Petition — Abrams v. Community Redevelopment Agency

Supreme Court brief1976

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IN THE tl ROOK yp Ciin

Sateen, Lope fe

SUPREME COURT OF THE UNITED STATES ~~~.

October Term 1975

no. %5-1642

ARTHUR J. ABRAMS,

Petitioner,

vs.

THE COMMUNITY REDEVELOPMENT AGENCY

OF THE CITY OF LOS ANGELES,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

SUPREME COURT OF THE STATE OF CALIFORNIA

JERROLD A. FADEM

MICHAEL M. BERGER

of FADEM, BERGER & McINTIRE

A Professional Corporation

8383 Wilshire Boulevard

Suite 210

Beverly Hills, CA 90211

(213) 651-3372

Attorneys for Petitioner

GIDEON KANNER

Of Counsel

P. O. Box 5133

Sherman Oaks, CA 91403

(213) 642-2951

IN THE

SUPREME COURT OF THE UNITED STATES

October Term 1975

No.

ARTHUR .*. ABRAMS,

Petitioner,

vs.

THE COMMUNITY REDEVELOPMENT AGENCY

OF THE CITY OF LOS ANGELES,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

SUPREME COURT OF THE STATE OF CALIFORNIA

JERROLD A. FADEM

MICHAEL M. BERGER

of FADEM, BERGER & McINTIRE

A Professional Corporation

8383 Wilshire Boulevard

Suite 210

Beverly Hills, CA 90211

(213) 651-3372

Attorneys for Petitioner

GIDEON KANNER

Of Counsel

P. O. Box 5133

Sherman Oaks, CA 91403

(213) 642-2951

ee LS

TOPICAL INDEX

Table of Authorities

Opinions Below

Jurisdiction

Questions Presented for Review

Constitutional and Statutory

Provisions

STATEMENT OF THE CASE

REASONS FOR GRANTING THE WRIT

INTRODUCTION

ARGUMENT 14

A STATE MAY PROPERLY CHOOSE FOR

ITSELF WHAT ECONOMIC INTERESTS

CONSTITUTE "PROPERTY" RIGHTS

UNDER ITS JURISPRUDENCE, BUT

HAVING THUS MADE ITS CHOICE AND

DEFINED "PROPERTY", IT IS BOUND

TO EXTEND CONSTITUTIONAL PROTEC- @~«

TION TO SUCH PROPERTY RIGHTS AND

MAY NOT SUBJECT THEM TO CONFIS-

CATION WITHOUT OFFENDING DUE

PROCESS AND EQUAL PROTECTION

GUARANTEES 14

ae el Ale RO -

THE ASSUMPTIONS ON WHICH REST

THE 19th CENTURY RULE OF NON-

COMPENSABILITY OF BUSINESS

LOSSES IN EMINENT DOMAIN ARE

UTTERLY UNFOUNDED AND IRRATION-~

AL IN THE CONTEXT OF TODAY'S

URBAN MASS CONDEMNATIONS 10

THE APPLICATION OF THE CALIFOR-

NIA RELOCATION ACT TO MR,

ABRAMS' FACTUAL SITUATION CON- |

STITUTES A DEPRIVATION OF PROP- .

ERTY WITHOUT DUE PROCESS OF LAW

AND OF EQUAL PROTECTION OF THE

LAW 25

ii.

THE OPINION BELOW MISCONSTRUES

THE LAW LAID DOWN BY THIS

COURT 28

The California Supreme Court

Consciously Declined to Follow

Constitutional Criteria Estab-

lished by This Court 28

The California Supreme Court

Distorted the Teaching of

Kimbali Laundry 29

CONCLUSION 32

APPENDIX A OPINION

CALIFORNIA SUPREME COUR

FILED December 29, 1975

APPENDIX B OPINION

COURT OF APPEAL

SECOND APPELLATE DISTRICT

STATE OF CALIFORNIA

DIVISION TWO

FILED September 5, 1974

APPENDIX C CONSTITUTIONAL & STATUTORY

PROVISIONS

iii.

TABLE OF AUTHORITIES

Cases Page

Armstrong v. United States (1960)

364 U.S. 40 29

Bank of California v. San Francisco

(1904) 142 Cal. 27,

75 Pac. 832 18

Banner Milling Co. State

(1925, N.Y.) 148 N.E. 668 22

Berman v. Parker (1954)

348 U.S. 26 10, 22

Camara v. Municipal Court (1967)

387 U.S. 523 34

Chicago B. & Q.R. Co. v. Chicago

(1897) 166 U.S. 226 28

Community Redevelopment Agency

v. Abrams (1974, Cal.App.)

116 Cal.Rptr. 308 3

Community Redevelopment Agency

v. Abrams (1975)

15 Cal.3d 813,

126 Cal.Rptr. 473,

543 P.2dad 905 3

Doe v. Bolton (1973)

410 U.S. 179 35

Edmands v. Boston (1871)

108 Mass. 535 17

iv.

—— lll

Cases Page

In re Edward J. Jeffries Homes,

etc. (1943, Mich.)

ll N.W.2d 272 22

Escobedo v. Illinois (1964)

378 U.S. 478 35

Euclid v. Ambler Realty Co. (1926)

273 U.S. 365 32

Application of Gault (1967)

387 U.S. 1 36

Great Northern R. Co. v. Weeks

(1936) 297 U.S. 135 18

Hughes v. Washington (1967)

389 U.S. 290 17, 18

Jenkins v. State of Georgia (1974)

418 U.S. 153 35

Kimball Laundry Co. v. United

States (1949)

338 U.S. 1 14, 22, 24,

29, 30-33

Lynch v. Household Finance

Corp. (1972)

405 U.S. 538 35

Miller & Lux v. Richardson (1920)

(1920) 182 Cal. 115,

187 Pac. 411 18

Miller v. State of California

(1973) 413 U.S. 15 35

Cases Page

Miranda v. Arizona (1966)

384 U.S. 436

Mitchell v. United States (1925)

267 U.S. 341

Roe v. Wade (1973)

410 U.S. 113

Sauer v. New York (1907)

206 U.S. 536

Sotomura v. County of Hawaii

(1975, D. Haw.)

402 F. Supp. 95

State v. Saugen (1969, Minn.)

169 N.W.2d 37

United States v. Commodities

Trading Corp. (1950)

339 U.S. 121

United States v. Fuller (1973)

409 U.S. 488

United States ex rel. T.V.A. v.

Powelson (1943)

319 U.S. 266

United States v. Virginia E. &

P. Co. (1961)

365 U.S. 624

United States v. Willow River

Power Co. (1945)

324 U.S. 499 16, i353,

vi.

Statutes

Cal. Bus. & Prof. Code:

§14102

Cal. Civil Code:

§654

§655

Cal. Gov't. Code:

§7262 6,

§7267

Cal. Rev. & Tax Code:

§201

28 U.S.C. §1257 (3)

42 U.S.C. §4621

Constitution

United States Constitution,

Fifth and Fourteenth Amendments

Calif. Constitution, Art. l, §19

Calif. Constitution, Art. 13, §§1l,

Texts

Aloi and Goldberg, A Reexamina-

tion of Value, Good Will and

Business Losses in Eminent

Domain, 53 Cornell L. Rev.

604 (1968)

vii.

25, 27

Texts Page

Annotation, 1 A.L.R. Fed.

at 482-483

Bigham, "Fair Market Value", "Just

Compensation" and The Consti-

tution: A Critical View,

24 Vanderbilt L.Rev. 63 (1970) 12,

Comment, Eminent Domain Valua-

tions in an Age of Redevelop-

ment, 67 Yale L.J. 61 (1967) ll,

Bryant, Eminent Domain-Its Use

and Misuse, 39 Univ. of

Cincinnati L.R. 259 (1970)

Note, “Just Compensation" for the

Small Businessman, 2 Columbia

Jour. of Law & Soc. Prob.

144 (1966)

Michelman, Property Utility and

Fairness: Comments on tne

Ethical Foundation of “Just

Compensation" Law, 80 Harv.

L.Rev. 1165 (1967)

Comment, Non-Compensable Business Los

Losses in Eminent Domain Proceed-

ings: A Time for Re-evaluation,

46 Temple L.Q. 72 (1972);

48 Notre Dame Lawyer at 804, fn. 196

John Sherman's Recollections of Forty

Years in the House, Senate and Cab-

inet: An Autobiography, Vol. l,

p. 80 (1895)

viii.

Texts Page

Spies & McCoid, Recovery of

Consequential Damages in

Eminent Domain, 48 Va.L.Rev.

437 (1962) 13

Note, The Unsoundness of Califor-

nia's Noncompensability Rule

as Applied to Business Losses

in Condemnation Cases, 20

Hastings L. Jour. 675 (1968) 12

Vondracek, Compensation for

Losses Resulting from Acts

of Public Policy in Soviet

Law, in “Compensation for

Compulsory Purchase: A

Comparative Study", (1975,

United Kingdom Comparative

Law Series) at p. 233 20

Miscellaneous

Relocation: Unequal Treatment of

People and Businesses Displaced

by Government, Advisory Commis-

sion on Intergovernmental Rela-

tions (Jan. 1965) ll

Study of Compensation and Assistance

for Persons Affected by Real

Property Acquisition in Federal

and Federally Assisted Public

Works, 88th Congress, 2d Session,

Committee Print No. 3l

(Dec. 27, 1964) ll

——

oe ee ee

ee — -

IN THE

SUPREME COURT OF THE UNITED STATES

October Term 1975

No.

ARTHUR J. ABRAMS,

Petitioner,

vs.

THE COMMUNITY REDEVELOPMENT AGENCY

OF THE CITY OF LOS ANGELES,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

SUPREME COURT OF THE STATE OF CALIFORNIA

Petitioner Arthur J. Abrams respect-

fully prays that a writ of certiorari is-

sue to review the decision of the Supreme

Court of California in the case at bench,

and that upon such review said decision

be reversed.

This petition presents for review one

of the most cruel and unjust constitutional

anomalies extant in the country today:

The plight of a small, one-location busi-

nessman who finds himself in the path of

the urban redevelopment bulldozer, only to

discover in the process that his constitu-

tional promise of "just compensation" is

an illusion compounded of archaic 19th

Century rhetoric that bears no more rela-

tion to the reality of mass condemnations

in today's urban society, than a horse-

drawn wagon does to modern transportation

systems.

Mr. Abrams, the petitioner, is an elder-

ly unemployable druggist whose established,

27-year old business and its valuable

stock of prescription medicines were ef-

fectively confiscated in the process of

condemnation of his drugstore for the

Watts Redevelopment Project. He prays

for relief from this Court; relief which

was partially granted by the trial court

below, fully granted by the California

Court of Appeal, and then denied alto-

gether by the California Supreme Court.

Opinions Below

The opinion of the California Supreme

Court presented for review by this peti-

tion is reported as Community Redevelop-

ment Agency v. Abrams (1975) 15 Cal.3d

813, 126 Cal.Rptr. 473, 543 P.2d 905.

The vacated intermediate appellate opin-

ion is Community Redevelopment Agency v.

Abrams (1974, Cal.App.) 116 Cal.Rptr.

308. Copies of the opinions are attached

hereto as Appendices.

Jurisdiction

The opinion of the California Supreme

Court was filed on December 29, 1975.

Thereafter that court (by its order filed

January 23, 1976) extended time for grant-

ing or denying rehearing until February

27, 1976; and eventually denied petition-

er's timely petition for rehearing on

February ll, 1976.

Jurisdiction of this Court is invoked

pursuant to 28 U.S.C. §1257(3).

Questions Presented for Review

l. Is it permissible under the due pro-

cess and equal protection clauses of the

14th Amendment to the United States Con-

stitution for a state to declare: (a) by

its constitution, (b) by its statutes,

and (c) by its decisional law that busi-

ness goodwill is property - taxed as such

and treated as such for every purpose and

in all legal contexts, but deny compensa-

tion when such business goodwill is taken

and destroyed by that state's exercise of

the power of eminent domain?

2. Is it permissible under the due pro-

cess and equal protection clauses of the

14th Amendment to the United States Con-

stitution for a state to declare business

goodwill to be property in the state con-

stitutional sense for purposes of taxation,

but not property in the constitutional

sense for purposes of eminent domain?

3. (a) Where state law (i) requires a

druggist to maintain an adequate stock of

prescription medicines, and (ii) forbids

the bulk disposition of such medicines

(except upon a laboratory certification

the cost of which exceeds the value of

the medicines), is it a deprivation of

property without due process of law for

the state to deny compensation for the

value of such medicines when the drug-

store housing them is taken under eminent

domain for an urban redevelopment project

and the stock of such medicines cannot be

sold because the cost of certification

exceeds its value?

(b) Where the value of such medi-

cines is stipulated to be $10,000, and

they consist largely of high-potency tran-

quilizers of relatively small weight and

bulk, which makes them easily and cheaply

transportable, (i) is it a deprivation of

property without due process of law for a

state statute to limit compensation for

the taking of such medicines to the cost

of moving them, and (ii) is it a denial

of equal protection to so limit such com-

pensation, in that owners of bulky and

heavy commodities that cost more to move,

arbitrarily receive higher compensation,

irrespective of the value of the commodity

or the ioss suffered by its owner?

Constitutional and Statutory Provisions

The following constitutional and statutory

provisions are involved in this Petition.

Each is reproduced in full in the Appendix

attached hereto:

U.S. Constitution, Fifth and Fourteenth

Amendment}

California Constitution, Art. l, §19;

Art. 13, §§1, 2:

Cal. Civ. Code §§ 654, 655;

Cal. Bus. & Prof. Code §14102;

Cal. Govt. Code §§ 7262, 7267.

STATEMENT OF THE CASE

The facts at bench are the subject of

findings made by the trial court on ample

and uncontradicted evidence.

Before the instant case, Petitioner,

Arthur J. Abrams was the owner of the sub-

ject property which was taken by the Re-

development Agency. Mr. Abrams was at

the time of trial 64 years old, and had

been a druggist for 43 years. For 27

years preceding the instant case Mr.

Abrams had been the owner of and operated

a drugstore on the subject property.

Beginning five years before the in-

stant case, Mr. Abrams has suffered from

rheumatoid arthritis which increasingly

prevented him from physical activity or

from standing for periods of more than an

hour. By reason of his age and physical

condition, Mr. Abrams is unemployable,

and must rely for a livelihood on his own

business, and for that reason his business

- until it was taken - constituted his

only source of livelihood, and his prin-

Cipal asset.

By reason of his age and physical con-

dition, Mr. Abrams is incapable of start-

ing a new business located in a new area,

because the effort involved in such an en-

deavor would tax him beyond his physical

capacity and is economically unwise be-

cause of his age and health. Nor can he

reopen his business in its old area and

keep his established customers because

the condemnor took some 20 square blocks

in the area surrounding Mr. Abrams' prop-

erty, thereby scattering the inhabitants

from whom Mr. Abrams drew his clientele.

These factors combined to make it impos-

sible for Mr. Abrams to reopen his business.

Mr. Abrams' business, Sav-Way Drugs,

was, before the taking, an ongoing business

conducted on the subject property. One

of the business assets of Mr. Abrams’

business was its valuable goodwill owned

by Mr. Abrams.

The trial court expressly found that

Mr. Abrams' goodwill was "taken, damaged

and destroyed" by the Redevelopment

Project.

Moreover, Mr. Abrams' drugstore sold -

in addition to other merchandise - pre-

scription drugs. His pharmacy was the

only one in the area to stock the extreme-

ly potent tranquilizers and similar drugs

prescribed by mental hospitals to their

outpatients. These drugs are expensive

and hence a stock of them quickly mounts

up into substantial sums (the value of

these prescription drugs in open containers,

i.e., bulk containers that had been opened

to dispense part of their contents for

individual prescriptions, was stipulated

to be $10,000).

