Opinion
E052227 Super.Ct.No. RIC494274
11-02-2011
GARY BAILEY, Plaintiff and Appellant, v. LAMAR ADVERTISING COMPANY, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.
OPINION
APPEAL from the Superior Court of Riverside County. Mac R. Fisher, Judge. Affirmed in part, reversed in part and remanded for further proceedings. Michael V. Hesse for Plaintiff and Appellant.
Gresham Savage Nolan & Tilden, Theodore K. Stream, Jamie E. Wrage and Eugene Kim for Defendant and Respondent.
Plaintiff and appellant Gary Bailey appeals a judgment awarding him $222,373.38, following an order granting a defense motion for summary judgment or summary adjudication. Bailey contends that he is entitled to a larger award of damages, including punitive damages. We will affirm the judgment as to the compensatory damages, but will reverse as to punitive damages.
HISTORY
The current appeal arises from the latest in a series of lawsuits between Bailey and Lamar Advertising Company (Lamar) or Lamar's predecessor, Outdoor Media Group (OMG). We recite the following factual and procedural history from our opinion in Bailey v. Outdoor Media Group (2007) 155 Cal.App.4th 778 (Fourth Dist., Div. Two; hereafter Bailey II):
"Bailey sued OMG and Lamar, both of which are billboard advertising companies, to recover damages for trespass and wrongful occupation of a strip of land in the City of Grand Terrace that Bailey had leased from the property owners and then subleased to OMG, which constructed billboards on the land and sold the advertising space. When OMG's 10-year sublease with Bailey expired in 1998, OMG continued to occupy the land and sell advertising on its billboards while it attempted to negotiate a new sublease agreement with Bailey. Bailey and OMG did not agree on the terms of a new sublease, and in 1999 Bailey sued OMG for damages based on, among other things, its wrongful occupation of Bailey's leasehold. Bailey won that lawsuit [Bailey v. Outdoor Media Group (Super. Ct. Riverside County, 2001, No. RIC325716); 2001 WL 35828562; hereafter Bailey I] [fn. omitted], and recovered damages from OMG through August 2001. Although the trial court in that case awarded Bailey damages, it denied Bailey's cause of action for ejectment on the ground that ejectment could result in waste because the City of Grand Terrace had outlawed new billboard construction with the result that if the billboards were removed from the property, they could not be replaced. Bailey appealed the damage award in Bailey I [Bailey v. Outdoor Media Group (Dec. 9, 2002, E030836), 2002 WL 31745018 (nonpub. opn.)] [fn. omitted], but he apparently did not challenge the trial court's denial of his request to eject OMG from the property. In that appeal, this court modified the judgment by increasing the damage award and affirmed the judgment as modified. Despite its loss in Bailey I, both at trial and on appeal, OMG continued to occupy Bailey's property and sell advertising space on its billboards until May 2003, when it sold the billboards to Lamar.
"In the sale to Lamar, OMG represented that it had a valid sublease with Bailey on the subject property and that it would assign that sublease to Lamar. OMG provided Lamar with a copy of what OMG represented to be the sublease agreement. The purported sublease in fact was an offer that Bailey had made to OMG nine months earlier and that OMG had not accepted and that Bailey subsequently revoked. Because Bailey had signed the sublease offer, OMG backdated its acceptance, and represented to Lamar that the document was a valid sublease agreement with Bailey. [Fn. omitted.] When Bailey learned of the transaction between OMG and Lamar, which occurred shortly after the transaction took place, he notified Lamar that OMG did not have a sublease on the property. In addition, when Lamar sent Bailey what it represented to be its first rent payment, Bailey returned the check, and advised Lamar that no sublease existed between Bailey and OMG. Lamar continued to occupy the property and send monthly rent payments to Bailey, only to have Bailey return the payments with a letter advising Lamar that OMG did not have a lease on the property.
"Bailey filed the instant action [i.e., Bailey II] in July 2003, seeking among other things damages under Civil Code section 3334 for trespass measured by the gross revenue Lamar and OMG received from their respective sale of advertising space on the billboards located on Bailey's leasehold. Bailey also sought to recover from OMG the price Lamar had paid to purchase the billboards from OMG. A court trial took place in March 2005 at the conclusion of which the trial court found in favor of Bailey and against both OMG and Lamar. The trial court awarded damages to Bailey against OMG measured by the net profit it generated from the billboards ($108,069), rather than by gross revenue ($168,850), and against Lamar measured by the reasonable rental value of the land ($86,131), rather than its net profit ($99,580.64). The trial court denied Bailey recovery of the purchase price OMG had received from Lamar, and also found that Bailey was collaterally estopped by Bailey I from seeking ejectment, and in any event, ejectment would cause waste. After the trial court issued its tentative decision, Bailey moved for a new trial on the issue of damages or in the alternative to vacate the submission and reopen the case to evidence. The trial court denied that motion." (Bailey II, supra, 155 Cal.App.4th at pp. 781-782.)
