Penn Central Transportation Co. v. New York City

PENN CENTRAL TRANSPORTATION CO. ET AL. v. NEW YORK CITY ET AL.

“APPEAL FROM THE COURT OF APPEALS OF NEW YORK”

“No. 77-444. Argued April 17, 1978 — Decided June 26, 1978”

Disposition: Affirmed, p. 138. “42 N. Y. 2d 324, 366 N. E. 2d 1271”, affirmed.

Opinion of the Court by Mr. Justice Brennan. Mr. Justice Rehnquist, “with whom THE CHIEF JUSTICE and MR. JUSTICE STEVENS join,” dissenting, at 438 U.S. 138.

Metadata correction recorded under Authority Library § 09.4: the prior record described the case as arriving on certiorari. The bound volume records an appeal from the Court of Appeals of New York.

[438 U.S. 104] “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 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.”

[438 U.S. 104] “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.’ . . . After the Commission had rejected appellants' plans for the building as destructive of the Terminal's historic and aesthetic features . . . 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.”

[438 U.S. 105] “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. 123-138.”

[438 U.S. 105] “(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’ . . . 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. 123-128.”

[438 U.S. 105] “(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. 130-131.”

[438 U.S. 105] “(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.”

[438 U.S. 123] “Before considering appellants' specific contentions, it will be useful to review the factors that have shaped the jurisprudence of the Fifth Amendment injunction ‘nor shall private property be taken for public use, without just compensation.’ The question of what constitutes a ‘taking’ for purposes of the Fifth Amendment has proved to be a problem of considerable difficulty.”

[438 U.S. 123] “While this Court has recognized that the ‘Fifth Amendment's guarantee . . . [is] designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole,’ Armstrong v. United States, 364 U. S. 40, 49 (1960), this Court, quite simply, has been unable to [438 U.S. 124] develop any ‘set formula’ for determining when ‘justice and fairness’ require that economic injuries caused by public action be compensated by the government, rather than remain disproportionately concentrated on a few persons.”

[438 U.S. 124] “In engaging in these essentially ad hoc, factual inquiries, the Court's decisions have identified several factors that have particular significance. The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, of course, relevant considerations. . . . So, too, is the character of the governmental action. A ‘taking’ may more readily be found when the interference with property can be characterized as a physical invasion by government, see, e. g., United States v. Causby, 328 U. S. 256 (1946), than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.”

[438 U.S. 130] “Apart from our own disagreement with appellants' characterization of the effect of the New York City law . . . the submission that appellants may establish a ‘taking’ simply by showing that they have been denied the ability to exploit a property interest that they heretofore had believed was available for development is quite simply untenable.”

[438 U.S. 130] “‘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. 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 [438 U.S. 131] parcel as a whole — here, the city tax block designated as the ‘landmark site.’”

[438 U.S. 131] “Appellants concede that the decisions sustaining other land-use regulations, which, like the New York City law, are reasonably related to the promotion of the general welfare, uniformly reject the proposition that diminution in property value, standing alone, can establish a ‘taking,’ see Euclid v. Ambler Realty Co., 272 U. S. 365 (1926) (75% diminution in value caused by zoning law); Hadacheck v. Sebastian, 239 U. S. 394 (1915) (87½% diminution in value) . . . and that the ‘taking’ issue in these contexts is resolved by focusing on the uses the regulations permit.”

[438 U.S. 136] “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. 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.”

[438 U.S. 136] “Unlike the governmental acts in Goldblatt, Miller, Causby, Griggs, and Hadacheck, the New York City law does not interfere in any way with the present uses of the Terminal. Its designation as a landmark not only permits but contemplates that appellants may continue to use the property precisely as it has been used for the past 65 years: as a railroad terminal containing office space and concessions. So the law does not interfere with what must be regarded as Penn Central's primary expectation concerning the use of the parcel. More importantly, on this record, we must regard the New York City law as permitting Penn Central not only to profit from the Terminal but also to obtain a ‘reasonable return’ on its investment.”

[438 U.S. 137] “Second, to the extent appellants have been denied the right to build above the Terminal, it is not literally accurate to say that they have been denied all use of even those pre-existing air rights. Their ability to use these rights has not been abrogated; they are made transferable to at least eight parcels in the vicinity of the Terminal, one or two of which have been found suitable for the construction of new office buildings. . . . While these rights may well not have constituted ‘just compensation’ if a ‘taking’ had occurred, the rights nevertheless undoubtedly mitigate whatever financial burdens the law has imposed on appellants and, for that reason, are to be taken into account in considering the impact of regulation.”

