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Business Law by Tom Ramsey

Excusable Governmental Inaction For 22 YearsTom Ramsey - Business Law

April 9th, 2013 – Although a private citizen can lose the ability to enforce his rights by not taking action within the applicable prescribed time or in a reasonable amount of time, the same rules do not apply to governmental bodies, as illustrated below.

In conjunction with the 1984 Olympics in Los Angeles, the then-owner of a building located at 155 West Washington Blvd. in Los Angeles erected what is known as a “wallscape.” It measured approximately 8,000 square feet. A permit was obtained from the City of Los Angeles to erect the wallscape. Although the wallscape could be seen from the Santa Monica Freeway, the 1984 owner did not obtain an apparently required permit from Caltrans to erect it.

In 1999, West Washington Properties, LLC, purchased the building. At that time, the wallscape was still in place. In conjunction with the purchase of the building, the LLC found the City of Los Angeles permit. It did not check with Caltrans, probably unaware that Caltrans would be involved in the permit process.

As was apparently subsequently discovered, a Caltrans permit is needed for any sign that exceeds 1,200 square feet and is located within 660 feet of a freeway.

Between 1984 and November 17, 2006, a period exceeding 22 years, Caltrans took no action of any kind with regard to the wallscape, although it issued citations to other signs that did not have the requisite permit or were too big to be permitted. On November 17, 2006, a Caltrans inspector issued a notice of violation to the LLC because no Caltrans permit for the wallscape existed, the wallscape exceed the apparent exemption of 1,200 square feet and the wallscape was visible from the Santa Monica Freeway. This was the one and only citation issued by Caltrans for the wallscape.

The LLC contested the citation at an administrative hearing.

At the hearing, the LLC argued as follows: Caltrans should be estopped [prevented] from enforcing the law as to the wallscape because so much time has passed without Caltrans taking any action; Caltrans investigators must have driven past the wallscape and could not have missed it because it was so large; the opportunity to profit from the wallscape was the significant motivation for the LLC’s purchase of the building; once the LLC became the owner of the building, the LLC rejected many significant offers to purchase the wallscape space; to reduce the wallscape’s size to satisfy Caltrans would result in a loss of $50,000 in revenue per month; as it exists the wallscape is worth $12,000,000.

Caltrans responded that it had, in fact, issued citations for other advertising signs, but could not really explain how the gigantic wallscape escaped any enforcement for 22 years.

The administrative law judge sided with the LLC, finding that although the wallscape violated the law, equitable reasons existed to bar Caltrans from enforcing the law with regard to the wallscape. The administrative law judge’s decision applied only to the wallscape.

The LLC next went to the superior court to obtain a judgment against Caltrans that would parrot the administrative law judge’s recommendation.

Caltrans responded to the LLC’s complaint in superior court, contending, in effect, that if everything the LLC contended was true, it could not state a claim against Caltrans.

The trial court sided with Caltrans and the LLC appealed the ruling.

As its central theme, the Court of Appeal found that the wallscape was erected without the requisite Caltrans permit: This violated applicable law. Additionally, as long as a permit was required, Caltrans is not required to explain why it failed to enforce the applicable law for over 22 years.

The court explained that for Caltrans to be estopped from enforcing the applicable law, it must be aware of the facts (the existence of the wallscape), it must intend that its conduct be acted upon by the LLC and the LLC must be ignorant of the true state of facts (the permit requirement).

However, continued the Court of Appeal, since a governmental agency is involved, there can be no estoppel if the result would effectively nullify a strong rule or policy adopted for the benefit of the public (apparently the prohibition of large signs within 660 feet of a freeway). In this setting, government inaction rarely forms a proper basis to estop the government from enforcing a law intended to benefit the public. Additionally, this case involves “only” the loss of potential profits to the LLC if Caltrans is not estopped.

The decision of the trial court was affirmed.

This case is entitled West Washington Properties, LLC, v. California Department of Transportation. It was decided in 2012.

(Tom Ramsey is a Long Beach attorney who has specialized in business law for more than 40 years. He may be reached at bizlawwiz@aol.com.)