Articles Written By The Firm

Just Compensation for the Condemnation of Going Concern Value

By February 20, 2019 No Comments

Just Compensation for the Condemnation of Going Concern ValueMichigan Bar Journal, December, 1995, Volume 64, No. 12, Special Pullout Section – by Alan T. Ackerman

Introduction

Going concern value, goodwill, lost business profits and other related items, when taken in an eminent domain expropriation, have traditionally been treated as non-compensable by our judiciary. Legislation in some states now allows for payment of traditionally non-compensable items.

There are also a number of jurisdictions which have judicially expanded the availability of compensation. This article will cover the changes in patterns of compensation created by legislation, and review judicial decisions which have modified standards for compensation.1

The United States Supreme Court Standard of Just Compensation

The Supreme Court standard for just compensation relies on an indemnification theory of damages to make the owner whole for all losses created by the condemnation.2 “The public may not by any means confiscate the benefits or be required to bear the burden of the owner’s bargain.”3 In concluding its discussion on the standard for just compensation, the Olson Court applied the language of the Minnesota Rate Cases holding a property owner should be indemnified for his loss.4 The Olson Court then noted the Supreme Court has held an owner should obtain payment for the highest and most profitable use of his property.5

U.S. v Miller6 clarified the Supreme Court’s construction of “just compensation” previously set forth in Olson and Monongahela by restating the proposition “that an owner of property is to receive no more than indemnity for his loss, his award cannot be enhanced by any gain to the taker.” The Miller Court, by viewing payment on the basis of a willing-buyer/willing-seller context, utilized an objective theory of just compensation, to avoid subjective factors created by the pendency of condemnation on the market value of the property.7

In McCandless v U.S.8, the owners claimed they would have had the opportunity to use the property for a different and more profitable agricultural purpose than the property was presently being used for. The Supreme Court held the fact finder should determine the value, if proofs were presented showing a more profitable use for the property than the then existing use.

In U.S. v Powelson,9 property had been assembled over a number of years by an owner intending to construct a dam system in the area for the production of electricity. The United States Supreme Court held that the owner’s potential to establish private dams was too remote to be included as part of the market value of the property.10

In its analysis of the dicta of Mitchell v U.S., the Powelson Court determined that just compensation should not be granted to a business which could not be relocated when it was not the government’s intent to take the business.11 This federal precedent that a business should not receive compensation when condemned is a corollary to the policy that it is not the government’s gain for which compensation is to be paid.12 A requirement of compensation is that it be for going concern value. This rule differs from Michigan, Minnesota and Pennsylvania, where compensation awards for going concern value, in those limited circumstances where relocation is impossible, may now be allowed.

The reasons for limiting compensation clearly enunciated in Mitchell may have been somewhat modified by the subsequent cases of U.S. v General Motors13 and U.S. v Kimball Laundry.14

In Kimball the Court held the Army’s occupation and use of a laundry company for the duration of the war constituted a taking of a going concern for which compensation should be awarded. The award was based upon the reasonable rental value of the routes maintained by the laundry. However, the majority refused to award compensation for the diminution in the value of the “trade routes” of the laundry company because of the indeterminate taking of the property interest.

Most jurisdictions apply the general rule that unless the government is taking a property for the same purpose for which the property was used by the private owner, there will be no compensation paid for going concern value.15 However, in U.S. v Kimball, the United States Supreme Court allowed an award even though the government ostensibly had no use for the customer lists which were being paid for in a temporary taking of laundry routes for use by the Army during wartime.

The majority held that whatever the transferable value of these trade routes, their temporary use by the government must be paid for. The dissenting minority held that the trade routes were wholly useless to the government and therefore should not be compensable without consideration of whether the taking was temporary or permanent. The Supreme Court further limited compensation under these circumstances to the transferable interest; basing compensation upon rental value only as the alternative valuation, and the payment upon the temporary taking only.16

States Denying Payment of Going Concern Value

Many states deny recovery for payment of any goodwill or going concern value attached to the property. In Kentucky,17 Wyoming,18 Arkansas,19Texas,20 and Utah,21

proof of business losses, going concern value and goodwill are considered too speculative and uncertain to be included as a part of a market value determination.

