Rainey v. California Dept. of Transportation

Filed 9/5/08 Rainey v. California Dept. of Transportation CA1/4

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF CALTRANS OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR

Scott Rainey is engaged in the business of outdoor advertising. He brought this action for inverse condemnation, declaratory relief, and related claims against the California Department of Transportation (Caltrans) after Caltrans notified him that his long-existing advertising display was illegal, but then never held an administrative hearing to adjudicate the claimed illegality of the display space. The court granted Raineys summary adjudication motion and declared that Rainey was entitled to maintain the advertising display because an uncontested use of the property had existed for more than five years before Caltrans provided notice of a violation. (Bus. & Prof. Code,  5216.1.) The court further found that [Caltrans] is estopped from challenging Plaintiffs advertising, having waited 8 years to issue a citation and then failing to prove the violation [at an administrative hearing] despite orders from this Court to do so. The court held a bench trial on the issue of damages, and awarded Rainey $260,743 in lost profits. We affirm the judgment.

facts

Carl Hanken owns a building at Sixth and Harrison Streets in San Francisco, in which he operates a club called the EndUp. In September 1995, Hanken began using an exterior, unlit wall of his building as an outdoor advertising space. Hanken continuously posted advertising on the building for four years, until 1999. An off-premises business was advertised on the building space during those years, with the exception of one or two months, when the space advertised the on-site EndUp club. Hanken was never charged with a legal violation for using his building for outdoor advertising. In September or October 1999, Hanken leased the advertisement space on his building to Rainey, who continued to use the space for off-premises advertisers. Rainey continuously displayed advertising on the building from September 1999 through August 2003.

On August 20, 2003, appellant Caltrans issued to Rainey Outdoor[1] a Notice of Violation of the Outdoor Advertising Act (Notice). Caltrans asserted that the advertising display at Sixth Street violated the Outdoor Advertising Act, which requires a state permit for outdoor advertising displays visible from interstate highways and prohibits displays placed within 500 feet of another display on the same side of the highway. (Bus. & Prof. Code,  5271, 5350, 5408, subd. (d).) The Notice advised Rainey that he was required to do one of the following within 30 days. . . . Either: [] 1. Correct the violation and notify person below of compliance. . . .  [] 2. Remove the display and notify person below of compliance. [] 3. Contest the violation as explained in the enclosed Caltrans Outdoor Advertising Review Board (COARB) notice. Caltrans warned Rainey: For [a]n advertising display placed or maintained in a location that does not conform to the Outdoor Advertising Act or local ordinances and is not removed within thirty days of this written notice, ten thousand dollars ($10,000) plus one hundred dollars ($100) for each day the advertising display is placed or maintained after the Department sends written notice shall be assessed. [] Failure to respond in writing to the violation will be considered a waiver of your right to protest the violation. Thereafter, you are subject to the above fines and the display will be removed and destroyed at the expense of the violator.

In compliance with the Notice, Rainey stopped advertising at the Sixth Street location. Rainey also requested a COARB administrative hearing. A hearing was held on April 28, 2004. A month later, on May 28, 2004, Caltrans issued a one-page determination letter adverse to Rainey. Caltrans asserted that [t]he COARB panel members have reviewed all information submitted, and ha[ve] upheld the violation notice. Caltrans quoted the statute prohibiting advertising displays within 500 feet of another display on the same side of the highway, and said [t]herefore, Rainey Outdoor will not be permitted to place an outdoor advertising display at the Sixth Street location. (Bus. & Prof. Code,  5408, subd. (d).) The letter also said: The Department appreciates and acknowledges the compliance of Rainey Outdoor that has since removed the display in violation.

Rainey challenged the administrative ruling by filing a petition for a writ of mandate on August 13, 2004. (Code Civ. Proc.,  1094.5.) Caltrans submitted an administrative record of fewer than 20 pages, and two pages of minutes summarizing the hearing. There is no transcript of the hearing because it was not recorded.[2] In May 2005, the court denied the petition without prejudice upon concluding that Caltrans failed to provide a proper administrative record sufficient for the Court to either grant or deny the writ petition. The court remanded the matter back to COARB with directions to hold either a new administrative hearing, at the end of which COARB shall identify and set forth findings of fact and conclusions sufficient to allow the Court to determine whether COARB has committed an abuse of discretion; or in lieu of another COARB hearing, COARB is provided the option to prepare a meaningful administrative record and a decision that makes findings of fact and conclusions of law. . . .

