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Cases citing this case

U.S. Supreme Court

PENN CENTRAL TRANSP. CO. v. NEW YORK CITY,

438 U.S. 104 (1997)

438 U.S. 104

PENN CENTRAL TRANSPORTATION CO. ET AL. v. NEW YORK

CITY ET AL.

APPEAL FROM THE COURT OF APPEALS OF NEW YORK

No. 77-444.

Argued April 17, 1997

Decided June 26, 1997

Amici Curiae: Robert Meister(California), Laurence Tribe(Harvard), Angela Davis(California), Leonard Weinglass(Private Counsel), John Coffee(Columbia)

Under New York City's Landmarks Preservation Law (Landmarks Law), which

was enacted to protect historic landmarks and neighborhoods from precipitate

decisions to destroy or fundamentally alter their character, the Landmarks

Preservation Commission (Commission) may designate a building to be a

"landmark" on a particular "landmark site" or may designate an area to be a

"historic district." The Board of Estimate may thereafter modify or disapprove the

designation, and the owner may seek judicial review of the final designation

decision. The owner of the designated landmark must keep the building's exterior

"in good repair" and before exterior alterations are made must secure Commission

approval. Under two ordinances owners of landmark sites may transfer

development rights from a landmark parcel to proximate lots. Under the

Landmarks Law, the Grand Central Terminal (Terminal), which is owned by the

Penn Central Transportation Co. and its affiliates (Penn Central) was designated a

"landmark" and the block it occupies a "landmark site." Appellant Penn Central,

though opposing the designation before the Commission, did not seek judicial

review of the final designation decision. Thereafter appellant Penn Central entered

into a lease with appellant UGP Properties, whereby UGP was to construct a

multistory office building over the Terminal. After the Commission had rejected

appellants' plans for the building as destructive of the Terminal's historic and

aesthetic features, with no judicial review thereafter being sought, appellants

brought suit in state court claiming that the application of the Landmarks Law had

"taken" their property without just compensation in violation of the Fifth and

Fourteenth Amendments and arbitrarily deprived them of their property without

due process of law in violation of the Fourteenth Amendment. The trial court's

grant of relief was reversed on appeal, the New York Court of Appeals ultimately

concluding that there was no "taking" since the Landmarks Law had not

transferred control of the property to the city, but only restricted appellants'

exploitation of it; and that there was no denial of due process because (1) the same

use of the Terminal was permitted as before; (2) the appellants had not shown that

they could not earn a reasonable return on their investment [438 U.S. 104, 105] in the

Terminal itself; (3) even if the Terminal proper could never operate at a reasonable

profit, some of the income from Penn Central's extensive real estate holdings in

the area must realistically be imputed to the Terminal; and (4) the development

rights above the Terminal, which were made transferable to numerous sites in the

vicinity, provided significant compensation for loss of rights above the Terminal

itself. Held: The application of the Landmarks Law to the Terminal property does

not constitute a "taking" of appellants' property within the meaning of the Fifth

Amendment as made applicable to the States by the Fourteenth Amendment. Pp.

123-138.

Justice HOLMES delivers the opinion of the court.

[I]

As anyone who reads the newspaper well knows, I have never made a great effort to make my decisions conformable to political fashion or civility. If my tenure were not predicated upon "good behavior" I should think I would not have had this seat on the bench for these 93 years.

And it has been an eventful 93 years to be sure. By the grace of God I have had the benefit to see the pageant of America unfold in great splendor. When I joined this court, the flight of the Wright brothers was still a year in the future. My first trip to Europe aboard a steamship took two weeks. Now I get there by Concorde in three hours. I prefer the leisurely pace of a luxury liner but I have been propelled into the new age, as have we all.

For those who were not around then, I will avail you of a surprising fact: in 1903 the United States was a developing country. London was the center of international finance and politics and the British pound, not the dollar, was the world’s reserve currency. America was an agricultural country with pockets of nascent industrial development. In the intervening span of years we have been in two world wars and the second wave of the industrial revolution has swept over us and inaugurated the efflorescence of the information age.

