Hobble Diamond Ranch, LLC v. State Ex Rel. Montana Department of Transportation , 363 Mont. 310 ( 2012 )

January 17 2012
DA 11-0201
IN THE SUPREME COURT OF THE STATE OF MONTANA
2012 MT 10HOBBLE DIAMOND RANCH, LLC,
ROBERT L. and SUSAN BURCH,
husband and wife, and JAMES W. LOWE,
an individual,
Plaintiffs and Appellants,
v.
STATE OF MONTANA, by and through the
MONTANA DEPARTMENT OF TRANSPORTATION,
Defendant and Appellee.
APPEAL FROM: District Court of the First Judicial District,
In and For the County of Lewis and Clark, Cause No. ADV-2008-626
Honorable Dorothy McCarter, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Jack R. Tuholske, Tuholske Law Office, P.C., Missoula, Montana
Ryan R. Shaffer, Shaffer Law Office, P.C., Missoula, Montana
For Appellee:
Carol Grell Morris, Valerie D. Wilson, Special Assistant Attorneys
General, Montana Department of Transportation, Helena, Montana
Submitted on Briefs: November 23, 2011
Decided: January 17, 2012
Filed:
__________________________________________
Clerk
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 Hobble Diamond Ranch, LLC, Robert and Susan Burch, and James Lowe,
collectively referred to as the Neighbors unless otherwise specified, appeal from the
Findings of Fact, Conclusions of Law, and Order of the First Judicial District Court of
Lewis and Clark County, Montana, affirming the Montana Department of
Transportation’s (DOT) decision to issue billboard sign permits under the Montana
Outdoor Advertising Act (MOAA). The Neighbors seek removal of two billboards,
arguing that the billboards are not in compliance with MOAA, DOT’s granting of the
permits was unlawful, and the billboards are a public nuisance. We affirm.
ISSUES
¶2 The Neighbors raise six issues on appeal. We briefly address each issue; however,
a restatement of the dispositive issue is:
¶3 Whether the District Court erred in upholding DOT’s finding that an entire
270-acre parcel of land was being used for a “commercial or industrial activity,” thereby
justifying the issuance of two outdoor advertising permits under MOAA.
FACTUAL AND PROCEDURAL BACKGROUND
¶4 In 1998, Herbert and Christopher Bue (Bues) purchased an unzoned 270-acre
parcel of land along Interstate 90 in Sweet Grass County, Montana. That year they began
operating C & H Construction on the property, doing primarily earth moving and
excavation work. In 1999 they began gravel production on the property, later built a
3,200 square foot building for the business, and utilized connections to two power
utilities.
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¶5 Robert and Susan Burch (Burches) purchased the Hobble Diamond Ranch in 1998.
The Ranch is north of the Bues’ property and separated from it by Interstate 90, the
frontage road, the railroad, and the Yellowstone River. The Burches own approximately
27,000 acres of Hobble Diamond Ranch grazing land and approximately 500 acres of
other grazing land. They reside on the property for approximately three months each
year. James Lowe owns approximately 250 acres north of the Bues’ property, which is
also separated by Interstate 90, the frontage road, and the railroad.
¶6 In 2000, the Bues had their property east of the gravel pit drilled for gravel
samples, which indicated 1.5 million cubic yards of gravel. The following year, the Bues
contracted with Riverside Construction, which obtained an initial open-cut mining permit
from the Montana Department of Environmental Quality (DEQ); the permit was then
transferred to the Bues. Later, DEQ approved two permit modifications, allowing C & H
Construction to expand its gravel mining in 2002 and extending the reclamation deadline
to October 2016. The gravel mining operation began on 12.6 acres and expanded to 23.9
acres. The Bues intend to continue to expand the gravel mining operation.
