PENN CENTRAL TRANSPORT CO. v. NEW YORK
The New York City Landmarks Preservation Law of 1965 empowered the city to designate certain structures and neighborhoods as "landmarks" or "landmark sites." Penn Central, which owned the Grand Central Terminal (opened in 1913), was not allowed to construct a multistory office building above it.
Did the restriction against Penn Central constitute a "taking" in violation of the Fifth and Fourteenth Amendments?
Legal provision: Takings Clause
No. The Court held that the restrictions imposed did not prevent Penn Central from ever constructing above the terminal in the future. New York's objection was to the nature of the proposed construction and not to construction in general implemented to "enhance" the Terminal. Preventing the construction of a 50-plus story addition above the station was a reasonable restriction substantially related to the general welfare of the city.
Argument of Daniel M. Gribbon
Chief Justice Warren E. Burger: We will hear arguments first this morning in Penn Central Transportation Company against the City of New York.
Mr. Gribbon, you may proceed whenever you are ready.
Mr. Gribbon: Mr. Chief Justice, Justices of the Court.
Perhaps I should be intimidated legally if not physically by the sheer number of governments and organizations on the other side of the question presented on this appeal that have come to the support of the Appellee, the greatest city in the world, three other major cities, the nation’s two largest states.
Justice William H. Rehnquist: When you say greatest, are you referring by population?
Mr. Gribbon: I would prefer to encompass all aspects, Mr. Justice Rehnquist.
Justice William H. Rehnquist: Or weather?
Mr. Gribbon: I will still stay with greatest.
Chief Justice Warren E. Burger: Or total debt.
Mr. Gribbon: Total tax.
Chief Justice Warren E. Burger: Tax.
Mr. Gribbon: It may qualify on all those scores.
Justice Byron R. White: Mr. Gribbon, what city are you referring to?
Mr. Gribbon: Not Chicago.
In addition, 20 civic organizations which are all highly respected, and finally, the United States has had sufficient interest not only to file a brief but to participate in argument.
But I am not so intimidated because the position that I put to you here on behalf of Penn Central rests on the bill of rights, that great charter of liberties, which serves as a protection against all government, not just bean-old government but even the best-intentioned government.
In addition, I would suggest that the unusual display of public interest here serves to emphasize a principal element in Penn Central’s case.
That is the enormous public benefit which is claimed will be brought about by the governmental action that we challenge.
As a result of actions taken by the New York City Landmarks Preservation Commission pursuant to the city’s Landmarks Law, Penn Central has been prohibited from constructing an office building over the Grand Central Terminal.
Now that prohibition has been imposed by the city, not because such a building would be unsafe or uneconomic or in violation of zoning regulations, but solely to assure that all who live in New York and all who visit New York will have an unimpeded view, an unrestricted enjoyment of the terminal, a structure which the Commission found to be a magnificent example of French Beaux Arts architecture.
After the terminal had been designated as a landmark by a Commission of 11 private citizens reporting generally to the Board of Estimate, three separate efforts were made under the guidance of internationally known architect, Marcel Breuer to persuade the Commission in accordance with its procedures that an office building could be constructed without impairing the integrity of the terminal.
All three were rejected and it is now common ground among the parties that Penn Central stands affectively precluded from constructing a building over the terminal.
The record discloses that in return for the use of the air rights over the terminal, Penn Central would receive from a developer who would bear all the risks of constructing the building, $1 million a year during construction and thereafter, a minimum of $3 million a year escalating as rental collections increase.
Justice Potter Stewart: Is there a record anywhere, a picture or a drawing, an architect's drawing or a sketch of what this building would look like?
Mr. Gribbon: There is, Your Honor.
Record 2001, it is in Volume 4.
Justice Potter Stewart: Not in the Appendix?
Mr. Gribbon: Not in the Appendix, no, Your Honor.
It is in the record, came up from the lower court.
Justice Potter Stewart: Thank you.
Mr. Gribbon: Which is large to understand.
I say, therefore, that there can be no doubt that the city’s action has deprived Penn Central of something of value.
While the city recognizes that Penn Central has been denied the right to construct an office building which it is entitled to do, otherwise under applicable zoning regulations the city refuses to acknowledge that air rights constitute a form of property.
It even suggests that the use of the term is something of a semantic trick.
Such rights, however, have been widely used, sold, utilized for 50 years and the Court of Appeals did not hesitate to describe the controversy as one involving air rights to the terminal.
Now, I do not urge that the decision here should turn on whether Penn Central’s laws are characterized as a property right or as a use. As the Solicitor General correctly puts it, it is the substance of the government action that controls rather than the labels that are attached to it.
Chief Justice Warren E. Burger: You do not question the right to the City of New York to take this entire property, do you?
Mr. Gribbon: No, Your Honor, the issue raised here is not, as some of the brief seem to suggest, whether the City of New York may validly preclude Penn Central from constructing a building.
25 years ago in Berman v. Parker, this court, in unanimous opinion proclaimed for all that it is just as appropriate for government action to look to things that beautify and enhance the quality of life as it is to do away with things that are unsanitary.
But, the issue here simply stated is who is going to bear the loss of the burden that is occasioned by this substantial public benefit?
Justice William H. Rehnquist: Is there any doubt about how this case would have come out before the enactment of the Fourteenth Amendment?
Mr. Gribbon: I would think the same considerations are present now, Mr. Justice Rehnquist.
Justice William H. Rehnquist: What would you have relied on before the enactment of Fourteenth Amendment?
Mr. Gribbon: I would think the Fifth Amendment.
Justice William H. Rehnquist: But Berman v. Baltimore said the Fifth Amendment --
Mr. Gribbon: Well, there might have to be a little rewriting of some of the decisions there.
But I am looking at what the Fifth Amendment has been held to do since then.
I would have thought that the Fifth Amendment would provide assurance here if it were to come up today without the Fourteenth Amendment.
It is very difficult to imagine those circumstances in today’s legal climate.
Justice William H. Rehnquist: In today’s legal climate, you do not have to be that vague as in the case from this court held that the Fourteenth Amendment does incorporate the Fifth Amendment --
Mr. Gribbon: Yes, Your Honor.
And I say, I have not dealt with that and would not propose to do it on their basis.
Now, I would propose to address the issue that I have stated here first by examining the central premise of the different justifications that have been advanced, first, by the Court of Appeals and second by the city and its friends for imposing the full cost on Penn Central and that premise is that where the government acts in a regulatory capacity rather than through the exercise of eminent domain, there is no need to inquire whether there has been a compensable taking.
I shall next show that the decisions of this court interpreting the taking clause, the Fifth Amendment particularly those emphasizing its high content of fairness support the conclusion that the provoked prohibitions imposed here do constitute a taking for which compensation is constitutionally required.
Justice Potter Stewart: Are you talking about the full cost? The full cost of what?
Mr. Gribbon: Of not being able to build an office building, the loss that is suffered by being prevented from developing an office building over the terminal.
Justice Potter Stewart: Now it has been held in a case, Hudson, I think it was, that a municipality could limit the height of all buildings within its borders.
Mr. Gribbon: Your Honor, I think that is true.
The height limitation case, I do not believe have application here because this is very --
Justice Potter Stewart: Why isn't that a taking?
Justice Thurgood Marshall: Pan-Am Building is not the shortest building.
Mr. Gribbon: No, Your Honor.
It is there.
Justice Thurgood Marshall: It is right next to it.
Mr. Gribbon: Right next to it.
Because it is selective, Your Honor.
It does not say --
Justice Potter Stewart: The taking is just the same, selective or non-selective, is it not?
Mr. Gribbon: No, I think under the zoning case --
Justice Potter Stewart: It might be discrimination, but from the point of view of the taking it is just exactly the same if you limit every building in the municipality to no more than 4-15 stories.
Mr. Gribbon: I think the decisions indicate that zoning which is comprehensive and applies substantially equally to all people affected within the area can be tolerated as a non-compensable taking on the ground that the benefits and the burdens are reasonably dispersed, not precisely.
Justice Potter Stewart: From the point of view of the property owner, the taking is precisely the same, is it not?
Mr. Gribbon: That is right.
But I think the fact that other people are similarly burdened, and presumably similarly benefited by the height limitation, has served to justify the zoning cases and I do not think it can serve here to justify this selective highly particularized take.
Justice Potter Stewart: I can understand your argument based upon discrimination of some kind.
But if it has been established as, I think you can see it has, that a Municipal Government can limit the height of every building within its borders, why is it not from the point of view of the property owner just as much of taking in that case as it is in your case?
Mr. Gribbon: I think in many instances there is just as much of a taking on the property owner when something is done by regulation as by eminent domain.
But in the regulation cases where you are removing offensive uses or where in the zoning cases you are acting broadly to take care of the entire community in distributing the burdens and the benefits, it has been held not to be a taking.
