A.D. Improvements v. Dept. of Transportation ( 2024 )

Filed 10/22/24
CERTIFIED FOR PUBLICATION
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
A.D. IMPROVEMENTS, INC., D082751
Plaintiff and Appellant,
v. (Super. Ct. No. CIVSB2132716)
DEPARTMENT OF
TRANSPORTATION,
Defendant and Respondent.
APPEAL from an order of the Superior Court of San Bernardino
County, David S. Cohn, Judge. Reversed and remanded with directions.
Hunt Ortmann Palffy Nieves Darling & Mah, Dustin Lozano and Emily
Zung Manninger for Petitioner and Appellant.
Erin E. Holbrook, Chief Counsel, Jerald M. Montoya, Deputy Chief
Counsel and Mark Berkebile for Respondent
A.D. Improvements, Inc. (ADI), which leases property from the
California Department of Transportation (Caltrans), appeals the trial court’s
denial of a writ directing Caltrans to sell it the property.
This appeal involves the interpretation of Streets and Highways Code
section 118.1. The provision requires Caltrans to offer to sell at fair market
value “commercial real property acquired for the construction of a state
highway, but no longer required for that purpose,” to an occupant leasing the
land. (Sts. & Hy. Code, § 118.1.) ADI was using the leased property
commercially when it applied to purchase it. Yet Caltrans denied ADI’s
application because the property was not commercial when Caltrans acquired
it. The trial court agreed with Caltrans and denied ADI’s petition.
ADI argues the statute merely requires the leased property to be
commercial at the time Caltrans deems it excess. Based on a plain and
contextual reading of the statute, we agree, reverse, and remand.
I.
Caltrans purchased the leased property, then undeveloped, as part of a
freeway development plan. ADI and Caltrans entered into an agreement for
ADI to lease the property. ADI has used the property as a commercial
staging area for equipment and machinery for its projects for Caltrans.
Caltrans ultimately decided against using the property for a freeway.
In March 2021, while ADI was leasing and occupying the property, Caltrans
officially deemed the land “excess real property.” After the lease expired, ADI
continued to lease and occupy the land under a month-to-month holdover
tenancy.
Under Streets and Highways Code sections 118.1 and 118.6, Caltrans
“shall” offer commercial land it deems “excess” for sale at fair market value to
the current occupant, if the occupant (1) leased the property from Caltrans;
(2) used and occupied the property; and (3) made at least $5,000 in
improvements during the lease. (§118.1.)
Given Caltrans’ continued refusal to offer to sell the leased property to
it, ADI filed a petition for writ of mandate seeking an order directing
Caltrans to present an offer of sale to ADI. Following briefing and oral
argument, the trial court denied the petition. It held the phrase “‘commercial
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real property acquired for the construction of a state highway’” applies only to
property that was commercial when acquired by Caltrans, because the word
“acquired” is a past-tense verb rather than an adjective.
II.
As this appeal turns on the meaning of the words used in section 118.1,
it presents “a question of law that we review de novo.” (Bruns v. E-Commerce
Exchange, Inc. (2011) 51 Cal.4th 717, 724.) When interpreting a statute, we
must “determine the Legislature’s intent so as to effectuate the law’s
purpose.” (Coalition of Concerned Communities, Inc. v. City of Los Angeles
(2004) 34 Cal.4th 733, 737.) We first give the language “a plain and
commonsense meaning . . . in the context of the statutory framework as a
whole[,] in order to determine its scope and purpose and to harmonize the
various parts of the enactment.” (Ibid.) We “must generally follow [the]
plain meaning unless a literal interpretation would result in absurd
consequences the Legislature did not intend.” (Ibid.) If the “language
permits more than one reasonable interpretation,” however, we “may
consider other aids, such as the statute’s purpose, legislative history, and
public policy,” to assess its meaning. (Ibid.)
A.
No one disputes the trial court’s findings that (1) a lease was in effect,
(2) ADI used and occupied the property, and (3) ADI improved the property
by nearly $20,000. No one further disputes the land is currently commercial
and has been so used since 2017. Indeed, the lease forbade ADI from using
the land residentially. Thus, the sole disputed issue is whether the statute
requires the leased property to have been commercial when Caltrans
(1) initially acquired it, or (2) designated it excess.
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The clause of section 118.1 at issue requires Caltrans, “with respect to
commercial real property acquired for the construction of a state highway,
but no longer required for that purpose because the construction will not be
undertaken,” to sell the property to the occupant under specific conditions.
(§ 118.1.) ADI argues “acquired” is used as an adjective denoting possession,
so it is illogical to interpret it as a past-tense verb. Caltrans contends
section 118.1 only applies if the property was used commercially prior to
acquisition. As it was not here, Caltrans asserts section 118.1 is inapplicable.
Bayside Auto & Truck Sales, Inc. v. Department of Transportation
(1993) 21 Cal.App.4th 561 (Bayside)—the only published case discussing
section 118.1—supports ADI’s reading of the statute. Bayside explained,
“Once commercial property is determined to be ‘no longer required’ for
highway purposes, Caltrans ‘shall first offer’ it for sale at its current fair
market value to an occupant who has made over $5,000 in improvements.”
(Id. at pp. 566-567 [quoting section 118.1].) In interpreting section 118.1,
Bayside implied that the current use of the property is what matters. There
was no discussion of the property’s original zoning.
Well-established principles of statutory construction also support ADI’s
reading of section 118.1. Section 118.1 further states, “The failure of the
department to first offer excess real property as required by this section shall
not affect the validity of any conveyance of this excess real property to any
person or entity unaware of the failure of the department to do so.” This
language clearly indicates the Legislature’s intent that the statute governs
the sale of excess real property. As the property must be excess commercial
real property, the statute signals the court should look to the property’s
current, rather than past, use. No language expressly requires the land to
have been used commercially prior to being deemed excess.
