Appendix — Penn Central Transp. Co. v. New York City

Tree 5

77-444 | SEP201977

ws _LMICHAEL RODAK, Jf, ‘Anis

IN THE ’

Supreme Court of the United States

OctrosBerR TERM, 1977

PENN CENTRAL TRANSPORTATION CoMPANY, THE NEW

York AND HartemM Rarroap Company, THE 5lst

Street Reatty Corporation, UGP Properties, Inc.,

Appellants,

v.

Tue Crry or New York, et al., Appellees.

On Appeal from the Court of Appeals

of New York

APPENDIX TO JURISDICTIONAL

STATEMENT

DantrEL M. Grippon

JoHn R. Bouton

Covincton & BURLING

888 Sixteenth Street, N.W.

Washington, D.C. 20006

(202) 452-6118

Cart HELMETAG, JR.

F. W. Rover

Suite 3100 IVB Building

1700 Market Street

Philadelphia, Pa. 19103

(215) -3053

Attorneys for Appellants

September, 1977

j

U

INDEX TO APPENDIX

Page

A. Opinion of the New York Court of A s, dated

Pe REET env ndcdicasencasstaces _ séneéee la

B. (1) Opinion of the New York Supreme Cou

Ho

Appellate Division, First Department, dat

od encekesnceeeeseanesos l6a

(2) Order (with Findings of Fact) of the New

York Supreme Court, Appellate Division,

First Department, dated April 7, 1976 ...... 45a

(2) Order of Severance of the New York Supreme

Court, Trial Term, dated January 21,1975 .. 60a

(3) Memorandum Decision of the New York Su-

preme Court, Trial Term, dated January 21,

DD. scsssadheeendnsabakshstnasddeseoecess 6la

(4) Judgment of the New York Supreme Court,

Trial Term dated February 4, 1975 ........ 7la

BD GE BED Si icdvsdcccccccvevesiccseccess 74a

(1) New York City Landmarks Preservation Law,

New York City Charter and Administrative

Ss GE GE oc ccc cccccccscccceccesecs 76a

(2) New York City Zoning Resolutions 74-79

through 74-793, adopted May 22, 1968, as

amended December 4, 1969 ...........0005. 113a

Fifth and Fourteenth Amendments to the United

States Constitution .............ccc cece ee eeees 119a

la

APPENDIX A

STATE OF NEW YORE

COURT OF APPEALS

No. 273

Penn Centra, TraNsporTaTION COMPANY, ET AL.,

and

UGP Properties, Inc., Appellants,

vs.

Tue Crry or New York, er at., Respondents.

Brerrex, Ch. J.:

In broad terms, the problem in this case is determining

the scope of governmental power, within the Constitu-

tion, to preserve, without resorting to eminent domain,

irreplaceable landmarks deemed to be of inestimable so-

cial or cultural significance. In controversy is the consti-

tutionality of regulation which would prohibit appelleuts,

owner and proposed developer of the air rights above

Grand Central Terminal, from constructing an office

building atop the Terminal.

Undisputed is the principle, rooted in the Due Process

Clause of the Constitution, that government may not, by

regulation, deprive a property owner of all reasonable

return on his property. There are two issues neverthe-

less. The first is the extent to which government, when

regulating private property, must assure what is de-

scribed as a reasonable return on that ingredient of prop-

erty value created not so much by the efforts of the

property owner, but instead by the accumulated indirect

2a

social and direct governmental investment in the physi-

cal property, its functions, and its surroundings. The

second issue is whether above-the-surface development

rights, transferable to adjacent sites under the city land-

mark ordinance, may be considered in computing return

on the property when the landmark property and some

of the sites to which the rights may be transferred share

a common owner.

Plaintiffs, Penn Central Transportation Company and

its affiliates, who have a fee interest in Grand Central

Terminal, and UGP Properties, Inc., lessee of the devel-

opment rights over the Terminal, seek a declaration that

the landmark preservation provisions of the Administra-

tive Code of the City of New York, as applied to the

terminal property, are unconstitutional. They also seek

to enjoin defendants, the City of New York and the

City Landmark Preservation Commission, from enforcing

those provisions against the subject property. Trial Term

grarted the requested relief, but a divided Appellate Di-

vision reversed and granted judgment to defendants.

Plaintiffs appeal.

The order of the Appellate Division should be affirmed.

Although government regulation is invalid if it denies

a property owner all reasonable return, there is no con-

stitctional imperative that the return embrace all attri-

butes, ucidental influences, or contributing external fac-

tors derived from the social complex in which the prop-

erty rests. So many of these attributes are not the re-

sult of private effort or investment but of opportunities

for the utilization or exploitation which an organized

society offers to any private enterprise, especially to a

public utility, favored by government and the public.

These, too, constitute a background of massive social and

governmental investment in the organized community

without which the private enterprise could neither exist

nor prosper. It is enough, for the limited purposes of a

3a

landmarking statute, albeit it is also essential, that the

privately created ingredient of property receive a rea-

sonable return. It is that privately created and privately

managed ingredient which is the property on which the

reasonable return is to be based. All else is society’s

contribution by the sweat of its brow and the expenditure

of its funds. To that extent society is also entitled to its

due.