In terms of English language, yes, but in terms of the Constitution, I think it is just that difference.
Chief Justice Warren E. Burger: Is it not the point that in the situation you are referring to as distinguished from now, it is Mr. Justice Stewart is referring to, the taking some but not all or the taking one but not all the others.
Mr. Gribbon: That is right, selective.
It is a height limitation for one building.
All of its neighbors, including Pan-Am and all the others, can go much, much higher.
Justice Potter Stewart: I fully understand.
I just still have difficulty understanding that why it is not as much a taking in one case as in the other, and quite apart from any argument based upon discrimination or irrationality or anything else.
Mr. Gribbon: All I can say is that the zoning cases have viewed it as being a permissible use of the regulatory power when it is done in a way --
Justice Potter Stewart: You do not try to justify it rationally, you just say that that's authority, not reason.
Mr. Gribbon: That is right, I do not know that it is not rational to say when all people within the area are similarly treated, nobody can have a residence or nobody can have industry.
That is a permissible use of the government power.
Justice Potter Stewart: When several wrongs do not make it right, they make just several wrongs, do they not?
Mr. Gribbon: Yes, I think that is right.
But that depends on whether it is wrong to start with.
The Constitution does not prevent the government from effecting necessary regulations and every action of government has to have some kind of an adverse affect on somebody.
The question is where the line is going to be drawn on that adverse affect?
Chief Justice Warren E. Burger: Was there a matter of equal protection here somewhere?
Mr. Gribbon: Well, Your Honor, we do not argue any equal protection. I think it is a solid case for a taking.
The equal protection cases do not give a great deal of comfort.
If perhaps is warranted for the government to pick out a historic site and say “this should be preserved.”
We do not think it has to pick out every site and you cannot argue as to which site is historic.
I think it is sufficient that we simply argue that when they do that, they pay for what they take for the public benefit.
Chief Justice Warren E. Burger: The theory behind the take -- I will avoid the use of the word 'taking', the limitation because it is in historic place and historic monument is that that is for the benefit of everyone.
Mr. Gribbon: Of everybody.
Chief Justice Warren E. Burger: So you say if it is for the benefit of everybody, everybody should pay for it.
Mr. Gribbon: Everybody should pay for it.
And there is no balancing of benefits and burdens as there is in the zoning cases whereas Mr. Justice and I have just been discussing, the Court has held that they are not within the taking provision.
Justice William H. Rehnquist: Is it not part of the reasoning for the generalized use of the height regulation the notion that all of the buildings that are subject to that height regulation also derive some benefit from it in that their competitor, so to speak, cannot build above them and each of them will have a good view from the top floor and that sort of thing?
Mr. Gribbon: Precisely, Your Honor.
There is a fair distribution not only of cost, but of burdens.
Therefore, there is no taking.
Justice Potter Stewart: As my brother Rehnquist implies in his question, the theory is I think that benefits are accorded to everybody in terms of light and air and so on.
Mr. Gribbon: Yes, which is not true here.
Justice Potter Stewart: Right.
Mr. Gribbon: We are solely burdened and unbenefited, everybody else, not just the buildings, but the visitors, and the people who do it are the ones that get the whole benefit out of it.
Now the first point I wanted to make is that, however the government acts, whether by eminent domain or purporting to act by government regulation, there must be an inquiry into whether there is a compensable taking.
Now the Court of Appeals brushed that over.
They simply recited, this is government regulation and therefore, there need be no kind of an inquiry into taking.
Those who support the Court’s action take the same view that automatically, once you can say this is regulatory action then there is no reason or there is no occasion to look to see whether there is compensation.
Now that is the premise that underlies both the Court of Appeals' opinion and also the position submitted by the city here, and I think it is not supported by the Fifth Amendment itself or by the cases.
The Fifth Amendment does not by its terms apply only to cases of eminent domain, it applies broadly.
Cases in these courts have held that whatever governmental power is exercised, police power, commerce power, if there is a taking you look to see whether the Fifth Amendment comes into play.
I suppose Berman v. Parker, which I mentioned earlier stands for the proposition that the right of government to bring about change is designed, as they put it, to enhance the quality of life.
All comes within the police power, whether it is done under eminent domain or whether it is done through the exercise of regulatory actions.
In most of the cases where there is a problem as to a taking, there has not been an exercise of eminent domain, it is government regulation which is operated in a way which may constitute a taking even though the exercise of eminent domain has not been tried.
It is claimed here that the Goldblatt decision of this Court establishes a different rule, a rule that says, you do not look in the case of regulation to what has been taken, you look rather to what is leftover.
Now that decision does contain some language with respect to the uses left to the property owner but I do not believe it establishes anything like proposition claimed here.
The challenged regulation there prevented the Sand and Gravel company from continuing its operations on property that was originally rural but had become surrounded by the City of Hempstead.
Now far from saying, as it is urged here, that valid regulatory action cannot resolve in a compensable taking, the court, taking through Mr. Justice Clark acknowledged at the outset the basic principle on which we rest our case saying, “governmental action in the form of regulation can be so owners as to constitute a taking which constitutionally requires compensation.”
It then found that there had been no diminution in the value of the property involved.
Then therefore, there was not any taking.
It went on to find, despite the owner’s claim that Sand and Gravel operations were utterly benign and unlike the other things that had been barred by the exercise of the government regulation, the Court overruled them and set on safety grounds, this would be upheld as a valid exercise of the police power.
But, it did not say that as a substitute for a finding that a taking had not taken place.
I submit, that that is the initial inquiry, whether a taking has taken place.
That is the inquiry that the Court of Appeals did not make in which those supporting the city would not make.
Those words that constitutional guarantee that property shall not be taken without compensation incorporate, an exceedingly complex constitutional concept.
Though it has been with us since the beginning of the republic, nothing approaching an all-purpose principle has been articulated from which one can discern the specific application of the concept.
This Court has time and again turned down the opportunity to annunciate any such principle.
A scholar in the area recently wrote that judicial efforts to chart a usable test for determining when police power measures imposed constitutionally compensable losses have on the whole been notably unsuccessful.
With some exceptions the decisional law is largely characterized by confusing an incompatible result of an explained and conclusionary terminology, circular reasoning, and empty rhetoric.
Now those were the scholar’s words, not mine.
But I hasten to say that I have no all-purpose tests to offer the Court and I acknowledge more than the normal humility with which one must approach such constitutional questions.
I do put you, however that a review of the taking cases does disclose two guidelines that may usefully be applied here in determining whether the city’s action constitutes a compensable taking.
When regulatory action is directed towards the elimination of offensive uses or condition, it has been held in many cases that the resulting loss to the property owner is non-compensable because it is one that he may be properly called upon to bear for the public good.
Such cases began as you all know with the elimination of common nuisances, and then went on to encompass other properties and uses which though not nuisances were offensive to the general tenor of the community such as breweries and billiard halls and liberty stables.
Now the construction of a multi-story office building in Midtown, Manhattan, which Penn Central is prohibited from doing, is not only permitted by the zoning laws but it is actually encouraged as an efficient use of valuable land.
I submit therefore, that the principle justification for tolerating some non-compensable diminution in property value was a result of government regulation lends no support to the city’s action here.
Justice Potter Stewart: Would you be making the same argument here if all you wanted to do was to replace the building with one of the same height?
Is it just that the building was inefficient and you just want to build a building, but you are quite willing to not go up with it at the same height and the city said, “No, we want you to keep the old building?”
Mr. Gribbon: I think if it caused this loss and from what you say it would cause this loss we would be making the same argument.
Any action that we are forced to take or kept from taking that causes us a monetary loss is compensable.
Justice Potter Stewart: It is just not that some air space is being taken.
Mr. Gribbon: Well, in this particular case --
Justice Potter Stewart: Well, I know, but that is not --
Mr. Gribbon: No, that is not the whole thing.
I think it is any governmental action of this landmark designation nature.
Justice Potter Stewart: So this would be a taking because the city would be keeping you from making more profit than you could by using the same size building.
Mr. Gribbon: I would put it because they are taking a part of our property, for taking a part of our property right.
Justice Potter Stewart: You would make the argument even if it were conceded which I am sure it is not, even if it were conceded that the old building was profitable in the sense that you were not losing any money on it.
Mr. Gribbon: Yes, Your Honor if there were a cost --
Justice Potter Stewart: If you could double what the county would show you could make by using the building, you would say they are taking part of your property.
Mr. Gribbon: I think that is a fair statement, yes.
Justice Potter Stewart: That is your fundamental argument?
Mr. Gribbon: Well, it is based on the notion that the reason they are doing it is to benefit the general public.
If we can show any loss under the taking cases, whether it is an expectancy of profit here or whether it is a demolition, then it should be compensable.
When they take 3 acres out of 100 acres of land they do not look and say, “Well, you can do pretty well on the other 97 acres.”
