The Wicked Flee When No Man Pursueth

 

For a bit of intellectual amusement, don’t miss the opinion of the Wisconsin Supreme Court in City of Janesville v. CC Midwest, Inc. (Wis. 2007) 734 N.W.2d 428. Though the issue before the court had to do with what must Wisconsin condemnors do to provide the displaced condemnee-owners with suitable, statutorily-requied replacement property under the state relocation assistance laws, various Justices took off, pro and con, on a side isue of  the unsoundness of the rule denying compensation for business losses in eminent domain cases. Since that issue was not before the court, we can only attribute this outburst to a case of a judicial guilty  conscience, since everyone we know of agrees that the rule denying compensation for business losses that are actually suffered by condemnees, lacks both a doctrinal and a moral foundation, and judicial expressions on the subject are replete with utter nonsense. Thus, though business goodwill is routinely valued by courts in tort, contract, divorce and tax cases, in eminent domain litigation judges refuse to do so, often mouthing Justice Holmes’ absurd justification that business losses are so “uncertain in their vicissitudes” — whatever that means — that they plumb can’t be valued when a business is destroyed as a result of condemnation of the land on which it is located and it cannot move to a new location either at all, or not without suffering substantial damages.

Why are we so unkind to the judiciary on this point? We’re glad you asked. To begin with, courts have never had any trouble valuing business goodwill when public utilities are taken.  Also, when a statute makes business goodwill compensable in eminent domain, judges abruptly lose their inability to value it, and take on the task as any other valuation controversy.  People etc. v. Muller (1984) 36 Cal.3d 263, 681 P.2d 1340. Or, when a business property it taken temporarily, there is no problem valuing its goodwill either. See Kimball Laundry Co. v. United States (1949)  338 U.S. 1.

To find out just how nonsensical that “vicissitudes” argument is, try making it when Uncle Sam wants to tax business goodwill. Just you try!

Anyway, Justce  Prosser’s dissent in Janesville is must reading, and in footnote 1, it meticulously collects some 14 law review commentaries (a half century’s worth) criticizing that archaic rule.

2 thoughts on “The Wicked Flee When No Man Pursueth

  1. gideon

    Eric Leonhardt | ericl@freeandassociates.com | IP: 207.135.146.33

    John wants more return than a safe Treasury note so he puts his money in a business. The prospect of higher returns necessitates higher risk. Then why should the general public with their money in Treasuries insure the risk taker beyond the real estate? I do not believe it is the public’s responsibilty to insure the gambler against loss.

  2. gideon

    The risk of WHAT? The risk John takes is that his business will fail, not that the government [or anyone else] will destroy it for its own benefit. The American system is premised on the idea that the government is supposed to protects the people and their property, not steal it.

    Besides, if that business property is good enough to be taxed why wouldn’t it be good enough to be compensated for when the government destroys it for “public” benefit, or in the context of redevelopment for private benefit of another private party? See Dean Starkman, Take and Give: Condemnation is Used to Hand One Business Property of Another, Wall St. Jour., Dec. 2, 1998, at A1.

    After all, we pay taxes as the price of a civilized society.

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