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Keywords

lawsuitappealtrialdue process
appealzoningregulationdue processjudicial reviewappellant

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Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631, 11 ERC 1801, 8 Envtl. L. Rep. 20,528

Facts

The Grand Central Terminal, owned by Penn Central Transportation Co., was designated a landmark under New York City's Landmarks Preservation Law. After the Commission rejected plans to build a multistory office building above the terminal, the owners filed a lawsuit claiming that the law constituted a taking of their property without just compensation and deprived them of due process. The trial court initially granted relief, but the Appellate Division reversed, leading to an appeal to the New York Court of Appeals, which ultimately upheld the Appellate Division's decision.

The Terminal, which is owned by the Penn Central Transportation Co. and its affiliates (Penn Central), was designated a 'landmark' and the block it occupies a 'landmark site.' Appellant Penn Central, though opposing the designation before the Commission, did not seek judicial review of the final designation decision.

Issue

Whether the restrictions imposed by New York City's Landmarks Preservation Law on the development of Grand Central Terminal constitute a 'taking' of property requiring just compensation under the Fifth and Fourteenth Amendments.

The question presented is whether a city may, as part of a comprehensive program to preserve historic landmarks and historic districts, place restrictions on the development of individual historic landmarks—in addition to those imposed by applicable zoning ordinances—without effecting a 'taking' requiring the payment of 'just compensation.'

Rule

The application of the Landmarks Preservation Law does not constitute a taking of property if it does not transfer control of the property to the city but merely restricts the owner's ability to exploit it. Additionally, the law must not deprive the owner of a reasonable return on their investment.

The application of the Landmarks Law to the Terminal property does not constitute a 'taking' of appellants' property within the meaning of the Fifth Amendment as made applicable to the States by the Fourteenth Amendment.

Analysis

The court determined that the Landmarks Preservation Law did not constitute a taking because it did not transfer control of the property to the city; it only restricted the owners' ability to exploit the airspace above the terminal. The court found that the law allowed the same use of the terminal as before and that the owners had not demonstrated an inability to earn a reasonable return on their investment. Furthermore, the transferable development rights provided significant compensation for the loss of rights above the terminal.

The Court of Appeals concluded that the Landmarks Law had not effected a denial of due process because: (1) the landmark regulation permitted the same use as had been made of the Terminal for more than half a century; (2) the appellants had failed to show that they could not earn a reasonable return on their investment in the Terminal itself; (3) even if the Terminal proper could never operate at a reasonable profit some of the income from Penn Central's extensive real estate holdings in the area, which include hotels and office buildings, must realistically be imputed to the Terminal; and (4) the development rights above the Terminal, which had been made transferable to numerous sites in the vicinity of the Terminal, one or two of which were suitable for the construction of office buildings, were valuable to appellants and provided 'significant, perhaps ‘fair,’ compensation for the loss of rights above the terminal itself.

Conclusion

The New York Court of Appeals affirmed the lower court's ruling, concluding that the application of the Landmarks Law did not constitute a taking of the property within the meaning of the Fifth Amendment.

The New York Court of Appeals affirmed. 42 N.Y.2d 324, 397 N.Y.S.2d 914, 366 N.E.2d 1271 (1977).

Who won?

The City of New York prevailed in the case because the court found that the Landmarks Preservation Law did not constitute a taking and that the owners had not been deprived of a reasonable return on their investment.

The New York Court of Appeals affirmed. 42 N.Y.2d 324, 397 N.Y.S.2d 914, 366 N.E.2d 1271 (1977).

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