Under California law drugs in open bulk

containers may not be re-sold for off-

premise removal except to another licensed

druggist, and then only upon a laboratory

certification that the drugs are pure and

wholesome. However, in the case at bench,

the problem was that the cost of such a

certification would exceed the drugs'

stipulated $10,000 value. On that basis,

Mr. Abrams contended at trial that his

drugs’ value was completely destroyed

thereby constituting a taking within the

meaning of the Constitution.

The trial court ruled the drugs' value

to be compensable, but denied compensation

for Mr. Abrams taken business goodwill.

The California Court of Appeal affirmed

as to the compensability of the drugs,

and reversed as to compensability of busi-

ness goodwill (116 Cal.Rptr. 208).

The California Supreme Court reversed

as to the compensability of the drugs and

affirmed as to compensability of business

goodwill, thereby denying Mr. Abrams any

relief.1/

1/ Under California practice, the granting

of hearing by the Supreme Court auto-

matically vacates the intermediate Court

of Appeal opinion and transfers the appeal

de novo to the Supreme Court. Thus, the

State Supreme Court's reversal and affirm-

ance refer to the trial court's judgment.

REASONS FOR GRANTING THE WRIT

INTRODUCTION

In 1954 this Court in Berman v. Parker

(1954) 348 U.S. 26, issued a broad and

well-nigh unreviewable authority for urban

redevelopment agencies to take private

property. This awesome power was condi-

tioned on payment of "just compensation"

(348 U.S. at 36). Yet in the almost

quarter-century that followed, this Court

has not considered a single case dealing

with the parameters of "just compensation"

applicable to the mass urban condemnations

that have swept the county under the im-

primatur of Berman. 2/

While the stresses that the era of re-

devlopment was certain to impose on the

2/ Indeed, cold statistical data inexor-

~ ably suggest that the most recent

decades have seen a precipitous decline

in the numbers of eminent domain matters

considered by this Court (see data col-

lected in 48 Notre Dame Lawyer at 804, fn.

196), even though eminent domain litiga-

tion has mushroomed throughout the country

giving rise to hosts of difficult and

widely acknowledged constitutional ques-

tions.

10.

then-extant, candidly 19th Century crite-

ria of "just compensation" were noted and

assessed early ,>’actual experience sur-

passed the apprehensions of the early

critics. Undisputed data develoved before

the Congress — and other governmental agen-

cies >/nave disclosed that all too often

the mid-20th Century "just compensation"

proved in reality neither just nor - in

many cases - any compensation.

3/ See e.g., the brilliant analysis con-

tained in the now-classic Comment,

Eminent Domain Valuations in an Age of

Redevelopment, 67 Yale L.J. 61 (1957),

which astutely traced the anomalous devel-

opment of American rules of compensability

and ably spotlighted their inadequacy in

the coming tidal wave of urban redevelop-

ment expropriations.

4/ See Study of Compensation and Assis-

tance for Persons Affected by Real

Property Acquisition in Federal and ‘Fed-

erally Assisted Programs, House Committee

on Public Works, 88th Congress, 2d Session,

Committee Print No. 31 (Dec. 27, 1964).

5/ See Relocation: Unequal Treatment of

People and Businesses Displaced by

Government, Advisory Commission on Inter-

governmental Relations (Jan. 1965).

ll.

The space limitations inherent ‘a this

petition preclude one from exploring this

topic fully. Suffice it to note that prob-

ably no other area of the constitutional

law has come in for as consistently wither-

ing an appraisal by the scholarly community

as has the treatment of business losses in

eminent domain. See passim Aloi and Gold-

berg, A Reexamination of Value, Good Will

and Business Losses in Eminent Domain, 53

Cornell L. Rev. 604 (1968); Comment, Non-

Compensable Business Losses in Eminent

Domain Proceedings: A Time for Re-evaluation,

46 Temple L.Q. 72 (1972); Note, "Just Com-

pensation" for the Small Businessman, 2

Columbia Jour. of Law & Soc. Prob. 144

(1966); Note, The Unsoundness of Califor-

nia's Noncompensability Rule as Applied to

Business Losses in Condemnation Cases, 20

Hastings L. Jour. 675 (1968). Also see,

Bigham, “Fair Market Value","J ust Compensa-

tion" and The Constitution: A Critical

View, 24 Vanderbilt L. Rev. 63 (1970),

Comment, supa, 67 Yale L. J. 62; Michelman,

Property, Utility and Fairness: Comnents

on the Ethical Foundation of "Just Compen-

sation" Law, 80 Harv. L. Rev. 1165 (1967);

Spies & McCoid, Recovery of Consequential

12.

Damages in Eminent Domain, 48 Va. L. Rev.

437 (1962).

In sum, this is a long-neglected area

of constitutional law that cries out for

examination by this Court in light of

today's conditions. As this Court has

told us time and again, the constitutional

"just compensation" command embodies prin-

ciples of "fairness and equity” 6/ and

that "basic equitable principles of fair-

ness" are to be invoked to temper techni-

cal concepts of property law. / If ever

a case was presented for review that de-

serves the invocation of these policy

principles, this is it. Relief by this

Court is urgently called for.

6/ United States v. Virginia E. & P. Co.

(1961) 365 U.S. 624, 631; United States

v. Commodities Trading Corp.

U.S. 121, 124.

7/ United States v. Fuller (1973) 409 U.S

488, 490.

13.

ARGUMENT

A STATE MAY PROPERLY CHOOSE FOR

ITSELF WHAT ECONOMIC INTERESTS

CONSTITUTE "PROPERTY" RIGHTS

UNDER ITS JURISPRUDENCE, BUT

HAVING THUS MADE ITS CHOICE AND

DEFINED "PROPERTY", IT IS BOUND

TO EXTEND CONSTITUTIONAL PROTEC-

TION TO SUCH PROPERTY RIGHTS AND

MAY NOT SUBJECT THEM TO CONFISCA-

TION WITHOUT OFFENDING DUE PROCESS

AND EQUAL PROTECTION GUARANTEES

As this Court put in in United States

v. Willow River Power Co. (1945) 324 U.S.

499, 503:

", . . whether it is a property

right is really the question to

be answered."

And that answer is provided, not by some

unguided judicial discretion as to whether

to compensate for the taking of a private

economic interest, but by criteria esta-

blished by reasoned principles of consti-

tutional law that is applied in delineat-

ing the extent of judicial protection

extended to such interest .2/ Willow

8/ Thus, in Kimball Laundry Co. v.

United States (1949) 338 U.S. 1, 5-6,

(Continued)

14.

River covers this point quite explicitly:

. -Oonly those economic advan-

tages are ‘rights' which have the

law back of them, and only when

they are so recognized may courts

compel others to forbear from in-

terfering with them or to compen-

sate for their invasion. . ."

324 U.S. at 502.

In other words, it is the fact that

state law extends its protection to a

given economic right that confers upon

that right the status of "property" in a

constitutional sense. To say - as did the

California Supreme Court in the case at

8/ Continued:

this Court explained that "[t]he value

compensable under the Fifth Amendment,

- « «, is only that value which is capa-

ble of transfer from owner to owner and

thus of exchange for some equivalent. Its

measure is the amount of that equivalent."

California statutory law expressly makes

business goodwill constitutionally pro-

tected under that criterion as well. Cal.

Bus. & Prof. Code §14102 provides: "The

good will of a business is property and

is transferrable." (Emphasis added.)

15.

bench - that an interest may be "property"

for all purposes in statutory and deci-

sional law (including the state constitu-

tional purpose of taxation - cf. Cal.

Const., Art. 13, §§1,2), but it somehow

loses its status as "property in a consti-

tutional sense" only for eminent domain

purpose (15 Cal.3d at 819-820, 543 P.2d at

909-910) is to flout the very essence of

this Court's teaching in Willow River,

supra, and to supplant the Fifth Amend-

ment's "just compensation" guarantee with

semantic legerdemain. Since it is the

states that decide in the first instance

what constitute property interests, 2/

the Fourteenth Amendment's restraint on

the states, forbidding deprivation of

property without due process of law,

would be reduced to idle words if a state

could define an economic interest as

"property" for all purposes and then say

that nonetheless that property is not

9/ See United States ex rel. T.V.Ae Ve

Powelson (1943) 319 U.S.

Sauer v. New York (1907) 206 U. S. 536,

548. For an extensive collection of

federal cases articulating ana applying

this rule, see Annotation, 1 A.L.R. Fed.

at 482-483.

16.

constitutionally protected property. The

concept of property as a constitutionally

protected institution could be thus re-

duced to a now-you-see-it-now-you-don't

game of shifting definitions. The fact

that in the case at bench, this sort of

constitutional evasion was accomplished

by the judicial branch of the state

government, in no way legitimizes the

result; the judicial branch of state

government is bound by the due process

Clause of the Fourteenth Amendment the

same as the other two branches. Hughes

v. Washington (1967) 389 U.S. 290; see

Sotomura v. County of Hawaii (1975, D.

Haw.) 402 F. Supp. 95.

Thus, while it may be permissible for

a state to decide that business goodwill

is not property, and make it non-compens-

able in eminent domain on that basis

(see e.g., Edmands v. Boston [1871] 108

Mass. 535, 549), it is both illogical

and arbitrary for California to declare

business goodwill to be property, taxable

as such and subject to all rights, bur-

dens and restraints imposed by state law

On property, and yet not be deemed

17.

property for eminent domain purposes only.

Surely, individual citizens’ constitu-

tional rights are made of more solid stuff.

Wholly aside from the due process im-

plications of such semantic and conceptu-

ally insubstantial delineation of consti-

tutionally protected property rights (see

Hughes v. Washington, supra), there is

also present here a clear violation of the

equal protection guarantee. It is utterly

arbitrary for a state to thus remove an

otherwise fully legally protected and

taxable property right+2/ from the ambit

10/ As this Court noted in Great Northern

R. Co. v. Weeks (1936) 297 U.S. 135,

139, the principles of valuation of prop-

erty are the same in taxation as in emi-

nent domain. This is of particular signi-

ficance to California whose Constitution

(Art. 13, §1), and statutes (Cal. Rev. &

Tax Code §201) authorize only the taxation

of property, and whose decisional law

(Bank of California v. San Francisco

(1904) 142 Cal. 27, 75 Pac. 832; Miller

& Lux v. Richardson [1920] 182 cal. 115,

127-128, 187 Pac. 411, 416), deems busi-

ness goodwill to be property for taxation

purposes. Thus, the arbitrary nature of

excluding business goodwill from Califor-

nia's constitutional protection while

including it within the scope of consti-

tutional burdens (i.e., taxation), is

self-evident, and clearly transgresses

18 (Continued)

of constitutional protection, on the basis

of a judicial ipse dixit that it may be

“property” for all purposes except that

of constitutional protection.

It seems to Mr. Abrams that little

argument need be devoted to this proposi-

tion. How can an interest be "property"

within the burdens imposed by the Cali-

fornia Constitution (Art. 13, §1), and

at the same time not be "property" within

the protection of that very same Constitu-

tion (Art. I, §19)? If that is not arbi-

trary and capricious, then what is?

10/ Continued:

the rationality standard of the equal

protection guarantee.

19.

THE ASSUMPTIONS ON WHICH REST THE

19th CENTURY RULE OF NON-COMPENS-

ABILITY OF BUSINESS LOSSES IN

EMINENT DOMAIN ARE UTTERLY UN-

FOUNDED AND IRRATIONAL IN THE

CONTEXT OF TODAY'S URBAN MASS

CONDEMNATIONS

The rule of non-compensability of

business losses arose in this Country+!/

ll/ It is a historical anomaly that in

spite of the fundamental policy of

the American Constitution's guarantee of

"just compensation" for the taking of pri-

vate property for public use, business

losses have been ignored by the courts of

this Country. Yet other countries, with-

out any such compulsion of their respec-

tive organic laws, have readily granted

compensation for such losses. See Bigham,

supra, 24 Vanderbilt L.Rev. 63. What is

the final touch of irony is that even the

law of the Soviet Union (which reputedly

recognizes no private property rights)

provides compensation for ". . . expenses

paid or to be paid for the restoration of

husbandry and trade prejudiced by the act

of 'expropriation', or the costs result-

ing from reinstating husbandry or trade

on another spot by reason of annulment of

land tenure for the needs of the State

or society"; quoted in Vondracek, Compen-

sation for Losses Resulting from A Acts of

Public Policy in Soviet Law, in “Compensa-

tion for Compulsory Purchase: A Compara-

tive Study", (1975, United Kingdom Compar-

ative Law Series) at p. 233, emphasis added.

20.

in the 19th Century in the context of a

largely rural society in which land was

in seemingly inexhaustible supply and

freely available. Contemporary descrip-

tions of mid-19th Century land acquisition

practices vividly document the fact that

land was often given gratis to the con-

demning entity because the owneis wanted

thereby to secure to their community the

economic benefits anticipated from the

contemplated project (often a railroad).

See Comment, supra, 67 Yale L.J. at 65.

12/

It was in that historical context

that the courts of this country first

reasoned that the displacement of a busi-

ness by an occasional condemnation caused

no compensable harm because if a rare

shopkeeper or artisan of a 19th Century

America found himself displaced by a pub-

lic land acquisition he could put his

goods on a wagon and move down the street

to a new location where he was still

known, there to carry on his trade with-

out serious disruption. Thus, the notion

12/ See John Sherman's Recollections of

Forty Years in the House, Senate ane

Cabinet: An Autobiography, Vol. l, p. 81

(1895)

21.

that the displaced business condemnee

could relocate and take his business good-

will with him became the rationale of the

American rule. See e.g., Banner Milling

Co. v. State (1925, N.Y.) 148 N.E. 668,

670; In re Edward J. Jeffries Homes, etc.

(1943, Mich.) 11 N.W.2d 272, 276. Indeed,

as recently as 1949, this Court expressly

endorsed this rationale in Kimball Laundry

Co. v. United States, 338 U.S. at 1l, and

called it a “remote possibility” that the

displaced businessman-condemnee might not

be able to find a suitable replacement

site for his business (Id. at 15).

But whatever the ethical and intellec-

tual merits of that notion may have been

when it was first formulated in the 1800's,

the world changed drastically in the late

1950's. The dual impact of the Federal

Aid Highway Act of 1956 and this Court's

expansive endorsement of urban redevelop-

ment in Berman v. Parker (1954) 348 U.S.

26, sent an army of bulidozers rumbling

through American cities on a theretofore

undreamed of scale. What made these mass

urban condemnations vastly different than

anything that preceded them was their

22.

elimination of entire neighborhoods, and

their total restructing of large urban

13/

areas.— The problem became further

exacerbated by the equally notorious fact

that -particularly in urban redevelopment

cases - the length of time between the

condemnations and significant re-use of

the land is usually unconscionably long ,24/

and that the indigenous pop ‘ation that

formed the clientele of the displaced

businesses is scattered to the four winds.

13/ Right outside the Court's window, as

it were, virtually the entire South

West section of the District of Columbia

was bulldozed to the ground (save only

Fort McNair, The Amidon School and the

nearby Junior High Sch ol, and one or two

buildings of historical significance).

Surely it is so notorious as to be judi-

cially noticeable that the "new" South

West built on that land, bears not the

slightest resemblance to the former neigh-

borhood in economic, social, esthetic or

commercial terms. The local shopkeepers

were thus not only displaced but deprived

of any realistic opportunity to reesta-

blish their enterprises and to recapture

any of their business goodwill.

