Mazza v. Agency of Transp., 97-130

CourtUnited States State Supreme Court of Vermont
Citation168 Vt. 112,716 A.2d 817
Decision Date19 June 1998
Docket NumberNo. 97-130,97-130
PartiesSamuel and Annette MAZZA v. AGENCY OF TRANSPORTATION.

Thomas P. Aicher of David L. Cleary Associates, P.C., Rutland, for Plaintiffs-Appellees.

William H. Sorrell, Attorney General, and Scott A. Whitted, Assistant Attorney General, Montpelier, for Defendant-Appellant.

Before DOOLEY, MORSE, JOHNSON and SKOGLUND, JJ., and MARTIN, Superior Judge, Specially Assigned.

DOOLEY, Justice.

The State of Vermont appeals from a Chittenden Superior Court condemnation award in favor of Samuel Mazza arguing that the amount awarded for business loss was improper because the business was incorporated and, therefore, was not owned by the landowner. The landowner has cross-appealed claiming: (1) the amount awarded for the land was inadequate as a matter of law; (2) the amount awarded for business loss was also inadequate as a matter of law; and (3) the jury should have awarded additional damages for relocation of an irrigation line. We affirm.

The land in question, approximately 7.3 acres, lies in the proposed path of the Chittenden County Circumferential Highway, and about half of it, 3.9 acres, is used to grow pumpkins as part of a truck farm operation. In March 1993, the Chittenden Superior Court found necessity for the Vermont Agency of Transportation to take the land by eminent domain from its owners, Samuel and Annette Mazza. At the time, the landowners conducted the farm operations on the property as a sole proprietorship.

Shortly thereafter, in May 1993, landowners formed a family corporation known as S. Mazza Farmstand and Greenhouses, Inc. to carry on their farm business. The corporation was established for estate and tax planning purposes. Title to the land remained in the name of the individuals, but the land was leased to the corporation pursuant to a written lease.

Following a hearing, the Vermont Transportation Board on September 9, 1994 set the value of the condemned property at $60,100, and did not include in that amount any business loss. Landowners appealed to the Chittenden Superior Court. Annette Mazza died before the trial, leaving Samuel Mazza as the sole landowner.

The main issue at the November 1996 trial was whether landowners were entitled to business loss damages. The State argued they were not because the business was being conducted by a corporation which did not own the land, and because the value of a farming business is necessarily included in the value of the land. Landowner argued that the nature of the truck garden operation was such that the value of the land did not reflect the value of the business. Landowner also argued that he and his wife owned the business at the time of the taking, which he claimed was the date of the necessity determination, and, in any event, the corporate form of ownership should not be determinative in a family business.

The court submitted the issue of business loss to the jury, which came back with a verdict of $150,000--$140,720 for business loss, $5,850 for the tillable land, and $3,430 for the non-tillable land. The court denied landowner's motion for a judgment as a matter of law which argued that the undisputed evidence required the jury to set higher values on the land and the business.

On appeal, the State argues that the court erred in submitting the issue of business loss to the jury because the landowner did not own the business. The State has not appealed the court's decision that the value of the farm business is not included in the value of the land, and we do not consider that question.

The briefing on this issue has centered on whether landowners owned the business on the date of taking, whether the corporation's leasehold interest was sufficient to support an award to it, and whether the court could pierce the corporate form for a family business. We conclude that we need not reach these arguments because we do not believe the applicable statutes require that the landowner own the business as a sole proprietorship in order to recover business loss.

"Vermont is one of the few states to recognize business loss as an item of damage in a condemnation proceeding." Raymond v. Chittenden County Circumferential Highway, 158 Vt. 100, 105, 604 A.2d 1281, 1284 (1992). The authorization for this item of damages is contained in 19 V.S.A. § 501(2), which provides, in part:

Damages resulting from the taking or use of property under the provisions of this chapter shall be the value for the most reasonable use of the property or right in the property, and of the business on the property, and the direct and proximate decrease in the value of the remaining property or right in the property and the business on the property.

