Penn Central Transportation Co. v. New York City, 438 U.S. 104 

Supreme Court of the United States

1978

Chapter

30-31

Title

Power to Regulate Land Use

Page

617

Topic

New York City's Landmarks Law has not effected a "taking" of appellants' property

Quick Notes

The New York City Landmarks Preservation Law of 1965 empowered the city to designate certain structures and neighborhoods as "landmark sites."  Penn Central owned the Grand Central Terminal and wanted to construct a 55-story office building above it.  New York Citys Landmarks Preservation Commission refused to allow them to do so.  The owners sued in New York Supreme Court, claiming that the application of the Landmarks Preservation Law was an unconstitutional uncompensated taking.  The trial court granted an injunction.  The city appealed and the intermediate appellate court reversed.  The Court of Appeals of New York affirmed.  The owners of Grand Central appealed to the United States Supreme Court

Fifth Amendment

o    nor shall private property be taken for public use, without just compensation

14th Amendment XIV

o    nor shall any state deprive any person of life, liberty, or property, without due process of law;

Rule - Taking

o    A use restriction on real property may constitute a "taking" if not reasonably necessary to the effectuation of a substantial public purpose.

o    A use restriction on real property may constitute a "taking" if it has an unduly harsh impact upon the owner's use of the property.

Court Holding

o    New York City's Landmarks Law has not effected a "taking" of appellants' property.

o    The restrictions imposed are substantially related to the promotion of the general welfare and not only permit reasonable beneficial use of the landmark site but also afford appellants opportunities further to enhance not only the Terminal site proper but also other properties

Book Name

Fundamentals of Modern Property Law: Rabin; Kwall, Kwall.  ISBN:  978-1-59941-053-1.

Issue

o         Whether the restrictions imposed by New York City's law upon appellants' exploitation of the Terminal site effect a "taking" of appellants' property for a public use within the meaning of the Fifth Amendment (nor shall private property be taken for public use, without just compensation), which of course is made applicable to the States through the Fourteenth Amendment?  No.  It is not a taking.  The legislation promotes the general welfare and the City has a comprehensive plan.

o         Whether the interference with appellants' property is of such a magnitude that "there must be an exercise of eminent domain and compensation to sustain [it]?  No, Penn Central is permitted reasonable beneficial use and has additional opportunities.

Procedure

Trial

o         The trial court granted the injunctive and declaratory relief, but severed the question of damages for a "temporary taking."

Appellant

o         Reversed.

New York

o         Affirmed.

Supreme

o         Affirmed

Facts/Cases

Discussion

Reasoning/Key Phrase

Rules/Laws

Pl - Penn Central (Appellant)

Df - New York City (Appellee)

Description

o          This case involves the application of New York City's Landmarks Preservation Law to Grand Central Terminal (Terminal).

o         The Terminal, which is owned by the Penn Central Transportation Co. and its affiliates (Penn Central), is one of New York City's most famous buildings.

o         The Terminal itself is an eight-story structure which Penn Central uses as a railroad station and in which it rents space not needed for railroad purposes to a variety of commercial interests.

o         The Terminal is one of a number of properties owned by appellant Penn Central in this area of midtown Manhattan.

o         At least eight of these are eligible to be recipients of development rights afforded the Terminal by virtue of landmark designation.

City Tax Block

o         Commission designated the Terminal as a landmark.

o         Penn Central opposed, but did not seek review.

Penn Central wanted to increase income

o         50 year renewal lease with UGP properties.

o         To build a multi-story build on top of the Terminal.

Penn Central and UGP applied to Commission

o         Breuer I construct 55 story building.

o         Breuer II tearing down portion of Terminal and constructing 53 story building.

Commission Denied both plans

o         To protect a landmark one does not tear it down.

Appellants did not seek judicial review

o         Because the Terminal site enjoyed a tax exemption, remained suitable for present use and was not the subject of a control sale.

Justice Brennan

Penn Centrals Arg (Violation of the Fifth and Fourteenth Amendments)

o         Filed suit in New York Supreme Court

o         Claiming that the application of the Landmarks Preservation Law had "taken" their property without just compensation in violation of the Fifth and Fourteenth Amendments and arbitrarily deprived them of their property without due process of law in violation of the Fourteenth Amendment.

Penn Central (sought a declaratory judgment)

o         Appellants sought a declaratory judgment, injunctive relief barring the city from using the Landmarks Law to impede the construction of any structure that might otherwise lawfully be constructed on the Terminal site, and damages for the "temporary taking"

Trial Court

o         The trial court granted the injunctive and declaratory relief, but severed the question of damages for a "temporary taking."