14/ I.e., a decade in the case of South

West Washington. In Los Angeles, the

Bunker Hill (downtown) redevelopment pro-

ject began bulldozing in 1962; today most

of the condemned land is still vacant.

23.

Because of these intrinsic features of

today's mass urban condemnations, it

becomes literally impossible for small

businessmen to relocate.

This conclusion is borne out by im-

partial governmental studies. Both

Congressional hearings?>/ and studies of

the Advisory Commission on Intergovern-

mental Relations~©/ have demonstrated

without dispute that the 19th Century

theory of the condemnee's supposed ability

to relocate his business bears little

relation to the mid-20th Century reality.

Far from being the “remote possibility”

envisioned by Mr. Justice Frankfurter

(when he spoke in 1949 for this Court in

Kimball Laundry; see 338 U.S. at 15),

the inability to relocate one's business

becomes an imminent threat to all busi-

nessmen in the bulldozer's path, and a

certainty to over one-half individually

owned small businesses that rent their

premises (see Reports cited in fn. 4

and 5, supra).

15/ See fn. 4, supra.

16/ See fn. 5, supra.

24.

In sum, this case presents the Court

with a candidly 19th Century rule that

may have made sense at its inception over

a hundred years ago, but which today, as

applied to real people in a real world,

is cruel and irrational .2// If ever there

was an issue ripe - if not overripe - for

judicial re-examination, this is it.

THE APPLICATION OF THE CALIFORNIA

RELOCATION ACT TO MR. ABRAMS'

FACTUAL SITUATION CONSTITUTES A

DEPRIVATION OF PROPERTY WITHOUT

DUE PROCESS OF LAW AND OF EQUAL

PROTECTION OF THE LAW

T.e pertinent statute (Cal. Gov't.

Code §7262) provides for payment to owners

of taken businesses unable to relocate a

17/ This conclusion is no more than what

has been said more eloquently and

more forcefully by all legal commentators

who have expressed themselves on the sub-

ject; see commentaries cited at pp. 12-13

supra. See particularly the Minnesota

Supreme Court's collection of scholarly

commentaries in State v. Saugen (1969,

Minn.) 169 N.W.2d 37, 44, uniformly not-

ing the incompatibility of Mitchell v.

United States (1925) 267 U.S. 341, with

modern authorities.

25.

sum not to exceed $10,000 or the cost of

relocating the taken business' stock,

whichever is less. It is the cost of

relocation phase of that legislation

which Mr. Abrams challenges as arbitrary

in application and repugnant to the equal

protection clause.

The use of the moving cost limitation

renders the statute wholly arbitrary, as

the amount of money paid thereunder to a

particular condemnee bears no relation-

ship to the loss suffered (nor any other

rational criterion), but is instead deter-

mined solely by how bulky or fragile and

how expensive to move is the stock of a

particular business. Thus if the taken

business should happen to be a lumber

yard (for example) the bulk and weight

of the lumber and other building materials

may well result in such high moving costs

as to provide the owner the full $10,000

payment, or a sum close to it. In con-

trast, a businessman such as Mr. Abrams,

whose stock consists of expensive medi-

Cines (largely high-potency tranquilizers)

of low bulk would receive a pittance, as

the moving cost of his low-bulk goods is

26.

certain to be negligible ($10,000 worth

of high potency tranquilizers can be

easily transported in a station wagon, or

the trunk of a large passenger automobile).

This, the upshot is that Cal. Gov't.

Code §7262, as applied to these facts is

utterly arbitrary, bearing no rational

relationship to the loss suffered; indeed,

it is counterproductive to the essence of

the legislative intent. 28/

18/ The controlling Federal Uniform Relo-

cation Assistance and Real Property

Acquisition Policies Act (P.L. 91-646)

and its conforming California Legislation,

has as its express purpose the assurance

of equal treatment of displaced condem-

nees (see 42 U.S.C. §4621, and Cal. Gov't.

Code §7267). Yet, as applied, to these

facts the statute virtually assures ine-

quality of treatment by making the hap-

penstance of the nature of the stock of

a particular business the sole criterion

of money actually paid.

27.

THE OPINION BELOW MISCONSTRUES THE

LAW LAID DOWN BY THIS COURT

A. The California Supreme Court

Consciously Declined to Follow

Constitutional Criteria Esta-

blished by This Court

It is the essence of modern theory of

compensability in eminent domain that the

test is an inquiry as to whether the

aggrieved property owner is called upon

to bear a disproportionate share of the

cost of the public project for which his

property is being taken. This Court could

not have been clearer:

"The Fifth Amendment's guaran-

teet?/ that private property shall

not be taken for a public use with-

out just compensation was designed

to bar Government from forcing some

people alone to bear public burdens

19/ That the Fifth Amendment's just com-

pensation guarantee is binding on the

states through the due process clause of

the Fourteenth Amendment has been settled

law since Chicago B. & Q.R. Co. v. Chicago

(1897) 166 U.S. 226.

28.

which, in all fairness and justice

should be borne by the public as

a whole." Armstrong v. United

Srates (1960) 364 U.S. 40, 49.

Yet, the court below failed to apply

this test. This occurred in spite of the

fact that said court expressly acknowl-

edged that on the facts such as at bench,

the effect of adherence to the old rule

of non-compensability ". . . is in effect

to require the affected parties to bear a

disproportionate share of the true cost

of the public undertaking." (15 Cal.3d

at 826, 543 P.2d at 914.)

The discord which the opinion below

thus creates with this Court's constitu-

tional principle is clear, and warrants

review by this Court.

B. The California Supreme Court

Distorted the Teaching of

Kimball Laundry

The opinion below goes to some lengths

in purporting to extract from Kimball

Laundry a rule that business losses are

compensable only when the condemnation

29.

“in and of itself" (15 Cal.3d at 834 and

825, 543 P.2d at 920 and 913) causes such

loss. With due respect to the court

below, no such rule appears anywhere in

Kimball. On the contrary, Kimball ex-

pressly recognizes that when "the inevi-

table effect" of the condemnation is to

preclude the owner from re-establishing

his business he is entitled to compensa-

tion (338 U.S. at 13, emphasis added).

Thus, Kimball deals with the effect, not

the nature of the eeteiekion ae Here,

because the taking was not merely of Mr.

Abrams' parcel, but of a 20 square block

area containing the neighborhood's busi-

ness section, the "inevitable effect" of

th'z taking was to render it impossible

for Mr. Abrams to relocate. Mr. Abrams'

infirmity further exacerbated his predi-

cament - not only could he not reopen and

recapture his existing business goodwill,

but also it was impossible for him to

start a new business elsewhere and build

up new goodwill all over again.

20/ Expressly giving effect to the loss

to the owner criterion. See 338 U.S.

at 13.

30.

Kimball goes on to point out that

public utilities receive compensation for

their business goodwill because they can-

not relocate (338 U.S. at 13) as the

nature of their business would make it

unprofitable (Id. at 12-13). This is

then contrasted with situations where

- « »« the owner remained free to trans-

fer [his goodwill]" (Id. at 13).

While decades ago the owner's postu-

lated "free[dom] to transfer" was real

and exceptions to it were so rare as to

justify the characterization of "remote

possibility" (Id. at 15), that is no

longer true. Indeed, the court below

quite properly took judicial notice (15

Cal.3d at 825, 825, 543 P.2d at 914) that

conditions of modern American life have

grossly changed the impact of large

scale, urban public projects. Where -

as at bench - the taking consists of

some 20 city blocks containing the area's

business district, there simply isn't

anywhere to relocate! The owner's plight

on these facts is certain; his inability

to relocate anywhere where his existing

business goodwill can be salvaged is a

31.

total certainty - not a “remote possibil-

ity".

In sum, the court below misconstrued

Kimball Laundry's reasoning, particularly

as applied in the context of today's

urban reality.2)/

CONCLUSION

First. In the final analysis, Mr.

Abrams asks of the Court that it give

effect to the principle of Constitutional

construction so well stated in Euclid v.

Ambler Realty Co. (1926) 272 U.S. 365,

387:

", . »« while the meaning of con-

stitutional guaranties never varies,

the scope of their application must

expand or contract to meet the

new and different conditions which

are constantly coming ‘ithin the

field of their operation. Ina

21/ It deserves emphasis that Kimball was

decided more than a decade before the

waves of urban redevelopment swept over

American cities, causing a drastic change

in conditions that obtained when the rule

brought here for review was formulated.

32.

changing world it is impossible

that it should be otherwise."

This is 1976 - not 1876. The condi-

tions that prevailed in the America of

the 19th Century, that gave birth to the

rule brought for review here, are no more.

The small, one-location urban merchant in

the 1970's, whose business, along with

the surrounding neighborhood, falls prey

to the bulldozer, in most cases is no

more capable of relocating then he is of

levitating. The express assumption of

Kimball Laundry that such a person's ina-

bility to relocate was in the nature of

"remote possibility" has become a casualty

of changing urban conditions in the last

two decades; it is now a fiction that

lacks any validity as applied to the

facts at bench. That has been amply

demonstrated by objective studies (see

fn. 4 and 5, supra) which have not been

controverted.

Thus, the inevitable effect of large

scale urban condemnations is to inflict

greivous injury on completely innocent

people; good, hard-working people who

33.

form the backbone of our society. Worse

than that, the present rule so operates

as to work its evil with particular vici-

ousness on Older people who have literally

spent their lifetimes building up their

businesses as sources of livelihood and

security for their declining years, only

to discover that to them the Constitu-

tional promise of "just compensation" is

an illusion.

It is respectfully submitted that the

principles of fundamental fairness that

form the cornerstone of Constitutional

interpretation, and which this Court has

so freely bestowed over the recent years

on less deserving segments of society,

ought to be applicable to law abiding

citizens as well. As this Court so aptly

noted in Camara v. Municipal Court (1967)

387 U.S. 523, 530, it surely would be

anomalous to say that the Constitution

protects a citizen's rights only when he

is charged with criminal misconduct.

- « « the dichotomy between per-

sonal liberties and property rights

is a false one. Property does

not have rights. People have

34.

rights. The right to enjoy prop-

erty without unlawful deprivation,

no less than the right to speak

or the right to travel, is, in

truth a 'personal' right, whether

the ‘property’ in question be a

welfare check, a home or a savings

account. In fact, a fundamental

interdependence exists between

the personal right to liberty and

the personal right in property.

Neither could have meaning with-

out the other." (Lynch v.

Household Finance Corp. [1972]

405 U.S. 538, 552; emphasis added.)

The same measure of fairness and the

same recognition of changed conditions

that has led to re-examination of tradi-

tional rules of constitutional law as

22/

applied to the rights of murderers,—

pornographers, 2>/ abortionists,=“/ or

22/ Escobedo v. Illinois (1964) 378 U.S.

478; Miranda v. Arizona (1966) 384

U.S. 436.

23/ Miller v. State of California (1973)

413 U.S. 15; Jenkins v. State of

Georgia (1974) 418 U.S. 153.

24/ Roe v. Wade (1973) 410 U.S. 113; Doe

v. Bolton (1973) 410 U.S. 179.

35.

25/

juvenile offenders— surely ought to be

applied to the rights of innocent citizens

who have done nothing wrong but who find

themselves victimized by ambitious pro-

jects, often undertaken for private pecu-

niary benefit of redevelopers.

"The fact is that an ever in-

creasing amount of shameless and

needless damage and havoc are

wreaked on the lives and fortunes

of citizens and taxpayers whose

only fault is that they own real

property which is coveted by one

or more of the myriad agencies

which wisely or not, have been

entrusted with this terrible

power which we call eminent

domain." Bryant, Eminent Domain-

Its Use and Misuse, 39 Univ. of

Cincinnati L.R. 259 (1970) .26/

25/ Application of Gault (1967) 387

U.S. l.

26/ In light of the heavily colored lan-

guage in the quoted passage, it must

be pointed out that the author's conclu-

sions are based on his many years of ex-

perience as attorney for condemnating

agencies. Id. at 266, fn. 21.

36.

Second. Wholly aside from the above

considerations, it is shocking for a

State to declare business goodwill to be

property by its statutory and decisional

law, to tax it as such, and to submit its

owner to all legal burdens of ownership

of this species of property, and yet say

that it is freely subject to destruction

and confiscation by eminent domain. That

is a rule that defies reason, and could

well serve as a textbook example of arbi-

trariness and denial of equal protection

cf the laws.

Mr. Abrams prays that the Court bring

some measure of today's Constitutional

principles into this 19th Century dark

corner of the law. He prays that the

writ of certiorari issue.

Respectfully submitted,

GIDEON KANNER

JERROLD A. FADEM

MICHAEL M. BERGER

By GIDEON KANNER

Attorneys for Petitioner

37.

APPENDIX A

}

IN THE

SUPREMF: COURT OF THE STATE OF CALIFORNIA

IN BANK

COMMUNITY REDEVELOP-

MENT AGENCY OF THE L.A. 30380

CITY OF LOS ANGELES, Super. Ct. No.

997048

Plaintiff and

Appellant, Supreme Court

Filed

Dec. 29, 1975

G.E. Bishel,

Clerk.

vs.

ARTHUR J. ABRAMS,

Defendant and

Appellant.

mee ee eee ee ee ee ee”

In this action in eminent domain

both parties have appealed from a judg-

ment which, inter alia, awarded compen-

sation to the condemnee, a pharm:7ist,

for the value of certain “ethical drugs"

located on the condemned real property

but refused to award any compensation for

loss of business goodwill resulting from

the taking. In dealing with the ques-

tions thus presented we are required to

address a broad question of constitu-

tional law which, to borrow the image

used by one learned commentator in a

Similar context, has proved remarkably

A-1l.

"resistant to analytical efforts. "2/ (See

Sax, Takings, Private Property and Public

1/ The commentators have given eloquent

~ testimony to the durability of the

problem. (See, e.g., Bigham, "Fair Market

Value," “Just Compensation," and the

Constitution: A Critical View (1970) 24

Vand.L.Rev. 63; Kanner, When is "Property"

Not "Property Itself": A Critical Examina-

tion Of The Bases Of Denial of Compensation

For Loss of Goodwill In Eminent Domain

(1969) 6 Cal.Western L.Rev. 57; Note, The

Unsoundness of California's Noncompensa-

bility Rule As Applied to Business Losses

in Condemnation Cases (1969) 20 Hastings.

L.J. 675; Aloi & Goldberg, A Reexamina-

tion of Value, Good Will and Business

Losses in Eminent Domain (1968) 53 Cornell

L.Rev. 604; Michelman, Property, Utility,

and Fairness: Comments on the Ethical

Foundations of “Just Compensation” Law

T1967) 80 Harv.L.Rev. 1165; An Act to

Provide Compensation for Loss of Goodwill

Resulting From Eminent Domain Proceedings

(1966) 3 Harv.J.Legis. 445; Dunham,

Griggs v. Allegheny County in Perspective:

Thirty Years of Supreme Court Expropria-

tion Law (1962) 1962 Sup.Ct.Rev. 63;

Spies & McCoid, Recovery of Consequential

Damages in Eminent Domain (1962) rE Va.

L.Rev. 437; Note, Eminent Domain Valua-

tions in An Age of Redevelopment: Inci-

dental Losses (1957) 67 Yale L.J. 61;

Cormack, Legal Concepts in Cases of Emi-

nent Domain (1931) 41 Yale L.J. 221.)

A-2.

Rights (1971) 81 Yale L.J. 149, 149.)