They say, “They have taken 3 acres and we will give you the value of it.” and that I submit is precisely what we are faced with here.
Chief Justice Warren E. Burger: Mr. Gribbon, back in 1911, one plan considered it was a 20-story tower on the property, was it not?
Mr. Gribbon: Yes, over the terminal?
Chief Justice Warren E. Burger: Yes.
Mr. Gribbon: Yes, Your Honor.
Chief Justice Warren E. Burger: Has anything along that line been suggested that Commission here at this point?
Mr. Gribbon: No, Your Honor.
Nothing that small has been suggested simply because it would be an inefficient utilization of land.
There are no other buildings really in that area that had been built in recent days that would build only that muchfloor space.
That is the problem in this highly-priced portion of the city to get as much floor space as is consistent with other needs.
So the answer is, no, it has not been.
Although, I must say, there is not any suggestion in the action taken by the Landmarks Commission that even that would satisfy.
Nothing is going to satisfy because they want the air to roam freely over Grand Central Station.
Chief Justice Warren E. Burger: Adjacent to the contrary, but the other way.
Mr. Gribbon: That 20 stories would not do?
Chief Justice Warren E. Burger: Yes.
Mr. Gribbon: No, there has not been to my knowledge, but, there has been no resilience in the Landmarks Commission with three efforts to do this under guidance of noted people.
The answer comes back, “No, no, no.”
Every indication that what is wanted is the preservation of Penn Central in its pristine state.
But that is the only way that the people of New York and its visitors are going to continue to enjoy this architectural monument.
Chief Justice Warren E. Burger: Suppose 20 years ago, 30 years ago before we were as much concerned with the past as we are now and preserving the past, you had built over the Penn Central Station without using any part of the station but just build over to 60-70-storied hotel.
The Commission now decided that that was more in the appearance, the aesthetic value of this landmark.
They wanted to tear it down.
I suppose there is not much doubt that you would expect compensation for that.
Mr. Gribbon: They can condemn it or they can regulate it, and we would be entitled to compensation.
But I think the power of the city is there, and that is one of the things to be concerned about, that it is there.
Chief Justice Warren E. Burger: Are you suggesting that there is no difference in the taking aspect today in the present situation than in the one I hypothesized?
Mr. Gribbon: Well, I do not think there should be, and I do not perceive a difference.
I would have thought that would be a taking 20 years ago.
Chief Justice Warren E. Burger: In terms of Fifth Amendment principles.
Mr. Gribbon: I would think that would clearly have been a taking 20 years ago as well as today.
Justice Thurgood Marshall: Mr. Gribbon, not to long this case, how did Penn Central or Grand Central, how did they get that piece of land right in the middle of Park Avenue?
Mr. Gribbon: Well, there is a long history to it, they bargained they were pioneers --
Justice Thurgood Marshall: Did they steal it fair-and-square?
Mr. Gribbon: They did not steal it fair-and-square, they acquired it over a long period of time, and indeed that building there has done a great deal for the middle of New York and which came first is pretty hard to say.
Justice Thurgood Marshall: It sure does, when you are driving, you have to go all the way around it.
Mr. Gribbon: Well, that is what the city wants to maintain.
Justice Thurgood Marshall: I see!
Mr. Gribbon: They acquired it over many years from predecessor railroads largely and it is the Grand Central Terminal now that we are talking about and not Penn Central, that is gone.
Now I submit that the most frequently applied consideration in determining when government regulation has resulted in a compensable taking has simply stated one of fairness.
As this Court observed in the Forest case, there is a strong element of ethics in the constitutional requirement that private property not be taken without compensation.
Time and again, decisions of this Court have reiterated that the overwriting purpose of the Fifth Amendment guarantee is to assure fairness in the impact of government upon the owners of private property.
Back in 1893, Mr. Justice, Breuer speaking for the Court said, “The Fifth Amendment prevents the public from loading upon one individual more than his just share for the burdens of government.”
40 years later Mr. Justice Brandie speaking for the Court, “Particular individuals may not be singled out to bear the cost of advancing the public convenience.”
In 1960, the Court said the Fifth Amendment is designed to bar the government from forcing some people alone to bear public burdens which in all fairness and justice should be borne by the public as a whole.
Just a few years ago in a decision by Mr. Justice Rehnquist, I think the essence of these declarations was captured and the statement that the Fifth Amendment derives as much content from basic equitable principles of fairness as it does from technical concepts of Property Law.
Now these two taking guidelines that I have suggested would appear to be opposite sides of the same coin.
Where you are eliminating the use or condition which is imposing a burden on other people.
It is fair to permit the person who is charging that to take some expense, to take some burden in order to eliminate the burden that is on the rest of the people.
On the other hand, where the government sets out to secure an improvement or a benefit for all society performing what has been called its entrepreneurial or its resource acquisition function, basic considerations of fairness dictate that a disproportionate share of the cost of securing that benefit not be borne or loaded on a single individual.
Significantly, neither the Court of Appeals nor the city and its supporting friends have anything to say about this fairness concept which has to be the lifeblood of the Fifth Amendment.
Nothing they could say would alter the fact that full burden of the city’s action in freezing the terminal falls exclusively on Penn Central.
It is being called upon to bear a public burden which in all fairness and justice should be borne by the public as a whole in order to obtain the full and unimpeded enjoyment of the terminal.
I turn now to the justification that the Court of Appeals found for allowing the full cost of the terminal preservation to be borne by Penn Central.
It made no inquiry into taking and simply looked to see whether Penn Central had established that it would be impossible, and that is the word of the Court, for it to earn a reasonable return on the terminal without utilizing the air rights.
It is our contention of course that whatever the remaining value of the terminal, we are entitled to compensation for that part that has been taken.
But, even if the remaining value of the terminal is to be given the critical significance that has been accorded by the court, that value was erroneously ascertained.
In applying what it acknowledged to be a special rule for landmark statutes, the Court divided the value of property into two separate ingredients that contributed by private efforts and that contributed by the efforts of organized society as a whole.
Then, without attempting to ascertain how much of the terminal’s value had been contributed by private or society efforts, it concluded that Penn Central was not entitled any compensation because it had failed to establish that there was no possibility that it could not earn a reasonable return on the remaining and also un-ascertained privately contributed value of the terminal.
Justice Potter Stewart: As I read over the briefs filed by your brothers and sisters on the other side, it is my impression that none of them really tried to defend the basic reasoning of the -- that part of the reasoning of the Court of Appeals, would you agree with that?
Mr. Gribbon: I believe that is a fair statement, Mr. Justice Stewart.
That is the way I read those briefs.
They all back away to some degree and come forward with a further explanation of why the decision should go against Penn Central.
Justice William H. Rehnquist: Well, the Court of Appeals really is a statement of Henry George’s single text, is it not?
Justice Potter Stewart: Very close.
Mr. Gribbon: Yeah, but I submit, it is not a statement of sound Constitutional Law.
As many of Henry James’ things were not necessarily sound.
Justice Potter Stewart: Henry George.
Mr. Gribbon: James would be different.
The Court then went on in addition to these two ingredients of value to impute a great deal of income which it did not quantify to the terminal from other buildings in the area. And then as if to put its position beyond all argument, the Court observed that the terminal maybe capable of producing a reasonable return for its owners even if it can never operate at a profit.
I submit that under no circumstances can the Court’s view of whether Penn Central is able to earn a reasonable return on this property absent, the development rights be accepted.
I think its effort to divide property into these two segments it really has no support in the authorities and it is a principle that cannot be limited.
It cannot be limited to the terminal or the landmarks, it applies to all properties, it applies to a residence, it applies to a farm, to an office building.
They are all valuable or not valuable, depending upon their location, depending upon social services protection and amenities.
Now if this approach were adopted, the government would be free to appropriate any property by giving only a pittance of what that property is worth on the open market.
The error in the Court’s opinion is perhaps further disclosed in the passage near the end where it refers to the city’s financial distress, and then says that in times of easy affluence, preservation of landmarks through eminent domain might be desirable or even required.
Surely, however, no constitutional guarantee particularly one based on the Fifth Amendment should be granted or denied depending upon the government’s fiscal condition.
Chief Justice Warren E. Burger: Mr. Gribbon, down near the White House across the street from the Hay-Adams Hotel there is a historic church.
I suppose it goes back well over 100 years, does it not?
Mr. Gribbon: St. John's?
Chief Justice Warren E. Burger: St. John's Church.
I would assume, and I think you would assume with me that the land underlying that church is a very valuable piece of property for an office building or another hotel or what not.
If that were taken -- if the church which presumably has fee title to that property began negotiations for the sale of it to Hilton Hotel Corporation or someone to build a hotel there and some effort was made by the Congress to preserve it, would that be a taking in your view if they said, “No, you cannot tear that down and build a Hilton Hotel.
You cannot do anything with it.