Indiana has enacted a statute that loss of profits and goodwill do not constitute compensable interests. The going concern of the value of a business is the difference between a dead plant and a live one. It is generally a percentage of the physical property loss.22

Other state judiciaries will allow compensation awards for business related items or when a public utility is taken.23 Payment of going concern for a public utility is a logical corollary to the general rule of McGovern24 that compensation is paid for what is being taken and not for the taker’s gain. Community Redevelopment Agency v Abrams,25states the public utility exception policy:

“. . first the utility is uniquely adapted for a particular purpose and cannot be separately sold; second, the plant is so uniquely connected with the other parts of the business that if one is destroyed, all are destroyed; and third all chances of reestablishing the utility are destroyed and the condemnor will itself enjoy the benefits and other intangible aspects of goodwill which are given up.”26

In denying going concern value, Abrams also relied on the traditional theory that “in the usual case most of it can be transferred; in the remainder the amount of loss is so speculative that proof of it may justifiably be excluded.”27

Framework for Carving an Exception to the Noncompensability Rule

Applications of Highest and Best Use

Many jurisdictions are liberal in admitting evidence of enhancement for special value. The admission may effectively allow for evidence which includes goodwill or going concern value in an indirect manner. For example, in Connecticut, the value of the business is not ordinarily considered in determining the market value of the land unless that business value enhances the value of the property and therefore would effect what an individual would be willing to pay for the property.28 The highest and best use theory also applies in Alaska,29 Virginia,30 Vermont,31Mississippi,32 and Delaware.33

In New Jersey, going concern value of the condemned property is not considered as separately compensable because the loss hinges on speculative elements. However, where there is a temporary or continued use of the business and the losses are supported by evidence, these elements may be compensable.34

In New York, going concern value is a separately compensable item when the condemning authority takes and uses the intangible as well as tangible assets of the condemned operation.35

Liquor License Exception

A number of jurisdictions have carved out an exception for situations in which a license cannot be relocated.

For example, in Minnesota, loss of going concern value is not generally compensable. However, where there is a non-transferable liquor license which gives the property intrinsic value and the license is not movable, compensation has been allowed for the loss of going concern value.36

In both Minnesota and Pennsylvania,37 a liquor license itself is property, and is therefore considered to be a constitutionally compensable item. The impossibility of using the license at another location because of regulatory procedures prohibiting the transfer serves as an underlying basis for allowing compensation. Such rationale provides the framework for the following Michigan decisions.

Michigan Alteration Of the General Rule that Going Concern Value and Goodwill are Not Compensable as Part of the Condemnation

Michigan maintains the most liberal judicially developed going concern value compensation rules in the nation. The legal framework for the liberal construction of compensability is derived from Grand Rapids and Indiana Railroad Company v Weiden.38 However, in the 80 years following the Weiden decision, the Michigan judiciary followed a restrictive general rule that just compensation was not intended to include going concern or goodwill losses.39

The modern preceptor of the exception was carved out in State Highway Commission v L & L Concession Company40 In L & L, the owner was a tenant of a race track food stand which was condemned for a highway. At the trial, the owner presented an offer of proof explaining his operation and its “special adaptability to continue as an expectancy of renewal of the lease.” The owner claimed that the business was destroyed by the condemnation of the race track and compensation should be paid for what the property was best adapted for. The appellate court found the trial court erred in refusing to allow the evidence to be presented to the trier of fact because the owner had a special advantage due to the monopolistic position that it maintained at the race track rather than conventional customer goodwill. The L & L Court relied on Jackson v U.S.41 and Saugen to support the conclusion that going concern value may be paid when there is a nontransferable license being destroyed by the taking.

The Michigan judiciary then sought to delineate when going concern would be paid in Detroit v Whalings.42 In Whalings, the condemned tenant made a claim for the loss of goodwill for the clothing store which was located in the same area for over one hundred years. The tenant claimed there was no other site in the downtown area of Detroit in which he could relocate.

