Opinion
E031505.
11-4-2003
PATRICK MEDIA GROUP, INC., Plaintiff and Appellant, v. CITY OF RIVERSIDE, Defendant and Respondent.
Reid & Hellyer, Dan G. McKinney, Donald F. Powell; Law Offices of Michael N. Stafford, Michael N. Stafford and Jim Hasenfus for Plaintiff and Appellant. Gregory P. Priamos, City Attorney, James E. Brown, Supervising Deputy City Attorney; Bell, Orrock & Watase, Michael A. Bell; Greines, Martin, Stein & Richland and Timothy T. Coates for Defendant and Respondent.
Plaintiff Patrick Media Group, Inc. (PMG), owned a leasehold interest for the purpose of erecting a billboard on land owned by the City of Riverside (City). PMG brought this action when City declined to renew the lease and required removal of the billboard. It now appeals from a judgment entered in favor of City after a court trial, claiming that the trial court erred as a matter of law in (1) determining that Business and Professions Code section 5412 (hereinafter section 5412) did not apply to the instant action; (2) determining that there was no taking of its property so as to entitle it to inverse condemnation damages; and (3) modifying or vacating, sua sponte, its earlier order bifurcating the trial on the issues of liability and damages. We affirm.
FACTS AND PROCEDURAL HISTORY
On August 6, 1968, Foster and Kleiser, PMGs predecessor in interest, entered into a lease agreement with Sun Gold, Inc. (Sun Gold), allowing the construction and maintenance of a billboard on Sun Golds property (the subject parcel), effective October 15, 1968, in exchange for $300 per year. The lease was for a term of 10 years, and for successive like terms unless the lessor provided written notice of termination 30 days prior to the end of any 10-year term. On October 15, 1978, the lease was renewed for 10 years.
Later, as a condition of a zoning change to allow high density residential development of an adjacent parcel, City required that the subject parcel be conveyed to it for use as open space. City obtained possession by grant deed on November 21, 1986. On October 15, 1988, the lease was renewed for an additional 10-year term. In July 1990, City determined that PMGs billboard was located on its property and thereafter provided PMG with written notice of its intent to terminate the lease effective October 14, 1998.
PMG filed a complaint for inverse condemnation and violation of the Outdoor Advertising Act (Bus. & Prof. Code, § 5200 et seq. (the Act)) on December 6, 1999. Prior to trial, the parties executed a stipulation that it would be bifurcated with the first phase to establish liability and the second phase to determine damages. They also stipulated that discovery relating to damages would remain open until 10 days prior to the date set for trial of the second phase, if necessary.
The first phase of the trial was held before the court on December 4, 2001. On February 27, 2002, the trial court filed its statement of decision finding that there was no taking of PMGs property by City since the billboard was removed pursuant to the terms of the lease and not by the use of the power of condemnation or the threat thereof. The trial court also found that section 5412 was not applicable for the same reason. Judgment was therefore entered for City on March 8, 2002. This appeal followed.
DISCUSSION
A. Section 5412 Does Not Apply
Section 5412 provides, in part, "Notwithstanding any other provision of this chapter, no advertising display which was lawfully erected anywhere within this state shall be compelled to be removed, nor shall its customary maintenance or use be limited, whether or not the removal or limitation is pursuant to or because of this chapter or any other law, ordinance, or regulation of any governmental entity, without payment of compensation as defined in the Eminent Domain Law . . . . The compensation shall be paid to the owner or owners of the advertising display and the owner or owners of the land upon which the display is located."
PMG argues that the plain language of this statute requires only two facts in order to trigger a requirement for compensation: (1) the billboard was lawfully erected, and (2) a public entity compelled it to be removed. City admitted that the billboard was lawfully erected and that City caused and compelled it to be removed. City further admitted that it did not pay PMG any compensation in connection with the removal of the billboard. Therefore, PMG asserts, the trial court erred in failing to find that it was entitled to recover under section 5412.
On the other hand, City asserts that the plain language of section 5412 requires that the compelled removal be pursuant to the Act or some other law, ordinance or regulation of the public entity. The removal in this case having been effected by the terms of a written contract, City concludes that section 5412 does not apply. We believe this is the correct view.
