People Ex Rel. Dept. of Transportation v. Leslie

Opinion

GILBERT, J.

Two interdependent businesses share the same building. Here we hold that in a condemnation proceeding the combined loss of goodwill suffered by both businesses is a proper measure of damages even though the businesses are treated separately for tax purposes.

Facts

The State of California filed an action in eminent domain on March 25, 1993, seeking interests in property owned by Robert G. Leslie and Marilyn B. Leslie. The Leslies’ property was on Los Angeles Avenue in Saticoy, adjacent to State Highway 118. The state, through the Department of Transportation, sought permanent and temporary interests in the property to widen and straighten the highway. These interests included a partial taking, a temporary construction easement, and a right to enter the remainder.

The Leslies and R & H Paving, Incorporated (R & H) answered the complaint, claiming damages for loss of goodwill among other damages. Robert Leslie was the sole shareholder of R & H, a roadway construction business since 1967. R & H operated at the Los Angeles Avenue property and employed on a seasonal basis between 50 and 100 employees.

Prior to trial, the Leslies and R & H filed a witness list and a statement of valuation concerning R & H as well as another entity, BMB Leasing (BMB). (Code Civ. Proc., § 1263.510 [required proof for compensation of goodwill].)

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BMB, a sole proprietorship owned by Robert Leslie, purchased heavy equipment and leased it to R & H. Leslie testified that he formed BMB for reasons of business convenience and tax advantages. BMB did not answer the state’s complaint in eminent domain.

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Prior to trial, the state moved to preclude testimony from Chris Pedersen, the Leslies’ appraiser, concerning the goodwill loss of R & H and BMB. The State objected that the appraiser improperly valued the goodwill of R & H and BMB together as one business. The state also challenged the appraiser’s methodology, claiming he failed to calculate and compare the goodwill before and after the partial taking. The trial court denied the motion. The trial judge stated: “I can’t bring myself around to the point where I think it’s a matter of law that you cannot present testimony with respect to the loss of goodwill in this case on the basis that he didn’t evaluate the businesses separately, or improper methodology . . . .”