The Court distinguished Whalings from the L & L decision on the basis that Whalings did not enjoy a monopoly and its customers were not the “captive audience” that existed in the L & L race track concession stand. Further, there seemed to be a possibility of finding a suitable location nearby, whereas in L & L there was not a suitable alternative location. But the dicta of Whalings provides the test of when compensation should be paid for going concern. The test, paraphrasing Whalings from 43 Mich App 1, 10 which could be given as a jury instruction, is as follows:

… to determine that a taking requires compensation for losses of going concern value you must find with a degree of reasonable certainty that all suitable locations to which this business may relocate have been condemned or are unavailable, proof of destruction of this business because it is almost dependent on the location will then require payment of going concern value.43

The Whalings language also applies a standard by which a well located business in the middle of an area clearance urban renewal project would be more likely to be paid for going concern value as long as this would not be redundant of other damages.44

In City of Lansing v Wery, the Michigan Court of Appeals approved a trial court determination that “the premises were adapted for a particular highly productive use no way dependent on the ownership by the particular defendants.45 The Wery owner was the tenant operating a restaurant near the local governmental bodies and was denied the opportunity to relocate to any comparable site. The trial court made a specific finding that the operation was a unique operation at a unique location.

Additionally, the Wery Court held “compensation should be made for the going concern value where the operation depended greatly on that location, and any significant move would so greatly impair its business as to nearly destroy it.”46 The additional factors of the uniqueness of the location and the near destruction created by any condemnation may create an alternative test to that established in Whalings above.

In State Highway Commissioner v Gaffield,47 the Michigan Court of Appeals reviewed L & L to determine what facts were required for recovery of going concern.48 Payment would be made when there was an exclusive license, total destruction of the business, or no possibility of relocation and the award was not redundant of other items of compensation. Gaffield further clarified factors which would form a basis for recovery under the Wery standard as a unique operation in a unique location, or a business primarily dependent on the location, or evidence that the requirement of a move would nearly destroy the business, and the use of the business was not dependent on the ownership.

Sovereign Immunity Issue

A careful reading of Detroit v Whalings,49 would lead one to conclude that pursuing a tort damage theory would be unsuccessful in a condemnation setting because of the general rules that sovereign immunity protects governmental bodies from being sued for their exercise of governmental functions. However, as the demise of sovereign immunity grows throughout the nation,5O the denial of recovery for going concern value based upon the fact that it is a government agency condemning the property will also face its demise.

The Analogy to Payment of Lost

Profits in Contract Actions

There may be developing an enlightened view allowing for an award of damages for the loss of anticipated profits or going concern value when the loss is proven to a reasonable degree of certainty.51 For example, Michigan has abandoned the “new business” “interrupted business” distinction of summarily rejecting claims by new businesses for lost future profits caused by breach of contract.52

Allowing damage awards for businesses not yet open is at complete variance with the Abrams and Kimball dicta that consequential and going concern damages are speculative and therefore never compensable as part of just compensation.

Redundancy Issues

The most often quoted reason for refusing to allow compensation for going concern or goodwill is that such payment would often be redundant. The exclusion of going concern value is also predicated upon the theory that when there is a taking of land only the physical assets are taken by the condemnor. The going concern value remains in the owner who is at liberty to utilize such value by reestablishing his business elsewhere.53 However, when the owner can show that such separate damage for going concern would not be duplicative of any other damage awards received, an award has been allowed.54 Arguably, when a condemnee is paid for the highest and best use his property is adaptable for; he has received compensation for that going concern or goodwill value which is not transferable but inherent in the property itself.

The Uniform Eminent Domain Code, without any fear of awarding duplicative damages provides for compensation to owners for the loss of business goodwill or going concern value.55 The drafters of the Code avoid the problem of redundancy by including certain limitations and requiring the owner to mitigate the damages suffered when reasonably possible.56

Conclusion

Judicial rulings and legislative enactments allowing

for compensation of going concern value in some

jurisdictions may be a precursor of a trend allowing

compensation for going concern value because of the

waning three policies which previously supported

denial of payment.