Simply stated, the question is this:

When and to what extent do the tate and

federal Constitutions require that the

"Just compensation" to be paid upon the

taking or damaging of private projerty

for public use 2/ include payment over 3nd

above the fair market value of the pro-

perty taken on account of business losses

sustained by the condemnee as a result of

the taking?

Sixty years ago we answered this

question in decisive fashion, and thereby

stated the rule which presently applies

in this state and, generally speaking, in

2/ The Fifth Amendment to the United

States Constitution, made applicable

to the states by the Fourteenth Amendment,

(Chicago, Burlington, etc. R'd v. Chicago

(1897) 166 U.S. 226, 233-241), provides

in relevant part: "... nor shall private

property be taken for public use, without

just compensation."

Article I, section 19 (replacing for-

mer art. I, §14) of the California Con-

stitution provides in relevant part:

"Private property may be taken or damaged

for public use only when just compensation

ascertained by a jury unless waived, has

first been paid to, or into court for,

the owner."

A-3,

all other jurisdictions of this nation.=

" ... [t]he real contention of appellant

... [is] that business is property, and

when the taking by the state or its

agencies interferes with, impairs,

damages, or destroys a business, compen-

sation may be recovered therefor. We

are not to be understood as saying that

this should not be the law when we do

say that it is not our law. It is quite

within the power of the legislature to

declare that a damage to that form of

property known as business or the good-

will of a business shall be compensated

for, but unless the constitutior or the

legislature has so declared, it is the

universal rule of construction that an

injury or an inconvenience to a business

is damnum absgue injuria, and does not

form an element of the compensating

damages to be awarded." (Oakland v.

Pacific Coast Lumber etc. Co. (1915)

3/ See generally 4 Nichols, Eminent

Domain (3d ed. 1974) section 13.3,

pages 13-148.2 - 13.165; 1 Orgel,

Valuation Under The Law of Eminent

Domain (2d ed. 1953) sections 1, 66-77,

pages 1-ll, 303-334.

A-4.

enill

171 Cal. 392, 398.

It now appears that while this matter

was pending On appeal the Legislature

acted in this respect. New section

1263.510 of the Code of Civil Procedure

-- signed into law by the Governor cn

October 1, 1975, as a part of a compre-

hensive revision of the eminent domain

law of this state -- will operate to

render goodwill compensable to a certain

extent in cases arising on or after

January 1, 1976 (see new § 1230.065).

This legislation, however, as all parties

hereto readily concede, can have no

application to the present proceeding,

which was commenced in 1971 -- nor shall

what we have to say below be construed

to reflect any views on the part of this

court relative to the validity or inter-

pretation of the legislation itself. In

the posture of the instant case, the

question remains one of constitutional

dimension: Must the settled rules of

constitutional interpretation in this

area now give way, in light of the chang-

ing conditions of urban society, to rules

of similar constitutional stature

A-5.

providing for compensation for lost busi-

ness goodwill and other incidental

damages consequent upon exercise of the

power of eminent domain?

The facts of the case before us are

these: In the course of implementing

its Watts Redevelopment Project, the

Community Redevelopment Agency of Los

Angeles (Agency) brought this action in

eminent domain to acquire real property

owned by defendant Arthur J. Abrams.

For 27 years preceding the trial Abrams,

a pharmacist, had operated his pharmacy

on the subject property. His parcel lay

within an area of approximately 20 square

blocks condemned for the project, and the

total condemnation not only took the

pharmacy property but eliminated the

neighborhood from which Abrams‘ clientele

came,

In his answer to the complaint he

claimed as elements of the just compensa-

tion required by constitutional provisions

(see fn. 2, ante) not only the value of

the real property but also (1) the value

of his inventory of so-called “ethical

A-6.

acl

drugs" -- or drugs which may be scold only

on prescription -- which were in opened

containers, and (2) the value of his

business goodwill. In support of the

latter element Abrams alleged that by

reason of his age (64) and a rheumatoid

arthritis condition from which he suffered

he was incapable of relocating his busi-

ness in a new area and thereby retaining

or maintaining his business goodwill, and

that as a result of this circumstance and

the further fact that under state law his

inventory of "ethical drugs," insofar as

it was in containers already opened,

could not be sold to another pharmacist

without a certification of purity -- the

cost of which would exceed the value of

the subject drugs -- his inventory of

"ethical drugs" in opened containers

would be rendered valueless by the taking

of his real property.

The trial court found on the basis

of substantial evidence that by reason

of his age and physical condition Abrams

was incapable of relocating his business

in a new area; that the business good-

will of Abrams' pharmacy had been taken,

damaged, and destroyed by the taking of

A-7 .

his real property; and that the market

for Abrams' stock of “ethical drugs” had

likewise been destroyed. As here rele-

vant it concluded as a matter of law that

Abrams was entitled to compensation

pursuant to article I, section 14, of the

state Constitution for his stock of

"ethical drugs" in open containers, but

that he was not entitled to be compensat-

ed for business goodwill. On the basis

of these findings and conclusions the

trial court awarded Abrams $10,000, the

Stipulated value of the drugs in open

containers, in addition to the value

which the jury placed on the real proper-

ty and fixtures; no award was made for

loss of business goodwill. These appeals

followed.

Defendant Abrams' arguments on the

subject of compensation for business good-

will proceed on two distinct levels. The

first is a general attack on the rule of

noncompensability, based upon its assert-

ed irrational and arbitrary character.

The second is more specific, based upon

the particular facts of this case: It

A-8.

urges that whatever be the general rule

as to the compensability of business good-

will, compensation should be made when the

condemnee is incapable of relocating his

business and thus transferring any part

of his goodwill. We first address our-

selves to the more general challenge.

It is urged that the rule of noncom-

pensability for business goodwill is

irrational because goodwill is itself

"property" in this state and as such

should be subject to compensation like

any other "property." It is pointed out

that wanna Ty declared by statute to

be property;— that it is treated as such

4/ Section 654 of the Civil Code pro-

~ vides: "The ownership of a thing

is the right of one or more persons to

possess and use it to the exclusion of

Others. In this Code, the thing of which

there may be ownership is called property."

Section 655 of the Civil Code pro-

vides: "There may be ownership of all

inanimate things which are capable of

appropriation or of manual delivery; of

all domestic animals; of all obligations;

of such products of labor or skill as the

composition of an author, the good will

of a business, trade marks and signs, and

of rights created or granted by statute.”

(Italics added.)

(fn. Cont'd)

in matters of private law in the areas

of tort (see Carrey v. Boyes Hot Springs

etc. (1966) 245 Cal.App.2d 618, 622-623),

contract (see Lyon v. Lyon (1966) 246

Cal. App.2d 519), business affairs (see

Smith v. Bull (1958) 50 Cal.2d 294),

marital dissolution (see In Re Marriage

of Foster (1974) 42 Cal.App.3d 577), and

probate (see Rankin v. Newman (1896) 114

Cal. 635); and that it is taxable as such

(Cal. Const., art. XIII, §§ 1, 2; Miller

& Lux, Inc. v. Richardson (1920) 182 Cal.

115- 127-128; Bank of California v. San

Francisco (1904) 142 Cal. 276, 288-289,

cf. dis. opn., pp. 291-292). The only

area in which business goodwill is denied

the status of property, defendant asserts,

is when the government "takes and des-

troys" it for public use. The result, it

is urged, is not only a violation of

constitutional "just compensation"

clauses (see fn. 2, ante) but a denial

of equal protection of the laws.

4/ (Cont'd)

Section 14102 of the Business and

Professions Code provides: pane ood

will of a business is proper and is

transferable." (italics added.)

A-10.

The foregoing contentions betray a

fundamental misunderstanding. The courts

of this state have never taken the posi-

tion that business goodwill is not prop-

erty -- indeed, such a position would be

wholly inconsistent with statutory provi-

sions to the contrary (see fn. 4, ante).

What the courts have established is that

"that form of property known as business

or the goodwill of a business" (Oakland

v. Pacific Coast Lumber etc. Co., supra,

171 Cal. 392, 398) is not the form of

property to which constitutional provi-

sions requiring just compensation refer.

As the leading commentator has stated

the essentially universal rule, "An

established business, or what is called

"good will,' has never been held to be

by itself property in the constitutional

sense.* ... [{] While it may be an added

element of value to a particular piece

of land taken, a business is less tangi-

ble in nature and more uncertain in its

vicissitudes than the rights which the

"] Good will is generally held property

in matters of private law. ...

A-ll.

—— oe

constitution undertakes to protect abso-

lutely. Although in some cases the

destruction of an established business

works a much greater hardship than many

injuries for which the constitution

makes compensation necessary, diminution

of its value is considered a vaguer

injury than the type of taking or appro-

priat.ion with which the constitution

deals. A business might be destroyed by

the construction of a more popular street

into which travel was diverted or by a

change in the location of a railroad sta-

tion, a subway entrance, or even a

transfer point for street care [sic] (as

well as by competition), but **>-re would

be as little claim in the one vase as in

the other. [4] The case is no different

when the business is destroyec! by taking

the land on which it was conducted."

(4 Nichols, Eminent Domain, supra, §13.3,

pp. 13-148.2 - 13-149.3; fns. 2 and 3

omitted; italics added.) 2/

5/ Compare 1 Orgel, Valuation Under

~ Eminent Domain, supra, section l,

page 5: "It goes without saying that the

courts have never construed the ‘just —

compensation' clause of a federal or

State constitution as requiring payment

(Cont 'd)

A-12

It is clear from the foregoing that

defendant's linguistic arguments based

upon the status of goodwill as property

Simply ignore established precedents and,

in so doing, beg the real question we

face today. The fact that business good-

will is legislatively declared to be

property and is treated as such in var-

ious legal contexts, does not render per

se irrational a rule which refuses to

treat it as such in a constitutional

sense for purposes of awarding compensa-

tion in eminent domain. The inquiry must

go much deeper -- into an examination of

the reasons for this distinction. Only

when that examination has been made can

it be determined whether the considera-

tions of constitutional policy underlying

it are presently valid.

Before turning to the indicated task

we address ourselves to another conten-

tion of defendant which appears to us to

be equally superficial. It is contended

5/ (Cont'd) for all injuries imposed

upon persons or property by acts of

government. Any such requirement would

make government itself impossible."

A-13.

that the general rule denying compensa-

tion for loss of business goodwill is

arbitrary because it is "shot through"

with exceptions. The first such excep-

tion to which defendant refers is that

relating to the condemnation of public

utilities. (See Southern Calif. Edison

Co. v. Railroad Com. (1936) 6 Cal.2d 737,

750-751.) However, it must be noted that

compensation awarded by the Public Util-

ities Commission for goodwill or going-

concern value of public utilities is

based upon wholly separate constitutional

and statutory provisions.— The

6/ Article XII, section 5, of the

California Constitution provides:

"The Legislature has plenary power,

unlimited by the other provisions of this

constitution but consistent with this

article, to confer additional authority

and jurisdiction upon the commission, to

establish the manner and scope of review

of commission action in a court of

record, and to enable it to fix just

compensation for utilit roperty taken

by eminent domain.” (Italics added.)

Section 1411 of the Public Utilities

Code provides in relevant part: "When

the proceeding has been submitted, the

commission shall make and file its

written finding fixing, in a single sun,

the just compensation to be paid by the

(Cont 'd)

A-14 .

Southern California Edison case itself

points this out at the pages above cited.

Surely a rule of compensation based upon

6/ (Cont'd) political subdivision for

the lands, property, and rights."

(Italics added.)

The fact that the law provides two

distinct methods for governmental acqui-

Sition of public utilities -- proceedings

before the commission pursuant to section

1401 et seq. of the Public Utilities

Code, and judicial eminent domain proceed-

ings pursuant to section 1237 et seq. of

the Code of Civil Procedure (see Citizens

Utilities Co. v. Superior Court (1963)

59 Cal.2d 805, 814-815; City of North

Sacramento v. Citizens Utilities Co.

(1963) 218 Cal. App.2d 178, 181 -- does

not, as defendant suggests, "create

serious equal protection problems" due to

differing substantive measures of recov-

ery according to the method chosen. As

we said in Citizens Utilities Co. v.

Superior Court, supra, it was the clear

intent of the Legislature to create al-

ternative methods of procedure, and that

procedure authorized by the Public Utili-

ties Code should not be held to be

exclusive of the judicial method “at least

so long as no constitutional or other

rights are violated by the procedure under

the Code of Civil Procedure." (59 Cal.2d

at p. 815; see also Marin M.W. Dist. v.

Marin W. etc. Co. (1918) 178 Cal. 308,

316.) It is manifest that the measure of

compensation vouchsafed a public utility

by the Public Utilities Code -- i.e.

"just compensation ... for [its] lands,

(Cont 'd)

A-15.

constitutional and statutory provisions

other than those we now consider can

hardly be deemed an “exception” to the

rule applicable under the provisions

before us. Moreover, we find no merit

in the claim that the allowance of com-

pensation for going-concern value in

public utilities cases, viewed alongside

the denial of such compensation in cases

not involving public utilities, results

in a denial of equal protection of the

laws. The rational basis for this dis-

tinction is clear: "In the first place,

the utility plant is uniquely adapted to

the enterprise and cannot be separately

sold. In the second place, the plant is

so intimately connected with the remain-

der of the enterprise that the taking of

the one necessarily means the destruction

of the other. In the third place, while

in the ordinary real estate condemnation,

the taker acquires the property intending

to convert it to a different use, in the

6/ (Cont'd) property, and rights” --

is also to be accorded it in proceed-

ings under the Code of Civil Procedure.

(See Citizens Utilities Co. v. Superior

Court, supra, 59 Cal.2d at p. 817.)

A-16.

condemnation of a public utility the

taker not only destroys the company's

chances of re-establishing the business

but itself receives the benefit of cus-

tomer connections, personnel and other

intangible aspects of the enterprise."

(2 Orgel, Valuation Under Eminent Domain,

Supra, pp. 58-59.)

Defendant's search for "exceptions"

to the general rule denying compensation

for loss of business goodwill next leads

him to make reference to various instances

in which evidence of lost business profits

is taken into account in making an award

for government taking or damage. He

points out that such evidence may be con-

Sidered in certain cases of inverse con-

demnation in arriving at the difference

between the value of the real property

before and after the injury (see Natural

Soda Prod. Co. v. City of L.A. (1943) 23

Cal.2d 193, 199-201; Inyo Chemical Co.

v. City of Los Angeles (1936) 5 Cal.2d

525, 542-543; Frustuck v. City of Fair-

fax (1963) 212 Cal.App.2d 345, 367); that

it may likewise be regarded in cases of

severance damage in order to determine

A-17.

whether and how the value of the remain-

der for its immediate highest and best

use has been affected (see Ventura

County Flood Control Dist. v. Security

First Nat. Bank (1971) 15 Cal.App.3d

996, 1002-1003, and cases there cited;

People ex rel. Dept. Public Works v.

Giumarra Vineyards Corp. (1966) 245

Cal.App.2d 309, 319-320); that it may

also be considered in cases involving a

temporary taking (see Kimball Laundry Co.

v. United States (1949) 338 U.S. l, 8-

21); and, finally, that it is taken into

account in determining the capitalized

value of a leasehold interest in con-

demned realty (see Evid. Code, §§ 817,

819). We are again at a loss, however,

to understand how these rules may be

considered "exceptions" to the rule here

challenged. In each case to which

defendant has reference the courts have

been careful to explain that considera-

tions entirely different from those under-

lying the rule of noncompensability for

business goodwill require the application

of an entirely different rule.

The case of Kimball Laundry Co. v.

A-18.

United States, Supra, 338 U.S. 1, pro-

vides an instructive example. There the

federal government during the Second

World War had acquired the petitioner's

laundry plant, which it continued to

operate as a laundry for the army, retain-

ing most of the petitioner's employees.