Moreover, in this case, the challenged regulation pro-

vides Penn Central with transferable above-the-surface

development rights which, because they may be attached

to specific parcels of property, some already owned by

Penn Central or its affiliates, may be considered as part

of the owner’s return on the terminal property.

Thus, the regulation does not deprive plaintiffs of

property without due process of law, and should be up-

held as a valid exercise of the police power.

Grand Central Terminal was formally opened to the

public in 1913. Undisputed is its architectural, historical

and cultural significance (for further detail, see opn at

App Div, 50 AD2d 265, 269). On August 2, 1967, in ac-

cordance with the provisions of the New York City Ad-

ministrative Code, the Terminal was designated a land-

mark by the Landmarks Preservation Commission, and

the designation was confirmed by the Board of Estimate

on September 21, 1967 (see Administrative Code of City

of New York, § 207-2.0).

On July 18, 1968, plaintiffs submitted to the Land-

marks Preservation Commission an application for a per-

mit to construct the proposed office building, seeking a

certificate that the work would have no exterior effect

on protected architectural features (Administrative Code,

§ 207-5.0). The request was denied on September 20, 1968.

Then plaintiffs applied to the Commission for a certifi-

cate that the proposed building, even if it would have had an

4a

exterior effect, was appropriate to the site (Administra-

tive Code, § 207-6.0). Three separate alternative pro-

posals, each calling for erection of a substantial office

building atop the Terminal, were submitted. On August

26, 1969, the certificate of appropriateness was denied.

Not involved, because not raised in light of the denial of

a certificate of appropriateness, are the plans for the in-

terior of the Terminal. None of these administrative de-

terminations was ever directly challenged in the courts

(ef. Lutheran Church in America v. City of New York, 35

NY2d 121, 126-128).

Instead, on October 7, 1969, plaintiffs brought this ac-

tion seeking judicial invalidation of the landmark preser-

vation provisions of the Administrative Code as applied

to the Terminal. Plaintiffs also sought damages for a

temporary ‘‘taking’’ of property from the time of orig-

inal designation as a landmark to the time of the re-

quested judicial invalidation. Of course, any so-called

temporary ‘‘taking’’ is more accurately described as a

deprivation of property without due process of law (Fred

F. French Investing Co. v. City of New York, 39 NY2d

587, 593-595, app dsmd US ——).

Trial court found the landmark preservation provi-

sions, as applied, constitutionally deficient, but severed

the question of damages. As noted, the Appellate Divi-

sion, with two dissenters, reversed, and granted judgment

to defendants.

This is not a zoning case. In many ways, the restric-

tions imposed on the use of the property are similar to

zoning restrictions, but the purposes are different, and

in determining whether regulation is reasonable, the

purposes behind the regulation assume considerable sig-

nificance (id., p 596). Zoning restrictions operate to ad-

vance a comprehensive community plan for the common

good. Each property owner in the zone is both benefited

and restricted from exploitation, presumably without dis-

5a

crimination except for permitted continuing non-conforming

uses. The restrictions may be designed to maintain the gen-

eral character of the area, or to assure orderly development,

objectives inuring to the benefit of all, which property

owners acting individually would find difficult or impossible

to achieve (see, e.g., Berenson v. Town of New Castle, 38

NY2d 102, 109-110; Matter of 113 Hillside Ave. Corp. v.

Zaino, 27 N.Y.2d 258, 262-263).

Nor does this case involve landmark regulation of a his-

toric district. Historie district regulation, like zoning

regulation, may be designed to maintain the character,

both economic and esthetic or cultural, of an area (see

Maher v. City of New Orleans, 516 F2d 1051, esp p 1060,

cert den 426 US 905; Opinion of the Justices to the

Senate, 333 Mass 773, 778-780). The difference, generally,

is that zoning does this largely by regulating construc-

tion of new buildings, while historic district regulation

concentrates instead on preventing alteration or demoli-

tion of existing structures. In each case, owners although

burdened by the restrictions also benefit, to some extent,

from the furtherance of a general community plan.

Nor does this case partake of the principles applicable

to a taking in eminent domain. As noted earlier, there

is no taking for which just compensation must be paid.

And it is the concept of just compensation which is so

integrally related to value based on return. Instead,

landmark regulation is a limitation on exploitation of

property, an attribute shared with the classifications of

zoning and historic districting. Yet landmark regulation

is different because the burden of limitation is borne

by a single owner. He may or may not benefit from that

limitation but his neighbors most likely will. In contrast

both an owner and his neighbors benefit to some degree

and in some manner from zoning and historic districting.

Restrictions on alteration of individual landmarks are

not designed to further a general community plan. Land-

6a

mark restrictions are designed to prevent alteration or

demolition of a single piece of property. To this extent,

such restrictions resemble ‘‘discriminatory’’ zoning re-

strictions, properly condemned, affecting properties

singled out in a zoning district for more restrictive or

more liberal zoning limitations (see Udell v. Haas, 21

NY2d 463, 476-478). There is, however, a significant dif-

ference. Discriminatory zoning is condemned because

there is no acceptable reason for singling out one parti-

cular parcel for different and less favorable treatment.

When landmark regulation is involved, there is such a

reason: the cultural, architectural, historical, or social

significance attached to the affected parcel. Even when

regulation is designed to achieve such an acceptable pur-

pose, however, the landowner must be allowed a reason-

able return or equivalent private use of his property (ef.