First, there is an expansion in the attitude of our courts that special use or adaptability attached to land is an advantage which should be compensated for as part of the eminent domain transaction. The problem in determining whether there is value based upon good management or a special type of going concern or goodwill may end up being a factual question after there is a showing of a near total destruction of a property interest. Once the monopoly position, or license, or near total destruction is shown, the issues of whether in fact there was no possibility of relocation and the value of the going concern may become issues for factual determination.

There is an expansion in the attitude of our courts that special use or adaptability attached to land is an advantage which should he compensated for as part of the eminent domain transaction.

A second policy favoring compensation for going concern value or business losses created by condemnation may be due to the changing technology which allows business interests to be appraised with a precision similar to that now used for real estate. The American Society of Appraisers now has organized a business valuation specialty which is developing the field with similar material, research and continuing education which has brought respect to real estate appraisal practice.

Labeling the same business interests as speculative and non-compensable in a condemnation proceeding would seem inconsistent. Further, in breach of contract cases, the judiciary will award damages for prospective losses for businesses which have not as yet opened.57 The underlying theory in the breach of contract actions is that the party being damaged by the breach should be “placed in the same position as they would have been in had the breach not occurred” is similar to the language used in condemnation proceedings.58 Because there is no greater speculation in determining business damages which are part of a condemnation proceeding than damages occurring in breach of contract actions, perhaps the judiciary will take a less restrictive view of limiting compensation for going concern takings.

The distinction between allowing a party to be made whole, including redress for lost profits in contract actions and not allowing a party to be made whole even though the exact same language is used in condemnation actions as in tort or contract actions may be based upon absence of fault in a condemnation proceeding. Prosser on Torts, Third Edition, maintains there may be acts which are harmless in themselves individually which, together with other acts, cause damage for which redress may be granted to the injured party. Prosser cites the circumstances of otherwise innocent conduct which is tortious when combined with other like innocent activities. Among the cases cited are those which involve pollution, flooding, water diversion and highway obstruction. Prosser notes that such innocent activity will be tortious conduct only if the individual knows, “or is at least negligent in failing to discover,” that his conduct may concur with that of others to cause damage.

Possibly, in the idea of a condemnation itself, fault may not be a factor which allows for redress for all losses in a condemnation setting. However, in certain limited circumstances, such as the recent “Poletown” condemnation in Detroit, where the condemnor made major businesses move eight months after giving the owners notice that the condemnation would occur might be such an egregious abuse that the absence of fault theory normally applied to condemnations should not apply because of the circumstances. Although it may be arguable that neither party is at fault in a condemnation action, certainly the government should make every attempt to mitigate the damage to the owner.

The third policy is closely intertwined to the above policies. The judiciary is beginning to recognize that, on a case-by-case-basis, there may be situations in which relocation is impossible or there is a special adaptability of a use or license which should be quantified in terms of compensation. The perception is grounded upon the marketplace itself; if a willing buyer and a willing seller are going to pay for the going concern value because of the unique factors relating to the location of the property interest, the amount should be included as part of condemnation damages. As sovereign immunity declines, the judiciary will be more amenable to allowing compensation for all losses arising directly from condemnation activity.

 

Alan T. Ackerman is a 1972 graduate of the University of Michigan Law School. He is a past chairperson of the Detroit Bar Association Real Estate and Condemnation Committee, and the State Bar of Michigan’s Comdemnation Law and Procedures Committee. He is also an active member of the condemnation litigation section of the ABA.

 

Footnotes

1. Harjue and Clauretie, “New Directions in Eminent Domain: The Emerging Issue of Enhancement;” The Appraisal Journal, April 1984, at 214 covers legislative modifications to the noncompensability rule.

2. Monongahela v US, 148 U.S. 312, 324, 37 L.Ed. 463, 467, 13 S.Ct. 622, (1892).

… no private property shall be appropriated to public

uses unless a full and exact equivalent for it be returned to the owner, aptly expresses the scope of the constitutional safeguard against the uncompensated taking or use of private property for public purposes.