Civil Code section 3334 provides in pertinent part: "(a) The detriment caused by the wrongful occupation of real property . . . is deemed to include the value of the use of the property for the time of that wrongful occupation, . . . the reasonable cost of repair or restoration of the property to its original condition, and the costs, if any, of recovering the possession. [¶] (b)(1) Except as provided in paragraph (2), for purposes of subdivision (a), the value of the use of the property shall be the greater of the reasonable rental value of that property or the benefits obtained by the person wrongfully occupying the property by reason of that wrongful occupation. [¶] (2) If a wrongful occupation of real property subject to this section is the result of a mistake of fact of the wrongful occupier, the value of the use of the property, for purposes of subdivision (a), shall be the reasonable rental value of the property."
All further statutory citations will refer to the Civil Code, unless another code is specified.
In Bailey II, Bailey contended that the trial court incorrectly calculated the amount of damages to which he was entitled as the result of the wrongful occupation of his leasehold by OMG and Lamar. He contended that under section 3334, he was entitled to recover the gross revenue, not the net profit, generated by the billboards, along with the proceeds of OMG's sale of the billboards to Lamar. With respect to OMG, the trial court awarded Bailey OMG's net profits and did not include the proceeds of OMG's sale to Lamar. With respect to Lamar, the trial court found that its occupation of the property was the result of a mistake of fact, and therefore awarded Bailey the reasonable rental value of the property under section 3334, subdivision (b)(2). (Bailey II, supra, 155 Cal.App.4th at pp. 782-783.)
We examined the legislative history of section 3334 and determined that the Legislature intended to eliminate financial incentives for wrongfully occupying the land of another but did not intend to punish such occupiers. We concluded that an award of gross revenue would be punitive, and that the phrase "benefits obtained" as used in section 3334, subdivision (b)(1) normally means the defendant's net profit, at least in a case involving the wrongful occupation of real property in order to conduct a business. We held that a plaintiff's burden is to prove the gross revenues obtained by the defendant, and that the defendant bears the burden of proving expenses incurred in the wrongful use of the property, as a matter of defense. If the defendant proves its expenses, the trial court may offset them against the gross revenues. If the defendant does not present credible evidence of its expenses, however, the court may award damages in the amount of the defendant's gross revenues. (Bailey II, supra, 155 Cal.App.4th at pp. 784-789.) We affirmed the trial court's award of damages against OMG in the amount of its net profit (id. at pp. 788-789) and modified the judgment to award Bailey damages in the amount of Lamar's net profits, rather than the reasonable rental value the trial court employed with respect to Lamar(id. at pp. 795-796).
On February 8, 2008, Bailey filed the current suit against Lamar, seeking damages from March 1, 2005, through February 3, 2008, for trespass, wrongful occupation of real property, money had and received, as well as an accounting and imposition of a constructive trust. Lamar answered the complaint and then filed a motion for summary judgment.
In the summary judgment motion, Lamar conceded that Bailey was entitled to Lamar's net profits from the billboards from July 2005 to January 2008, in the amount of $222,373.38. It contended that Bailey was barred by res judicata or collateral estoppel from relitigating claims for ejectment and for gross revenue or punitive damages. The trial court granted the motion and entered judgment for Bailey in the amount of $222,373.38.
Bailey's lease expired on February 3, 2008.
The current complaint does not include a cause of action for ejectment.
Bailey filed a timely notice of appeal.
ANALYSIS
Standard of Review
On appeal after a motion for summary judgment or summary adjudication has been granted, we review the record de novo, considering all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained. Where it is the defendant seeking summary judgment or adjudication, we determine whether the defendant has conclusively negated a necessary element of the plaintiff's case or has demonstrated that under no hypothesis is there a material issue of fact that requires the process of trial, such that the defendant is entitled to judgment as a matter of law. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) If the defendant produces affirmative evidence which, unless materially contradicted or rebutted, would establish that each of the plaintiff's causes of action lacked merit, the burden shifts to the plaintiff to produce or point to evidence which shows the existence of one or more triable issues of material fact. (Id. at p. 335, fn. 7.)
Summary Adjudication Was Properly Granted As to Bailey's Compensatory Damages
Lamar concedes that Bailey is entitled to Lamar's net profit from the billboards but contends that his damages are limited to Lamar's net profit, both as a matter of law and by reason of res judicata. It contends that Bailey has not demonstrated the existence of any new facts which would permit an award of punitive damages. Bailey contends that net profit is not the exclusive measure of damages as a matter of law, and that under the facts of this case, where Lamar has intentionally continued its wrongful occupation of his land, a jury could have determined that its conduct warranted punitive damages.