¶7 Lamar Outdoor Advertising Corporation (Lamar) discussed with the Bues the
possibility of placing billboards on their property. Lamar submitted two permit
applications to DOT on October 13, 2006, for two outdoor advertising billboards to be
placed on the Bues’ property along Interstate 90 near milepost 384. Though the
application forms stated “THIS FORM MUST BE COMPLETED IN FULL” and “THIS
DRAWING MUST BE COMPLETED IN FULL,” the applications were incomplete and
missing required information. Some of the missing information was later filled in by
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DOT, though certain information, such as the distance between the qualifying activity
and the proposed sign location, was never added to the applications. The applications
were never returned to Lamar for completion.
¶8 On November 1, 2006, Allen Hagadone, DOT’s Compliance Specialist of the
Outdoor Advertising Control section (OAC) of MOAA, did a site inspection of the Bue
property, and noted that the sign locations were not staked and that their locations were
too far from the gravel pit area. Under § 75-15-103(14), MCA, the unzoned commercial
or industrial area where signs may be located must be along the highway and within 600
feet of a commercial or industrial activity. Accordingly, Hagadone called and told Lamar
that the location did not qualify for a permit because it was “to [sic] far from the qualifier
or the gravel pit.” A few days later Hagadone met with Lamar at the site and showed
Lamar where the billboards could legally be placed.
¶9 Hagadone and DOT’s Outdoor Advertising Coordinator, Patrick Hurley, met with
Lamar and Herbert Bue on site on December 5, 2006. After measurements were taken
and a sketch was made, Hurley determined that C & H Construction’s industrial or
commercial activities involved the entire 270 acres, including both the construction
business and the mining operation. After consulting with Hurley, Hagadone agreed and
determined that because the permit applications were for the entire 270 acres, and the
entire 270 acres was deemed to include industrial or commercial activities, it was not
necessary to measure 600 feet from any particular feature. On December 7, 2006, DOT
granted the permits to Lamar for the locations where the billboards are currently located.
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¶10 In April and May 2007, Lamar placed two billboards on the Bues’ property at a
total cost of approximately $75,000. The face of each billboard is 720 square feet, the
billboards are 500 feet apart from each other, and the closest sign is 2,380 feet from the
actual gravel pit. The billboards are lit for several hours every evening until 11:30 p.m.
In early 2008, Lamar constructed shields around the lights to reduce brightness in
response to complaints from the Neighbors that the lights interfered with the natural
evening light and night stars. Hurley made another site visit on December 16, 2008, and
confirmed the signs conformed to DOT’s requirements.
¶11 Lamar has a lease with the Bues for keeping the billboards on the Bues’ property
for $1,500 per year for five years and $1,750 per year for an additional five years, for a
total lease term of ten years. It would cost Lamar approximately $20,000 to remove or
relocate each billboard.
¶12 The Neighbors filed a complaint against DOT on July 14, 2008, and an amended
complaint on May 18, 2009, for removal of the billboards. Among other things, the
Neighbors alleged that: (1) DOT’s decision to issue permits for the billboards was
arbitrary, capricious, unsupported by evidence, and in violation of MOAA and its
implementing regulations; (2) the billboards constituted a public and private nuisance;
and (3) DOT violated the Neighbors’ right of public participation. The District Court
dismissed the public participation claim and this decision is not challenged on appeal.
¶13 The parties engaged in discovery. The Neighbors complained that DOT officials
introduced evidence during discovery that was outside of the material included in the
administrative record at the time the permits were approved. Following the conclusion of
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discovery, a non-jury trial was conducted on October 12 and 13, 2010. On March 8,
2011, the District Court affirmed DOT’s decision. In its Findings of Fact, Conclusions of
Law, and Order, the court found that the billboards complied with MOAA and that the
Neighbors failed to establish that DOT acted arbitrarily, capriciously, or in violation of
the law when it issued the two billboard permits. The court also concluded that the
Neighbors failed to prove their nuisance claim.
¶14 The Neighbors appeal.
STANDARD OF REVIEW
¶15 Our review of a district court’s conclusions of law is plenary. Kiely Constr. L.L.C.
v. City of Red Lodge, 2002 MT 241, ¶ 69, 312 Mont. 52, 57 P.3d 836. “When [a] district
court’s decision is based on review of an agency action, [the Montana Administrative
Procedure Act (MAPA)] governs our review,” and our scope of review is limited.
