Property II, Pages 906–918

Penn Central Transportation Co. v. City of New York

Supreme Court of the United States, 1978

Facts:

Defendant wanted to preserve historic landmarks to bolster tourism and for the pleasure of the city's residents. It designated plaintiff's terminal as a landmark and therefore imposed restrictions requiring plaintiff to keep it "in good repair" and to get approval for any exterior architectural alterations.

Plaintiff agreed to build and sublet for 50 years an office building above the terminal for $1 million per year while it was being built and for $3 million per year afterwards, while costing plaintiff the loss of its current $700,000–$1,000,000 rental.

Plaintiff applied for a certificate of "appropriateness" for two possible plans, one with the addition being built above the existing facade and resting on the roof and the other involving tearing down part of the facade. Defendant's commission denied both proposals in order to protect the landmark and preserve its aesthetic.

Rather than seek judicial review, plaintiff sued claiming that the law had taken its property without just compensation in violation of the Fifth and Fourteenth Amendments.

Procedural History:

  • Trial court granted the injunctive and declarator relief but not damages.

  • The Appellate Division reversed, holding that the restrictions were necessary to promote the public purpose of protecting landmarks and that plaintiff could therefore only recover if it was deprived of all reasonable beneficial use of the property.

  • Court of appeals affirmed.

Issue:

Did the regulations on plaintiff's land constitute a taking?

Rule:

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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 than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.

Explanation:

The two interests must be balanced.

Reasoning:

Just because it economically harms property does not mean that a governmental restriction is impermissible. Zoning laws can prohibit the most beneficial use of property and significantly harm property values, yet they have been upheld.

Even if this restriction removes plaintiff's ability to use its air rights, other laws limit air space rights without being classified as a taking.

While this restriction may single out plaintiff, invalidating it on this basis would invalidate landmark laws throughout the nation. Unlike laws with single out one for less favorable treatment than the neighboring lots, this is a comprehensive plan to preserve historic structures. Again, zoning laws affect some people more than others, so just because this affects plaintiff more than others does not mean it's invalid. There are many other landmarks in New York City as well, so plaintiff is not solely burdened by this.

The restriction does not interfere with the present uses of the terminal, only prevent some new uses. Plaintiff can still obtain a "reasonable return."

Holding:

No, a taking did not occur. Affirmed.

Dissenting Opinion:

Rehnquist: Defendant is not prohibiting a nuisance. Plaintiff's proposal would comply with health and safety requirements. Defendant is seeking to preserve architecture it thinks is good by imposing a duty to preserve it upon plaintiff. Imposing similar restrictions on 400 other landmarks in the city does not give plaintiff any benefits.

The cost of preserving the building would be only cents per person per year if spread across the public, but instead defendant is imposing the multi-million dollar annual cost solely upon plaintiff. This is exactly the type of discrimination the Fifth Amendment prohibits.

While the majority is correct that removing the owner's ability to make a reasonable return constitutes a taking, the inverse is not true. Just because one can make a "reasonable" use of his property, does not mean that a taking has not happened.

The Court cannot ignore past precedent with eminent domain just because it might benefit the public.

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