We held in Bailey II, supra, that where the defendant has wrongfully occupied the land of another for the purpose of conducting a business, net profit is ordinarily the "benefit obtained," as provided for in section 3334, subdivision (b)(1). We held that in most such cases, gross revenue is the measure of damages under section 3334 only when the defendant has failed to produce credible evidence of its expenses which may offset its gross revenues. (Bailey II, supra, 155 Cal.App.4th at pp. 784-788.) Here, Lamar produced credible evidence which establishes its net profit, as Bailey apparently concedes. Nevertheless, Bailey contends that gross revenue is the more appropriate measure of damages for Lamar's conduct. He notes that in Bailey II, we held that in amending section 3334 to provide for the "benefit obtained" measure of damages, the Legislature intended to eliminate any financial incentive for trespass. (See Bailey II, supra, at p. 786.) In his reply brief, Bailey argues that this statement in Bailey II supports the idea that gross revenue rather than net profit may be the appropriate measure of damages under section 3334 if "a circumstance arises wherein a business entity is willing to wrongfully occupy land and operate a business in order to break even at the end so that the entity can obtain some additional related benefit[.] In such a situation, the threat of an award of net profits will have no practical effect of 'eliminating the financial incentive' for the wrongful occupation of property, as is the express purpose of section 3334. In such [an] instance, is the court barred by section 3334 from awarding something other or more than 'net profits' to effectively eliminate the financial incentive for the wrongful occupation?"
This is an interesting question, but one we need not address because Bailey has not cited any evidence that Lamar continued to trespass on his property in order to gain some future advantage. The future advantage which comes to mind is, of course, that Lamar would negotiate a lease of the property after Bailey's lease terminated and would continue to use the billboards to generate revenue. However, Bailey's lease terminated on February 3, 2008, and Bailey filed his complaint on February 28, 2008. We assume that if Lamar did continue to use the land after February 3, 2008, Bailey could have produced evidence of that fact. However, he has not done so. Consequently, net profit is the appropriate measure of damages under the facts of this case.
Bailey Demonstrated by Clear and Convincing Evidence the Existence of a Triable Issue of Fact As to Punitive Damages
As Bailey contends, an intentional trespass may support an award of punitive damages under section 3294. (See Civic Western Corp. v. Zila Industries, Inc. (1977) 66 Cal.App.3d 1, 19.) Section 3294 provides for punitive damages in tort cases "where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice." (§ 3294, subd. (a).) Here, Bailey sought an award of punitive damages under section 3294. The question to be decided, therefore, is whether the evidence presented in connection with the summary judgment motion would support a finding that Lamar's conduct amounted to oppression, fraud or malice.
In reviewing a defendant's motion for summary judgment on an issue where the plaintiff's burden of proof at trial is clear and convincing evidence, the evidence and the inferences which can reasonably be drawn from it must meet that standard. (Basich v. Allstate Ins. Co. (2001) 87 Cal.App.4th 1112, 1118-1121; accord, Barton v. Alexander Hamilton Life Ins. Co. of America (2003) 110 Cal.App.4th 1640, 1644 [Fourth Dist., Div. Two] [applying same principle to review of nonsuit].)
Bailey contends that Bailey II involved Lamar's mistaken belief that it had the right to occupy the property, while this case involves an "intentional, wilful trespass and wrongful occupation" of the property. He argues that this difference supports a finding that Lamar acted maliciously, within the meaning of section 3294. Lamar contends, first, that in Bailey II, the trial court found no basis for awarding punitive damages against it, and because the facts in the current case are identical, res judicata or collateral estoppel precludes a different finding. Second, it contends that even if those doctrines do not apply, the evidence does not support a finding that it acted with malice or oppression, within the meaning of section 3294. (Lamar correctly notes that Bailey does not contend that it acted fraudulently.)
For purposes of section 3294, "malice" means "conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others," and "oppression" means "despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights." (§ 3294, subd. (c)(1), (2).)
Although Lamar clearly acted with conscious disregard of Bailey's right to control the property, it is equally clear that no rational juror would find that its actions subjected Bailey to cruel or unjust hardship. Indeed, Bailey is receiving all of Lamar's profit derived from the billboards, as opposed to the 25 percent of gross revenue he was entitled to under his agreement with OMG. Assuming that OMG would have derived the same amount in gross revenue as Lamar did during the period with which this lawsuit is concerned, Bailey's income from the property would have been approximately $53,000 less. Bailey did not produce any evidence that his income would have been greater if Lamar had not continued to use the property for billboard advertising or that it would have been greater if OMG had not sold the billboards to Lamar. Consequently, Bailey has not demonstrated by clear and convincing evidence that Lamar acted with oppression within the meaning of section 3294, subdivision (c)(2).
According to the figures Lamar provided, its gross revenue for the pertinent period was $674,551, while its net profit was $222,373.38. Twenty-five percent of the gross revenue equals $168,637.75.
