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Lamar Central Outdoor, LLC v. State

July 9, 2009


The opinion of the court was delivered by: Garry, J.


Calendar Date: June 1, 2009

Before: Mercure, J.P., Peters, Malone Jr., Stein and Garry, JJ.

Appeals (1) from a judgment of the Supreme Court (Platkin, J.), entered May 6, 2008 in Albany County, which, among other things, granted petitioner's application, in a proceeding pursuant to CPLR article 78, to annul a determination of respondent Department of Transportation denying petitioner's request for a sign permit, and (2) from an order of said court, entered October 10, 2008, which denied respondents' motion for reconsideration.

The Ninth Ward Memorial and Service League, a fraternal organization affiliated with the American Legion (hereinafter the American Legion), owns real property in the City of Albany consisting of.29 acres and located in an R2B zone, a one and two-family medium-density residential district as defined by the Albany City Code. The property has allegedly been used for many years as an American Legion Post. Under the Code, such a use by a fraternal organization is limited to commercial zones, but the American Legion's nonconforming use is allegedly "grandfathered" because it predates the Code's enactment. The property is located less than 660 feet from an interstate highway and within a "Billboard Zone" created by the City in 2003 as part of its comprehensive zoning plan.

In August 2006, as part of a litigation settlement, the City issued a building permit to petitioner, a corporation in the business of erecting, leasing, and selling outdoor advertising structures, to place a billboard on the property. Petitioner entered into a lease with the American Legion and applied to respondent Department of Transportation (hereinafter DOT) for a permit. DOT denied the permit application on the ground that the property was located in an area zoned as residential and was not located in a commercial or industrial zone as required by Highway Law § 88 and 17 NYCRR 150.5 (b) (1). Petitioner's lease manager sent DOT a copy of the City's stipulation allowing the billboard, inquiring whether the stipulation would permit DOT to rescind its denial or whether petitioner would "need to go back to the City for them to change the zoning classification." DOT replied by correspondence reiterating its previous denial.

In June 2007, the City enacted an ordinance rezoning the property from R2B to C-1, a neighborhood commercial district. Petitioner promptly submitted a new permit application to DOT with a copy of the ordinance. DOT again denied the application, refusing to recognize the zoning change for purposes of outdoor advertising control and stating, "Since the parcels surrounding this site remain zones R2B and R2A, this action is not part of comprehensive zoning and these parcels were rezoned primarily for the purposes of permitting this sign."

Petitioner commenced this proceeding pursuant to CPLR article 78 challenging DOT's denial of its permit application. Supreme Court granted the petition, annulled DOT's determination, and directed it to issue the permit. Respondents moved for leave to reargue or renew, and the court denied the motion. Respondents appeal from both determinations.

The Federal Highway Beautification Act (see 23 USC § 131 [hereinafter FHBA]) controls the placement of billboards along interstate and primary highway systems and requires states to provide for the effective control of such billboards or risk losing 10% of their federal highway funds (see 23 USC § 131 [b]). The FHBA allows billboards to be erected within 660 feet of interstate and primary highway systems in areas zoned under state law as industrial or commercial (see 23 USC § 131 [b]). In compliance with the FHBA, New York State enacted Highway Law § 88 authorizing the Commissioner of Transportation to regulate the placement of billboards along highways pursuant, in part, to "national standards promulgated by the secretary of transportation of the United States" (Highway Law § 88 [5]). Accordingly, the Commissioner of Transportation promulgated state regulations controlling the erection of billboards, including 17 NYCRR 150.5 (b) (1), which limits the placement of billboards as required by the FHBA.

It is undisputed that the proposed billboard complies with federal, state, and city requirements in that it is located within 660 feet of an interstate highway and in the City's "Billboard Zone" (see 23 USC § 131 [b]; Highway Law § 88 [5]; 17 NYCRR 150.5 [b] [1]). However, DOT based its denial of the permit on 23 CFR 750.708 (b), promulgated by the Secretary of Transportation pursuant to the FHBA, which provides:

"State and local zoning actions must be taken pursuant to the State's zoning enabling statute or constitutional authority and in accordance therewith. Action which is not a part of comprehensive zoning and is created primarily to permit outdoor advertising structures, is not recognized as zoning for outdoor advertising control purposes" (23 CFR 750.708 [b]).

