                    IN THE COURT OF APPEALS OF TENNESSEE
                                 AT JACKSON
                            ASSIGNED ON BRIEFS JULY 23, 2004

        CONLEE ENGINE REBUILDERS, INC. v. CITY OF MEMPHIS

                      Direct Appeal from the Circuit Court for Shelby County
                          No. CT-002435-02     Karen R. Williams, Judge



                     No. W2003-0216-COA-R3-CV - Filed November 17, 2004


This appeal arises out of an inverse condemnation action brought by Appellant against Appellee.
Appellee filed a motion to dismiss for failure to state a claim upon which relief can be granted,
contending that Appellant’s claim was time barred by the applicable statute of limitation. The trial
court granted Appellee’s motion, and Appellant now seeks review by this Court. For the following
reasons, we reverse.


       Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Circuit Court Reversed

ALAN E. HIGHERS, J., delivered the opinion of the court, in which DAVID R. FARMER , J., and HOLLY
M. KIRBY , J., joined.

Leonard E. Van Eaton, Memphis, TN, for Appellant

Norman P. Hagemeyer, Memphis, TN, for Appellee

                                      MEMORANDUM OPINION1

                                       Facts and Procedural History

       Conlee Engine Rebuilders, Inc. (“Conlee” or “Appellant”) is a Tennessee corporation owned
by Ray Conlee, his wife, Fannie Conlee, and their son, Andy Conlee. In September 1977, Conlee
purchased property located at 1091 North Sixth Street in Memphis, Tennessee. At that time, the




        1
                   Rule 10 (Court of Appeals). Memorandum Opinion. -- (b) The Court, with the concurrence of all
judges participating in the case, may affirm, reverse or modify the actions of the trial court by memorandum opinion
when a formal opinion would have no precedential value. W hen a case is decided by memorandum opinion it shall be
designated “MEMORANDUM OPINION,” shall not be published, and shall not be cited or relied on for any reason in
a subsequent unrelated case.
property was zoned as light industrial, permitting Conlee to use the property for its business purposes
of rebuilding and installing automobile engines.

        On December 13, 1988, the City of Memphis (“City” or “Appellee”), through its city council,
passed City Ordinance 3828. This ordinance amended City Ordinance 3064 and rezoned Conlee’s
property from light industrial to residential duplex. It is disputed whether Conlee was aware of the
rezoning by the City or if Conlee received actual notice of the zoning change. However, Conlee
admits in its brief that public notice had been published prior to the passage of City Ordinance 3828.

        On August 24, 1989, Conlee purchased approximately 1.0631 acres of real property
immediately north of 1091 North Sixth Street. Again, the parties dispute whether Conlee was aware
of the zoning change when it purchased the additional lots in August 1989. Subsequently, on
December 21, 1992, Conlee applied for and was issued a building permit from the Memphis and
Shelby County Office of Building Code Enforcement, allowing Conlee to construct a storage facility
for the machine shop. After beginning and substantially completing work on the new facility located
on the land purchased in 1989,2 a “stop work” order was issued by the Memphis and Shelby County
Office of Construction Code Enforcement, stating that such construction was in violation of City
Ordinance 3828 which rezoned the property from light industrial to residential duplex. Though the
“stop work” order was lifted and Conlee completed construction of the building, the City advised
Conlee that the new building could only be used for storage purposes and no expansion would be
permitted on the original parcel purchased in 1977.

        After exhausting its administrative remedies, Conlee filed a complaint for inverse
condemnation on April 20, 1994, in the Shelby County Chancery Court. On June 2, 1994, the City
filed a motion to dismiss the complaint pursuant to Tenn. R. Civ. P. 12.02. For reasons which are
not clear from the record, on May 30, 1997, the City filed an answer to Conlee’s complaint setting
forth numerous affirmative defenses, including the defense that Conlee’s claim was time barred. In
April 2002, the parties entered into a consent order to transfer the action to the Shelby County Circuit
Court. After the City filed another motion to dismiss in the circuit court, the lower court granted this
motion. The court reasoned that the statute of limitation for an inverse condemnation action began
to run on the day City Ordinance 3828 was passed, and Conlee’s complaint was filed more than a
year after the enactment of this ordinance. Conlee appeals to this Court and presents the following
issue, as we perceive it, for our review: whether the trial court erred when it determined that
Conlee’s complaint failed to state a claim upon which relief may be granted given the one-year
statute of limitation for inverse condemnation actions. For the following reasons, we reverse the
decision of the trial court and remand for further proceedings consistent with this opinion.

