Court Opinion

ID: 9664192
Source: CourtListenerOpinion
Date Created: 2023-08-24 00:06:41.567241+00
Date Added: 2024-06-11T18:15:03.121629
License: Public Domain

UHLENHOPP, Justice
(dissenting).
This is a hard case. On application in the fall of 1967, the Highway Commission granted access from the one-acre premises to the highway. Plaintiff thereupon leased and to some extent improved the premises. In the summer of 1968 the Highway Commission condemned the access to the highway, as well as the front one-tenth of the premises. With this ambivalence on the part of the Highway Commission, small wonder the jury made plaintiff a substantial award.
But the problem is more difficult for us. We are writing the law of eminent do*584main. Examination of the present proceedings shows the very thing happened that this court has warned against: lost profits (or contemplated profits) were in fact allowed.
A condemnor does not condemn a business ; it condemns the property. The measure of compensation is thus not the value of the business or its profits, but the value of the property. 1 Orgel, Valuation Under Eminent Domain § 162 at 661-662 (2d ed.). If title to the fee is encumbered by a lease for a term, the compensation is the value of the encumbered fee and the value of the leasehold. In determining the value of the leasehold, evidence that a prosperous business is being conducted on the premises is relevant. But when the evidence goes farther — into detailed proof of profits and indeed into hypothetical profits of a business not yet on the premises — the jury is taken down the wrong road and into the realm of profits.
A couple illustrations demonstrate that these proceedings in fact resulted in an award of profits. Plaintiff asks compensation for only one year of the term although with extensions, the lease would run for 20 years. Plaintiff claims that the value of the lease for that one year, over and above the rent of $400, is $8,854. (The fact that plaintiff is asking compensation for one year and not for the balance of the term itself indicates that it is seeking the profits for the year rather than the value of the leasehold for the term.) Now suppose that a similar condemnee asks compensation for the full 20 years at $8,854 per year. Can it be thought that sum is really the value of such a leasehold in the vicinity and not in fact the profits of the contemplated enterprise, with all the personal services, managerial skills, and other factors which go into profits? If it be said that the law would require such a condemnee to minimize loss of profits by promptly seeking another site, is it not thereby admitted that the condemnee is in fact recovering profits ?
Again, suppose plaintiff owned these premises in fee. Then if the condemnor took the entire acre, plaintiff would only be entitled to the value of such an acre with access. Since rent for business property is ordinarily capitalized at 10%, the value of this acre would appear to be about $4,000. If in contrast a lessee who plans to establish a business on the acre is allowed $8,854 for his right of possession for one year, must not such award in fact be based on contemplated profits of the business? Indeed, plaintiff’s president testified that the figure $8,854 represents one-year’s expected profits of his firm. In essence, plaintiff’s demand here is in the nature of an estoppel or breach of contract action for unrealized expectations in the form of profits, for the Highway Commission’s granting access and then taking it away. But this is not such an action; this is a proceeding in eminent domain, and in this proceeding plaintiff is not entitled to lost profits but to the value of such a leasehold in the community of DeWitt.
The fact of the matter is that the distinction between leasehold value and profits was extinguished here. But the distinction is real. It is one thing to require a lessee to show what a leasehold is worth in the vicinity, with a prosperous business located on the premises, and quite a different thing to permit a lessee to calculate his projected profits and then simply to characterize those profits as the value of the leasehold. To permit the latter is in fact to allow recovery of profits and to abolish the rule that profits do not constitute the measure. Condemnees will simply call profits by another name, and the rule against recovery of profits will be gone.
The established rule for valuing leas-holds should have been applied here in the evidence as well as in the instructions — the value of the leasehold based on consideration of the duration and provisions of the lease, the size, shape, location, accessibility, and terrain of the premises, the permanent improvements if any and their condition, *585and the suitability of the premises for particular uses, including the use the lessee planned to make of them.
Plaintiff may have received inequitable treatment by the Highway Commission’s ambivalence in granting and then taking away the right of access. But in an effort to remedy this, we should not set a precedent in eminent domain law which will cause difficulty later. The judgment should be reversed.
LeGRAND, J., joins in this dissent.