Title: City of Milwaukee Post No. 2874 v. Redevelopment Authority of the City of Milwaukee

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2009 WI 84 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2006AP2866 
COMPLETE TITLE: 
 
 
City of Milwaukee Post No. 2874 Veterans of 
Foreign Wars of the United States, 
          Plaintiff-Appellant, 
     v. 
Redevelopment Authority of the City of 
Milwaukee, 
          Defendant-Respondent-Petitioner. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2008 WI App 24 
Reported at: 307 Wis. 2d 518, 746 N.W.2d 536 
(Ct. App. 2008-Published) 
 
 
OPINION FILED: 
July 17, 2009   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
February 4, 2009   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Milwaukee   
 
JUDGE: 
Elsa Lamelas   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
ZIEGLER, J., concurs (opinion filed). 
GABLEMAN, J., joins concurrence.   
 
DISSENTED: 
PROSSER, J., dissents (opinion filed). 
CROOKS and ROGGENSACK, JJ., join the dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the defendant-respondent-petitioner there were briefs 
by Grant F. Langley, city attorney and Gregg C. Hagopian, 
assistant city attorney, Milwaukee, and oral argument by Gregg 
C. Hagopian. 
 
For the plaintiff-appellant there were briefs by Hugh R. 
Braun, Melinda A. Hein, and Godfrey Braun & Frazier, LLP, 
Milwaukee, and oral argument by Hugh R. Braun. 
 
An amicus curiae brief was filed by James S. Thiel, counsel 
for the Wisconsin Department of Transportation, and Abigail C.S. 
Potts, assistant attorney general, with whom on the brief was 
J.B. Van Hollen, attorney general, on behalf of the State of 
Wisconsin. 
 
 
 
2009 WI 84
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
 
No.  2006AP2866     
(L.C. No. 
2005CV365) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
City of Milwaukee Post No. 2874 Veterans of 
Foreign Wars of the United States,   
 
 
Plaintiff-Appellant,   
 
 
v. 
 
Redevelopment Authority of the City of 
Milwaukee,   
 
 
Defendant-Respondent-Petitioner.   
FILED 
 
JUL 17, 2009 
 
David R. Schanker 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed.   
 
¶1 
SHIRLEY 
S. 
ABRAHAMSON, 
C.J.   The 
Redevelopment 
Authority of the City of Milwaukee seeks review of a published 
decision of the court of appeals reversing a judgment of the 
Circuit Court for Milwaukee County, Elsa C. Lamelas, Judge.1  The 
judgment of the circuit court was that the Redevelopment 
Authority is not obligated under Article I, Section 13 of the 
Wisconsin Constitution to pay any sum to the City of Milwaukee 
                                                 
1 City of Milwaukee Post No. 2874 Veterans of Foreign Wars 
of the U.S. v. Redev. Auth. of Milwaukee, 2008 WI App 24, 307 
Wis. 2d 518, 746 N.W.2d 536. 
No.  2006AP2866   
 
2 
 
Post No. 2874 Veterans of Foreign Wars of the United States as 
just compensation for the taking of a parcel of real property in 
which the VFW held a leasehold interest.  The judgment also 
required the VFW to return a $300,000 award that it had 
previously received from the Redevelopment Authority and to pay 
$87,348 in interest and statutory costs.  
¶2 
The court of appeals reversed the judgment of the 
circuit court and remanded the cause to the circuit court, 
instructing that "the VFW must be afforded an opportunity to 
prove the value of its separate leasehold interest" in the 
condemned property and to receive compensation therefor.   
¶3 
We reverse the decision of the court of appeals and 
affirm the judgment of the circuit court.  We conclude that the 
unit rule the circuit court applied in the present case does not 
contravene 
the 
VFW's 
state 
constitutional 
right 
to 
just 
compensation.2  
¶4 
The 
circuit 
court 
applied 
the 
"unit 
rule" 
in 
determining the amount that the Redevelopment Authority had to 
pay the VFW as just compensation for the taking.  Under the unit 
rule, when property that is held in partial estates by multiple 
owners is condemned, the condemnor pays the fair market value of 
                                                 
2 We 
need 
not 
address 
additional 
issues 
that 
the 
Redevelopment Authority raises in its briefs to this court in 
support of its position that the court of appeals erred in 
reversing the circuit court's judgment.  The Redevelopment 
Authority argues that the doctrines of due process, law of the 
case, claim and issue preclusion, and waiver prevent the VFW 
from 
arguing 
to 
this 
court 
that 
the 
unit 
rule 
is 
unconstitutional as applied in the present case. 
No.  2006AP2866   
 
3 
 
an undivided interest in the property rather than the fair 
market value of each owner's partial interest.3  Apportionment of 
the total sum awarded is then made among the owners.  Fair 
market value is the sum a willing purchaser would pay to a 
willing seller for the property, taking into consideration the 
                                                 
3 Maxey v. Redev. Auth. of Racine, 94 Wis. 2d 375, 401, 288 
N.W.2d 794 (1980) ("[C]ondemnation awards should be based on the 
value of the property as a whole as if there were only one 
owner, and it is only after there is a determination of the 
taken property's total value that it is apportioned among the 
various interests in the property."); 4 Phillip Nichols, Nichols 
on Eminent Domain § 13.01[16] (3d ed. 2007) (stating that the 
unit rule applies "when there are different interests or estates 
in the property acquired by condemnation" and that "[p]ursuant 
to the unit rule, the proper course is to determine the entire 
compensation to be awarded as though the property belonged to 
one person and then apportion this sum among the different 
parties according to their respective rights"). 
Section 1012 of the Uniform Law Commissioners' Model 
Eminent Domain Code provides: 
The amount of compensation for the taking of property 
in which divided interests exist is based upon the 
fair market value of the property considered as a 
whole, giving appropriate consideration to the effect 
upon market value of the terms and circumstances under 
which the separate interests are held. 
Model Eminent Domain Code § 1012, 13 U.L.A. 102 (2002). 
No.  2006AP2866   
 
4 
 
uses of the land.4  The court is not being asked to determine the 
value of the VFW's leasehold interest or the cost to the VFW of 
obtaining comparable replacement facilities.  
¶5 
A jury found that the undivided interest in the 
property condemned in the present case by the Redevelopment 
Authority had no value at the time of the taking.  In accordance 
with the unit rule and with the jury's verdict, the circuit 
court entered a judgment declaring that the VFW is not entitled 
to receive any compensation from the Redevelopment Authority and 
must reimburse the Redevelopment Authority for money paid to it.   
¶6 
The VFW contends that because the terms of its lease 
agreement were exceedingly favorable ($1 a year rent for a 
                                                 
4 P.C. Monday Tea Co. v. Milwaukee County Expressway 
Commission, 24 
Wis. 2d 107, 112-13, 128 N.W.2d 631 (1964) 
(stating that in a condemnation case, "[f]air market value is 
defined as that amount which can be realized on sale by an owner 
willing, but not compelled, to sell to a purchaser willing and 
able, but not obliged, to buy") (citation omitted); Esch v. 
Chicago, Minneapolis & St. Paul Ry. Co., 72 Wis. 229, 231-32, 39 
N.W. 129 (1888) ("The full and fair market value means what the 
property is worth or will sell for as between one who wants to 
purchase and one who wants to sell. . . .  The market value, or 
what the property was worth to a person who would pay its just 
and 
full 
value, 
would 
certainly 
not 
exclude 
from 
the 
consideration of the jury the use to which the property was put 
by the owner; nor any reasonable use to which it could be 
applied by a prudent and discreet man in the immediate 
future."). 
See also 4 Nichols, supra note 3, § 12.02[1] ("The term 
'fair market value' means the amount of money which a purchaser 
willing, but not obliged, to buy the property would pay to an 
owner willing, but not obliged, to sell it, taking into 
consideration all uses for which the land was suited and might 
be applied.") (footnotes omitted). 
No.  2006AP2866   
 
5 
 
renewable 99-year term), the VFW's leasehold interest in the 
condemned property had value notwithstanding the property's lack 
of value.  The VFW argues that under the circumstances of the 
present case, the unit rule operates to deprive it of just 
compensation contrary to Article I, Section 13 of the Wisconsin 
Constitution.  The VFW thus challenges the circuit court's 
judgment on the ground that the circuit court improperly 
instructed the jury to determine just compensation according to 
the unit rule.  The VFW urges the court to apply the "separate 
valuation" (or "independent valuation") rule in the present case 
in lieu of the unit rule to determine the fair market value of 
the condemned property.5        
¶7 
We state the issue on review as follows: If the VFW, 
which 
holds 
a 
long-term 
favorable 
lease, 
receives 
no 
compensation for its leasehold interest under the unit rule, has 
the VFW's right to just compensation under Article I, Section 13 
of the Wisconsin Constitution been violated?  In other words, 
the court is asked to determine whether the application of the 
unit rule in the present case violates the just compensation 
clause when the fair market value of the property is zero, 
rendering the VFW entitled to $0 for the loss of its property 
interest as a lessee.          
                                                 
5 See 4 Nichols, supra note 3, § 12.05[2] (contrasting the 
"rule of separate valuation" to the unit rule (also sometimes 
referred to as the undivided fee rule)); John D. Johnston, Jr., 
"Just Compensation" for Lessor and Lessee, 22 Vand. L. Rev. 293, 
310-19 (1969) (contrasting the rule of "independent valuation of 
divided interests" to the unit rule). 
No.  2006AP2866   
 
6 
 
¶8 
We conclude that using the unit rule in the present 
case to value the whole property to determine the amount of 
compensation due to the VFW does not violate the just 
compensation clause.  We conclude that the VFW receives just 
compensation when it receives no compensation for its leasehold 
interest in a property that has no value.  Accordingly, we 
reverse the decision of the court of appeals reversing the 
judgment of the circuit court.  The judgment of the circuit 
court is affirmed.  
¶9 
Inquiring minds might ask how the property at issue in 
the instant case can be worth nothing.  The property is located 
in the heart of the City of Milwaukee.  Even if the building is 
worthless, isn't the land worth something, and doesn't the VFW 
as a lessee have an interest in the land upon which the hotel 
stands?   
¶10 The answer is that the property as a whole is worth 
nothing because it is financially infeasible to use the property 
either by remodeling the hotel building or by demolishing the 
building to get at the unimproved land.  An appraiser testified 
(and the jury apparently accepted) that the cost of remodeling 
the building to make it usable would be more than the fair 
market value of the building and land.  Furthermore, the 
appraiser testified, and the jury again apparently accepted, 
that although the unimproved land does have value, the value of 
the land in an undeveloped state is exceeded by the cost of 
demolishing the building to render the land vacant.      
I 
No.  2006AP2866   
 
7 
 
¶11 The Redevelopment Authority and the VFW have been 
parties to numerous proceedings relating to the Redevelopment 
Authority's taking of the property at issue.  Many of these 
proceedings are not directly within the scope of our review and 
are not fully documented in the circuit court record in the 
present case.  We do not offer a comprehensive account of the 
history underlying this case.6  We briefly state the facts and 
refer to prior proceedings as relevant to the issue on review. 
                                                 
6 The proceedings not discussed in this opinion may be 
summarized as follows:      
The VFW commenced an action in February 2001 challenging 
the Redevelopment Authority's right to condemn the property at 
issue in this case.  The Circuit Court for Milwaukee County, 
William J. Haese, Judge, granted summary judgment to the 
Redevelopment Authority.  The court of appeals affirmed the 
circuit court in an unpublished decision.  See City of Milwaukee 
Post No. 2874 Veterans of Foreign Wars of the U.S. v. Redev. 
Auth. of Milwaukee, No. 01AP1642, unpublished slip op. (Wis. Ct. 
App. Feb. 12, 2002). 
In August 2001, the Redevelopment Authority applied for a 
writ of assistance to evict the VFW from the property.  The 
Circuit Court for Milwaukee County, Maxine A. White, Judge, 
granted the application.  The VFW appealed to the court of 
appeals, but in the interim a different circuit court judge 
approved an order requiring the Redevelopment Authority to raze 
the building at 2601 West Wisconsin Avenue.  The court of 
appeals concluded that the VFW's challenge to the writ of 
assistance had become moot by virtue of the raze order.  See 
City of Milwaukee Post No. 2874 Veterans of Foreign Wars of the 
U.S. v. Redev. Auth. of Milwaukee, Nos. 02AP1035, 02AP1880, 
unpublished slip op. (Wis. Ct. App. Sept. 30, 2003). 
No.  2006AP2866   
 
8 
 
¶12 The VFW owned a parcel of real property situated at 
2601 West Wisconsin Avenue in the City of Milwaukee that is the 
subject of the condemnation.  It used this property as its 
headquarters.  In 1961, the VFW conveyed the real estate (land 
and improvements) to Towne Metropolitan, Inc., which built an 
11-story, 113,000-square-foot hotel on the land.   
¶13 In exchange for conveying the real estate, the VFW 
obtained a 99-year lease for 5,250 square feet on the hotel's 
ground floor, was amounting to 4.6 percent of the building.  The 
lease provided that the VFW's space in the hotel would be 
designed 
for 
the 
VFW's 
purposes 
and 
that 
all 
leasehold 
improvements and equipment would be furnished by the lessor.  It 
further provided that the lessor would pay all real estate taxes 
and would provide heat, air conditioning, maintenance, and 
periodic redecoration at no cost to the VFW.  The lease 
obligated the VFW to pay an annual rent of only $1 and was 
renewable for a second 99-year term at the VFW's option.   
¶14 Under the lease, the VFW was vulnerable, however, to 
complete loss.  The lease was subordinate to any mortgage 
against the building, allowing a lender to foreclose and wipe 
out the lease.  The VFW's interest reverted to the lessor when 
                                                                                                                                                             
In April 2003, the VFW filed a claim for relocation 
benefits under chapter 32 of the Wisconsin Statutes.  The 
Circuit Court for Milwaukee County, Francis T. Wasielewski, 
Judge, dismissed the claim.  The court of appeals affirmed in an 
unpublished decision.  See City of Milwaukee Post No. 2874 
Veterans of Foreign Wars of the U.S. v. Redev. Auth. of 
Milwaukee, No. 2004AP3266, unpublished slip op. (Wis. Ct. App. 
Feb. 14, 2006).    
No.  2006AP2866   
 
9 
 
the VFW ceased to occupy the building.  The lessor had no duty 
to assure that in the event of eminent domain the building would 
have adequate value to compensate the VFW for the value of its 
lease.  The lease was silent regarding allocation of the 
proceeds of condemnation.             
¶15 Towne Metropolitan sold the real estate in 1986 to 
Marquette University, which used the hotel as a dormitory.  In 
1994, Marquette University sold the real estate to Maharishi 
Vedic University for $600,000.  With each sale of the property, 
the VFW's lease was assigned to the new owner, who had the 
responsibility of complying with the VFW's lease.  Maharishi 
Vedic University never occupied the hotel after purchasing it 
but continued to provide utilities and maintenance for the VFW's 
space.  
¶16 Although the premises rented by the VFW apparently 
remained in habitable condition, by the 1990s the hotel as a 
whole had deteriorated, along with the surrounding neighborhood. 
In February 1998, the Redevelopment Authority held a public 
hearing to consider creating a redevelopment district in an area 
including the real estate at 2601 West Wisconsin Avenue.  In 
January 1999 the Redevelopment Authority created a redevelopment 
district and issued a relocation order.  The Department of 
Commerce approved the Redevelopment Authority's relocation plan 
in May 1999.   
¶17 In January 2001, the Redevelopment Authority issued a 
jurisdictional offer to purchase the real estate at 2601 West 
Wisconsin 
Avenue, 
including 
the 
hotel 
and 
any 
other 
No.  2006AP2866   
 
