System Components Corp. v. Florida Dot

• Decision Date: 09 July 2009
• Docket Number: No. SC08-1507.,SC08-1507.
• Citation: 14 So.3d 967
• Parties: SYSTEM COMPONENTS CORPORATION, Petitioner, v. FLORIDA DEPARTMENT OF TRANSPORTATION, Respondent.
• Court: Florida Supreme Court

14 So.3d 967

SYSTEM COMPONENTS CORPORATION, Petitioner, v. FLORIDA DEPARTMENT OF TRANSPORTATION, Respondent.

No. SC08-1507.

Supreme Court of Florida.

July 9, 2009.

Marty Smith and Ann Melinda Craggs of Bond, Arnett, Phelan, Smith and Craggs, P.A., Ocala, FL, for Petitioner

Alexis M. Yarbrough, General Counsel and Gregory G. Costas, Assistant General Counsel, Department of Transportation, Tallahassee, FL, for Respondent.

LEWIS, J.

In this case, we review System Components Corp. v. Department of Transportation, 985 So.2d 687 (Fla. 5th DCA 2008), in which the Fifth District Court of Appeal certified that its decision directly conflicts with the decision of the Fourth District Court of Appeal in State Department of Transportation v. Tire Centers, LLC, 895 So.2d 1110 (Fla. 4th DCA 2005). We thus possess and exercise our discretionary jurisdiction to resolve this conflict. See art. V, § 3(b)(4), Fla. Const. Here, we must consider whether an award of business damages in an eminent-domain action under section 73.071(3)(b), Florida Statutes (2004), should include and account for the actual economic realities of the business's operations given its relocation following a partial taking. As more fully explained in our analysis, we approve the Fifth District's decision in System Components and disapprove the Fourth District's decision in Tire Centers because we agree that the actual extent of harm suffered by an affected business is the "sine qua non" of any eminent-domain business damages awarded pursuant to section 73.071(3)(b). Sys. Components, 985 So.2d at 693.¹ Due to the inherent nature of "damages" in this context, business damages "are not intended to be a windfall unconnected with any out-of-pocket loss." Id. at 690.² For these reasons, when a qualified partial taking destroys a business at its prior location, and the land/business owner chooses to relocate, the resulting business damages are measured by the "probable" financial impact "reasonably" suffered as a result of the taking. § 73.071(3)(b), Fla. Stat. (2004); see also Sys. Components, 985 So.2d at 689-93. Under the circumstances presented here, we therefore conclude that if an affected business chooses to relocate, its business damages must be determined in light of its continued existence at its new location.

BACKGROUND

The Condemned Property and the Affected Business

On May 13, 2004, the Florida Department of Transportation ("FDOT") filed an eminent-domain petition pursuant to chapters 73 and 74, Florida Statutes (2004). The petition involved several parcels, which FDOT requested permission to condemn for purposes of expanding a road right-of-way. The overall taking was necessary to widen a portion of West State Road 40 from S.W. 85th Avenue to and including the intersection located at 52nd Avenue in Ocala, Florida.

A tract of real property labeled parcel 130 (6750 West State Road 40, Ocala, Florida) was part of this proposed taking and belonged to the petitioner, System Components Corporation. The Fifth District accurately described System Components as "a wholesale distributor of fluid purification control and instrumentation ..., [which] has exclusive Florida distributor arrangements with a number of manufacturers and service customers in food processing, drug manufacturing, municipal water and other related areas." Sys. Components, 985 So.2d at 688 n. 1. System Components receives fluid-purification component parts from manufacturers and then assembles, repackages, and ships completed systems to its Florida customers. There is virtually no walk-in business; instead, System Components' physical location simply functions as a point of assembly and distribution. Prior to the taking, parcel 130 consisted of 1.774 acres and contained a 5000-square-foot, single-story building, from which System Components conducted its distribution and service business. The building included front-office and warehouse areas. Additionally, parcel 130 provided System Components sufficient land to accommodate future expansion. In contrast, the eventual taking and demolition bisected System Components' building and reduced parcel 130 to .648 acres, which the parties agreed rendered the remaining land unusable and of nominal value due to required setback lines that precluded rebuilding.