It is a fundamental rule of statutory construction that the court should ascertain the legislative intent so as to effectuate the purpose of the law. (Code Civ. Proc., § 1859.) In so doing, "a statute should be interpreted `"with reference to the whole system of law of which it is a part so that all may be harmonized and have effect." [Citation.]" (Kavanaugh v. West Sonoma County Union High School Dist. (2003) 29 Cal.4th 911, 919.) A statute should also be given an interpretation that avoids an illogical or absurd result. (Id. at pp. 923-924.)
Our review of the Act reveals that the general tenor and scope of the entire scheme embodied in the enactments reflect a legislative concern with haphazard and inconsistent regulation of outdoor advertising by various local and regional public entities, and a desire to provide minimum standards for such regulation. Thus, an interpretation of section 5412 that is limited to a public entitys attempt to regulate outdoor advertising is entirely consistent with the apparent purpose of the Act.
In addition, we believe that PMGs interpretation of section 5412 would lead to absurd and unintended results. In essence, PMG espouses the position that no public entity can ever contract to allow outdoor advertising without granting a perpetual entitlement or, at some point in the future, paying the advertiser the value of its interest as defined by eminent domain law. Under these circumstances there is little or no chance that any public entity would enter such an agreement, a consequence that is contrary to the Acts recognition of the legitimacy of outdoor advertising and its right to exist subject only to reasonable controls in the public interest. (Bus. & Prof. Code, § 5226, subds. (a) and (b); see also § 5412 [encouraging public entities to enter relocation agreements where possible rather than requiring removal].) Further, it is axiomatic that so long as their agreements are not contrary to public policy and do not violate the law, parties are free to contract as they please. (Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 75.) PMGs interpretation of section 5412 is offensive to this concept as it limits a public entitys ability to freely contract with outdoor advertisers. It is also absurd to interpret the Citys present action as a "compelled" removal. To do so would reward PMG for ignoring its contractual obligations. Surely when PMG entered into the lease with Sun Gold it balanced the costs of erecting, maintaining and removing the billboard against the economic benefits derived from the sign over the life of the lease, which could have been as few as 10 years.
Thus, we hold that section 5412 does not apply in this instance where the billboard was removed pursuant to the written terms of a contract freely entered, and not pursuant to the Act or some other law, regulation or ordinance.
While it is true, as PMG submits, that the legislative history suggests that the Legislature decided not to include a specific exception in section 5412 for displays erected pursuant to written agreements with public entities providing for removal after a fixed period of time, that does not necessarily lead to the inevitable conclusion that the Legislature intended to do away with the exception. As City points out, where language is removed from a proposed statute, but the final version remains broad enough to include the omitted material, the rejection of the specific language does not suggest an intent to exclude it from the statute. (California Assn. of Psychology Providers v. Rank (1990) 51 Cal.3d 1, 17-18.) Thus, the fact that the statute requires compensation when removal is compelled either under the Act or any other law, regulation or ordinance makes it clear that compensation is not required when removal is required pursuant to a written contract.
In addition, rules of statutory construction are meant as guides and are not invariably applied. Where a rule would result in an interpretation that was either absurd, or clearly unintended as shown by other indicia of legislative intent, it will not be applied. (In re J. W. (2002) 29 Cal.4th 200, 209-210.)
Further, it has been recognized that the Legislature did address a specific problem with section 5412 applying only to laws, regulations and ordinances when it enacted Business and Professions Code section 5412.6 in 1985. (Patrick Media Group, Inc. v. California Coastal Com. (1992) 9 Cal.App.4th 592, 602, fn. 6.) Noting that public entities had attempted to circumvent section 5412 by exercising their permitting authority, rather than enacting a law, regulation or ordinance, the court observed that Business and Professions Code section 5412.6 was passed to close the loophole by equating a permitting requirement that signs be removed with a compelled removal under section 5412. In so doing the court and the Legislature have recognized that section 5412 applies only to actions under the Act or any other law, regulation or ordinance.