Fred F. French Investing Co. v. City of New York, 39

NY2d 587, 596, supra). That is, in the case of commercial

property, the owner must be assured of a continued rea-

sonable return on the property.

Reasonable return, however, is an elusive concept, in-

capable of easy definition. For the reasonableness of the

return must be based on the value of the property, and

the value of the property necessarily depends on the re-

turn permitted or available. The inevitable circularity of

reasoning is obvious (see Berger, The Accommodation

Power in Land Use Controversies: A Reply to Professor

Costonis, 76 Col L Rev 799, 818-819). In most landmark

eases, however, it is acceptable to use alternative bases of

valuation, assessed valuation perhaps, as a basis for

determining the reasonableness of return (see Admini-

strative Code, § 207-1.0, subd [v]). At best, the compu-

tation is rough and successful if it is fairly approximate.

In considering reasonable return the owner’s desire to

expand the property physically or functionally affects the

base upon which the return is to be computed. Again,

there may be a circularity of cause and effect.

7a

Grand Central Terminal is no ordinary landmark. It

may be true that no property has economic value in the

absence of the society around it, but how much more true it

is of a railroad terminal, set amid a metropolitan popula-

tion, and entirely dependent on a heavy traffic of travelers

to make it an economically feasible operation. Without

people Grand Central would never have been a successful

railroad terminal, and without the Terminal, a major

transportation center, the proposed building site would be

much less desirable for an office building.

Of course it may be argued that had Grand Central

Terminal never been built, the area would not have de-

veloped as it has. Thus, the argument runs, construction

of the Terminal triggered growth of the area, and cre-

ated much of the terminal property’s current value. In-

deed, the argument has some validity. But, in reality, it

is of little moment which comes first, the Terminal or the

travelers. For it is the interaction of economic influences

in the greatest megalopolis of the western hemisphere—

the Terminal initially drawing people to the area, and

the society developing the area with shops, hotels, office

buildings, and unmatched civic services—that has made

the property so valuable. Neither factor alone accounts

for the increase in the property’s value; both, in tandem,

have contributed to the increase.

Of primary significance, however, is that society as an

organized entity, especially through its government, ra-

ther than as a mere conglomerate of individuals, has cre-

ated much of the value of the terminal property. Although

recent financial troubles and consequent governmental

assistance make the fact more apparent, railroads have

always been a franchised and regulated public utility,

favored monopolies at public expense, subsidy, and with

limited powers of eminent domain, without which their

existence and character would not have been possible (cf.

Ball v. New York Cent. R.R., 229 NY 33, 43; Schaghti-

8a

coke Powder Co. v. Greenwich & J. Ry., 183 NY 306, 316).

Even in the best of times, railroads were dependent on

government-granted monopolies for their rights of way,

government grants for their land, and government as-

sistance for such projects as grade crossing eliminations.

Railroads were given franchises to use city streets with-

out charge, often to the detriment of neighboring resi-

dents and often without leaving the city power to termi-

nate the franchise (cf. Kellinger v. Forty-Second Street

R.R., 50 N.Y. 206, 210, 212; New York Cent. d H.R. R.R. v.

City of New York, 202 NY 212, 221-224). Through the .

years, Penn Central and its predecessors have benefited

mightily from this assistance. Today, government influ-

ence is even more pervasive, extending even to the real

estate tax exemption enjoyed by Grand Central Terminal

itself (Real Property Tax Law, 4 489-ff).

Government has aided the Terminal in less direct ways,

as well. It is no accident that much of the city’s mass

transportation system converges on Grand Central. Num-

erous subways and bus routes pass through or near the

Terminal. Without the assistance of the city’s transit

system, now municipally owned and subsidized, the prop-

erty, with or without a towering office structure atop it,

would be of considerably decreased value. It is true that

most city property benefits to some extent from public

transportation, but the benefit is peculiary concentrated

and great in the area surrounding Grand Central

Terminal.

Absent this heavy public governmental investment in

the Terminal, the railroads, and connecting transporta-

tion, it is indisputable that the Terminal property would

be worth but a fraction of its current economic value.

Plaintiffs may not now frustrate legitimate and important

social objectives by complaining, in essence, that govern-

ment regulation deprives them of a return on so much of

the investment made not by private interests but by the

people of the city and state through their government. In-

9a

stead, to prevail, plaintiffs must establish that there was

no possibiliy of earning a reasonable return on the pri-

vately contributed ingredient of the property’s value.

To put the matter another way, the massive and in-

distinguishable public, governmental, and private contri-

butions to a landmark like the Grand Central Terminal

are inseparably joint, and for most of its existence, made

both the Terminal and the railroads of which it was an

integral part, a great financial success for generations

of stockholders and bondholders. Their investment has

long been eliminated or impaired by the recent vicissi-

tudes of the Penn Central complex. It is exceedingly

difficult but imperative, nevertheless, to sort out the

merged ingredients and to assess the rights and responsi-

bilities of owner and society. A fair return is to be ac-

corded the owner, but society is to receive its due for its

share in the making of a once great railroad. The his-

torical, cultural, and architectural resource that remains

was neither created solely by the private owner nor sole-

ly by the society in which it was permitted to evolve.

