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Housing and Redevelopment Authority of the City of St. Paul v. Lambrecht

June 26, 2003

HOUSING AND REDEVELOPMENT AUTHORITY OF THE CITY OF ST. PAUL, PETITIONER, APPELLANT,
v.
GERALDINE M. LAMBRECHT, ET AL., RESPONDENTS BELOW, SHANNON KELLY'S, INC., RESPONDENT.



SYLLABUS BY THE COURT

1. A clause in a lease agreement that terminates a tenant's interest in the property at the time of condemnation leaves the tenant without a compensable interest in the condemned property and bars the tenant's claim for loss of going-concern value.

2. The district court shall determine as a matter of law whether a compensable interest has been taken in condemnation before submitting damages to the jury.

3. In a claim for loss of going-concern value in condemnation, summary judgment was properly granted to the government when it was determined that the inability to relocate was due solely to an unwillingness or inability to pay the price for an alternative location.

Reversed and remanded.

Heard, considered, and decided by the court en banc.

The opinion of the court was delivered by: Meyer, Justice.

Concurring in part, dissenting in part, Gilbert, J.

Concurring specially, Page, J., and Anderson, Paul H., J.

Took no part, Hanson, J.

OPINION

This appeal arises out of the dismissal by summary judgment of a lessee's claim of loss of going-concern damages in a condemnation proceeding. The district court granted the Housing and Redevelopment Authority of the City of Saint Paul's (HRA) motion for partial summary judgment against Shannon Kelly's, Inc. (Shannon Kelly's). The court determined that Shannon Kelly's could not establish a claim for loss of going-concern damages as a matter of law; and in any event, the claim was precluded by certain lease language and the acceptance of relocation benefits by Shannon Kelly's. The court of appeals reversed on all three grounds, finding that issues of genuine fact remain as to whether a claim for loss of going concern existed and that neither the lease language nor the acceptance of relocation benefits precluded recovery. We granted review only on the limited issue of whether the district court erred in holding that Shannon Kelly's was not entitled to recover for loss of going-concern value.

We reverse the court of appeals on two grounds. We conclude that the condemnation clause in Shannon Kelly's lease precluded any recovery for loss of going-concern damages because the lease language effectively ended Shannon Kelly's interest in the property upon condemnation. In addition, we conclude that Shannon Kelly's did not establish its claim as a matter of law and the district court properly granted summary judgment to HRA. We decline to address whether Shannon Kelly's claim is also precluded by the acceptance of relocation benefits.

On July 30, 1997, HRA adopted a resolution authorizing the condemnation of Block 39 as part of a redevelopment plan in downtown St. Paul. Block 39 is bounded by St. Peter, Fifth, Wabasha, and Sixth Streets and includes 395 Wabasha, which housed Shannon Kelly's. Shannon Kelly's was a restaurant/brewery owned by James H. McGovern and had occupied its downtown location for over seven years. McGovern also owned twenty-five percent of W.O.A.M., Inc., the corporation that owned 395 Wabasha at the time Block 39 was condemned. Upon adopting the resolution, HRA sent letters to all of the businesses affected, including W.O.A.M. and Shannon Kelly's, notifying them of the pending condemnation and offering relocation assistance.

On October 9, 1997, HRA filed its petition in condemnation in Ramsey County District Court. On October 20, 1997, W.O.A.M., with knowledge of the pending condemnation, sold 395 Wabasha to Hoyt Development Company (Hoyt). That same day, Shannon Kelly's entered into a five-year lease agreement with Hoyt. The lease contained a "condemnation clause" that allegedly terminated the lease upon condemnation and a clause that ...


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