four properties on the 2700 and 2800 blocks of Wesley Avenue are seeking payment for the loss of ocean views and access.

Each of the owners claims "riparian rights" — they say they own the land between their beachfront homes and the ocean. And the City of Ocean City has a signed easement agreement from each property — the owners, voluntarily and without seeking compensation, agreed to let the city build dunes on their land. In exchange, the city made its promise to keep the dunes from growing too tall. (See attached PDF for a sample easement agreement.)

The property owners and plaintiffs include:

• Eustace and Suzanne Mita, 2813-15 Wesley Avenue
• Michael and James Scully, 2837-39 Wesley Avenue
• Stephen and Kathleen Tanner, 2723 Wesley Avenue
• Maureen Smith, 2709 Wesley Avenue

The current or former owners of the properties signed easement agreements in 1992.

The sand began to arrive in 1992 — 2.6 million cubic yards of it at a cost of $11 million — as the federal Army Corps of Engineers approved Ocean City for a program that would bring new beach-widening projects every three years. The first round covered the area from the Great Egg Harbor Inlet to 15th Street. 

Another 2.7 million cubic yards of sand came in 1993 at a cost of $14 million. It covered the area from 15th Street to 36th Street.

The initial project laid the groundwork for a dune system that would continue to thrive — particularly in the central part of the island, where the dunes grew wider and taller in the ensuing years with dune grass and other native plantings helping to anchor the mounds of sand.

By 2005, Ocean City had applied for and been denied a dune alteration permit. A lawsuit that included 95 plaintiffs and 63 properties followed soon after. The dunes were between four and five feet above the average height of the bulkhead (one to two feet higher than the easement agreement allowed).

By the time the case went to trial, only 15 plaintiff claims remained. The court dismissed all but six of the claims. The court ruled:

• Some plaintiffs (including the Mitas) failed to prove ownership of the beach.
• The new state regulations (Coastal Area Facility Review Act, or CAFRA, rules) made it impossible for the City of Ocean City to fulfill its end of the agreement.
• The plaintiffs failed to prove "substantial loss of use."

Owners of the four properties are appealing that decision. They are represented by Frank Corrado of the Wildwood firm Barry, Corrado and Grassi.

"This is a contract and inverse condemnation action in which a group of beachfront property owners claims Ocean City breached the terms of a dune easement agreement and thereby 'took' their ocean views," Corrado writes in a summary of his argument.

"Rather than condemn and pay for the easements, Ocean City asked the property owners to donate them. In return, the city promised, in perpetuity, to maintain the dune height at three feet above the bulkhead, to preserve the property owners' ocean views and access."

Corrado is asking the appellate court to reverse the trial court's decision for four reasons:

• He says the Mitas can provide ample evidence that they own their dune property.
• Because the city is "subdivision of the state," the city's impossibility defense makes no sense — the state knew about the city's promise, and the city knew the state had to authorize it.
• Even if it's impossible for the city to keep its dune height promise, the city should still be obligated to compensate the plaintiffs for breaking it.
• The trial court should not have considered the "taking" of the properties as an all-or-nothing proposition. "Loss of ocean view and access are compensable property interests, whose deprivation entitles plaintiffs to severance damages."

In the aftermath of Sandy, which caused an estimated $438 million in damage to public and private property in Ocean City, Corrado said the lawsuit appeal will continue.

"It's irrelevant to the question of whether the city has taken my clients' property," Corrado said. "If its ability to control the height of dunes is limited, then they have to pay for it."

The city's argument in the appeal by City Solicitor Dorothy McCrosson reflects the lower court's opinion but also notes the benefits of the dunes, not only to the public but to the plaintiffs.

"It is important to note the underlying reason for the beach projects in Ocean City," McCrosson writes in a brief filed before the Oct. 29 storm. "The trial court began its Findings of Fact and Conclusion of Law with a brief history of hurricanes along the Jersey Shore. Ocean City undertook the beach replenishment and dune construction projects when a narrow beach and the absence of beach dunes left the beachfront properties, and the rest of the city, incredibly vulnerable to wave damage."

"The trial court was mindful of the competing equities in this case. ... Obviously, Plaintiffs are among the biggest beneficiaries of Ocean City's dunes as their beachfront homes are the first in line for damage from wave action."

CITY APPEALS AWARD OF DAMAGES TO TWO BEACHFRONT OWNERS

In a separate appeal related to the same original lawsuit, the city argues that the lower court "erred by awarding damages in the absence of credible expert testimony" when it gave two beachfront duplex owners on the 3400 block of Wesley Avenue (the alley on the beach side of Central Avenue) $35,000 (second-floor owner) and $70,000 (first-floor owner) for the loss of their views and access.

The property owners — Nicholas Talotta and David Hughes — live in separate units of the same duplex at 3420 and 3422 Wesley Avenue.

Talotta and Hughes signed their easement agreements in 1995 — after the state DEP changed its CAFRA rules in 1994 to prohibit dune alteration without a permit. Because the city knew by 1995 that it would be impossible to regulate dune heights, but still made the same promise in its easement agreement, the court ruled in favor of Talotta (second-floor) and Hughes (first-floor).

"The only issue the city is raising in this appeal is whether the respondents are entitled to an award of compensatory damages for the diminution in the value of their real property where there was no competent evidence quantifying the dimunition," McCrosson writes in a court brief.

Representing Talotta and Hughes, Kenneth Porro of the Paramus firm Wells, Jaworski and Liebman argues that the damages awards were based on both precedent and evidence.

Among other cases, he cites the City of Ocean City vs. Maffucci, in which a beachfront homeowner on Wesley Avenue who refused to sign the easement agreement was awarded $37,000 for loss of views, access and privacy when the city took the easement by eminent domain.

Both appeals are still ongoing in the courts with no trial date set. City Council met in executive session in September to discuss the suits — sometimes a sign that the governing body is asked about whether to continue to argue the cases or seek settlements.

POTENTIAL IMPACT OF THE SUITS

With dunes stretching the length of the island and hundreds of beachfront homes, the potential for a costly precedent seems high in the two lawsuit appeals.

But the trial court decisions define a fairly narrow window.

"Our exposure would be limited to people who signed after 1994, who can prove ownership, who can prove loss of value," McCrosson said.

Beachfront residents would first have to prove they own the land where dunes are built. Riparian (or littoral) rights are not universal among beachfront properties in Ocean City or the rest of the Jersey Shore.

"It's a patchwork quilt of different kinds of ownership throughout the state," Corrado said. "There's no consistency. It was developed as a matter of historical accident."

McCrosson said riparian rights were granted and negotiated at different times and are not limited to oceanfront properties, but include bay waters and tidal streams. 

Owners who signed easement agreements after 1994 appear to have precedent on their side, though the Corrado appeal could potentially change that — if Ocean City's "impossibility" argument is reversed. It remains unclear how many easements were signed before and after 1994.

Finally, the owners will have to be able to prove and quantify a loss in value due to the dunes. It also remains unclear if the courts would consider an added value in the placement of dunes.

The recent storm likely bought some time for the city — as dunes throughout much of the island were wiped out or greatly diminished. But as the Army Corps of Engineers returns this winter to begin a new beach replenishment project, the issue could resurface as the dunes rise again.

Similar battles are being fought in other Jersey Shore towns, including Long Beach Township on Long Beach Island, where some owners have refused to sign easement agreements allowing dune-building, while the township has refused to pay for the rights.