Lake Erie and Northern Rway. Co. v. Schooley

Lake Erie and Northern Rway. Co. v. Schooley
Collection
Supreme Court Judgments
Date
1916-06-13
Report
(1916) 53 SCR 416
Judges
Fitzpatrick, Charles; Davies, Louis Henry; Idington, John; Anglin, Francis Alexander; Brodeur, Louis-Philippe
On appeal from
Ontario
Subjects
Expropriation
Decision Content
Supreme Court of Canada
Lake Erie and Northern Rway. Co. v. Schooley, (1916) 53 S.C.R. 416
Date: 1916-06-13
The Lake Erie and Northern Railway Company (Plaintiffs) Appellants;
and
Ignatius Franklin Schooley and The Brantford Ice Company (Defendants) Respondents.
1916: May 30; 1916: June 13.
Present: Sir Charles Fitzpatrick C.J. and Davies, Idington, Anglin and Brodeur JJ.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ONTARIO.
Expropriation—Business premises—Special value—Mode of estimating compensation.
Where property expropriated is, owing to its location and adaptability for business, worth more to the owner than its intrinsic value, he is not entitled to have the capital amount representing the excess added to the market value of the property. His proper compensation is the amount which a prudent man in the position of the owner would be willing to pay. Brodeur J. dissenting. Judgment appealed against (34 Ont. L.R. 328) varied.
APPEAL from a decision of the Appellate Division of the Supreme Court of Ontario[1] affirming with a slight variation of the award of the arbitrators appointed to determine the compensation to respondents for their property expropriated.
The respondents carried on an ice business in Brantford and the business premises were expropriated for purposes of appellants’ railway. The evidence produced before the arbitrators appointed to determine their compensation showed that the premises were specially adapted for their business and the arbitrators awarded for such special adaptability the sum of $20,000 representing the annual saving of expense over the cost of doing business in another place capitalized for ten years. This was added to the $29,000 allowed as the market value of the property. The Appellate Division upheld the award save as to $800 allowed for sawdust which was struck off.
Tilley K.C. and Brewster K.C., for the appellants.
Cowan K.C. for the respondents.
THE CHIEF JUSTICE.—Any question of principle involved in this case is, I think, covered by the authority of the decision of the Judicial Committee in Pastoral Finance Association v. The Minister[2].
The arbitrators here have found the market value of the property and then added to the amount the special value of the land to the respondents. To this special value the respondents were undoubtedly entitled whatever exception may be taken to the way in which it was arrived at. In the case above referred to the Judicial Committee say:—.
The substantial ground on which the majority of the court based their decision was that the appellants were not entitled to anything beyond the market value of the land * * * * Their Lordships have no hesitation in deciding that, the principle underlying this decision is erroneous. The appellants were clearly entitled to receive compensation based on the value of the land to them.
The Appellate Division, following this ruling, has held that the respondents were entitled to the special value which the arbitrators have allowed. The court indeed takes exception to the method adopted for arriving at the proper compensation by first taking the market value of the property and then ascertaining and adding the special value to the respondents. The court considers, and I think rightly, that the preferable method would have been to ascertain simply the value of the property to the respondents and base upon this the compensation to which they were entitled. The court, however, finds and again, I think, rightly, that there has been no error in principle which can affect the amount of the compensation awarded. With the amount allowed the court professes itself satisfied and declines to vary it.
The only question, therefore, for this court to determine is, in my opinion, the adequacy of the amount of the compensation awarded.
Although I think the sum of $29,000 at which the jury have estimated the market value of the property is a very liberal allowance, I am not disposed to interfere with this, holding as I do, that unless the award of arbitrators is clearly excessive, it should not be disturbed on an appeal to the courts. Notwithstanding, however, this disposition to interfere as little as possible with the award of arbitrators on a simple question of amount, I cannot accept the finding, with regard to the special value of the property to the respondents. The sum of $20,000 cannot, I think, be justified by anything in the evidence pointing to such loss by the respondents as would entitle them to compensation on this scale.
Under the circumstances, it is necessary to adhere to the method of valuation which the arbitrators have adopted and to deal separately with the loss which the respondents have sustained by reason of the special value of the property to them.
Upon reading the evidence and giving the matter the most careful consideration, the conclusion that I have arrived at is, that if to the market value found by the arbitrators at $29,000 there is added $4,000 for the so-called special value, the respondents will have received full and ample compensation for the loss which they have sustained by the taking from them of their property.
The appeal must be allowed to the extent of reducing the total award to the sum of $33,000. The appeal of the respondents is dismissed.