10 
 
improvements, as well as an adjoining parking lot owned 
exclusively by Maharishi Vedic University.  After locating 
comparable 
properties, the Redevelopment Authority made a 
jurisdictional offer in the amount of $440,000 as compensation 
for (1) land and improvements (with the VFW and Maharishi Vedic 
University as owners), (2) personal property in the hotel owned 
by Maharishi Vedic University, and (3) an adjoining parking lot 
owned solely by Maharishi Vedic University.7   
¶18 At the date of taking the only occupant of the 
building was the VFW; it was not legally permissible to use the 
rest of the building because of the many building code 
violations.8      
¶19 The Redevelopment Authority filed a $440,000 award of 
damages with the clerk of courts for Milwaukee County in 
February 2001.  The Circuit Court for Milwaukee County, Michael 
P. Sullivan, Judge, divided the $440,000 award between the VFW 
and Maharishi Vedic University.  The VFW received $300,000, less 
taxes owing.  Maharishi Vedic University received $140,000, less 
taxes owing.   
                                                 
7 The VFW rhetorically asked the circuit court why the 
Redevelopment Authority would offer more than $0 when the 
property had no value.  The circuit court opined that the 
Redevelopment Authority might have wanted to avoid litigation 
and litigation expenses and to facilitate timely occupancy.   
8 The VFW remained in the building after condemnation until 
April 9, 2003, when it was evicted.  The City Department of 
Neighborhood Services issued a raze order in March 2003.  The 
building was razed and, according to the briefs, the land 
remains vacant.   
No.  2006AP2866   
 
11 
 
¶20 The VFW appealed the adequacy of the award to the 
Condemnation Commission in February 2002.  Maharishi Vedic 
University did not join in the appeal.  The Condemnation 
Commission requested instruction from the circuit court about 
how to value the property.  The Circuit Court for Milwaukee 
County, Michael P. Sullivan, Judge, ordered the Condemnation 
Commission to determine the value of the property for just 
compensation according to the unit rule.9  The Commission 
determined that the Redevelopment Authority was obligated to pay 
$425,000 in compensation——$15,000 less than the Redevelopment 
Authority had provided in its award.     
¶21 The VFW appealed the decision of the Condemnation 
Commission to the Circuit Court for Milwaukee County.  In a 
pretrial motion, the VFW urged the circuit court not to apply 
the unit rule when determining the amount of just compensation.  
The VFW argued that under the circumstances of the present case, 
application of the unit rule would violate Article I, Section 13 
of the Wisconsin Constitution.  
¶22 The VFW contended that its leasehold interest was 
extremely valuable because the rent was only $1 per year.  One 
estimate was that the value of the leasehold to the VFW was 
                                                 
9 The VFW petitioned for leave to appeal this determination.  
The court of appeals granted the petition and concluded that the 
unit rule should be used by the Condemnation Commission.  The 
court of appeals, however, declined to address the state 
constitutional issue of just compensation.  See City of 
Milwaukee Post No. 2874 Veterans of Foreign Wars of the U.S. v. 
Redev. 
Auth. 
of 
Milwaukee, 
Nos. 
2002AP1035, 
2002AP1880, 
unpublished slip op. (Wis. Ct. App. Sept. 30, 2003).  
No.  2006AP2866   
 
12 
 
approximately $50,000 a year.  The VFW's appraiser estimated the 
fair market value of the VFW's leasehold interest at the date of 
taking, reduced to present value, as approximately $1,200,000, 
an amount "sufficient to build a facility with 5,250 square feet 
and maintain it without occupancy costs over the remaining 
period of the lease."10  The VFW also argued that it should not 
be obligated to prove the value of the building that it did not 
own and did not have an obligation to maintain. 
¶23 The circuit court (Michael D. Guolee, Judge) denied 
the VFW's motion seeking that the unit rule not be used, holding 
                                                 
10 The VFW again asserts in its brief to this court that the 
value of its leasehold interest was approximately $1,200,000.  
As it did in its brief to the circuit court, the VFW also states 
that this amount is "sufficient to permit the VFW to build a 
facility with 5,250 square feet and maintain it without 
occupancy costs over the remaining years in the initial term of 
the lease."  Brief and Appendix of the City of Milwaukee Post 
No. 2874 Veterans of Foreign Wars of the United States 
Plaintiff-Appellant at 13-14.  
It is not clear that the VFW is employing the proper 
approach for valuing its leasehold interest.  "A leasehold is 
normally valued as the difference between the rental value of 
the premises at the time of taking and the rent due the lessors 
during the unexpired term."  Maxey, 94 Wis. 2d at 401.  The VFW 
seems to present a valuation equaling the amount that it would 
cost the VFW to build and maintain an entirely new substitute 
facility, rather than a valuation equaling the difference 
between the rental value of the actual premises rented by the 
VFW and the rent that the VFW owed under the lease.      
Nevertheless, we accept for purposes of our review the 
VFW's 
contention 
that 
its 
leasehold 
interest 
had 
value.  
Although the premises rented by the VFW presumably had a 
depressed rental value by virtue of their location within a 
vacant and deteriorating building that apparently could not be 
put to any profitable use, it seems plausible that the rental 
value of the premises exceeded the rent of $1 per year. 
No.  2006AP2866   
 
13 
 
that just compensation would be calculated according to the unit 
rule.  The matter then went to a jury trial for a determination 
of the fair market value of the property taken by the 
Redevelopment Authority.     
¶24 The Redevelopment Authority and the VFW both presented 
professional appraisers who testified at trial regarding the 
value of the property. The appraisers also submitted written 
reports that were introduced as evidence.11         
¶25 The appraisers agreed that a buyer could not extract 
value from the property by demolishing the hotel structure and 
starting over with vacant land.  The Redevelopment Authority's 
appraiser testified that the land would be worth about $285,000 
if vacant and that it would cost more than $1,000,000 to 
demolish the hotel building, including $864,000 for asbestos 
removal.  The VFW's appraiser agreed that the land would be 
worth about $300,000 if vacant, that demolishing the building 
would mean spending about $850,000 on asbestos removal, and that 
a prospective owner likely would not be interested in tearing 
the building down.       
                                                 
11 Each appraiser made clear in his written report that he 
appraised the value of the entire parcel of property, including 
the hotel structure and the land underneath it.  The VFW's 
appraiser stated that his appraisal considered "the overall 
value of the entire property, including the Hotel, parking 
structure and vacant lot."  The Redevelopment Authority's 
appraiser 
stated 
that 
he 
had 
appraised 
the 
"land, 
site 
improvement and building improvements." 
No.  2006AP2866   
 
14 
 
¶26 The appraisers disagreed, however, about whether the 
property could yield value if the hotel structure were renovated 
for some use.   
¶27 The Redevelopment Authority's appraiser testified that 
it would not be financially feasible to put the hotel building 
to any use.  He specifically concluded that it would not be 
financially feasible to renovate the hotel building for use as a 
retail outlet, an office building, an apartment building, a 
dormitory, an educational facility, a subsidized housing unit, a 
full-service hotel, or a limited-service hotel.  He concluded 
that when put to each use, the land and hotel structure would 
have a negative value because the cost of necessary renovations 
would outweigh any profits that the property could be expected 
to yield.        
¶28 The VFW's appraiser testified that the hotel building 
could be renovated and put to a use falling within the "general 
residential" category.  His testimony and written report 
suggested that the building could be renovated and used as an 
apartment complex, a housing complex for the elderly, a homeless 
shelter, a mental health facility, a halfway house, or a 
limited-service hotel.  The VFW's appraiser admitted, however, 
that he had not determined whether any of his proposed uses 
would be financially feasible. 
¶29 The 
appraisers 
provided 
dramatically 
different 
estimates of the property's total worth.  The Redevelopment 
Authority's appraiser testified that the property had zero 
market value, because a buyer would be unable to make any money 
No.  2006AP2866   
 
15 
 
with the property either by razing or renovating the hotel 
building.  The VFW's appraiser fixed the property's value at 
approximately $1,800,000. 
¶30 The parties also disagreed about the assessed value of 
the property for property tax purposes at the time of the 
taking.  The VFW asserted that the assessed value was $566,000.  
The Redevelopment Authority contended that the assessed value 
was $1,000.  The circuit court concluded that the latter figure 
was the correct assessed value at the time of the taking.     
¶31 The circuit court instructed the jury to determine the 
fair market value of the land and building according to the unit 
rule as follows: 
The entirety of 2601 West Wisconsin Avenue must be 
valued as a whole unit and a single entity with all of 
its square footage as of [the date of taking] as if 
owned by only one owner and as if not leased. 
¶32 The special verdict required the jury to answer a 
single question: "What was the fair market value of the entire 
property located at 2601 West Wisconsin Avenue, in the City and 
County of Milwaukee, as a whole unit and single entity, with all 
its square footage, on February 28, 2001, in the condition of 
the property on that date?"  The jury answered: $0. 
¶33 The circuit court (Elsa C. Lamelas, Judge) rendered a 
judgment consistent with the jury's verdict.  The judgment 
required the VFW to return the $300,000 award that it previously 
had received from the Redevelopment Authority and to pay $87,348 
in interest and statutory costs.  The VFW contends that "this is 
No.  2006AP2866   
 
16 
 
the wors[t] abuse of condemnation powers ever recorded in the 
State of Wisconsin."12 
II 
 
¶34 Article I, Section 13 of the Wisconsin Constitution 
provides in full that "[t]he property of no person shall be 
taken for public use without just compensation therefor."13   
¶35 The 
text 
of 
this 
provision 
of 
the 
Wisconsin 
Constitution is substantially similar to the Takings Clause of 
the Fifth Amendment to the United States Constitution, which 
provides that private property shall not "be taken for public 
use, 
without 
just 
compensation."14 
 
Accordingly, 
when 
                                                 
12 Brief and Appendix of the City of Milwaukee Post No. 2874 
Veterans of Foreign Wars of the United States at 28. 
13 The 
parties 
briefly 
touch 
upon 
the 
statutes 
but 
concentrate on interpreting the constitution.  Various statutes 
define "property" as including estates in land and require 
valuation of the fair market value of the entire property taken.  
See Wis. Stat. § 32.01(2) and § 32.05(9)(a)1.  The condemnor is 
required to pay "fair market value of the property taken."  Wis. 
Stat. § 32.09(5)(a).  The condemning authority is required to 
issue only one award for just compensation that names "all 
persons having an interest of record in the property taken and 
may name other persons," with apportionment made by the circuit 
court if there is a dispute.  See Wis. Stat. §§ 32.05 (7)(a), 
(d); 32.05(9)(a)1.-3.   
Wisconsin Stat. § 32.09(5)(a) provides as follows: 
In the case of a total taking the condemnor shall pay 
the fair market value of the property taken and shall 
be liable for the items in s. 32.19 [relating to 
additional items payables] if shown to exist.  
14 The Fifth Amendment Takings Clause is applicable to the 
states under the Fourteenth Amendment.  See Kelo v. City of New 
London, 545 U.S. 469, 472 (2005). 
No.  2006AP2866   
 
17 
 
interpreting and applying Article I, Section 13 of the Wisconsin 
Constitution, this court long has sought guidance in decisions 
based on the federal Takings Clause or on analogues in the 
constitutions of other states.15 
¶36 It is undisputed that the Redevelopment Authority has 
taken the VFW's property for public use and is obligated to 
provide just compensation therefor.  Although the VFW held only 
a leasehold interest in the real estate taken, the court held in 
Maxey v. Redevelopment Authority of Racine, 94 Wis. 2d 375, 400, 
404, 288 N.W.2d 794 (1980), that under ordinary circumstances a 
lessee with a lease for more than one year has a property 
interest and is entitled to some portion of a condemnation 
award.  The court stated that "[i]t is well settled that a 
lessee has a property interest; and, when that interest is 
completely taken by a condemning authority, the lessee is 
entitled to compensation."16   
¶37 The question in the present case is what amount of 
compensation is "just" within the meaning of Article I, Section 
13.  Answering this question requires us to interpret a 
provision of the state constitution, which we do independently 
                                                 
15 See, 
e.g., 
Maxey, 
94 
Wis. 2d at 
396-99; 
Luber 
v. 
Milwaukee County, 47 Wis. 2d 271, 277-78, 177 N.W.2d 380 (1970); 
Randall v. City of Milwaukee, 212 Wis. 374, 382, 249 N.W. 73 
(1933); State ex rel. Carter v. Harper, 182 Wis. 148, 153-54, 
196 N.W. 451 (1923). 
16 Maxey, 94 Wis. 2d at 400. 
No.  2006AP2866   
 
18 
 
of the circuit court and court of appeals, although benefiting 
from their analyses.17  
¶38 The constitutional requirement of just compensation 
cannot be reduced to a formula or expressed in inexorable 
rules.18  The requirement of just compensation "derives as much 
content from the basic equitable principles of fairness, as it 
does from technical concepts of property law."19   Courts have 
determined just compensation according to practical rules that 
work substantial justice in the ordinary case but may be subject 
to exception when warranted by the circumstances.20   
¶39 The "unit rule"——sometimes called the "undivided fee 
rule"——is one of these practical rules.  As we have stated, 
under 
the 
unit rule there is no separate valuation of 
improvements or natural attributes of the land, and the manner 
                                                 
17 State v. Schweda, 2007 WI 100, ¶12, 303 Wis. 2d 353, 736 
N.W.2d 49.  
18 See 
United 
States 
v. 
Toronto, 
Hamilton 
& 
Buffalo 
Navigation Co., 338 U.S. 396, 402 (1949) ("Perhaps no warning 
has been more repeated than that the determination of value 
cannot be reduced to inexorable rules."); United States v. Cors, 
337 U.S. 325, 332 (1949) ("The Court in its construction of the 
constitutional provision has been careful not to reduce the 
concept of 'just compensation' to a formula."). 
19 United States v. Fuller, 409 U.S. 488, 490 (1973) 
(internal citation omitted).   
20 Cors, 337 U.S. at 332 ("The Court in an endeavor to find 
working rules that will do substantial justice has adopted 
practical standards . . . ."); United States v. Miller, 317 U.S. 
369, 375 (1943) ("Courts have had to adopt working rules in 
order 
to 
do 
substantial 
justice 
in 
eminent 
domain 
proceedings."). 
No.  2006AP2866   
 