Plaintiffs contend that the Terminal currently operates

at a loss. Even if that be true, it is not of critical im-

portance. What is significant, instead, is whether the

property, managed efficiently, is capable of producing a

reasonable return. If the courts were forced to look to

the property as it is, rather than as it could be, any

inadequacy of managers of property could frustrate any

land use restrictions.

Perhaps of greater importance, the property may be

capable of producing a reasonable return for its owners

even if it can never operate at a profit. For it should

he evident that plaintiffs’ heavy real estate holdings in

the Grand Central area, including hotels and office build-

ings, would lose considerable value and deprive plain-

tiffs of much income, were the Terminal not in operation.

10a

Some of this income must, realistically, be imputed to

the Terminal.

The situation is analogous to that of a flagship store

in a regional shopping center. The flagship store may not

produce enough income to justify its construction or

maintenance, but it may draw enough customers into the

other, smaller stores, to make its operation worthwhile,

and to extract concessions from the owners of the re-

mainder of the center (see G.R.F., Inc. v Board of As-

sessors, 41 NY2d 512, 514). So it is with Grand Central

Terminal. The Terminal acts, in effect, as a magnet for

Penn Central’s other, more profitable, enterprises.

The discussion thus far is in accord with the teachings

cf Lutheran Church in America v City of New York (35

NY2d 121, supra). The Lutheran Church, owner of the

landmark site, established, as plaintiffs here have not,

that economic considerations did not permit maintenance

of the landmark building in its existing form (id., p. 132).

Moreover, the Lutheran Church was a charitable insti-

tution which, over *’ » years, did not and could not reap

the same pecun’’ , benefits of massive governmental in-

vestment enjoyed by the railroads and Grand Central

Terminal. Yet, the regulatory provisions prohibited re-

placement of the landmark building without any new

ameliorative provisions, other than the pre-existing tax-

exemption to which it had always been entitled, to assure

that the property remained capable of usefulness on a

reasonable economic basis. The same problem was reached

and discussed in Matter of Sailors’ Snug Harbor v Platt

(29 AD2d 376, esp p 378). In recognizing the invalidity

of the landmark regulation as applied to Lutheran

Church, however, this court, as had the court in the

Sailors’ Snug Harbor case (supra), declined to strike

down the landmarks preservation provisions of the city

administrative code (id., pp. 131-132). In this case, by

contrast, there has been no showing that the property,

a

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owned not by a charitable enterprise but by an entity exist-

ing to make a profit, is incapable in its economic context

of producing a reasonable return, even if its develop-

ment is limited.

Moreover, plaintiffs have not been wholly deprived of

the development rights above the Terminal. Those rights

have been made transferable to other parcels of land in

the vicinity, at least eight of them owned by Penn Cen-

tral, including the sites of the Biltmore, Commodore,

Barclay, and Roosevelt Hotels.

The many defects in New York City’s program for de-

velopment rights transfers have been detailed elsewhere

(Costonis, The Chicago Plan: Incentive Zoning and the

Preservation of Urban Landmarks, 85 Harv L Rev 574,

585-589). The area to which transfer is permitted is

severely limited, complex procedures are required to ob-

tain a transfer permit, and the program, it has been

said, has the unfortunate consequence of encouraging

large, bulky buildings around landmarks which are

dwarfed by comparison. But the possibility that a better

program could have been devised does not preclude analy-

sis and justification of the existing one in this particular

application.

That several of the potential receiving parcels are

encumbered by long-term leases or currently improved

with suitable buildings does not make the development

rights worthless. The knowledge that at some future time,

when the lease term has run out or the improvements

have lost their utility, a larger building could be con-

structed, should increase the value of the building plot,

at least so long as there is a market demand for new

construction (see Costonis, ‘‘Fair’’ Compensation and

the Accommodation Power: Antidotes for the Taking Im-

passe in Land Use Controversies, 75 Col L Rev 1021,

1067).

12a

Moreover, in this case, construction of new office build-

ings was at least given serious consideration on two of

the available receiving parcels, the sites of the Biltmore

and Roosevelt Hotels. Defendants contend that the al-

ternative sites, and particularly the Biltmore site, are

better suited for office building construction than even

the Terminal site. But that is beside the point. Impor-

tant instead is the availability of receiving parcels, in

common ownership with the landmark site, on which the

development rights, or some of them, could be used. It

is significant, as well, that the challenged regulation per-

mitted splitting of the development rights among several

receiving parcels, to allow optimal use of the rights.

Development rights, once transferred, may not be equiva-

lent in value to development rights on the original site. But

that, alone, does not mean that the substitution of rights

amounts to a deprivation of property without due proc-

ess of law. Land use regulation often diminishes the value

of the property to the landowner. Constitutional stand-

ards, however, are offended only when that diminution

leaves the owner with no reasonable use of the property.

The situation with transferable development rights is

analogous. If the substitute rights received provide rea-

sonable compensation for a landowner forced to relin-

guish development rights on a landmark site, there has

been no deprivation of due process. The compensation

need not be the ‘‘just’’ compensation required in eminent

domain, for there has been no attempt t> take property

(see Fred F. French Investing Co. v City of New York,

39 NY2d 587, 595, supra; ef. Costonis, ‘‘Fair’’ Compen-

sation and the Accomodation Power, 75 Col L Rev 1021,

1061-1070, supra).