DAVIES J.—This appeal is from the judgment of the First Appellate Division of Ontario confirming an award made by arbitrators appointed to value the compensation payable to the respondents for two pieces of property expropriated by the railway company in the City of Brantford on which the respondents carried on an ice business, less the sum of $800 for sawdust which was disallowed.
There was a cross-appeal by the respondents to restore this $800; but I may as well dispose of this cross-appeal by saying that I am quite in accord with the Appellate Division in disallowing this item.
As to the award, the business premises consisted of two distinct parcels of land with buildings upon them, one called the Water Street lands and the other the Greenwich Street lands. As to the former, the arbitrators valued the compensation payable for the lands at $4,620 and the buildings at $3,500, and as to the latter, the lands at $10,560 and the buildings at $8,400. The values placed upon the machinery and the sawdust between the walls are not in dispute:
The total value awarded for the lands, buildings, sawdust and machinery amounted to $29,000 and in their written reasons the arbitrators explained that
the values put upon these lands and buildings is their intrinsic value or real value as taken for any purpose, not necessarily the ice business, but we found also that these lands were especially adapted for the ice business, reducing the handling and storing of ice to a minimum of expense and making it much less expensive than it can be done for at the premises to which the claimants propose removing or indeed in any other premises in the City of that were mentioned or pointed out to us.
The arbitrators then proceed to add to the “intrinsic or real value” of the lands and buildings as determined by them the sum of $20,000 for the reason, as explained by them, of “special adaptability” of the lands for the business of the ice company, thus increasing their award to $49,000. Their language in the award is:—
Then in addition also for the extra cost of harvesting ice in any other place in the City of Brantford or what may be termed “Special Adaptability” interest in the lands expropriated by the Railway Company. * * *
With respect to this item, the main one is dispute, the Appellate Division says:—
The amount of $20,000 seems large, having regard to the figures awarded for the land and buildings in this case. But there seems to be no basis on which it can fairly be reduced, if, as I think was intended, it represents the special value of the land expropriated and damages for disturbance to business.
I am extremely reluctant to set aside or alter the award of arbitrators who have had the advantages of seeing and hearing the witnesses and visiting the property, and with respect to the $29,000 awarded, though I agree it is very large and, specially with respect to the amount awarded for the Water Street buildings, which had been condemned by the city inspector as dilapidated and dangerous, indefensibly large, yet I am not, in view of the judgment of the Appellate Division, disposed to interfere with it holding that it includes all damages for compulsory purchase.
With respect to the additional amount of $20,000 added under the head of “special adaptability,” I am of opinion that the arbitrators proceeded upon a wrong principle. They first found on conflicting evidence that the extra expense of harvesting and selling the ice at the proposed new location would be $2,000 yearly and they proceed to allow this amount for ten years in addition to the intrinsic value of the property taken. There is no justification in my judgment for such an arbitrary assessment.
The true principle on which they should have proceeded is that laid down by the Judicial Committee in the Pastoral Finance Association v. The Minister[3], namely, that this special suitability of the lands expropriated for the carrying on of an ice business and the additional profits which the owners will derive from so carrying it on, are proper elements in assessing the compensation, but the owner is not entitled to have the capitalized value of those savings and profits added to the market value of the lands.
Their Lordships say at page 1088 of the report of the above case:—
That which the appellants were entitled to receive was compensation not for the business profits or savings which they expected to make from the use of the land, but for the value of the land to them. No doubt the suitability of the land for the purpose of their special business affected the value of the land to them, and the prospective savings and. additional profits which it could be shewn would probably attend the use of the land in their business furnished material for estimating what was the real value of the land to them. But that is a very different thing from saying that they were entitled to have the capitalized value of these savings and additional profits added to the market value of the land in estimating their compensation. They were only entitled to have them taken into consideration so far as they might fairly be said to increase the value of the land. Probably the most practical form in which the matter can be put is that they were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it. Now it is evident that no man would pay for land in addition to its market value the capitalized value of the savings and additional profits which he would hope to make by the use of it. He would, no doubt, reckon out those savings and additional profits as indicating the elements of value of the land to him, and they would guide him in arriving at the price which he would be willing to pay for the land, but certainly if he were a business man that price would not be calculated by adding the capitalized savings and additional profits to the market value.
This statement of the law shews clearly that in arbitrarily adding ten times the amount of their estimate of the extra yearly cost of harvesting and selling their ice product, the arbitrators proceeded upon a wrong principle and one which, if indorsed by the courts, would, in many cases (I think in this case), be productive of great wrong.
After giving the facts of the case and the arguments at bar and in the respective factums every consideration and giving the judgment which, in my opinion, the Appellate Court should have given, I have reached the conclusion that a prudent man in their position might have been willing to give for the lands taken a sum certainly not greater than $5,000 for these special advantages and adaptability to the ice business in addition to their intrinsic value as found by the arbitrators. In this view my brother Anglin concurs but we agree to reduce that $5,000 down to $4,000 in order that there may be a majority judgment reached. The judgment appealed from accordingly will be reduced to $33,000.
