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Penn Cent. Transp. Co. v. New York City

Citation: 6 ELR 20251
No. No. 1305, 377 N.Y.S.2d 20/50 App. Div. 2d 265, (N.Y. App. Div., 12/16/1975)

The New York Appellate Division reverses a lower court judgment and holds that the New York City Landmarks Preservation Law is constitutional as applied to Grand Central Terminal, over which plaintiffs intended to construct a 50-story office building. The Landmarks Preservation Commission's designation of Grand Central as a landmark was struck down by the trial court on the incorrect ground that any such regulation of an historical building in private hands constitutes a compensable taking. The Landmark Preservation Law serves an important governmental purpose, historic preservation, in a reasonable manner. Under the deprivation-of-all-reasonable-use test, plaintiffs bear the heavy burden of showing that they have been rendered incapable of obtaining a reasonable return on their investment in order to obtain compensation, and cannot merely demonstrate that they are presently not receiving such a return. Plaintiffs impermissibly attribute railroad operating expenses to the real estate costs of the Terminal in attempting to make such a showing, and in addition omit any rental value of the building in calculating possible rates of return. Furthermore, plaintiffs have failed to demonstrate why development rights over the Terminal could not be profitably transferred to nearby property owners. Plaintiff's burden is not met by showing that they have been deprived of the building's most profitable use, as long as some reasonable use remains.

A lengthy dissent argues that, even excluding the expenses disallowed by the majority, the substantial operating deficit of the terminal deprives the plaintiffs of any reasonable use. The majority's imputation of rent to the Terminal to determine net annual return is not permissible since the Landmarks Law defines "reasonable return" as the excess of earned income over operating expenses. Furthermore, plaintiffs have consistently attempted to increase the income from the Terminal. The right of ownership, subject to the one restriction of nuisance law, includes the right to destroy by neglect. Nor could the transfer of development rights be easily accomplished, in view of possible protest by neighbors of transfers that cause variances from applicable zoning. Other cases in which historic preservation statutes have been upheld dealt with districts, rather than, as here, individual parcels, and have analogized historic district preservation to zoning. Even zoning is confiscatory, however, if it effectively adds private property to government resources. That the original plans for the Terminal called for a building above it indicates that the Landmarks Law would not be vitiated by construction of the proposed office building.

Counsel for Plaintiffs-Respondents
John E. F. Wood
Dewey, Ballantine, Bushby, Palmer & Wood
140 Broadway
New York NY 10005
(212) 344-8000

White & Case
14 Wall Street
New York NY 10005
(212) 732-1040

Counsel for Defendant-Appellant
W. Bernard Richland, Corporation Counsel
Nina G. Goldstein
Municipal Building
New York NY 10013
(212) 566-3929

Before Stevens, P.J.; Markewich, Kupferman, Murphy and Lupiano, JJ.

All concur except Markewich and Lupiano, JJ., who dissent in an opinion by Lupiano, J.