Citizens Awareness Network v. Mont. Bd. of Envtl. Rev., 2010 MT 10, ¶ 13, 355 Mont.
60, 227 P.3d 583; N. Fork Preservation Assn. v. Dept. of State Lands, 238 Mont. 451,
465, 778 P.2d 862, 871 (1989). We review the record to determine if the agency acted
arbitrarily, capriciously, or unlawfully. N. Fork, 238 Mont. at 458-59, 778 P.2d at 867;
Kiely Constr., ¶ 69 (citations omitted).
DISCUSSION
¶16 Whether the District Court erred in upholding DOT’s finding that an entire
270-acre parcel of land was being used for a “commercial or industrial activity,”
thereby justifying the issuance of two outdoor advertising permits under MOAA.
¶17 The Neighbors argue on appeal that the District Court erroneously found the entire
270-acre Bue property was the site of an “industrial activity” when only 3% of the land
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was in fact used for mining. DOT counters that the evidence before it was consistent
with the decision it made, and the determination that the entire 270-acre property was
used for “industrial activity” was legitimate. DOT also argues that the evidence
considered by the District Court was properly admitted so as to allow the court to
determine what DOT knew at the time of its decision, and to determine if the decision
was arbitrary, capricious, or unlawful.
¶18 Billboards along interstate highways in Montana are regulated under MOAA. The
purpose of the regulation is “to promote the safety, convenience, and enjoyment of travel
on and protection of the public investment in highways within th[e] state and to preserve
and enhance the natural scenic beauty or aesthetic features of the highways and adjacent
areas.” Section 75-15-102, MCA. Generally, outdoor advertising in proximity to
highways is prohibited under MOAA unless an exception applies. MOAA states:
(1) Outdoor advertising may not be erected or maintained that is within 660
feet of the nearest edge of the right-of-way and that is visible from any
place on the main-traveled way of an interstate or primary system, except:
. . .
(e) signs, displays, and devices located in unzoned commercial or
industrial areas, which areas must be determined from actual land uses and
by agreement between the department and the secretary and defined by
rules adopted by the commission. The exception granted by this subsection
is limited to two signs and may not apply to signs, displays, and devices
located within an unzoned area in which the commercial or industrial
activity used in defining the area has ceased for a period of 9 months.
. . .
(2) Outdoor advertising authorized under subsections (1)(a), (1)(d),
and (1)(e) must conform with standards contained in and must bear permits
required in rules that are adopted by the commission and this part.
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(3) Outdoor advertising may not be erected or maintained beyond
660 feet of the nearest edge of the right-of-way of an interstate or primary
highway outside of an urban area if the outdoor advertising is or was
erected with the purpose of its message being read from the main-traveled
way and visible from the main-traveled way unless the outdoor advertising
meets the criteria of subsections (1)(a), (1)(b), or (1)(c). If the outdoor
advertising meets that criteria, it must conform with standards contained in
rules that are adopted by the commission and with this part.
Section 75-15-111(1)(e), (2), (3), MCA (emphasis added). The issue before us is whether
the entire 270 acres is an unzoned commercial or industrial area based on the actual uses
of the land.
¶19 Pertinent definitions for this section include:
(1) “Commercial or industrial activities” means those activities
generally recognized as commercial or industrial by zoning authorities in
this state, except that none of the following activities are considered
commercial or industrial:
(a) agricultural, forestry, grazing, farming, and related activities,
including wayside fresh produce stands;
(b) transient or temporary activities;
(c) activities not visible from the main-traveled way;
(d) activities conducted in a building principally used as a residence;
(e) railroad tracks and minor sidings;
(f) activities more than 660 feet from the nearest edge of the
right-of-way.
. . .
(14) “Unzoned commercial or industrial area” means an area not
zoned by state or local law, regulation, or ordinance that is occupied by one
or more commercial or industrial activities, other than outdoor advertising,
on the lands along the highway for a distance of 600 feet immediately
adjacent to the activities.