You have got to keep it the way it is.”
Mr. Gribbon: I think it would, Your Honor.
As you put the case, it seems to me it would be a taking and the church would be entitled to compensation on the value of that land and building.
Chief Justice Warren E. Burger: Now in that process or that inquiry it developed that that church was the result of many, many contributions by people that the church corporation as such did not ever put a single dollar into it.
It was all gift money.
Would that make any difference?
Mr. Gribbon: I do not think it would.
I think whoever held the title at that point would be entitled to the compensation.
Chief Justice Warren E. Burger: They would be entitled to get the compensation for the highest invest use of that land as of today?
Mr. Gribbon: Well, that is a phrase that has been banded in the cases, and I am not too sure of the meaning.
I think they would be willing to get what that property is worth, what the Hilton Hotel would pay for them.
Chief Justice Warren E. Burger: Presumably, at the moment, the highest and best use would be a hotel site.
Mr. Gribbon: If that is permitted by the generally applicable zoning laws, and I take that it would be because there is a hotel across the street.
Chief Justice Warren E. Burger: They would of course be limited to the height limits of Washington D.C.
Mr. Gribbon: Whatever they are.
Chief Justice Warren E. Burger: 800-Feet or something.
Mr. Gribbon: The same as everybody else is limited.
But, what an owner has invested in a piece of property is really quite immaterial to what he gets when that property is taken.
He may have an enormous investment, but he is not going to get it back if the property is not worth that or he may have a fully-depreciated investment so it is net zero, and it is the value, it is the loss to that owner. It is not really what is acquired or what the investment law is, but the loss to the owner which is determinative.
As we discussed earlier here in my colloquy with Mr. Justice Stewart, the city and its friends backed away from the Court of Appeals rational and attempt to salvage this statute as being simply a form of land use regulation or zoning.
In the first place, there is not any general principle that all land use regulation or all zoning is permissible and does not constitute a taking.
This Court made that clear in the leading case of Euclid against Ambler.
The basis on which many zoning laws have been upheld is that they represent a comprehensive regulatory program.
This Court has used the term 'comprehensive' in a number of recent decisions.
It has not been defined, but I take it that if comprehensive means anything, it means something close to the opposite of selective or highly particularized.
That is the vice of this landmark law.
It is not zoning, it does not purport to be zoning, it is on top of the zoning laws.
There are vast pervasive zoning laws in the City of New York and this sits on top of them superimposed, and it permits highly-selective and particularized actions.
The designation for example of the Public Library or of the Brooklyn Bridge or of the Statue of Liberty as historic landmarks does not mean anything.
The designation of a final home as a historic landmark may simply give the owner the satisfaction of putting a brass plaque on the door to that effect.
The recent designation of the Radio City Music Hall interior as a landmark was followed very quickly by efforts by the State and the city to put up about $2 million to keep the show going for another year.
But it is the unpredictable nature and the highly-selective nature of what not only has been done but indeed what the law contemplates.
That is why the Court of Appeals looked at this as zoning and said, “No, Sir, it cannot be zoning.”
This really resembles discriminatory zoning which has been condemned and it declined to condemn it because it was historical.
Justice Potter Stewart: Mr. Gribbon, may I interrupt with a question that when does the taking take place?
Supposing with respect of the Chief Justice's example of the church which say it had no negotiations with Hilton, but the Congress decided that they would designate as a historic landmark today.
They had no deal on the fire or anything like that.
Would there be a taking then or would it only a take place when they could show they had a better offer?
Mr. Gribbon: I would think it would take place at the former time.
Justice Potter Stewart: Then why do you say the putting a plaque on the door of a home is just a ceremonial act? Why would that not also be a taking?
Mr. Gribbon: I do not think it imposes any burden or a loss.
Indeed it is a net gain for the owner.
He does not have to do anything but he is permitted to put it on.
Justice Potter Stewart: Is he not equally forbidden to tear down the house and sell it for something else?
Mr. Gribbon: No, that depends upon what he can later workout with the Landmarks Commission, whether he can have additions to it, which will not impair the integrity of the house just as Penn Central attempted to do things that would not impair the terminal.
The mere designation is just the start of the gain.
Justice Potter Stewart: Oh, I see.
Justice Thurgood Marshall: But then you are assuming with the house that it is in a single family occupancy zone.
Mr. Gribbon: Yes.
Justice Thurgood Marshall: So it can never be anything more than basically what it is.
Mr. Gribbon: It is not burdened the way Penn Central has been burdened.
Justice Thurgood Marshall: Which is in a commercial zone.
Mr. Gribbon: In a commercial zone where it is precluded from doing what is permitted under the zoning law.
Justice Thurgood Marshall: By all others in the commercial zone.
Mr. Gribbon: Right.
Under any zoning law the people who are affected do have to deal with some restrictions, but those restrictions are uniformly applied and the affected person can move around, it can develop, it can do things within those zoning restrictions.
Penn Central has no such freedom.
The terminal has in effect been selected out and frozen in place.
I submit that the Landmarks Law has thus operated as a compensable taking of its property rights to acquire compensation.
Chief Justice Warren E. Burger: Mr. Koerner.
Argument of Leonard J. Koerner
Mr. Koerner: Mr. Chief Justice Burger, may it please the Court.
The appellant’s argument has proceeded from the approach that the only method to regulate private property is by and through the principles of eminent domain.
Justice Potter Stewart: I do not think so.
I think counsel very clearly conceded the complete validity of all the zoning legislation in New York City at least for the purposes of this case.
Mr. Koerner: Well, let me just establish the perimeter of the appellant’s argument.
Chief Justice Warren E. Burger: You do not contend this is a zoning case, do you?
Mr. Koerner: No.
What we contend is this is another type of land use regulation with a very same test annunciated by this Court for all other land use cases for those applied here.
Chief Justice Warren E. Burger: As applied to one particular unit?
Mr. Koerner: No, this is the nub of the case.
The appellant has proceeded with the assumption that Grand Central Terminal has been singled out.
That analysis might be correct if they had never been a Landmarks Preservation Law and in response to an announcement by Penn Central that they were going to build a building on top of Grand Central Terminal that the public reacted to it and passed a law that distinctively impacted on Penn Central.
Chief Justice Warren E. Burger: Can it not be different from the case we have now?
Mr. Koerner: That is correct.
That is not what is before the Court.
Chief Justice Warren E. Burger: How would it be different to a constitutional --?
Mr. Koerner: In this particular case, we have a comprehensive land use plan which sets out in advance the criteria for determining whether or not a building is architecturally or historically significant.
The intention of the plan is to preserve all historical buildings, whether by accident they are a part of historic district or they are single and outside the district.
Justice William H. Rehnquist: What if the five boroughs got together and said together that there just is not much open space in the five boroughs and so we are going to preserve all the open space just as it is, even though it may be in private ownership.
Do you think that that will be constitutional?
Mr. Koerner: It would depend on the strength.
You are saying without any --?
Justice William H. Rehnquist: No, finding that there is a --
Mr. Koerner: The answer would be, no, because the individual who was affected by the regulation would not be getting any return on his property, nor would he be permitted to use his property for any purpose.
Justice William H. Rehnquist: Suppose that he was allowed to use it as open space, he could graze cattle there or have dairtrucks.
Mr. Koerner: No, because that would not be economically productive.
We do not contend that if the appellant in this case had been able to establish that his property as restricted was not economically viable that he would not be entitled to relief, he would be.
Justice Potter Stewart: Suppose, in my brother Rehnquist’s example, he was permitted to put a fence around it and if people want to come and sit in the sunshine, they could pay a little fee and they would be raised enough to pay his taxes and maybe 1% profit.
Mr. Koerner: No, that would be insufficient.
The test is whether or not the property as restricted, it is economically viable.
It is the same test that has been applied by this Court in other land use regulations.
Justice Potter Stewart: It would not be enough for the land owner to say, “I may be able to make a profit here the way it is, but I can make two or three times as much if you permitted another use?”
Mr. Koerner: That is correct.
But the test is not whether or not he can receive the highest and best use.
There has been no taking in this case.
The appellant has not had any out-of-pocket expense incurred.
What he has lost is the potential to develop his property of the highest and best use.
Chief Justice Warren E. Burger: Which isn't counsel a valuable right?
Mr. Koerner: Yes, but it must be balanced against the validity of the land use regulation.
Chief Justice Warren E. Burger: Which is for the benefit of whom?
Mr. Koerner: Of the entire community of which the appellant is a part.
Chief Justice Warren E. Burger: But you do not think the entire community should bear the cost of the benefits for the entire community?
Mr. Koerner: What I am saying is that the entire community should pay the appellant if the restriction denies him the right to a reasonable rate of return.
The problem here is that everybody is trying to analogize this case to zoning.
But it is a different type of land use regulation.