19 
 
in which the land is owned or the number of owners does not 
affect the value of the property.21  When property that is held 
in partial estates by multiple owners is condemned, the 
condemnor provides compensation by paying the value of an 
undivided interest in the property rather than by paying the 
value of each owner's partial interest.22  Simply stated, the 
unit rule determines the fair market value as if only one person 
owned the property.  When the value of the property is 
determined, the condemnor makes a single payment for the 
property taken and the payment is then apportioned among the 
various owners.23 
                                                 
21 Green Bay Broad. Co. v. Redev. Auth., 116 Wis. 2d 1, 12, 
342 N.W.2d 27 (1983). 
This court modified the Green Bay Broadcasting opinion on a 
motion for reconsideration.  See 119 Wis. 2d 251, 349 N.W.2d 478 
(1984).  The modifications are not germane to the issue 
presently on review.   
22 Maxey, 94 Wis. 2d at 401 ("[C]ondemnation awards should 
be based on the value of the property as a whole as if there 
were only one owner, and it is only after there is a 
determination of the taken property's total value that it is 
apportioned among the various interests in the property."); 4 
Nichols, supra note 3, § 13.01[16] (stating that the unit rule 
applies "when there are different interests or estates in the 
property acquired by condemnation" and that "[p]ursuant to the 
unit rule, the proper course is to determine the entire 
compensation to be awarded as though the property belonged to 
one person and then apportion this sum among the different 
parties according to their respective rights"). 
23 4 Nichols, supra note 3, § 12.05[1] ("The public pays 
what the land is worth, and the amount so paid is to be divided 
among the various claimants, according to the nature of their 
respective elements."); Green Bay Broad. Co., 116 Wis. 2d at 11 
(same; quoting Nichols on Eminent Domain).   
No.  2006AP2866   
 
20 
 
¶40 That 
property 
is 
valued 
as 
an 
integrated 
and 
comprehensive unit does not mean that the individual components 
of value may not be examined or considered in arriving at an 
overall fair market value.24  "The unit rule requires only that 
the various components be valued as contributing parts of an 
organic whole."25   
¶41 In Wisconsin jurisprudence, "acceptance [of the unit 
rule] is beyond question."26  Indeed the unit rule is accepted in 
the majority of American jurisdictions.27  The unit rule is a 
carefully guarded rule and only in rare and exceptional 
situations are departures permitted.28 
                                                 
24 Milwaukee & Suburban Transp. Corp. v. Milwaukee County, 
82 Wis. 2d 420, 449-50, 263 N.W.2d 503 (1978).  See also United 
States v. 6.45 Acres of Land, 409 F.3d 139, 147 (3d Cir. 2005). 
25 Milwaukee & Suburban Transp. Corp., 82 Wis. 2d at 449-50. 
26 Green Bay Broad. Co., 116 Wis. 2d at 11 (citing Milwaukee 
& Suburban Transp. Corp., 82 Wis. 2d at 448).  See also Hoekstra 
v. Guardian Pipeline, LLC, 2006 WI App 245, ¶5, 726 N.W.2d 648; 
Appleton Water Works Co. v. R.R. Comm'n of Wis., 154 Wis. 121, 
142 N.W.2d 476 (1913).  
27 Johnston, supra note 5, at 302. 
28 Nebraska v. United States, 164 F.2d 866, 869 (8th Cir. 
1947).   
For 
a 
general 
discussion 
of 
cases 
determining 
just 
compensation for the condemnation of property held in different 
estates or interests, see Are Different Estates or Interests in 
Real 
Property 
Taken 
Under 
Eminent 
Domain 
to 
Be 
Valued 
Separately, or Is Entire Property to Be Valued as a Unit and the 
Amount Apportioned Among Separate Interests, 69 A.L.R. 1263 
(1930) (supplemented by 166 A.L.R. 1211).   
No.  2006AP2866   
 
21 
 
¶42 The VFW contends that this court must make an 
exception to the unit rule in the present case in order to avoid 
a grossly unjust result.   
¶43 The VFW argues that under the unit rule the VFW will 
not be compensated for the loss of its valuable leasehold 
interest because the value of its leasehold interest exceeds the 
zero value of an undivided interest in the condemned property.  
According to the VFW, the unit rule should not be applied when 
payment equaling the value of an undivided interest in condemned 
property is insufficient to fully compensate owners holding 
partial interests in the property.29   
¶44 The court of appeals agreed with the VFW, concluding 
that the necessities of the instant case require an exception to 
the unit rule.  According to the court of appeals, the 
particular 
circumstances 
leading 
to 
the 
conclusion 
that 
application of the unit rule amounts to an unconstitutional 
taking, and that the VFW must be afforded an opportunity to 
prove the value of its leasehold interest, are that the 
leasehold was a long-term lease; that the lease did not include 
                                                                                                                                                             
For 
a 
general 
discussion 
of 
cases 
determining 
the 
compensation due to a lessee for the taking or damaging of a 
leasehold interest in property, see Eminent Domain: Measure and 
Elements of Lessee's Compensation for Condemnor's Taking or 
Damaging of Leasehold, 17 A.L.R.4th 337 (1982). 
29 See, e.g., Brief and Appendix of the City of Milwaukee 
Post No. 2874 Veterans of Foreign Wars of the United States 
Redevelopment Authority-Appellant at 15 ("[T]he 'unit rule' may 
be utilized provided that [it does] not deprive a tenant of its 
right to be fully compensated for the value of its leasehold."). 
No.  2006AP2866   
 
22 
 
a forfeiture provision upon condemnation; and that the fair 
market value of the property was found to be zero.  The court of 
appeals seemed to conclude as a matter of public policy that 
when the fair market value of the condemned property is zero, 
awarding a lessee zero dollars upon condemnation would be a 
manifest injustice.  The court of appeals remanded the cause to 
the circuit court to value the VFW's separate leasehold interest 
and to allow the VFW to recover something more than the VFW's 
share of the fair market value of the condemned property.  The 
court of appeals decision is based on equitable principles of 
fairness to the VFW.       
¶45 Several courts in other states have, as the VFW urges, 
departed from the unit rule when the aggregate value of partial 
interests in the condemned property exceeds the value of an 
undivided interest.  In such cases, these courts apply what 
commentators call the rule of "separate" or "independent" 
valuation.30  Application of this rule indemnifies each of the 
several owners.  The condemnor pays each of the several owners 
the fair market value of his, her, or its property interest even 
                                                 
30 See 4 Nichols, supra note 3, § 12.05[2] (contrasting the 
"rule of separate valuation" to the unit rule (also sometimes 
referred to as the undivided fee rule)); Johnston, supra note 5, 
at 310-19 (contrasting the rule of "independent valuation of 
divided 
interests" 
to 
the 
unit 
rule; 
arguing 
that 
the 
independent valuation rule is consistent with the position that 
condemnors must indemnify property owners in order to provide 
just compensation). 
No.  2006AP2866   
 
23 
 
though the total amount paid exceeds the fair market value of 
the property as if owned by a single owner.31   
                                                 
31 See, e.g., City of Baltimore v. Latrobe, 61 A. 203, 206 
(Md. 1905) ("We say that because each is entitled under the 
Constitution to be compensated in damages for the amount of his 
interest taken, and, if it be true that the values of the two 
interests are more than what the lots would be worth if owned by 
one person, the necessities of the case require an apparent 
exception to the general rule . . . as to what the condemning 
party must pay."); State ex rel. McCaskill v. Hall, 28 S.W.2d 
80, 82 (Mo. 1930) ("There may be instances in which, owing to 
exceptional circumstances, the damages to the various interests 
when added together exceed the value of the property as a whole; 
in such case the particular interests should of course be 
separately appraised, because the owner of each is entitled to 
be compensated in damages for the amount of his interest taken." 
(citing 
Latrobe)); 
State 
v. 
Platte 
Valley 
Pub. 
Power 
& 
Irrigation Dist., 23 N.W.2d 300, 307-08 (Neb. 1946) ("The 
measure of compensation to each owner must be that which he has 
lost. . . .  [T]hose courts which have held that the sum of the 
separate values of the divided interests may not exceed the 
value of the unencumbered whole have at that point abandoned the 
rule that the measure is what has the owner lost, and applied 
the rule that the measure is what has the taker gained."); 
Wilson v. Fleming, 31 N.W.2d 393, 401-02 (Iowa 1948) (adopting 
Platte Valley Pub. Power & Irrigation Dist.); People ex rel. 
Dep't of Pub. Works v. Lynbar, Inc., 253 Cal. App. 2d 870, 879 
(Cal. App. 1967) ("The question to be answered in this case is, 
of what does the whole really consist, for which payment is to 
be made by the condemnor in one lump sum . . . ?  It seems to us 
that this whole must be the total of what the various 
involuntary sellers have to sell and not the undivided fee which 
the condemnor is seeking to acquire."); State Highway Dep't v. 
Thomas, 154 S.E.2d 812, 816 (Ga. Ct. App. 1967) ("[W]here there 
are separate interests to be condemned, the jury, in arriving at 
just and adequate compensation, is not only authorized but 
required to consider the value which the thing taken has to the 
respective owners of the interests being condemned.  If just and 
adequate compensation to the owners of the various interests in 
the land being condemned requires that the total compensation 
exceed 
the 
value 
of 
the 
land, 
this 
presents 
no 
difficulty . . . .").   
No.  2006AP2866   
 
24 
 
¶46 In contrast, an equal or greater number of courts do 
not depart from the unit rule when the aggregate value of 
partial interests in property exceeds the fair market value of 
an undivided interest.32  The rationale for applying the unit 
                                                                                                                                                             
See 
also 
4 
Nichols, 
supra 
note 
3, 
§ 12.05[2] 
("It 
has . . . been intimated that where the undivided fee rule 
operates to the prejudice of the interest of the condemnee it 
might be considered unconstitutional." (citing Latrobe)).   
32 See, e.g., United States v. 6.45 Acres of Land, 409 F.3d 
139, 141, 147-49 (3d Cir. 2005) (agreeing with the United States 
that the district court had erred in failing to apply the unit 
rule; concluding that the district court's error was not 
harmless because it was "quite likely that the sum of the 
District Court's independent awards——its assessment of 'the 
value of the separate interests'——substantially exceeded the 
value of the whole"); United States v. 131.68 Acres of Land, 695 
F.2d 872, 975 (5th Cir. 1983) ("[T]he division of a fee into 
separate interests cannot increase the amount of compensation 
that the condemnor has to pay for the taking of the fee."); 
Nebraska v. United States, 164 F.2d 866, 868 (8th Cir. 1947) 
("The [unit] rule manifestly is not without hardships in 
practical operation, but nevertheless the guarantee of the Fifth 
Amendment is regarded as being satisfied generally where the 
cash value of property taken in fee is substituted for it and 
the cash is allocated or apportioned among the respective 
estates or interests on the basis of their relative values."); 
County of Clark v. Sun State Props., Ltd., 72 P.3d 954, 958-60 
(Nev. 2003) (stating that under the undivided-fee rule, "the 
division of a fee into separate interests cannot increase the 
amount of compensation that the condemnor has to pay for the 
taking of the fee"; concluding that a Nevada statute codified 
the 
undivided 
fee 
rule, 
which 
is 
consistent 
with 
the 
constitution); Harco Drug, Inc. v. Notsla, Inc., 382 So.2d 1, 6 
(Ala. 1980) ("The total award stands in place of the land, and 
the owners of each interest may recover out of the award the 
same 
proportionate 
interest 
which 
they 
had 
in 
the 
land 
condemned. . . .  [W]here, as appears to be the case here, the 
total award is inadequate to fully compensate both the lessee 
and lessor, the inadequacy, or loss, must be shared by both the 
lessee and lessor according to their proportionate interests in 
the estate."); Hughes v. City of Cincinnati, 195 N.E.2d 552, 556 
(Ohio 1964) ("Undoubtedly, defendant city should only have to 
No.  2006AP2866   
 
25 
 
rule 
under 
these 
circumstances 
is 
that 
the 
condemnor, 
representing the public, should not pay a total sum to all the 
                                                                                                                                                             
pay the value of the land appropriated, even though that value 
may be less than the aggregate values of the interests in that 
land."); State Highway Comm'n v. Burk, 265 P.2d 783, 798-800 
(Or. 1954) (holding that although the constitution may not 
require the valuation of condemned property to be in a lump sum, 
"[t]he very great weight of authority establishes that the 
constitution permits valuation in that manner"; refusing to 
recognize "any rule that the separate amounts apportioned to the 
owners of different interests may exceed the market value of the 
whole"); Cornell-Andrews Smelting Co. v. Boston & Providence 
R.R. Corp., 95 N.E. 887, 889 (Mass. 1911) ("[N]o contracts 
between the owners of different interests in the land can affect 
the right of the government to take the land for public use, or 
oblige it to pay by way of compensation more than the entire 
value of the land as a whole." (citation omitted)); J.J. 
Newberry Co. v. City of E. Chicago, 441 N.E.2d 39, 43 (Ind. Ct. 
App. 
1982) 
("Newberry 
cites 
several 
cases 
from 
other 
jurisdictions in support of the proposition that the combined 
value of a leasehold interest and a reversionary interest may 
exceed the fair market value of the property as a whole.  
However, this Court need look no further than the unambiguous 
directives of the Indiana Supreme Court which stated: 'For the 
purposes of condemnation proceedings, the value of all the 
interests or estates in a single parcel of land cannot exceed 
the value of the property as a whole, and that when the value of 
the property as a unit is paid to the various owners, or into 
court for them, the constitutional requirements are fully 
met . . . .'"  (quoting State v. Montgomery Circuit Court, 157 
N.E.2d 577, 578 (Ind. 1959))); New Jersey Sports & Exposition 
Auth. v. Borough of E. Rutherford, 348 A.2d 825, 829-30 (N.J. 
App. 
1975) 
(noting 
that 
some 
jurisdictions 
recognize 
an 
exception to the unit rule "when the aggregate value of the 
separate interests exceeds the value of the unencumbered fee"; 
holding that the New Jersey courts do not recognize such an 
exception); Frankfurt v. Texas Turnpike Auth., 311 S.W.2d 261, 
267 (Tex. Ct. App. 1958) ("[T]he value of the property taken is 
all that the condemnor must pay, and this value cannot be 
increased by any contracts or distribution among the different 
persons owning interests in it; . . . the sum of all the parts 
can not exceed the whole.").   
No.  2006AP2866   
 
26 
 
owners that exceeds the total fair market value of the property 
were the property held by one person.   
¶47 In 
Green 
Bay 
Broadcasting 
Co. 
v. 
Redevelopment 
Authority of Green Bay, 116 Wis. 2d 1, 342 N.W.2d 27 (1983), we 
stated 
that 
although 
partial 
owners 
are 
constitutionally 
entitled to just compensation, "contracts between the owners of 
different interests in the land should not be permitted to 
result in a total sum which is in excess of the whole value of 
the 
undivided 
fee."33 
 