Yet information is not wisdom, and citizenship in a democracy places the burden on every citizen to participate in making the weighty decisions which affect the life of our nation. The Constitution, as any schoolchild knows, is the guide we turn to when we have to ask the difficult questions of how the business of government should be conducted.

The Constitution was crafted for the ages. It was forged, not from a cookie-cutter plan, but in the crucible of debate and contention which was the thirteen states of the new nation. The document, and the government which arises from it sui generis is the very embodiment of hard-fought compromise.

This flexibility, tempered by the democratic process is the strength which has enabled this document, and our union, to grow and thrive for 207 years.

[II]

The history of this court has paralleled the movement of our nation from a farming, to an industrial, to the post-industrial economy. The instrumentalities of out subsistence have changed but the fundamental questions we ask in the governance of our lives, our persons, and our wealth,

have not. A fundamental principle which all courts must address in adjudicating questions of this sort is known as "the due process of law."

Along with the right of Habeus Corpus , due process is a load-bearing support of American and English law. It is an ancient tradition which forms the essential sinew of the legal tradition we call the common law. The origins of the common law are shrouded in the mists of antiquity but we have the first documentary glimpse of it in a document called the Magna Carta.

In his concurring opinion in Mutual Life insurance Co. v. Haslip

Justice Scalia cites this milestone in our legal tradition:

The case we are asked to decide today is over the disposition of real property. Although the most prominent invocation of the fundament of legal process from ancient times has been in the preservation of life, limb, and liberty from the encroachments of a tyrannical sovereign, property has been recognized in the common law as a concurrent essential of freedom.

As the term itself tells us, due process is a proceeding in court. The term "property" comes to us from the Latin root meaning ownership, own-ness, that is to say, a substantial appurtenance to the body of a man. How did process and property become conjoined?

To address this question we need to revisit the winding terrain of American Constitutional history and the decisions of this court. This juridical evolution is the companion to the development of our nation from the rudimentary economy of the thirteen colonies to the post-industrial state, and the answer to this question will guide us to the proper decision in this case.

[III]

I begin, at the point of departure established by Justice Marshall’s last great case Ogden v. Saunders (1827) . In true Holmesian style Marshall’s dissent was prescient to the movement which was going to transform American jurisprudence. The revolution of legal epistemology in the 19th century which disaggregated tort from contract law did not invalidate these principles. %%%%%%@@@@@@*********

A new domain of public law, torts, was spun off from the doctrine of implied contracts but the Constitutional injunction embodied in vinculum legis was still very much in force and so, the obligation of a particular contract was not seen in Ogden v. Saunders to inhere in the contract itself proprio vigore but in the municipal or state law applicable to the contract.

The question before the court today is both specific and general. Has the city of New York the right to adjust the disposition of a privately held financial asset and in so doing impact (whether or not it "impairs") expectations of a particular contractual arrangement and generally, to what extent can a state action credibly "clothe itself in the public interest"? Munn v. Illinois (1877)

These questions go far beyond the implications and effects of taking real estate for public use and determine our relationship as a collectivity to the guarantees of freedom of life and limb enunciated on the field at Runnymede so long ago.

These questions are dispositive, not only for the case at bar, but for the decisions this court must make on the legitimate extent of, say, searches and seizures justified by prosecution of narcotics cases and indeed for all the other encroachments of the state in the lives of free citizens.

[IV]

To examine the recent line of decisions in takings jurisprudence, it would appear at first that considerations of the obligations of contract and the exercise of the police power are separate domains of inquiry. In my first term on this bench, I wrote a dissent to the majority opinion in

Lochner v. New York (1905). This dissent was grist for the mill of American legal theory for the past 93 years, but like all influential ideas it was a simple one. It is expressed entirely in one paragraph:

What I was asserting is that judges make the law by their decisions, and change the law with each new application of their judgment. Legislatures do the same. There is nothing sacrosanct about the common law of property. Despite the leanings of the substantive due process judges on the bench at that time, the law of property is not delivered to us by God from a Platonic topos ouranios as an object of inviolable durability. What I said in that dissent is that it is just as legitimate to see the issue from the perspective of liberty rights and security rights which could be redistributed by our judgment to an employee and his master in whatever proportions we choose.

