Kimball Laundry Co. v. United States
Encyclopedia
Kimball Laundry Co. v. United States, affirmed the principle set forth in The West River Bridge Company v. Dix et al., ; that is, that intangible property
rights are condemnable via the eminent domain
power, and that just compensation
must be given to the owners of such rights.
In this case, the United States filed a petition in the United States District Court for the District of Nebraska
to condemn the plant of the Kimball Laundry Company in Omaha, Nebraska
, for use by the Army
. After the District Court granted the United States immediate possession of the facilities of the company for the requested period, the owner of the family business claimed that he had been denied just compensation, and contented that the award should have included some allowance for diminution in the value of the business due to the destruction of its customer base.
, which was claimed by the company and recognized as probable by the appraisers.
The Court, through Justice Frankfurter, made the government pay the diminution in the going concern value of the business. In reaching this conclusion, Justice Frankfurter first observed that the loss in going concern
value, though related in part to intangibles, is property capable of being destroyed by the government so as to give rise to an obligation of just compensation under the Fifth Amendment.
In his opinion, Frankfurter posed the question: "When do such circumstances occur?" Justice Frankfurter conceded, arguendo
, that such circumstances do not arise in the normal taking of a fee interest. This, he said, could only be justifiable because the intangible parts of the value of the business are normally transferable. Note that he did not say that there can never be a fee condemnation situation giving rise to an obligation to give full going business value as just compensation. In fact, he illustrated that obligation by cases involving the taking of the land and buildings of a public utility. Franfurter concluded:
Thus, the Court reasoned that“the intangible acquires a value . . . no different from the value of the business’ physical property,” and concluded that intangibles such as trade routes of a laundry service were condemnable, upon payment of just compensation, when properly taken for a public use.
understood the majority opinion to stand for the proposition that short-term takings of property entail considerations not present where complete title has been taken, and agreed with at least this much of the decision. However, he cautioned against a formulation of theoretical rules defining their nature or prescribing their measurement (for purposes of compensation), and noted that what seems theoretically sound may prove unworkable for judicial administration. He concluded:
, with whom Justices Black
, Vinson, and Reed concurred, dissented from the majority decision, and asserted that the majority decision forced the United States to pay not for what it gets, but for what the owner loses. Warning that the majority decision "forged new constitutional doctrine," the dissent argued that government was only required to pay just compensation for the property that it actually receives. That the trade routes were of no use to the government was particularly persuasive to the dissenting Justices, and they argued that if the business was destroyed, the destruction was an unintended incident of the taking of land, and thus not compensable.
Intangible property
Intangible property, also known as incorporeal property, describes something which a person or corporation can have ownership of and can transfer ownership of to another person or corporation, but has no physical substance. It generally refers to statutory creations such as copyright, trademarks,...
rights are condemnable via the eminent domain
Eminent domain
Eminent domain , compulsory purchase , resumption/compulsory acquisition , or expropriation is an action of the state to seize a citizen's private property, expropriate property, or seize a citizen's rights in property with due monetary compensation, but without the owner's consent...
power, and that just compensation
Just compensation
Just Compensation is required to be paid by the Fifth Amendment to the U.S. Constitution when private property is taken for public use...
must be given to the owners of such rights.
In this case, the United States filed a petition in the United States District Court for the District of Nebraska
United States District Court for the District of Nebraska
The United States District Court for the District of Nebraska is the Federal district court whose jurisdiction is the state of Nebraska. Court offices are in Omaha, Lincoln, and North Platte....
to condemn the plant of the Kimball Laundry Company in Omaha, Nebraska
Omaha, Nebraska
Omaha is the largest city in the state of Nebraska, United States, and is the county seat of Douglas County. It is located in the Midwestern United States on the Missouri River, about 20 miles north of the mouth of the Platte River...
, for use by the Army
United States Army
The United States Army is the main branch of the United States Armed Forces responsible for land-based military operations. It is the largest and oldest established branch of the U.S. military, and is one of seven U.S. uniformed services...
. After the District Court granted the United States immediate possession of the facilities of the company for the requested period, the owner of the family business claimed that he had been denied just compensation, and contented that the award should have included some allowance for diminution in the value of the business due to the destruction of its customer base.