The taking was not permanent but was

subject to renewal at the election of the

Secretary of War, and the property was

returned to the petitioner at the conclu-

sion of the war. Agreeing with the trial

court that the proper measure of compen-

sation was the rental that probably would

have been obtained in free bargaining

between the petitioner and a hypothetical

lessee of the temporary interest, and

that damage to machinery in excess of

ordinary wear and tear should also be

compensated, the United States Supreme

Court went on to consider the petitioner's

claim for incidental damages for the

destruction of its "trade routes” --

which term "serves as a general designa-

tion both for the lists of customers

built up by solicitation over the years

and for the continued hold of the Laundry

upon their patronage." (338 U.S. at p.

A-19.

8.) The trial court had denied compen-

Sation in this respect, holding that

such damage did not bear upon the "fair

market value or fair use of the property

taken" (id.) but the high court reversed.

Holding that the value alleged to inhere

in the petitioner's trade routes was

essentially the going-concern value of

its business, and that the intangible

nature of this value did not in and of

itself preclude compensation for it,—

7/ “The value of all property, as we

have already observed, is dependent

upon and inseparable from individual

needs and attitudes, and these, obviously,

are intangible. As fixed by the market,

value is no more than a summary expres-

sion of forecasts that the needs and

attitudes which made up demand in the past

will have their counterparts in the future.

[Citations.] The only distinction to be

made, therefore, between the attitudes

which generate going-concern value and

those of which tangible property is com-

poinded is as to the tenacity of the

past's hold upon the future: in the case

of the latter a forecast of future demand

can usually be made with greater certain-

ty, for it is more probable on the whole

that people will continue to want parti-

cular goods or services than that they

will continue to look to a particular

supplier of them. It is more likely, in

other words, that people will persist

in wanting to have their laundry done

A-20.

the court went on in several illuminating

passages to explain the circumstances

under which compensation for such a value

would be required by the Constitution.

"What, then, are the circumstances

under which the Fifth Amendment requires

compensation for such an intangible? Not,

indeed, those of the usual taking of fee

title to business property, but the denial

of compensation in such circumstances

rests on a very concrete justification:

the going-concern value has not been

taken. Such are all the cases, most of -

them decided by State courts under con-

stitutions with provisions comparable to

‘the Fifth Amendment, in which only the

7/ (Cont'd) than that they will keep

~ On sending it to a particular laundry.

But as the probability of continued

patronage gains strength, this distinc-

tion becomes obliterated, and the intan-

gible acquires a value to a potential

purchaser no different from the business’

physical property. Since the Fifth

Amendment requires compensation for the

latter, the former, if shown to be present

and to have been ‘taken’, should also be

compensable.” (Kimball Laundry Co. v.

United States, supra, 338 U.S. 1, 10-11;

italics added.)

A-21 .

physical property has been condemned,

leaving the owner free to move his busi-

ness to a new location. [Citations.] In

such a situation there is no more reason

for a taker to pay for the business'

gOing-concern value than there would be

for a purchaser to pay for it who had not

secured trom his vendor a covenant to

refrain from entering into competition

with him. It is true that there may be

loss to the owner because of the diffi-

culty of finding other premises suitably

situated for the transfer of his good

will, and that such loss, like the cost

of moving, is denied compensation as

consequential. [Citation.] But such

value as the good will retains, the

owner keeps, and the remainder dissipated

by removal would not contribute to the

value paid for by a transferee of the

vacated premises, except perhars to the

extent that the prospect of its loss

would induce the owner to hold out for a

higher price for his land and building.

Cf. United States v. General Motors Corp.,

323 U.S. 373, 383. When a condemnor has

taken fee title to business property,

there is reason for saying that the

A-22.

compensation due should not vary with the

owner's good fortune or lack of it in

finding premises suitable for the trans-

ference of going-concern value. In the

usual case most of it can be transferred;

in the remainder the amount of loss is so

speculative that proof of it may justi-

fiably be excluded. See Sawyer v.

Commonwealth, 182 Mass. 245 ..., per

Holmes, C.J. By an extension of that

reasoning the same result has been reached

even upon the assumption that no other

premises whatever were available.

Mitchell v. United States, 267 U.S. 341."

(338 U.S. at pp. 11-12.)

At this point the Kimball court went

on to contrast the foregoing situation

with that in which the inevitable effect

of a taking is to deprive the owner of

the going-concern value of his business --

giving as an example the area of public

utility condemnation. "If such a depri-

vation has occurred," the court concluded,

"the going-concern value of the business

is at the Government's disposal whether

or not it chooses to avail itself of it,"

and compensation should be awarded

accordingly. (338 U.S. at p- 13.)

A-23.

Finally, applying this latter prin-

ciple to the case before it, the Kimball

court made a series of observations

pertinent to the issue before us at this

time. The temporary taking of the peti-

tioner's premises, the court held, com-

pletely appropriated its opportunity to

profit from its trade routes -- just as

completely as a promise not to compete

would have done. While the government

remained in possession, the petitioner's

investment remained bound up in the

reversion. While the trade routes

remained technically capable of transfer

independently of the physical property

with which they had been associated, it

was "wholly beyond the realm of conjec-

ture" that they could have been

temporarily transferred subject to

recapture. "It is arguable, to be sure,"

the court went on, “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

A-24 .

that no such premises happened to be

available, as it would have been irrele-

vant, under a strict application of

Mitchell v. United States [supra] 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 go-

ing-concern value. But when the Govern-

ment 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. The

temporary interruption as opposed to the

final severance of occupancy so greatly

narrows the range of alternatives open to

the condemnee that it substantially

increases the condemnor's obligation to

him. It is a difference in degree wide

enough to require a difference in result.”

(338 U.S. at pp. 14-15.)

A-25 +

We learn from the foregoing that the

rule denying compensation for business

goodwill, far from being "shot through"

with exceptions, is uniformly applied in

all cases to which it is applicable --

i.e., in all cases wherein the condemnor

takes the fee upon which a business is

conducted and does not by the nature of

its action wholly preclude the condemnee

from transferring its going-concern or

goodwill value to another location. We

also learn that this rule is based on

the conviction that it is "fair on the

whole" to treat all such condemnees alike,

refusing to create distinctions on the

basis of "the remote possibility that the

owner will be unable to find a wholly

Suitable location for the transfer of

going-concern value." (Kimball, supra,

at p. 15.) We are thus brought to the

question which lies at the core of our

inquiry: Does the erosion by modern

conditions of the assumptions underlying

this rule require its abrogation as a

matter of constitutional law and its

replacement with a constitutionally

grounded and judicially administered rule

of compensation more responsive to

A-26

present-day realities?— It is to this

question that we now turn our attention.

IIil

We judicially notice the following as

facts "of generalized knowledge that are

so universally known that they cannot

reasonably be the subject of dispute"

(Evid. Code § 451, subd. (f)): The con-

ditions of modern American life, includ-

ing the increased concentration of people

in urban centers and the need for increas-

ed governmental activity in the areas of

transportation and urban redevelopment,

have resulted in the disruption and dis-

placement of increased numbers of people

and businesses by government projects.

Moreover, the peculiar nature of urban

redevelopment programs, which act upon

large areas of contiguous property,

often involves the uprooting of entire

neighborhoods and the consequent

8/ We re-emphasize at this point that

~ we here consider defendant's general

attack on the rule of noncompensability

for business goodwill, not his more speci-

fic contention based on the particular

facts of this case. The latter conten-

tion will be taken up in due course.

A-27,

dispersal of their business and residen-

tial occupants to other areas. (See

generally An Act to Provide Compensation

For Loss of Goodwill Resulting From

Eminent Domain Proceedings, supra, 3 Harv.

J.Legis. 445, 447-448 (memo.); Note,

Eminent Domain Valuation in an Age of

Redevelopment: Incidental Losses, supra,

67 Yale L.J. 61.)

While the effects of this process are

severe in both a personal and social

sense for the residential occupants of

areas subjected to redevelopment, its

effects upon business occupants may be

even more serious. One such effect re-.

lates to the business goodwill which such

a businessman has built up in the loca-

tion of which he is deprived by condemna-

tion. In some cases, as for example in

the case of a mail order business whose

clientele is not rooted in the area

affected by redevelopment, business good-

will may be transferred with relative

ease to a new location outside the

redevelopment area. At the other end of

the spectrum, however, are businesses

which depend on a clientele within the

A-28.

redevelopment area. In many such cases

business goodwill is based almost wholly

upon the businessman's personal acquaint-

ance with his customers and his knowledge

of their particular needs. Such goodwill

is by its nature not freely transferable

within the context of wholesale condemna-

tion pursuant to urban redevelopment, for

the inevitable effect of such condemnation

is to disperse the businessman's clientele

throughout the urban area, with the result

that any new location chosen by him will

be unable to continue to profitably serve

a significant portion of them.

It is clear that to apply the rule of

noncompensability for loss of business

goodwill to cases in which the assumption

underlying it -- i.e., that such goodwill

is not "taken" or "damaged" but remains

subject to transfer to a new location --

does not hold true is in effect to require

the affected parties to bear a dispropor-

tionate share of the true cost of the

public undertaking. It is the increased

incidence of this occurrence, brought

about by the modern urban conditions

averted to above, which has been the

basis of scholarly comment critical of

> A- 29.

the rule. (See generally, materials

cited at fn. 1, ante.) The question

before us is whether these considerations

require that we hold as a matter of con-

stitutional law that bysiness goodwill is

now to be considered a compensable element

of damage in eminent domain.

As we have repeatedly emphasized, it

is the underscored language which is the

kernel of the controversy before us. To

recognize that there are substantial

numbers of cases in which the assumption

underlying the rule of noncompensability

for business goodwill is not borne out by

the particular facts is not necessarily

to conclude that alteration of the con-

stitutional rule is required. It is at

this point that a consideration of insti-

tutional functions and capacities must

come into play.

It is strenuously urged that because

ultimate responsibility for determining

the amount of compensation to be paid for

property taken under constitutional "just

compensation” clauses lies with the courts

(see United States v. New River Collieries

(1923) 262 U.S. 341, 343-344; Seaboard

A-30.

‘his property had not been taken from him.

Air Line Ry. v. United States (1923) 261

U.S. 299, 304; Monongahela Navig'n. Co.

v. United States (1892) 148 U.S. 312, 327;

County of Los Angeles v. Ortiz (1971) 6

Cal.3d 141, 145), it is the courts who

must fashion rules insuring that losses

of business goodwill occasioned through

condemnation be compensated. —

This argument, at least insofar as it

implies that the sole institution which

may provide standards of compensation is

the courts, proceeds upon an invalid

premise, to wit, that the "just compen-

sation" prescribed by constitutional pro-

visions contemplates total indemnifica-

tion for damage sustained through

condemnation. However, as we have pointed

out above (see text accompanying fn. 5,

ante), the law simply does not equate

"just compensation" with total indemni-

fication. 2/ We have not far to look in

9/ We are of course aware of language in

~ gome cases which indicates that "The

owner is to be put in as good a position

pecuniarily as he would have occupied if

(People ex rel. Dept. Pub. Wks. v. Lynbar,

Inc. (1967) 253 Cal.App.2d 870, 880; see

also United States v. Miller (1942) 317

U.S. 369, 373.) This language which we

A-31.

California jurisprudence for cases other

than those involving business goodwill in

which demonstrable loss resulting from

condemnation has been held not to consti-

tute an element of constitutionally

required "just compensation." For

example, in County of Los Angeles v. Ortiz,

supra, 6 Cal.3d 141, we held that a con-

demnee's litigation expenses, although

clearly resulting in a loss to the

condemnee which he would not.have sustain-

ed absent condemnation, did not, under a

virtually unbroken line of authority, form

an element of damage required to be paid

by the Constitution. Such costs, we

concluded, were “of policy as distin-

guished from constitutional dimension"

and the allowance of their recovery

rested with the Legislature rather than

the courts. (6 Cal.3d at pp. 148-149.)20/

9/ (Cont'd) have previously characteriz-

ed as “panoramic” (County of Los

Angeles v. Ortiz, supra, 6 Cal.3d 141,

147), makes up in idealism what it lacks

in universal application.

10/ Partial legislative response in this

area has come in the form of new

section 1249.3 of the Code of Civil

Procedure (enacted in 1974), which

A-32,

Similarly, in Town of Los Gatos v. Sund

(1965) 234 Cal.App.2d 24, it was held

that expenses of moving personal property

involved in the business conducted on the

condemned property, although clearly

incurred by the condemnee as a result of

the condemnation, were not compensable

under constitutional "just compensation"

provisions, and that any appeal for their

allowance must be made to the Legislature.21/

10/ (Cont'd) requires the parties to make

final settlement offers prior to trial

and awards the defenda:t his litigation

expenses when it appears after trial that

the plaintiff's offer was unreasonably low

Litigation expenses, including reasonable

attorney's fees, appraisal fees, and fees

for the services of other experts, are

also awarded by statute when the eminent

domain proceeding is ultimately abandoned

(Code Civ. Proc., § 1255a) or the defend-

ant secures a judgment that the condemnor

may not acquire the real property (Code

Civ. Proc., §1246.4). Further provisions

in this area are included in the 1974 act

(new Code Civ. Proc. §1268.610).

1l/ Legislative response in this area

"appeared in 1971 amendments to the

state Relocation Assistance Act, specifi-

cally with the addition of subdivision (2)

(2) to section 7262 of the Government

Code. We discuss this act in some detail

below.

A-33.

What these cases show is simply that com-

pensation provided for the taking of real

property through eminent’ domain may be

"Just" within the meaning of the consti-

tutional provisions without providing

complete reimbursement to the cwner for

all losses suffered by him as a result of

condemnation, and that in at least some

cases in which the constitutional measure

of compensation falls demonstrably short

of that required to make the condemnee

"whole," his recourse must be to the

Legislature.

The central issue, then, is whether

compensation for loss of business good-

will should be included within the con-

stitutional minimum required by “just

compensation" clauses or whether it should

continue to be excluded from that measure

and remain subject to legislative com-

petence for the redress of demonstrable

losses. We have concluded that valid

reasons of policy, based primarily upon

considerations of institutional compe-

tence, counsel in favor of judicial

deference to the legislative branch in

fashioning standards and procedures

responsive to present realities in this

A-34 .

area.

Loss of business goodwill due to

condemnatton of business premises is just

one Of a number of areas in which demon-

strable loss and inconvenience are

suffered by those who are uprooted from

their homes and businesses by the modern

phenomenon of urban redevelopment pro-

grams. The damage sustained ranges from

the relatively imponderable (for example,

educational damage caused young persons by

mid-stream changes in schools) to the

relatively tangible (for example, expenses

incurred by a family or a business in

moving personal property from condemned

realty to a new location). In the

specific area with which we are here con-

cerned -- to wit, loss of business good

will -- there are similar problems. Thus,

even assuming as defendant insists that

the goodwill possessed by a business at

one location is capable of accurate trans-

lation into a dollar amount, to what

extent must the assumption of transfer-

ability (upon which, as we have seen, the

rule of noncompensability rests) break

down in the particular case to justify

compensation, and what amount of

A-35.

Saw

compensation is appropriate when the

breakdown of the assumption is less than

total?

The courts, although rarely making

explicit reference to the overall problen,

have, by their case by case rulings in

accordance with established principles

such as that we consider today, demon-

strated a fundamental awareness cf the

real dimensions of the underlying problem.

