John Gannon, Inc. v. Tex. Dep't of Transp.

John Gannon, Inc., Appellant v. The Texas Department of Transportation; James M. Bass,in His Official Capacity as Executive Director of The Texas Departmentof Transportation; and Kyle Madsen, in His Official Capacity asDirector of Right of Way for The Texas Department of Transportation, Appellees

NO. 03-18-00696-CV

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

October 9, 2020

FROM THE 98TH DISTRICT COURT OF TRAVIS COUNTY

NO. D-1-GN-18-001981, THE HONORABLE LORA J. LIVINGSTON, JUDGE PRESIDING

MEMORANDUM OPINION

John Gannon, Inc. (JGI) appeals from the trial court's order granting the motion to dismiss for want of jurisdiction filed by the Department of Transportation (the Department) and James Bass and Gus Cannon in their official capacities (the Officials).¹ In the underlying suit, JGI sued the Department under the Administrative Procedure Act (the APA Claim) and the Officials under the Uniform Declaratory Judgments Act (the UDJA Claim). For the following reasons, we conclude that the trial court has jurisdiction over the APA Claim but not the UDJA Claim. We therefore affirm the order in part and reverse and remand in part.

BACKGROUND

JGI owns and operates outdoor advertising signs—billboards—that are often located next to Texas highways. The Department is a state agency tasked with regulating commercial signs along the State's highways. See Tex. Transp. Code §§ 391.002, .065, .068(b). Before proceeding to the procedural history and the merits of this jurisdictional dispute, a general understanding of the legal history and framework is necessary.

Legal History and Framework

The Texas Transportation Code provides that the State, pursuant to its eminent domain authority, may condemn and acquire real property. See id. §§ 203.051-.052. As explained by the Department, historically billboards were generally not acquired through condemnation although billboard owners were often joined in the proceedings as owning leasehold interests in the land. Rather, billboard owners could receive relocation assistance benefits to remove and move the billboard. For example, before 2004, if the State condemned the property on which a billboard was located, the billboard owner may have been eligible to receive relocation benefits and a relocation permit pursuant to the Department's former rule 21.160 if the sign was "designated by the owner as personal property." See 43 Tex. Admin. Code § 21.160(c)(10) (2003) (Relocation) ("A permit may be issued pursuant to this section if a sign is designated by the owner as personal property and the sign owner receives relocation benefits, or if the sign is designated by the owner as realty, valued and purchased according to the department's sign valuation schedules, and retained by the sign owner. . . . Relocation benefits will be paid in accordance with Subchapter G of this chapter."), repealed by 35 Tex. Reg. 10634, 10634 (2010), adopted by 36 Tex. Reg. 2418, 2418 (2011); see also 43 Tex. Admin. Code § 21.116 (Moving and Related Expense Payments) (promulgated to take effect in 2002 and providing that when person is required to relocate as result of acquisition of right-of-way for highway project, Department will pay reasonable expenses of relocating displacee and displacee's business and personal property so long as eligibility requirements are met).²

In 2004, the Department amended section 21.160 to clarify that billboards are personal property, not real property. See 29 Tex. Reg. 8779, 8779-80 (2004), adopted by 29 Tex. Reg. 11389, 11389 (2004) (to be codified as amendment to 43 Tex. Admin. Code § 21.160) (explaining that "[t]here has been confusion due to the language included in § 21.160(c)(10) that the department may consider sign structures as real property" and that "[t]his section is contrary to current department policy, and § 21.160 is amended to delete any reference to the treatment of signs as real property for relocation assistance purposes"); Harris County v. Clear Channel Outdoor, Inc., No. 14-07-00226-CV, 2008 WL 1892744, at *1 (Tex. App.—Houston [14th Dist.] Apr. 29, 2008, no pet.) (mem. op.) (noting that "[p]rior to December 2004, both [Department] policy and federal law considered billboards removed for transportation projects to be real property and required that the billboard owner be compensated for the loss of the sign or the cost of relocating the sign," but that Department changed regulations to "dictate[] that billboards affected by transportation projects would no longer be treated as real property and the sign owners would no longer be offered compensation for the loss of the sign"). In 2011, the Department repealed section 21.160 and other related regulations and replaced them with a new subchapter that subdivided former section 21.160 across multiple sections. See 36 Tex. Reg. 2418, 2418 (2011) (noting that "[a] majority of the new rules have nonsubstantive changes" and "[t]he department adopts a new rule organizational structure that subdivides the current rules into smaller sections and reorganizes them so that the new rules logically follow the sign permitting process"). Thus, the relevant rules at issue in this appeal providing for relocation, relocation benefits, relocation permits, and locational and spacing requirements were spread across multiple new sections. See id. at 2452-53 (noting that these requirements would be codified at sections 21.192 (Permit for Relocation of Sign), 21.193 (Location of Relocated Sign), 21.195 (Relocation of Sign within Municipality), and 21.196 (Relocation Benefits) of title 43 of Texas Administrative Code).