Section 75-15-103(1), (14), MCA. The Administrative Rules of Montana (ARM) further
provide:
(7) “Commercial or industrial activity” is defined at 75-15-103,
MCA, and has the additional meaning of an activity which is permitted
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only in a commercial or industrial zone or a less restrictive zone by the
nearest zoning authority within the state, except that none of the following
is a commercial or industrial activity:
(a) any erection or maintenance of an outdoor advertising
structure;
(b) any agricultural, forestry, ranching, grazing, farming or
related activity, or operation of a wayside stand for sale of fresh fruit, their
products, or produce;
(c) any activity normally and regularly in operation less than
three months of the year;
(d) any transit or temporary activity;
(e) any activity not visible from the traffic lanes of the main
traveled way;
(f) any activity more than 660 feet from the nearest edge of
the right-of-way;
(g) any activity conducted in a building principally used as a
residence;
(h) any operation of railroad tracks, a minor siding or a
passenger depot;
(i) any activity that has been in business less than one year.
Admin. R. M. 18.6.202(7) (2007).
¶20 DOT regulates MOAA through its OAC section by issuing permits for qualifying
outdoor advertising billboards and enforcing compliance with Montana’s outdoor
advertising statutes and rules. DOT utilizes an Operations Manual for its permitting and
enforcement process. On review, a court is not allowed to stand in the place of a
“commission or board to try a matter anew as an administrative body”; the court may
only ascertain if the commission or board “stayed within the statutory bounds and has not
acted arbitrarily, capriciously or unlawfully.” Langen v. Badlands Coop. State Grazing
Dist., 125 Mont. 302, 308, 234 P.2d 467, 470 (1951) (citations omitted). Likewise, it is
well established that “a court will not substitute a judicial discretion for the discretion of
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an officer, board or body acting within the scope of his or its exclusive authority.”
Freeman v. Bd. of Adjustment, 97 Mont. 342, 357, 34 P.2d 534, 539 (1934).
¶21 The MOAA proceeding was not a contested case proceeding under MAPA, as it
did not require the “determination of legal rights, duties, or privileges” of a party after the
opportunity for a hearing. Section 2-4-102(4), MCA. When an agency such as DOT
makes an informal agency decision, we review the decision to determine if the decision is
“arbitrary, capricious, unlawful, or not supported by substantial evidence.” Clark Fork
Coalition v. Mont. Dept. of Envtl. Quality, 2008 MT 407, ¶ 21, 347 Mont. 197, 197 P.3d
482; Skyline Sportsmen’s Assn. v. Bd. of Land Commrs., 286 Mont. 108, 113, 951 P.2d
29, 32 (1997). When making the factual inquiry about whether an agency decision was
arbitrary or capricious, we “consider whether the decision was based on a consideration
of the relevant factors and whether there has been a clear error of judgment.” N. Fork,
238 Mont. at 465, 778 P.2d at 871 (quoting Citizens to Preserve Overton Park v. Volpe,
401 U.S. 402, 416, 91 S. Ct. 814, 823 (1971)). “This inquiry must ‘be searching and
careful,’ but ‘the ultimate standard of review is a narrow one.’ ” N. Fork, 238 Mont. at
465, 778 P.2d at 871 (quoting Overton Park, 401 U.S. at 416, 91 S. Ct. at 823).
Furthermore, “[w]e cannot substitute our judgment for that of the [agency] by
determining whether its decision was ‘correct.’ ” N. Fork, 238 Mont. at 465, 778 P.2d at
871.
¶22 It is undisputed that the 270-acre parcel is not zoned within the meaning of this
chapter. DOT concluded that the entire parcel contained commercial or industrial
activity. The Neighbors argue that DOT made this decision based on the future plans of
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the Bues rather than on the “actual land uses.” Section 75-15-111(1)(e), MCA.
However, it is evident that DOT used the applications (though incomplete), multiple site
visits, information received from the parties, and the combination of the construction and
mining operations on the property to reach the conclusion.