In the words of one perceptive commenta-

tor, “the courts recognize that they

cannot, through the enunciation of doc-

trine which decides cases, adequately

stake out the limits of fair treatment;

that if the quest for fairness is left to

a series of occasional encounters between

courts and public administrators it can

but partially be fulfilled; and that the

political branches, accordingly, labor

under their own obligations to avoid

unfairness regardless of what the courts

may require." (Michelman, Property,

Utility, and Fairness: Comments on The

Ethical Foundations of "Just Compensation"

A-36.

Law, supra, 80 Harv.L.Rev. 1165, 1252. 12/

12/ The cited article by Professor Michel-

man, which must be acknowledged a

landmark in the field of compensation

analysis, goes far to explicate the nature

of the broad problem of compensation for

public takings and the role of courts,

legislatures, and other public bodies in

providing solutions for that problem.

Professor Michelman's thesis is stated

in brief in the following paragraph from

his article: "A serious objection to

the habit of leaving fairness discipline

to the courts is that we may thereby

miss opportunities to make good use of

settlement methods too artificial or

innovative for judicial adoption. A

court, it seems, must choose between

denying all compensation and awarding

"just' compensation; the loss is either

a ‘'taking' of 'property' or it is not.

If 'just' compensation is essentially

incalculable, or if the cost of comput-

ing it is very high, the court may be

led to classify a situation as non-com-

pensable. If choice must be relegated

to this framework, we shall not be able

to exploit the substitutability of

settlement costs and demoralization costs.

{[*] It may be that even though that

settlement which would reduce demorali-

zation costs to zero would be prohibi-

tively costly, there exists some rela-

tively cheap form of settlement which

would reduce demoralization costs so

effectively that, by using it, we can

reduce the total of settlement plus

demoralization costs below what they

would be in the absence of any settle-

ment. Such a settlement technique, if

A- 37.

It is manifest that state and federal

legislative bodies have begun to demon-

strate their awareness of such obligations.

The federal Uniform Relocation Assistance

12/ (Cont'd) one exists, is very li*ely

to require legislative adoption."

(Michelman, supra, 80 Harv.L.Rev. at pp.

1253-1254; fns. omitted.)

ad ""Demoralization costs' are defined

as the total of (1) the dollar value

necessary to offset disutilities which

accrue to losers and their sympathizers

specifically from the realization that no

compensation is offered, and (2) the pre-

sent capitalized dollar value of lost

future production (reflecting either im-

paired incentives or social unrest)

caused by demoralization of uncompensated

losers, their sympathizers, and other ob-

servers disturbed by the thought that they

themselves may be subjected to similar

treatment on some other occasion. 'Settle-

ment costs' are measured by the dollar

value of the time, effort and resources

which would be required in order to reach

compensation settlements adequate to avoid

demoralization costs. Included are the

costs of settling not only the particular

compensation claims presented, but also

those of all persons so affected by the

measure in question or similar measures

as to have claims not obviously distin-

guishable by the available settlement ap-

paratus.” (Michelman, supra, 80 Harv.L.

Rev. at p. 1214; fns. omitted.)

A- 38.

and Real Property Acquisition Policies

Act (42 U.S.C. § 4601 et seq.) and the

inter locking22/

California Relocation

Assistance Act (Gov. Code, § 7260 et seq.)

have made substantial strides in the

direction of providing -- in the words

of the declaration of policy of the fed-

eral act -- "fair and equitable treatment

of persons displaced as a result of

[public] programs in order that such

persons shall not suffer disproportionate

injuries as a result of programs designed

for the benefit of the public as a whole.

(42 U.S.C. § 4621.) Thus, provision is

now made for the payment of moving and

related expenses (42 U.S.C. § 4622; Gov.

Code, §7262), acquisition of replacement

housing (42 U.S.C. §§ 4623, 4624, 4626;

Gov. Code, §§ 7263, 7263.5, 7264,

13/ The federal act provides in substance

that federal assistance for public

projects is contingent upon the state

providing payments as outlined in the

federal act, and that the payments so

made shall be included in the cost of

the program for which federal assistance

is available.

4631.)

(See 42 U.S.C. §§ 4630,

A-39 .

7264.5), and advisory services (42 U.S.C.

§ 4625; Gov. Code, § 7261.) As to the

matter of business relocation, the acts

provide for in lieu payment (based upon

average net earnings) of up to $10,000

in cases wherein the business cannot be

relocated without substantial loss of

patronage and is not a part of an enter-

prise having another establishment or

establishments in the same or similar

business which are not being acquired.

(42 U.S.C. § 4622(c); Gov. Code § 7262,

subd. (c).) 24/ (See generally 6A Nichols,

14/ The federal act provides: "(c) Any

displaced person eligible for pay- |

ments under subsection (a) of this sec-

tion who is displaced from his place of

business or from his farm operation and

who elects to accept the payment author-

ized by this subsection in lieu of the

payment authorized by subsection (a) of

this section, may receive a fixed payment

in an amount equal to the average annual

net earnings of the business or farm

Operation, except that such payment shall

be not less than $2,500 nor more than

$10,000. In the case of a business no

payment shall be made under this subsec-

tion unless the head of the Federal

agency is satisfied that the business

(1) cannot be relocated without a sub-

stantial loss of its existing patronage,

and (2) is not a part of a commercial

(Cont 'd)

A-40.

Eminent Domain, supra, ch. 34; Comment:

Relocation Assistance in California:

Legislative Response to the Federal Pro-

gram (1972) 3 Pacific L.J. 114.)

14/ (Cont'd) enterprise having at least

one other establishment not being

acquired by the United States, which is

engaged in the same or similar business.

For purposes of this subsection, the term

‘average annual net earnings' means one-

half of any net earnings of the business

or farm operation, before Federal, State,

and local income taxes, during the two

taxable years immediately preceding the

taxable year in which such business or

farm operation moves from the real prop-

erty acquired for such project, or during

such other period as the had of such

agency determines to be more equitable

for establishing such earnings, and

includes any compensation paid by the

business or farm operation to the owner,

his spouse, or his dependents during

such period."

The relevant provisions of the state

act (Gov. Code, § 7262, subd. (c)) are

Similar in all pertinent respects.

A-41 .

The foregoing acts do not address

themselves directly to the matter here

before us, i.e., loss of business good-

will. However, it is clear that the

provision for in lieu payments adverted

to above represent an attempt to provide

some compensation (up to the maximum of

$10,000) for business losses occasioned

through condemnation. 15/ More important-

ly, the recent action of the Legislature

in enacting new section 1263.510 of the

Code of Civil Procedure -- which section

will in future cases provide compensation

for loss of goodwill in coordination

with applicable provisions of the

15/ This, like the other provisions of

the respective relocation acts, is

clearly an effort by the legislative arm

of government to introduce what Professor

Michelman would term a “relatively cheap

form of settlement [designed to] reduce

demoralization costs so effectively that,

by using it, we can reduce the total of

settlement plus demoralization costs

below what they would be in the absence

of any settlement." (See fn. 12, ante.)

A- 42,

Relocation Assistance act 28/ -- manifests

an explicit legislative recognition of the

problem and a willingness to address

16/ New section 1263.510, effective Jan-

uary l, 1976, provides:

(a) The owner of a business conduct-

ed on the property taken, or on the

remainder if such property is part of a

rt go panes os My + be compensated for

of goodw the owner

of the following: i eo

"(1) The loss is caused by the taking

of the property or the injury to the

remainder.

"(2) The loss cannot reasonably be

prevented by a relocation of the business

or by taking steps and adopting proce-

a = a ge eee | prudent person

wou ake and adopt in preserv

goodwill. s oo

"(3) Compensation for the loss will

not be included in payments under Section

7262 of the Government Code.

"(4) Compensation for the loss will

not be duplicated in the compensation

otherwise awarded to the owner.

"(b) Within the meaning of this arti-

Cle, ‘goodwill' consists of the benefits

that accrue to a business as a result of

its location, reputation for dependabili-

ty, skill or quality, and any other

circumstances resulting in probable

retention of old or acquisition of new

patronage."

A-43,

itself to it.22/

In view of all of the foregoing we

have concluded that sound reasons of con-

stitutional and judicial policy counsel

against a present reinterpretation of

constitutional "just compensation"

clauses to require compensation for busi-

ness goodwill affected or damaged by

exercise of the power of eminent domain.

The present discrete limits upon consti-

tutionally compelled compensation, while

seeming arbitrary and irrational from the

point of view of total indemnification

for losses sustained through condemnation,

suffer from meither of those vices when

viewed in the proper context of institu-

tional functions and capabilities. The

courts, in essentially limiting the

scope of constitutionally compelled com-

pensaticn to the fair market value of

real property taken or damaged by public

17/ Although, as we have observed at the

“outset of this opinion, the provisions

of new section 1263.510 are not applicable

to this proceeding, we believe it appro-

priate to make reference to them as a

manifestation of continued legislative

concern in this area,

A- 44,

projects, have in essence recognized

their limitations in providing overall

fair treatment for persons who suffer

injuries as a result of public projects.

The legislative branch of government,

recognizing its peculiar competence in

this area, has undertaken responsive steps

and evidences a willingness to continue

to deal with the difficult and involved

questions of social policy which under-

lie the task. In these circumstances

wisdom lies in the direction of judicial

deference to the legislative branch. We

therefore reaffirm the long-standing and

uniform rule of constitutional interpre-

tation which holds that the provisions

of the state and federal Constitutions

providing for the payment of just compen-

sation upon the taking or damaging of

private property for public use (see Fn.

2, ante) do not require that compensation

be paid for the loss of business goodwill

sustained due to the exercise of the

power of eminent domain, and that recourse

for recoupment of injury of this kind

must lie with the legislative branch. We

further hold that this rule is based upon

sound considerations of governmental

A-45.,

policy and does not operate to deny

affected parties the equal protection of

the laws.

As we have indicated above, defend-

ant's attack upon the trial court's

failure to include the loss of business

goodwill is based not only upon his gen-

eral challenge to the rule of noncompen-

sability, which we have treated above, but

also upon the particular facts of this

case, as reflected in the trial court's

findings. The substance of the applicable

findings was (1) that due to his age and

physical condition defendant Abrams was ~

wholly incapable of relocating his busi-

ness in a new area, and (2) that as a

result the business goodwill of his phar-

macy was taken, damaged, and destroyed by

the taking of his real property. It is

Clear from what we have said above, how-

ever, that damage resulting to business

goodwill due to the failure or inability

of the condemnee, in his particular

personal circumstances, to transfer that

goodwill to another location, cannot form

an element of the compensation required

A-46,

by applicable constitutional provisions.

Accordingly, the trial court was correct

in denying compensation in this respect.

As we have pointed out above (part I,

ante), the trial court in this case

awarded compensation for the stipulated

value ($10,000) of certain “ethical

drugs" owned by defendant on the ground

that condemnation had destroyed his mar-

ket for these drugs. The drugs in ques-

tion were in opened containers, and the

trial court -=- apparently reasoning that

because defendant Abrams' physical condi-

tion rendered relocation of the business

impossible, and because state law essen-

tially forbids resale of “ethical drugs"

in opened containers to another pharma-

cist without a certification of purity28/

(the cost of which would exceed the value

18/ See California Administrative Code,

title 16, section 1717(a). All per-

tinent evidence before the court indicat-

ed that upon discontinuation of his

business defendant Abrams would be unable

to dispose of his stock of “ethical

drugs" to another pharmacist.

A-47.

of the subject drugs) -- concluded as a

matter of law as follows: "ABRAMS'

ethical drugs in open containers, as his

personal property, are compensable under

Cal. Const. Art. 1, § 14 [now Cal. Const.,

art I, § 19 == see fn. 2, ante) (Sutfin

v. State (1968) 261 Cal.App.2d 50).”

Plaintiff challenges this determina-

tion on appeal. It urges that the

"ethical drugs" in question -- i.e. those

in opened containers -- are movable per-

sonal property not affixed to the realty

and as such are non-compensable in an

eminent domain proceeding brought to ac-

quire a parcel of real property. (See

2 Nichols, Eminent Domain, supra, § 5.84,

pp. 5-438 - 5-439; City of Los Angeles v.

Allen's Grocery Co. (1968) 265 Cal.App.2d

274, 279.) It submits that the case of

Sutfin v. State, supra, 261 Cal.App.2d

50, cited by the trial court in support

of its conclusion, is readily distinguish-

able because that case <= an action in

inverse condemnation for damage to auto-

mobiles inundated by flood waters result-

ing from a state highway project --

involved actual physical invasion of the

A-48.

plaintiff's personal property and more-

over did not concern public acquisition

of real property through eminent domain.

The universal rule and California rule,

plaintiff insists, is that personal

property not affixed to the realty can-

not form an element of compensation

under constitutional provisions assuring

"Just compensation" when the realty is

taken through eminent domain; this rule,

it is asserted, applies regardless of

whether the subject personal property is

rendered essentially valueless by condem-

nation of the realty.

Defendant offers strenuous arguments

to the contrary, urging that Sutfin is

controlling and that recent decisions in

state and federal courts have undermined

the reasoning upon which the so-called

general rule rests -- at least in cases

wherein condemnation has had the effect

of rendering the subject personal pro-

perty essentially valueless.

We believe that all of defendant's

contentions in this respect may be answer-

ed by noting a fundamental distinction

between this case and the Kimball Laundry

A-49.

case to which we have made extensive ref-

erence in part III above. In Kimball

Laundry, it will be recalled, the United

States Supreme Court held that when the

government by its act of condemnation

rendered the condemnee's trade routes

essentially valueless to it during the

period of the temporary taking these

involved, compensation was required be-

cause the specific nature of the condem-

natory act involved (i.e., a temporary

taking) in and of itself brought about

the total devaluation in question.

In the instant case, on the other

hand, the act of condemning the property

upon which defendant conducted his busi-—

ness did not in and of itself result in

the loss of value of which defendant com-

plains. Rather, as we have pointed out

above with respect to the matter of busi-

ness goodwill, it was the personal cir-

cumstances of the condemnee himself --

specifically his age and physical condi-

tion -- which operated to prevent his

transfer of his "ethical drugs" to a new

location and his realization of their

value at that new location. (See part IV,

ante.) It was only this factor which

A-50 .

rendered significant the fact of legal

limitations upon the sale of those drugs

to another pharmacist. Thus, the expan-

Sion of the general rule which defendant

seeks is not one based on the nature of

the condemnatory act but upon its practi-

cal effect in particular personal circun-

Stances. No case has been cited to us or

has been found as a result of our study

which would justify departure in this sit-

uation from the universal rule denying

compensation for movable, nonaffixed per-

sonal property on condemned realty.+2/

We conclude that the award of compensation

On a constitutional basis in this instance

was inappropriate and erroneous.

Considerations similar to those

expressed by us in part III above also

19/ The so-called "constructive annexa-

tion" cases, such as City of Los

Angeles v. Klinker (1933) 219 Cal. 198,

and In Re Slum Clearance, City of Detroit

(1952 332 Mich. 485, are clearly distin-

guishable. There is no suggestion in

this case that defendant's “ethical drugs”

are so adapted for use on the condemned

realty that they must be considered a

part of it.

A- Dae

support our conclusion in this matter.

The California Relocation Assistance Act,

at section 7262 of the Government Code,

makes specific provision for the award of

statutory compensation in cases of this

nature. Subdivision (a) of that section

provides: "As a part of the cost of ac-

guisition of real property for a public

use, a public entity shall compensate a

displaced person for his: (1) Actual and

reasonable expense in moving himself,

family, business, or farm operation, in-

cluding moving personal property. (2)

Actual direct losses of tangible personal

property as a result of moving or dis-

continuing a business or farm operation,

but not to exceed an amount equal to the

reasonable expenses that would have been

reguired to relocate such property, as

determined by the public entity. (3)

Actual and reasonable expenses in search-

ing for a replacement business or farm."

