
    Matter of the Application of the Board of Water Supply, on Behalf of the City of New York, to Acquire Real Estate Under Chapter 724 of the Laws of 1905 and the Acts Amendatory Thereof, Etc.
    (Supreme Court,
    Ulster Special Term, May, 1913.)
    Boarding house keepers — business — good-will measured by profits — condemnation proceedings.
    Condemnation proceedings — compensation — measure of damages.
    The boarding house business is well recognized in the vicinity of the Ashokan reservoir and many such businesses have value, and, in ascertaining their value where connected with farms, the farm property and the boarding house property, for the practical purpose of ascertaining the amount of capital employed, should be separated.
    The boarding house business should be charged with the services of the owner and his family only for that part of the year in which such business is transacted.
    • Where the value of such a business consists in good-will alone measured by profits, the multiple of years should be determined by the commissioners in condemnation proceedings.
    Where in a condemnation proceeding the proprietors of boarding house businesses in a locality where there was no market for such a business at the time the damages to them were sustained, in undertaking to show that their businesses were profitable, proved the gross receipts and the necessary expenses of carrying on such businesses claiming the difference to be the profit and that the measure of value, the expenses with which a boarding house business should be charged in arriving at its value, includes interest on the capital invested in the real estate and personal property necessarily used in the business or the rental value thereof; the reasonable value of the services of the owner and members of his family for such part of the year in which the business is transacted and the market value of the supplies raised by the owner, or the cost thereof, are proper to be considered in ascertaining the profit and, thus, the value of the business; and where,the commissioners in making an award fail to make deduction for such expenses objections to their report will be sustained.
    Where the wife of a physician did not choose to charge him rent for his office and barn, a determination of the commissioners that in ascertaining his net earnings the rental value of such space as he used for his business in the house and bam should be deducted from an award to him for injury to his business is error.
    Where the commissioners after finding the gross receipts of a country store fail to charge against it in ascertaining its value the rental value of the store and barn, interest on the capital invested in the stock of merchandise and property necessary for the operation of said business such failure constitutes error calling for reversal of their award.
    Motion" to confirm the thirteenth separate report of Business Damage Commission No. 1.
    Brown & Slosson, for claimants DeForest Bishop and Frank V. Bishop, claim No. 1; George Pierson, claim No. 4; Lisette Corbett, claim No. 5; Albert Brown, claim No. 7; Martha Young, claim No. 19; Matilda Barton, claim No. 84.
    Milton 0. Auchmo'ody, for claimant Dr. John D. W. Dumond, claim No. 33.
    
      Wm. D. Brinnier, for claimant Carrie A. Burhans, claim No. 83.
    A. B. Watson, Corporation Counsel; Wm. Mc-Murtrie Speer, special counsel, opposed.
   Hasbrouok, J.

This is a motion upon the part of several persons having claims for damages for decrease in the values of their established businesses, because of the taking of lands for the Ashokan reservoir, etc., to confirm the thirteenth separate Beport of Business Damage Commission No. 1. The petitioner, the city of New York, makes a counter motion to reject such report. Objections are made to part of such report, viz.: to the awards upon claims Nos. 1, 4, 5, 7, 19, 33, 83 and 84. All of such claims are for damages to boarding-house businesses, except No. 4, which is for a grocery store business, and No. 33, for a physician and surgeon’s business.

Among the objections the petitioner makes to these awards are that the commissioners proceeded upon a wrong theory in making them, and made allowances to claimants for compensation of counsel. This court, upon confirming a recent report of Business Damage Commission No. 2, at a Special Term, March 1, 1913, refused to grant the motion of counsel for claimants for an allowance for compensation of counsel. The appeal taken from such order reviewing such determination of the court has not been decided. The objection, therefore, of the petitioner to allowances for compensation of counsel is sustained.

The rule which obtains upon awards made by commissioners in condemnation proceedings is that such awards should not be disturbed on account of inadequate or excessive damages unless it appears that the commissioners have proceeded upon erroneous theory or have been influenced by prejudice or passion or have disregarded the evidence in the case. Lewis Em. Dom. (1910), § 776. The claim is made against these awards that the commissioners proceeded upon wrong principles in reaching their determination. With their report the commissioners submitted to the court an opinion, stating the items considered by them in determining the value of an established business. In it the commissioners say regarding a boarding-house business:

We cannot assent to the request that we deduct from the earnings of the business the value of the services of the proprietor and the members of his family, and also interest upon the capital employed, both real and personal, and credit them to the city.” Again: To charge the owner of the business in ascertaining the decrease in the value of his business, or, in other words, his damage, with the value of the personal services of himself and his family and the interest upon the value of his farm and chattel equipment of his business, would, in many if not in all cases, wipe out his claim of damage.”