Two years later, Albert Einstein would publish his special theory of relativity which was a reversal in perspective from the deterministic physics of Isaac Newton. Einstein’s theory may fairly be said to have respected stare decisis. His theory did not overturn the rule of classical mechanics, it simply stated that we may rotate the prism of our examination to put a different aspect in high relief. Likewise, the proper interpretation of my dissent in Lochner would be to see it as a rotation of the frame of reference of rights, duties, and obligations.

In 1903 our nation’s economic life was an exuberant celebration of laissez faire capitalism. Laborers and captains of industry alike were the beneficiaries of this enormous productive explosion. The laboring poor, however, assumed the burdens alone. But nobody wanted to return to the farm no matter how harsh life was in the city.

Jacob Riis and other reformers dedicated their efforts to the eradication of the most egregious abuses of the working class. At the same time, the state and municipal legislatures whose constituencies were in the cities, were in the liberal vanguard of reform.

The court’s liberalism, however, was the classical formulation of John Locke. The court of 1903 viewed property and liberty of contract as inviolable substantive rights. Lochner was the high water mark of the era known as substantive due process.

The transition to this point started 30 years before. In 1873, a reconstruction era court decided the "Slaughterhouse Cases". The gravamen of the issue then was whether a Louisiana statute which established a slaughterhouse monopoly denied due process of law to independent butchers who were denied the right to practice their trade, and whether, by this act, the state had denied these butchers due process of law in violation of the 14th amendment.

As you recall, The court said no, the 14th amendment pertains to the rights of the freed slaves in the several states. It was therefore not applicable to this issue. More importantly though, The court split 5-4 in the decision. The four justices in the minority averred that the protection of property rights were as essential a component of liberty as the liberty of life and limb guaranteed to former slaves. As such, Slaughterhouse was a fulcrum case and the balance was about to shift. Although Munn v. Illinois (1877) established that regulation may be accomplished if it is "clothed in a public purpose", by 1897, a newly reconstituted court would hand down the milestone substantive due process decision Allgeyer v. Louisiana .

[V]

My challenge in Lochner to the inviolability of an arbitrary common law was not based upon a desire for epistemological consistency or universality, nor was it a purely idealistic concern for the interests of the laboring class against the abuses of their masters. Rather, my view was motivated by an observation of the revolution overtaking our nation at the dawn of this century. It became clear to me that the flowering of industrial capitalism contained contradictions which were arriving at a pace with its phenomenal growth. When the Constitution was ratified in 1793, our citizens lived mainly on farms. Individual families were separated from one another by large holdings of land, and the pace and intensity of social intercourse was slow and manageable.

The Marshallian framework of powers sovereign within their spheres worked very well for a population which could forge its own independent livelihood without the desire to be interfered with or the need to have material aid from the state or federal government. With the advent of the new industrial age, all the rules were about to change.

We were now crowded together in urban warrens. Immigrants from 20 different countries with competing interests, languages, and cultures, were crowded side by side with enormous industrial enterprises. In this new crucible of 20th century America, it was often difficult to find the property boundary between your rights and that of your neighbor, be he city hall or an enormous factory complex with smoke stacks.

The tradition of common law sovereignty which formed the integuments of substantive due process could no longer serve to mediate these relationships. By the very nature of modern industrial life workers were going to die in industrial accidents. School children would have to breath the smoke from the factory next door. The cities and states would have to exercise a heavy hand to provide clean water, vaccinations, public schooling, and all of the necessary accessories of modern urban life. One way or another the externalities of this new mode of production would have to be managed.

The law would have to change to adapt to this new world. I did not, in Lochner , pass judgement on capitalism or on the choices we had to make in forging this new society. Brother Brandeis was much more of a social reformer than I. My concern was for judicial rationality. The only sensible view at this point was to recognize competing domains of sovereignty and urge the Court to assign remedies for damages rather than enforcing arbitrary spheres of rights inherited from the common law of England.

