In City and County of San Francisco v. Coyne, No. A118222 (Cal. Ct. App. 1st Dist. Dec. 5, 2008), the court held that in order to be compensated for goodwill under California law when a parcel is taken by eminent domain, the property owner must have a business on the parcel taken, and that Coyne did not. The decision correctly noted that “historically, lost business goodwill was not recoverable [as just compensation] under eminent domain law.” Slip op. at 5. In response to the injustice of not compensating condemnees whose businesses were taken or diminished by the exercise of eminent domain, the California legislature enacted California Code of Civil Procedure § 12636.51, which was a statutory grant of compensation for goodwill to owners “of a business conducted on the property taken, or on the remainder if the property is part of a larger parcel.”
The court held that Coyne did not have an ongoing business conducted on the property taken, a parcel in San Francisco’s North Beach, then being used as a parking lot. The court affirmed the trial court’s determination that the property owner did not produce evidence that it was conducting an ongoing business at that location aside from the parking lot, even though the owner claimed that he was “occasionally present at the Property and made cell phone calls related to the development and met with surveyors, architects, and neighbors.” Slip op. at 9. The owner also asserted that it was entitled to goodwill based on the profits to be derived from the sale of units in a condominium complex it had plans to build there. The property owners were developers, and
argue they were actively engaged in the business of developing a multi-unit residental and commercial complex, and that business lost is the goodwill as a result of the taking of the Property. They contend they are entitled to recover for lost goodwill because the Legislature “has decided, as a matter of public policy, that a business owner whose business is damaged by the taking of property upon which the business depends for its operations should be compensated for any resulting loss of goodwill.”
Slip op. at 8 (emphasis original). The court rejected the argument, holding that the statute only covers such losses if the business is located on the property taken, not merely if a business depends upon the property taken. Id.