3. L. Vogelstein v US., 262 U.S. 337, 340, 67 L.Ed. 1012, 1014, 43 S.Ct. 564 (1922).

4. 230 U.S. 352, 454, 57 L.Ed. 1511, 1563, 33 S.Ct. 729 (1912), also cited in Olson v US., 292 U.S. 246, 78 L.Ed. 1236, 1241, 545 704 (1934).

He is entitled to be put in as good a position pecuniarily as if his property had not been taken. He must be made whole but is not entitled to more. It is a property and not the cost of it that is safeguarded by state and federal constitutions.

5. Mississippi R. River v Patterson, 98 U.S. 403, 408; 25 L.Ed. 206, 208(1878).

In Olson, the Court described the highest and best use standard in stating:

The highest and most profitable use for which the property is adaptable and needed or likely to be needed in the reasonably near future is to be considered, not necessarily as the measure of value, but to the full extent that the prospect of demand for such use affects the market value while the property is privately held.

6. 317 U.S. 369, 375; 87 L.Ed. 336, 343, 63 S.Ct. 276 (1943).

Again, strict adherence to the criterion of market value May involve inclusion of elements which, though they affect such value, must in fairness be eliminated in a condemnation case, as where the formula is attempted to be applied as between an owner who may not want to part with his land because of its special adaptability to his own use and a taker who needs the land because of its peculiar fitness for the taker’s purposes. These elements must be disregarded by the fact finding body in arriving at “fair” market value.

Since the owner is to receive no more than indemnity for his loss, his award cannot be enhanced by any gain to the taker.

7. Id. at 375, relying on United States v Chandler-Dunbar Co., 229 U.S.53, 81; 57 L.Ed. 1063, 33 S.Ct. 667 (1912).

8. 298 U.S. 342, 80 L.Ed. 1205, 56 S.Ct. 764 (1935).

9. 319 U.S. 266, 87 L.Ed. 1390, 63 S.Ct. 1047 (1942).

10.Id., 319 U.S. at 275-6; 63 S.Ct. at 1053.

But in order for that special adaptability to be considered, there must be a reasonable probability of the lands in question being combined with other tracts for that purpose in the reasonably near future.

In the absence of such a showing, the chance of their being united for that special use is regarded “as too remote and speculative to have any legitimate effect upon the valuation.” McGovern v New York, 229, U.S. 363, 372; 57 L. Ed. 1232, 33 S.Ct. 876 (1913).

11.Id., 319 U.S. at 281-2 63 S.Ct. at 1056 stating:

… not all losses suffered by the owner are compensable under the Fifth Amendment. In absence of a statutory mandate (United States v Miller supra, 317 U.S. page 376, 63 S.Ct.page 281), the sovereign must pay only for what it takes, not for opportunities which the owner may lose. See Orgel,Valuation Under Eminent Domain (1936) §71, §73. On the one hand are such cases as Monongahela Navigation Company v US., supra, where it was held that the United States had appropriated a going enterprise to its own ends and must make compensation accordingly. But it is well settled in this Court that, “Frustration and appropriation are essentially different things’ ” Omnia Commercial Company v US., supra, 261 U.S. page 513, 43 S.Ct. page 439, 67 L. Ed. 773. Thus in Mitchell v United States, 267 U.S. 341, 45 S.Ct. 293, 69 L.Ed. 644,the owner was denied compensation for the destruction of his business which resulted from the taking of his land for a public project even though the business could not be reestablished elsewhere.

  1. See McGovern v New York, 229 U.S. 363, 33 S.Ct. 876, 57 L. Ed. 1228; also Boston Chamber of Commerce v Boston, 217 U.S. 189, 195, 30 S.Ct. 459, 460, 54 L.Ed. 725 (1910).
  2. 338 U.S. 1, 93 L.Ed. 1765, 69 S.Ct. 1434 (1949).

14. 323 U.S. 378, 65 S.Ct. 357, 89 L.Ed. 311 (1945).

15 See footnotes 23-25 infra.

  1. 338 US at 16, 93 L.Ed. at 1777, 69 S.Ct. at 1443.

