You Can Receive Compensation for Goodwill IF...
Posted in Court Decisions

The Court has once again reminded us that it takes its role as gate keeper seriously.  This week, in an unpublished case, the Court of Appeal issued a decision that serves as a not-so-gentle reminder that business owners are entitled to loss of business goodwill only if they meet the four threshold requirements set forth in CCP § 1263.510: (1) the loss is caused by the taking, (2) the loss cannot be prevented by relocation of the business or taking steps a reasonably prudent person would take to preserve goodwill, (3) compensation was not paid through relocation funds, and (4) the owner will not receive double compensation. 

In People v. Giligia College, the trial court ruled, and the appellate court affirmed, that Giligia College did not meet its burden of showing that it was entitled to compensation for loss of goodwill because it had not made reasonable efforts to relocate.  The College was a small private institution in Glendale which primarily served the Armenian community.  The College owner testified that he did everything he could to find a relocation site, that the site he ultimately selected required significant upgrades and modifications, and that he ultimately ran out of money and could not complete the relocation.  He also claimed that he wasn't provided any assistance from Caltrans, and he never received a notice of eligibility of relocation assistance, which his expert said was Caltrans' major failing. 

Caltrans' right of way agent testified that Caltrans provided the notice of eligibility to the College and the owner refused to sign it.  The College argued that if Caltrans presented the Notice of Eligibility and the College did not sign it, then the college did not receive the Notice.  The appellate court called the argument absured.  The agent also testified that Caltrans (i) gave the College 25 potential relocation sites in Glendale, all of which the owner rejected, (ii) researched permitting and licensing issues for the College, (iii) provided a relocation advance, and (iv) researched relocation feasibility. 

The trial court found the owner's testimony unpersuasive and unreliable.  In a twist of fate, the trial court used the College's own expert's testimony against it.  The College's expert testified that it should not have been difficult for the College to relocate to a properly zoned location with adequate parking within the Armenian community.  The relocation site selected by the College met none of these criteria and was more expensive than some options proposed by Caltrans.  The College's expert also testified that the College never received the Notice of Eligibility, but he merely relied on the owner's contention in that regard, acknowledging that he had never seen a case where a Notice was not provided to a business owner.  The court ruled that the College had not taken reasonable steps to preserve its goodwill, and therefore was not entitled to compensation for the loss of any goodwill.

It is interesting to note that a demand for expert exchange was never served by either party!  Meaning, neither party had to comply with the rules set forth in CCP § 1258.210.  Caltrans served its statement of valuation days before trial and the College served its statement of valuation on the first day of trial!

There are three take aways from this case:

  1. Condemnors - make sure everyone gets a notice of eligibility; and Condemnees - make sure you receive a notice.  
  2. Make efforts to relocate!  Don't rely on your experts (whose testimony may ultimately help sink your case) to make the case for you.  Make sure you meet the threshold eligibility requirements for compensation. 
  3. Serve a demand for expert exchange to ensure that all parties comply with the statutory requirements, otherwise no one has to comply.
  • Bernadette  Duran-Brown

    Bernadette Duran-Brown is a real estate litigation attorney primarily focusing on eminent domain, inverse condemnation, regulatory takings and valuation matters.  With more than a decade of experience, she has advised numerous ...

Eminent Domain Report is a one-stop resource for everything new and noteworthy in eminent domain. We cover all aspects of eminent domain, including condemnation, inverse condemnation and regulatory takings. We also keep track of current cases, project announcements, budget issues, legislative reform efforts and report on all major eminent domain conferences and seminars in the United States.

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