Dep't of Transp. v. Adams Outdoor Adver. of Charlotte Ltd.

• Decision Date: 19 April 2016
• Docket Number: No. COA15–589.,COA15–589.
• Court: North Carolina Court of Appeals
• Parties: DEPARTMENT OF TRANSPORTATION, Plaintiff, v. ADAMS OUTDOOR ADVERTISING OF CHARLOTTE Limited Partnership, Defendant.

247 N.C.App. 39

785 S.E.2d 151

DEPARTMENT OF TRANSPORTATION, Plaintiff,

v.ADAMS OUTDOOR ADVERTISING OF CHARLOTTE Limited Partnership, Defendant.

No. COA15–589.

Court of Appeals of North Carolina.

April 19, 2016.

Attorney General, Roy Cooper, by Special Deputy Attorney General, Dahr Joseph Tanoury and Assistant Attorney General, Kenneth A. Sack, for the Department of Transportation.

Van Winkle, Buck, Wall, Starnes and Davis, P.A., Asheville, by Craig D. Justus, for defendant-appellee.

BRYANT, Judge.

Where the trial court did not lack subject matter jurisdiction, we affirm. However, where the trial court's findings and conclusions regarding the compensable property interests taken are unsupported by the evidence and contrary to law, we reverse.

On 6 December 2011, the North Carolina Department of Transportation ("plaintiff-DOT") filed a civil action in Mecklenburg County Superior Court and an acknowledgment of taking pursuant to a resolution of plaintiff-DOT authorizing the appropriation of defendant's property for the construction of a highway project. When the parties could not agree on the purchase price of the leasehold interest to be appropriated, the trial court held a Section 108¹ hearing and made findings of fact and conclusions of law. The trial court's findings of fact included those set forth below.

In 1981, a billboard ("the billboard") was originally constructed on a lot (the "CHS Lot") located at the corner of Independence Boulevard and Sharon Amity Road in Charlotte, North Carolina. It was legally erected pursuant to permits issued by the City of Charlotte and plaintiff-DOT. It was constructed pursuant to a lease agreement between Craig T. Brown, Jr., then-owner of the CHS Lot, and National Advertising Company ("National"), predecessor in interest to defendant Adams Outdoor Advertising of Charlotte Limited Partnership ("defendant"). The billboard had two back-to-back V-type sign face displays of approximately 14' x 48' each or 672 square feet of advertising space per face.

About ten years later, on 15 August 1991, a new lease agreement was entered into by National and C.H.S. Corporation, then-owner of the land. The new lease had an original term of six years and thereafter was to run on a year-to-year basis. In October 2001, defendant acquired the billboard from National and all property rights pertaining thereto. At that time, defendant inherited the 1991 lease which was operating on a year-to-year basis.

On 26 September 2006, defendant entered into a lease agreement (the "2006 lease") with C.H.S. Corporation to secure the CHS Lot for the purpose of operating, maintaining, repairing, modifying, and reconstructing the billboard. The original term of the 2006 lease commenced on 1 August 2007 and ran for a ten-year period with one automatic ten-year extension. Therefore, except for the discretion specifically reserved to defendant to cancel upon the happening of certain events,² the 2006 lease would not terminate until 1 August 2027. The 2006 lease was recorded in the Mecklenburg County Register of Deeds Office in Book 22206 at Pages 740–44 and permitted defendant to use the CHS Lot for outdoor advertising purposes only.

In the 2006 lease, defendant agreed to pay substantially more rent to the landlord C.H.S. Corporation than what was found in the 1991 lease due to the high value of the unique location of the CHS Lot and the need to secure defendant's investment for a long term. Additionally, the lease contained the following language regarding defendant's right to remove its billboards:

All Structures erected by or for the Lessee [defendant] or its predecessors-in-interest ... shall at all times be and remain the property of [defendant] and the above-ground portions of the Structures may be removed by [defendant,] ... notwithstanding that such Structures are intended by Lessor and [defendant] to be permanently affixed to the Property.

Prior to plaintiff-DOT's taking on 6 December 2011, defendant owned and operated the billboard and each year would pay the DOT to renew its State permit for the billboard.

Although the billboard was legally erected and maintained, it was not, as of 6 December 2011, in conformity with then existing height regulations adopted by plaintiff-DOT for outdoor advertising adjacent to interstates or federal aid primary highways. The sign was approximately sixty-five feet in height, and DOT regulations, adopted in 1990, set height limitations at fifty feet. However, because it was legally existing at the time it was erected, the billboard was grandfathered as a nonconforming sign that could be maintained under an exception to applicable state statute and DOT regulations. See Charlotte, N.C., Code § 13.112(1)(c).

