Opinion ID: 1626992
Heading Depth: 1
Heading Rank: 3

Heading: Appellant's going-concern value was destroyed by the condemnation.

Text: A taking requires that the condemnee be deprived of his property and that such deprivation be caused by the condemnation. It was stipulated that absent the taking by the state in these proceedings, there is no evidence that the condemnee could not have continued to operate its lounge at the premises in question. Appellant accepts the general rule that loss of going-concern value is not recoverable on condemnation. [9] In our opinion, an exception to the general rule applies in the situation where, as here, the condemnee's business is one which cannot be pursued without a license (Minneapolis Code of Ordinances, § 851.010), and where that license, while transferable between persons (§851.300), must relate specifically to particular premises which are designated in the license itself. § 851.440. It is immaterial whether or not appellant proves he cannot get his license transferred to some other location if and when he acquires such other location. Appellant has made three applications, all of which have been refused. In Canada it has been held that condemnees are entitled to reasonable compensation for the value of their liquor businesses in addition to the value of the physical assets. [10] [T]he principles applied to the assessment of compensation in United States eminent domain cases closely resemble the principles applied in Canada and Quebec. Challies, The Law of Expropriation, p. 12 (1954). In Assaf v. City of Toronto [1953] Ont.R. 595, 604, 4 Dom.L.R. 466, 472, the court stated:    Whether the burden of proof if inability to get his licences transferred is on the appellant, or whether the burden is on the respondent to prove the opposite proposition, namely, that the appellant could obtain a transfer of his licences to some other location, the fact remains that by reason of this expropriation the appellant is left in the position where the premises which he had and with which he enjoyed a liquor licence are taken from him, with the licence coming to an end in relation to those premises when the respondent takes possession. By the award the appellant is left to take the risk of being able to get a licence elsewhere by transfer or otherwise without any compensation for the loss he may suffer. What was taken from him was property to which was attached a licence.    What may happen if the applicant endeavours to establish himself elsewhere is so speculative that I think the proper way to determine the amount of compensation in this case is to approach it on the basis of what the appellant, as a prudent man at the time of the expropriation of his property, would have paid for it rather than be ejected from it. Other courts have carved out exceptions to the general rule and have begun to include incidental damages in determining appropriate awards. This occurs where the government takes over a public utility and intends to permanently furnish the prior services, [11] or where the taking by the condemnor is temporary. [12] Compensation under eminent domain for loss of going-concern value was required in Kimball Laundry Co. v. United States, supra . In that case the United States temporarily condemned for Army use a laundry plant for a term which could be extended from year to year at the election of the Secretary of War. Following the general rule of noncompensability, the district court awarded the owner an annual rental value and damages to plant and machinery beyond ordinary wear and tear, but no compensation was given for the loss of going-concern value due to the destruction of his customer trade routes. The United States Supreme Court (five to four) reversed, holding the condemnee was entitled to the value of the trade routes. Distinguishing cases involving the usual taking of fee title to business property when the going-concern value has not been taken, in that only the physical property has been condemned, leaving the owner free to move his business to a new location, the court held that  an exercise of the power of eminent domain which has the inevitable effect of depriving the owner of the going-concern value of his business is a compensable `taking' of property. (Italics supplied.) 338 U.S. 11, 13, 69 S.Ct. 1440, 1441, 93 L.Ed. 1775, 1776. Appellant argues that the present case is like the taking in Kimball because the taking had the inevitable effect of depriving appellant of its business' going-concern value. The trial court sought to distinguish Kimball on the grounds that the case involved a temporary taking, quoting as follows: It is arguable, to be sure, that since an equally suitable plant might conceivably have been available to the petitioner at reasonable terms for the same period as the Government's occupancy of its own plant, and since that would have enabled it to stay in business without loss of going-concern value, it is irrelevant that no such premises happened to be available, as it would have been irrelevant, under a strict application of Mitchell v. United States, 267 U.S. 341, 45 S.Ct. 293, 69 L.Ed. 644, had the Government taken the fee. When fee title to business property has been taken, however, it is fair on the whole that the amount of compensation payable should not include speculative losses consequent upon realization of the remote possibility that the owner will be unable to find a wholly suitable location for the transfer of going-concern value. But when the Government has taken the temporary use of such property, it would be unfair to deny compensation for a demonstrable loss of going-concern value upon the assumption that an even more remote possibility the temporary transfer of going-concern valuemight have been realized.  (Italics supplied.) 