Penn Central Transportation Company v. City of New York

Supreme Court of the United States, 1978.

438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631, reh. den., 439 U.S. 883, 99 S.Ct. 226, 58 L.Ed.2d 198 (1978).

Johnson, pp. 826-839


Facts: The owners of Grand Central Terminal wanted to build a high-rise office tower on top of the station.  New York City’s Landmarks Preservation Commission refused to allow them to do so.  The owners sued in New York Supreme Court, Trial Term, claiming that the application of the Landmarks Preservation Law was an unconstitutional uncompensated taking.  The trial court granted an injunction.  The city appealed and the intermediate appellate court reversed.  The Court of Appeals of New York affirmed.  The owners of Grand Central appealed to the United States Supreme Court.


Issue: Did the Commission’s application of the Landmarks Preservation Law constitute an unconstitutional “taking” that violated the station owners’ Fifth and Fourteenth Amendment rights?


Rule: Regulation authorized by statute that sufficiently frustrates the rational expectations of investors in land capital can amount to a “taking” even if it serves an important public purpose.


Analysis: The majority rejects several contentions of the station owners:


1.     The Court won’t consider different parts of a property and look at the taking of one part as the taking of 100% of a property interest.  The Court will look at the effect on the parcel of property as a whole.  (C.f. Brandeis’s dissent in Pennsylvania Coal)

2.     The Court says that it won’t entertain the idea that the only way to make the application of landmark laws fair is to make all landmark regulations compensable takings.  One reason they won’t consider this is that this would invalidate all landmark preservation laws all around the country.

3.     The Court finds that the regulation of the Terminal is not an appropriation of property for a purely governmental purpose.  The Court thus distinguishes United States v. Causby.


Next, the majority considers whether Pennsylvania Coal applies.  If the government’s interference with the station owners’ use of the property is sufficiently severe, it may be classified as a compensable taking.  The Court notes that the regulation does not interfere with the owners’ present and long-time past use of the property, and that the owners can still make a profit on the terminal as just a plain old terminal and not an office building.  The majority concludes that there was no “taking”.


Rehnquist’s dissent argues that the government took away a substantial property right that the owners previously had, and thus decreased the value of their property.  It is argued that this would be okay if the government was preventing a nuisance by restricting the use of the property, but no such nuisance exists.


Alternatively, the dissent says that regulations in the nature of “zoning” are acceptable because they produce a net gain for society over a broad swath of affected properties and property owners.  Instead, the dissent argues in this case that there is a big net transfer from the station owners to the people of the city who are meant to benefit.  The dissent says it’s not fair to have the entire burden of preserving Grand Central fall on its owners.  That cost is the opportunity cost of not developing the airspace over the terminal.


The dissent basically says that it wouldn’t be expensive for the people who will benefit from the regulation to pay the burdened property owner such that the whole thing is at least a wash.


Conclusion: The Court upheld the ruling of the Court of Appeals of New York.


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