Penn Central Transportation Co. v. New York City
438 U.S. 104 (1978)

Annotate this Case

U.S. Supreme Court

Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978)

Penn Central Transportation Co. v. New York City

No. 77-444

Argued April 17, 1978

Decided June 26, 1978

438 U.S. 104

Syllabus

Under New York City's Landmarks Preservation Law (Landmarks Law), which was enacted to protect historic landmarks and neighborhoods from precipitate decisions to destroy or fundamentally alter their character, the Landmarks Preservation Commission (Commission) may designate a building to be a "landmark" on a particular "landmark site" or may designate an area to be a "historic district." The Board of Estimate may thereafter modify or disapprove the designation, and the owner may seek judicial review of the final designation decision. The owner of the designated landmark must keep the building's exterior "in good repair," and, before exterior alterations are made, must secure Commission approval. Under two ordinances, owners of landmark sites may transfer development rights from a landmark parcel to proximate lots. Under the Landmarks Law, the Grand Central Terminal (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. Thereafter appellant Penn Central entered into a lease with appellant UGP Properties, whereby UGP was to construct a multistory office building over the Terminal. After the Commission had rejected appellants' plans for the building as destructive of the Terminal's historic and aesthetic features, with no judicial review thereafter being sought, appellants brought suit in state court claiming that the application of the Landmarks 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. The trial court's grant of relief was reversed on appeal, the New York Court of Appeals ultimately concluding that there was no "taking," since the Landmarks Law had not transferred control of the property to the city, but only restricted appellants' exploitation of it; and that there was no denial of due process because (1) the same use of the Terminal was permitted as before; (2) the appellants had not shown that they could not earn a reasonable return on their investment

Page 438 U. S. 105

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 must realistically be imputed to the Terminal; and (4) the development rights above the Terminal, which were made transferable to numerous sites in the vicinity, provided significant compensation for loss of rights above the Terminal itself.

Held: 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. Pp. 438 U. S. 123-138.

(a) In a wide variety of contexts, the government may execute laws or programs that adversely affect recognized economic values without its action constituting a "taking," and, in instances such as zoning laws where a state tribunal has 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 real property interests. In many instances use restrictions that served a substantial public purpose have been upheld against "taking" challenges, e.g., Goldblatt v. Hempstead, 369 U. S. 590; Hadacheck v. Sebastian, 239 U. S. 394, though a state statute that substantially furthers important public policies may so frustrate distinct investment-backed expectations as to constitute a "taking," e.g., Pennsylvania Coal Co. v. Mahon, 260 U. S. 393, and government acquisitions of resources to permit uniquely public functions constitute "takings," e.g., United States v. Causby, 328 U. S. 256. Pp. 438 U. S. 123-128.

(b) In deciding whether particular governmental action has effected a "taking," the character of the action and nature and extent of the interference with property rights (here the city tax block designated as the "landmark site") are focused upon, rather than discrete segments thereof. Consequently, appellants cannot establish a "taking" simply by showing that they have been denied the ability to exploit the superjacent airspace, irrespective of the remainder of appellants' parcel. Pp. 438 U. S. 130-131.

(c) Though diminution in property value alone, as may result from a zoning law, cannot establish a "taking," as appellants concede, they urge that the regulation of individual landmarks is different, because it applies only to selected properties. But it does not follow that landmark laws, which embody a comprehensive plan to preserve structures of historic or aesthetic interest, are discriminatory, like "reverse spot" zoning. Nor can it be successfully contended that designation of a landmark involves only a matter of taste, and therefore will inevitably

Page 438 U. S. 106

lead to arbitrary results, for judicial review is available, and there is no reason to believe it will be less effective than would be so in the case of zoning or any other context. Pp. 438 U. S. 131-133.

(d) That the Landmarks Law affects some landowners more severely than others does not, itself, result in "taking," for that is often the case with general welfare and zoning legislation. Nor, contrary to appellants' contention, ar they solely burdened and unbenefited by the Landmarks Law, which has been extensively applied and was enacted on the basis of the legislative judgment that the preservation of landmarks benefits the citizenry both economically and by improving the overall quality of city life. Pp. 438 U. S. 133-135.

(e) The Landmarks Law no more effects an appropriation of the airspace above the Terminal for governmental uses than would a zoning law appropriate property; it simply prohibits appellants or others from occupying certain features of that space while allowing appellants gainfully to use the remainder of the parcel. United States v. Causby, supra, distinguished. P. 438 U. S. 135.

(f) The Landmarks Law, which does not interfere with the Terminal's present uses or prevent Penn Central from realizing a "reasonable return" on its investment, does not impose the drastic limitation on appellants' ability to use the air rights above the Terminal that appellants claim, for, on this record, there is no showing that a smaller, harmonizing structure would not be authorized. Moreover, the preexisting air rights are made transferable to other parcels in the vicinity of the Terminal, thus mitigating whatever financial burdens appellants have incurred. Pp. 438 U. S. 135-137.

42 N.Y.2d 324, 366 N.E.2d 1271, affirmed.

BRENNAN, J., delivered the opinion of the Court, in which STEWART, WHITE, MARSHALL, BLACKMUN, and POWELL, JJ., joined. REHNQUIST, J, filed a dissenting opinion, in which BURGER, C.J., and STEVENS, J., joined, post, p. 438 U. S. 138.

Page 438 U. S. 107

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Primary Holding

A city can restrict property development near a landmark in order to preserve it without needing to pay compensation to the property owners.

Facts

As provided under the Landmark Preservation Law in New York, the Landmark Preservation Commission had the authority to designate certain buildings and properties as landmarks of historic or scenic value. Once it had applied a landmark designation to a property, the owner could appeal the decision through administrative and judicial proceedings. The owner also retained the right to transfer development rights to other properties under its control.

The railroad company Penn Central sought to build a multistory office building above Grand Central Terminal, which the Commission had designated as a historic landmark. Appeals against that designation failed, and Penn Central was prevented from constructing the office building. It argued that the Commission's action under the state law had constituted an unconstitutional taking of property under the Fifth Amendment.

Opinions

Majority

  • William Joseph Brennan, Jr. (Author)
  • Potter Stewart
  • Byron Raymond White
  • Thurgood Marshall
  • Harry Andrew Blackmun
  • Lewis Franklin Powell, Jr.

Brennan pointed out that Penn Central still could develop the rest of the parcel on which Grand Central Terminal stood, since the law only burdened its ability to use the air space above the Terminal. He was not discomfited by the fact that the law burdened certain property owners more than others, since this is often true of laws that promote the public good. Brennan stated that the government interference with private property should be evaluated both qualitatively (the type of interference) and quantitatively (the extent of the interference). He found that the restrictions under the law had a substantial relationship to the government's legitimate interest in preserving historical landmarks for the general welfare and that Penn Central had plenty of alternative ways to develop this property and others.

Dissent

  • William Hubbs Rehnquist (Author)
  • Warren Earl Burger
  • John Paul Stevens

Observing that fewer than 0.1 percent of the buildings in New York City were affected by the law, Rehnquist argued that the takings principle should prohibit laws that impose substantial burdens on a very small group in exchange for a small benefit to a very large group.

Case Commentary

The Court's reasoning showed that, in evaluating whether a taking requires compensation, a key inquiry consists of evaluating the economic impact of the regulation and whether it has undermined the investment-backed expectations of a private property owner. Although Penn Central lost the case, it eventually secured what it wanted because the terminal later was restored at public expense.

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