State Highway Commission v. L & L Concession Co.

187 N.W.2d 465, 31 Mich. App. 222, 1971 Mich. App. LEXIS 2076
CourtMichigan Court of Appeals
DecidedFebruary 26, 1971
DocketDocket 6799
StatusPublished
Cited by24 cases

This text of 187 N.W.2d 465 (State Highway Commission v. L & L Concession Co.) is published on Counsel Stack Legal Research, covering Michigan Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
State Highway Commission v. L & L Concession Co., 187 N.W.2d 465, 31 Mich. App. 222, 1971 Mich. App. LEXIS 2076 (Mich. Ct. App. 1971).

Opinion

Levin, J.

The State Highway Commission commenced an action to condemn 22 acres of a parcel of land. 1 The condemned land had been improved with a half-mile automobile racing track and grandstands, known as the Grand Rapids Speedrome. Ora, Inc. owned the property. L & L Concession Company had acquired the lessee’s interest in a food and souvenir concession lease made by Ora as lessor. The lease gave L & L the exclusive right to sell food and souvenirs in the grandstand until January 1, 1976.

At the hearing before the commissioners the judge refused to allow L & L to prove the existence and value of the lease and L & L made an offer of proof. 2 *226 The judge declared that the lease was, by its terms, to be operative only as long as Ora was conducting races, that Ora had ceased to operate the track and, therefore, L & L’s interest was valueless. 3

The commissioners made an award of $168,950, and a judgment on the award for that amount was entered in favor of Ora. L & L appealed. Our Court granted a stay of proceedings pending the appeal.

Paragraph 7 of the lease provided:

“Second party [L & L] shall conduct the concession business at the leased premises only at such times as races are being conducted at the racetrack premises. Second party, at its option, may operate the concession at such times as other public events are being conducted at the race track premises.”

Ora ceased to operate the track in July, 1966, several months before the taking in September, 1966. But the decision to close the track appears to have been attributable to the impending condemnation. 4 It is an established rule of condemnation law *227 that the value of an interest in property is to he determined without regard to any enhancement or reduction of the value attributable to condemnation or the threat of condemnation. 5

Viewing the matter, as we must, as if on the date of taking there had been no threat of condemnation, there is no record evidence which would support a finding that the lease was valueless because, for reasons not attributable to the threatened condemnation, the racetrack would not be operated at any time during the remaining nine years of the term of L & L’s lease.

Paragraph 7 of the lease was not a condemnation clause, it did not confer on Ora the right to cancel L & L’s lease in the event of condemnation or for any other reason. The lease rental was a percentage of L & L receipts. Paragraph 7 addresses itself to the question of the extent of L & L’s duty to operate the concession. Such clauses are common in percentage leases. 6 Without such a clause, it might be contended that L & L was obligated to operate the concession at times other than when races were being held at the track.

The agreement of the parties, as expressed in paragraph 7, was that L & L would be obligated to operate the concession only during such times as *228 races were being field and that it might operate the concession at other public events at its option.

L & L does not contend that Ora was under a duty to operate the racetrack and thereby enable L & L to profit from the operation of its food and souvenir concession,’ accordingly, there is no need to consider whether such a covenant might properly be implied. 7 Even if Ora was not under an obligation to operate, nonoperation of the track would not terminate L & L’s concession which, by its terms, continued until a date nine years after the taking.

The possibility that for economic or other reasons the racetrack might not be operated during some portion of the nine-year period must, indeed, be considered in evaluating L & L’s concession. That contingency does not render it impossible to determine the value of the concession with reasonable certainty. 8

It is a “settled rule in Michigan that a leasehold, and rights derived from a leasehold, constitute *229 ‘property’, for the taking of which just compensation must be made or secured.” 9

Ordinarily no compensation is allowed for the goodwill or going-concern value of a business operated on the real estate being condemned. 10 This view has been strongly criticized by commentators who argue that “the owner has no assurance after the taking that he can again combine [at a new location] all the factors of production into his previously efficient and profitable operation.” 11 However, since the state hut rarely intends to operate the *230 business, the courts have been unwilling to award compensation unless the destruction of the business was a necessary consequence of the condemnation.

Where the condemnee’s business has been destroyed, recovery of the value of the business has been awarded. In Jackson v. United States (Ct Cl, 1952), 103 F Supp 1019, 1020, the government redefined certain restricted military proving ground areas to include fishing grounds where a commercial fisherman had been licensed by the State of Maryland to operate All other locations had been appropriated by other fishermen and, therefore, the fisherman could not secure a license to fish elsewhere. In requiring the government to compensate the fisherman for the loss of his livelihood, the court declared that he “had a sort of property right in his fishing ground, and that the Government took that property from him”. Similarly, see United States v. Smoot Sand and Gravel Corporation (CA 4, 1957), 248 F2d 822, 828, holding that whether the rights granted by a state statute to a riparian landowner in sand and gravel under tidal waters “is called a revocable though unrevoked ‘license’, or a ‘profit a prendre’ is immaterial. The label does not matter; the substance cannot be taken away by the United States even for a public use without the owner being made whole.”

In State, ex rel. Mattson, v. Saugen (1969), 283 Minn 402 (169 NW2d 37), the Supreme Court of Minnesota held that the owner of a liquor license was entitled to recover for the destruction, as a result of condemnation proceedings, of the going-concern value of his business where he had proven that he was unable to transfer the license to a new location and there was no evidence that he could not continue to operate the business successfully at the premises being condemned.

*231

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Kafka v. MONTANA DEPARTMENT OF FISH
2008 MT 460 (Montana Supreme Court, 2008)
Kafka v. Montana Department of Fish, Wildlife & Parks
2008 MT 460 (Montana Supreme Court, 2008)
STATE, DEP'T. OF TRANSP. v. Cowan
103 P.3d 1 (Nevada Supreme Court, 2004)
Housing & Redevelopment Authority of St. Paul v. Lambrecht
645 N.W.2d 157 (Court of Appeals of Minnesota, 2002)
Township of West Windsor v. Nierenberg
695 A.2d 1344 (Supreme Court of New Jersey, 1997)
In re Condemnation by the Minneapolis Community Development Agency
488 N.W.2d 319 (Court of Appeals of Minnesota, 1992)
City of Detroit v. Hospital Drug Co.
440 N.W.2d 622 (Michigan Court of Appeals, 1988)
City of Detroit v. Campbell
380 N.W.2d 88 (Michigan Court of Appeals, 1985)
City of Detroit v. Michael's Prescriptions
373 N.W.2d 219 (Michigan Court of Appeals, 1985)
State Highway Commission v. Gaffield
310 N.W.2d 281 (Michigan Court of Appeals, 1981)
City of Minneapolis v. Schutt
256 N.W.2d 260 (Supreme Court of Minnesota, 1977)
State Ex Rel. Bena v. Hon. John J. Crosetto
243 N.W.2d 442 (Wisconsin Supreme Court, 1976)
City of Lansing v. Wery
242 N.W.2d 51 (Michigan Court of Appeals, 1976)
In Re Lansing Urban Renewal
242 N.W.2d 51 (Michigan Court of Appeals, 1976)
No. 74-1644
534 F.2d 337 (D.C. Circuit, 1976)
City of Muskegon v. Lipman Investment Corp.
239 N.W.2d 375 (Michigan Court of Appeals, 1976)

Cite This Page — Counsel Stack

Bluebook (online)
187 N.W.2d 465, 31 Mich. App. 222, 1971 Mich. App. LEXIS 2076, Counsel Stack Legal Research, https://law.counselstack.com/opinion/state-highway-commission-v-l-l-concession-co-michctapp-1971.