COARB opted for issuing a decision with findings of fact and conclusions of law. An Amended Board Decision was issued on July 21, 2005, and listed eight findings of fact and conclusions of law. COARB found that the Sixth Street advertising display was visible from Interstate 80, and thus regulated by the Outdoor Advertising Act. COARB upheld the violation notice upon concluding that the display did not have a permit and was within 500 feet of another display on the same side of the highway. COARB declared: Said outdoor advertising display is ordered removed forthwith. Caltrans filed the Amended Board Decision with the court, along with a two-page supplemental administrative record.

In August 2005, Rainey renewed his petition for writ of mandate, now challenging the Amended Board Decision. Rainey claimed, among other things, that he was entitled to a statutory presumption that the advertising display was lawful because it existed for over five years without notice of a violation. (Bus. & Prof. Code,  5216.1.) Rainey alleged that COARB abused its discretion in ignoring this presumption.

The court held a hearing on the renewed petition in September 2005, at which the court again complained about the inadequacy of the administrative record. The court said it was inclined to grant the petition, and debated whether to do so with or without remanding the matter to COARB for a second opportunity to provide an adequate administrative record supporting COARBs decision. The court decided to remand the case to COARB. In December 2005, the court granted the petition and vacated the COARB decision, but also instructed COARB to notice and commence a new hearing at which it shall generate an adequate record of the evidence considered, [and prepare] the findings of fact and conclusions of law such that the Court will be able to conduct an appropriate review of any such decision to determine if there is a violation of the law or an abuse of discretion.

COARB never noticed another hearing. Raineys attorney contacted Caltrans asking for resolution of the matter, and noting that Rainey was losing $10,000 to $15,000 a month in advertising income. Receiving no response, Rainey filed this action for declaratory relief and damages on August 18, 2006.

Rainey alleged that Caltrans denied his business all economically beneficial or productive use of its lawfully-erected advertising display and that COARB has failed to comply with a Court Order ordering it to notice and commence a new hearing. By failing to comply, Caltrans has effectively denied Plaintiff an opportunity to be heard. Rainey stated causes of action for inverse condemnation, violation of Business and Professions Code section 5412 (requiring compensation for removal of a legal advertising display), violation of due process, and declaratory relief. Rainey asked the court to declare his right to place an advertising display at the Sixth Street location.

Rainey moved for summary judgment or, in the alternative, summary adjudication and the court granted summary adjudication in August 2007. On the declaratory relief cause of action, the court declared that Rainey was entitled to have an advertising display at the Sixth Street location because an uncontested use of property had existed for more than five years before Caltrans provided notice of a violation. (Bus. & Prof. Code,  5216.1.) The court further found that [Caltrans] is estopped from challenging Plaintiffs advertising, having waited 8 years to issue a citation and then failing to prove the violation despite orders from this Court to do so. As to the remaining causes of action, the court found that there is a triable issue of fact as to damages only, and on that basis only, denies the Motion as to those causes of action.

The remaining issue of damages was determined in a September 2007 bench trial. The court found that lost profits are an appropriate measure of compensatory damages to the Plaintiff . . . as Plaintiffs lost profits most closely approximate the value of the rights taken by the Defendant. The court awarded damages for the time period September 2003 (when Rainey complied with Caltranss notice of violation and removed the advertising display) through July 2007 (Rainey renewed advertisements after the August 2007 summary adjudication in his favor). The court rejected Raineys damages projections based on claimed monthly revenue of about $7,000, and set a lesser damages figure by using the average monthly advertising revenue earned from 1999 through August 2003 ($4,500). The court used the $4,500 average monthly revenue figure for damages incurred in 2003, and applied an incremental adjustment of ten percent annually for damages incurred in later years.