B. PMG May Not Recover in Inverse Condemnation
A party seeking to recover inverse condemnation damages must prove that its property has been taken or damaged for a public use without just compensation. (San Diego Gas & Electric Co. v. Superior Court (1996) 13 Cal.4th 893, 939-940.) PMG sought to demonstrate a taking in two ways. First, it claimed that Citys violation of section 5412 established a taking as a matter of law. As we have determined that Citys action did not violate section 5412, we need not further discuss this claim. Second, PMG asserted that when City obtained the subject parcel, it did so by condemnation or its substantial equivalent, thereby accomplishing a taking when it exercised the option not to renew PMGs lease some 12 years later. PMG argues that the trial courts reasoning was faulty because it centered on Citys status as landlord instead of the method by which City obtained the subject parcel. It further claims that since City obtained the subject parcel through a possessory exaction, rather than by means of an arms length transaction, a taking occurred.
The first problem with PMGs argument is that the lease did not guarantee its option to renew. Thus, PMG could not demonstrate the existence of a required element of an inverse condemnation claim, a compensable property interest. (San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 531.) "A hypothetical future lease resting on the `probability of renewal, unlike a contractual option to renew an existing lease, is not a compensable property right [citation], because its potential execution rests upon the commercial vagaries of the market, its players and their competitive interests. Granted, `[t]here is some authority for the proposition advanced by appellant — that a tenants reasonable expectation of renewal of a lease be considered as an element of value in condemnation proceedings. But the weight of authority, with which we are in accord, holds to the contrary. A tenants right of renewal of a lease refers to a legal right, and this exists only when the lease expressly grants to the tenant the option to renew the lease at the end of its term. A mere expectation, or even probability, that the lease will be renewed based upon past practice and present good relations between landlord and tenant, is not a legal right of renewal. It is nothing more than a speculation on chance. Intentions which are subject to change at the will of a landlord do not constitute an interest in land so as to confer upon the tenants something to be valued and compensated for in a condemnation action. [Citations.]" (Id. at pp. 531-532, italics added.) Because it could be and was terminated at will by the landlord at any 10-year increment, PMGs interest in the lease was merely speculative and is therefore not compensable in inverse condemnation. In addition, because any personal or intangible property interest PMG had in its billboard was entirely dependent on the continuation of its lease of the property, those interests were as speculative as the leasehold and are not compensable either. (Id. at pp. 532-533.)
This is essentially what the trial court concluded when it found that the facts established that City required PMG to remove its billboard by exercising its contractual option not to renew the lease, and that this was not a taking. None of the cases that PMG cites compel us to conclude that this finding was erroneous.
The real question in Redevelopment Agency v. Diamond Properties (1969) 271 Cal.App.2d 315 and Concrete Service Co. v. State of California ex rel. Dept. Pub. Wks. (1969) 274 Cal.App.2d 142 was whether a condemnation could be said to have occurred. This is because only through the application of former Code of Civil Procedure section 1248b, which required a condemnation, could either of the tenants even have had a compensable interest in the property. Thus, both cases are concerned with creating an exception to the general rule that an actual completed condemnation was required. One found that a condemnation had actually been instituted and the other found that such an action had been threatened and was intended. (Redevelopment Agency v. Diamond Properties, supra, 271 Cal.App.2d at pp. 317, 320-321; Concrete Service Co. v. State of California ex rel. Dept. Pub. Wks., supra, 274 Cal.App.2d at pp. 145-147.) Neither case addresses the question whether the public entity could have terminated leases pursuant to their provisions had the public entity acquired the properties without having instituted or unequivocally stated its express intention to institute condemnation proceedings. Here, at no time during the discussions with the developer did City ever consider or threaten to use its power of eminent domain to acquire the subject parcel. Thus, even were they not focused on former Code of Civil Procedure section 1248b, which would not have been applicable here, these cases would not apply in this action.