The promotion of which has the same effect on the community as the zoning, and that is to make the community more attractive.
Justice William H. Rehnquist: When you say reasonable rate of return, you sound like it is a public utility.
Mr. Koerner: No, we have not quantified it except to the extent that it has been suggested that 6% would be reasonable.
But we never got to the point in this litigation because there was a total failure of proof.
The appellant was unable to show that he could not make a profit.
That is precisely why we had the trial in the State Court.
Chief Justice Warren E. Burger: But suppose instead of this being owned by the Penn Central, this had been a private residence of great historic importance, Commodore Vanderbilt’s house or some such thing, and the Landmark Commission wanted to take it.
What kind of a return do you have on a private residence to use the measurement that you are suggesting here?
Mr. Koerner: Well, in that case, the question was, whether or not our designation would interfere with the existing use?
To the extent that the owner wanted to convert the private residence to a commercial residence then he would be entitled to show whether the property was economically viable.
Chief Justice Warren E. Burger: How about my hypothetical question to Mr. Gribbon on St. John’s Church over, by the White House by Lafayette Park?
Do you think the St. John’s Church could get the reasonable market value of the land less the cost of demolition?
Mr. Koerner: No.
If the designation did not interfere with the use of the church as a church, since it is a non-profit association it would be our position that that church could be maintained as part as an overall scheme to preserve landmarks.
Chief Justice Warren E. Burger: Even if they wanted to do what the National Presbyterian Church did to sell its downtown church for a very large office building site and move out to the outskirts where the parishioners can get to the church more rapidly?
Mr. Koerner: If there was a justification and then they could apply to the Landmarks Commission and that would be a condition, that would be considered by the Commission.
Chief Justice Warren E. Burger: In fixing value?
Mr. Koerner: Yes.
That is not involved in this particular case.
Justice Thurgood Marshall: Is the Landmark Commission qualified to deal with due process?
Mr. Koerner: No.
Justice Thurgood Marshall: Are you not giving it business?
Mr. Koerner: No.
What I am saying is that they have set up a procedure to determine which properties are historically significant.
Justice Thurgood Marshall: You say it is not a Zoning Commission.
Mr. Koerner: It is like the Zoning Commission to the extent that its --
Justice Thurgood Marshall: But a minute ago, you said, “Oh, no”.
Mr. Koerner: No, I was not able to finish.
Justice Thurgood Marshall: You were not going to get in the zoning business.
I thought that is what you said.
Mr. Koerner: No, what I said --
Justice Thurgood Marshall: But now you are going in zoning?
Mr. Koerner: No.
What I am saying that in both zoning and landmarks, you have expert commissions charged with the responsibility of developing a comprehensive land use scheme. The purpose of the scheme is to benefit the community.
What I am saying is that with respect --
Justice Thurgood Marshall: I assume that Commission knows how to operate a railroad terminal?
Mr. Koerner: No, the Commission determines whether the railroad terminal fits under the criteria before it, that is, whether it is architecturally and historically significant.
Once it is designated if it imposes a hardship, that is, if it denies the appellant a reasonable rate of return or makes the property economic.
Justice Thurgood Marshall: But who makes that determination?
Mr. Koerner: The Court in this case made that determination after a lengthy trial.
Justice Thurgood Marshall: I am talking about with the Commission by itself, do they make that determination?
Mr. Koerner: There is a procedure within the --
Justice Thurgood Marshall: I understood two or three times Penn Center went there trying to work this out.
Am I right?
Mr. Koerner: No.
Justice Thurgood Marshall: They did not go there?
Mr. Koerner: Well, they had applied to the Commission for the right to knock-down Grand Central Terminal and put up an office building.
The question was, whether or not that application was appropriate for the purpose of effectuating the chapter, the statute?
And the Landmarks Commission properly determined that it would not be appropriate.
Penn Central did not choose to litigate that issue in a court proceeding.
Indeed they have not chosen to litigate the question of whether Grand Central Terminal is a landmark, it must be assumed.
With respect to the analogy to zoning, in zoning, it is reasonable to divide up area into geographical areas.
That is the reasonableness of a zoning plan.
But with a landmark regulation the reasonableness depends upon the preservation purpose, and that purpose is only achieved by preserving the landmarks wherever they may be in the City of New York.
It is that distinction, it is a different type of land use regulation.
Justice Thurgood Marshall: The Landmark Commission can do this at any time, it sees fit.
Mr. Koerner: No.
There are procedures set up where they have to have a hearing, they have to make a --
Justice Thurgood Marshall: Time-wise they could do it on a building that was 80-years-old.
Mr. Koerner: Yes, that is correct.
But, the built-in safeguard is that if the owner of the subject property is unhappy with the designation, he can bring a special proceeding in the Supreme Court and challenge the designation on the basis of arbitrariness and capriciousness.
One of the factors in considering whether there has been a deprivation of due process.
Justice Thurgood Marshall: I assume that is true as to all State Commissions.
Mr. Koerner: That is correct.
Justice Thurgood Marshall: So there is nothing new, it is old but especially for this Commission.
Mr. Koerner: Well, that is precisely our point that this is a land use regulation that has the same effect as any other land use regulation.
Justice William H. Rehnquist: What if in that proceeding the Court decides that the Commission was absolutely right, no one can dispute this is a historical landmark?
Is that the end of it?
Mr. Koerner: No, because all that says is that the designation is proper.
Whether or not the designation makes the property economically unviable is the type of issue that was reviewed by all the State courts and this Court.
That is the due process question.
Justice William H. Rehnquist: And what standard do they use?
Mr. Koerner: Whether or not the property, as restricted, is being precluded of all reasonable beneficial use.
I want to point out that the --
Justice William H. Rehnquist: Do you mean that not of all economic use but some profitable?
Mr. Koerner: That is correct.
But what they do determine is what this Court has constantly reiterated that when the Police power is properly exercised, and by the way there was no dispute that this is a proper subject for the exercise to the Police power that the highest and maximum use is not a necessary goal.
That it is presumed that that goal can be withdrawn when you exercise the police power.
That is a necessary by-product.
Justice William H. Rehnquist: Do they set a percentage of return on initial investment like the public utility?
Mr. Koerner: No, they have not, they did not do that because in this particular case there was such a failure of proof they did not have to quantify it.
Justice Potter Stewart: You say as the case comes to us, we must judge it on the basis that the Grand Central’s present use is profitable?
Mr. Koerner: Must be and Your Honor that is the essence of this case.
The appellant has ignored the lengthy trial and the two findings of the appellate courts.
Justice Potter Stewart: Mr. Koerner.
Mr. Koerner: Yes, sir.
Justice Potter Stewart: Grand Central is still used by the railroads for passenger service.
Mr. Koerner: That is correct.
Justice Potter Stewart: Let us assume that the Interstate Commerce Commission allowed the station to be clothed for rail service on the ground but not enough people used it for that purpose.
Assume further that no other use of the building in its present condition is deemed feasible.
Mr. Koerner: Right.
Justice Potter Stewart: What would your position be with respect to that situation?
Mr. Koerner: Penn Central would be entitled to relief because the property as restricted was not economically viable.
Justice Potter Stewart: Was that clear from the New York law?
Mr. Koerner: Yes, and I again want to emphasize the attempt by the appellant to ignore the substantial factual data presented during the trial.
Justice Potter Stewart: Is there a specific section of the New York Law that deals with that situation?
Mr. Koerner: In this particular case, it came under the guys of the challenge to the application as a deprivation of due process.
To answer your question it was framed in response to a due process issue raised in Court.
With respect to other challenges internally through the administrative process, we allow for an application, for a certificate of appropriateness, that is, even to the extent of demolishing the landmark parcel if it is not economically viable.
Justice Potter Stewart: But that is not in the statute.
Mr. Koerner: No, it is in the statute.
Justice Potter Stewart: It is?
Mr. Koerner: But, Penn Central was a tax-exempt property and the statute did not have this exception applicable to a tax-exempt property.
So Penn Central sued in Court and they attempted to prove in Court what they could not prove before the Commission, it is the same test
Justice Potter Stewart: In any event similar to the question of my brother Powell, if the company at any time in the future, next year or the year after that, any time it can prove that the situation has changed and that the property is no longer economically viable, it will get relief.
Mr. Koerner: That is precisely the answer.
That is right.
Justice William H. Rehnquist: What again is the definition of being economically viable?
Mr. Koerner: It was not required to be quantified in this case, but it has been traditionally meant that on his investment, he would be able to earn approximately 6%.
Justice William H. Rehnquist: Like public utilities.
Mr. Koerner: Correct!
Justice William H. Rehnquist: Supposing that the New York Central railroad is applying to the Railroad Rate Commission in New York for an intrastate fare change and the Commission decides that you can make 6% on -- which we consider a reasonable rate without a spur track of three miles which you presently own.