IDINGTON J.—This appeal arises out of the expropriation by appellant under the Railway Act of lands in Brantford used by the respondents for carrying on an ice business.
The arbitrators’ award of compensation amounted to a total of $49,000 made up as follows:— Machinery (valued by consent)
$675.00
Water Street lands
4,620.00
Water Street buildings
3,500.00
Greenwich Street lands
10,560.00
Greenwich Street buildings
8,400.00
Sawdust in walls
445.00
Sawdust in ice house for covering ice
800.00
Total of above
$29,000.00
Then in addition also for the extra cost of harvesting ice in any other place in the City of Brantford or what may be termed “Special Adaptability” interest in the lands expropriated by the Railway Company
20,000.00
Making a grand total of
49,000.00
The Appellate Division of the Supreme Court of Ontario struck out the $800 item for sawdust used for covering in the ice house, thus leaving $28,200.00 for lands and buildings.
How such an item of purely personal property crept into such an award puzzles me, yet respondents ask its restoration. The remaining items of the original $29,000 are claimed to be high but admittedly cannot be contested here with much hope of success in face of the evidence and no legal principle violated in acting thereon.
The additional item of $20,000 does not seem to be justifiable on any legal principle put forward to support it when dependent only upon such evidence as relied upon.
The expression of the arbitrators of what the item stands for is rather confusing and, I most respectfully submit, seems the result of the confusion of thought which lies at the root of the error into which the arbitrators fell. And their later deliveries of divergent reasons supporting their respective views, apparently after an appeal was in sight, is an unsatisfactory method of doing so, for the reasons under such circumstances do not carry the same weight as if they had been delivered with the award.
The lands are to be estimated in such cases as in question herein upon the basis of their market value. And it is what they are worth to the owner that is to be considered.
In fixing the market value at the figure they did I have to assume the arbitrators proceeded on their appreciation of the evidence before them. We are not seriously asked to change that. But in that evidence so far as counsel in argument or in factum has directed our consideration, there was nothing presented to shew that there was any market price for ice house sites as distinguished from their values for anything else. Yet it is that market price of any land possessing special adaptability for anything that has to be determined if we are in principle to follow the latest authority reiterating the rule in the case of Cedars Rapids Manufacturing and Power Co. v. Lacoste[4], at p. 579.
The direct evidence which ought to be required to fix the market value in that regard has not been produced. In the indirect way, of entering into a long and elaborate investigation of the comparative cost of operating with this plant where it is, as compared with a plant assumed to be placed some place else, there is alleged to exist the basis of a calculation of value to be added to the market price.
Not a title of evidence is referred to shewing that any sane man of business would think of investing $48,200 for land and buildings of the kind in question devoted to an ice business selling four thousand tons of ice per season. The proposition seems to me to sound rather hollow. And without going so far as to hold, as matter of law, that you cannot prove value and even market value by an involved process like unto that tried but uncompleted here, I may say the process has (if it ever can be made operative and serviceable), failed in this case because of that reasonable approach to completion which would make it worth anything being entirely wanting.
Would any one looking ahead to the enlightenment of the public on the subject of health and the gradual enforcement of the results thereof, through boards of health and otherwise, think of purifying the Grand River sewage for the express purpose of an ice business? Would he shew his faith in the business sense of doing so by paying $20,000 for the privilege when and where pure water is to be found and ice produced therefrom at perhaps less expense in any convenient spot? And all for the sake of a few incidental and temporary advantages of handling the product at a trifling less expense. And in Brantford, we are asked to believe these incidental advantages will extend over a period of ten or twenty years. The economic and social forces are against the realization of such imaginary contingencies.
There is only one other ice business in the city and that is supplied by pure water and involves a haulage of a mile and a half more than respondents either had to or has now to face in way of competition.
The proof that this plant had been made profitable and had been placed on a permanently profitable basis that would justify an investment of $48,200, has fallen short. Indeed so far as I can see the evidence is the other way.
The appellant’s factum presents a statement of counsel’s estimate of the results so far as known which I do not adopt in its entirety. But in the main it ought to have been met and displaced if untrustworthy.
The only reason I imagine for respondents’ able counsel failing therein is that the main facts were against him attempting it.
Moreover, though respondents’ counsel properly enough put forward the interest on $29,000 as an item of expense in order to test whether or not there was such a profit in the business as to render it likely an owner getting that sum for his business stand could rightly complain, yet it is to be observed that the problem facing us is whether or not any one would think of paying $48,200 for such a business stand and to test that we must take interest on the latter sum as a test of what strain the proposition to be maintained by respondents will stand.