This 
language 
in 
the 
Green 
Bay 
Broadcasting decision cannot be reconciled with the VFW's 
position that compensation should be awarded for the taking of 
its leasehold interest when the undivided property has no value.  
Green Bay Broadcasting is also inconsistent with the cases from 
other 
states 
holding 
that 
the 
condemnor 
must 
provide 
compensation sufficient to indemnify each partial owner of real 
property even when the total paid exceeds the fair market value 
of the undivided property.  Green Bay Broadcasting is consistent 
with the cases from many other jurisdictions holding that the 
unit rule should be applied even when the aggregate fair market 
value of partial interests in property exceeds the total value 
of an undivided interest.   
¶48 The VFW implicitly invites this court to reconsider 
the analysis in Green Bay Broadcasting and to withdraw language 
relating to the unit rule from that opinion.  The court of 
                                                 
33 Green Bay Broad. Co. v. Redev. Auth. of Green Bay, 116 
Wis. 2d 1, 11, 342 N.W.2d 27 (1983) (emphasis added).   
No.  2006AP2866   
 
27 
 
appeals, which held in the VFW's favor, discussed Green Bay 
Broadcasting but did not discuss the relevant language we set 
forth above.34   
¶49 Courts should not apply the unit rule robotically as 
Stepford judges.35  Departure from the unit rule may be made in 
rare and exceptional circumstances.  The instant case, however, 
does not present a rare and exceptional situation justifying 
departure 
from 
the 
unit 
rule 
set 
forth 
in 
Green 
Bay 
Broadcasting.36  Many cases have applied the unit rule to 
condemnation of the lessor's and lessee's interests.  We follow 
the unit rule in the present case for several reasons.   
                                                 
34 See City of Milwaukee Post No. 2874 Veterans of Foreign 
Wars of the U.S. v. Redev. Auth. of Milwaukee, 2008 WI App 24, 
¶15, 307 Wis. 2d 518, 746 N.W.2d 536. 
35 See Ira Levin, The Stepford Wives (1972), in which robots 
are preferred to human beings. 
36 The dissent incorrectly asserts that this court has 
recognized exceptions to the unit rule in Luber v. Milwaukee 
County, 47 Wis. 2d 271, 177 N.W.2d 380 (1970); Maxey v. Redev. 
Auth. of Racine, 94 Wis. 2d 375, 288 N.W.2d 794 (1980); and 
Green Bay Redev. Auth. v. Bee Frank, Inc., 120 Wis. 2d 402, 355 
N.W.2d 240 (1984).  See dissent, ¶¶112-120. 
The Luber decision relates to an owner's loss of rental 
income resulting from an impending taking and does not mention 
the unit rule.  Maxey held in relevant part that a lessee of 
property may be entitled to compensation in a takings case and 
that just compensation is determined according to the unit rule.  
See Maxey, 94 Wis. 2d at 400-01.  The Bee Frank case held that 
the unit rule is not applicable "in determining entitlement to 
litigation expenses [under Wis. Stat. § 32.28(3)]," Bee Frank, 
120 
Wis. 2d at 
414, and did not address the manner of 
determining just compensation under the constitution. 
No.  2006AP2866   
 
28 
 
¶50 First, the unit rule stated in Green Bay Broadcasting  
protects the interests of both the public and the private 
property owners in the instant case.  It comports with the 
principle that just compensation "means a compensation that 
would be just in regard to the public, as well as in regard to 
the individual . . . ."37     
¶51 Under the unit rule, the public pays the full value of 
the property that it takes but is not required to pay excess 
value attributable to contracts between the owners of different 
interests in the property.38  Because eminent domain terminates 
                                                 
37 Bauman v. Ross, 167 U.S. 548, 570 (1897).  See also 
United States v. 564.54 Acres of Land, 441 U.S. 506, 512 (1979) 
(stating that question of just compensation as follows: "What 
compensation is 'just' both to an owner whose property is taken 
and to the public that must pay the bill?") (quoting United 
States v. Commodities Trading Corp., 339 U.S. 121, 123 (1950)).    
38 See Green Bay Broad. Co. v. Redev. Auth. of Green Bay, 
116 Wis. 2d 1, 11, 342 N.W.2d 27 (1983) ("[W]hen a tract of land 
is taken by eminent domain, as the land itself is taken by a 
paramount title rather than the separate estates of different 
persons having interests in the land, the compensation awarded 
is for the land itself . . . .  The public pays what the land is 
worth . . . ." (quoting Nichols on Eminent Domain)); United 
States v. 499.472 Acres of Land, 701 F.2d 545, 549 (5th Cir. 
1983) (stating that the unit rule is "[c]onsistent with th[e] 
theory . . . that the government should not have to pay more for 
the property than it is worth").  
See also Walgreen Co. v. City of Madison, 2008 WI 80, ¶48, 
311 Wis. 2d 158, 752 N.W.2d 687 (explaining that when the value 
of land is assessed for tax purposes, "[a] lease never increases 
the market value of real property rights to the fee simple 
estate.  Any potential value increment in excess of a fee simple 
estate is attributable to the particular lease contract, and 
even though the rights may legally 'run with the land,' they 
constitute contract rather than real property rights." (quoting 
Appraisal Institute, The Appraisal of Real Estate 473 (12th ed. 
2001))). 
No.  2006AP2866   
 
29 
 
leases,39 the entire fee simple estate (as if not leased) is what 
the condemnor is purchasing.  The fee simple estate is valued 
under the unit rule.  This valuation equitably balances property 
owners' interest in receiving compensation against the public's 
interest in paying a fair, reasonable amount for property 
acquired by eminent domain. 
¶52 Second, the "fairness award" doctrine adopted by the 
court of appeals conflicts with the principle that damages 
lacking a direct relationship to the fair market value are 
incidental or consequential damages and are not considered when 
determining just compensation under the constitution.40  Under 
the court of appeals' decision, if the fair market value of the 
property in condemnation is not enough to pay the lessee, the 
condemnor must pay more for the property than it is worth.  The 
result of the fairness award doctrine is that the condemnor 
becomes a guarantor of a private lease in low-to-no-value leased 
property.  In the present case, the condemnor would be insuring 
                                                 
39 See Wis. Mall Props., LLC v. Younkers, Inc., 2006 WI 95, 
¶26, 293 Wis. 2d 573, 717 N.W.2d 703 ("[C]omplete condemnation 
of a property terminates a lease attached to that property."). 
40 Consequential or incidental damages are excluded from 
eminent domain valuation cases.  See, e.g., Rotter v. Milwaukee 
County Expressway & Transp. Comm'n, 72 Wis. 2d 553, 562-63, 241 
N.W.2d 440 (1976); City of Janesville v. CC Midwest, Inc., 2007 
WI 
93, 
¶17 
n.16, 
¶21, 
302 
Wis. 2d 599, 
734 
N.W.2d 428 
(Roggensack, J., lead op.).  
See also United States v. Petty Motor Co., 327 U.S. 372, 
377-78 (1946) ("[E]vidence of loss of profits, damage to good 
will, the expense of relocation and other such consequential 
losses are refused in federal condemnation proceedings."). 
No.  2006AP2866   
 
30 
 
the VFW's sale-leaseback business deal that has gone bad.  In 
other words, under the fairness doctrine, the condemnor becomes 
liable to the lessee for consequential, incidental damages 
associated with the termination of the lease, above and beyond 
the fair market value of the property.  Such a bailout by the 
condemnor is not authorized by statute and is not required by 
the state constitution. 
¶53 Third, the court of appeals' "fairness award" doctrine 
is at odds with Walgreen Co. v. City of Madison, 2008 WI 80, 311 
Wis. 2d 158, 752 N.W.2d 687.  In Walgreen, this court held that 
for purposes of determining the fair market value of that real 
estate for property-tax-assessment purposes, a lease favorable 
to the lessor did not increase the market value of the fee 
simple estate.41  The Walgreen court declared that a business 
arrangement extraneous to the lease but built into the rental 
agreement reflects a business-contractual arrangement, not real 
property value.42   
¶54 In 
the 
instant 
case, 
VFW's 
lease 
is 
a 
lease 
unfavorable to the lessor.  The VFW refers to the lease as a 
"negative lease" because it "encumbers rather than enhances the 
value of the fee."43  When the negative lease is relatively long 
                                                 
41 Walgreen Co., 311 Wis. 2d 158, ¶3. 
42 Id., ¶¶65-66. 
43 Brief and Appendix of the City of Milwaukee Post No. 2874 
Veterans of Foreign Wars of the United States Plaintiff-
Appellant at 16. 
No.  2006AP2866   
 
31 
 
and rental values have substantially increased since the 
beginning 
of 
the 
lease 
term, 
the 
lessee's 
share 
of 
a 
condemnation award may exhaust the entire award.  Maxey, 94 
Wis. 2d at 401.  Maxey does not, however, support abandonment of 
the unit rule.  
¶55 The VFW's negative lease does not present a usual 
negative lease.  The VFW lease, like the Walgreen lease, 
reflects a business arrangement.  The VFW's sweetheart sale-and-
leaseback business arrangement reflects a business-contractual 
arrangement, and according to Walgreen, should not be considered 
in determining the fair market value of the fee simple estate.   
¶56 The court of appeals decision would change Wisconsin 
law so that a lessor's separate real property interest and the 
lessee's separate leasehold interest would be valued separately 
for condemnation purposes.  Such an approach ignores the fact 
that the unit rule and the statutes and case law providing for 
the valuation of the fair market value of a fee simple interest 
in real property; ignores the fact that in condemnation 
proceedings a lease is terminated and the lessor and lessee 
allocate the sum paid for the total fee estate unless the lease 
provides otherwise; and ignores the fact that a business-
                                                                                                                                                             
See 
also 
Walgreen 
Co., 
311 
Wis. 2d 158, 
¶97 
n.9 
(Abrahamson, C.J., concurring) ("If the rent and/or terms of the 
lease are favorable to the tenant (or lessee), the value of the 
leased fee interest will usually be less than the value of the 
fee 
simple 
interest, 
resulting 
in 
a 
positive 
leasehold 
interest." (quoting Appraisal Institute, The Appraisal of Real 
Estate 82 (12th ed. 2001)). 
No.  2006AP2866   
 
32 
 
contractual arrangement between the parties built into the 
rental agreement does not get valued in calculating the fair 
market value of the condemned property.         
¶57  Fourth, although the unit rule admittedly may leave a 
lessee vulnerable to injury when the lessor fails——as the 
lessors in the present case apparently failed——to maintain 
property in a valuable state prior to a condemnation, a lessee 
may obtain by contract the protections not afforded by the 
constitution.   
¶58 Although 
"complete 
condemnation 
of 
a 
property 
terminates a lease attached to that property,"44 the lessee and 
lessor 
nevertheless 
"may 
contract 
for 
their 
rights 
and 
obligations in the event of condemnation."45  Furthermore, "[t]he 
termination of a lease would not ordinarily be expected to 
extinguish an existing cause of action for a breach of the 
lease."46  Contract law offers tools with which a lessee may 
                                                 
44 Wis. Mall Props., 293 Wis. 2d 573, ¶26. 
45 Id. 
In Maxey, 94 Wis. 2d at 383, although the lease between 
Maxey and the lessors provided that Maxey's interest in the 
lease terminated upon the taking of the property, the court 
concluded that the lease provision terminated the liabilities of 
the lessor and lessee but did not forfeit Maxey's right to share 
in the compensation award.  A lease may bar a lessee from 
sharing in the proceeds of a condemnation award. Such a 
condemnation clause is a negotiated apportionment of a risk 
between a lessor and a lessee.  Van Asten v. Dep't of Transp., 
214 Wis. 2d 135, 138, 571 N.W.2d 420 (Ct. App. 1997). 
46 Wis. Mall Props., 293 Wis. 2d 573, ¶34.   
No.  2006AP2866   
 
33 
 
guard against injury resulting from the lessor's failure to 
maintain the property prior to a condemnation.47   
¶59 The VFW protests that it did commence an action 
against the lessors for breach of the lease agreement in the 
present case.  According to the VFW, that action was dismissed 
on the ground that the VFW lost the right to sue the lessors 
once the property had been condemned.  During oral argument to 
this court, counsel for the VFW contended that the Redevelopment 
Authority's actions condemning the property cut off the VFW's 
ability to recover from the lessors who allegedly had violated 
the lease in allowing the property to deteriorate.  Counsel for 
the VFW argued as follows:   
If the [Redevelopment Authority] wants to apply the 
unit rule, that's fine——just so long as the [VFW] 
retains the right to sue the defaulting lessor.  But 
there's a combination of rules here.  There's the unit 
rule, and then the rule that in condemnation, the 
condemnation terminates the obligations between the 
lessor and the lessee.  [The circuit court] dismissed 
[the VFW's] case [against the lessors]. . . . I invite 
you to examine that record carefully, because it is 
true that a strict application of the unit rule is 
acceptable just so long as you don't enforce the 
collateral rule which prevents the lessee (in this 
case) from suing the lessor for an obvious breach of 
lease.  But that happened in this case.       
 
¶60 The VFW's account of its prior lawsuit against the 
lessors, however, does not tell the full story.  The circuit 
                                                 
47 See Wis. Mall Props., 293 Wis. 2d 573, ¶30 ("[M]ost 
conflicts that condemnation imposes on the landlord and tenant 
can be avoided by proper planning.  In this regard, the most 
important tool is educated negotiation and drafting of the lease 
contract." 
(quoting 
7A 
Nichols 
on 
Eminent 
Domain 
§ 11.06[1][a])). 
No.  2006AP2866   
 
34 
 
court did not dismiss the VFW's action against the lessors on 
the basis stated by the VFW.    
 