The view thus expressed is not shared by the court. In dealing with the question of damages to an “ established business,” it is essential to come to some definition. It is not held that by an established business is meant the place, stock or person, but rather the activities that result in bargains and profits. Braeutigam v. Edwards, 38 N. J. Eq. 542, 543. There is no difference between- a business and an “ established business,” except that the latter description conveys the idea that the business has existed or been carried on for some period of time. There is, as has been observed in the Central Coal & Coke Company case, a difference between a business and the good will ” of a business. The latter is an attribute of the former. In determining the value of either a ‘6 business ’ ’ or the “good-will ” of it the profit earned must be sought. Thus, in eases of the character of those at bar, the rules regulating the ascertainment of damages to or values of businesses have been quite generally satisfied by measurements of the value of the ‘ ‘ good-wills ’ ’ of such businesses. The ordinary measure of the value of a business is the market value. It is claimed here, and is not disputed, that at and about the site of the Ashokan reservoir there was no market for the boarding-house businesses at the time the damages to them were sustained. The claimants were compelled to adopt another course in proving value. They undertook to show that their businesses were profitable, and in so doing they proved the gross receipts and the necessary expenses of carrying' on such businesses, claiming the difference to be the profit, and that to be the measure of value. The petitioner, in the boarding-house claims reported upon, claimed that among the expenses wdth which a boarding-house business should be charged in arriving at its value should be included interest upon the capital invested in the real property and personal property necessarily used in such business, or the rental value thereof; the reasonable value of the services of the owner and members of his family, and the- market value of supplies raised by the owners or the cost thereof. This contention of the petitioner has the support of the authorities.

Speaking of personal injury resulting in loss of business, Sedgwick, in his work on Damages (§ 181, 9th ed.), says: “In such a case there might enter into the profits of the business several sources of profit; interest on the capital employed, the value of the personal services of the plaintiff, the value of the good will of the business,” etc.

In Central Coal & Coke Co. v. Hartman, 111 Fed. Rep. 98, Sanborn, Circnit Judge, says: “Now, the anticipated profits of a business are generally so dependent upon numerous and uncertain contingencies that their amount is not susceptible of proof with any degree of certainty,- hence the general rule that expected profits of a commercial business are too remote, speculative, and uncertain to warrant a judgment for their loss. * ' # * There is a notable exception to this general rule. It is that the loss of profits from the destruction or interruption of an established business may be recovered where the plaintiff makes it reasonably certain by competent proof what the amount of Ms loss actually was. The reason for tMs exception is that the owner of a long established business generally has it in his power to prove the amount of capital he has invested, the market rate of interest thereon, the amount of monthly and yearly expenses of operating his business, and the monthly and yearly income he derives from it for a long time before, and for the time during the interruption of which he complains. * * * The interest on the capital and the expenses deducted * * "* show * * * the actual net income. ’ ’

Without further citations, it must be apparent that to find the profit, interest on capital must be reckoned an expense.

Neither can the value of an established business be properly found without consideration of the value of the services of the proprietor and Ms employees. Sedg. Dam., § 181 (9th ed.); Central Coal Co. v. Hartman, supra; Sawyer v. Commonwealth, 185 Mass. 360. Profits earned by a business where it was not charged with the value of the services of the owner and his wife and children, where they worked for it, cannot be regarded as other than fictitious. Services to a business for which no charge is made must be in the nature of a gift. A business which does not earn a profit, but has a profit as the result of services given to it, cannot be claimed to have a value based upon profit. This is as true of a boarding-house business as of any other business.

The boarding-house business is a well-recognized business in the vicinity of the Ashokan reservoir, and many such businesses have value. In ascertaining their values where they are connected with farms, the farm property and the boarding-house property should be for the practical purpose of ascertaining the amount of capital employed separated. Woodhull v. Rosenthal, 61 N. Y. 383.