17. Commonwealth Dept. of Highways v Silver, 487 SW2cl 926 (1972).

18. State Highway Commissioner v Peters, 416 P 2d 390 (1966).

19. Arkansas State Highway Commission v Highfill, 248 Alk 541, 452 SW2d 846 (1970);

Arkansas State Highway Commission v Wallace, 247 Ak 157, 444 SW2d 685 (1969).

20. Huckabee v State, 431 SW2d 927 (1968); State v Zaruba, 418 SW2d 499 (1967).

21. State v Ouzounian, 26 Utah 442, 491 P2cl 1093, (1971).

22. Public Service Co. of Indiana, Inc. v Morgan Co. Rural Electric Membership Corp., 360 N E2d 1022 (1977). Indiana Code § 32-11-1-6.

23. Arizona (City of Phoenix v Consolidated Water Co., 415 P2d 866, 101 Ariz 43 (1966)).

Wisconsin (Milwaukee and Suburban Transportation Co. v Milwaukee,72 Wisc 2nd 252, 240 NW2d 503 (1978)). Massachusetts (Gloucester Water Supply Company v City of Gloucester, 60 NE 977 (1901)). The underlying policy creating support for payment of the taking of a going concern is well stated in New Jersey Highway Authority v Rue, 41 NJ Super 385, 125 A2d 305 (1956). The Court noted that business profits are not a separate element of compensation but the proof of business profits may be admissible. Although a condemnor does not acquire the going concern value of a business as the loss hinges on speculative elements, a different situation may exist where a condemnation involves a temporary use of the business as a going concern or a seizure of the property for continued operation. The value of the going concern is as important to the City in furnishing services to the public as are the tangible assets being taken.

24. See fn 12 supra.

25. 15 Cal 3d 813, 543 P2d 905 (1975), cert. den. 429 U.S. 869, 50 L.Ed. 2d 144, 97 S.Ct. 180.

26. 15 Cal 3d 813, 543 P2d 405, citing Sawyer v Commonwealth, 182 Mass 245, 65 NE 52 (1902).

27. Compare the “consequential damage” standard of Mitchell v US., 267 U.S. 341 69 L.Ed. 644, 45 S.Ct. 293 (1924) cited in fn 11 supra. Arguably, Kimball and G.M. have somewhat retreated from the ironclad rule that all consequential damages are speculative and therefore never compensable.

28. Housing Authority of City of Bridgeport v Lustig, 139 Conn 73, 90A2d 169 (1952).

29. Ketchian Cold Storage Co. v State, 491 P 2d 143 (1971). (Alaska has an exception to the general rule which permits introduction of evidence of income when a condemnation is of unique commercial property.)

30. Andersen v Chesapeake Ferry Co., 186 Va. 481, 43 SE2cl 10 (1947).(Ferry boat)

31. Sharp v Transportation Board of the State of Vermont, 141 Vt 480,451 A2d 1074 (1982).

32. Bear Creek Water Assoc. v Town of Madison, 416 So.2d 399 (1982).(Miss.) (Water supply system)

33, State v Davis Concrete of Delaware, Inc. 355 A2d 883 (1976).

34. Beech Forest Hills, Inc. v Morris Plains, 127 N.J. Super 574, 318 A2cl 435 (1974).

35. Matter of City of New York 5th Avenue Coach Lines, 18 NY 2d 212,273 NYS.2d 52 (1966).

36. Mattson v Saugen, 238 Minn 402; 169 NW2d 37 (1969).

37. Redevelopment Authority of Philadelphia v Lieberman, 461 Pa. 208,336 A2d 249 (1975).

38. 70 Mich App 390, 395, 38 NW 94 (1888).

… both of the appellants were using their property in lucrative businesses, in which the locality and its surrounding had some bearing on its value. Apart from the money value of the property itself, they were entitled to be compensated so as to lose nothing by the interruption of their business and its damage by the change, A business stand is of some value to the owner of the business, whether he owns the fee of the land or not and a diminution of business facilities may lead to serious results. There may be cases where the loss of a particular location may destroy business altogether, for want of access to any other that is suitable for it. Whatever damage is suffered, must be compensated. Appellants are not legally bound to suffer for petitioner’s benefit. Petitioner can only be authorized to oust them from their possessions by making up to them the whole of their losses.