Supreme Court Decision
This litigation began after the United States took over a laundry's facilities to do washing for the army. The laundry, having no other means of serving its customers, suspended business for the duration of the army's occupation. The company was given the rental value of the facilities for the period the army used the premises, but no award for the loss of customers and resultant diminution in going business valueBusiness Value
In management, business value is an informal term that includes all forms of value that determine the health and well-being of the firm in the long-run...
, which was claimed by the company and recognized as probable by the appraisers.
The Court, through Justice Frankfurter, made the government pay the diminution in the going concern value of the business. In reaching this conclusion, Justice Frankfurter first observed that the loss in going concern
Going concern
A going concern is a business that functions without the threat of liquidation for the foreseeable future, usually regarded as at least within 12 months.-Definition of the 'going concern' concept:...
value, though related in part to intangibles, is property capable of being destroyed by the government so as to give rise to an obligation of just compensation under the Fifth Amendment.
In his opinion, Frankfurter posed the question: "When do such circumstances occur?" Justice Frankfurter conceded, arguendo
Arguendo
Arguendo is a Latin legal term meaning for the sake of argument. The phrase "assuming, arguendo, that ..." is used in courtroom settings and academic legal settings to designate provisional and unendorsed assumptions that will be made at the beginning of an argument in order to explore their...
, that such circumstances do not arise in the normal taking of a fee interest. This, he said, could only be justifiable because the intangible parts of the value of the business are normally transferable. Note that he did not say that there can never be a fee condemnation situation giving rise to an obligation to give full going business value as just compensation. In fact, he illustrated that obligation by cases involving the taking of the land and buildings of a public utility. Franfurter concluded:
- But the public utility cases plainly cannot be explained by the fact that the taker received the benefit of the utility's going concernGoing concernA going concern is a business that functions without the threat of liquidation for the foreseeable future, usually regarded as at least within 12 months.-Definition of the 'going concern' concept:...
value. If benefit to the taker were made the measure of compensation, it would be difficult to justify higher compensation for farm land taken as a firing range than for swamp or sandy waste equally suited to the purpose. It would be equally difficult to deny compensation for value to the taker in excess of value to owner. The rationale of the public utility cases, as opposed to those in which circumstances have brought about a diminution of going concern value although the owner remained free to transfer it, must therefore be that an exercise of the power of eminent domain which has the inevitable effect of depriving the owner of the going concern value of his business is a compensable "taking" of property.
Thus, the Court reasoned that“the intangible acquires a value . . . no different from the value of the business’ physical property,” and concluded that intangibles such as trade routes of a laundry service were condemnable, upon payment of just compensation, when properly taken for a public use.
Concurring Opinion
Justice RutledgeWiley Blount Rutledge
Wiley Blount Rutledge, Jr. was an American educator, lawyer, and justice of the Supreme Court of the United States.-Early life:...
understood the majority opinion to stand for the proposition that short-term takings of property entail considerations not present where complete title has been taken, and agreed with at least this much of the decision. However, he cautioned against a formulation of theoretical rules defining their nature or prescribing their measurement (for purposes of compensation), and noted that what seems theoretically sound may prove unworkable for judicial administration. He concluded:
- But I do not understand the opinion of the Court to do more than indicate possible approaches to the compensation of such interests. Since remand of the case will permit the empirical testing of these approaches, I join in the Court's opinion.
Dissenting Opinion
Justice DouglasWilliam O. Douglas
William Orville Douglas was an Associate Justice of the United States Supreme Court. With a term lasting 36 years and 209 days, he is the longest-serving justice in the history of the Supreme Court...
, with whom Justices Black
Hugo Black
Hugo Lafayette Black was an American politician and jurist. A member of the Democratic Party, Black represented Alabama in the United States Senate from 1927 to 1937, and served as an Associate Justice of the Supreme Court of the United States from 1937 to 1971. Black was nominated to the Supreme...
, Vinson, and Reed concurred, dissented from the majority decision, and asserted that the majority decision forced the United States to pay not for what it gets, but for what the owner loses. Warning that the majority decision "forged new constitutional doctrine," the dissent argued that government was only required to pay just compensation for the property that it actually receives. That the trade routes were of no use to the government was particularly persuasive to the dissenting Justices, and they argued that if the business was destroyed, the destruction was an unintended incident of the taking of land, and thus not compensable.