In 2015, a dispute between the State and a billboard owner arising out of a condemnation proceeding reached the Texas Supreme Court. See State v. Clear Channel Outdoor, Inc., 463 S.W.3d 488 (Tex. 2015). The State argued that the condemnation of land did not take the billboards on that land because billboards are personalty, not fixtures. See id. at 493. The Texas Supreme Court, however, rejected the State's argument, holding:

Clear Channel's billboards were fixtures if a unified fee-holder would have intended them to become a permanent part of the land. . . . The billboards were firmly embedded in the earth; their removal required that the poles be cut and the signs dismantled. Moreover, the billboards were perfectly suited to the use of the realty, which was outdoor advertising alongside a busy freeway. On this record, the hypothetical holder of a unified fee would have intended the billboard structures to become a part of the real estate as a matter of law.

Id. at 495-96. But, as noted, the Texas Supreme Court limited its holding to "this record" and further stated:

This is not to say that all sign structures are necessarily fixtures. Different construction methods may make a billboard structure more portable than those in this case. Were a sign less firmly embedded in the ground, more easily moveable, or located on land not actually useful for advertising, it might well remain personalty. Courts are to determine whether any particular billboard is a fixture in a condemnation case based on the Logan test as framed from the perspective of a holder of the unified fee.

Id. at 496 (citing Logan v. Mullis, 686 S.W.2d 605, 607-08 (Tex. 1985)).

On March 29, 2016, Cannon issued a memorandum titled "Guidance for Impacted Off-Premise Billboards as Part of Highway Transportation Projects." On June 9, Cannon issued a document titled "Amended Guidance for Impacted Off-Premise Billboards Affected by Highway Transportation Projects" (the Amended Guidance) that expressly "clarifie[d] and replace[d]" the March guidance document. The Amended Guidance stated, as relevant here:

• In light of recent Texas Supreme Court case-law, the Right of Way Division has revised how it treats billboards in the course of acquiring property as part of a highway construction project.

• Effective immediately for new acquisitions where no initial offer has been previously made, all off-premise billboards will be treated as realty.

• For the sign structure owner to be eligible for a relocation permit . . . they will need to retain the structure for its salvage value and follow the current . . . relocation permitting regulations.

• In conclusion, [the Department]'s policy is that all billboards are treated as realty. In addition, this will ensure the timely removal of the signage from the real property that is the subject to the highway construction project.

The Amended Guidance continued by stating, "Effective the date of this guidance the following procedures," listed below as relevant to this appeal, "will be followed":

• [T]he billboard structure owner will not be provided reimbursement of expenses to relocate the billboard structure as a billboard structure cannot be the subject of duplicate payments as both an item of real estate and for relocation[.]

• If the billboard structure owner chooses to retain the structure and this is properly reflected in the deed, [the Department] will provide the sign owner[] a Notice to Vacate at a date certain that corresponds with the language in the deed, which should be no less than 60 days prior to the date on which the land on which the sign is erected is needed for construction purposes.

• If the billboard structure owner does not remove the structure per the deed and Notice to Vacate, the ownership shall revert back to the state for removal. The sign structure owner will forfeit the salvage value paid to the state AND their eligibility for a relocation permit . . . .

• If the billboard structure owner does not choose to retain the structure, then they will not be provided the ability to apply for a relocation permit under the current . . . permitting regulations and any application by the sign owner would be treated as an application for a new permit.

The Amended Guidance closed by stating, "All Right of Way Manuals will be updated as needed."

In September 2017, the Department proposed the repeal and amendment of certain...