City of Milwaukee Post No. 2874 Veterans of Foreign Wars v. Redevelopment Authority of the City of Milwaukee

The Veterans of Foreign Wars (Veterans) (plaintiff) owned property in Milwaukee. In 1961, Veterans entered a leaseback agreement with Towne Metropolitan, under which Veterans sold the property in exchange for a 99-year lease requiring an annual rent of $1. The lease did not contain a clause requiring the lessor to ensure that the building would have sufficient value to compensate Veterans for the lease’s value in the event of condemnation. Towne Metropolitan built a hotel on the property and later sold the property to Marquette University. Marquette sold the property to Maharishi Vedic University. By the 1990s, the hotel and surrounding neighborhood had deteriorated. In 2001, the Redevelopment Authority of the City of Milwaukee (agency) (defendant) made an offer of $440,000 to condemn the property. Veterans was the only occupant. The circuit court awarded $300,000 to Veterans and $140,000 to Maharishi for the taking. Veterans appealed. The circuit court applied the unit rule, under which property value is based on one unit rather than separate property interests. The jury found that the property had no market value, because the cost of razing or renovating the hotel exceeded the cost of the land in its undeveloped state. The circuit court ordered Veterans to return the award. Veterans appealed, claiming that its lease had value independent of the property’s value. The court of appeals reversed the judgment and adopted a fairness-award doctrine, under which the condemnor must pay more than the property’s value if the condemnation value is insufficient to pay the lessee. Veterans brought a separate action against the three lessors, claiming that they had breached a lease clause requiring them to maintain the building in good condition. The court found that the clause did not exist.