So we are just going to take that three miles spur track away from you and you will still make 6% on the total investment you have.
Do you think it could do that?
Mr. Koerner: No, because I do not see the strength of the public purpose in that particular case.
Justice William H. Rehnquist: Supposing they want the spur track is a railroad museum to show how the 20th century used to look?
Mr. Koerner: Well, then again, the answer to Your Honor’s question is that in your application you are singling out that particular railroad and restricting its development of its property.
The entire concept of this scheme is that we are not singling out Penn Central, we are treating it like every other landmark within the City of New York.
We have designated over 500 properties.
Indeed, before a designation is completed, that designation has to be approved by the City Planning Commission which must determine whether it is consistent with the zoning plan and the master plan, and whether or not any urban renewal, development might interfere.
Justice Potter Stewart: Mr. Koerner, could I return for a moment to Justice Powell’s question about economic viability of demolition or something like that.
As I understood the statute, the statutory test of whether to grant a Certificate of Appropriateness does not say anything at all about economic viability.
Am I wrong on that?
Mr. Koerner: There are two bases for Certificate of Appropriateness.
With respect to Penn Central, because it was a tax-exempt property, you are correct that they could not have gotten a Certificate of Appropriateness administratively because the economic viability question was not allowed since they were tax-exempt.
With respect to other commercial properties, a Certificate of Appropriateness can be granted.
Justice Potter Stewart: On the ground of economic --?
Mr. Koerner: That is correct.
Justice Potter Stewart: What section of the statute authorizes that, 207-6.0?
I do not see anything in there about economic viability.
Mr. Koerner: Can I?
I just want to use my time.
Justice Potter Stewart: Alright, but you do agree that with respect to the --
Mr. Koerner: Section 207-8.0.
Justice Potter Stewart: 8.0, I see.
But with respect to the Grand Central, economics are totally irrelevant.
Mr. Koerner: No, because while he could not get administrative relief, we agree that if he have had established his case in Court that the property was not economically viable he would have been entitled to judicial relief.
Justice Potter Stewart: But not under subsection 6?
Mr. Koerner: No, that is correct, under due process.
Justice Potter Stewart: Under the Constitution.
Now as you are admitting that as applied in that situation the statute would be unconstitutional.
Mr. Koerner: If we had not had the added step that whatever deficiency was in the Landmark Law was corrected at trial.
Justice Potter Stewart: But the Landmark Law in it as it reads is unconstitutional if it does not allow for some kind of remedy when there is this kind of economic --
Mr. Koerner: That is correct.
But it is not the issue in this case because Penn Central had the opportunity to establish under the very same test and fail.
Justice Lewis F. Powell: Mr. Koerner, I am a little confused about your references to tax-exemption.
What specifically is tax-exempt here?
Mr. Koerner: The railroad does not have to pay full city real estate taxes on the terminal.
There is an exemption under the Railroad Law for that portion of the terminal that is used for railroad purposes so that they only pay approximately one-third the assessed valuation.
Justice Lewis F. Powell: Is the theory be that they are taxed in other ways or --?
Mr. Koerner: It was intended to encourage them to keep up the railroad system.
Chief Justice Warren E. Burger: Does this make any difference to the constitutional issues in this case whether they were totally tax-exempt or paid the full tax that everyone else pays?
Mr. Koerner: No.
Chief Justice Warren E. Burger: So In this respect they are in the same posture.
Mr. Koerner: That is correct.
Chief Justice Warren E. Burger: Same posture as St. John’s Church?
Mr. Koerner: That is correct, with the exception that here though you can equate their business with whether or not they can make a reasonable rate of return. You can determine it.
One thing we have left out, my time is running out, but I want to emphasize one of the factor that was quite important.
We have concentrated on the restriction of Grand Central Terminal and whether that restriction imposes on them an extraordinary burden not present with other land use regulation impacts on a parcel.
What we have left out and the appellant has not commented on the air rights.
We have never contended that the transferred development rights were equal in value to what the person lost, but that is not the test.
The test is whether the transferred development rights constituted a valuable asset to the appellant, that when added to his return on the railroad which he was unable to establish, whether that satisfied even the appellant’s test of fairness.
Now I want to briefly mention the evidence that was upheld by the two appellate courts.
Justice Potter Stewart: Mr. Koerner, before you do that, let me just understand your theory.
If there is no taking here, you do not even have to give them the TDR.
Mr. Koerner: That is correct.
Justice Potter Stewart: Then why do we have to consider?
Mr. Koerner: Because the air rights are part of the comprehensive scheme in an attempt to at least recognize that we are going to try to do everything we can.
Justice Potter Stewart: But maybe you have been generous than the Constitution compels you to be.
Why is that of any relevance at all, what we have to decide?
Mr. Koerner: Because, Judge Pritel felt that the air rights --
Justice Potter Stewart: Nobody is defending his rationale.
Mr. Koerner: No, to the extent that he relied on the air rights, it was appropriate to consider the air rights in the context of the whole package to determine exactly whether we have been fair.
Justice Potter Stewart: What difference does it make whether you have been fair?
I do not understand.
Mr. Koerner: Because the fairness concept advocated by the appellant goes to the concept of due process in determining value.
Our plan contemplates giving the individual does not mean this.
Justice Potter Stewart: But your legal position is you do not have to be fair.
Mr. Koerner: No, that is not our legal position.
Justice Lewis F. Powell: Your position is, as I understand is that there can be a taking sometimes under this contemplation.
Mr. Koerner: That is correct, but there has not been in this particular case and that the facts and circumstances of this particular case show there has not been.
I will only take one more minute.
With respect to the air rights, the testimonial trial showed that the proposed builder UPG, had offered Penn Central $3.8 million a year for the right to develop air rights over the Biltmore Hotel an eligible receiving site under the transfer development rules.
Penn Central’s representative testified that $3.8 million was insufficient because it wanted $5 million.
They computed the $5 million as follows: it was guaranteed $3 million if it developed the air rights above the terminal.
In addition, its profit from building Biltmore was $2 million.
So to get the same deal that it would have had with respect to building over Grand Central Terminal, it concluded it had to receive $5 million.
I urge that this is not the issue before the Court.
The issue is not whether or not Penn Central was entitled to the highest and best use, the $5 million.
The issue is whether or not the $3.8 million return by using the Biltmore site, together with their failure to establish that the property, as restricted, cannot earn a reasonable rate of return is so unfair as to really in all effect totally emasculate the land use regulation that is now under attack because in a city like New York it is unusual for all of the landmarks to be clustered in historic districts.
For the preservation purpose to be accomplished, it is necessary that the Landmarks Commission be able to act wherever it finds a building of historical and architectural significance.
The total plan here is a reasonable one, it is a different type of land use regulation, but all the courts have applied the traditional rules and have properly concluded that this regulation should be sustained.
Justice Potter Stewart: Mr. Koerner, let me just ask one more question.
I know you are concerned about your time, but if the transfer rights are of equal value or substantially equal value, could we not hold that there was a taking and then on retrial they would find that there was just compensation, you can go ahead with your program without any --?
Mr. Koerner: No, because I do not think the transfer rights were of the equivalent values.
Justice Potter Stewart: You concede they were not.
Mr. Koerner: It was not litigated in Court, all that was litigated --.
Justice Potter Stewart: For purposes of our decision, we should assume they are not.
Mr. Koerner: That is correct.
Chief Justice Warren E. Burger: Mrs. Wald!
Argument of Patricia Wald
Mr. Wald: Mr. Chief Justice and may it please the Court.
The United States has a vital interest in these proceedings today.
Congress and the executive have declared in many statutes that it is a national policy, “the historical and cultural foundations of the nation” should be preserved as a living part of our community life and development in order to give our people a sense of orientation.”
Now the Federal Government is deeply involved in historical preservation in many ways and I will allude to them only briefly.
Number one, it designates and preserves historic landmarks on its own public lands.
Two, it sometimes utilizes the power of eminent domain to acquire sites of national historic significance.
Number three, since 1966 it maintains a national registry of historic buildings which have local, state, city, and national significance and now contains 15,000 such buildings.
Fourth, it provides financial aid to states and cities so that they can survey their historic preservation problems, formulate plans, and embark on preservation projects to preserve their treasures.
Fifth, all federal agencies pursuant to the 1966 Act and to an executive order, who license projects or spend money on projects in any state must take account of the need to preserve historic sites which are registered or which are eligible for registration.
Finally, there are several very specific enactments including the National Environmental Protection Act which requires need for impact statements to assess the impact of historic sites that might be affected by proposed projects.
Justice John Paul Stevens: Mrs. Wald, can I just interrupt because it goes to what you are reciting out.
Has the United States ever imposed the regulation on private use of private property for historic purposes without compensating the owner?
Mr. Wald: I do not believe it has directly done so.
Justice John Paul Stevens: So it has never done anything comparable to what we have before us in this case?
