People ex rel. Dept. of Transportation v. Muller

In People ex rel. Dept. of Transportation v. Muller (1984) 36 Cal.3d 263, a veterinarian (Muller) owned real property on which his veterinary hospital was located. (Muller, supra, 36 Cal.3d at p. 265.) In 1972, CalTrans notified him that it was considering condemnation of the property for construction of a freeway. (Ibid.) In or about 1974, he leased that property to his corporate veterinary practice (which, at the time, had other shareholders) for a 15-year term. (Ibid.) It was agreed that were the property condemned, he would buy or build a replacement hospital and lease it to the corporation with rent equal to 10 percent of his costs for land and construction. (Id. at p. 266.) In 1978, CalTrans informed him that it would proceed with condemnation of the property. (Ibid.) Muller purchased a parcel of real property about one mile away and constructed a new hospital. (Ibid.) His costs eventually totaled $ 502,000. (Id. at p. 267.) In 1980, the veterinary practice moved to the new location and began paying annual rent of $ 54,000. (Ibid.) The annual rent at the old building had been about $ 25,000. (Id. at p. 266, fn. 3.) At trial, Muller's two experts testified regarding the goodwill value of Muller's practice before and after the condemnation. (Id. at p. 267.) They testified Muller had between $ 176,000 to $ 200,000 in goodwill before the condemnation but, because of the increased rent at the new location, had no goodwill value after the condemnation. (Ibid.) In contrast, CalTrans's expert testified that Muller had lost no goodwill value because he did not have any goodwill before the condemnation. (Id. at p. 268.) The jury awarded Muller $ 96,000 in lost business goodwill. (Ibid.) On appeal in Muller, CalTrans argued the evidence showed Muller had lost only profits, not goodwill. (Muller, supra, 36 Cal.3d at p. 269.) Citing the definition of "goodwill" in Code of Civil Procedure section 1263.510, the Muller court noted Muller had clearly lost a "benefit" of the condemned location that had accrued to his business--specifically, "he has lost the cheap rent in an older building which enabled his practice to show a profit." (Muller, at p. 268.) Muller stated: "The statute does authorize compensation for a loss of 'benefits' of 'location.' There are other benefits to a particular location besides patronage. . . . Here, the old location carried the manifest benefit of a cheap rent in an older building. The statute authorizes a court to award compensation for the loss of this benefit." (Muller, at p. 269.) Accordingly, Muller affirmed the judgment awarding Muller compensation for lost business goodwill. (Id. at p. 272.)