Law TalkSam K. Abdulaziz & Kenneth S. Grossbart
This particular case deals with eminent domain. For purposes of this article, simply stated an eminent domain case is where the government entity can take private property for its own use. In this case, the City and County of San Francisco (SF) filed an eminent domain case and acquired property from Martin J. Coyne and Brian Murphy O'Flynn. The property was undeveloped but Coyne and O'Flynn had plans to develop a mixed-use complex on the site. At one point, Coyne and O'Flynn had leased their undeveloped property to Tower Valet Parking Incorporated to use as a parking lot. It was a month to month lease. There were never any improvements or structures on the site other than paving the lot and adding a small kiosk for a parking attendant.
Coyne and O'Flynn set up a limited liability company with the state of California for the purpose of the proposed development. They did not list the site address with the Secretary of State as where they did business, but gave a completely separate address. There were never any phone or fax lines installed on the undeveloped property, and no documentation of any kind that was stored at the undeveloped property address.
Prior to SF passing a "Resolution of Necessity" which stated that public interest and necessity required SF to acquire the property by eminent domain so that it could be developed and maintained as open space, Coyne and O'Flynn had received approval from the San Francisco Planning Commission to build a nine-unit residential condominium with ground floor retail space. Coyne and O'Flynn had also commissioned and received architectural and engineering plans for the proposed development prior to the eminent domain action by SF. However, they had not obtained a building permit, secured construction financing nor presold or preleased any of the residential or commercial units.
In the legal proceedings, Coyne and O'Flynn claimed loss of business goodwill under Code of Civil Procedure section 1263.510. SF argued that there was no goodwill associated with the property prior to the taking and therefore there was no loss of goodwill that was suffered. The court found that there was no evidence to show that Coyne and O'Flynn suffered lost goodwill, citing section 1263.510 which states they "failed to establish that they suffered a loss of goodwill typical of an ongoing small business forced to move and give up the benefits of its former location." Coyne and O'Flynn were unable to show that they lost anything other than an amount remaining after the fair market value of the land. The courts took into account that the property was still unimproved, they were not conducting business, and no spaces had even been attempted to be presold or preleased. Therefore the case went to the jury to decide the value of the property. The appellate court confirmed the lower court's decision.