Unless there was either a highly profitable or at least a clearly substantial, profitable and permanently established business existent on the premises, this mode of proof of market value thereof is worthless.
All the elaborate calculations of a possible difference in cost of handling are of no consequence if the thing itself has failed to produce to the owner such a productive investment that reasonable men must say he would not and should not be asked to part with such a property for its ordinary market value.
If he expects others, even a railway company, to pay him for depriving him of a business stand something beyond ordinary market value, he must be ready and willing to demonstrate the fact just as fully as possible and allow the fullest possible investigation of the basis of such a proposition.
There was neither cash book nor ledger kept in the business and the only possible available and sub- stantial means of testing the matter was an inspection and thorough investigation of the bank book and that was refused.
There was, therefore, in short no proof upon which the arbitrators should have allowed any such sum as the item in question, and that part of the award should be stricken out.
The ordinary ten per centum allowance for compulsory taking in absence of such proper proof should be allowed instead, amounting to $2,820.
This is not a case for referring back, for the respondents had deliberately refused that proper investigation of the lines of proof upon which they rested their claim.
The appeal should be allowed with costs here but without costs to either party in the court below, and the award amended in the way I have indicated.
ANGLIN J.—I concur with Mr. Justice Davies.
BRODEUR J.—This is an appeal concerning the compensation which should be awarded to the respondents for the expropriation of lands in the City of Brantford. Those properties were used by the respondents for harvesting and storing ice. They were situated on the Grand River and they were specially adaptable for that business. The current of the river afforded facilities for storing ice which reduced to a minimum the cost of the work.
There is not much difficulty with regard to the value put upon the lands and the buildings. The three arbitrators have come to a unanimous conclusion in that respect.
There is, however, a difference between them. One of the arbitrators is of opinion that the price which has been awarded for the lands and the buildings would have included also the special adaptability of this property for the ice business.
The other two arbitrators, on the other hand, state that $29,000, which is the amount awarded for the lands and buildings, would simply give the intrinsic value of the property for any purpose, not necessarily the ice business; but they find that the lands were specially adapted for the ice business and that it has cost less to the owners for handling and storing their ice than it will cost at the place where they will have to remove their place of business.
It appears that the reason for this low degree of expense is that the ice field is some distance above the buildings and that the respondents used to cut the ice in squares on that field. They would cut then a canal through the ice to the storehouse and float the ice down this canal each block being ready for storage.
The other arbitrator does not dispute the advantage of the convenience of harvesting ice at that point; but he claims that the railway company had the option either of compensating them for such advantage or of compensating them for the establishment of the business so far as such business was incidental to the land expropriated. He does not dispute the fact that, if the method adopted by the majority of the arbitrators is correct, the value put as to damages incurred would be correct.
The railway companies in exercising their right of eminent domain are bound not only to pay the market value of the lands expropriated but also the damages incurred by the owner in connection with the expropriation.
Here is a man who had, on account of the con- venient site of his business, particular advantages for handling it. Those advantages could not be secured elsewhere and in order to carry out the same business as he was doing before he will have to pay extra costs and incur additional expenditure. He will suffer damages then as a result of that expropriation and it seems to me that the principles of law enunciated above render the railway company liable for those additional costs.
The Privy Council in the case of Pastoral Finance Association v. The Minister[5], decided that the special suitability of the land for a business which the owner carries on elsewhere but intends to transfer to that land and the savings and additional profits which he will derive from so doing are elements in assessing the compensation.
It seems to me that, applying the principles enunciated in the above decision of the Privy Council, the owners, respondents, are in this case entitled to be compensated for special adaptability of the lands expropriated or for extra cost of harvesting ice in any other place in the locality.
The arbitrators have awarded a sum of $20,000 for such compensation and they are all unanimous as to the amount of that compensation if the above principle is right. The amount seems to be very high; but I would not feel disposed to substitute my own judgment as to the value for the judgment of the arbitrators.
There has been a cross-appeal by the respondents concerning a sum of $800 which was awarded by the arbitrators for the sawdust which was in the ice house for covering ice. That amount was refused by the Appellate Division and I concur in the views expressed by that court that the owners are not entitled to the same.
For these reasons the appeal and the cross-appeal should both be dismissed with costs.
Appeal allowed with costs.
Solicitors for the appellants: Brewster & Heyd.
Solicitors for the respondents: Beatty, Blackstock, Fasken, Cowan & Chadwick.
[1] 34 Ont. L.R. 328.
[2] [1914] A.C. 1083.
[3] [1914] A.C. 1083.
[4] [1914] A.C. 569.
[5] [1914] A.C. 1083.