Also, as of 6 December 2011, the CHS Lot was zoned B–2 by the City of Charlotte, and several years earlier, the City of Charlotte enacted zoning regulations banning new billboard locations within its jurisdiction, including along Independence Boulevard. The immediate neighborhood near the CHS Lot consisted of many commercial properties with a large concentration of retail shopping centers and automobile dealerships. Approximately 85,000 vehicles travel Independence Boulevard on a daily basis and it is one of the main thoroughfares linking the Charlotte downtown with areas to the east, including Union County, which is one of the fastest growing counties in the State.

However, because of the nonconforming nature of the billboard and the restrictive regulatory climate, relocation of the billboard in the City of Charlotte was not possible. Additionally, because plaintiff-DOT acquired the entire CHS Lot for highway widening purposes, neither the billboard, nor any substantial part thereof, could be moved anywhere else on the same site. As of 6 December 2011, the date of the taking, defendant had at least sixteen years remaining (until August 2027) on the lease to use the CHS Lot and maintain the billboard for outdoor advertising purposes.

The Complaint and Declaration of taking condemned defendant's right to use the CHS Lot for outdoor advertising and to operate and maintain on said land a sign for that purpose. Plaintiff–DOT had become the fee owner of the CHS Lot, having acquired title voluntarily from the former owner, C.H.S. Corporation, on 6 December 2011. On or about 13 December 2012, defendant filed an Answer praying for the appointment of commissioners to appraise any damage to the land as a result of the taking pursuant to Article 9, N.C. Gen.Stat. § 136–109.

Both parties filed motions for a "Section 108 hearing," pursuant to N.C. Gen.Stat. § 136–108, to hear all matters raised by the pleadings, except the issue of damages. On 23–25 June 2014, a Section 108 hearing was held pursuant to the motions before the Honorable Lisa C. Bell, Special Superior Court Judge presiding, in Mecklenburg County Superior Court. The trial court entered an order on 27 August 2014 finding, inter alia, that plaintiff-DOT took various property interests of defendant and that defendant was entitled to compensation pursuant to the Outdoor Advertising Control Act ("OACA"), for the value of defendant's outdoor advertising. On 24 September 2014, plaintiff-DOT gave Notice of Appeal from the order.

_________________________ On appeal, plaintiff-DOT argues that (I) the trial court lacked subject matter jurisdiction and erred by applying Article 11, the OACA, to a condemnation proceeding; (II) the trial court's findings and conclusions are unsupported by the evidence and contrary to law; and (III) the trial court erred by adopting the wrong measure of compensation and damages.

I

Plaintiff–DOT first argues that the trial court lacked subject matter jurisdiction and erred by applying the incorrect article to a condemnation proceeding. Specifically, plaintiff-DOT argues that the trial court erred by applying the Outdoor Advertising Control Act, codified within Article 11 of North Carolina General Statutes Chapter 136, rather than Article 9 (titled "Condemnation"), Chapter 136 of the North Carolina General Statutes. Instead, plaintiff-DOT argues the trial court should have applied Article 9 exclusively because plaintiff-DOT filed this action under Article 9 for the sole purpose of acquiring rights of way for the construction of highway improvements to E. Independence Boulevard and did not file the action under Article 11 to condemn a nonconforming billboard that violated the OACA. In other words, plaintiff-DOT contends that because the pleadings, consisting of plaintiff-DOT's complaint and defendant's answer, did not expressly raise the issue of N.C. Gen.Stat. § 136–131, the trial court lacked subject matter jurisdiction to decide the issue.³ We agree with plaintiff-DOT to the extent the trial court erred in applying Article 11; however, we disagree that the trial court lacked subject matter jurisdiction to conduct a Section 108 Hearing.

"Subject matter jurisdiction involves the authority of a court to adjudicate the type of controversy presented by the action before it." In re McKinney, 158 N.C.App. 441, 443, 581 S.E.2d 793, 795 (2003) (citations and quotation marks omitted). "A court has jurisdiction over the subject matter if it has the power to hear and determine cases of the general class to which the action in question belongs."

Dep't of Transp. v. Tilley, 136 N.C.App. 370, 373, 524 S.E.2d 83, 86 (2000) (quoting Balcon, Inc. v. Sadler, 36 N.C.App. 322, 324, 244 S.E.2d 164, 165 (1978) ). In Tilley, this Court, citing N.C. Gen.Stat. § 136–103(a) of Article 9, stated that "[o]ur legislature has expressly conferred jurisdiction over condemnation matters on our superior courts." Id.

Article 9 procedures begin with the application of N.C. Gen.Stat. § 136–103 and the filing of a complaint and declaration of taking. N.C.G.S. § 136–103 (2015). Pursuant to N.C.G.S. § 136–103, both plaintiff-DOT's complaint and declaration of taking are to provide "[a] statement of the authority under which and the public use for...