State by Mattson v. Saugen

Decision Date23 May 1969
Docket NumberNo. 41333,41333
Citation169 N.W.2d 37,283 Minn. 402
PartiesSTATE of Minnesota by Robert W. MATTSON, its Attorney General, Respondent, v. Robert A. SAUGEN, et al., and Ann Dunlap, et al., Respondents-below, Ace's Lounge, Inc., Appellant.
CourtMinnesota Supreme Court

Syllabus by the Court

1. The stipulated going-concern value of a liquor lounge, operating under a valid and unrevoked city liquor license, has attributes of a property right within the meaning of Minn.Const. art. 1, § 13, and the Fifth and Fourteenth Amendments of the United States Constitution.

2. Where a liquor license is tied to a precise location, the going-concern value of a liquor lounge is destroyed when an owner attempts in good faith but without success to transfer the license to a new location and the property is demolished as a result of eminent-domain proceedings.

3. Where it was stipulated that, absent the taking by the state, there was no evidence that the condemnee could not have continued to operate its lounge at the premises in question and that the condemnee had gone out of the liquor business because it was unsuccessful in transferring its license to another location, the going-concern value of the liquor lounge was a property interest which was taken by the condemnor, and the condemnee is entitled to recover for the loss.

Lindquist & Vennum, and William C. Mortensen, Richard E. Wetherall and Kenneth F. Kirwin, Minneapolis, for appellant.

Douglas M. Head, Atty. Gen., Norman R. Carpenter, Deputy Atty. Gen., Charles R. Hall, Special Asst. Atty. Gen., St. Paul, for respondent.


SHERAN, Justice.

Appeal from a judgment of the district court.

On September 30, 1966, the State of Minnesota took by eminent domain appellant's property at 1329 South Third Street, Minneapolis, upon which appellant had been operating a liquor lounge. Commissioners appointed by the district court awarded appellant $39,500. On appeal to the district court from the award, the facts were stipulated by the parties as follows:

'* * * (A)bsent the taking by the state in these proceedings, there is no evidence that the condemnee could not have continued to operate its lounge at the premises in question.'

'* * * (T)he value, according to the State's theory of recovery, namely, that the State is acquiring simply the land, buildings and fixtures, at 1329 South Third Street, * * * is in the amount of the commissioners' award; namely, $39,500.00.

'* * * (I)n addition * * *, the value of the business operated at those premises is * * * $17,500.00. So that the total stipulated value according to the owner's theory of recovery, namely, that the State is acquiring land, building, fixtures and business * * * is $57,000.00.'

The stipulation also provided that appellant had attempted to transfer the going-concern value of its liquor business to another location. It applied three times but was unsuccessful in transferring the license to another location 'because of the restricted liquor patrol limits and the other peculiarities of the Minneapolis licensing situation.'

The trial court ruled for the state, holding that 'neither the liquor license nor the business or goodwill of the respondent constitutes property acquired by the State of Minnesota.'

The issue to be decided by us is whether the going-concern value of a liquor lounge, operating under a valid city liquor license, is property taken, destroyed, or damaged by the state's condemnation of the premises for which compensation should be given.

This question involves three considerations: (1) Whether the going-concern value is property; (2) whether such property was Taken, destroyed, or Damaged; and (3) whether it was taken, destroyed, or damaged By the condemnation.

Minn.Const. art. 1, § 13, provides: 'Private property shall not be taken, destroyed or damaged for public use without just compensation therefor, first paid or secured.' Minn.St. 117.02, subd. 2, provides: 'The word 'taking' and all words and phrases of like import include every interference, under the right of eminent domain, with the ownership, possession, enjoyment, or value of private property.' Similarly, the Fourteenth Amendment of the United States Constitution in § 1 provides: '* * * (N)or shall any state deprive any person of life, liberty, or property without due process of law, * * *.' The Fourteenth Amendment provides the same standard 1 as the Fifth Amendment, which provides: '* * * (N)or shall private property be taken for public use without just compensation.'