¶23 The Neighbors argue that based on the mining permit the Bues hold, they are
allowed to mine only a small area of the entire parcel, and therefore only that small area
should be considered in determining the location of the commercial or industrial activity.
The District Court rejected this argument. After considering all the evidence and
exhibits, it concluded that the mining operation was not limited to the actual gravel pit,
but also encompassed an area for crushing and storing the material, the access roads into
the site, and an area for storing equipment. The court further concluded that the business
activities near the location of the billboards included both the mining operation and the
construction business, and that these comprised “industrial or commercial” activities
within the meaning of MOAA. It therefore concluded that DOT’s decision to issue the
billboard permits was not arbitrary, capricious, or in violation of the law.
¶24 We cannot conclude that the District Court’s ruling upholding the DOT decision
was arbitrary, capricious, or unlawful. As we stated in Silva v. City of Columbia Falls,
258 Mont. 329, 335, 852 P.2d 671, 675 (1993), “a review by a district court or this Court
of an action under the ‘arbitrary and capricious’ standard does not permit a reversal
merely because the record contains inconsistent evidence or evidence which might
support a different result. Rather, the decision being challenged must appear to be
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random, unreasonable or seemingly unmotivated, based on the existing record.” Because
the District Court decision does not reach this level, we decline to disturb it.
¶25 The Neighbors also assert that the commercial or industrial activity taking place
on the property is temporary and therefore should not be considered a commercial or
industrial activity according to § 75-15-103(1)(b), MCA. However, as noted by the
District Court, MOAA does not define “temporary.” To qualify as an unzoned
commercial or industrial area under Admin. R. M. 18.6.203(1)(c) (2007), the commercial
or industrial activity must have been in business at least one year before the area may
qualify as a commercial or industrial area. The construction and mining activities have
both continued for more than one year; therefore the District Court did not err in
concluding that they were not “temporary” according to the ARM.
¶26 The Neighbors also argue that the billboard permit applications were incomplete
and should have been returned to Lamar for completion, rather than having DOT accept
the incomplete applications and subsequently modify and approve them. DOT’s Outdoor
Advertising Control Operations Manual (Manual) describes the application process for a
billboard permit. The Manual states that it is “imperative that the proposed sign meets
local government zoning or land use control,” and that DOT “personnel are not allowed
to interpret local zoning or land use requirements for the applicant.” It goes on to state
that “[i]f the proposed sign site is unzoned, it is the right-of-way agent’s responsibility to
determine whether the area qualifies for the placement of a sign and the issuance of a
permit. It is the responsibility of the applicant to identify the activity presumed to qualify
the area for the placement of a sign.” If a permit application is incomplete, the Manual
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directs DOT to return it “to the applicant together with an explanation of the
deficiencies.”
¶27 On review, the District Court concluded that “[a]lthough the applications were
incomplete on their face,” they were in “substantial conformance” with DOT’s
regulations and were “substantially complete.” DOT obtained the necessary information
that the court deemed “sufficient” to make an informed decision, and then made an
“informed decision about whether permit requirements were satisfied.” We will not
disturb this conclusion.
¶28 The Neighbors also complain that the District Court unlawfully received evidence
at the trial that was outside the administrative record and relied on post-decision
justifications for DOT’s decision. While review of an agency action is generally limited
to the record before the agency at the time of its decision, a reviewing court may accept
new evidence in order to clarify matters that occurred before the agency, and to
determine whether the agency properly considered all relevant factors in reaching its
decision. Aspen Trails Ranch, LLC v. Simmons, 2010 MT 79, ¶ 53, 356 Mont. 41, 230
P.3d 808 (citing Skyline Sportsmen’s Assn., 286 Mont. at 113, 951 P.2d at 32). We
conclude the court did not abuse its discretion in admitting evidence for these purposes.
¶29 Finally, the Neighbors state public nuisance claims, citing § 75-15-133, MCA, for
the proposition that outdoor advertising which does not conform to the requirements of
MOAA is a public nuisance. Because we will not disturb the decision of DOT and the
District Court to the effect that the permit applications were in conformance with MOAA,
the public nuisance claims of the Neighbors must fail.
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¶30 We conclude that DOT based its decision that the entire 270-acre parcel included
commercial or industrial activity on sufficient evidence. We do not find this decision or
DOT’s subsequent decision to issue the two billboard permits arbitrary, capricious, or
unlawful, and we will not substitute our judgment for that of DOT or the District Court.
CONCLUSION
¶31 For the foregoing reasons, we affirm the decision of the District Court.
/S/ PATRICIA COTTER
We concur:
/S/ BETH BAKER
/S/ BRIAN MORRIS
/S/ JAMES C. NELSON
Justice Michael E Wheat dissents.
¶32 I would reverse on the grounds that the DOT failed to establish, during its permit
application review process, a reasonable basis for designating the entire 270 acres as a
qualifying commercial or industrial site. The record is clear that the primary qualifying
activity (gravel mining) is confined to an area of approximately 23 acres in the northwest
corner of the property. The billboard signs are located more than 2,000 feet away from
the boundary of the gravel mining operation. Because billboards along interstate
highways must be located within 600 feet of a qualifying unzoned commercial or
industrial area, the only way to approve the location of the signs in this case was to
qualify the entire 270 acres.
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¶33 In affirming the DOT’s designation of the entire 270 acres as a qualifying
commercial or industrial site, the District Court relied on the following findings of fact:
(1) The landowners operate C&H Construction on the property, which includes
a gravel mining operation. The construction business is primarily earth
moving and excavation;
(2) C&H Construction is connected to two power utilities and has built a 3,200
square foot building that is part of the construction business;
(3) The landowners had their land just east of the current gravel pit drilled for
gravel samples. The gravel mining operation started out on 12.6 acres and
subsequently expanded another 11.3 acres. The land owners anticipated
expanding the operation to accommodate new projects;
(4) Evidence indicates that the land owners have, since beginning their mining
operation, intended to continue to operate and expand their gravel mining
operation into the future;
(5) Placing the billboards within 600 feet of the gravel pit (as required by § 75-
15-111(1)(e), MCA, and Admin. R. M. 18.6.203) would have interfered
with the gravel mining operation, as well as its anticipated expansion. It
would have required the costly relocation of the billboards with every
expansion of the mine; and
(6) The area between the actual pit and the billboards (2,380 feet) is used for
storage of equipment for C&H Construction and also includes a spring
being developed for use by C&H. The entire area around and at the
location of the billboards is used for the construction business, which
includes the mining operation, areas for storage of construction equipment,
and access roads.
¶34 There is no evidence to support the conclusion that the billboards, if placed within
600 feet of the gravel pit, would interfere with the operation of the pit or would need to
be moved every time the pit expanded, if ever. Furthermore, there is no evidence that the
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entire distance between the pit and the billboards is needed to park construction
equipment.
¶35 Section 75-15-111(1)(e), MCA, prohibits placement of billboards within 660 feet
of the interstate highway, except “in unzoned commercial or industrial areas, which areas
must be determined from actual land uses and by agreement between the department and
the secretary and defined by rules adopted by the commission. . . .” (Emphasis added.)
Section 75-15-103(14), MCA, defines an unzoned commercial or industrial area as “an
area not zoned . . . that is occupied by one or more commercial or industrial activities,
other than outdoor advertising, on the lands along the highway for a distance of 600 feet
immediately adjacent to the activities.” (Emphasis added.)
¶36 There is no dispute that the existing gravel pit (approximately 23 acres) in the
northwest corner of the property qualifies as a commercial or industrial area for purposes
of the statute. The question is whether the entire 270 acres qualifies, and on the basis of
the evidence in the record, I maintain it does not. Therefore, I would reverse the District
Court decision and remand the case back to the DOT for additional evidentiary hearings
related to the area of land that would qualify as a commercial or industrial area.
/S/ MICHAEL E WHEAT
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