¶61 The VFW filed a complaint against all three lessors 
(Towne Metropolitan, Marquette University, and Maharishi Vedic 
University), 
alleging 
that 
they 
had 
"breached 
the 
lease 
obligation to maintain the property in a condition so that it 
will have a value on February 28, 2001 [the date of the 
condemnation] of an amount sufficient to compensate the VFW for 
the value of its leasehold."48  The court of appeals concluded 
that the VFW's complaint did not state a claim upon which relief 
could be granted, because the lease did not contain the 
provision that the VFW, in its complaint, accused the lessors of 
breaching.49  The court of appeals refused to consider the 
argument that the VFW made on appeal (but not in the circuit 
court) that the lessor had an obligation under the lease to 
maintain the hotel building and that Maharishi Vedic University 
breached this obligation, causing the condemnation.50   
                                                 
48 Milwaukee City Post #2874 Veterans of Foreign Wars of the 
U.S. v. Maharishi Vedic University, Inc., No. 2006AP1039, 
unpublished slip op., ¶5 (Wis. Ct. App. March 1, 2007).   
The court of appeals' decision in this unpublished case 
constitutes a fact that the Redevelopment Authority contends is 
relevant to the case presently on review.  We cite to the court 
of appeals' unpublished opinion in order to examine the 
Redevelopment Authority's factual claims.  We do not cite to the 
opinion as precedent.   
49 Milwaukee City Post #2874 Veterans of Foreign Wars of the 
U.S. v. Maharishi Vedic University, Inc., No. 2006AP1039, 
unpublished slip op., ¶¶15, 21 (Wis. Ct. App. Mar. 1, 2007).   
50 Id., ¶¶16-18.   
No.  2006AP2866   
 
35 
 
¶62 The court of appeals in that case explicitly declined 
to determine whether the condemnation had affected the VFW's 
right to bring an action against the lessors for breach of the 
lease.  It stated that in light of its conclusion that the VFW 
failed to state a claim for breach of contract in the first 
instance, the court of appeals had no need to determine whether 
the VFW could bring a breach-of-contract action against the 
lessors notwithstanding the condemnation.51  Accordingly, the 
court of appeals affirmed the circuit court's judgment and 
orders dismissing the VFW's action against the lessors. 
¶63 The VFW's basic point is that if the VFW is denied the 
right to prove the fair market value of its leasehold interest 
when the VFW has been barred from proceeding against the lessors 
for breach of the lease, an unconstitutional taking has 
occurred.  We disagree with the VFW.  The VFW was not barred 
from suing the lessor for damages.  The VFW, a long term lessee, 
is asking the condemnor to shield it from devaluation of its 
interest and to place it in a better position than a lessor-
owner.   
¶64 In 
effect 
the 
VFW 
is 
asking 
the 
Redevelopment 
Authority to protect the VFW against the loss of its sale price 
of the real estate, which was payable over many years through a 
favorable lease. The VFW agreed to the sale and leaseback 
arrangement, assumed the possibility of total loss, and did not 
protect itself against diminution of value of the property and 
                                                 
51 Id., ¶22.   
No.  2006AP2866   
 
36 
 
condemnation.  Equity does not require a condemnor to indemnify 
the VFW against the risk it undertook: that the value of its 
leasehold interest would not equal the sale price of its 
interest in the real estate.  Mandatory indemnification through 
condemnation for a "lost purchase price" would be contrary to 
the principle that contracting parties are free and able to 
allocate economic risk.   
¶65 We agree with the Supreme Court of Massachusetts, 
which has stated that it is not reasonable that "losses arising 
from the failure of [private] contracts which otherwise might 
furnish grounds of damage between the individual parties, should 
measure the compensation to be rendered for the property so 
taken."52  A condemnation proceeding cannot be used in these 
circumstances to recover damages that could have been determined 
by contract between the parties.    
 
¶66 In sum, the VFW's failure to recover from the lessors 
for the lessors' failure to maintain the property is not related 
to the condemnation.  The VFW's loss did not result from the 
application of the rule that complete condemnation of a property 
terminates a lease attached to that property and that the unit 
rule governs fair market value.  The VFW's loss might have been 
recovered in an action against the lessors for damages for 
breach of the lease; this action foundered because the VFW, when 
proceeding in the circuit court, did not plead or argue that the 
                                                 
52 Cornell-Andrews Smelting Co. v. Boston & Providence R.R. 
Corp., 95 N.E. 887, 889 (1911).   
No.  2006AP2866   
 
37 
 
lessors had breached any lease provision that required the 
lessors to maintain the premises.   
 
¶67 Fifth, the VFW errs in relying upon Boston Chamber of 
Commerce v. City of Boston, 217 U.S. 189 (1910), stating in part 
that "the question is, What has the owner lost? not, What has 
the taker gained?"53  Reliance on Boston Chamber of Commerce is 
not persuasive under the circumstances of the present case.    
¶68 In Boston Chamber of Commerce, the City of Boston laid 
out a public street on a parcel of land owned by the Boston 
Chamber of Commerce.  The parcel was already subject to an 
easement of way, light, and air benefitting the Central Wharf 
                                                 
53 Boston Chamber of Commerce v. City of Boston, 217 U.S. 
189, 195 (1910).  
Several Wisconsin cases repeat the language in Boston 
Chamber of Commerce stating that just compensation is based on 
what the owner has lost, not what the condemnor has gained.  
None of these cases involves condemnation of property with 
multiple owners or the unit rule.  See Volbrecht v. State 
Highway Comm'n, 31 Wis. 2d 640, 647, 143 N.W.2d 429 (1966) 
(holding that a jury instruction was in error insofar as it 
implied that "damages may be awarded for value created by the 
taking and its prospective use in the improvement.  Just 
compensation is what the owner has lost, not what the condemnor 
has gained." (citing Nichols on Eminent Domain)); Besnah v. Fond 
du Lac, 35 Wis. 2d 755, 758, 151 N.W.2d 725 (1967) (relating to 
an owner's loss in a partial taking case (citing Volbrecht)); 
Luber v. Milwaukee County, 47 Wis. 2d 271, 279, 177 N.W.2d 380 
(1970) (relating to an owner's loss of rental income resulting 
from an impending taking (quoting Volbrecht and citing Besnah)).   
The court of appeals relied upon the language in Boston 
Chamber of Commerce in holding for the VFW in the present case.  
See City of Milwaukee Post No. 2874 Veterans of Foreign Wars of 
the U.S. v. Redev. Auth. of Milwaukee, 2008 WI App 24, ¶26, 307 
Wis. 2d 518, 746 N.W.2d 536. 
No.  2006AP2866   
 
38 
 
and Wet Dock Corporation, as well as subject to a mortgage, 
itself subject to the easement, benefiting Boston Five Cents 
Savings Bank.  An unencumbered interest in the parcel would have 
been worth approximately $60,000.  The laying out of the public 
street, however, resulted in minimal damage to the owners.  The 
fee was worth little, being restricted by the easement, and the 
holder of the easement "lost nothing by the superposition of a 
public easement upon its own."54   
¶69 The three property owners (Boston Chamber of Commerce, 
Central Wharf, and the Bank) wanted to value the parcel as if 
unencumbered so that Boston would have to pay $60,000 to the 
property owners to divide among themselves.  The property owners 
contended that they were entitled to recover the full value of 
an 
undivided 
interest 
in 
the 
land 
that 
was 
taken, 
notwithstanding their actual loss, stipulated to be only $5,000.      
¶70 Justice Oliver Wendell Holmes, writing for the United 
States Supreme Court, stated that "the question is, What has the 
owner lost? not, What has the taker gained?"55  The loss that the 
owners sought to recover was "of theoretical creation, suffered 
by no one in fact."56  Accordingly, the Court held that the 
owners were entitled to recover no more than the $5,000 required 
to compensate them for their actual loss, despite the larger 
value of an undivided interest in the land that had been taken.  
                                                 
54 Boston Chamber of Commerce, 217 U.S. at 194.   
55 Id. at 195. 
56 Id. at 194.   
No.  2006AP2866   
 
39 
 
The Court stated: "We regard it as entirely plain that the 
[owners] were not entitled, as a matter of law, to have damages 
estimated as if the land was the sole property of one 
owner. . . . "57    
 
¶71 A more recent United States Supreme Court decision, 
Brown v. Legal Foundation of Washington, 538 U.S. 216 (2003), is 
similar to the Boston Chamber of Commerce case. This case 
involved the constitutionality of IOLTA (Interest on Lawyers' 
Trust Account) funds, which the Wisconsin Supreme Court has also 
authorized.  In Brown, the Washington Supreme Court had 
promulgated rules under which the interest on a certain class of 
lawyers' trust accounts was transferred to the Legal Foundation 
of Washington, which used the interest for tax-exempt, law-
related charitable and educational purposes.58     
¶72 The Washington Supreme Court's rules forbade lawyers 
from placing a client's funds in these trust accounts under 
circumstances in which the client's funds could generate net 
interest for the client's benefit.59  Only funds that could not 
generate net interest for the client were to be placed in trust 
accounts yielding interest for the use of the Legal Foundation.60   
                                                 
57 Id. at 195.   
58 See Brown v. Legal Found. of Wash., 538 U.S. 216, 224-25 
(2003). 
59 Id. at 224-25. 
60 Id.   
No.  2006AP2866   
 
40 
 
 
¶73 The United States Supreme Court assumed for purposes 
of deciding Brown that the Washington Supreme Court's program 
amounted to a per se taking of the clients' interest in their 
escrow deposits.61  The Court therefore turned its attention to 
determining whether any compensation was due to clients under 
the Just Compensation Clause of the Fifth Amendment.62 
 
¶74 The Court concluded in Brown that a client was due 
zero compensation for the taking.  The Court quoted and relied 
upon "Justice Holmes' characteristically terse statement"63 in 
Boston Chamber of Commerce "that 'the question is what has the 
owner lost, not what has the taker gained.'"64  The Court 
concluded that although the condemnor gained a lot of money from 
the plan of "condemning" the clients' interest, the clients lost 
nothing from the taking of interest; the Washington Supreme 
                                                 
61 Id. at 235. 
62 Id. 
63 Id. at 236. 
64 Id. (quoting Boston Chamber of Commerce, 217 U.S. at 
195). 
Another recent decision of the United States Supreme Court, 
City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 
687, 710 (1999), also has quoted Justice Holmes' statement in 
Boston Chamber of Commerce.  City of Monterey, however, was not 
a just compensation case.  The issue before the Court was 
"whether it was proper for the District Court to submit the 
question of liability on Del Monte Dunes' regulatory takings 
claim to the jury."  City of Monterey, 526 U.S. at 707. 
Older United States Supreme Court cases quoting Holmes' 
aphorism but shed no light on its meaning and give no hint as to 
how it should be applied.  
No.  2006AP2866   
 
41 
 
Court's rules did not permit their funds to be used for public 
purposes except when the clients' funds could not generate 
interest for the clients' benefit.  The Court examined what the 
clients (the owners) lost, not what the condemnor gained, and 
concluded that "just compensation for a net loss of zero is 
zero."65 
¶75 The Boston Chamber of Commerce and Brown decisions 
stand for the proposition that a condemnor need not provide 
compensation for a loss "of theoretical creation, suffered by no 
one in fact,"66 regardless of the gain to the condemnor.  Nichols 
on Eminent Domain interprets Boston Chamber of Commerce as 
demonstrating that the constitution permits deviation from the 
unit 
rule 
when 
the 
rule 
would 
result 
in 
a 
condemnee 
"recover[ing] more than the damages actually suffered by him."67  
¶76 Neither the Boston Chamber of Commerce nor the Brown 
decision demonstrates that a condemnor is required to compensate 
several owners of a single parcel of land separately when doing 
                                                 
65 Brown v. Legal Found. of Wash., 538 U.S. at 240 n.11.  
66 Boston Chamber of Commerce v. City of Boston, 217 U.S. 
189, 194 (1910).   
67 4 Nichols, supra note 3, § 12.05[2]. 
See also United States v. 6.45 Acres of Land, 409 F.3d 139, 
148 (3d Cir. 2005) (charactering the Boston Chamber of Commerce 
decision as holding that "in a taking by the City of Boston, it 
was not unconstitutional for a commonwealth court to disregard 
the value of the unencumbered estate as a whole where there was 
a great disparity between the value of the unencumbered whole 
and the value of the estate in its actual state of title"). 
No.  2006AP2866   
 
42 
 
so would mean paying more than the fair market value of the 
property as owned by a single owner.  
 
¶77 When the language in Boston Chamber of Commerce 
stating that the question is what has the owner lost, not what 
has the taker gained, is read out of context, it could be 
interpreted as meaning that the condemnor must indemnify 
condemnees for all losses resulting from the condemnation, 
although doing so may mean paying more than the fair market 
value of the property that is taken.  This interpretation, 
however, would be inconsistent with the Court's oft-repeated 
endorsement 
of 
the 
market 
approach 
to 
determining 
just 
compensation.68   
¶78 Furthermore, the United States Supreme Court has made 
clear in numerous cases that indemnification of all losses 
suffered by the condemnee is not the rule.  Although the Court 
                                                 
68 Johnston, supra note 5, at 311. 
Professor Johnston, who argues for separate valuation of 
long-term leasehold interests, explains that the language in 
Boston Chamber of Commerce should not be interpreted to mean 
that the condemnor must fully compensate property owners on the 
basis of their loss: 
This passage [in Boston Chamber of Commerce] has 
occasioned considerable confusion.  Out of context, 
the last sentence could be interpreted as an assertion 
that 
the 
Constitution 
incorporates 
the 
indemnity 
approach [to determining just compensation].  But this 
interpretation is completely inconsistent with the 
Court's oft-repeated endorsement of the market value 
approach.   
Id. (footnote omitted). 
No.  2006AP2866   
 
43 
 
generally "has sought to put the owner of condemned property 'in 
as good a position pecuniarily as if his property had not been 
taken,'"69 the "principle of indemnity has not been given its 
full and literal force."70  Notwithstanding the "loss to the 
owner" language in Boston Chamber of Commerce, compensation may 
be just although it does not provide full indemnification to a 
condemnee.  Thus, for example, the United States Supreme Court 
has 
held 
that 
the 
condemnor 
generally 
may 
provide 
just 
compensation by paying the fair market value of condemned 
property, even though the market-value standard clearly leaves 
owners undercompensated to the extent that property is uniquely 
suited to their needs.71 
¶79 In sum, Holmes' "characteristically terse statement" 
in 
Boston 
Chamber 
of 
Commerce 
is 
clearly 
applicable 
to 
situations in which a condemnee seeks compensation for a 
                                                 
69 United States v. 564.54 Acres of Land, 441 U.S. 506, 511 
(1979) (quoting Olson v. United States, 292 U.S. 246, 255 
(1934)).  
70 564.54 Acres of Land, 441 U.S. at 512. 
71 See United States v. 50 Acres of Land, 469 U.S. 24, 30 
(1984) (stating that when property is taken from a private 
owner, "the possibility that the cost of a substitute facility 
exceeds the market value of the condemned parcel would not 
justify a departure from the market value measure."); 564.54 
Acres of Land, 441 U.S. at 514 ("[I]t is not at all unusual that 
property uniquely adapted to the owner's use has a market value 
on condemnation which falls far short of enabling the owner to 
preserve that use. . . . Yet the Court has previously determined 
that nontransferable values arising from the owner's unique need 
for the property are not compensable, and has found that this 
divergence from full indemnification does not violate the Fifth 
Amendment." (citation omitted)). 
No.  2006AP2866   
 
44 
 
theoretical loss.  The statement has been subject to varying 
interpretation,72 and is more frequently quoted in the United 
States Supreme Court's case law than explained or applied.    
 