Mr. Wald: Not to my knowledge, but may I add that it does provide subsidization to local groups to embark upon some of their projects pursuant to laws like the New York City Landmark Law which use a regulatory framework for preservation.
Justice John Paul Stevens: Is it fair to say that the Federal Policy has always been where there is a public benefit, the public shall pay?
Mr. Wald: I believe that that is an overstatement for the following reasons.
Naturally, the Federal Government has relied primarily upon state and local governments and their Police power and their particular historic preservation laws to bring about the preservation of buildings except where those buildings are on public lands.
However, we do have several instances not for historic preservation but for other uses which raise a similar question where the Federal Government to its regulatory powers, does in fact impose restrictions upon land use which it does not compensate for by eminent domain.
In the area of Historic Preservation to my knowledge, you were correct, Justice Stevens, that we do not do it directly.
Justice John Paul Stevens: I suppose a farmer up near Manassas is suddenly informed that the records now discover an important part of the Battle of Manassas was fought on his farm.
Therefore, they will let him graze his cows and raise some grain, but that he cannot sell it.
It is just going to be preserved for the benefit of the rural people. Do you mean to suggest that they do not have to pay him the going rate per acre for that farm?
Mr. Wald: If we are referring now, as I believe you are to the national government taking such action, then right now the national government would either have to do it through eminent domain or through a state or local government which had jurisdiction.
We do not have any statutes on the books to my knowledge which allow us to have a national historic preservation regulatory framework such as the states and cities.
That is not to say, Your Honor, and certainly we do not have the question before us today that it would not be possible for Congress to enact such.
Justice John Paul Stevens: Yeah, the Chief Justice’s question was a constitutional question and that is because that is what we have in this case, not you happened to have at the moment, a federal statute.
Mr. Wald: It is always very hazardous to pass unconstitutional questions ahead of time.
Justice John Paul Stevens: That is what we have to do in this case.
Mr. Wald: You are passing on a statute, of course, it is one the books for New York City.
If the Federal Government pursuant to a federal jurisdiction pass such a statute, I believe that if properly written it would be constitutional.
Chief Justice Warren E. Burger: Without compensation?
Mr. Wald: Without compensation in the sense that it would be subject to the same test which we suggest constitutionally apply the state and local government.
If it became so onerous to the landholder, if he could not take any beneficial uses out of his property, that it would become a taking and it would be unconstitutional.
Chief Justice Warren E. Burger: The beneficial use that my farmer friend up at Manassas has in mind is to leave it to his children or to sell it as the case maybe.
And he can get $1,500 an acre for it in some places now.
Are you suggesting the United States government or any government could take that property without paying him the going rate?
Mr. Wald: I am not suggesting they could take it, Mr. Chief Justice, I am suggesting that a valid historical landmark statute could allow them to restrict its usage so that a particular historic framework or particular historic use would not be violated.
Now I believe --
Justice Thurgood Marshall: If we had an offer to sell it to the supermarket, a landmark supermarket, would that be right?
The Grand Central Supermarket.
Would that be a price he had to be paid?
Mr. Wald: I am sorry, I am not sure I understand your question, Mr. Justice Marshall.
Justice Thurgood Marshall: I just want to put one little point to the Chief Justice’s question.
Now, we have got the cattle and all that.
The Grand Central Supermarket has (Inaudible) build a huge land mall there and they will give him $2,500 an acre.
Is that the price?
Mr. Wald: Is that the price you suggest that the government would have to pay?
Justice Thurgood Marshall: Yes.
Mr. Wald: I believe that the Federal Government could indeed enact a statute which would not require them to pay the price you suggest, the going rate on the market for the land simply because they had restricted its uses so as to prevent him from selling it to the supermarket.
Chief Justice Warren E. Burger: Let me get back to the hypothetical that I gave Mr. Gribbon and see what your answer is.
The National Presbyterian Church was surely a historic place on Connecticut Avenue.
Out in front of the building was the statue of John Witherspoon, one of the signers of the Declaration I think.
They contracted to sell it for $3 or 4 million.
Suppose after they contracted to sell it in order to build a new church further out and had this $3 or 4 million contract, the District of Columbia had said, “No, that is going to be a landmark.
You cannot sell it.”
You have got the going market value fixed by a contract an arm's length contract with the National Broadcasters Association to put the building up there.
Do you suggest the District of Columbia under any statute could have taken that property without paying them for it?
Mr. Wald: I do suggest that the District of Columbia could have passed a regulation which required after designation through a reasonable mechanism of that church as a historical site.
That indeed either that site must be maintained -- the church must be maintained, or if it were sold, the successor must maintain it in the church form.
And I believe that a somewhat similar case, the Benningson (ph) case here where indeed the district --
Justice Byron R. White: You would not say that if it were sold for $10 or whatever the buyer would pay then he just close down the church. You could not make him operate the church.
You would not suggest that, would you?
Mr. Wald: No, I would not suggest it.
Justice Byron R. White: The city here indicated that if they seized operating as a church, it would no longer be appropriate to restrict the use.
Justice Thurgood Marshall: Without compensation.
Justice Byron R. White: Without compensation.
Mr. Wald: I would suggest that since the property was originally -- its original, its present use at the time it was designated was as a church, that indeed nobody can be made obviously to operate a church if they do not want to.
But I think what can be done is to restrict other uses of the property.
Justice Byron R. White: Well, in the Grand Central case, are you differing with your colleague that if Penn Central just shut the terminal down, that it would still be required to leave the building as it is?
Mr. Wald: Certainly, I believe the statute is valid, and under the statute if it wished to shut down the station, to cease operating, to demolish the --
Chief Justice Warren E. Burger: Not demolish.
Justice Byron R. White: It is cease operating, then they go in before the Commission and say, “We are not making a nickel on this unless we can do something with it, we cannot even pay our taxes on it, reduced as they are.”
I thought your colleague indicated that then they could tear it down or at least if they were going to have to live it standing, they had to be paid for it.
Mr. Wald: I believe that the courts, although it is not in the statute in Grand Central’s case, but I believe that the New York courts in that situation if they did not want to operate it at all would indeed permit them to cease operating it.
But I am not sure that it would permit them to go ahead and make another use of the property.
Justice William H. Rehnquist: The point is, in the event hypothesized by my brother white, would the Constitution then require that compensation to be paid?
Mr. Wald: I do not believe that the Constitution require the compensation to be paid simply because they decided they did not want to operate it anymore as a railroad station.
I believe that they would be before a taking and compensation would be required.
Under existing law, they would be required to find some beneficial use to attempt to find some beneficial use that did not violate the nature of the Preservation Law.
I believe, in fact, that is what most of the cases this Court has held in the past would suggest.
For instance, in the Goldblatt case.
The case said, candidly the ordinates completely prohibited the pit use to which the property had been put before.
That was completely ruled out.
Yet, the Court held that was not a taking because the plaintiff might well find some other uses for the property or there had not been any showing that he could not.
There had been cases in which the south terminal case in Boston where the EPA simply said, in its regulations and its transportation plan, “You may not use 'X' percentage of parking spaces because if you do it will affect the Clean Air Acts” and the court there held the First Circuit that was not a taking because even though you could not use those spaces for parking spaces, for which they had originally been intended, you had to look around and find some other less value uses.
Justice Lewis F. Powell: Mrs. Wald, just applying it to the historic landmark area, if the landmark designation causes the property owner to actually lose money on the property, then it is a taking.
If it can still make a reasonable return, it is not a taking.
Is that your test?
Mr. Wald: That is pretty much the test.
I think it is the test of the past cases here.
I think as long as there is a profitable use to the property, there has not been a taking there would have been a numerable taking.
Justice Lewis F. Powell: Is it just one penny a profit or a reasonable return?
Mr. Wald: Certainly, the cases do not tell us in the past.
They leave the formula.
In fact, I think they said --
Justice Lewis F. Powell: But we have to decide.
Mr. Wald: “No set of formula has a reasonable return or a beneficial use.”
Justice Lewis F. Powell: You just say, just a marginal profit would not be enough.
It has to be a reasonable return.
Mr. Wald: I would say a reasonable return is a beneficial use.
Justice Lewis F. Powell: In a reasonable return, how does one measure that if it is a lot less then it could be obtained by putting it to some other use? Is it still reasonable?
Mr. Wald: I believe so and I believe that is exactly what all of the cases have said, we do not take the test of the most profitable use.
Most recently and most --
Justice Lewis F. Powell: But, you do not take the test of the least profitable use either.
Chief Justice Warren E. Burger: It could be zero.
Mr. Wald: I certainly believe that Constitution would require the owner, if he could not use it for a particular purpose to be able to go out and find the most profitable use consistent with the point of the regulation, namely the preservation of the landmark.
Chief Justice Warren E. Burger: Do you mean you are going to make him do something with it?