In calculating lost profits, the court did not deduct rent from revenue because Raineys lease with the building owner (Hanken) does not provide for a set rent. Instead, the lease obligates Rainey to share a percentage of the advertising revenue with Hanken, and Hanken expects to recover his share from the damages award. The court did not deduct any other expenses from revenue in determining the amount of lost profits because expenses were insignificant.

The court concluded that the total damages sustained by Plaintiff as a result of the Defendant ordering that the advertising display be removed is $260,743. The court also awarded prejudgment interest and costs, including attorney fees, in amounts to be determined at further hearings. Judgment was entered on October 5, 2007. Caltrans served notice of appeal on November 6, 2007, and completed briefing in June 2008.

discussion

Caltrans contends that the trial court erred in finding, on the summary adjudication motion, that Rainey was entitled to have an advertising display at the Sixth Street location, and also erred in later awarding damages for lost profits. There was no error.

The trial court properly found that the long-existing advertising display was presumptively legal, and Caltrans failed to rebut that presumption on the motion for summary adjudication. Business and Professions Code section 5216.1 provides that there shall be a rebuttable presumption . . . that an advertising display is lawfully erected if it has been in existence for a period of five years or longer without the owner having received written notice during that period from a governmental entity stating that the display was not lawfully erected.

It was undisputed that various forms of advertising had been placed at the Sixth Street location since September 1995. It was not until August 2003, almost eight years after advertising started, that anyone received notice of an alleged violation. These facts trigger the presumption that the advertising display was lawfully erected. (Bus. & Prof. Code,  5216.1.)

Caltrans argues that the presumption should not apply because there was a month or two when the Sixth Street location advertised the on-site EndUp club. Advertising displays used exclusively to advertise on-site premises are subject to less regulation than those displays that advertise off-site businesses and products. (Bus. & Prof. Code,  5272, subd. (d).) Caltrans argues: [s]ince on-site advertisements are exempt from a majority of the provisions of the [Outdoor Advertising Act] . . . they are not cited for the same reasons as displays that advertise off-site businesses. Since on-site business displays cannot be cited for all the same reasons as off-site business displays, the month or two of an on-site display disrupted the continuity of the five-year period of open use without legal citation.

The argument finds no support in law or reason. On-site displays are subject to certain Outdoor Advertising Act provisions, so even the brief interval of on-site advertising could have subjected the owner to citation. Moreover, only advertising displays used exclusively to advertise on-site businesses receive less regulation. The Sixth Street location was plainly not used exclusively to advertise the on-site club. In almost eight years of use, the club was the sole advertiser for only a month or two. Nothing in the statutes language or purpose suggests that a brief interval of on-site advertising negates the presumption of legality that arises from an uncontested use.

Caltranss alternative argument is that, even if the presumption of legality applies, Caltrans was wrongly denied the opportunity to rebut the presumption. Caltrans complains that it was estopped from challenging the presumption and maintains that the estoppel doctrine was improperly applied. Caltrans confuses two separate grounds upon which the summary adjudication was granted. The court found, in its written order, that Rainey was entitled to advertise at the Sixth Street location because (1) Rainey proved an uncontested use pursuant to Business and Professions Code section 5216.1; and (2) Caltrans was estopped from challenging the advertising because it waited 8 years to issue a citation and then fail[ed] to prove the violation despite orders from the Court to do so.

Caltrans notes that the trial court, at the hearing on the motion for summary judgment, initially stated that Caltrans was estopped from rebutting the presumption of legality. However, the court immediately clarified its statement and explained that Caltrans did have the opportunity to rebut the presumption on the motion for summary adjudication, and failed to do so. The court said: I did not on the grounds of estoppel reject a consideration of Caltranss evidence.

The trial court was correct in concluding that the evidence presented by Caltrans on the motion for summary adjudication failed to rebut the presumption of legality. The only evidence presented on the issue were photographs taken along Interstate 80 in May 1999, and Raineys deposition testimony in which he admitted that he did not apply for a Caltrans permit. In opposing the motion for summary adjudication, Caltrans argued the presumption is rebutted by plaintiffs own admission that he has no permit from [Caltrans] and photographs along Interstate 80 showing that plaintiffs display was within 500 feet of another billboard.