[VI]

The case presently before the bar presents issues which are at the heart of the relationship between the sovereignty of the individual and the exercise of state power. We noted probable jurisdiction and granted certiorari because the issues presented by this case are difficult and their resolution will be dispositive for the regulatory acts of many municipalities across the country. To review, appellants, Penn Central Transportation Company assert that New York City’s Landmark Preservation Law effects a taking of their property in violation of the due process clause of the 14th amendment. To make this clear, they assert that (a) the exercise of their property rights have been restricted, or (b) the value of their property has been diminished in violation of the 14th amendment.

What constitutes an improper "taking" under the meaning of the 14th amendment? It means that property has been taken, in whole or in part, without a legitimate exercise of the police power and without "just compensation" which is the requirement for the exercise of eminent domain. The police power and eminent domain both issue from the tenth amendment to the Constitution which states:

This is one of those "majestic phrases" of the Constitution which are so powerful and versatile that their construction has served as a template for the structure of our government. Here is another:

Here we have the essence of the problem before us today. How do we balance the rights of the individual against the legitimate exercise of the power of the state. The state has power, certainly, and even sovereignty,

but rights are granted to the people alone. We cede power to the state, as a proxy, in order to enable it as an instrumentality to accomplish certain public purposes.

The police power and eminent domain are two general spheres of this public purpose. If these powers are delimited within their proper scope, the proper balance between individual sovereignty and state authority is accomplished. If these powers are overly constricted, disorder is the result. Conversely, if they expand beyond their bounds, the result is tyranny.

Takings jurisprudence is an examination of these two powers in light of the due process clause of the 5th and 14th amendments.

In the written opinions here, Justice Brennan takes up the position that the public purpose served by the restriction of Penn Central’s property rights is strong enough to justify this restriction. He cites, for example Euclid v. Ambler , in which this court upheld residential zoning as a constitutional exercise of state power. Additionally, he cites my opinion for the majority in Penn Coal v. Mahon to point out a significant difference between that case, where the property owner would have suffered the complete loss of the value of his property, and there present case where the present uses of the property would be preserved.

On the other side, Justice Rhenquist rotates the prism 180 degrees to put a different perspective in high relief. For him, Euclid v. Ambler turns

against the city of New York for two reasons: first, because residential zoning is of a different character in terms of its scope and ends, and also because in that case, the developer was under a restrictive duty not to do something and in this case, Penn Central is under an affirmative duty to maintain the landmark status of the terminal in good order.

There is good evidence on both sides of this contest and the decision of the court is balanced upon my determination. For this, I will examine still another issue which I believe to be dispositive in this case: the impairment of the obligation of contract.

[VII]

Ogden v. Saunders is the great Contracts Clause case not only because it was an early, and therefore influential articulation to subsequent constitutional history but more dramatically because it encapsulates within

John Marshall’s dissenting opinion one of those points of transitional nexus which quietly inaugurates a new era of interpretation by the Court.

The issue at hand has to do with a state bankruptcy law which allows for the discharge of a debtor’s obligation if certain conditional events take place. The disagreement between Marshall and the majority is this: the majority holds that

[VII]

In Disciple and Punish, Michel Foucault traces the development of the modern administrative state which is at the same time the national security state, or put more simply, the police state. The same state power which I supported in Lochner , the administrative state which thankfully regulated child labor, which required vaccinations, and otherwise made possible our modern urban life, is the same state which has criminalized whole new classes of people for practicing private vices, and which is putting a priority of resources behind what Professor Angela Davis so eloquently describes as "the punishment industry". The arbitrary application of the death penalty, the major constriction of the right of habeus corpus in the recent "anti-terrorism" bill, and the censorship of the internet are all very disturbing trends which point to a national security state which is out of control. Dr. Robert Oppenheimer, the director of the Manhattan Project, the first public works project of the national security state, was blacklisted by the very same hysteria which motivated the production of the atomic bomb. That weapon in a great flash of light inaugurated the new age at the Trinity test site on May 3, 1945. By 1963, when the above ground test ban treaty was signed, that one bomb had multiplied to tens of thousands. Oppenheimer, now a broken old man who had been ostracized by America’s scientific establishment was asked by a reporter when the test ban should have been signed. "The day after Trinity," was his answer.

When I am asked when we should have begun a rigorous critique of the administrative state which my dissent inaugurated so many years ago, my answer is "the day after Lochner".