The case at bar, like the Fred French case (supra), fits

neatly into this analysis. In Fred French the develop-

ment rights on the original site were quite valuable. The

regulations deprived the original site of any possibility

Pe ee ee ee

we

l3a

of producing a reasonable return, since only park uses

were permitted on the land. And, the transferable de-

velopment rights were left in legal limbo, not readily at-

tachable to any other property, due to a lack of common

ownership of the rights and suitable site for using them.

Hence, plaintiffs were deprived of property without due

process of law. The regulation of Grand Central Termi-

nal, by contrast, permitted productive use of the Termi-

nal site as it had been used for more than half a cen-

tury, as a railroad terminal. In addition, the development

rights were made transferable to numerous sites in the

vicinity of the Terminal, several owned by Penn Cen-

tral, and at least one or two suitable for construction

of office buildings. Since this regulation and substitution

was reasonable, no due process violation resulted.

To recapitulate, a property owner is not absolutely

entitled to receive a return on so much of the property’s

value as was created by social investment. And, even as

to the privately created ingredient of the property’s

value, a plaintiff seeking to show that an otherwise rea-

sonable land use regulation constitutes a deprivation of

due process of law must demonstrate affirmatively that

the regulation eliminates all reasonable return (see Mary

Chess, Inc. v City of Glen Cove, 18 NY2d 205, 209-210;

Shepard v Village of Skaneateles, 300 NY 115, 118).

Piaintiffs in this case have failed to meet that burden.

In none of their analyses do they include the benefits

provided to Penn Central’s varied real estate holdings

by the Terminal’s operation. These real, albeit indirect,

benefits alone might suffice to provide Penn Central with

a reasonable return. But there is more. The development

rights above Grand Central Terminal have been made trans-

ferable, and could be transferred to several sites owned

by Penn Central and suitable for office building construc-

tion. These substitute rights are valuable, and provide sig-

nificant, perhaps ‘‘fair’’, compensation for the loss of rights

l4a

above the Terminal itself. Hence, no constitutional viola-

tion has been established.

In times of easy affluence, preservation of historic

landmarks through use of the eminent domain power

might be desirable, or even required. But when a less

expensive alternative is available, especially when a city

is in financial distress, it should not be foreed to choose

between witnessing the demolition of its glorious past

and mortgaging its hopes for the future. The landmark

preservation provisions of the Administrative Code rep-

resent an effort to take a middle way (Marcus, Mandatory

Development Rights Transfer and the Taking Clause: The

Case of Manhattan’s Tudor City Parks, 24 Buff L Rev 77,

78, 107-110). The statute needs improvement. In some cases

it protects property owners inadequately (Lutheran

Church in America v City of New York, 35 NY2d 121,

supra). But, in its generality and as applied to Grand

Central Terminal, the statute does not deprive plaintiffs

of due process of law.

In concluding the analysis, it is recognized that one

does not pursue a path guided by ample precedent or

wholly developed principles. The area is not merely diffi-

cult; it has at present viewing impenetrable densities. The

last word has not only not been spoken; it has hardly been

envisaged. For this case, and for the cases which may

follow in its wake, deference to the unknown must be

accorded. Moreover, the analysis has not been one which

had been fully developed in the valuable presentations

by counsel either at nisi prius, the Appellate Division, or

in this court. In fairness then, and in order to assure that

the better application of the rule be evolved, if counsel

be so advised, they should be entitled to present at nisi

prius any additional submissions which, in the light of

this opinion, may usefully develop further the factors

discussed. On the present record, however, the result di-

rected by the Appellate Division is correct and in ac-

cordance with the views expressed in this opinion.

en ee ee ee mew er er ard ewer On Swe ne So ire ee

15a

Accordingly, the order of the Appellate Division should

be affirmed, with costs.

co) e @ s @ e @ @ @

Order affirmed, with costs. Opinion by Breitel, Ch.J. All

concur.

Decided June 23, 1977

16a

APPENDIX B

(1)

Supreme Court. Appellate Division. First Department

Dec. 16, 1975

Penn CentTraL TRaNsporTaTION Company et al., Plaintiffs-

Respondents,

Vv.

The City or New York and the Landmarks Preservation

Commission of the City of New York, Defendants-

Appellants.

Before Stevens, P. J., and Markewicu, KuprerMan, Mur-

pHy and Luprano, JJ.

Murpay, Justice.

Defendants have thus far been more successful, at the

appellate level, in repelling a direct frontal attack on the

constitutionality of the New York City Landmarks Preser-

vation Law (New York City Charter and Admin. Code, ch.

8-A) than in applying it to a given factual situation. (Cf.

Lutheran Church v. City of New York, 35 N.Y.2d 121, 359

N.Y.S.2d 7, 316 N.E.2d 305; Mir. of Trustees of Sailors’

Snug Harbor v. Platt, 29 A.D.2d 376, 288 N.Y.S.2d 314.) A

majority of us now feels that the time for its full implemen-

tation has arrived.