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Additionally, section 118.6 mandates Caltrans “shall, to the greatest
extent possible, offer to sell or exchange excess real property [under
section 118.1] within one year” of being deemed excess. (Sts. & Hy. Code,
§ 118.6.) This provision calls for an expansive reading of section 118.1, as it
directs Caltrans to effectuate the sale of all excess land, with limited
statutorily defined exceptions that are inapplicable here. There is no
mention of commercial property, let alone any limitation regarding
commercial property. Nor is there mention of the time at which the land
must be classified as commercial.
Moreover, section 118.6 specifically defines “‘[e]xcess real property’” to
mean “all land and improvements situated outside of calculated highway
right-of-way lines not needed or used for highway or other public purposes.”
(§ 118.6.) The land referred to in section 118.1 is therefore excess
“commercial real property.” Because land can only be deemed excess after
Caltrans acquires it, the statute focuses on the property’s use at the time of
that designation rather than a prior time, like acquisition. Thus, the trial
court erred when it inserted a requirement into the statute that the land be
commercial when acquired.
In its brief, Caltrans adds language to section 118.1 to force meaning
into the statute never intended by the Legislature. In analyzing whether the
section uses “acquired” as an adjective or a verb, Caltrans brackets in
qualifiers, contending the leased property is not “‘commercial property [that
was] acquired for the construction of a state highway, but no longer required
for that purpose because the construction [was] not to be undertaken.’” By
adding the bracketed language, Caltrans implicitly concedes its
interpretation is not supported by a plain reading of the statute.
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B.
Because we conclude the plain meaning of section 118.1 is that leased
property merely needs to be used commercially when deemed excess, we need
not consider the statute’s legislative history. Nevertheless, the legislative
history further supports our conclusion.
The parties do not dispute that we may consider the legislative history
to resolve any ambiguities. Thus, on our own motion, we judicially notice
documents comprising the legislative history materials related to the
enactment of section 118.1. (Evid. Code, §§ 452, 459; Gananian v. Wagstaffe
(2011) 199 Cal.App.4th 1532, 1541, fn. 9 [“We may take judicial notice of
legislative history materials on our own motion.”].)
Like the statute itself, the legislative history of Assembly Bill No. 1277
(1981-1982 Reg. Sess.), which added section 118.1 to the Streets and
Highways Code, contains no indications that the land had to be zoned or used
commercially when acquired by Caltrans.
Instead, the legislative history materials repeatedly state Assembly Bill
No. 1277 “requires the Department of Transportation to first offer the sale of
excess commercial real property to current occupants of that property, under
specified conditions.” (See e.g., Assem. Com. On Ways & Means, Analysis of
Assem. Bill No. 1277 (1981-1982 Reg. Sess.) June 9, 1981.) The materials
also repeatedly state: “Under existing law, the Department must sell excess
commercial real property upon the terms and conditions established by the
California Transportation Commission.” (Cal. Dept. of Transportation,
Supplemental Analysis of Assem. Bill No. 1277 (1981-1982 Reg. Sess.)
Sept. 21, 1981.) These repeated references to the sale of “excess commercial
real property” indicate the Legislature intended the property to be
commercial when it was deemed “excess,” not when acquired.
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Similarly, the analysis by the Senate Transportation Committee
explains the “bill establishes a priority system for the sale of excess
commercial property acquired for highway construction.” (Sen. Com. on
Transportation, Analysis of Assem. Bill No. 1277 (1981-1982 Reg. Sess.)
Aug. 4, 1981.) The supplemental analysis by the Department of
Transportation further explains the “bill as originally worded would have
required the Department to offer to sell excess residential property . . . to the
occupant of the property if the occupant has rented the property from the
Department, has used and occupied it[,] and has made improvements at his
own expense. The bill as amended deletes the word ‘residential’ and inserts
the word ‘commercial’ in place of it, thereby requiring the Department to first
offer to sell commercial property to the occupant subject to the same
restrictions and conditions.” (Cal. Dept. of Transportation, Supplemental
Analysis of Assem. Bill No. 1277 (1981-1982 Reg. Sess.) May 13, 1981.)
Thus, to the extent there is any ambiguity, the legislative history
reinforces our plain reading of section 118.1, which does not require the
leased property to have been used commercially when acquired by Caltrans.
The “excess” designation cannot be divorced from the commercial use of the
property.
C.
Finally, Caltrans’ own manuals support ADI’s interpretation.
Section 11.16.05.00 of Caltrans’ Property Management Manual, which
comments on section 118.1, defines “excess” land as including commercial
property “‘on a rescinded route or downscoped project.’” The manual’s
language does not add any qualifiers requiring the subject commercial
property to have been zoned commercial when Caltrans acquired it.
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Further, Section 16.05.06.01 of Caltrans’ Excess Land Manual, entitled
“Direct Sale of Commercial Property Pursuant to S&H Code Section 118.1,”
notes that “Section 118.1 is . . . also applicable in situations where
commercial property that was originally acquired for construction purposes
has since been determined not to be required for construction.” The only
qualifier is that the property must have been originally obtained, but then
not used, for construction purposes.
III.
We reverse and remand the trial court’s order denying ADI’s petition
and direct the trial court to issue a writ requiring Caltrans to comply with its
ministerial duty under section 118.1 to offer to sell the leased property to ADI
at fair market value. ADI is entitled to its costs on appeal.
CASTILLO, J.
WE CONCUR:
IRION, Acting P. J.
KELETY, J.
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