The boarding-house business should not be charged with the services of the owner and his family for the whole year, but only for such part of the year as the business is transacted in. Where the value of the established business consists in good-will alone, and that value is measured by profits, the multiple of years should be determined by the commissioners. If interest on capital, services of owners and wives and children and market price of vegetables used are proper expenses to be considered in finding the profit, and thus the value of a boarding-house business, then the Commissioners of Business Damage Commission No. 1 failed to use a proper measure in determining the value of the following boarding-house claims: 1, 5, 7, 19, 83' and 84.

The value of the good-will of a boarding-house business and that of a physician is somewhat different. Ordinarily the value of a boarding-house, like that of an inn, depends upon its location. Elliott’s Appeal, 60 Penn. St. 161. And it may not depend upon any special qualification of the proprietor. It is important to consider the movability of a business in finding how much its owner has been damaged by the injury.

Regarding claim No. 33 of Dr. Dumond, the commissioners say in their opinion that “as his wife did not choose to charge him anything for the rent of his office and barn, we know of no reason why any deduction should be made for such an item in the interest of the city.” We think in determining his net earnings the rental value of such space as he used for his business in the house and barn should be deducted.

The fact that Dr. Dumond earned after the taking of the property where his office was located nearly or quite as much as he earned before, though proven, does not throw much light upon his damage. For in place of the patrons evicted by the taking of the land have come the men to construct the reservoir, and the doctor ’s practice has thus been fictitiously sustained. For when the work is completed his old patrons and his new ones will both have gone. Thus the decrease in the value of his business may become correctly apparent. The rule stated in the Supreme Court of Massachusetts is: “ In estimating the decrease in value of the business of a practicing physician * * * the damages are to be assessed for the actual decrease in the value of that business, and not merely for the decrease jn such elements of the value as admit of being sold. The decrease in the money value of the petitioner’s business to himself is to be estimated.” Earle v. Commonwealth, 180 Mass. 579.

In finding the injury done to the business of a physician regard should be had for another principle of law. It has been held proper where one whose occupation or business has been interrupted or injured by an act of a stranger, and thereby damaged, to prove any circumstances in abatement of such damages which will tend to mitigate or lessen them. The late Prof. Theodore W. Dwight, writing for the Court of Appeals in Howard v. Daly, 61 N. Y. 377, quoted Cock-burn, Ch. J., in Frost v. Knight, in the Exchequer Chamber, as follows: ‘1 On the other hand, the promisee may, if he thinks proper, treat the repudiation of the other party as a wrongful putting an end to the contract, and may at once bring his action as on a breach of it; and in such action he will be entitled to such damages as would have arisen from the non-performance of the contract at the appointed time; subject, however, to abatement in respect of any circumstances which may have afforded him the means of mitigating his loss.” In Dickinson v. Hart, 142 N. Y. 188, Earl, J., said: “ The plaintiff proved the gross amount of his sales in each of the two years he was in the defendant’s store, and the amount of his net profits, showing that during the last year his sales and profits had largely increased. He also proved what income he was able to make in his business elsewhere during the succeeding year, and what he was able to earn after his business in the defendant’s store had been broken up; and from these and other facts appearirig in the record there was a basis, however unsatisfactory, for the amount of damages awarded by the jury.” Waterman Set-off (2d ed.), 523. The United States Supreme Court says: “ It is true he nowhere instructed the jury to make the profits of the business the criterion of value, nor indeed would he have been justified in so doing. The profitableness of the business was undoubtedly a matter to be considered, and so the judge fairly intimated in these prior colloquies. But the profits of a business are not destroyed unless the business is not only there stopped but also one which in its nature cannot be carried on elsewhere. If it can be transferred to a new place and there prosecuted successfully, then the total profits are not appropriated and the injury is that which flows from the change of location.”

There are go many elements entering into the ascertainment of damage to a physician because of being compelled to move from bis old site that it is particularly within the province of a jury to determine them in the light of all the facts and circumstances. The award of Dr. Dumond on claim No. 33 is set aside and vacated because of the error herein pointed out.

Begarding claim No. 4 of Pierson: After finding the gross receipts of the store business which Pierson conducted the commissioners did not reckon among the expenses to be charged up against said business in ascertaining its value the rental of the store and barn, nor any interest on the capital invested in the stock of merchandise and the property necessary for the operation of a country store business. This likewise constitutes error.

Motion to confirm denied. Objections sustained. Awards Nos. 1, 4, 5, 7, 19, 33, 83 and 84 are vacated and set aside and John D. Schoonmaker, G-eorge B. Wellington and Seaman Miller are appointed commissioners to hear said claims and make awards thereon.

Motion denied.  