The specific issue presented in this case is whether, as

applied to these plaintiffs, the City’s Landmarks Preserva-

tion Law and the action of defendants thereunder with re-

spect to certain property commonly known as the Grand

Central Terminal are unconstitutional. Trial Term re-

sponded affirmatively on the grounds that plaintiffs’ private

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17a

property was taken for public use without just compensa-

tion and that they were deprived of due process and equal

protection of the laws. We disagree.

In recent years, as we have become painfully aware that

‘the frontier’’ has been disappearing and our natural re-

sources are rapidly being depleted, there has been an in-

creasing national growth of interest in preserving irreplace-

able buildings and sites which have historical, aesthetic or

cultural significance.

These changing attitudes now acknowledge that ‘‘ [u]rban

landmarks merit recognition as an imperiled species along-

side the ocelot and the snow leopard. Over fifty per cent of

the 12,000 buildings listed in the Historic American Build-

ings Survey, commenced by the federal government in 1933,

have been razed. The threat to the remainder continues

undiminished as the recent loss of Chicago’s Old Stock Ex-

change and the precarious status of New York’s Grand Cen-

tral Terminal attest. If this trend is not reversed the nation

at its hicentennial in 1976 will mourn the loss of an essential

part of its architectural and cultural heritage rather than

celebrate the visible evidence of its past.’’ (The Chicago

Plan: Incentive Zoning and The Preservation of Urban

Landmarks, 85 Harv.L.Rev. 574-5.)

Since 1966 Congress has passed major new laws further-

ing historic preservation. (See Gray, The Response of Fed-

eral Legislation to Historic Preservation, 36 Law & Cont.

Prob. 314.) The National Historie Preservation Act of 1966

found and declared ‘‘that the historical] and cultural founda-

tions of the Nation should be preserved as a living part of

our community life and development in order to give a

sense of orientation to the American people.’’ (16 U.S.C.

§ 470(b).)

Though ‘‘fraught with trouble’’ (Lutheran Church v. City

of New York, 35 N.Y.2d 121, 131, 359 N.Y.S.2d 7, 15, 316

N.F..2d 305, 311), the preservation of landmarks in urban

areas is of special importance. Great cities have always been

18a

havens for educational and cultural activities. New York’s

rich history is reflective of the great deal of time, money

and talent invested in building its own architectural heri-

tage. Structures such as the Brooklyn Bridge, the Metro-

politan Museum of Art, the New York Publie Library and

Grand Central Terminal are important and irreplaceable

components of the special uniqueness of New York City.

We have already witnessed the demise of the old Metro-

politan Opera House (see Matter of Keystone Assoc. v.

Moerdler, 19 N.Y.2d 78, 278 N.Y.S.2d 185, 224 N.E.2d 700)

and the original Pennsylvania Station. Stripped of its re-

maining historically unique structures, New York City

would be indistinguishable from any other large me-

tropolis.

Following the evolving national trend, New York City, in

1365 provided for landmark preservation by adding Chap-

ter 8-A to its Administrative Code, pursuant to enabling

legislation adopted by the State nine years earlier (former

Gen. City Law, § 20(25-a), now Gen.Mun.Law, § 96-a.) The

Council ‘‘declared as a matter of public policy that the pro-

tection, enhancement, perpetuation and use of improve-

ments of special character or speeial historical or aesthetic

interest or value is a public necessity and is required in the

interest of the health, prosperity, safety and welfare of the

people’’; and established, as the purpose of the chapter,

inter alia: ‘the protection, enhancement and perpetuation

of such improvements and of districts which represent or

reflect elements of the city’s cultural, social, economic, po-

litical and architectural history,’’ the safeguarding of ‘‘the

city’s historic, aesthetic and cultural heritage’’, the foster-

ing of ‘‘civie pride in the beauty and noble accomplishments

of the past,’’ the protection of ‘‘the city’s attractions to

tourists and visitors’’ and the promotion of ‘‘the use of his-

toric districts and landmarks for the education, pleasure

and welfare of the people of the city.’’ (Admin. Code,

§ 205-1.0.)

Briefly stated, the Landmarks Preservation Law provides

for the establishment of a commission which, after a public

«ail

i tienes ab Note

19a

hearing, proposes to the Board of Estimate the designation

of landmark properties and historic districts. The Board

approves, disapproves or modifies the designation after

receipt of a report from the City Planning Commission.

(Id., § 207-2.0.)

Once a landmark is so designated it must be kept ‘‘in good

repair’’ (Id., § 207-10.0) and any alteration, construction or

demolition of an improvement on the site is regulated. (Jd.,

§ 207-4.0.) Comprehensive procedures are provided for

changes. A landmark owner may seek a ‘‘certificate of no

exterior effect’’ or, if there will be such exterior effect, a

‘*certificate of appropriateness.’’ (Id., §§ 207-5.0—207-7.0.)

There is also a procedure for seeking a certificate of appro-

priateness on the ground of insufficient return in the case

of taxpaying commercial properties; and a similar proce-

dure, but a different form of relief, for certain tax exempt

properties used for charitable purposes. (Jd., § 207-8.0.)

Related to the Landmarks Preservation Law are certain

amendments to the New York City Zoning Resolution which

permit the transfer of unused development rights over land-

mark properties located in certain high density areas of

the City to other nearby sites. (Zoning Resolution, Sections

74-79 to 74-793.)