(Italics added. » 20/

20/ As noted above (see fn. 14, ante),

subdivision (c) of section 7267 makes

provision for an in lieu payment of up to

$10,000 in certain circumstances.

A-52,

Clearly the underscored language con-

templates that an owner of a business on

real property acquired for public use may

elect either to move that business to a

new location or to discontinue it entirely.

When he chooses the latter alternative,

as defendant Abrams has done in this case,

and "actual direct losses of tangible

personal property” result -- as they are

alleged to have resulted in this case --

the statute provides for compensation up

to “an amount equal to the reasonable

expenses that would have been required

to relocate such property, as determined

by the public entity. Clearly, in the

case of discontinuance as opposed to mov-

ing, the "reasonable expenses that would

have been required to relocate” are those

which would be required in order to place

the subject property in the hands of one

who could utilize it after the owner's

discontinuance of business. Here it was

alleged, and the trial court apparently

concluded, that those expenses would

exceed the value of the "ethical drugs”

themselves.

The presence of the foregoing statute,

A-53 .

in combination with the considerations of

policy which we have discussed in part IV

above, buttresses our conclusion that the

trial court was in error when it held that

the settled rule of constitutional inter-

pretation (forbidding compensation for

personal property not affixed to the con-

demned realty) should be relaxed in cases

wherein condemnation has the practical

result -- due to circumstances personal to

the owner -- of diminishing the value to

him of movable personal property located

on the condemned premises. The Legisla-

ture has brought its special competence

to this very area of incidental damage,

and sound policy dictates that the courts

refrain from setting up competing rules

on a constitutional basis.

It might be thought, on the basis of

the last paragraph but one, that we should

affirm the judgment on this point in spite

of the trial court's erroneous approach

because the result to be reached under a

proper interpretation of the Relocation

Assistance Act is identical to that

reached by the trial court. "No rule of

decision is better or more firmly estab-

lished by authority, nor one resting upon

A-54.

a sounder basis of reason and propriety,

than that a ruling or decision, itself cor-

rect in law, wil not be disturbed on

appeal merely because given for a wrong

reason." (Davey v. Southern Pacific Co.

(1897) 116 Cal. 325, 329; see also Blank

v. Borden (1974) 11 Cal.3d 963, 970, fn.

5; D'Amico v. Board of Medical Examiners

(1974) 11 Cal.3d 1, 18-19). However, we

believe that in the instant case such a

disposition would not be justified.

Section 7262, subdivision (2) (2) of the

Government Code clearly contemplates that

the determination of the amount to be

awarded for losses of tangible personal

property as a result of discontinuance of

business following condemnation is to be

made, at least in the first instance, by

the public entity. Moreover, the sta-

tute's provision for in lieu payments (see

fns. 14 and 20, ante) contemplates an

election by the condemnee; we would

essentially foreclose that election if

we were to affirm the judgment.

Finally, because this is not an action

under the California Relocation Assistance

Act but an action in eminent domain

A-55.

brought pursuant to article I, section 19,

of the state Constitution, a judgment

which would amount to enforcement of the

provisions of the act would be inappro-

priate. In view of all of the circum-

stances we believe that the judgment

should be reversed in its entirety, with

directions to the trial court to undertake

further proceedings leading to a new judg-

ment in eminent domain limited in

accordance with the views expressed

herein. Defendant may immediately pro-

ceed to avail himself of such relief and

remedies as may be available to him under

the California Relocation Assistance Act.

We do not intend to imply by any- |

thing we say in this opinion that we

relinquish all constitutional supervi-

sion of actions undertaken by the legis-

lative branch in affording “fair and

equitable treatment of persons displaced

as a result of [public] programs in order

that such persons shall not suffer dis-

proportionate injuries as a result of

programs designed for the benefit of the

public as a whole." (42 U.S.C. § 4621.)

If at any time it should appear that

legislative efforts in this area result

A-56.

in the clear infringement of constitution-

al rights, the courts will necessarily

discharge their historic and constitu-

tional responsibilities. What we

declare and hold is that constitutional

"just compensation" clauses do not and by

reason of institutional realities cannot

be made to perform all conceivable func-

tions in the area of providing fair

treatment for persons who are deprived of

their property for the public good. A

Substantial share of those functions, most

notably those relating to incidental

damages arising from a taking, must be

performed by the governmental institution

best designed and equipped to balance and

consider the competing social policies

here at work. That institution, the

Legislature, has taken significant steps

in this regard and manifests a continuing

disposition to insure that the goal of

fundamental fairness be achieved. The

fact that the most recent statutory de-

velopments -- i.e., those contained in

the 1974 act -- are by their terms appli-

cable to the instant case cannot cause

us to depart from what we consider to be

sound judicial and constitutional policy.

A-57.

™o recapitulate, we hold (1) that

under the law applicable to the case at

bench, and in particular under pertinent

constitutional provisions, defendant con-

demnee was not entitled to recover compen~-

sation either for loss of business good

will or for the loss of value of his

inventory of “ethical drugs," resulting

from condemnation of the real property

owned by him; (2) that accordingly the

trial court did not err in concluding that

he was not entitled to be compensated for

loss of business goodwill; but (3) that

the court did err in awarding him compen-

sation for his inventory of ethical drugs.

The judgment must therefore be reversed,

but we find nothing in the record impel-

ling us to order a new trial. The case

was fully tried and we apprehend no

necessity to take further evidence. On

remand the court should make findings of

fact and conclusions of law in conformity

with the views herein expressed and enter

judgment accordingly.

The judgment is reversed and the cause

is remanded to the trial court to proceed

with the disposition thereof under the

A-58 .

directions and in

conformity with the

views herein expressed. Defendant shall

recover his costs

on plaintiff's appeal;

plaintiff shall recover its costs on

defendant's appeal,

WE CONCUR:

WRIGHT, C.J,

McCOMB, J.

TOBRINER, J,

MOSK, J.

CLARK, J.

RICHARDSON, J.

SULLIVAN, J. |

A-59 .

APPENDIX B

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE

STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

THE COMMUNITY REDEVELOPMENT

AGENCY OF THE CITY OF LOS

ANGELES, 2D CIVIL

Plaintiff, Appellant rot ot.is

and Respondent, 997 068

vs.

ARTHUR J. ABRAMS,

Defendant, Respondent

and Appellant.

mee eee ee ee ee ee ee ee

APPEALS from a judgment of the

Superior Court of Los Angeles County.

Robert W. Kenny, Judge. Reversed with

directions.

Eugene B. Jacobs, Agency Counsel,

Robert J. Hall and Oliver, Stoever &

Laskin, Special Counsel, by Thomas W.

Stoever and C. Edward Dilkes, for appel-

lant Community Redevelopment Agency.

Fadem, Kanner, Berger & Stocker, a

B-l.

professional corporation, by Gideon Kanner,

for appellant Abrams.

Arthur Abrams has been a pharmacist

in an area embraced by the Watts Redevel-

opment project. He was the owner in fee

simple of the real property on which the

pharmacy was located. At the time of the

commencement of this action Mr. Abrams

was 64 years of age and suffered from

rheumatoid arthritis.

On February 24, 1971, the Community

Redevelopment Agency of the City of Los

Angeles (the Agency), in the course of

implementing the Watts Redevelopment Plan,

filed an action in eminent domain to ac-

quire the real property on which Mr.

Abrams' pharmacy was situated. This par-

cel was part of an area of approximately

20 square blocks falling under the sweep

of the Agency's proposed condemnation.

The total condemnation not only took

Abrams' pharmacy but eliminated the neigh-

borhood from which his clientele came.

By his answer Mr. Abrams specifically

prayed that the value of two types of

personal property shouid be included in

any determination of "just compensation"

B-2.

for the Agency's taking of his property.

These two types of personal property were

(1) a quantity of "ethical drugs"+ which

were in inventory on the premises, and

(2) the business or "goodwill." He

alleged that the value of the drugs was

$60,000 and the value of the business or

goodwill was $25,000.

In support of his contention Mr.

Abrams alleged that because of State im-

posed restrictions on the sale of "ethi-

cal drugs" his stock thereof were rendered

valueless by the elimination of his place

of business and that because of his own

particular situation and the circumstances

of this particular "taking" he is inca-

pable of relocating his business.

The trial court, on the basis of sub-

stantial evidence, found that (1) by

1. “Ethical Drugs" are those drugs

— cannot be sold without a prescrip-

ion.

2. It is claimed by Abrams and not

denied by the Agency that the Watts Re-

development plan contemplates that the

area acquired by the Agency will eventu-

ally be turned over to private i’iterests

for the purpose of establishing various

commercial enterprises which could include

a drug store.

B-3.

reason of his age and physical condition,

Mr. Abrams in unemployable, and must rely

for a livelihood on his own business, and

for that reason his business constitutes

his only present and potential source of

livelihood, and his principal asset, and

(2) Mr. Abrams is incapable of starting

a new business located in a new area.

The evidence established that because

of State requirements the inventory of

ethical drugs could not be sold to another

pharmacist without a certification as to

purity. The cost of such testing and

certification would exceed the value of

the drugs. It was stipulated that the

value of the drugs was $10,000.

As a result the trial court concluded

that the good will of Mr. Abrams' busi-

ness was “taken, damaged, and destroyed"

and that the market for the drugs had

been "destroyed" by the condemnation

action.

On the basis of these findings and

conclusions the trial court awarded Mr.

Abrams $10,000, the stipulated value of

the drugs, in addition to the value which

the jury placed on the real property and

B-4.

fixtures but denied any award for the

goodwill of the business on the grounds

that as a matter of law it was non-com-

pensable. Both the Agency and Mr.

Abrams have appealed.

Since on appeal we do not reweigh the

evidence, our starting point is the well

Supported findings of the trial court

that the two forms of personal property

at issue were taken, damaged or destroyed

by the condemnation action. Their value

has been reduced to zero.

From this base we proceed to deter-

mine who should bear the loss. The

essential question to be answered is

whether a failure to compensate for

these items would result in the owner of

private property being asked to bear a

disproportionate share of the cost of a

public improvement. (Clement v. State

Reclamation Board, 35 Cal.2d 628.)

On this appeal the Agency Suggests

an issue which was not raised below,2/

3/ During pretrial proceedings the

Agency's position was that compensa-

bility per se of the contested items of

personal property was at issue. It did

not challenge Abrams‘ claim of inability

B-5

that is that Mr. Abrams did not mitigate

the damages. This claim is based on two

different notions.

As to the inventory of drugs the

Agency contends that Mr. Abrams made no

effort to dispose of the drugs but in-

Stead continued to keep his inventory

current. The agency did not seek an or-

der for immediate possession, hence Mr.

Abrams continued in business until con-

clusion of the trial. It appears that

he conducted that business with its in-

ventory at normal levels.

Administrative Code section 1710

reguires the owner of a pharmacy to main-

tain an adequate supply of drugs and

chemicals. Be that as it may, the Agency

3/ (Cont'd) to relocate the business

or dispose of the ethical drugs.

The final pretrial order states as

follows: "Plaintiff and defendant can

now stipulate and agree that the legal

issue is as follows: Whether on the facts

at bar, defendant A.J. ABRAMS is entitled

to be compensated for business good will,

if any, and his stock of ethical drugs,

if any, pursuant to Article I, §14 of the

California Constitution and the Fifth and

Fourteenth Amendments of the U.S.

Constitution.”

B-6.

is really suggesting that we reweigh the

evidence since the trial court found that

Mr. Abrams could not otherwise dispose of

the drugs he had on hand. Mr. Abrams

was not required, prior to judgment, to

allow his business to atrophy.

Concerning the loss of the business

the Agency contends that Mr. Abrams

should have availed himself of certain

relocation assistance afforded by provi-

sions of the Government Code.

Government Code section 7262 provides

that as a cost of the acquisition of real

property for a public use, a public entity

shall compensate a displaced person for

(1) expense of moving the business, (2)

expense in searching for a replacement of

the business, (3) actual direct loss of

tengibie personal property as a result of

moving or discontinuing a business.

In lieu of such compensation a busi-

ness man who is displaced by a condemna-

tion action may elect to accept a lump

Sum payment based on annual average net

earnings not to exceed $10,000. This

latter option is conditioned on the public

agency being satisfied that the business

B-7 .

cannot be relocated without substantial

loss of patronage.

This statute appears to us to be

legislative recognition of the need to

compensate for loss of business as a

result of a condemnation action but con-

templates that such compensation be

independent of the condemnation proceed-

ings. The relocation assistance contains

a certain amount of "hedging" by the

Legislature in giving the Agency the fact-

finding power on the issue of relocability

and in limiting absolutely the amount of

compensation available.

Further, section 7270 of the Govern-

ment Code provides that nothing in these

provisions shall be construed as creating

in any condemnation proceedings any

element of damages not in existence on

the date of the enactment. Section 7274

specifically provides that these provi-

sions create no rights or liabilities.

Thus these provisions are not an adequate

substitute for the constitutional require-

ment of just compensation.

We discuss the Legislature's power to

limit compensation infra. At this point

for the reasons stated and because the

issue was not raised at trial we reject

the Agency's contention that Mr. Abrams

failed to mitigate damages,

The remaining contention of the Agency

is essentially that personal property is,

as a matter of law, non-compensable in an

action for condemnation of real property.

Article I, section 14 of the Califor-

nia Constitution provides that "Private

property shall not be taken or damaged

for public use without just compensation.

-«+" That very simple statement of one

of the most fundamental tenets of our

tradition and culture has resulted in

volumes of case law and text material

dealing, under varying circumstances,

with the issues of what has been "taken

or damaged" and what are the ingredients

of "just compensation."

The Constitution refers to "property"

without distinction as to its character

as real or personal. (See Sutfin v. State

of California, 261 Cal.App.2d 50, where

in an inverse condemnation action it was

held that plaintiff could be compensated

for damage to a number of automobiles

B-9.

on plaintiff's property caused by flooding

from state flood control works.) Contrary

to the Agency's contention here, if the

state takes or damages personal property

in the exercise of its power of eminent

domain it is obligated to pay just compen-

sation to the owner. (Sutfin, Supra;

also see Van Alstyne, Statutory Modifica-~

tion of Inverse Condemnation: The Scope

of Legislative Power, 19 Stanford L.Rev.

727; 1 Nichols, The Law of Eminent Domain

(rev. 3€ ed. 1973) §1.13[3], pp. 1-18.)

We see no difference between the damaging

of automobiles in Sutfin and the destruc-

tion of the personal property here.

In determining whether property, real

or personal, has been taken or damaged the

test is the loss to the owner and not

benefit to the taker. (People v.

La Macchia, 41 Cal.2d 738; U.S. Vv.

General Motors Corp., 323 U.S. 373.)

Thus in the case at bench it matters

not that the Agency does not intend to

operate a drug store on the premises or

make use of Abrams' inventory or business.

(Boston Chamber of Commerce v. Boston,

217 U.S. 189; United States v. Fuller,

409 U.S. 488; Almota Farmers Elevator

B-10.

& Whse. Co. v, U.S., 409 U.S. 470.)

The fundamental issues for the courts

in these cases are simply whether a pro-

perty right has been taken or damages and

the value of that private property right

as of the time of the taking or damaging.

Just compensation means the full and

perfect equivalent in money of the pro-

perty taken or damaged. Its owner is to

be put in as good a position pecuniarily

as he would have occupied if his property

had not been taken or damaged. (United

States v. Miller, 317 U.S. 369, 373.)