New York Supreme Court (Appellate Division)

o         Reversed.

o         There was no taking since the law had not transferred control of the property to the City, but only restricted appellants exploitation of it.

Section II

o   Whether the restrictions imposed by New York City's law upon appellants' exploitation of the Terminal site effect a "taking" of appellants' property for a public use within the meaning of the Fifth Amendment (nor shall private property be taken for public use, without just compensation), which of course is made applicable to the States through the Fourteenth Amendment?

Section II-A

Fifth Amendment

o    nor shall private property be taken for public use, without just compensation

What Constitutes a Taking?

o    There is not set formula.

o    Depends on particular circumstances.

Several Factors of particular significance

o         The economic impact of the regulation on the claimant.

o         The extent to which the regulation has interfered with distinct investment-backed expectations.

o         The character of the governmental action.

o         A "taking" may more readily be found when the interference with property can be characterized as a physical invasion by government.

o         A taking is not found when the interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good

Relating to this case

o    In instances in which a state tribunal reasonably concluded that "the health, safety, morals, or general welfare" would be promoted by prohibiting particular contemplated uses of land, this Court has upheld land-use regulations that destroyed or adversely affected recognized real property interests.

Miller v. Schoene

o    Red Cedar trees were order to but down, because they harmed the nearby apply industry.

Provided compensation to cut down trees, but not the actual loss

o    Although the statute provided for recovery of any expense incurred in removing the cedars, and permitted claimants to use the felled trees, it did not provide compensation for the value of the standing trees or for the resulting decrease in market value of the properties as a whole.

Omission did not make statute invalid

o    A unanimous Court held that this latter omission did not render the statute invalid.

o    The Court held that the State might properly make "a choice between the preservation of one class of property and that of the other" and since the apple industry was important in the State involved.

Legislature judgment greater value to the public

o    The State had not exceeded "its constitutional powers by deciding upon the destruction of one class of property [without compensation] in order to save another which, in the judgment of the legislature, is of greater value to the public."

Hadacheck v. Sebastian, 239 U.S. 394 (1915) Prohibited Brickyar

o    Upheld a law prohibiting the claimant from continuing his otherwise lawful business of operating a brickyard in a particular physical community on the ground that the legislature had reasonably concluded that the presence of the brickyard was inconsistent with neighboring uses.

Goldblatt v. Hempstead Banned excavation of sand and gravel

o    There, a 1958 city safety ordinance banned any excavations below the water table and effectively prohibited the claimant from continuing a sand and gravel mining business that had been operated on the particular parcel since 1927.

Court

o    The Court assumed that the ordinance did not prevent the owner's reasonable use of the property since the owner made no showing of an adverse effect on the value of the land.

Served substantial public purpose

o    Because the restriction served a substantial public purpose, the Court thus held no taking had occurred.

Rule - Taking

o    A use restriction on real property may constitute a "taking" if not reasonably necessary to the effectuation of a substantial public purpose.

o    A use restriction on real property may constitute a "taking" if it has an unduly harsh impact upon the owner's use of the property.

Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922) Surface Rights

o         This is the leading case for the proposition that a state statute that substantially furthers important public policies may so frustrate distinct investment-backed expectations as to amount to a "taking."

Sold the surface rights, reserved the right to remove the coal

o         There the claimant had sold the surface rights to particular parcels of property, but expressly reserved the right to remove the coal thereunder.

Statute

o         A Pennsylvania statute, enacted after the transactions, forbade any mining of coal that caused the subsidence of any house, unless the house was the property of the owner of the underlying coal and was more than 150 feet from the improved property of another.

Commercially impracticable to mine the coal

o         Because the statute made it commercially impracticable to mine the coal, and thus had nearly the same effect as the complete destruction of rights claimant had reserved from the owners of the surface land, the Court held that the statute was invalid as effecting a "taking" without just compensation.

United States v. Causby, 328 U.S. 256 (1946) - overflights

o         In holding that direct overflights above the claimant's land, that destroyed the present use of the land as a chicken farm, constituted a "taking," Causby emphasized that Government had not "merely destroyed property [but was] using a part of it for the flight of its planes.

Section II-B

Penn Central Arg

o         The restriction imposed pursuant to a landmark law must be accompanied by just compensation if it is to be constitutional.

Causby Airspace Arg

o         The Landmark law has deprived them of any gainful use of their air rights above the Terminal and is entitled to just compensation measured by the fair market value of these air rights.

Court

You do not divide parcel into segment

o         Taking" jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated.

Focus on the nature and extend of interference with parcel as a whole

o         In deciding whether a particular governmental action has effected a taking, this Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole.

o         The city tax block designated as the "landmark site.