Grand Central Terminal is unquestionably one of New

York City’s best known buildings. Along with the Empire

State Building and the Statue of Liberty, the image of its

facade symbolizes New York City for millions of visitors

and residents. The Terminal as a whole includes a variety

of architectural and engineering elements: railroad tracks

and platforms; space and facilities for marshalling and

handling railroad equipment; passage-ways and ramps af-

fording access to adjacent streets, office buildings and sub-

way stations; and concourses for the use of passengers and

pedestrians passing through the Terminal. The Main Con-

20a

course, probably the Terminal’s most striking feature, isa _

large room 120 x 375 feet, with a ceiling 125 feet high at

its apex.

From its formal opening to the public in 1913 (as a re-

placement for the ‘‘Grand Central Depot’’ built by Cor-

nelius Vanderbilt in 1871) the Terminal has been recognized

not only for its architecture, but as a superb example of

comprehensive urban design. The complete submergence of

all the tracks and a double level track system not only re-

sulted in the accommodation of more trains without the

acquisition of more land, but permitted construction of

revenue-producing buildings on air rights over the railroad

tracks and the development of Park Avenue as one of this

nation’s most prestigious residential communities. (See,

Grand Central Terminal and Rockefeller Center: A His-

torical Critical Estimate of Their Significance, by Fitch

and Waite, published by the New York State Parks and

Recreation Division for Historic Preservation [1974].) To-

day, although somewhat neglected over the years, Grand

Central Terminal still remains a splendid edifice and a ma-

jor part of the cultural and architectural heritage of New

York City.

On August 2, 1967, after a public hearing and over objec-

tion of plaintiff Penn Central Transportation Company

(‘‘Penn Central’’), the Landmarks Preservation Commis-

sion proposed the designation of Grand Central Terminal

as a landmark, predicated on the following findings:

‘*On the basis of a careful consideration of the his-

tory, the architecture and other features of this build-

ing the [Commission] finds that Grand Central Termi-

nal has a special character, special historical and aes-

thetic interest and value as part of the development,

heritage and cultural characteristics of New York City.

‘*The Commission further finds that, among its im-

portant qualities, Grand Central Terminal is a magni-

ee

itis ctteitiss: sn enone. Nt PEP IA i Dee et ARS POOLE Mal omen be Be WAS

2la

ficent example of French Beaux Arts architecture ; that

it is one of the great buildings of America, that it repre-

sents a creative engineering solution of a very difficult

problem, combined with artistic splendor; that as an

American Railroad Station it is unique in quality, dis-

tinction and character; and that this building plays a

significant role in the life and development of New York

City.”’

It is worthy of note, in such connection, that the Amtrak

Improvement Act of 1974 (88 U.S.Stat. 1526), in accordance

with the Congressional declaration that it is national policy

to preserve historic sites, seeks to encourage the preserva-

tion of passenger railroad terminals of special significance

and architectural quality, such as Grand Central Terminal,

by authorizing the Secretary of Transportation to provide

them with financial and other assistance. (49 U.S.C. § 1653.)

Plaintiff Penn Central (including, for the purposes here-

of, its subsidiaries plaintiffs The New York and Harlem

Railroad Company and The 5ist Street Realty Corpora-

tion) is the successor to the New York Central Railroad

Company and the Pennsylvania Railroad. Plaintiff UGP

Properties, Inc. (‘‘UGP’’), which was incorporated after

the landmark designation here in issue, is a wholly-owned

subsidiary of a British company.

Penn Central’s losses over the last several years brought

it to insolvency and bankruptcy. In order to minimize such

losses and provide offsetting revenues, it entered into a

lease with UGP in January, 1968, pursuant to which UGP

was to erect a tower exceeding 50 stories over the Terminal.

UGP undertook to pay to Penn Central $1,000,000 per year

during construction and thereafter an amount that was

guaranteed to equal not less than $3,000,000 annually. In

addition, UGP assumed a portion of Penn Central’s real

estate taxes estimated at $578,500. These rental payments

were to be offset in part by the elimination of approximately

22a

$700,000 te $1,000,000 in net rents presently received from

concessionaires whose space would be occupied by the pro-

posed new building. Commencing in July, 1968, plaintiffs

submitted several building designs prepared by the archi-

tectural firm of Marcel Breuer & Associates to the Land-

marks Commission (called Breuer I, Breuer IT and Breuer

II Revised) and requested an appropriate certificate (of no

exterior effect or of appropriateness). Plaintiffs appear to

have indicated a preference for Breuer II Revised, which

would have preserved the Terminal’s Main Concourse, but

not its famous south facade. On August 29, 1969, a certifi-

cate of appropriateness was denied.

Since Grand Central Terminal receives partial real estate

tax exemption (Real Property Tax Law, 4 489-ff), no fur-

ther administrative remedy, in the form of relief on the

ground of economic hardship, was available to it. (Admin.

Code, § 207-8.0.) The instant action, seeking declaratory

and injunctive relief from the Landmarks Law, on its face

and as applied, as well as compensation for the temporary

taking (between the landmark designation and its expected

judicial invalidation), was commenced. The trial court sev-

ered the cause of action for damages and, as above indi-

cated, entered judgment declaring the Landmarks Law, as

applied to plaintiffs, unconstitutional and permanently en-

joined defendants from acting thereunder to prevent the

construction of a lawful improvement on the terminal site.

