Tennison Bros., Inc. v. Thomas

• Decision Date: 15 December 2017
• Docket Number: No. W2016–00795–COA–R3–CV,W2016–00795–COA–R3–CV
• Citation: 556 S.W.3d 697
• Parties: TENNISON BROTHERS, INC., et al. v. William H. THOMAS, Jr.
• Court: Tennessee Court of Appeals

556 S.W.3d 697

TENNISON BROTHERS, INC., et al.

v.William H. THOMAS, Jr.

No. W2016–00795–COA–R3–CV

Court of Appeals of Tennessee, AT JACKSON.

September 20, 2017 Session

FILED December 15, 2017

Application for Permission to Appeal Denied April 23, 2018

Jonathan Lynn Miley, Nashville, Tennessee, for the appellant, William H. Thomas, Jr.

Kathy Baker Tennison and Stuart Brian Breakstone, Memphis, Tennessee, for the appellee, Tennison Brothers, Inc.

Robert L.J. Spence, Jr. and Kristina Alicia Woo, Memphis, Tennessee, for the appellee, Clear Channel Outdoor, Inc.

Brandon O. Gibosn, J., delivered the opinion of the court, in which Andy D. Bennett, J., and J. Steven Stafford, P.J., W.S., joined.

Brandon O. Gibosn, J.

This appeal involves parties with interests in neighboring properties who competed for the issuance of a billboard permit. Rather than waiting for the resolution of the administrative process that would determine which of the two applicants was entitled to a billboard permit, one party illegally constructed his billboard without a permit in the midst of the proceedings. Because of his action, the opposing party was unable to construct a billboard when the litigation ultimately ended in its favor. The party who prevailed in the administrative process and its landlord both obtained default judgments against the party who constructed the billboard based on claims of intentional interference with business relations and inducement to breach a contract. The trial court appointed a special master to calculate damages and adopted the master's report in its entirety, awarding the landlord approximately $1.1 million and awarding the party who planned to construct the billboard $3.9 million, which included treble damages. We affirm and remand for further proceedings.

I. FACTS & PROCEDURAL HISTORY

Tennison Brothers, Inc. owns property near the convergence of two major interstate highways in Memphis, Tennessee. Due to the volume of traffic on the nearby interstates, the Tennison Brothers property is a prime location for a billboard. On August 19, 2004, Tennison Brothers entered into a lease agreement with Clear Channel Outdoor, Inc., whereby Tennison Brothers leased its property to Clear Channel for the purpose of erecting a billboard. The lease term was to commence on September 1, 2004, and extend for twenty years. Clear Channel was required to pay Tennison Brothers $1,000 upon execution of the lease, and when construction of the billboard was complete, its annual rent obligation would begin at the rate of $15,600 per year with a three percent increase each year thereafter.

Southern Millwork and Lumber Company owns property adjacent to the Tennison Brothers property. Days after the execution of the lease between Tennison Brothers and Clear Channel, on August 23, 2004, Southern Millwork entered into a lease with William Thomas, Jr., permitting Thomas to construct a billboard on the Southern Millwork property.

Tennessee's Billboard Regulation and Control Act provides that no person can construct a billboard within 660 feet of an interstate highway right-of-way (unless otherwise provided in the Act) without first obtaining a billboard permit from the Commissioner of the Tennessee Department of Transportation ("TDOT"). Tenn. Code Ann. § 54–21–104(a). TDOT Regulations further provide that no two structures shall be spaced less than 1000 feet apart on the same side of the highway. Tenn. Comp. R. & Regs. 1680–02–03–.03(1)(a)(4)(i)(I). The site for Clear Channel's proposed billboard on the Tennison Brothers property was approximately fifty feet from the site for Thomas's proposed billboard on the Southern Millwork property, so only one of the proposed billboards could legally be constructed.

TDOT Regulations provide that applications will be considered "on a first come, first served basis." Tenn. Comp. R. & Regs. 1680–02–03–.03(1)(a)(7)(v).¹ Thomas was the first to apply for a TDOT permit. His application packet was received on August 24, 2004. It included a copy of the lease agreement between Thomas and Southern Millwork, but the property owner's signature was not notarized. On August 27, 2004, TDOT informed Thomas that his application was being returned for failure to have the property owner's signature notarized as required by TDOT Regulations.² That same day, TDOT received Clear Channel's application for a permit to construct a billboard on the Tennison Brothers property. Clear Channel's application was deemed complete, and it was ultimately approved. In the meantime, Thomas resubmitted his application with the required notarization, but TDOT ultimately denied his application in light of the spacing requirement and Clear Channel's recently approved application for a billboard at its site fifty feet away.