¶80 Sixth, the VFW errs in arguing that the conduct of the 
Redevelopment Authority justifies foregoing application of the 
unit rule in the present case.  Counsel for the VFW asserted 
during 
oral 
argument 
that 
the 
Redevelopment 
Authority 
intentionally permitted the hotel building to deteriorate so 
that the Redevelopment Authority could acquire the building and 
the underlying land at a reduced cost.  The VFW urges that the 
unit rule should not be applied in light of the Redevelopment 
Authority's conduct. 
¶81 Counsel's allegations are not supported by the record.  
The record does not make clear when or why the hotel building 
                                                 
72 Professor Victor Goldberg et al. contend that Boston 
Chamber of Commerce is best understood as reflecting the 
"offsetting benefits" doctrine, under which the condemnor may 
offset benefits generated by the condemnation in determining the 
final amount of "just compensation" payable to the condemnee.  
They argue that "[b]ecause the public right-of-way [created by 
the City of Boston] was nearly as valuable to the Wharf Company 
as the private easement, the net result was to deny it all 
compensation."  Victor P. Goldberg, Thomas W. Merrill & Daniel 
Unumb, Bargaining in the Shadow of Eminent Domain: Valuing and 
Apportioning Condemnation Awards Between Landlord and Tenant, 34 
UCLA L. Rev. 1083, 1101 (1987).  Thus, in the view of Professor 
Goldberg et al., the Boston Chamber of Commerce decision 
demonstrates that "the offsetting benefits rule can be a 
complicating factor in determining the correct measure of just 
compensation."  Id. at 1102. Professor Goldberg et al. further 
conclude that "correctly analyzed, Boston Chamber of Commerce 
does not establish an exception to the undivided fee rule."  Id. 
No.  2006AP2866   
 
45 
 
came to be in a worthless state at the time of condemnation.73  
That the building was worthless and needed to be razed made the 
underlying land worthless because the costs of razing the hotel 
exceeded the fair market value of the land.  Furthermore, 
counsel's allegations regarding the Redevelopment Authority's 
conduct and motive are not consistent with the fact that the 
Redevelopment Authority initially paid a substantial sum in 
compensation for the taking of a property that was, according to 
the jury's verdict, worthless.          
¶82 We conclude that using the unit rule in the present 
case to value the whole property to determine the amount of 
compensation due to the VFW does not violate the just 
compensation clause.  We conclude that the VFW receives just 
compensation when it receives no compensation for its leasehold 
interest in a property that has no value.  Accordingly, we 
reverse the decision of the court of appeals reversing the 
judgment of the circuit court.  The judgment of the circuit 
court is affirmed.  
                                                 
73 The dissent asserts that "the City and the Redevelopment 
Authority together contributed to the decline of the underlying 
real property by their actions and inactions and by the lengthy 
delay between the condemning authority's announced intention to 
take the property and the filing of the condemnation petition."  
Dissent, ¶135. 
The 
dissent's 
assertion 
is 
a 
finding 
of 
fact 
made 
improperly by the dissent rather than by the circuit court.  
Moreover, the dissent's finding of fact has no basis in the 
record in the present case. 
No.  2006AP2866   
 
46 
 
By the Court.—The decision of the court of appeals is 
reversed.  
        
No.  2006AP2866.akz 
 
1 
 
¶83 ANNETTE KINGSLAND ZIEGLER, J. (concurring).  While it 
is often said that bad facts make bad law, this court has not 
succumbed to that legal axiom in this case despite the 
absolutely dreadful situation the VFW finds itself in.  I join 
the majority, but I write separately to emphasize that while we 
sympathize with the VFW, our sympathy cannot dictate the result. 
¶84 The unfortunate situation the VFW finds itself in is 
quite sympathetic.  The VFW, once the owner of the prime real 
estate at issue here, conveyed the property to another in 
exchange for a 99-year lease with annual rent due of $1.  For 
that $1, the VFW obtained 5,250 square feet of space with no 
obligations to pay for taxes, utilities, maintenance, or even 
redecoration costs.  Because of acts outside of the VFW's 
control, the building fell into a state of disrepair such that 
the city of Milwaukee condemned the property, which eventually 
led to the eviction of the VFW.  The VFW claimed its interest in 
the property was $1.8 million, but pursuant to the unit rule, 
the VFW was unfortunately left with no money for its interest in 
the property.  As a result, the VFW was left not only with no 
place to conduct its business, but it was left with no money to 
find a new place to call home. 
¶85 In a perfect world, the VFW would be given the 
necessary funds to replace their space.  However, our precedent 
dictates that we must apply the unit rule to the case at hand, 
and as a result, the jury verdict must be sustained and the VFW 
will receive nothing for its loss.   
No.  2006AP2866.akz 
 
2 
 
¶86 While my heart may want to rule in favor of the VFW, 
that would require me to circumvent the unit rule, which our 
precedent requires that we apply in this case.  To invent an 
exception here would swallow, and thus abandon, the rule.  As 
Justice Wilcox once noted, "A legitimate system of law requires 
adherence 
to 
established 
legal 
principles, 
even 
if 
such 
adherence does not produce a result deemed desirable . . . ."  
Thomas v. Mallett, 2005 WI 129, ¶180, 285 Wis. 2d 236, 701 
N.W.2d 523 (Wilcox, J., dissenting).  The Missouri Supreme 
Court's Chief Justice has aptly noted: 
Judges are accountable to uphold the rule of law 
through their decisions. This means that, just as 
juries are asked to set aside their personal beliefs 
and decide a case based only on the law and the 
evidence, judges also must set aside their personal 
feelings, beliefs and attitudes and decide each case 
according to the facts and law in that case. 
Column by Michael A. Wolff, C.J., Your Missouri Courts, Law 
Matters: Judges Are Accountable . . . To The Law (Dec. 15, 2005) 
available at http://www.courts.mo.gov/page.asp?id=1082. 
¶87 Despite the unfortunate situation the VFW finds itself 
in, I must follow Wisconsin's precedent, and in this case that 
means I must join the majority's application of the unit rule. 
¶88 I am authorized to state that Justice MICHAEL J. 
GABLEMAN joins this concurrence. 
No.  2006AP2866.dtp 
 
1 
 
¶89 DAVID T. PROSSER, J.   (dissenting).  "Property must 
be secured or liberty cannot exist."  John Adams 1791.1 
¶90 The protection of private property is one of the 
principal objectives of the United States Constitution.2  The 
original constitution prohibited the states from passing any 
"law impairing the obligation of contracts."3  The Fifth 
Amendment 
added that "[n]o person shall . . . be deprived 
of . . . property, without due process of law; nor shall private 
property be taken for public use, without just compensation."  
The Fourteenth Amendment imposed the due process limitation upon 
the 
states, 
and 
the 
United 
States 
Supreme 
Court 
later 
interpreted this due process provision as incorporating just 
compensation.4  The prohibition against the impairment of 
                                                 
1 6 The Works of John Adams 280 (Charles Francis Adams ed., 
1850). 
2 "One 
great 
obj[ective] 
of 
Gov[ernment] 
is 
personal 
protection and the security of Property."  1 The Records of the 
Federal Convention of 1787, 302 (Max Farrand ed., Yale Univ. 
Press rev. ed. 1937 (quoting Alexander Hamilton)); see also Adam 
Smith, Lectures on Jurisprudence 1 (Ronald L. Meek et al. eds., 
Oxford University Press 1978) (1762-63)  
The first and chief design of every system of 
government is to maintain justice: to prevent the 
members of society from encroaching on one another's 
property, or seizing what is not their own.  The 
design here is to give each one the secure and 
peaceable possession of his own property. 
3 U.S. Const. art. I, § 10, cl. 1. 
4 Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 
155, 160 (1980); Penn Cent. Transp. Co. v. New York City, 438 
U.S. 104, 122 (1978); Chicago, Burlington & Quincy R.R. Co. v. 
Chicago, 166 U.S. 226, 239 (1897). 
No.  2006AP2866.dtp 
 
2 
 
contracts and the requirement of just compensation are embodied 
in the Wisconsin Constitution.5  
¶91 This case concerns just compensation for a prepaid, 
long-term lease.  The issue presented is whether the City of 
Milwaukee Redevelopment Authority (Redevelopment Authority) may 
take private property that is subject to a prepaid, long-term 
lease that has value, evict the leaseholder from the property, 
and demolish the property, impairing and terminating the 
leaseholder's contract and real property rights in the process, 
without paying the leaseholder any compensation whatever for the 
taking of its property.  In short, may the Redevelopment 
Authority 
extinguish the leaseholder's rights without any 
compensation and still comply with all the constitutional 
requirements designed to protect private property rights? 
¶92 The unusual circumstances of this case, culminating in 
zero payment for the taking of an 11-story building on historic 
Wisconsin Avenue in Milwaukee, as well as the termination of a 
valuable leasehold interest in that building, cry out for an 
exception to the "unit rule" because of the grossly unjust 
result that it visits upon the leaseholder.  The majority will 
hear none of it.  Indeed, the majority seizes the opportunity 
presented by this case to (1) disavow existing exceptions to the 
unit rule in Wisconsin law; (2) minimize Justice Oliver Wendell 
Holmes, Jr. and the Wisconsin cases citing his landmark decision 
                                                 
5 Wis. Const. art I, §§ 12 ("No . . . law impairing the 
obligation of contracts[] shall ever be passed . . . ."), 13 
("The property of no person shall be taken for public use 
without just compensation therefor."). 
No.  2006AP2866.dtp 
 
3 
 
in Boston Chamber of Commerce v. City of Boston, 217 U.S. 189 
(1910); (3) repudiate the concept of consequential damages under 
the Wisconsin Constitution; and (4) validate the unprecedented 
proposition that no compensation is just compensation for the 
taking of valuable property.  Thus, the majority decision 
represents a very different view of private property rights from 
what we are accustomed to in Wisconsin.  For the reasons stated 
below, I respectfully dissent. 
I 
¶93 As noted, the facts in this dispute are unusual.  The 
VFW was the sole owner of a parcel of real property situated on 
the south side of Wisconsin Avenue at 26th Street in downtown 
Milwaukee.  In 1961, the VFW conveyed its land with improvements 
to Towne Metropolitan (Towne), a real estate development company 
that planned to construct a large hotel on the site.  In return 
for the conveyance of its property, the VFW obtained a 99-year 
lease for 5,250 square feet on the ground floor of the new 
hotel.  This lease contained an option to renew for another 99 
years.  It also provided that the VFW's space would be designed 
for VFW purposes and that all leasehold improvements and 
equipment would be furnished by the lessor.  In addition, the 
annual rent was to be only $1.00, and the lessor would pay all 
real estate taxes, heating, air conditioning, and maintenance 
costs, and would redecorate the premises every seven years. 
¶94 The terms of this lease were honored by Towne when the 
11-story hotel was operated by Hilton Hotels, and later Holiday 
No.  2006AP2866.dtp 
 
4 
 
Inn, and then honored by Marquette University (Marquette), which 
acquired the property in 1986. 
¶95 Over time, the neighborhood declined, and the 11-story 
building began to deteriorate.  In 1994, Marquette sold the 
property, which was being used for student housing, to the 
Maharishi Vedic University (the Maharishi) for $600,000.  The 
Maharishi never occupied the property. 
¶96 One of the major fact questions in this case is why 
the Maharishi never occupied the building.  Counsel for the 
Redevelopment Authority explained that the new owner was never 
given occupancy permits, presumably because the building had 
building code violations.  Counsel for the VFW asserted that the 
City of Milwaukee refused to act on repeated demands by the VFW 
that the City enforce the building code against the new owner.  
Instead, the City simply continued to assess and tax the 
property at a value near the 1994 purchase price, while the 
Redevelopment Authority sent signals of its intention to condemn 
the property as part of an urban redevelopment project.  In 
February 1998, the Redevelopment Authority held a public hearing 
to consider creating a redevelopment district, and after the 
hearing, it issued a relocation order.  All these factors 
contributed to the deterioration of the building and its 
eventual abandonment by the Maharishi. 
¶97 On 
January 
18, 
2001, 
after 
identifying 
three 
comparable 
properties 
and 
utilizing 
the 
unit 
rule, 
the 
Redevelopment Authority issued a jurisdictional offer in the 
amount of $440,000 to be divided between two named owners, the 
No.  2006AP2866.dtp 
 
5 
 
Maharishi and the VFW.  On February 28, 2001, the $440,000 
proposed Award of Damages was deposited with the Milwaukee 
County Clerk of Circuit Court.  The award covered not only the 
land, the hotel building on the land, the personal property in 
the building, and the lease, but also an adjoining parking lot 
owned exclusively by the Maharishi. 
¶98 On December 7, 2001, the Milwaukee County Circuit 
Court divided the Award of Damages.  The Maharishi was awarded 
$140,000, less delinquent taxes, for the adjoining parking lot 
and its personal property in the hotel; the VFW was awarded 
$300,000, less taxes due, for the value of its leasehold 
interest. 
¶99 The City had assessed the former hotel property at 
$566,000 for tax purposes in the year prior to the taking.  It 
reduced the assessment to $1,000 for the year of the taking. 
¶100 On February 15, 2002, the VFW appealed the adequacy of 
the Award of Damages to the Condemnation Commission (the 
Commission) pursuant to Wis. Stat. § 32.05(9).  The Maharishi 
did not join this appeal, having accepted an award of $140,000, 
less delinquent taxes.  After litigation to determine how the 
Commission should value the property, the Commission valued the 
total property, using a strict application of the unit rule, at 
$425,000; 
that 
is, 
$15,000 
less 
than 
the 
Redevelopment 
Authority's jurisdictional offer.  This award was made in 
December 2004. 
¶101 The VFW appealed to Milwaukee County Circuit Court.  
After a four-day trial in September 2006, a jury determined that 
No.  2006AP2866.dtp 
 
6 
 
the hotel building had no value.  The jury was not permitted to 
consider the value of the VFW's leasehold.  The court thereupon 
entered judgment against the VFW in the amount of $387,348.24, 
taking back the $300,000 that was paid to the VFW as part of the 
allocation of the Award of Damages, plus accumulated interest 
and costs. 
¶102 The VFW appealed, and the court of appeals, in a 
unanimous decision, reversed.  The court of appeals remanded the 
case to the circuit court for a determination of the value of 
the VFW's prepaid, long-term lease.  It determined that the unit 
rule, as applied to the unusual facts of this case, was 
unconstitutional because it permitted a taking of the VFW's 
entire 
leasehold 
interest 
(as 
well 
as 
the 
building 
and 
underlying land) for zero compensation. 
¶103 The Redevelopment Authority sought review in this 
court on grounds that the unit rule was and is the only 
appropriate method of valuing the combined interests in the 
property taken.  The Redevelopment Authority asserts that it was 
acting prudently in condemning the property, evicting the VFW, 
and razing the building (as it did in 2003).  It asserts that 
the building had become unsafe to its tenants and an impediment 
to area renewal and that it spent hundreds of thousands of 
dollars to raze the building and the adjoining parking ramp to 
prepare the area for future development.6  The Redevelopment 
                                                 
6 The parcel of land at issue remains vacant and undeveloped 
after six years of ownership by the Redevelopment Authority.  As 
a result, the parcel has yielded no tax revenue to local 
governments since it was condemned in 2001. 
No.  2006AP2866.dtp 
 
7 
 
Authority 
claims 
that 
the 
court 
of 
appeals 
decision 
is 
unprecedented and will adversely impair the legitimate interests 
of public condemnation throughout Wisconsin.   
II 
¶104 The Fifth Amendment to the United States Constitution 
and Article I, Section 13 of the Wisconsin Constitution require 
that just compensation be paid when the government takes private 
property for a public purpose.  This requirement bars the 
government "'from forcing some people alone to bear public 
burdens which, in all fairness and justice, should be borne by 
the public as a whole.'"  Dolan v. City of Tigard, 512 U.S. 374, 
384 (1994) (quoting Armstrong v. United States, 364 U.S. 40, 49 
(1960)). 
¶105 "It has long been established that the holder of an 
unexpired leasehold interest in land is entitled, under the 
Fifth Amendment, to just compensation for the value of that 
interest when it is taken upon condemnation . . . ."  Alamo Land 
& Cattle Co. v. Arizona, 424 U.S. 295, 303 (1976) (internal 
footnote omitted); Maxey v. Redevelopment Auth. of Racine, 94 
Wis. 2d 375, 400, 288 N.W.2d 794 (1980) ("It is well settled 
that a lessee has a property interest; and, when that interest 
is completely taken by a condemning authority, the lessee is 
entitled to compensation."); see also United States v. Petty 
Motor Co., 327 U.S. 372 (1946); A.W. Duckett & Co. v. United 
States, 266 U.S. 149 (1924). 
¶106 The United States Supreme Court has said that just 
compensation "normally is to be measured by 'the market value of 
No.  2006AP2866.dtp 
 
