State ex rel. Dep't of Transp. v. Lamar Adver. of Okla., Inc.

• Decision Date: 03 June 2014
• Docket Number: 111108.,Nos. 110896,s. 110896
• Citation: 2014 OK 47,335 P.3d 771
• Parties: STATE of Oklahoma, ex rel. DEPARTMENT OF TRANSPORTATION, Appellant, v. LAMAR ADVERTISING OF OKLAHOMA, INC., an Oklahoma domestic corporation; Lamar Central Outdoor, Inc., Successor in interest to Chancellor Media Whiteco, a Delaware Corporation, Appellees.
• Court: Oklahoma Supreme Court

335 P.3d 771

2014 OK 47

STATE of Oklahoma, ex rel. DEPARTMENT OF TRANSPORTATION, Appellant

v.LAMAR ADVERTISING OF OKLAHOMA, INC., an Oklahoma domestic corporation; Lamar Central Outdoor, Inc., Successor in interest to Chancellor Media Whiteco, a Delaware Corporation, Appellees.

Nos. 110896

111108.

Supreme Court of Oklahoma.

June 3, 2014.

Rehearing Denied Sept. 22, 2014.

Kelly F. Monaghan and Lori Gilliard, Holloway & Monaghan, Tulsa, Oklahoma, for Appellant.

William H. Hickman and Brad S. Clark, Hickman Law Group, Oklahoma City, Oklahoma, for Appellees.

Opinion

WINCHESTER, J.

¶ 1 Plaintiff/Appellant, the State of Oklahoma, ex rel. Department of Transportation (“ODOT”), filed this condemnation proceeding against Lamar Advertising of Oklahoma Inc., and Lamar Central Outdoor, Inc. (collectively “Lamar”), for the removal of an outdoor advertising sign and the acquisition of Lamar's leasehold interest associated with the sign. ODOT previously acquired the real property on which the sign was located as part of a highway improvement project to Interstate 40 and, as such, removal of the sign was necessary.

¶ 2 Lamar erected the sign on the underlying real property pursuant to a written lease agreement with the owners of the land. Lamar has since removed and kept possession of the sign. ODOT argues that the sign is a trade fixture and that trade fixtures are personal property. As such, ODOT claims Lamar is only entitled to the depreciated reproduction costs of the sign or the costs associated with the sign's relocation. Conversely, Lamar argues that the sign's label of personal or real property is irrelevant to this case as the only criteria is fair market value of the sign and its related interests. ODOT asserts that Lamar's method of valuation improperly allows for the recovery of lost business income and profits. Lamar valued its property interests at $429,000 while ODOT valued the property significantly less at roughly $60,000.

¶ 3 Pursuant to 69 O.S.2011, § 1203(c). the trial court selected three disinterested commissioners to assess the just compensation to which Lamar was entitled. The Commissioners were directed to “inspect the real property and consider the injury which the owner(s) may sustain by reason of the condemnation, and they shall assess the just compensation to which the owner(s) is entitled; and they shall ... make a report in writing ... setting forth the ... just compensation for the property taken....” Id. On July 23, 2008, the commissioners issued a report finding that Lamar was entitled to $212,500 for the property interests acquired by ODOT through eminent domain. ODOT demanded a jury trial.

¶ 4 At the conclusion of trial, the jury returned a verdict awarding Lamar $206,000 in just compensation for its interests. Lamar filed a motion for new trial and a motion to reconsider, both of which the trial court denied. Both parties appealed and we have retained and consolidated the matters.

¶ 5 ODOT maintains that based on Oklahoma law the sign is personal property. Accordingly, ODOT argues just compensation should be determined based on the cost of relocating the sign and only in the event the sign cannot be relocated the fair market value of the sign itself. Lamar filed Motions in Limine to exclude evidence regarding relocation of the sign, claiming relocation was not an option¹ , and to prohibit evidence that the sign was personal property. Both Motions were sustained by the trial court and ODOT claims the rulings were in error.

¶ 6 Prior to trial, ODOT filed a motion for partial summary judgment seeking a determination that pursuant to Oklahoma law, the sign in question was a trade fixture and trade fixtures are personal property under Oklahoma law. ODOT also filed a Daubert Motion to exclude the testimony of Lamar's expert, Paul Wright, arguing that he erroneously valued the sign as if it were real property. ODOT further urges this Court to reject the use of the gross rent multiplier, or similar valuation methods used by Lamar's expert, claiming that such methods improperly award compensation for lost business profits relating to the outdoor advertising sign business. The trial court denied ODOT's motion for partial summary judgment as well as the Daubert motion.

¶ 7 Conversely, Lamar claims its constitutional rights were violated by having the burden of proof of valuation on it instead of ODOT, the party demanding the jury trial. Lamar also filed a Daubert motion seeking to exclude ODOT's expert's opinions as failing to adequately assess the fair market value of the sign. The trial court denied Lamar's Daubert motion.