This evidence was wholly inadequate to rebut the presumption. Raineys admission that he did not have a Caltrans permit is plainly inadequate evidence of a violation without proof that a Caltrans permit was required. Rainey presented evidence that the display was not visible from the highway, and thus not subject to Caltrans permitting requirements. Caltranss only response to this evidence was a relevancy objection (which was overruled), and referral to Interstate 80 photographs. The photographs fail to show that the Sixth Street location is visible from the freeway, and they also fail to show that the subject location is within 500 feet of another advertising display. The evidentiary paucity of these photographs, unaccompanied by any explanation or measurements, was pointed out to Caltrans when they were first presented in the same bare form in opposition to a writ of mandate in 2005. They remained inadequate when recycled years later to oppose the motion for summary adjudication.

Caltranss final argument against liability is its claim that Raineys decision to remove the advertising display was voluntary, so Caltrans did not take or impair his property interests. Caltrans concedes that it cited Rainey for violating the Outdoor Advertising Act but claims Rainey was free to maintain the display while challenging the citation and says Caltrans did not have the power to remove the display absent a court order. We cannot endorse this revisionist treatment of history.

As described above, the violation Notice advised Rainey that he was required to do one of the following within 30 days. . . . Either: [] 1. Correct the violation and notify person below of compliance. . . .  [] 2. Remove the display and notify person below of compliance. [] 3. Contest the violation as explained in the enclosed Caltrans Outdoor Advertising Review Board (COARB) notice. Caltrans warned Rainey: For [a]n advertising display placed or maintained in a location that does not conform to the Outdoor Advertising Act or local ordinances and is not removed within thirty days of this written notice, ten thousand dollars ($10,000) plus one hundred dollars ($100) for each day the advertising display is placed or maintained after the Department sends written notice shall be assessed. [] Failure to respond in writing to the violation will be considered a waiver of your right to protest the violation. Thereafter, you are subject to the above fines and the display will be removed and destroyed at the expense of the violator.

While Caltrans now contends that it did not have the power to remove the display absent a court order, it plainly asserted its unbridled power to do so in its previous dealings with Rainey. In its August 2003 Notice, Caltrans threatened to remove the display at the violators expense and, in its July 2005 Amended Board Decision, declared: Said outdoor advertising display is ordered removed forthwith. It is also untenable to claim that Rainey could have maintained the display while challenging the citation. While Rainey was given the option to contest the Notice, and did so, he remained subject to mounting penalties unless the display was removed within 30 days of the Notice. The threatened penalties were substantial, and increased daily. A fair reading of the record shows that Rainey was compelled to remove the display and did not volunteer. On the motion for summary adjudication, Caltrans even admitted that Rainey stopped displaying advertising at the Sixth Street location [i]n compliance with the Notice of Violation. (Italics added.)

Finally, on the issue of damages, Caltrans misconstrues the damages award in arguing against compensation for lost business good will. Rainey never sought business good will as an element of damages. Rainey sought, and was awarded, lost profits. This was proper. As Caltrans acknowledges on appeal, the impairment of real property interests is compensable, and damages may be quantified in different ways. (Pacific Gas & Electric Co. v. County of San Mateo (1965) 233 Cal.App.2d 268, 274-275.) Lost profits are a recognized measure of damage to an interest in real property. (Ibid.) Despite these principles, Caltrans argues that damages were wrongly awarded here because no real property interest was impaired, only a business. Caltrans fails to understand that there was a real property interest that was impairedRaineys lease, which entitled him to post advertising displays on the building at the Sixth Street location. The trial court properly awarded lost profits for the impairment of this lease.

disposition

The judgment is affirmed.

_________________________

Sepulveda, J.

We concur:

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Ruvolo, P. J.

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Rivera, J.

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[1] Rainey operates a business called Rainey Outdoor Advertising. We use Rainey to refer interchangeably to the individual and the business.

[2] Caltrans has since modified its review procedures to provide a full administrative hearing.