8 
 
the property at the time of the taking contemporaneously paid in 
money.'"  United States v. 50 Acres of Land, 469 U.S. 24, 29 
(1984) (quoting Olson v. United States, 292 U.S. 246, 255 
(1934)).  The Court has explained that just compensation could 
be measured in various ways depending on the circumstances.  "In 
an effort . . . to find some practical standard, the courts 
early adopted, and have retained, the concept of market value."  
United States v. Miller, 317 U.S. 369, 374 (1943).  "Deviation 
from this measure of just compensation has been required only 
'when market value has been too difficult to find, or when its 
application would result in manifest injustice to owner or 
public.'"  50 Acres of Land, 469 U.S. at 29 (quoting United 
States v. Commodities Trading Corp., 339 U.S. 121, 123 (1950)); 
Kirby Forest Indus. v. United States, 467 U.S. 1, 10 n.14 
(1984). 
¶107 The unit rule is a valuable tool in determining market 
value in a condemnation involving a single parcel of property 
that is encumbered by more than one interest, such as a lease.  
Specifically, "[t]he unit rule requires that [the] real estate 
be valued in respect to its gross value as a single entity as if 
there was only one owner."  4 Nichols on Eminent Domain 
§ 13.01[16][a] (3d ed. 2007).  "[The] rule exists for the 
protection of the condemnor," as it ensures that the aggregate 
value of the separate interests in the property cannot exceed 
the property's value as an unencumbered whole.  Id., § 13.08[2].  
"Ordinarily no difficulty (or apparent injustice) arises from 
the application of the [unit] rule.  The value of a lease is 
No.  2006AP2866.dtp 
 
9 
 
paid to the lessee and deducted from the compensation of the 
owner of the fee."  Id., § 12.05[1].   
¶108 Although the unit rule is the generally accepted 
method for valuing condemned property that is encumbered by 
various 
interests, 
its 
operation 
cannot 
displace 
the 
constitutional mandate of just compensation.  State v. Platte 
Valley Pub. Power & Irrigation Dist., 23 N.W.2d 300, 312 (Neb. 
1946).7 
 
Accordingly, 
the 
unit 
rule 
cannot 
dictate 
the 
determination of just compensation in all cases involving 
multiple interests.  United States v. 6.45 Acres of Land, 409 
F.3d 139, 147 (3d Cir. 2005) ("[T]he unit rule is [not] to be 
applied rigidly in all cases."); Nebraska v. United States, 164 
F.2d 866, 869 (8th Cir. 1947) ("[T]he [unit] rule is not one 
that is autocratically absolute."); Nichols on Eminent Domain, 
supra, 
§ 13.08[4] 
("Despite 
statements 
indicating 
broad 
acceptance of the unit rule, other methods have been approved by 
courts in valuing a leasehold interest."); see also majority 
                                                 
7  
The rule requiring just compensation to each 
owner for that which is taken must be applied in all 
instances under our Constitution.  [A]ny rule that may 
be laid down must itself be measured by the rule given 
in the Constitution, and any rule that so limits the 
damages in such case as that the result will be in 
fact less than just compensation for the injury 
suffered falls short of the constitutional measure. 
State v. Platte Valley Pub. Power & Irrigation Dist., 23 
N.W.2d 300, 312 (Neb. 1946) (internal quotations omitted). 
No.  2006AP2866.dtp 
 
10 
 
op., ¶45 (discussing a host of jurisdictions that have departed 
from the unit rule).8 
¶109 In some cases, "a departure [from the unit rule] may 
be necessary to avoid grossly unjust results.  See, e.g., United 
States v. Welch, 217 U.S. 333, 338 (1910)."  6.45 Acres of Land, 
409 F.3d at 148 (emphasis added); United States v. 499.472 Acres 
of Land, 701 F.2d 545, 549 (5th Cir. 1983); United States v. 
Corbin, 423 F.2d 821, 828 (10th Cir. 1970); Nebraska, 164 F.2d 
at 869; Arkansas State Highway Comm'n v. Fox, 322 S.W.2d 81, 82-
83 (Ark. 1959); People ex rel. Dept. of Pub. Works v. Lynbar, 
Inc., 62 Cal. Rptr. 320, 327 (Ct. App. 1967); State Highway 
Dept. v. Thomas, 154 S.E.2d 812, 815-16 (Ga. Ct. App. 1967); 
Wilson v. Fleming, 31 N.W.2d 393, 401-02 (Iowa 1948); Mayor of 
Baltimore v. Latrobe, 61 A. 203, 205-06 (Md. 1905); State ex 
rel. McCaskill v. Hall, 28 S.W.2d 80, 82 (Mo. 1930); Platte 
Valley, 23 N.W.2d at 307-08; see also majority op., ¶¶41, 49 
("Departure from the unit rule may be made in rare and 
exceptional circumstances.").9   
                                                 
8 See 
also 
majority 
op., 
¶38 
("The 
constitutional 
requirement of just compensation cannot be reduced to a formula 
or expressed in inexorable rules." (citing United States v. 
Toronto, Hamilton & Buffalo Navigation Co., 338 U.S. 396, 402 
(1949); United States v. Cors, 337 U.S. 325, 332 (1949))). 
9 See also 4 Nichols on Eminent Domain § 12.05[2] (3d ed. 
2007)  
The method of valuation based upon the undivided 
fee has been criticized where there was a great 
disparity between the value of the undivided fee and 
the 
aggregate 
value 
of 
the 
separate 
interests.  
Valuation 
of 
the separate interests, under such 
circumstances, has been held to be constitutional.  It 
has, in fact, been intimated that where the [unit] 
No.  2006AP2866.dtp 
 
11 
 
¶110 There are rare exceptions to fair market value as the 
appropriate measure of just compensation, and there are rare 
exceptions to the unit rule as the appropriate way to determine 
fair market value.  As the Supreme Court observed in Mississippi 
& Rum River Boom Co. v. Patterson, 98 U.S. 403, 408 (1878), 
"[e]xceptional circumstances will modify the most carefully 
guarded rule."     
¶111 The 
court 
of 
appeals 
decision 
in 
this 
matter 
identified three Wisconsin cases where courts have recognized 
exceptions to the unit rule. 
¶112 First is Luber v. Milwaukee County, 47 Wis. 2d 271, 
177 N.W.2d 380 (1970).  In Luber, this court interpreted Article 
I, Section 13 of the Wisconsin Constitution to award $11,200 in 
lost rent to the condemnees for 32 months of vacancy leading up 
to condemnation of their building.  Id. at 273, 276, 284.  The 
Milwaukee County Expressway Commission, which had condemned the 
building for a public purpose, was livid that it was being asked 
to pay for something more than the fair market value of the 
building.  See id. at 276.  "The question," this court stated, 
"is whether there are any interests, other than the building 
itself, for which appellants are constitutionally entitled to 
compensation."  Id. at 278.  The court answered with the 
following: 
                                                                                                                                                             
rule operates to the prejudice of the interest of the 
condemnee it might be considered unconstitutional. 
(Emphasis added.) 
No.  2006AP2866.dtp 
 
12 
 
 
We think that under property concepts one's 
interest in rental income is such as to deserve 
compensation under the "just compensation" provision 
of the Wisconsin Constitution.  In the instant case it 
is undisputed that the pendency of the condemnation 
was the sole cause of the appellants' rental loss.  
The reason for formerly denying compensation for such 
interest was that the condemnor received no benefit 
from the taking thereof.  This court, however, 
departed from such thinking when it said in Volbrecht 
v. State Highway Comm[ission, 31 Wis. 2d 640, 647, 143 
N.W.2d 429 (1966),] that "Just compensation is what 
the owner has lost, not what the condemnor has 
gained. . . ." 
. . . . 
 
We believe that one's interest in rental loss is 
such as is required to be compensated under the "just 
compensation" clause of art. I, sec. 13, Wisconsin 
Constitution. 
Id. at 279, 283 (internal footnote omitted) (first ellipsis in 
original). 
¶113 Luber represented a departure from the unit rule when 
it recognized lost rents as a compensable loss and described the 
"inadequacy of merely awarding the fair market value of the 
property actually taken."  Id. at 280.  Luber is the flip side 
of this case, because here, the "rent" was prepaid when the VFW 
conveyed its entire property to the developer for its leasehold 
interest.  The Luber case is also valuable in illuminating how a 
tenant can be scared off by the "imminent" threat of acquisition 
of the leased property, just as here the Maharishi was motivated 
not to repair the hotel property, and ultimately to abandon the 
property 
because 
of 
the 
actions 
of 
the 
City 
and 
the 
Redevelopment Authority. 
¶114 The second case is Maxey, 94 Wis. 2d 375.  The facts 
in Maxey are complicated, but in essence, Maxey's 99-year lease 
No.  2006AP2866.dtp 
 
13 
 
in a building that was condemned by the Racine Redevelopment 
Authority rendered Maxey the owner of the building for purposes 
of a potential inverse condemnation award.  Id. at 384.  Maxey 
filed an inverse condemnation action three days before the 
Redevelopment Authority filed a direct condemnation action.  Id. 
at 381. 
¶115 The facts and reasoning of the Maxey case present 
striking parallels to the present case: 
A. 
The unanimous court cited Luber with approval.  
Id. at 392. 
B. 
The court reiterated that "long-term leasehold 
interests constitute ownership of land."  Id. 
at 387-88. 
C. 
The court closely tracked the conduct of the 
City of Racine and the Racine Redevelopment 
Authority leading up to formal condemnation.  
The City placed a moratorium on the issuance 
of theater licenses in the central business 
district 
of 
Racine, 
directly 
affecting 
a 
theater in Maxey's building which was denied 
renewal of its license.  Id. at 385.  The 
Redevelopment Authority and the City made 
published statements that the building "would 
be taken" through eminent domain.  Id.  The 
City and the Redevelopment Authority contacted 
tenants and told them that the property would 
be condemned and encouraged tenants to vacate 
No.  2006AP2866.dtp 
 
14 
 
the premises.  Id.  Some of these actions 
occurred more than three years before the 
actual petition for condemnation was filed.  
Id.  The circuit court determined that a 
taking had effectively occurred two years 
before the Redevelopment Authority formally 
filed its petition for direct condemnation.  
Id. at 386.  This court stated that "there was 
some impingement upon Maxey's uninhibited use 
of the property almost from the time the 
redevelopment project was proposed in 1973," 
id. at 388, which was well over three years 
before formal condemnation.  The circuit court 
found that "the City of Racine and the 
Redevelopment Authority were responsible for 
each other's acts."  Id. at 386.  This court 
summed up the circuit court's finding with the 
comment that "the City of Racine and the 
Redevelopment Authority were to be considered 
as alter egos in respect to the condemnation 
of the Baker Block Building."  Id. at 390.  
The parallels to this case are self-evident.  
D. 
The court cited Just v. Marinette County, 56 
Wis. 2d 7, 
201 
N.W.2d 761 
(1972), 
Howell 
Plaza, Inc. v. State Highway Commission, 66 
Wis. 2d 720, 226 N.W.2d 185 (1975), and Howell 
Plaza, Inc. v. State Highway Commission, 92 
No.  2006AP2866.dtp 
 
15 
 
Wis. 2d 74, 
284 
N.W.2d 887 
(1979), 
to 
illustrate 
how 
government 
actions 
that 
effectively 
deprive 
a 
property 
owner 
of 
practically 
all 
beneficial 
use 
of 
his 
property, amount to a constructive taking or 
an inverse condemnation.  Maxey, 94 Wis. 2d at 
389-91.  In this case, when the Redevelopment 
Authority acknowledges that the City would not 
give the Maharishi occupancy permits for the 
hotel building, it reveals similarities to the 
Maxey case. 
E. 
The 
court 
said 
that 
"under 
ordinary 
circumstances, a lessee is entitled to some 
portion of the condemnation award."  Id. at 
401.  It construed a "condemnation clause" in 
Maxey's lease to avoid a forfeiture: "The 
Wisconsin law, like the law generally, abhors 
a forfeiture."  Id. at 403.  "We conclude that 
the court erred when it interpreted the clause 
to completely deprive the lessee of any 
interest."  Id. at 400.10 
F. 
The court remanded the case to the circuit 
court so that Maxey could proceed on an 
inverse condemnation claim.  Id. at 406.  The 
                                                 
10 There was no "condemnation clause" in the VFW's lease.  
Consequently, the leasehold interest of the VFW was not 
disqualified by contract from receiving all or part of any 
condemnation award. 
No.  2006AP2866.dtp 
 
16 
 
effect of this ruling was to avoid a narrow 
interpretation of condemnation damages under 
the unit rule because it recognized damages 
that were incurred before the formal taking. 
¶116 The third case is Redevelopment Authority of Green Bay 
v. Bee Frank, Inc. (Bee Frank II), 120 Wis. 2d 402, 355 
N.W.2d 240 (1984).  In Bee Frank II, the circuit court, 
interpreting condemnation statutes, considered the separate 
appeal of a lessee who owned immovable fixtures in a condemned 
building.  Id. at 404-05.  The Green Bay Redevelopment Authority 
offered $282,000 to the owner of the building and offered 
$168,000 to Bee Frank for loss of its immovable fixtures.  Id. 
at 405-06.  Both parties rejected the offer.  Id. at 406.  The 
circuit court scheduled a hearing before the Condemnation 
Commission.  Before that hearing, the owner of the building 
settled for $296,100.  The Condemnation Commission then awarded 
Bee Frank $210,000, "an amount $41,592 (approximately 25 
percent) 
in 
excess 
of 
the 
Redevelopment 
Authority's 
jurisdictional offer."  Id.  When Bee Frank asked for litigation 
expenses, the Redevelopment Authority objected.  Id.   
¶117 The court recounted the procedural history: 
 
The 
trial 
court 
rejected 
the 
Redevelopment 
Authority's argument that the total amount of the 
property as a whole should be involved in determining 
Bee 
Frank, 
Inc.'s 
entitlement 
to 
litigation 
expenses . . . . 
 