Although the statute does not state that the landowner must own the business outright in order to recover business losses, the State argues that this requirement must be implied because the statutes would not allow a business-owner who is not a landowner to participate in a condemnation proceeding. See 19 V.S.A. § 501(3) (person interested in lands must have "a legal interest of record"); id. § 511 (Cum.Supp.1997) ("person having an interest in the land" may participate in hearing to determine compensation).

For three major reasons, we reject the State's argument. First, the condemnation proceeding in the superior court is essentially an in rem action with respect to the property. See City of Winooski v. State Highway Bd., 124 Vt. 496, 498, 207 A.2d 255, 257 (1965). Because of the nature of the action, we held in American Oil Co. v. State Highway Bd., 122 Vt. 496, 504, 177 A.2d 358, 364 (1962):

[W]e take the view that the legislative intention is correctly interpreted as contemplating a single proceeding against the property in the nature of an in rem action transferring to the highway board the required right in the property in return for money damages representing its fair equivalent, passing in the first instance to the person having the legal capacity to convey the interest acquired.

American Oil Co. is instructive on this point. The land involved was used for a filling station. The gasoline company as lessee, the filling station operator as sublessee, and the mortgagee all claimed an interest in the property for which they wanted damages. This Court denied their claims, allowing the State to bring one proceeding and make one payment to the landowner. As reflected in the statement that the payment passed "in the first instance" to the landowner, the landowner might be obligated to pay over part of the damages to others. Id.

Because of our view that the condemnation proceeding operates in rem and that the State is required to make only one payment, there is no impediment to including an amount for business loss even if the business is not owned by the landowner. Of course, a damage award made "in the first instance" to the landowner may have to be shared with the owner of the business which suffered losses. The State need not be concerned about how that apportionment is made.

Second, the State is relying on a distinction without a meaningful difference. The Legislature has determined that it will compensate for business losses in condemnation proceedings. See Record v. State Highway Bd., 121 Vt. 230, 237, 154 A.2d 475, 480 (1959) (Legislature responded to inequity created where business received no compensation although it was "invaded" by the taking "and the yield of the business [was] lessened or destroyed as a result of the taking of the land upon which the business is situated"). In implementing this policy, the State has suggested no reason for discriminating between closely-held family businesses owned directly by the landowner and those in corporate ownership, or even for discriminating against corporations generally if they do not own the condemned land.

On the other hand, the rule the State seeks to impose is an unnecessary trap for the unwary. In order to recover for its loss in a condemnation proceeding, a business must be tied to the land:

It is only to the extent that a business is taken by the appropriation of the land on which it is situated that the legislature meant that compensation be paid. A business may be inextricably related and connected with the land where it is located so that an appropriation of the land means an appropriation of the business.

Id. This requirement is most likely to be met where there is overlapping ownership of the land and business to ensure the availability of the real property for business purposes. Thus, the main effect of the State's rule is to deny business loss compensation to some closely-held businesses that chose a form of ownership of the real property and business that is otherwise most advantageous for taxation or other purposes. We see no legitimate state purpose behind this result. See Rhodes v. Town of Georgia, 166 Vt. 153, 157, 688 A.2d 1309, 1311 (1997) (statutes should not be construed to produce "absurd or illogical consequences").

Third, and finally, the State's position is not consistent with the language of the controlling statutes. The Legislature has specifically provided that compensable damages include "the value ... of the business on the property" without requiring...

To continue reading

Request your trial
2 cases
  • City of Blue Mound v. Sw. Water Co.
    • United States
    • Court of Appeals of Texas
    • 13 Noviembre 2014
    ...because no statute or city charter provision existed providing for compensation for going concern value); cf. Mazza v. Agency of Transp., 168 Vt. 112, 716 A.2d 817, 819 (1998) (discussing Vermont general condemnation statute that specifically authorizes business loss as an 449 S.W.3d 692ite......
  • In re Chittenden Solid Waste Dist., 2005-217.
    • United States
    • United States State Supreme Court of Vermont
    • 20 Abril 2007
    ...use and business loss based on another would create double recovery. Id. at 488, 451 A.2d at 1077; see also Mazza v. Agency of Transp., 168 Vt. 112, 117, 716 A.2d 817, 821 (1998). Although there are significant differences in the circumstances here compared to those in Sharp, there is simil......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT