Legal Arguments - Caddy's

Just Compensation

    The Fifth Amendment of the U.S. Constitution provides that private property shall not be taken for a public use without just compensation. Although this provision was first intended to apply to the federal government only, for over 100 years, the Supreme Court has interpreted the "due process clause" (of both the Fifth and Fourteenth Amendments) to make it applicable to the actions of state and local governments.

    Many community officials and administrators either fail or refuse to take into account the contributory value of a sign to its site when considering the economic impact of regulatory limitations on size/height/type/location or an outright loss of a sign. However, as it has become more and more apparent that on-premise business signs contribute significantly to business success, it also has become more and more apparent, at least to judges and juries, that governments owe compensation to a sign owner when a regulatory or eminent domain "takings" causes consequential damages. Lack of consideration for the contributory value of a sign has proved costly for many cities challenged by aggrieved sign owners.

In this case: Although it was argued, and subsequently taken by the jury as a given, that the subject signs provided premiere visibility for the business and attracted substantial numbers of customers, the county's position was that the signs' income generation had no bearing on the case because they were fully depreciated, and their costs fully recovered. Therefore, the county argued, the signs had no compensable value. Also, while conceding that available replacement sites could not duplicate the overall visibility of the condemned site, the county would not acknowledge that signage which conformed to the new code could not possibly overcome the visibility deficiencies of the proposed replacement locations. The owner believed he could only succeed in a new location with the additional exposures provided by alternate communication mediums.

The outcome turned on two questions:

  1. Does the contributory value of a sign to a business survive its full depreciation and recovery of its costs?

  2. If the visibility provided by a sign cannot be duplicated on a replacement building, may compensation for its "taking" be based on the cost of alternate replacement, or substitute, exposures?

For the owner to recover separate compensation for destruction of the subject signs, the answer to both questions had to be "yes."

Because of the unique circumstances of the case -- either the building nor the signs nor the location could be replicated elsewhere -- the signage experts called to give evidence concentrated on the cost of replacement of lost exposures approach. Significantly it was not necessary to apply the income approach, as the drawing power of the subject signs was clearly self-evident. Further, the market approach had little utility because no similar sites or buildings, with similar optimum visibility to freeway and major arterial traffic, existed.

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Last Modified: 06-01-01