                                               Standard of Review


         2
                   Though the record does not explicitly state that the new building was constructed on the land purchased
by Conlee in 1989, the complaint states that the City of Memphis advised Conlee, after allowing Conlee to finish
construction, that “no further expansion will be allowed on the parcel of ground acquired in 1989 . . . .” (emphasis
added). Such statement suggests that the new building was constructed on the land purchased by Conlee in 1989.

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       The Tennessee Supreme Court has articulated an appellate court’s standard of review
when a party appeals the grant of a motion to dismiss:

               A Rule 12.02(6) motion to dismiss only seeks to determine whether the
       pleadings state a claim upon which relief can be granted. Such a motion challenges
       the legal sufficiency of the complaint, not the strength of the plaintiff’s proof, and,
       therefore, matters outside the pleadings should not be considered in deciding whether
       to grant the motion. See Bell ex rel. Snyder v. Icard, Merrill, Cullis, Timm, Furen &
       Ginsburg, P.A., 986 S.W.2d 550, 554 (Tenn. 1999). In reviewing a motion to
       dismiss, the appellate court must construe the complaint liberally, presuming all
       factual allegations to be true and giving the plaintiff the benefit of all reasonable
       inferences. See Pursell v. First Am. Nat’l Bank, 937 S.W.2d 838, 840 (Tenn. 1996).
       It is well-settled that a complaint should not be dismissed for failure to state a claim
       unless it appears that the plaintiff can prove no set of facts in support of his or her
       claim that would warrant relief. See Doe v. Sundquist, 2 S.W.3d 919, 922 (Tenn.
       1999); Fuerst v. Methodist Hosp. S., 566 S.W.2d 847, 848 (Tenn. 1978). Great
       specificity in the pleadings is ordinarily not required to survive a motion to dismiss;
       it is enough that the complaint set forth “a short and plain statement of the claim
       showing that the pleader is entitled to relief.” White v. Revco Disc. Drugs Ctrs., Inc.,
       33 S.W.3d 713, 718 (Tenn. 2000) (citing Tenn. R. Civ. P. 8.01). We review the trial
       court’s legal conclusions de novo without giving any presumption of correctness to
       those conclusions. Id.

Trau-Med of Am., Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 696-97 (Tenn. 2002).
                                           Law and Analysis
        The crux of this appeal does not question whether City Ordinance 3828 was validly enacted
by the city council of Memphis. The focus of this appeal is the restriction placed on Conlee by City
Ordinance 3828 and whether Conlee filed its complaint within the one-year statute of limitation for
inverse condemnation actions. We begin by noting that “[i]nverse condemnation is the popular
description of a cause of action against a governmental defendant to recover the value of the property
which has been taken in fact by a governmental defendant even though no final exercise of the power
of eminent domain has been attempted by the government.” Johnson v. City of Greeneville, 435
S.W.2d 476, 478 (Tenn. 1968). It is codified at Tenn. Code Ann. § 29-16-123 as follows:

       If, however, such person or company has actually taken possession of such land,
       occupying it for the purposes of internal improvement, the owner of such land may
       petition for a jury of inquest, in which case the same proceedings may be had, as near
       as may be, as hereinbefore provided; or the owner may sue for damages in the
       ordinary way, in which case the jury shall lay off the land by metes and bounds and
       assess the damages, as upon the trial of an appeal from the return of a jury of inquest.

Tenn. Code Ann. § 29-16-123(a) (2000). Further, with regard to zoning and land-use ordinances,
the Tennessee Supreme Court has stated:


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                Ordinances regulating the use and development of property are generally held
        to lie within the police power of municipal corporations, and their adoption, while
        frequently affecting property values and restricting use of property, has generally not
        been considered to amount to a taking under the power of eminent domain or to
        constitute retrospective legislation within the meaning of the state constitution.