In Pacific Outdoor Advertising Co. v. City of Burbank (1978) 86 Cal.App.3d 5 (Pacific Outdoor Advertising), the plaintiff tenant was denied inverse condemnation damages on the ground that the public entity had not induced the property owner to terminate the lease, but acquired its interest in the real property through arms length negotiations. (Id. at pp. 7-9, 11-12.) It was noted that at no time had the public entity ever threatened to use its power of condemnation to acquire the interest that it desired in the property. Rather, it negotiated with the property owner, which acted freely in its own interest and obtained a more beneficial deal than it had with the plaintiff. (Id. at pp. 8-9.) This absence of the threat of condemnation, the court held, distinguished the case from both Concrete Service Co. v. State of California ex rel. Dept. Pub. Wks., supra, 274 Cal.App.2d 142, and Redevelopment Agency v. Diamond Properties, supra, 271 Cal.App.2d 315. (Pacific Outdoor Properties, supra, at pp. 10-12.) Still, the case does not stand for the proposition that only an arms length transaction will excuse a public entity from paying damages for condemnation. It does state that the existence of an arms length transaction and the absence of a threat of condemnation are factors that support a finding that no taking has occurred.
Langer v. Redevelopment Agency (1999) 71 Cal.App.4th 998 is similar. There the owner of 3.74 acres of a 10-acre site, and a developer with whom he had an agreement, sought the public entitys assistance in acquiring other parcels so the entire site could be developed. Tenants of the owners property, which was not acquired by the public entity, sought condemnation damages after they were evicted. (Id. at pp. 1001-1002.) The appellate court held that the fact that the owner and developer had initiated the public entitys involvement in the process and the absence of any condemnation or threat of condemnation precluded the plaintiff tenants recovery. (Id. at pp. 1006, 1008.) Again, contrary to PMGs assertion, the court emphasized the absence of condemnation and not merely a finding of an arms length transaction as the deciding factor in the case.
In Lanning v. City Of Monterey (1986) 181 Cal.App.3d 352, however, the public entity was found to have acquired property from its owner, subject to existing leases, in lieu of using its power of eminent domain to condemn it for public use. Pursuant to the terms of the lease, some 16 months after acquiring the property, the public entity gave the plaintiff tenant notice to quit the premises. (Id. at p. 354.) The Court of Appeal held that the fact that the lease was terminated pursuant to its terms was not controlling in light of the fact that the trial court found the property had been obtained through condemnation or its substantial equivalent. Once such a finding was established, the plaintiff tenant was entitled to compensation. (Id. at pp. 358-359.)
PMG points to a statement the trial court made from the bench in this case, claiming that it places this action on all fours with Lanning. During argument, the trial court stated that "[f]or purposes of my ruling I am willing to accept for purposes of argument that the 19 — that the acquisition of the property in the 80s was the functional equivalent of condemnation." However, the court later issued a statement of decision indicating that City "caused the Sign to be removed from the Parcel pursuant to the terms of the Lease, and not by the use of its power of condemnation nor the threat of use of its power of condemnation." PMG filed an objection to the statement claiming, based upon the trial courts pronouncement from the bench, that there had indeed been a finding that Citys acquisition of the property was the substantial equivalent of condemnation. There is no evidence that the trial court found the objection meritorious. More importantly, the trial courts statement from the bench cannot be used to contradict its statement of decision. (Wurzl v. Holloway (1996) 46 Cal.App.4th 1740, 1756.) Indeed, the trial court is entitled to change its ruling completely from its announcement of intended decision to its issuance of its findings and conclusions. (Ibid.) Thus, the Lanning case does not support reversal here.
Finally, PMG cites Dolan v. City of Tigard (1994) 512 U.S. 374 and Nollan v. California Coastal Comn (1987) 483 U.S. 825 for the proposition that the facts of this case establish, as a matter of law, that Citys acquisition of the subject property was a regulatory taking and therefore justifies condemnation damages. There are numerous problems with this approach.
Most importantly, neither Nollan nor Dolan deals with what constitutes a compensable property interest. Rather, they define when compensation is required for a regulatory taking by exaction. Even if PMG establishes a regulatory taking occurred when City obtained the property, it has still failed to demonstrate that it is entitled to recover in inverse condemnation since it has not shown that it had a compensable property interest.
