Dep't of Transp. v. Adams Outdoor Advert. of Charlotte Ltd. P'ship
370 N.C. 101
| N.C. | 2017Background
- Adams Outdoor leased a Charlotte lot and owned a large, grandfathered nonconforming billboard located where DOT needed to widen a highway; lease was recorded and limited use to outdoor advertising.
- Lease (2007) had a 10-year term plus an automatic 10-year extension and further optional 10-year renewals; lease allowed Adams to remove the billboard and contained limited tenant cancellation rights.
- DOT condemned Adams’s recorded leasehold interest by exercise of its highway-condemnation authority (to widen a road), not under the Outdoor Advertising Act.
- Trial court held Article 11 (Outdoor Advertising Control Act) controlled, excluded DOT’s bonus-value appraisal, and ordered compensation to include billboard value, permits, rent stream and renewal expectations.
- Court of Appeals reversed: held Article 9 governed, classified the billboard as noncompensable personal property (trade fixture), excluded permits/lease renewals/lost advertising revenue, and allowed DOT’s bonus-value evidence.
- Supreme Court of North Carolina: affirmed in part, reversed in part — Article 9 governs; billboard’s physical value is not recoverable, but (under Article 9) evidence of the billboard’s contribution to leasehold value, rental income from billboard space, existing permits, and the automatic 10-year extension are admissible; optional renewals and DOT’s flawed bonus-value appraisal are not admissible as offered.
Issues
| Issue | DOT (Plaintiff) Argument | Adams Outdoor (Defendant) Argument | Held |
|---|---|---|---|
| Governing statutory measure (Article 9 v. Article 11) | Article 11 applies because billboard was nonconforming and Article 11 specifies compensation includes outdoor advertising value | Article 9 applies because DOT condemned for highway widening under general condemnation power, not to acquire prohibited advertising | Article 9 governs; Article 11 applies only when condemning under Outdoor Advertising Act for prohibited devices |
| Compensability of billboard structure / trade fixture | Value of outdoor advertising should be included in compensation as part of leasehold (Article 11 principle applied by trial court) | Billboard is a trade fixture/personal property removable under lease and physical structure value is not recoverable in condemnation | Billboard is a trade fixture (personal property) so physical structure value is not recoverable; but its presence and contribution to leasehold market value may be considered under Article 9 |
| Advertising revenue (payments from advertisers) | Revenue from billboard leases is rental income tied to the property and should be included in valuation | Revenue is business profits (lost profits) not compensable in condemnation | Payments from advertisers that function as rental income for use of billboard space are admissible as a factor in leasehold fair market value; pure lost business profits remain noncompensable when offered as quantified business loss |
| Lease renewals and permits | All renewal expectations and existing permits increase leasehold value and must be compensated | Automatic extension and permits affect value; optional renewals are speculative expectancies and should not be treated as property rights | Existing permits and the automatic 10-year extension are admissible factors; subsequent optional renewals are mere expectancies and not compensable |
| Admissibility of DOT’s bonus-value appraisal | DOT’s appraiser applied bonus-value method showing zero value; should be admissible | Appraisal omitted relevant factors (billboard-specific value, permits, automatic extension) and is unreliable | Bonus-value method permissible in principle but DOT’s appraisal was inadmissible because it failed to account for material market factors and comparability, rendering the methodology unreliable |
Key Cases Cited
- United States v. Petty Motor Co., 327 U.S. 372 (right-to-renew included in leasehold valuation)
- Alamo Land & Cattle Co. v. Arizona, 424 U.S. 295 (lease-renewal rights in takings valuation)
- Ross v. Perry, 281 N.C. 570 (bonus-value calculation for leasehold damages)
- Dep’t of Transp. v. M.M. Fowler, Inc., 361 N.C. 1 (distinguishing rental income from lost business profits in condemnation)
- Barnes v. N.C. State Highway Comm’n, 250 N.C. 378 (consider all market uses and capabilities when valuing property)
- Lyerly v. N.C. State Highway Comm’n, 264 N.C. 649 (personal property not recoverable in condemnation)
- Stephens v. Carter, 246 N.C. 318 (trade-fixture doctrine—tenant’s fixtures may remain personal property)
- Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S. 470 (distinguishing valuation issues for structural improvements vs. leasehold expectancies)