[438 U.S. 138] “On this record, we conclude that the application of New York City's Landmarks Law has not effected a ‘taking’ of appellants' property. 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.”

[438 U.S. 138] “Of the over one million buildings and structures in the city of New York, appellees have singled out 400 for designation as official landmarks. The owner of a building might initially be pleased that his property has been chosen by a distinguished committee of architects, historians, and city planners for such a singular distinction.”

Editorial summary of the remainder of the dissent, outside quotation marks: Justice Rehnquist argued that the burden imposed on the individual landmark owner is not reciprocated by the general benefits and burdens characteristic of zoning, that the designation imposed a servitude for the public's aesthetic benefit on a small number of selected owners, and that the transferable development rights were too uncertain to constitute just compensation for the loss of the right to build above the Terminal.

Editorial note. This edition reproduces the Reporter of Decisions apparatus at 438 U.S. 104–107 and extended verbatim passages of the opinion of the Court from Part III, at 438 U.S. 123–138, arranged under the Court's own divisions and marked with the official page on which each passage appears.

Editorial limitations, declared under Authority Library § 09.4: (1) the numbered footnotes of both opinions are not reproduced; (2) Parts I and II of the opinion of the Court (438 U.S. 107–123), which recite the Landmarks Law, the designation proceedings, and the litigation below, are summarised in Society prose rather than quoted at length; (3) the dissent of Justice Rehnquist (438 U.S. 138–153) is reproduced only at its opening and otherwise summarised; (4) the Reporter's syllabus is reproduced in substantial part with declared ellipses rather than in full; and (5) obvious scanning defects in the digitised volume have been corrected against the surrounding text.

Editorial note. Source correction: the record formerly cited a commercial reproduction as its canonical source. It now cites the Library of Congress digitisation of volume 438 of the United States Reports.

Editorial note. Grand Central Terminal was designated a landmark under New York City's Landmarks Preservation Law, which required Commission approval before alteration of the exterior. The Commission rejected two proposals to build a multistory office tower above the Terminal. The owner and its lessee sued, contending that the designation took their property — including the air rights above the Terminal — without just compensation. The ordinance permitted transfer of the unused development rights to nearby parcels.

Editorial note. The state trial court granted relief; the Appellate Division reversed; and the New York Court of Appeals, 42 N.Y.2d 324, 366 N.E.2d 1271 (1977), held that no taking had occurred. The Supreme Court of the United States heard the case on appeal and affirmed.

Editorial note. Application of the landmarks law to the Terminal was not a taking. The relevant parcel is the property as a whole, not a discrete segment such as the air rights; a claimant may not establish a taking by showing that one strand of the bundle has been abrogated. Because the owner could continue the existing, profitable use and retained transferable development rights, the regulation did not deny it a reasonable return on its investment.

Editorial note. Justice Brennan declined to adopt any set formula, describing takings adjudication as an essentially ad hoc, factual inquiry that weighs (1) the economic impact of the regulation on the claimant, (2) the extent of interference with distinct investment-backed expectations, and (3) the character of the governmental action. Landmark designation was a comprehensive plan to preserve structures of historic value, not a spot appropriation for public use, and its burdens were accompanied by benefits shared across the city. The transferable-development-rights mechanism further mitigated the burden.

Editorial note. Penn Central supplies the default regulatory-takings analysis and the parcel-as-a-whole rule, both of which control unless a categorical rule applies. It converts Holmes's question of degree in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922), into an articulated multifactor test and makes investment-backed expectations a doctrinal category of its own.

Editorial note. Loretto (permanent physical occupation) and Lucas (total deprivation of economically beneficial use) carve categorical rules out of the Penn Central inquiry. Palazzolo v. Rhode Island, 533 U.S. 606 (2001), and Tahoe-Sierra Preservation Council v. Tahoe Regional Planning Agency, 535 U.S. 302 (2002), confirm Penn Central as the residual framework and reaffirm the parcel-as-a-whole rule. Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005), clarified that substantially-advances analysis has no place in takings doctrine.

Editorial note. Read with U.S. Const. amend. V (Takings Clause), Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922), and Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).