39. In re Edward Jeffries Homes Housing Project, 306 Mich, 638, 11 NW2cl 272 (1943), the Michigan Supreme Court found “. . The loss of goodwill is not an element of compensation where the business is not taken for a use as a going concern.”

40. 31 Mich App 222, 187 NW2d 465 (1971).

41. 103 F Supp 1019 (Ct. Cl. 1952).

42. 43 Mich App 1, 202 NW2d 816 (1972), leave denied 388 Mich 813(1972).

43. The language from which the test is paraphrased may be found at 43 Mich 1, 10, 202 NW2d 816, 821.

44. Id. at 10

“. . .the possibility of finding a suitable location nearby with the same or nearly the same convenience factors is not foreclosed by reason of the condemnation herein. In the L & L case, a ‘suitable location nearby’ could only be within the racetrack grounds. The possibility of such relocation was foreclosed by reason of the condemnation of the entire racetrack. For this case to come within the facts of L & L, the entire downtown area would have to be included in the condemnation order.”

45. 68 Mich App 158; 242 NW2d 251 (1976), leave denied 397 Mich 828 1976).

46. Id. 68 Mich App 158, 165; 242 NW2d 51,55.

47. 108 Mich App 88; 310 NW2d 281 (1981).

48. Id. 108 Mich App at 91, 310 NW2d 283 relying upon L & L stated:

“. . going concern value can be awarded if it is necessary to render the compensation full, if it is not redundant of other damages awarded and if the business has been totally destroyed by the taking.”

49, Whalings fn 40 supra, 43 Mich at 11 202 NW2d at 821 held:

Respondent-appellant also argues that there is an analogy between a condemning authority and a tortfeasor and thus going concern value allowed in a tort case should also be allowed in a condemnation case. The power of the public to take private property is carefully limited by constitution and statute with the right to attack initially the authority to take. Such is not the case where a wrongful act is done tortiously. In fact, the power of eminent domain is a vital right of a people exercised through its governing body. Livonia Twp School Dist v Wilson, 339 Mich 454 (1954).

50. Evans v Board of County Comrs., 174 Colo. 97, 482 P2d 968 (1971),judicially abrogated the sovereign immunity rule in the state.

Pittman v City of Taylor, 398 Mich. 41, 247 NW2d 512 (1976), Provisions of Governmental Immunity Act are to be strictly construed. MCLA §691.1401 et. sec. Cauley v City of Jacksonville, Fla 403 So.2d 379 (1981).

However, please see Ross v Consumers PowerCo, ____Mich ____(1985). Sovereign immunity may now be reverting to the old more stringent standard.

51. Fera v Village Plaza, Inc., 396 Mich 639; 242 NW2d 372 (1976).

52. Id. 396 at 644, 242 NW2d at 374;

See also, Godwin v Ace Iron & Metal Co., 376 Mich. 360, 368, 1 NW2cl 151, 156 (1965), in which the Michigan Supreme Court after determining fraud occurred, found that the introduction of evidence should be liberally allowed in order to prove damage.

The liberal rules allowing the introduction of evidence which are allowed in contract breach and tort actions do not require absolute precision in proof of damages. See McCullagh v Goodyear Tire, 342 Mich 254-5, 69 NW2d 731, 737, citing Eastman Kodak v Southern Photo Materials, 273 U.S. 359, 379, 47 S.Ct. 400, 7 L.Ed.,684 (1927). Further, the burden of proving lack of mitigation transfers to the party committing the wrongful conduct. This standard of liberal introduction of evidence and the change of the burden of proof of mitigation has not as yet been applied to condemnation because of the basic policy that neither the condemnor nor the condemnee is to be considered “at fault,” rather that there is a public need for the property interest being taken and the owner should not be placed in a worse position nor bettered because of the need of the condemnee’s property interest.

