Penn Central Transportation Co. v. City of New York

Brief Fact Summary. Penn Central (Appellant) owned the Grand Central Terminal, which was designated by application of New York’s Landmarks Preservation Law to be a landmark. Thereafter, the Appellant entered into a renewable 50-year lease with UGP Properties, Ltd., a United Kingdom company, under which the UGP agreed to construct a multistory office building on top of the terminal. The plans for the new office building were submitted to the Commission for approval, which was denied.

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

Facts. Appellant owned the Grand Central Terminal, which was designated by application of New York’s Landmarks Preservation Law to be a landmark. Thereafter, the Appellant entered into a renewable 50-year lease with UGP Properties, Ltd., a United Kingdom company, under which the UGP agreed to construct a multistory office building on top of the terminal. The plans for the new office building were submitted to the Commission for approval, which was denied. The plans were in conformity with existing zoning regulation, but the Commission of Landmarks Preservation nonetheless denied the applications for certificates of “no external effect” and for “appropriateness.” The Appellants did not pursue any administrative remedies because none were available. The Appellants did not decide to submit other plans to the Commission, either. Instead, the Appellants filed suit in state court seeking a declaratory judgment, injunctive relief barring the City from using the Landmarks Law to impede the c
onstruction of any structure that might otherwise be lawfully constructed, and damaged for the temporary “taking” that occurred between the designation date (August 2, 1967) and the date when the restrictions arising under the Landmarks Law would be lifted. The trial court granted injunctive and declaratory relief, but severed the question of damages for a “temporary taking.” The New York Court of Appeals affirmed, and summarily rejected any claim that the Landmarks Commission had taken any property without just compensation because the law had not transferred control of the property to the city, but only limited the Appellants’ use. The Appellants appealed.

Issue. Has a taking occurred?

Held. No. Affirmed.
Several factors must be weighed to determine whether a taking occurred: (1) the economic impact of the regulation on the claimant and the extent to which the regulation has interfered with distinct investment backed expectations, and (2) the character of the government action, a taking is more readily found when the government has physically invaded the property than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.
In deciding whether a particular government action has effected a taking, this Court focuses both on the character of the action and the nature and extent of the interference with rights in the parcel as a whole- here, the city tax block designated as the “landmark site.”
The Appellants contended that a taking had resulted by the diminished value of the terminal as the result of the Landmarks Law. The Court pointed out that other precedent cases held that diminished value as the result of rezoning did not amount to a taking.
The Court concluded that the interference with Appellants’ property was not such that the interference amounted to a taking requiring just compensation. The Court also held that the impact of the regulation on Appellants’ parcel was insufficient to require the government to institute eminent domain proceedings.

Dissent. The dissent would not equate the Landmarks Law with a zoning regulation. The dissent points out that the effect of the Landmarks Law is to place an affirmative duty on the owner of a designated property to maintain the property as a landmark at his own expense.

Discussion. This case should be read closely as it contains an excellent discussion of the permissible scope of zoning regulations and the requirements for finding that a taking has occurred. The Court did stretch a bit to uphold the Landmarks Law based on its analogy to zoning.