The determination of these issues is

purely a judicial function and that func-

tion cannot be circumscribed by the

Legislature. When the state through its

executive arm takes or damages private

property it cannot through its legisla-

tive arm limit the price it will pay or

the manner of its payment. (Monongahela

Navigation Co. v. United States, 148 U.S.

312; United States v. New River Collie-

ries, 262 U.S. 341; Beals v. City of Los

Angeles, 23 Cal.2d 381; County of Los

Angeles v. Ortiz, 6 Cal.3d 141.)

The law in California and elsewhere

B-11

has long recognized compensable conse~

quential damage to property rights which,

while not actually “taken", are damaged

or destroyed by the physical appropria-

tion of a portion of the owner's property.

(See People v. Giumarra Vineyards Corp.,

245 Cal.App.2d 309; Southern Calif,

Edison Co. v. Railroad Com., 6 Cal.2d 737;

4A Nichols, Eminent Domain, § 14.1.)

There seems to be no logical reason why

that principle should not apply with

equal force where, in condemning real

property, personal property, though not

"taken", is damaged or destroyed.

Of course, if personal property which

is located on the real property can simply

be picked up and moved without loss to

the property owner then the condemning

agency takes and pays for only the land

and fixtures. In the latter situation the

condemning agency has not taken or damaged

the personal property. But that is not

the same as saying that such personal

property is never compensable when it has

been taken or damaged as a result of con-

demning the underlying real property.

Where the removal or relocation of

either tangible or intengible personal

B-12.

property, under the circumstances of the

particular case, is impossible, then the

Owner's just compensation should not be

limited by an arbitrary notion that in

eminent domain any particular form of

recognized property right is non-compen-

sable.

"This is so because, as was said in

People v. Superior Court, 145 Cal.App.2d

683, 690, hearing denied, the constitu-

tional concept of just compensation

expresses a principle of fairness. If

any compensable constituent element of

value, ... is omitted in arriving at just

compensation this constitutional mandate

has not been met. (Citations. ] Every

rule of condemnation law, be it statutory

or decisional, for determining the value

of land taken in condemnation, must in

its every application conform to this

constitutional mandate. [Citations.]"

(People Ex Rel, Dept. Pub. Wks. v. Lynbar,

Inc., 253 Cal.App.2d 870, at 883.)

The Agency relies heavily on City of

Los Angeles v. Allen's Grocery Co., 265

Cal.App.2d 274, where it was stated

", « »« the taking of real estate does not

B-13.

affect the ownership of personal property

kept on the premises taken, but not per-

manently affixed thereto. The owner of

the personal property is entitled to

remove said personal property, and evi-

dence of the value of the unsold and

removed stock in trade retained ... is

not a proper element of damage under the

circumstances." (Page 279.) (Emphasis

added. )

The circumstances in the Allen case

were that real property upon which a

grocery store was located was being con-

demned. The owner sought compensation

for his inventory of grocery items, how-

ever, there was nothing in the Allen case

to indicate that the grocery items were

in any way different than the usual in-

ventory of a grocery store nor was there

any special problem in removal and

resale. This is markedly different from

the situation of Mr. Abrams' inventory of

ethical drugs. Since the state itself

through its regulation of the transfer of

these drugs made the transfer impossible

it may not be heard to say that Mr.

Abrams could or should have somehow dis-

posed of them,

B-14.

We turn now to the issue of whether

Abrams should be compensated for the loss

of his business. Of course the good will

of a business is property and recognized

as compensable in both contract and tort

actions between private litigants. (Civ.

Code, §§ 654, 655; Bus. & Prof. Code,

§ 14102; Carrey v. Boyes Hot Springs

Resort, Inc., 245 Cal.App.2d 618.) It is

recognized as community property in cases

of dissolution of marriage. (Golden v.

Golden, 270 Cal.App.2d 401; In re

Marriage of Fortier, 34 Cal.App.3d 384.)

The California Supreme Court in Oak-

land _v. Pacific Coast Lumber etc. Co.,

171 Cal. 392, held that Code of Civil

Procedure section 1248 limited compensa-

tion to the value of the property taken

and/or severance damages accruing to

property not condemned. Thus the court

declared that damage to business situated

on the condemned real estate was not

recognized by the statute as an element

of compensation.

The court in Oakland, Supra, at p.

398, stated: "It is quite within the

power of the Legislature to declare that

a damage to that form of property known

B-15.

as business or the goodwill of a business

shall be compensated for, but unless the

constitution or the legislature has so

declared, it is the universal rule of

construction that an injury or inconven-

ience to a business is damnum absque

injuria, and does not form an element of

the compensating damages to be awarded.”

(Emphasis added.)

This rule enunciated in 1915 has been

widely criticized. (20 Hastings Law

Journal, p. 675, The Unsoundness of Calif-

ornia's Noncompensability Rule as Applied

to Business Losses In Condemnation Cases;

67 Yale Law Journal, pp. 62-74, Eminent

Domain Valuations in an Age of Redevelop-

ment. )

The Oakland court itself took the

pains to state that it did not wish to

be understood as saying that the rule

should not be otherwise.

The California Law Revision Commis-

sion, as recently as January of 1974, at

page 45, of its tentative recommendations

relating to condemnation law and proce-

dure pointed out that eminent domain

frequently works a severe hardship on

B-16.

owners of businesses affected by public

projects and recommends that steps be

taken to compensate for the loss of good-

will of business that has been taken or

damaged.

There has been considerable develop-

ment in the law since the Oakland decision.

Of course, the Constitution still does not

Say that a property right in a business is

compensable. On the other hand, the Con-

Stitution does not say that it is not

compensable, and it is now well establish-

ed that since the mandate for payment of

just compensation comes from the Consti-

tution itself, the courts need not await

legislative authorization in order to

determine the ingredients of such compen-

sation.

The private ownership of property is

fundamental to our system of government

and its protection against governmental

intrusion is constitutionally guaranteed,

hence the requirement that the government

pay for its taking should be liberally

construed in favor of the property owner.

An arm's length bargain-seeking posture

on behalf of a condemning agency in

B-17.

dealing with a property owner is really

contrary to the spirit of our Constitution.

"The Constitutional requirement of

just compensation derives as much content

from the basic equitable principles of

fairness, [citations] as it does from

technical concepts of property law."

(United States v. Fuller, supra, 409 U.S.

488, at 490.)

In 1936, Oakland v. Pacific Coast

Lumber, etc. Co., supra, 171 Cal. 392,

was distinguished and found inapplicable

in Southern Calif. Edison Co. v. Railroad

Com., 6 Ca.2d 737. The City of Tulare

intending to operate its own municipal

electrical system condemned Edison

transmission lines which had previously

served electrical consumers within the

City of Tulare. The Supreme Court

approved an award of severance damages

to Edison based upon a reasonable return

on capital investment, and rejected the

condemnor's contention that, based on

Oakland v. Pacific Coast Lumber, etc. Co.,

no damages for interference with business

should be allowed. The distinction which

the court found to exist was in a 1917

B-18.

amendment to the Public Utilities Act

providing for severance damages, stating

"The deficiency in the law in 1915 (the

time of the Oakland decision) was thus

supplied in 1917 and the contention of

the city is no longer available." (Sou-

thern Calif. Edison Co. v. Railroad Ccx.,

at pages 750-751.)

Another distinction which is some-

times advanced as a reason for denying

compensation for goodwill of a business

was that in Edison the condemncr intended

to operate the business, while in Oakland

the condemnor did not so intend or desire.

This distinction loses its significance

in light of the “loss to owner" test of

La Macchia, U.S. v. General Motors and

U.S. v. Fuller, supra, and the Oakland

decision in light of Edison as well as

those cases appears to have lost some of

its vitality. At least it does not

appear to stand as an insurmountable

barrier to compensation in hardship cases

such as the one at bar.

Furthermore, since there are many

readily available formulae for evaluating

the worth of a business (see In re

B-19.

Marriage of Fortier and Southern Calif.

Edison Co. v. Railroad Com., supra) it

cannot be earnestly suggested that coi-

pensation should be denied on the basis

that it is too speculative or difficult

to ascertain.

The most recent and persuasive lan-

guage pointing to an abandonment of the

former rigid rule is to be found in

Klopping v. City of Whittier, 8 Cal. 3d

39, where our Supreme Court in an inverse

condemnation action approved compensation

for loss of rental income occasioned by

an announcement of future condemnation

action.

The court in Klopping quoted with

approval the following at pages 53-54,

from a decision of the Wisconsin Supreme

Court in Luber v. Milwaukee County, 177

N.W.2d 380:

"The importance for allowing recovery

for incidental losses has increased sig-

nificantly since condemnation powers were

initially exercised in this country.

During the early use of such power, land

was usually undeveloped and takings sel-

dom created incidental losses. Thus the

B-20.

former interpretation of the "just com-

pensation" provision of our constitution

seldom resulted in the infliction of in-

cidental losses. The rule allowing fair

market value for only the physical pro-

perty actually taken created no great

hardship. In modern society, however,

condemnation proceedings are necessitated

by numerous needs of society and are

initiated by numerous authorized bodies.

Due to the fact that people are often

congregated in given areas and that we

have reached a state wherein re-develop-

ment is necessary, commercial and indus-

trial property is often taken in

condemnation proceedings. When such

property is taken, incidental damages are

very apt to occur and in some cases exceed

the fair market value of the actual phy-

Sical property taken. ... The rule making

consequential damages damnum absgue

injuria is, under modern constitutional

interpretation, discarded. ..." (Emphasis

added. )

In State v. Saugen, 169 N.W.2d 37,

the Supreme Court of Minnesota also dis-

carded the rule that consequential damages

are damnum absque injuria by holding that

B-21.

where a condemnee is unable to transfer

his business from the condemned real

property to a new location the loss of

the business is compensable.

Following the lead of Minnesota and

Wisconsin, the California Supreme Court

has pointed the way toward a more logi-

cal approach and to eliminating hardship

in these types of cases. We follow along

that path by affording Mr. Abrams the

relief for which the circumstances here

cry out.

The judgment is reversed and the

matter is remanded to the trial court for

the sole purpose of determining the value

of the business that was destroyed by the

condemnation. When that value is deter-

mined it shall be added to the judgment.

Defendant Abrams to recover costs on

both appeals.

CERTIFIED FOR PUBLICATION

COMPTON , Je

I concur:

BEACH , Je

B-22 .

COMM. REDEVELOPMENT AGENCY v.

ABRAMS - Civ. 42058

DISSENT

I dissent.

In my view the trial court correctly deter-

mined that business goodwill is not a com-

pensable item of damages in the condemnation

of real property for public use. The Supreme

Court of California has consistently held

such damages noncompensable, (Oakland Vv.

Pacific Coast Lumber etc. Co.(1915) 171 Cal.

392, 398-399; People v. Ricciardi (1943)

23 Cal.2d 390, 396; People v. Ayon (1960)

594 Cal.2d 217, 226; Breidert v.Southern

Pac. Co. (1964) 61 Cal.2d 659, 667), and

the California Legislature has repeatedly

rejected attempts to make business goodwill

a generally compensable item in condemnation

proceedings.

The Federal Constitution does not require

that such forms of intangible property as

contingent rights, future interests, privi-

leges, servitudes, expectancies, permits,

and licenses be made compensable in eminent

Gomain. (Mitchell v. United States (1925)

267 U.S. 341, 345 (Brandeis, J.); U.S. ex

rel. T.V.A. v. Powelson (1943) 319 U.S.

266, 283-284 (Douglas, J.); United States

v. Fuller (1973) 409 U.S. 488, 493-494

(Rehnquist, J.).) Business goodwill is

merely a shorthand term for expectation of

future business profits. (Bell v. Ellis,

33 Cal. 620, 625.) The extent of compensa-

tion for such expectancies has been left to

the good judgment of the Congress and the

state legislatures, bodies well-equipped

to evaluate to what extent such specula-

tive interests should be compensated in

the condemnation of real property for pub-

lic use.

In California the line between compensa-

ble and noncompensable property has been

consistently drawn to exclude business

goodwill as a generally compensable item

of danges. While in certain cases a force-

ful argument can be made for the inclusion

of business goodwill as a compensable item,

in others it can be argued with equal force

that future business profits, that is to

say business goodwill, are inherently spec-

ulative and should be excluded as items of

cost in the acquisition of real property

for public use. A measured and temperate

evaluation of the extent to which such

expectancies should be recognized in

eminent domain is particularly needed

today when a myriad of environmental pro-

blems presses upon us, including protec-

tion of coastline, preservation of scenic

areas, slum clearance, purification of

urban atmosphere, rectification of sur-

face waters, mass transit, urban renewal

(as at bench), and reformation of subur-

ban sprawl, each accompanied by its

inseparable auxiliary of limited available

means to achieve unlimited ends. In the

equation between private expectancies and

public use a balance must be struck which

will allow the private owner adequate

compensation for what he has irretrievably

and categorically lost and at the same

time permit the public to move against

critical environmental problems without

being saddled with exorbitant costs that

could foreclose effective action. The

need for reasonable accommodation be-

tween private expectancies and the public

interest may be seen from the facts of

Such cases as California v. Superior

Court (Veta Co.), — Cal.3d , filed

August 2, 1974 (coastal preservation);

Candlestick Properties, Inc. v. San

Francisco Bay Conservation Etc. Com., ll

Cal. App.3d 557 (tidelands preservation) ;

Selby Realty Co. v. City of San Buenaven-

tura, 10 Cal.3d 110 (compulsory dedica-

tien for public use); Friends of Mammoth

v. Board of Supervisors, 8 Cal.3d 247

(controlled use of private property) ;

Gion v. City of Santa Cruz, 2 Cal.3d 29

(prescriptive rights in shoreline).

In this equilibrium between private

expectancy and public outgo, business

goodwill is a critical factor, for its

monetary value may be inflated to

whopping amounts.=— The degree of

1/ Unlimited acceptance of future busi-

~ ness profits as a compensable item

of damages in eminent domain could mul-

tiply the costs of public improvements

many-fold. Compare, for example, the

value of the real property condemned with

the amounts sought for loss of future

business profits in the following cases:

Cases Real Future Busi-

+ Estate ness Profits

Claimed

Oakland v. Pac-

Lumber, etc. 949, ieee

Co., 171 Cal. 392,

397

(Continued)

recognition to be given in condemnation

proceedings to such Open-ended claims

presents a problem that has always been

considered in California a matter for

legislative solution. (Oakland v. Pacific

Coast Lumber etc. Co., 171 Cal. 392, 398.)

The same is true elsewhere, for in the

absence of statute general compensation

for business goodwill has been consis-

tently denied. (U.S. v. General Motors

Corp. 1945) 323 u.sS. 373, 377-380;

Nichols on Eminent Domain (3d ed.) §§5.76,

13.3, 13.3[2], 13.31, 13.31[1].) The

Community Redevelopment Agency's brief

asserts that only two states, Vermont and

Florida, compensate for loss of general

business goodwill in condemnation, and

both of these do so by statute. A third

1/ (Cont'd.)

Mitchell v. 76,000 100.000

United States,

267 U.S. 341, 343

U.S. ex rel. T.V.A.

- Powelson, 319 976,000 6,524,000

U.S. 266. 275

State, Pennsylvania, formerly compensated

by statute for business goodwill, but

repealed its law in 1971.

The California Legislature has not

been oblivious to the difficulties en-

countered by persons displaced by condem-

nation of real property for public

improvements, and in the Relocation

Assistance Act it provided, among alter-

native benefits, compensation up to

$10,000 for a displaced person who has

discontinued a business that cannot be

relocated (Gov. Code, §§ 7260, 7262(c);