The evidence does, however, potentially support an award of punitive damages as despicable conduct carried on by Lamar with a willful and conscious disregard of Bailey's property rights. Within the meaning of section 3294, subdivision (c)(1), despicable conduct is conduct that is""" . . . so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people."' [Citation.] 'Such conduct has been described as "[having] the character of outrage frequently associated with crime." [Citation.]'" (American Airlines, Inc. v. Sheppard, Mullin, Richter & Hampton (2002) 96 Cal.App.4th 1017, 1050-1051.) Bailey has demonstrated by clear and convincing evidence that Lamar acted with conscious disregard of Bailey's right to control his property. Because we cannot say as a matter of law that this conduct is not despicable, within the meaning of section 3294, Bailey has the right to a trial on that issue.
The Claim for Punitive Damages Is Not Barred by Collateral Estoppel
Lamar contends that Bailey's claim for punitive damages is barred by collateral estoppel because the trial and appellate courts in Bailey II considered and rejected that claim. We disagree.
Collateral estoppel is an aspect of the doctrine of res judicata. It does not bar an action, but rather precludes a party to an action from relitigating in a second proceeding matters which were finally adjudicated in a prior proceeding. (Border Business Park, Inc. v. City of San Diego (2006) 142 Cal.App.4th 1538, 1563 [Fourth Dist., Div. Two].) The issues must be identical in order for the bar to apply. (Ibid.) And, the issue must necessarily have been decided. (Bame v. City of Del Mar (2001) 86 Cal.App.4th 1346, 1364.)
In Bailey II, the trial court found that the evidence was insufficient to justify imposing punitive damages on Lamar. It did not explain the basis for that finding. It also found that Lamar was liable only for the reasonable rental value of the property, rather than for the benefit obtained, in part because Bailey was equitably estopped to demand the greater measure of damages, based on Bailey's conduct in attempting to negotiate a lease with Lamar. The court also found that reasonable rental value was the appropriate measure of damages because Lamar was operating under a mistake of fact induced by OMG's representation that it had a valid sublease. (Bailey II, supra, 155 Cal.App.4th at p. 792.) We rejected both of those grounds for limiting Lamar's liability to the reasonable rental value of the property and modified the judgment to award Bailey the benefit Lamar had obtained. (Id. at pp. 792-797.) We pointed out that Lamar had constructive knowledge of Bailey's lease by virtue of the lis pendens Bailey had filed. (Id. at pp. 793-794.) We also concluded that there was insufficient evidence to support application of equitable estoppel. (Id. at pp. 790-792.)
The judgment denying punitive damages was based at least in part on the trial court's incorrect conclusions that Lamar was operating under a mistake of fact and that Bailey was estopped to seek damages in excess of reasonable rental value. On appeal, we determined that the judgment was erroneous in both respects. Consequently, the final judgment in Bailey II does not reflect an adjudication that punitive damages were not warranted based on the trial court's legal and factual conclusions. On the contrary, our rejection of the legal and factual basis for the judgment for reasonable rental value vitiates any collateral estoppel effect with respect to punitive damages, in that there was no determination as to the propriety of punitive damages based on the facts and the law as determined on appeal. The fact that we did not remand the cause in Bailey II to permit Bailey to reassert his claim for punitive damages does not alter the effect of the judgment.
Contrary to Lamar's contention, in Bailey II we did not uphold the trial court's judgment denying punitive damages against Lamar because we did not address the issue. (We take judicial notice that in the briefs filed in Bailey II, Bailey did not seek remand for further proceedings on his claim for punitive damages.) We discussed punitive damages only in the context of Bailey's argument that as to OMG, he was entitled to OMG's gross revenue as a more punitive version of "benefits obtained" than net profit. We noted that as to OMG, the trial court's denial of punitive damages "effectively resolved" any factual issue as to whether Bailey was entitled to the greater measure of damages. (Bailey II, supra, 155 Cal.App.4th at p. 788.)
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Lamar also contends that collateral estoppel precludes Bailey's claim for punitive damages because the trial court stated, "The Court in [Bailey I] did not order ejectment, which makes it harder to find that OMG's continued occupation was malicious or despicable under Section 3294 of the Civil Code." However, whether OMG's continued occupation following the judgment in Bailey I was malicious or despicable has no bearing on whether Lamar's conduct in doing so following the judgment in Bailey II was malicious or despicable. The issues are not identical, and collateral estoppel does not apply. (Border Business Park, Inc. v. City of San Diego, supra, 142 Cal.App.4th at p. 1563.)
DISPOSITION
The judgment is reversed as to Bailey's claim for punitive damages, and the cause is remanded for further proceedings on that issue only. The judgment is otherwise affirmed. Bailey is awarded costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
McKinster
Acting P.J.
We concur: King
J.
Miller
J.