Draper v. Haynes, 567 S.W.2d 462, 465 (Tenn. 1978) (citing Houck v. Minton, 212 S.W.2d 891
(Tenn. 1948); Spencer-Sturla Co. v. City of Memphis, 290 S.W. 608 (Tenn. 1927); Jones v.
Nashville, 72 S.W. 985 (Tenn. 1902)). However, to constitute a “taking,” “‘it is not necessary for
the owner to be entirely deprived of the use of the property. Any destruction, restriction or
interruption of the common and necessary use may constitute a taking.’” Id. at 165 (quoting Jones
v. Cocke County, 420 S.W.2d 587, 589 (Tenn. Ct. App. 1967)) (emphasis added). Indeed, this Court,
adopting the findings of a lower court and quoting them with approval, enunciated that “when
regulation goes so far as to deprive an owner of the beneficial use of his property, it becomes
confiscatory and constitutes a taking of property without due process of law.” Bayside Warehouse
Co. v. City of Memphis, 470 S.W.2d 375, 378 (Tenn. Ct. App. 1971) (citing Pa. Coal Co. v. Mahon,
260 U.S. 393, 415 (1922); Arverne Bay Constr. Co. v. Thatcher, 15 N.E.2d 587 (N.Y. 1938)).

       Section 29-16-124 of the Tennessee Code Annotated articulates the statute of limitation for
claims of inverse condemnation:

        The owners of land shall, in such cases, commence proceedings within twelve (12)
        months after the land has been actually taken possession of, and the work of the
        proposed internal improvement has begun; saving, however, to unknown owners and
        nonresidents, twelve (12) months after actual knowledge of such occupation, not
        exceeding three (3) years, and saving to persons under the disabilities of infancy and
        unsoundness of mind, twelve (12) months after such disability is removed, but not
        exceeding ten (10) years.

Tenn. Code Ann. § 29-16-124 (2000). The Tennessee Supreme Court has further elaborated on
when an inverse condemnation action begins to accrue stating “the onus is on the property owner to
institute his suit within one year after he realizes or should reasonably realize that his property has
sustained an injury which is permanent in nature.” Knox County v. Moncier, 455 S.W.2d 153, 156
(Tenn. 1970). The time of the accrual of an inverse condemnation cause of action is frequently a
question of fact and not a matter of law. See Osborne Enters., Inc. v. City of Chattanooga, 561
S.W.2d 160, 165 (Tenn. Ct. App. 1978).

        Appellant argues that the trial court erred when it determined that the statute of limitation for
Appellant’s inverse condemnation action began to run when City Ordinance 3828 was enacted in
December 1988. Under the circumstances of this case, we agree. In this case, Appellant complains
that the Appellee committed a “taking” in the form of a restrictive zoning ordinance for property
acquired by Appellant in December 1977 but also in August 1989. As an initial matter, it seems



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illogical to this Court that a “taking” occurred, and the statute of limitation for inverse condemnation
began to run, in December 1988 for the parcel of land Appellant acquired in August 1989.

         Next, we note that, given this Court’s holding in Osborne Enterprises, Inc. v. Chattanooga,
it was inappropriate for the lower court to hold, as a matter of law, that the statute of limitation for
inverse condemnation actions codified in Tenn. Code Ann. § 29-16-124 began to run at the time City
Ordinance 3828 was enacted on December 13, 1988. Osborne Enters., Inc., 561 S.W.2d at 165.
Instead, the statute of limitation begins to run when the complainant “realizes or should reasonably
realize that his property has sustained an injury which is permanent in nature.” Moncier, 455 S.W.2d
at 156. In this case, it appears from the complaint that Appellant had no knowledge of City
Ordinance 3828 when it was passed, did not realize that the property was rezoned when he purchased
additional, adjacent lots in August 1989, continued to have no knowledge of such rezoning when he
obtained a building permit from the Memphis and Shelby County Office of Building Code
Enforcement on December 21, 1992, for expansion of his business, and only learned of the rezoning
when Appellee issued a “stop work” order while Appellant was amidst construction of a new facility
on the rezoned property. Though Appellee disputes in its answer the point in time Appellant knew,
or should have known, of the rezoning, such statement is insufficient to sustain a motion to dismiss
and renders the grant of such motion inappropriate. For these reasons, we reverse the trial court’s
grant of the Appellee’s motion to dismiss and remand for further proceedings consistent with this
opinion.

                                             Conclusion

       For the reasons stated above, we reverse the trial court’s grant of the motion to dismiss in
favor of Appellee. Costs of this appeal are taxed to Appellee, the City of Memphis, for which
execution may issue if necessary.




                                                        ___________________________________
                                                        ALAN E. HIGHERS, JUDGE




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