Mr. Wald: No, we are going to permit him to do something with it if he wants to.
Chief Justice Warren E. Burger: What if he just wants to board it up?
Mr. Wald: If he wants to board it up and that does not, in some way infringe upon the historical preservation aspect of the property, then he could do that, it is the historical preservation simply said, this is a beautiful church to look at from the outside and we do not care what happens, whether anybody goes in it or anything else.
Then, he can just leave it stand there, if he wants to.
On the other hand, he wants to continue to run it as a church, then he could do that too.
Chief Justice Warren E. Burger: Who should pay the $10,000 a year insurance premiums on it and public liability in the meantime?
Mr. Wald: Well, the church might be the wrong example, but in essence the owner continues with all of both the liabilities and the profits of ownership.
But, any owner has certain options about how to use his property.
Chief Justice Warren E. Burger: What profit have you got on a boarded up building?
Mr. Wald: If you boarded it up by your own choice then you --
Chief Justice Warren E. Burger: No, boarded it up because the government from your point of view would not let them sell it.
Mr. Wald: In most of these cases, the sale and indeed in the case instance here in the New York Law they do not forbid the sale per se, they only forbid the sale for a use which is restricted.
So indeed many of the cases in which the courts have held there is no taking at a reasonable regulatory use, they point out that it leaves the option with the owner as to whether or not he wants to sale or lease it or use it for other purposes.
All of these cases if I may finish in one sentence, all of the land use cases have pointed out that it is almost inevitable starting with Justice Holmes back in the Coal case that when the government pursues a Police power for a legitimate end, it will likely end up with the diminution of value of land and the restriction of use.
Unless that becomes so onerous as to move over into a taking and where that line is drawn the courts have over the years said, it is very difficult that it is a reasonable use of the Police power.
I think the rule which appellant would suggest that any time there is a loss in value of property due to a reasonably valid regulation use of the Police power that the owner must be compensated is indeed a radical revolutionary rule, which just simply has no foundation in the past cases of the Police power or indeed in the taking cases themselves.
Chief Justice Warren E. Burger: Thank you.
Do you have anything further, Mr. Gribbon?
Rebuttal of Daniel M. Gribbon
Mr. Gribbon: If I may briefly, Mr. Chief Justice, I shall like to answer Mr. Justice Marshall’s inquiry and make clear that Penn Central did make an effort with the Landmarks Commission to obtain a Certificate of Appropriateness and no exterior effect.
In the Landmarks Commission, there was never any attention paid to dollars.
That was strictly an aesthetic determination.
The only time economic laws came into the picture was when the case went into court.
And then instead of inquiring as to whether there was a taking and making a determination which is not terribly complex in this case as to the value of what was taken the courts went off on this economic inquiry and the reasonable return which, as you read the Court of Appeals opinion, we were bound to lose.
There was no way to win under the way the Court of Appeals analyzed this economic problem.
Justice William H. Rehnquist: What if in passing this ordinance, was it an ordinance?
What was it?
Mr. Gribbon: This Landmarks Law is an ordinance.
Justice William H. Rehnquist: What if they had done their homework before they have passed the ordinance and said the following landmarks are hereby designated right in the ordinance, and they did 30 of them or 40.
So that you were not singled out at all.
They thought they had spotted all the landmarks in town.
Mr. Gribbon: I think if the economic impact on us was the same, ultimately as it is here, the fact that they were designated in the law rather than designated by the Commission would be immaterial.
Justice William H. Rehnquist: But, you would not be singled out.
Mr. Gribbon: Well, certainly were singled out much more than the zoning case.
Justice William H. Rehnquist: At least you would be one of 30.
Mr. Gribbon: Yes, but we understand that they do not operate the same way.
Among these 30 are the Statue of Liberty and the Landmarks Law does not operate on it.
It was nearly the impact that operates on us.
Another one is a tree in Brooklyn.
It is the way it operates to take property that we complain of here.
Justice Lewis F. Powell: Well I think as I heard this argument, it has narrowed the issue, as I understand your opponent.
He conceives that there might be occasions and circumstances under which the operation of this ordinance did operate so as to be a taking in the constitutional sense.
You concede with respect to the Statue of Liberty or the tree in Brooklyn, that there might be occasions when it did not so operate.
The question then is, does it in this particular case so operate?
Mr. Gribbon: Does it operate here?
Justice Lewis F. Powell: Yeah.
Justice William H. Rehnquist: Do you agree that we judge the case on the assumption that the station is a sustainable economic operation?
Mr. Gribbon: No, I do not think so, Your Honor because the only --
Justice William H. Rehnquist: I know, but you disprove it or --?
I thought there were two findings that it was -- as they say economically viable?
Mr. Gribbon: I say the Court of Appeals finding to that effect is totally erroneous because it is based on this concept that we need only earn or return on the privately contributed ingredient.
That destroys the entire finding.
Justice William H. Rehnquist: Well, let us assume for the moment that we accept it.
That it is economically viable, but nevertheless, it is perfectly obvious, you could make more if you build a big building on it.
Mr. Gribbon: I still say, even if you accept it, the decision is wrong and we are entitled to compensation.
I do not think the fact that what we have left over is atonement for what has been taken from us.
Chief Justice Warren E. Burger: In your brief at Page 17 you cite this Court’s opinion in Fuller, where you say that the government in a condonation case can exclude from consideration of the jury the value that maybe added by the fact that the government build a post office near the site 80 years ago.
Is that substantial to your argument there?
Mr. Gribbon: I think it is.
I think that is a very important part of our argument.
I think that this highest and best use is something that has to be looked at very carefully and I would ask the Court to look at the Causby decision here in 328, which is cited, which illustrates a number of things.
In the first place, property was not taken by the government.
Yet, there was a loss to the property owner and he was compensated for it.
Second, his entire property was not taken.
He was compensated because he was no longer able to operate a chicken farm and it was clear that he could have operated a vegetable patch.
The Court noted that, but, the compensation was because he was prevented from doing that.
The Court also said that an expected use of a property is properly to be taken into account in making an evaluation for taking purposes.
Chief Justice Warren E. Burger: The expected use, is that what you said?
Mr. Gribbon: That is what it said, an expected use.
Chief Justice Warren E. Burger: How is that different from the highest and best potential use?
Mr. Gribbon: I am not sure how it is different.
I think it makes more sense because an expected use is clearly an element of value.
That is why people buy it for what they expect to do.
I think the highest and beneficial use is a term that has really outlived its usefulness, if it ever had one because I think the cases stand for the proposition that you get compensation for what has been taken, whatever the value.
Chief Justice Warren E. Burger: Is that term obsolete when a church could show that it has a contract to sell the church and the site for $4.5 million?
Does that not give some evidence of the highest and best use?
Mr. Gribbon: I would put it under terms of expected use.
Justice Thurgood Marshall: The highest and best use might be to sell it as a slaughter house for $8,000 that the zoning would --
Mr. Gribbon: The zoning would prohibit it but for a legitimate use.
Chief Justice Warren E. Burger: The highest and best use always is restrained by the permissible use.
Mr. Gribbon: As the Solicitor General recognizes, a statute such as this Landmarks Law creates unusual opportunities for arbitrary action.
The remedy is not in judicial review at a landmark designation.
Those who own property that is coveted for public use are rarely, if ever, going to be a majority at the post or in law-making bodies.
The only effect of discipline on government acquisition of private resources is that provided by the pocketbook.
Only if the elected representatives and their designees are required to make a cost-benefit analysis and pay through the taxes what they are going to acquire from private people for public use.
Is there any protection for private property against ever expanding government acquisition of private resources?
Justice William H. Rehnquist: What if you have a regulation put down by OSIA that puts down a number of safety standards and the owner says, “I simply cannot run the business with all these safety standards.”
Does that mean that he has a claim of taking or is that simply a question of a regulation that forces an individual out of business like Brandie has descended, it may have?
Mr. Gribbon: It may be if the representatives have decided that those OSIA requirements are necessary to do away with harm that may be a price that the individual owner has to pay.
But I suggest the difference between that when the government goes out in a resource acquisition capacity as it is doing here, as it did in the case of the Gettysburg battlefield many years ago and where the government did pay eminent domain for it.
Thank you, Your Honor.
Justice Potter Stewart: In the Causby case, the air space above a minimum safe altitude was not deemed compensable, was it?
Mr. Gribbon: Above, yes.
That is right, Your Honor, it was the interference with the use.
As they said, they could take into account an expected use and that is precisely what we are doing here, a recognizable expected use of a small building in the middle of Manhattan.
Justice Potter Stewart: It was impact on the use of the land below on the surface.
Mr. Gribbon: Well, yes, but I do not know that that would distinguish it.
This is a recognized property use.
You should have to begin from the bottom and go up.
Chief Justice Warren E. Burger: Thank you counsel.
The case is submitted.