The Redevelopment Authority appealed . . . .  In 
a published opinion, the court of appeals held that 
immovable trade fixtures were an integral part of the 
building and could not be considered separately from 
No.  2006AP2866.dtp 
 
17 
 
the purchase price for the land and building in 
determining entitlement to litigation expenses. 
Id. at 406-07 (citing Redevelopment Auth. of Green Bay v. Bee 
Frank, Inc. (Bee Frank I), 112 Wis. 2d 1, 331 N.W.2d 840 (Ct. 
App. 1983)). 
¶118 In its decision, the court of appeals stated that a 
separate award could not be made for fixtures because of the 
unit rule.  Bee Frank I, 112 Wis. 2d at 7.  But this court 
disagreed: 
 
Respondent . . . argues that the unit rule of 
damages for real estate valuation mandates a finding 
that awarding separate litigation expenses to the 
owner of the immovable fixtures is impermissible.  The 
unit rule requires improved real estate to be valued 
as a single entity for purposes of determining the 
total 
value 
of 
property 
taken 
through 
condemnation . . . .  [However, w]hile the unit rule 
of damages is a controlling principle in eminent 
domain 
actions, 
its 
application 
in 
determining 
entitlement to litigation expenses . . . contravenes 
the public policy. 
Bee Frank II, 120 Wis. 2d at 413-14 (emphasis added) (internal 
citations omitted). 
¶119 The plain truth is, in Bee Frank II, the value of 
immovable fixtures was determined separately from the value of 
the whole property, and litigation expenses were not keyed to 
the value of the whole property.  The unit rule was disregarded 
in fact while it was being affirmed in rhetoric.11  The rule was 
                                                 
11 To understand the significance of Green Bay Redevelopment 
Authority v. Bee Frank, Inc. (Bee Frank II), 120 Wis. 2d 402, 
355 N.W.2d 240 (1984), one must consider the case in relation to 
the analysis employed by the court of appeals in Green Bay 
Redevelopment Authority v. Bee Frank, Inc. (Bee Frank I), 112 
Wis. 2d 1, 331 N.W.2d 840 (Ct. App. 1983).  There, the court of 
appeals stated the following: 
No.  2006AP2866.dtp 
 
18 
 
                                                                                                                                                             
 
In eminent domain proceedings, Wisconsin has 
adopted the "unit rule of damages" approach for 
improved real estate, which requires that the real 
estate be valued as a single entity.  "Buildings and 
improvements are not valued in isolation from the 
market value of the land, but are considered only to 
the extent that they enhance the value.  The proper 
measure of damages is therefore the market value of 
the 
land 
with 
the 
improvements 
on 
it. . . ."  
Milwaukee & Suburban Transport Corp. v. Milwaukee 
County, 82 Wis. 2d 420, 448-49, 263 N.W.2d 503, 518 
(1978).  A condemnation award should be based on  the 
property's value as a whole as if there were only one 
owner, 
and 
it 
is 
only 
after 
the 
appropriated 
property's total value is determined that the award is 
apportioned 
among 
the 
various 
interests 
in 
the 
property. 
 
. . . .  
 
In Milwaukee & Suburban Transport, the court also 
approved an instruction similar to Wisconsin Civil 
Jury 
Instruction 
8135 
used 
in 
eminent 
domain 
proceedings involving buildings with improvements.  
Both instructions require the jury to value the 
property as a single unit comprised of the various 
components. . . .  The first question asked for the 
fair market value of the property taken.  The 
remaining questions merely asked what calculations had 
gone into the jury's determination of overall value. 
 
. . . .  
 
The State of New York, which has occasionally 
criticized the unit rule, nevertheless acknowledges 
that there is no dispute "that a separate award cannot 
be made for fixtures if what are claimed to be 
fixtures have become an integral part of the real 
property."  Marraro v. State, 189 N.E.2d 606, 609 
(N.Y. 1963).  We agree.  An appropriation of land is 
an appropriation of everything annexed to the land, 
whether classified as buildings or fixtures.  Although 
the value of fixtures must be included in determining 
the 
appropriated property's total value, when a 
fixture has lost its identity by becoming a structural 
part of the building, it can no longer become the 
subject of a separate award.   
No.  2006AP2866.dtp 
 
19 
 
set aside because its application would have contravened public 
policy. 
¶120 The majority opinion in this case is quick to dismiss 
exceptions to the unit rule without coming to grips with the 
fact that exceptions were recognized in Luber, in Maxey, and in 
Bee Frank II.  The majority is quick to borrow snippets from 
cases like Maxey and Green Bay Broadcasting Co. v. Redevelopment 
Authority of Green Bay, 116 Wis. 2d 1, 342 N.W.2d 27 (1983), 
which preceded Bee Frank II, to resist any relief to a property 
owner 
whose 
property 
was 
taken 
without 
any 
compensation 
whatever, as though addressing a grossly unjust result on highly 
unusual 
facts 
is 
somehow 
an 
illegitimate 
undertaking.  
Permitting a limited exception to the unit rule on the extreme 
facts before us would not undermine the rule any more than three 
previous exceptions have undermined the broad and general 
application of the rule. 
                                                                                                                                                             
Bee Frank I, 112 Wis. 2d at 5-7 (second emphasis added) 
(internal footnote omitted). 
 
The court of appeals added in a footnote: 
 
It 
appears 
questionable 
under 
a 
§ 32.06 
condemnation proceeding, however, whether a tenant who 
owns immovable fixtures in a building is entitled to a 
separate hearing before the commission or circuit 
court.  It also appears questionable whether a non-
titleholder to the property, such as a tenant, is ever 
entitled 
to 
litigation 
expenses 
in 
a 
§ 32.06 
condemnation proceeding. 
Id. at 8 n.3. 
No.  2006AP2866.dtp 
 
20 
 
 
III 
¶121 In its decision, the court of appeals sought to 
provide a rationale for an exception to the unit rule in this 
case.  It cited several different federal and state cases, 
including Boston Chamber of Commerce, in which Justice Oliver 
Wendell Holmes, Jr., penned an oft-quoted aphorism pertaining to 
just compensation: 
[T]he Constitution does not require a disregard of the 
mode of ownership . . . .  It does not require a 
parcel of land to be valued as an unencumbered whole 
when it is not held as an unencumbered whole.  It 
merely requires that an owner of property taken should 
be paid for what is taken from him.  It deals with 
persons, not with tracts of land.  And the question is 
what has the owner lost, not what has the taker 
gained. 
Boston Chamber of Commerce, 217 U.S. at 195 (emphasis added).  
The court of appeals observed that, in this case, "the taker 
gained, according to the jury . . . , a building that was 
worthless when measured against fair market value.  But what has 
the VFW lost?  The jury was not allowed to consider the value of 
the leasehold because of the unit rule."  City of Milwaukee Post 
No. 2874 Veterans of Foreign Wars of the United States v. 
Redevelopment Auth. of Milwaukee, 2008 WI App 24, ¶26, 307 
Wis. 2d 518, 746 N.W.2d 536.   
¶122 The majority leaps to fend off any unfair question 
about what the VFW has lost: "[T]he VFW errs in relying upon 
Boston Chamber of Commerce, stating in part that 'the question 
is, What has the owner lost? not, What has the taker gained?'"  
Majority op., ¶67 (citation omitted).  The majority tries to 
No.  2006AP2866.dtp 
 
21 
 
dismiss the statement by Justice Holmes as "not persuasive" and 
taken out of context.  Id. 67-79. 
¶123 In fact, several Wisconsin Supreme Court cases have 
recognized 
the 
Holmes 
standard 
when 
determining 
just 
compensation in condemnation cases.  See, e.g., Luber, 47 
Wis. 2d at 
279-80; 
Besnah 
v. 
City 
of 
Fond 
du 
Lac, 
35 
Wis. 2d 755, 
758, 
151 
N.W.2d 725 
(1967); 
Volbrecht, 
31 
Wis. 2d at 647.  Despite the expressed acceptance of this 
standard in Wisconsin case law, the majority attempts to 
minimize the import of Justice Holmes's statement on the 
constitutional issue of just compensation.  See majority op., 
¶¶67-79. 
¶124 The majority opinion dissects the Boston Chamber of 
Commerce case as though a penetrating new look at the facts will 
wipe out a century of legal decisions adhering to the Holmes 
standard.  The Holmes standard is not irrelevant, as evidenced 
by the Supreme Court's decision in Brown v. Legal Foundation of 
Washington, 538 U.S. 216, 235-36 (2003), where Justice Stevens 
wrote as follows: "[T]he 'just compensation' required by the 
Fifth Amendment is measured by the property owner's loss rather 
than the government's gain.  This conclusion is supported by 
consistent and unambiguous holdings in our cases."  (Emphasis 
added.)  Similarly, in City of Monterey v. Del Monte Dunes at 
Monterey, Ltd., 526 U.S. 687, 710 (1999), Justice Kennedy 
observed that "[j]ust compensation . . . differs from equitable 
restitution and other monetary remedies available in equity, for 
in determining just compensation, 'the question is what has the 
No.  2006AP2866.dtp 
 
22 
 
owner lost, not what has the taker gained.'"  (Quoting Boston 
Chamber of Commerce, 217 U.S. at 195.) 
¶125 The 
majority 
contends 
that 
determining 
just 
compensation by evaluating what the owner has lost and not what 
the taker has gained "would be inconsistent with the Court's 
oft-repeated endorsement of the market approach to determining 
just compensation."  Majority op., ¶77.  This overgeneralization 
is grounded in the fiction that the VFW lost nothing when its 
leasehold interest was taken, and it fails to appreciate that 
the individual valuation advocated by this dissent would measure 
the fair market value of what the owner (VFW) has lost.  See 
infra, ¶132. 
IV 
¶126 The majority opinion makes the following statement: 
"[T]he 'fairness award' doctrine adopted by the court of appeals 
conflicts with the principle that damages lacking a direct 
relationship to the fair market value are incidental or 
consequential damages and are not considered when determining 
just compensation under the constitution."  Majority op., ¶52.  
This 
statement 
serves 
little 
purpose 
except 
to 
reopen 
hostilities over issues considered at length in City of 
Janesville v. CC Midwest, Inc., 2007 WI 93, 302 Wis. 2d 599, 734 
N.W.2d 428, and to drive another nail into this court's notable 
decision in Luber. 
V 
¶127 The most disturbing element of this case is that the 
majority 
approves 
the 
unprecedented 
proposition 
that 
no 
No.  2006AP2866.dtp 
 
23 
 
compensation is just compensation for the taking of valuable 
property. 
¶128 Like Justice Holmes, Justice Hugo Black had the 
facility for putting profound truths into simple words.  In 
Commodities Trading Corp., 339 U.S. at 123, he wrote the 
following in regards to just compensation: "[T]he dominant 
consideration always remains the same: What compensation is 
'just' both to an owner whose property is taken and to the 
public that must pay the bill?" 
¶129 Zero compensation is not "just" to the leaseholder in 
this case.  It exposes the absence of any balance between the 
interests of the leaseholder whose property is taken and the 
interests of the Redevelopment Authority that willfully moved to 
condemn the property.  It takes the position that "compensation 
may be just although it does not provide full indemnification to 
a condemnee"12 to its extreme, as though it were some inexorable 
rule that Stepford judges are powerless to resist regardless of 
the circumstances. 
¶130 The 
majority 
cites 
Green 
Bay 
Broadcasting 
with 
approval.  This is the case in which the court admits, "The unit 
rule is designed to protect the interests of the condemnor and 
not to protect the interests of a condemnee."  Green Bay 
Broadcasting, 116 Wis. 2d at 11.  This quote is unnerving to 
people who believe that our constitutions were designed to 
protect property owners, not property takers. 
                                                 
12 Majority op., ¶78. 
No.  2006AP2866.dtp 
 
24 
 
¶131 The unit rule usually works well, but it is not part 
of either the federal constitution or the state constitution, as 
the Redevelopment Authority insists, and it is unconstitutional 
when it deprives a property owner of just compensation.  In this 
instance, we must fashion and apply something other than strict 
adherence to the unit rule to comply with constitutional 
provisions protecting property. 
¶132 Rather than employing the unit rule at the expense of 
the 
U.S. 
and 
Wisconsin 
constitutions, 
this 
court 
should 
recognize an exception to the unit rule in this case so that the 
VFW's 
leasehold 
interest 
is 
valued 
independently 
of 
the 
property's fee simple interest.  Specifically, the VFW's 
leasehold interest should be valued separately from the rest of 
the property by subtracting the value of the contract rent for 
the period remaining on the lease (what the VFW was obligated to 
pay during the lease period) from the value of the market rent 
for the period remaining on the lease.  See, e.g., Maxey, 94 
Wis. 2d at 400-01; see also Nichols on Eminent Domain, supra, 
§ 13.08[6]; majority op., ¶¶22 n.10, 45.13  This method "will 
adequately compensate [the VFW] for any pecuniary loss resulting 
                                                 
13 "The generally accepted measure of compensation for such 
a taking is the fair market value of the leasehold for the 
unexpired lease term. . . .  A lessee is, therefore, entitled to 
a sum which will adequately compensate it for any pecuniary loss 
resulting from the taking."  4 Nichols on Eminent Domain, supra, 
§ 13.08[6] (internal footnotes omitted). 
No.  2006AP2866.dtp 
 
25 
 
from 
the 
taking."14 
 
Nichols 
on 
Eminent 
Domain, 
supra, 
§ 13.08[6]. 
¶133 There 
may 
be 
other 
ways 
to 
arrive 
at 
just 
compensation.  For instance, there ought to be some reasonable 
relationship between the assessed value of property for tax 
purposes and fair market value.  The assessed value of the hotel 
property was $566,000 in 2000, two years after the Redevelopment 
Authority signaled its intent to condemn the property.  The 
Redevelopment Authority offered $300,000 for the VFW's leasehold 
interest, a figure close to what its appraiser later testified 
the land alone would be worth.  None of these three approaches 
will yield "just compensation" of zero. 
¶134 The majority has given no attention to the most 
appropriate method of measuring the value of the VFW's leasehold 
interest because it is committed to the proposition that, on 
these facts, zero compensation is just compensation. 
¶135 To sum up: (1) the VFW had a prepaid, long-term lease 
of real value; (2) the lease was a recognized property interest, 
the taking of which requires just compensation; (3) there was no 
"condemnation clause" in the lease that forfeited the VFW's 
right to receive just compensation; (4) the City and the 
Redevelopment Authority together contributed to the decline of 
the underlying real property by their actions and inactions and 
                                                 
14 The majority opinion implicitly accepts that, if the 
VFW's property were valued separately according to this method, 
there would be some fair market value to the VFW's leasehold 
that would need to be compensated.  See majority op., ¶22 n.10 
("[W]e accept for purposes of our review the VFW's contention 
that its leasehold interest had value.").  
No.  2006AP2866.dtp 
 
26 
 
by 
the 
lengthy 
delay 
between 
the 
condemning 
authority's 
announced intention to take the property and the filing of the 
condemnation petition; (5) the VFW was given no opportunity 
before the jury to prove the separate value of its leasehold 
interest, i.e., no opportunity to show what it lost; and (6) the 
VFW is being awarded no compensation whatever for the taking of 
its property. 
¶136 Would that John Adams could rise from his grave to 
speak for the VFW, and for property rights in twenty-first 
century America.  I believe he would observe that, if the VFW's 
property can be taken without compensation, no property is 
secure.   
¶137 For the foregoing reasons, I respectfully dissent. 
¶138 I am authorized to state the JUSTICE N. PATRICK CROOKS 
and JUSTICE PATIENCE DRAKE ROGGENSACK join this dissent. 
 
No.  2006AP2866.dtp 
 
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