338 U.S. 14, 69 S.Ct. 1442, 93 L.Ed. 1777. Here the amount of loss is not speculative, but has been stipulated. And the occurrence of the loss is not a remote possibility but an accomplished fact, and, at the time of the condemnation, it was certain that it would occur. Mitchell v. United States, 267 U.S. 341, 45 S.Ct. 293, 69 L.Ed. 644, does not require us to reach a different result. It has been argued that, notwithstanding the court's failure to say so expressly, Mitchell was substantially overruled sub silentio by Kimball. [13] But it is not necessary for us to consider whether Mitchell was completely overruled, because it is distinguishable from the present case and no portion of Mitchell's rationale which would favor the state in the present case survived Kimball. In Mitchell, the Federal government condemned land for a military proving ground. In so doing, plaintiff's lands, which were especially adapted to growing corn of a special grade and quality, were taken and he was unable to find another location. The United States Supreme Court upheld the refusal to pay for the business, saying (267 U.S. 344, 45 S.Ct. 294, 69 L.Ed. 648): The special value of land due to its adaptability for use in a particular business is an element which the owner of land is entitled, under the Fifth Amendment, to have considered in determining the amount to be paid as the just compensation upon a taking by eminent domain. [Citations omitted.] Doubtless such special value of the plaintiffs' land was duly considered by the President in fixing the amount to be paid therefor.    There is no finding as a fact that the Government took the business, or that what it did was intended as a taking. If the business was destroyed, the destruction was an unintended incident of the taking of land. In Mitchell, the court reasoned that the going-concern value was not taken because the condemnor only needed, and only received, the physical property. This approach construes taking as if it were taking over. [14] But note that in Kimball, the court said the situation is otherwise when the condemnor intends to carry on the business; however, the court also required compensation for the condemnee's laundry routes which the government never carried on or intended to carry on. The court held (338 U.S. 13, 69 S.Ct. 1441, 93 L.Ed. 1776):    If such a deprivation has occurred, the going-concern value of the business is at the Government's disposal whether or not it chooses to avail itself of it.    `[T]he question is what has the owner lost, not what has the taker gained.' The Mitchell court presumed that the value of the business was reflected in the value placed upon the land. However, in the present case the state's counsel admitted before the trial court:    The fact situation and arguments of law were presented to the commissioners at that time, with the understanding of the State of Minnesota that the commissioners did not consider the value of the business in reaching their award   . The Mitchell condemnee's assumed inability to relocate was not caused by law or regulation, but merely by peculiar factual circumstances. In the present case, law renders it impossible for appellant to reestablish the business elsewhere in the city [15] or in the state. [16] Jackson v. United States, supra ; Todd v. United States, 292 F.2d 841, 155 Ct.Cl. 87; and United States v. Smoot Sand & Gravel Corp., supra, holding that a condemnee may recover for the loss of fishing or sand and gravel rights held under authority of and subject to revocation by the state, also aid us in concluding that appellant must be compensated. Renewability as of right for a definite term is not a requirement for property to be entitled to compensation. In Smoot, the condemnee's interest was plainly recognized to be revocable at the state's pleasure, and the fishing license in Jackson was renewable barring misconduct. Appellant's property was destroyed by the state, not the Minneapolis City Council. The state unequivocally stipulated that absent the taking by the state in these proceedings, there is no evidence that the condemnee could not have continued to operate its lounge at the premises in question. A majority of the commentators agree that denying recovery for loss of going-concern value is inequitable. [17] One commentator has even recommended that    recompense for these losses, should be specifically authorized by the legislature, or should be sanctioned by the courts where the way is open, by the use of the concept, not of `market value,' but of `value to the owner.' McCormick, The Measure of Compensation in Eminent Domain, 17 Minn.L. Rev. 461, 482. The present case is one where the way is open to award appellant compensation for the going-concern value of the business. Here the condemnee was deprived of far more than the value of cold assets. The exercise of the right of eminent domain effectively destroyed appellant's valid and unrevoked ability to continue to engage in the liquor business. The parties stipulated that absent the taking by the state, there was no evidence that appellant could not have continued to operate its lounge at the premises in question and that the appellant has gone out of the liquor business because it was unsuccessful in transferring its license to another location. It was unable to relocate because of the restricted liquor patrol limits and other peculiarities of the Minneapolis licensing situation. There is no problem here with a speculated loss because the going-concern value has been stipulated to be $17,500. Although a liquor license is a privilege vis-a-vis the licensing authorities, it has qualities of a property right as to third parties, and in eminentdomain proceedings we consider the condemnee to have a property right in his liquor license vis-a-vis the condemnor. The going-concern value of appellant's liquor lounge operating under a valid and unrevoked liquor license was a property right which was taken by the condemnor. As such, we hold that the facts of this particular case fall within an exception to the general rule of no compensation for incidental damages and that appellant is entitled to recover for the loss of the going business (stipulated as $17,500) as well as the usual award for the value of the real property taken (stipulated as $39,500). Judgment is affirmed as to the value of the real property taken and reversed as to the going-concern value. Affirmed in part; reversed in part.