A storm in 1962 knocked down the house that Edward and Nancy Klumpp built in Avalon.
An appeals court had sided with the town in ruling it had the right to the property under the concept of inverse condemnation when the town approved a project to restore the beach, dunes and vegetation.
In their lawsuit, the Klumpps said the town didn't notify them it was taking the property and kept sending them tax bills over the years.
Tuesday's court ruling called Avalon's actions "contradictory" and said the town "skirted its obligation to answer for its action."