1. Going-concern value under a liquor license is property.

The intangible character of going-concern value does not preclude compensation for its taking. In Kimball Laundry Co. v. United States, 338 U.S. 1, 10, 69 S.Ct. 1434, 1440, 93 L.Ed. 1765, 1774, 7 A.L.R.2d 1280, the United States Supreme Court held that compensation for going-concern value was required, saying:

'* * * (T)he question arises whether the intangible character of such (going-concern) value alone precludes compensation for it. The answer is not far to seek. The value of all property, as we have already observed, is dependent upon and inseparable from individual needs and attitudes, and these, obviously, are intangible.'

The state argues that a liquor license is not a property right but, instead, a privilege. It bases its argument on the fact that '(n)o citizen has an inherent or vested right to sell intoxicating liquors.' 2 Sabes v. City of Minneapolis, 265 Minn. 166, 171, 120 N.W.2d 871, 875. Appellant recognizes that liquor selling is a 'privilege,' but contends that this means no more than that it is subject to the control of the licensing authority, and that as to the licensing authority, one has no 'right' to a license. Appellant further contends, however, that a liquor license does constitute a property right as to third parties.

In Lane v. Hewgley (Tex.Civ.App.), 155 S.W. 348, 350, the court stated:

'* * * It has been said that 'as between the state (licensor) and the licensee no such right does exist.' * * * (Citation omitted.) But it does not follow that as to all the balance of the world the licensee has not a property right in the license. * * *

'* * * This license or permission the citizen can hold and exercise against all the world but the state which conferred it. Such a right can hardly be said to be without value as a property interest.' 3

Courts do differ as to whether a liquor license is a privilege 4 or property 5 vis-a-vis third parties.

'* * * This difference of opinion as to the legal nature of a liquor license is apparently due to the fact, not always recognized by the courts, that such license, while a mere privilege as far as the relation between the government and the licensee is concerned, nevertheless constitutes a definite economic asset of monetary value for its owner. * * * It is submitted that wherever the legislature has made licenses assignable or transferable, and the transfer can be effected with the consent of the authorities to anyone qualifying under the statute, the property element in the license is sufficiently recognized to warrant its exposure to seizure by the creditors of the licensee.' 6 Annotation, 148 A.L.R. 492.

Appellant operated a liquor establishment under the authority of a valid and unrevoked license issued by the city of Minneapolis. The license was specifically related to a particular location or premises. Minneapolis Code of Ordinances, § 851.440. The number of licenses which can be issued is limited. § 851.030. Upon the licensee's death, the decedent's personal representative might operate under the license by filing his appointment and a bond. § 851.450. The license was transferable to another person with the consent of the city council. § 851.300. Revocation of an issued license would be in order only upon a violation of ordinances and laws relative to such license, and then only 'for cause after notice to the licensee and hearing.' § 851.330. Thus, appellant's license was assignable and transferable and as such can be construed as a property right rather than a privilege.

Compensation has been awarded for condemnation of rights very similar to those which exist under liquor licenses. In Jackson v. United States, 103 F.Supp. 1019, 122 Ct.Cl. 197, plaintiff's decedent had possessed, since 1941, a license from the State of Maryland to conduct commercial fishing operations in certain areas of Chesapeake Bay. Under the Maryland statute the license was effective for one year but, barring misconduct, could be renewed. The license, like the liquor license in the present case, was capable of being transferred to other parties, or to the licensee's estate upon his death. In 1943, the government redefined certain restricted military proving-ground areas to include decedent's fishing grounds, and notified him that he would no longer be permitted to fish there. The court noted that he was unable to secure a license to fish elsewhere since all other locations had been appropriated by other fishermen, and held that the fishing right constituted a property right for which compensation in excess of $11,000 was required. The court reasoned (103 F.Supp. 1020, 122 Ct.Cl. 206):

'In a sense, what the plaintiff had before he was forbidden to fish was a property right. It had value, in that he made his living from it. * * *

'We think, therefore, that the plaintiff had a sort of property right in his fishing ground, and that the Government took that property from him.' 7

United States v. Smoot Sand & Gravel Corp. (4 Cir.), 248 F.2d 822, involved rights granted by state statute to riparian landowners to remove sand and gravel from tideland waters owned by the state. In holding that compensation for such rights was required upon condemnation of the landowner's land, the court said (248 F.2d 827):

'* * * It cannot be disputed that when one is assigned the right, pending its revocation, to use or consume something to...

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