Thomas requested a hearing after the denial of his application. As a result, TDOT voided the billboard permit that Clear Channel had been granted pending the outcome of Thomas's appeal. Clear Channel requested a hearing regarding this action as well. After a hearing regarding both applications, an administrative law judge entered an "Initial Order" concluding that Clear Channel's application should have also been rejected because even though it contained a notarized signature of the property owner, the person who notarized it served as the real estate manager for Clear Channel. Because Thomas's re-submitted application would have been "next in line for review," the administrative law judge concluded that Thomas's re-submitted application should be approved and that Clear Channel's previously issued permit should remain "voided." This initial order from the administrative law judge was entered on October 20, 2005.

Clear Channel timely filed a petition for reconsideration of the initial order and then an appeal to the Commissioner of TDOT, such that the initial order never became a final order.³ Nevertheless, in reliance on the reasoning contained in the initial order, Thomas proceeded to construct a billboard on the Southern Millwork property despite the fact that he did not have a permit from TDOT. He acquired a local building permit from Shelby County, which was also necessary in order to construct a billboard, and built the structure in November 2005. Unbeknownst to either TDOT, Tennison Brothers, or Clear Channel, in December 2005, Thomas sold the unpermitted billboard to CBS Outdoor for $188,600, representing to CBS Outdoor that the permitting matters had been resolved and that TDOT had been ordered to issue the permit. However, for the next several years, Thomas continued to participate in the administrative proceedings regarding the TDOT permits as if he still held a lease on the property and owned the unpermitted billboard.

On May 18, 2006, the Commissioner of TDOT overturned the initial order entered by the administrative law judge and concluded that Clear Channel's application was not improper as a result of the notarization by its real estate manager. The Commissioner remanded the matter, with instructions, for further consideration by the administrative law judge. On March 5, 2007, the administrative law judge entered another initial order, this time concluding that Clear Channel's application was properly approved and that the TDOT permit should again be granted to Clear Channel, while Thomas's application should be denied. The administrative law judge specifically ruled that the billboard Thomas constructed without a permit was illegal and "should be immediately removed." On July 31, 2007, the Commissioner of TDOT entered a final order affirming the decision of the administrative law judge. Thomas argued before the Commissioner that he was justified in constructing the billboard without a permit due to the finding in the original initial order. However, the Commissioner rejected this argument as "spurious and utterly without merit." Simply put, the Commissioner explained, "An Initial Order is not a permit." The Commissioner noted that the initial order was appealed and that TDOT had never issued a permit to Thomas for his proposed billboard. The Commissioner found that Thomas's actions in constructing and operating a billboard without a permit were a clear violation of Tennessee Code Annotated section 54–21–104 and that the illegal billboard should be immediately removed. Even though Thomas no longer owned the billboard at issue (still unbeknownst to the other parties), Thomas filed a petition for judicial review of the Commissioner's final order in the chancery court of Davidson County pursuant to the Uniform Administrative Procedures Act ("UAPA"), Tenn. Code Ann. § 4–5–322.

While the UAPA petition for judicial review remained pending in Davidson County, Tennison Brothers instituted the present action on July 16, 2008, by filing a complaint for damages in the chancery court of Shelby County, naming Thomas, Southern Millwork, and Clear Channel as defendants.⁴ The complaint described the lease executed in 2004 by Tennison Brothers and Clear Channel for the construction of a billboard and the ensuing litigation regarding the billboard permits. The complaint alleged that Thomas constructed his billboard on neighboring property in November 2005 even though no permit for the location was ever issued by TDOT. The complaint described the orders entered by the administrative law judge and the Commissioner of TDOT in 2007 instructing Thomas to immediately remove the illegal billboard, but according to the complaint, the illegally constructed billboard still had not been removed by the time the complaint was filed in July 2008. According to the complaint, the defendants refused to remove the billboard and continued to update it and profit from new advertisements. Tennison Brothers alleged that the illegally constructed billboard and Thomas's refusal to remove it interfered with the planned construction of the billboard on the Tennison Brothers property. The complaint specifically referenced the 1000–feet spacing requirement imposed...