211 Cal. App. 4th 486
Cal. Ct. App.2012Background
- Dry Canyon Enterprises, LLC owns land used for growing cabernet vines and planned a flagship Chumeia wine.
- State condemns a 1,466-vine portion of Dry Canyon’s Paso Robles property for highway widening, paying $203,500 for land and vines.
- Only remaining issue at trial was the amount of lost business goodwill due to the taking.
- Dry Canyon’s expert claimed preexisting goodwill existed and valued its loss using two methodologies: cost-to-create and premium pricing.
- Trial court granted nonsuit, ruling Dry Canyon had no goodwill to lose and excluding the expert’s testimony.
- Appellate court holds that entitlement to a jury on goodwill depends on proving preexisting goodwill.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May a business owner obtain a jury on goodwill loss when no goodwill existed pre-taking? | Dry Canyon argues entitlement hinges on existence of preexisting goodwill. | State contends no preexisting goodwill means no entitlement to jury on loss. | Entitlement hinges on proving preexisting goodwill; no goodwill to lose bars recovery. |
| Was the trial court correct to reject the cost-to-create methodology without preexisting goodwill? | Dry Canyon urged Aklilu’s cost-to-create method as valid when goodwill existed. | State argued cost-to-create is inappropriate absent clear preexisting goodwill. | Trial court did not abuse discretion; cost-to-create limited by precedent when goodwill is uncertain. |
| Was the premium pricing methodology a valid measure of goodwill loss? | Dry Canyon claimed premium pricing reflected lost goodwill from future premium bottle price. | State objected to novelty and subjectivity, deeming it speculative. | Premium pricing rejected as speculative and not a legitimate measure of goodwill. |
Key Cases Cited
- Redevelopment Agency of San Diego v. Attisha, 128 Cal.App.4th 357 (Cal. Ct. App. 2005) (jury on goodwill loss requires qualifying conditions)
- Sobke, 65 Cal.App.4th 379 (Cal. Ct. App. 1998) (pretaking goodwill essential; supports gatekeeping role)
- Emeryville Redevelopment Agency v. Harcros Pigments, Inc., 101 Cal.App.4th 1083 (Cal. Ct. App. 2002) (finding goodwill as precondition to recovery)
- Campus Crusade for Christ, Inc. v. City of San Bernardino, 41 Cal.4th 954 (Cal. 2007) (gatekeeping role in evidence for compensation claims)
- Inglewood Redevelopment Agency v. Aklilu, 153 Cal.App.4th 1095 (Cal. Ct. App. 2007) (limits cost-to-create method to cases with clear preexisting goodwill)
- City of San Diego v. Sobke, 65 Cal.App.4th 379 (Cal. Ct. App. 1998) (reaffirmed limits on measuring goodwill and remediable recovery)
- Redevelopment Agency of the City of San Diego v. Mesdaq, 154 Cal.App.4th 1111 (Cal. Ct. App. 2007) (discussed speculative or nonexistent goodwill not compensable)
- Coyne v. City and County of San Francisco, 168 Cal.App.4th 1515 (Cal. Ct. App. 2008) (gatekeeping and entitlement under §1263.510)
- People ex rel. Dept. of Transportation v. Muller, 36 Cal.3d 263 (Cal. 1984) (remedial statutes construed liberally but avoid absurd results)