People ex rel. Dept. of Transp. v. Muller

In People ex rel. Dept. of Transp. v. Muller (1984) 36 Cal.3d 263, condemnation forced a veterinarian to relocate his practice and he did so to a nearby location to avoid losing customers although the rent was higher than at a farther location. Muller held that the decrease in profits attributable to the higher rent could be recovered as lost goodwill, noting "the purpose of the statute was unquestionably to provide monetary compensation for the kind of losses which typically occur when an ongoing small business is forced to move and give up the benefits of its former location." (Id. at p. 270.) Because the lower rent at the original location was such a benefit, its loss was recoverable as lost goodwill. (Id. at p. 268.) The court disagreed with the Department of Transportation's contention that Code of Civil Procedure section 1263.510 did not authorize compensation for increased expenses but only for lost patronage. (Muller, supra, 36 Cal.3d at pp. 268-269.) It stated, in dictum, "Under Department's definition of goodwill, Dr. Muller would also be entitled to compensation for expenses reasonably incurred in an effort to prevent a loss of patronage. It appears that his expenses--the higher rent at the new location--were incurred in a reasonable (and apparently successful) effort to prevent a loss of patronage. The Department conceded as much in its trial brief and on this appeal. Thus, had the case been tried on a theory that the higher rent was reasonably necessary to mitigate a threatened loss of patronage, Dr. Muller might well have been awarded the same recovery." (Id. at pp. 271-272.)