PENN CENTRAL TRANSPORTATION CO. V. NEW YORK CITY 438 U.S. 104 (1978) CASE BRIEF

PENN CENTRAL TRANSPORTATION CO. V. NEW YORK CITY

438 U.S. 104 (1978)

NATURE OF THE CASE: This is an appeal of an action challenging the application of a municipal landmark preservation law. The issues presented by appellants are (1) 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, which, of course, is made applicable to the States through the Fourteenth Amendment and, (2), if so, whether the transferable development rights afforded appellants constitute 'just compensation' within the meaning of the Fifth Amendment.

FACTS: Penn Central (P) owned Grand Central Station. It was used as a railroad terminal with office space and concession stands. P wished to construct a multistory office building above the terminal. New York City (D) adopted the Landmarks Preservation Law, meant to protect historic landmarks. D determined that its status as a worldwide tourist center and world capital of business, culture and government would be threatened if legislation were not enacted to protect historic landmarks and neighborhoods from precipitate decisions to destroy or fundamentally alter their character. The intent of the law was to encourage preservation by private owners and users. The law placed restrictions on the use of property but the major theme of the law was to ensure the owners of both a reasonable return and maximum latitude to use their parcels for purposes not inconsistent with the preservation goals. The law imposed a duty to keep the exterior features in good repair and the Commission must approve in advance any proposal to alter the exterior or to construct any exterior improvements. While restrictions were placed on such lands, under zoning laws, the owners of such real property could transfer their undeveloped property rights to contiguous parcels on the same city block. A 1968 ordinance gave the owners of landmark sites additional opportunities to transfer development rights to other parcels by permitting transfers across the street or across the street intersection. In 1969 that law was liberalized further giving owners of restricted lands even more rights to transfer. P did own several properties in downtown Manhattan to which they could transfer their development rights to. At least eight of their buildings were eligible for such transfers. The Landmarks Preservation Commission decided that Grand Central was a landmark, and P opposed that designation but did not seek judicial review of the final decision. The Commission determined that it was an ingenious engineering solution and a magnificent example of French beaux-arts style. In 1968, P entered into an agreement with UGP to construct a multistory office building above the terminal. UGP promised to pay D $1 million annually during construction and $3 million annually thereafter for a 50-year renewable lease and sublease agreement with UGP. P and UGP then applied to D for permission to construct the office building atop the terminal. Two plans were submitted and both were rejected. P did not seek judicial review of the denial and did not decide to submit any more plans. P sued, claiming that this denial amounted to a violation of the fifth and fourteenth Amendments, a taking without just compensation. P sought a declaratory judgment and injunctive relief and damages for a temporary taking. The trial court granted the injunctive and declaratory relief but severed the questions of damages for a temporary taking. The New York Court Supreme Court ruled for D. The restrictions on the site were necessary to promote a legitimate public purpose and that P bore the burden of showing that this regulation deprived them of all reasonable beneficial use of the property. The mere showing of a net operating loss for three years was not sufficient to satisfy their burden to overturn the law. The Court of Appeals affirmed. P appealed.

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