## Facts

- An eleven-story hotel at 2601 W. Wisconsin Ave. in Milwaukee included approximately 5,200–5,250 square feet used as the Veterans of Foreign Wars (VFW) post headquarters.
- In 1961, after previously owning the property, the VFW conveyed the property to a third party in exchange for a 99-year lease (renewable for another 99 years) under which the VFW paid $1 per year and the fee owner paid taxes, utilities, and maintenance.
- The fee interest later changed hands, including ownership by Marquette University and then Maharishi Vedic University.
- The Redevelopment Authority of the City of Milwaukee (RACM) condemned the property for a redevelopment project.
- A condemnation commission initially allocated $300,000 to the VFW and $140,000 to RACM.
- Applying the unit rule, the circuit court concluded the fair market value of the property as a whole at the time of taking was zero and ordered the VFW to repay the $300,000 plus $87,348 in interest and statutory costs.
- The dispute centered on whether the VFW’s favorable long-term leasehold could be separately valued and compensated when the total property value under the unit rule was zero.

## Issues

1. Whether Article I, Section 13 of the Wisconsin Constitution requires compensation to a leaseholder when the condemned property’s fair market value as a whole is zero under the unit rule.
2. Whether applying the unit rule to deny separate compensation for a valuable leasehold, despite a zero total property valuation, violates the state constitutional guarantee of just compensation.

## Decision

- The Wisconsin Supreme Court reversed the court of appeals and reinstated the circuit court’s judgment.
- The Court held that applying the unit rule did not violate the VFW’s right to just compensation under Article I, Section 13.
- Because the property’s fair market value as a whole was zero, RACM owed no compensation to the VFW for its leasehold interest.
- The Court affirmed the order requiring the VFW to return the $300,000 and to pay interest and statutory costs.

## Legal Principles

- Under the unit rule, the condemnor pays the fair market value of the property as an undivided whole, not the summed value of partial estates; any award is then apportioned among interest holders.
- “Just compensation” is measured by the fair market value of the condemned property itself (what a willing buyer would pay a willing seller considering lawful uses), not by the subjective value of contract advantages to a particular occupant.
- When the fair market value of the property as a whole is zero, there is no compensation to apportion, and a leaseholder is not constitutionally entitled to a separate valuation of its leasehold.
- Absent evidence of governmental bad faith intended to reduce value before condemnation, private lease risk allocation does not create a constitutional entitlement to payment beyond the property’s market value.

## Conclusion

The court held that the unit rule governs valuation in condemnation of property held in multiple interests, and that when the property’s fair market value as a whole is zero, the condemnor owes no just compensation to a leaseholder, even one holding a highly favorable long-term lease.


City of Milwaukee Post No. 2874 Veterans of Foreign Wars v. Redevelopment Authority of the City of Milwaukee, 768 N.W.2d 749 (Wis. 2009)