53. In re Edward Jeffries Homes Housing Project, 306 Mich 638, 651; 11 NW2d 272,276 (1943), the Michigan Supreme Court stated a good plumber should be able to continue his business in almost any location and do as well as he formerly did.” See also Banner Milling Co. v State, 240 NY 533, 148 NE 668 (1925).

54. L & L, at 235 held:

But where the valuations of the estates of lessor and lessee in land do not reflect going concern value of the lessee’s business there operated, then, the going concern value can, without making the total damages awarded redundant, and, it full compensation is to be paid, must be determined and awarded to a businessman whose business has been destroyed by the taking.

Nassau County v Cohen, 384 NYS.2cl 761, 39 NY2cl 574,349 NE2d 861 (1976). See also, Gaffield, footnote 46 supra.

55. Uniform Eminent Domain Code, § 1016(a), (1974):

    1. In addition to fair market value determined under Section 1004, the owner of a business conducted on the property taken, or on the remainder if there is a partial taking, shall be compensated for loss of goodwill only if the owner proves that the loss (1) is caused by the taking of the property or the injury to the remainder, (2) cannot reasonably be prevented by a relocation of the business or by taking steps and adopting procedures that a reasonably prudent person would take and adopt in preserving the goodwill; (3) will not be included in relocation payments under Article XIV, and (4) will not be duplicated in the compensation awarded to the owner

56. The comment to § 1016 states, in part,:

Section 1016 is intended to reverse the general rule but widely criticized rule under which compensation for loss of business goodwill is not allowed in eminent domain. See Auraria Businessmen Against Confiscation, Inc v Denver Urban Renewal Authority, (Colo. 1974) 517 P2d 845; Aloi and Goldberg, A Reexamination of Value, Goodwill, and Business Losses in Eminent Domain, 53 Cornell L.Q. 604 (1968). It provides compensation for loss of goodwill in both a whole or a partial taking; but such loss is recoverable only to the extent it cannot reasonably and economically be prevented by relocation or other efforts by the owner to mitigate.

The determination of loss of goodwill is governed by the rules of evidence generally applicable to such a determination and not by the special rules of evidence relating to property evaluation in eminent domain contained in Article X1. See Comment to Section 1103. In addition, the burden of proof under this section is upon the owner. Compare Section 904 (neither party, has burden of proof on issue of amount of compensation)-.

57. Compare the judicial willingness to award damages in a breach of contract for a business not yet opened in Fera, footnote 52 supra, with the absolute refusal of the Powelson Court to allow hopes of profits in the future enterprise to be part of the evidence of the highest and best use in determining fair market value. In Goodwin v Coe Pontiac, 62 Mich App 405, 233 NW2cl 598 (1975) the court cited 5 Williston, Contracts (rev ed), § 1338, p 3763 which held that the remedy for breach of contract was to “. . . put the plaintiff in as good a position as he would have been in had the defendant kept his contract.” The court held that when not conjectural or speculative, lost profits would fall within the parameters of making the damaged party whole.

58. Compare the notion of indemnification as set forth in Olson, fn 4 supra, with the tort action of Gowdy v U.S., 271 F Supp 733 (1967), in which Judge Fox of the Western District of Michigan cited the language from a number of condemnation cases in his holding that: Fair compensation is that which puts the plaintiff in as good a condition as he would have been if the injuries had not occurred. Anything short of this is inadequate. A person who causes an injury to another should not be allowed to cast any portion of the actual or appreciable loss on the party whom he has injured. Olsen v City of Dearborn, 290 Mich 651, 288 NW 295 (1939); Fisk v Powell, 349 Mich 604, 84 NW2d 736 (1937); In re State Highway Commissioner, 249 Mich 530, 229 NW 500 (1930); Grand Rapids & Indiana R. Co. v Heisel, 47 Mich 393, 11 NW 212 (1882).

Judge Fox also allowed an award for future damages of pain, suffering, impairment of earning capacity and other physical losses. See also U.S. v Rio Grande Western R. Co., 547 F2c! 1101 (1977).

Leave a Reply