FDOT proceeded under the quick-take procedures provided in chapter 74, Florida Statutes. See § 74.011, Fla. Stat. (2004) ("In any eminent domain action, properly instituted by and in the name of ... the Department of Transportation ..., the petitioner may avail itself of the provisions of this chapter to take possession and title in advance of the entry of final judgment." (emphasis supplied)). Pursuant to section 74.051(2) and a stipulated order of taking entered on July 13, 2004, FDOT deposited into the circuit-court registry a good-faith estimate of the "full compensation" due to System Components under article X, section 6 of the Florida Constitution (i.e., compensation for (1) the value of the land, (2) associated appurtenances and improvements, and (3) severance damages³). The deposited amount agreed to by both parties was $348,300 ($88,300 for the value of the condemned land, $109,400 for appurtenances and improvements, $130,900 for severance damages, and $19,700 to demolish a portion of the building left standing on the remainder).

The taking occurred on July 22, 2004, and System Components sought and obtained FDOT's permission to remain on the property pending demolition. FDOT and System Components entered into a lease agreement through which System Components leased back its prior property at $2000 per month for a five-month term ending in December 2004. Subsequently, System Components entered into an agreement with a third party to lease separate warehouse space in another area of Ocala for $2068 per month for a one-year term (October 1, 2004 through September 30, 2005), which System Components was later forced to extend due to the delayed construction of its new facility ($3000 per month for an additional three months). During this time, George Kirkland, System Components' principal, sought to continue the business while also obtaining a permanent relocation site. As part of this process, Kirkland (1) consulted commercial real-estate brokers to obtain a suitable relocation site; (2) hired an architect and an engineer to design and prepare the replacement site and building (as required by Marion County); and (3) rehired a former employee to accomplish the eventual move to the relocation site. To finance these efforts, Kirkland and System Components were forced to incur additional debt.

On October 5, 2004, System Components purchased new land in an area of Ocala approximately eleven miles from its prior location. Kirkland testified that land near his prior location had become scarce and more expensive, so he decided to move the business further from the I-75 corridor to a location where land was more plentiful and less expensive. On December 23, 2005, the new building was completed, and System Components relocated from its temporary, leased location.

The Business-Damages Trial

Prior to trial, the parties agreed that System Components qualified for statutory business damages under section 73.071(3)(b), Florida Statutes (2004), which are not part of the "full compensation" guaranteed by the Florida Constitution. See, e.g., Tampa-Hillsborough County Expressway Auth. v. K.E. Morris Alignment Serv., Inc., 444 So.2d 926, 928-29 (Fla. 1983). The only remaining issue involved the proper measure of business damages in light of System Components' relocation and continued existence. As the Fifth District later explained:

During the litigation, relying on section 73.071(3)(b), Florida Statutes, and Florida Department of Transportation v. Tire Centers, LLC, 895 So.2d 1110 (Fla. 4th DCA 2005), System Components filed a motion in limine seeking to exclude all evidence of what it terms "off-site cure," i.e., that Systems Components was continuing to operate in another location. The trial court denied the motion, expressing disagreement with the Tire Centers decision and undertaking to distinguish it.

Sys. Components, 985 So.2d at 689.

Specifically, System Components maintained that eminent-domain proceedings are solely concerned with the land taken and the resulting damages to the condemnee. Therefore, in the view of System Components, it was entitled to the "total-take" value of its business as though it had ceased to exist on the date of taking. This position was consistent with the decision of the Fourth District in Tire Centers, which was decided on substantially similar facts and held:

Eminent domain law focuses only on the land taken, notwithstanding that in a case such as this a substantial portion of lost goodwill may possibly be recaptured by way of a nearby relocation. As such, the taking of the specific property at issue is the sole focus of business damages under section 73.071(3)(b). If the legislature had intended business damages to be subject to mitigation by an off-site cure, it could have easily done so. Consequently, we find that the trial court did not err by excluding any consideration of mitigated business damages by way of an off-site cure.

Tire Centers, 895 So.2d at 1113. FDOT resisted the application of Tire Centers and asserted that it was the constitutional duty of the trial court not to apply this precedent because, in FDOT's view, the Fourth District had erroneously "legislated" and thereby exceeded its authority to construe section 73.071(3)(b).⁴ The trial court eventually refused to follow Tire Centers and, correspondingly, denied the motion in limine.

During trial, which lasted from February 13, 2006, until February 24, 2006, the court permitted each side to present expert testimony concerning the extent of the business damages sustained by System Components and, further, charged the jury that it was to determine (1) the total value of the...