STANDARD OF REVIEW

¶ 8 A condemnation proceeding is a special proceeding for the taking of private property for public use and must be carried out in accordance with legislatively-proscribed procedure. See Gaylord v. State ex re. Dept. of Highways, 1975 OK 63, 540 P.2d 558, 560 ; Bd. Of County Com'rs of Creek Co. v. Casteel, 1974 OK 31, 522 P.2d 608, 610. On appeal in eminent domain proceedings, the verdict of the jury may be set aside only when it manifestly appears that it is unjust and not supported by any competent evidence. Denver, W. & M. Ry. Co. v. Adkinson, 1911 OK 18, 119 P. 247. An appellate court's duty is to ensure that there is “competent evidence reasonably tending to support the verdict of the jury and no prejudicial errors are shown in the trial court's instructions to the jury or on legal questions presented during trial.” Florafax Intern., Inc. v. GTE Market Resources Inc., 1997 OK 7, ¶ 3, 933 P.2d 282, 287.

¶ 9 The trial court is vested with wide discretion in determining what information it receives in a condemnation proceeding. See, e.g., State ex rel. Dept. of Transp. v. Little, 2004 OK 74, ¶ 11, 100 P.3d 707, 712 (evaluation of property value left largely to discretion of trial court). Any “competent evidence of matters, not merely speculative, which would be considered by a prospective vendor or purchaser, or which tend to enhance or depreciate the value of the property, is admissible.” City of Enid. v. Moyers, 1945 OK 281, ¶ 5, 165 P.2d 818, 820. The “admissibility of evidence of value in condemnation cases is more largely within the trial court's discretion than is the determination of other issues, so that error predicated upon the exclusion of certain evidence will not be sustained except in cases of manifest error.” Finley v. Bd. of County Comm., 1955 OK 321, ¶ 13, 291 P.2d at 339.

DISCUSSION

¶ 10 In 1965, Congress enacted the Highway Beautification Act (HBA) which provided for, among other things, the regulation of outdoor advertising signs along the interstate and federal aid primary highways. See 23 U.S.C. §§ 131, et seq. Thereafter, Oklahoma adopted its own version of the HBA entitled the Highway Advertising Control Act. See 69 O.S §§ 1271, et. seq. The Legislature determined that it was “in the public interest to control the size, number, spacing, lighting, type and location” of outdoor advertising structures in certain areas. 69 O.S.2011, § 1271. In addition, local municipalities often impose their own restrictions. With all of these regulations, the legal sites for the erection of outdoor advertising signs are dwindling.

¶ 11 The Fifth Amendment to the U.S. Constitution, and Article 2, Section 24 of the Oklahoma Constitution, both provide that the government shall not take private property for public use without just compensation. Oklahoma case law provides that property owners are entitled to just compensation for their property interests when the government acquires such property through its eminent domain powers and “just compensation shall mean the value of the property taken.” State of Oklahoma, ex rel. Dep't of Transportation v. Norman Industrial Development Corp., 2001 OK 72, 41 P.3d 960 ; OKLA. CONST. Art. 2, § 24.

¶ 12 Property owners must be placed as fully as possible in the same position they occupied before the government's taking. State ex rel. Dep't of Transp. v. Little, 2004 OK 74, ¶ 23, 100 P.3d 707, 718 ; Oklahoma Turnpike Authority v. New Life Pentecostal Church of Jenks, 1994 OK 9, ¶ 12, 870 P.2d 762, 766. Further, all presumptions must favor the landowner, not the condemnor, and constitutional eminent domain statutes must be strictly construed in the landowner's favor. See State ex rel. Department of Transportation v. Sissom, 2009 OK 40, ¶ 9, 236 P.3d 49, 51, citing Public Serv. Co. v. B. Willis, CPA, Inc., 1997 OK 78, ¶ 16, 941 P.2d 995, 999.

¶ 13 Where billboards are part of a taking in a condemnation proceeding, Oklahoma law provides that the just compensation to a sign owner must be based on fair market value for the “outdoor advertising and property rights pertaining thereto.” 69 O.S.2011, § 1280(A). The Act further specifies that outdoor advertising “is a trade fixture, and owners shall be awarded just and fair compensation for its taking.” 69 O.S.2011 § 1280(B). Although trade fixtures are often treated like personal property between a lessee and lessor, in condemnation proceedings they are generally treated as real property.

¶ 14 Pursuant to 27 O.S.2011 § 14. “[w]here any interest in real property is acquired, an equal interest shall be acquired in all buildings, structures or other improvements located upon the real property.” The statute goes on to provide:

For the purpose of determining the just compensation to be paid for any building, structure or other improvement required to be acquired as by subsection A of this section, such building, structure or other improvement shall be deemed to be a part of the real property to be acquired notwithstanding the right or obligation of a tenant, as against the owner of any other interest in the real property, to remove such building, structure or improvement at the expiration of his term, and the fair market value which such building, structure or improvement contributes to the fair market value of the real property to be acquired or the fair market value of such building, structure or

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