Diminished value of Terminal Site Arg

o         The law effects a taking because its operation has significantly diminished the value of the Terminal site.

Court Penn Central Concedes

o         The law is reasonably related to the promotion of the general welfare, and that the diminution in property value standing alone can establish a taking.

o         Euclid 75% diminution in valued cause by zoning laws.

o         Hadacheck 87.5% diminution.

Landmark law is different than zoning Arg

o         New York City's regulation of individual landmarks is fundamentally different from zoning or from historic-district legislation because the controls imposed by New York City's law apply only to individuals who own selected properties.

Court We find not merit.

o         This would invalidate all comparable Landmark legislation.

Difference between Historic Zoning laws and Landmark legislation.

o         Historic Zoning regulates all property within a given physical community.

o         Landmark legislation applies only to selected parcels.

Court Landmark laws are not discriminatory

o         They are not reverse spot zoning a land use decision which arbitrarily singles out a particular parcel for different, less favorable treatment than the neighboring ones.

Court Landmark law embodies a comprehensive plan

o         The Landmark law embodies a comprehensive plan to preserve structures of historic or aesthetic interest wherever they might be found in the city.

o    400 landmarks, 31 historic districts have been designated to this plan.

Landmark Law is Arbitrary

o         The decision to designate the Terminal was arbitrary or at least subjective because it is a matter of taste.

Court Hollow ring

o         Penn Central did not seek judicial review.

Landmark Law incapable of producing fair and equitable distribution of benefits and burdens

o         New York City's law is inherently incapable of producing the fair and equitable distribution of benefits and burdens of governmental action which is characteristic of zoning laws and historic-district legislation and which they maintain is a constitutional requirement if "just compensation" is not to be afforded.

Court This does not effect a takings.

o         It is, of course, true that the Landmarks Law has a more severe impact on some landowners than on others, but that in itself does not mean that the law effects a "taking."

Promoting the general welfare commonly burdens some more than others

o         Legislation designed to promote the general welfare commonly burdens some more than others.

o         The owners of the brickyard in Hadacheck, of the cedar trees in Miller v. Schoene, and of the gravel and sand mine in Goldblatt v. Hempstead, were uniquely burdened by the legislation sustained in those cases.

Zoning laws affect some more severely than others

o         Similarly, zoning laws often affect some property owners more severely than others but have not been held to be invalid on that account.

Euclid

o         For example, the property owner in Euclid who wished to use its property for industrial purposes was affected far more severely by the ordinance than its neighbors who wished to use their land for residences.

Section II-C

What we have established thus far

o         The New York City law is not rendered invalid by its failure to provide "just compensation" whenever a landmark owner is restricted in the exploitation of property interests, such as air rights, to a greater extent than provided for under applicable zoning laws.

o         We now must consider whether the interference with appellants' property is of such a magnitude that "there must be an exercise of eminent domain and compensation to sustain [it]." Pennsylvania Coal Co . v. Mahon, 260 U.S., at 413.

Court Impact Analysis

o         That inquiry may be narrowed to the question of the severity of the impact of the law on appellants' parcel, and its resolution in turn requires a careful assessment of the impact of the regulation on the Terminal site.

Court Does not interfere with present use

o         The law does not interfere with present use of the Terminal.

o         The law contemplates for the continued use as a railroad terminal, office space and concessions.

o         Penn Central profits from use and receives a reasonable return.

Court Penn exaggerates its ability to make use of air rights

o         The commission did reject the plan.

o         But the commission did not prohibit ANY construction above the terminal.

o         They emphasized construction would depend on harmonizing in scale, material, and character with the Terminal.

Court Penn has not been denied ALL use of pre-existing AIR rights

o         Their rights have not been abrogated.

o         They are made transferrable to at least 8 parcels in the vicinity of the Terminal.

o         Some parcels are suitable for office buildings.

o         These rights mitigate whatever financial burdens the law has imposed.

Court Holding

o    New York City's Landmarks Law has not effected a "taking" of appellants' property.

o    The restrictions imposed are substantially related to the promotion of the general welfare and not only permit reasonable beneficial use of the landmark site but also afford appellants opportunities further to enhance not only the Terminal site proper but also other properties

Affirmed

Rules

Fifth Amendment

o    nor shall private property be taken for public use, without just compensation

14th Amendment XIV

o    nor shall any state deprive any person of life, liberty, or property, without due process of law;

Rule - Taking

o    A use restriction on real property may constitute a "taking" if not reasonably necessary to the effectuation of a substantial public purpose.

o    A use restriction on real property may constitute a "taking" if it has an unduly harsh impact upon the owner's use of the property.

Class Notes