DOT asserts that this regulation establishes a national standard to which it must conform and that it properly applied the regulation in refusing to recognize the City's rezoning of the property. Supreme Court held that the property's zoning change merely comported with its longstanding actual commercial use and that neither federal nor state law provided a basis for DOT's refusal to recognize the City's rezoning of the property. In reaching this determination, the court found that it did not owe deference to DOT's interpretation of 23 CFR 750.708 (b) because DOT did not follow the federal interpretation of the regulation as set forth in a legal opinion (hereinafter the opinion letter) of the chief counsel of the Federal Highway Administration (hereinafter FHA). The opinion letter explains that the regulation's intent is to avoid "sham zoning" enacted solely to circumvent the FHBA by opening up areas for billboards rather than in furtherance of a community's comprehensive planning goals. The opinion letter sets forth several factors to be considered in this analysis, no one of which is determinative, and states that the FHA will not be required to accept a zoning action as valid if a combination of factors demonstrates that the action "is primarily to allow billboards in areas that have none of the attributes of a commercial or industrial area." Based on this interpretation of 23 CFR 750.708 (b) and on the property's longstanding commercial use, Supreme Court found that neither state nor federal law provided a valid basis for DOT's refusal to recognize the City's rezoning of the property.

In reviewing this agency determination, the standard of review is "whether [it] was arbitrary and capricious or affected by an error of law" (Matter of Scherbyn v Wayne-Finger Lakes Bd. of Coop. Educ. Servs., 77 NY2d 753, 758 [1991]; see CPLR 7803 [3]; Matter of Paulsen Dev. Co. of Albany, LLC v County of Schenectady Dept. of Eng'g & Pub. Works, 47 AD3d 1031, 1034 [2008]). Essentially, the test is one of rationality (see Matter of Pell v Board of Educ. of Union Free School Dist. No. 1 of Towns of Scarsdale & Mamaroneck, Westchester County, 34 NY2d 222, 231 [1974]). Supreme Court determined that DOT misinterpreted 23 CFR 750.708 (b). However, "the construction given statutes and regulations by the agency responsible for their administration will, if not irrational or unreasonable, be upheld" (Matter of Johnson v Joy, 48 NY2d 689, 691 [1979]). DOT is vested with the authority to regulate outdoor advertising signs along interstate highways in New York and is responsible for the administration of statutes and regulations applicable to such signs (see Highway Law § 88; Niagara Falls Sightseeing by Sheridan, Inc. v Penn Adv., 163 AD2d 861, 862 [1990], lv denied 77 NY2d 803 [1991]). Therefore, if DOT's interpretation of CFR 750.708 (b) is not irrational or unreasonable, it is entitled to deference (see Matter of Johnson v Joy, 48 NY2d at 691; Matter of Skyline Specialty v Gargano, 294 AD2d 742, 742 [2002]). Further, as the agency responsible for the regulation of billboards, "DOT's decision to grant or deny a sign permit is entitled to great weight and will be upheld if reasonable" (Matter of Trea v New York State Dept. of. Transp., 265 AD2d 847, 847 [1999]).

According to its June 2007 letter, DOT determined that the rezoning was not part of comprehensive zoning and had taken place primarily for the purpose of permitting a billboard because the parcels surrounding the site continued to be residentially zoned. This determination was based on the information presented, including, among other things, the original application stating that the property was residentially zoned, the lease agreement for a proposed billboard, the City building permit for the billboard, the litigation stipulation permitting the billboard, and petitioner's letter responding to the first denial by inquiring whether it would be necessary to return to the City "for them to change the zoning classification." Also before DOT was petitioner's second permit application referring to the earlier denial and enclosing the City's ordinance that rezoned the property from a residential to a commercial classification. It was neither ...

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