In addition, PMG has failed to point to any instance where a tenant was entitled to recover inverse condemnation damages for an alleged regulatory taking by making a claim some 13 years after that alleged taking occurred, nor has it made any reasoned argument on this score. PMGs position is especially complicated by the fact that in the instant case, the property owner freely bargained away the property to City, and did not challenge Citys action. (See, e.g., County of Imperial v. McDougal (1977) 19 Cal.3d 505, 510-511 [failure to challenge condition and acceptance of benefits of permit bars later challenge to condition by one to whom property rights devolved].) Contrary to the instant case, neither Nollan nor Dolan dealt with a developers request for a change in zoning. Zoning has traditionally been viewed differently from other regulations in that a property owner has no vested interest in any existing or anticipated zoning unless the property is rendered useless thereby. (HFH, Ltd. v. Superior Court (1975) 15 Cal.3d 508, 512, fn. 2, 514, 518; North Sacramento Land Co. v. City Of Sacramento (1983) 140 Cal.App.3d 576, 579.) The developer who leased the subject parcel to PMG had no right to build high-density apartments on its property. The situation here is reminiscent of that in Langer v. Redevelopment Agency, supra, 71 Cal.App.4th 998, where the owner of the property made a decision to participate in a development that caused the tenant to lose its interest in the property. Here, the facts support a conclusion that the owner of the subject parcel willingly bargained it away to City in order to obtain a higher benefit from its property as a whole. There has been no showing that alternatives were either proposed or rejected, and no showing that the owner/developer objected.
Further, had the property owner desired to challenge Citys condition, it would have been required to do so within the time allotted for seeking a writ of administrative mandamus. (Hensler v. City of Glendale (1994) 8 Cal.4th 1, 7.) PMG has not explained why, as a tenant, if the subject property was the target of a regulatory taking in 1986, it should not have to comply with the same statute of limitations as the property owner. This is especially so in light of the fact that "[w]here all the property subject to a lease is acquired for public use, the lease terminates." (Code Civ. Proc., § 1265.110.) Thus, if there was a taking in 1986, PMGs lease terminated at that time and it was required to assert its interest in a timely fashion. Since it did not do so, it cannot here establish its right to compensation for a regulatory taking.
C. The Bifurcation Order Was Not Improperly Modified or Vacated
At the commencement of trial the court indicated a desire to "change" the parties stipulation to bifurcate trial of the right to compensation from the amount of compensation by including in the first phase a determination whether the amount of compensation was something other than zero. In response, PMG argued that it intended to show that it was entitled to recover damages in an amount greater than zero, should it be successful in establishing the remaining elements of liability. It now claims that the trial courts expressed intent was prejudicial error.
In the first instance, PMGs argument that its due process rights were violated by this action of the trial court is utterly without support in the record. It points out, in its own papers, that it repeatedly reminded the court that discovery had not been undertaken with respect to the measure of damages and that neither party was prepared to offer evidence on that issue. Thus, it cannot reasonably be heard to argue that it did not have an opportunity to be heard on the subject.
Further, the trial courts desire to have some evidence that compensable damages existed does not improperly modify or vacate the parties stipulation. Patently, the existence of some amount of damages is an element of liability in each of PMGs causes of action. (See HFH, Ltd. v. Superior Court, supra, 15 Cal.3d at p. 518; § 5412.) Absent damages in an amount greater than zero, there can be no liability. (Ibid.) Thus, in the liability phase of the trial, the burden was upon PMG to demonstrate its right to recover an amount of damages in the first place. By requiring it to do so, the court did not modify or vacate the stipulation that the amount of damages would be reserved for a second trial, if necessary.
Finally, contrary to PMGs suggestion, our review of the record does not cause us to conclude that the judgment was based, in some part, on the trial courts conclusion that PMG failed to establish the amount of damages that it claimed. To the extent that the judgment may have been based upon a finding that PMG failed to demonstrate that it had a compensable property interest at all, as we have pointed out above, there was no error.
DISPOSITION
The judgment is affirmed. The City of Riverside to recover its costs on appeal.
We concur: HOLLENHORST, J. and GAUT, J. --------------- Notes: While, as it points out, PMGs request for judicial notice of legislative materials is not necessary, we will nevertheless exercise our discretion to grant the request. (Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 571, fn. 9.)