For the reasons hereinbelow stated, such determination

should be reversed.

Although the apparent basis for the Trial Judge’s deci-

sion is the found presence of ‘‘such elements as economic

hardship, lack of compensatory alternative to alleviate eco-

nomic hardship, inadequacy of relief by tax rebate, etc.,

ete.’’, the rationale would seem to be stated in the penulti-

mate paragraph of his opinion:

‘*The point of decision here is that the authorities em-

powered to make the designation may do so but only

i) Ren Fs eh res

Se te ae oe ee

23a

at the expense of those who will ultimately have to bear

the cost, the taxpayers.”’

Such language suggests (in accordance with the interpre-

tation by the court below of the holding in Lutheran Church

v. City of New York, supra) that any regulation of private

property to protect landmark values constitutes a compen-

sable taking. Such holding would surely, as the amicus brief

submitted hereon states, ‘‘eviscerate New York’s Land-

marks Preservation Law.’’

While the line between a compensable ‘‘taking’’ and a

noncompensable ‘‘regulation’’ is sometimes difficult to dis-

cern, it nevertheless exists. (See, generally, Sax, Takings

And The Police Power, 74 Yale L.J. 36.)

In Mtr. of Trustees of Sailors’ Snug Harbor v. Platt

(supra, 29 A.D.2d at p. 377, 288 N.Y.S.2d at P. 315), we

upheld the validity of the Landmarks Preservation Law as

‘‘the right, within proper limitations, of the state to place

restrictions on the use to be made by an owner of his own

property for the cultural and aesthetic benefit of the com-

munity * * *.’’ And the Court of Appeals concluded that

we were ‘‘correct in refusing to declare the entire law un-

constitutional on its face.’’ (Lutheran Church v. City of

New York, 35 N.Y.2d 121, 131, 359 N.Y.S.2d 7, 16, 316

N.E.2d 305, 311.)

The sole question to be decided, then, is whether plaintiffs

have satisfactorily established that the law, as applied to

them in this case, imposes such a burden as to constitute a

compensable taking. Put another way, while the exercise of

the police power to regulate the private use of property is

not unlimited, it is for the one attacking such regulation in

any given case to establish that the line separating valid

regulation from confiscation has been breached.

In reaching such determination, consideration must be

given to the importance of the regulation to the public good,

24a

the reasonableness of the regulation in achieving such end

and the effect of the regulation on the economic viability of

the parcel involved. (Goldblatt v. Hempstead, 369 U.S. 590,

82 S.Ct. 987, 8 L.Ed.2d 130.) We believe the first two re-

quirements are met by the clearly stated purpose of the

Landmarks Preservation Law and the unavailability of any

reasonable alternative (short of condemnation) for the

preservation of a landmark.

The remaining issue is the economic impact of the law on

the particular parcel. In Lutheran Church v. City of New

York, 35 N.Y.2d 121, 359 N.Y.S8.2d 7, 316 N.E.2d 305, supra,

the court dealt with a landmark devoted to a charitable use.

Adopting a concept first enunciated by this Court (Matter

of Trustees of Sailors’ Snug Harbor v. Platt, 29 A.D.2d 376,

288 N.Y.S.2d 314, supra) it applied, as the standard: Does

the designation ‘‘prevent or seriously interfere with the

carrying out of the charitable purpose’’? (35 N.Y.2d, at p.

131, 359 N.Y.S.2d, at p. 16, 316 N.E.2d, at p. 311.)

In the instant case, the landmark parcel is not devoted

to a charitable purpose; and no claim is made that it cannot

be used for its prime function—as a railroad terminal. Ac-

cordingly, (and as Lutheran implied), the test to be applied

is the same as in zoning cases, t.e.: Have the plaintiffs dem-

onstrated that the regulation én issue deprives them of all

reasonable beneficial use of their property? (Cf. Williams

v. Town of Oyster Bay, 32 N.Y.2d 78, 343 N.Y.S.2d 118, 295

N.E.2d 788; Adamo v. Babylon, 28 N.Y.2d 982, 323 N.Y.S.2d

839, 272 N.E.2d 338; Salamar Builders Corp. v. Tuttle, 29

N.Y.2d 221, 325 N.Y.S.2d 933, 275 N.E.2d 585.)

Plaintiffs’ burden, in such connection, is to establish that

they are incapable of obtaining a reasonable return from

Grand Central Terminal operations, not that they are not

receiving it. (Cf. Salamar Builders Corp. v. Tuttle, 29

N.Y.2d 221, 325 N.Y.S.2d 933, 275 N.E.2d 585, supra; Ste-

vens v. Town of Huntington, 20 N.Y.2d 352, 283 N.Y.S.2d

16, 229 N.E.2d 591; Arverne Bay Construction Co. v.

ee De ee ee ee ee ee ae ee ES. Ree Sener T t Sat Cor ene eTOCs ee aero

25a

Thatcher, 278 N.Y. 222, 15 N.%.2d 587.) In our view, such

burden has not been met.

To support the claim that it is actually sustaining a loss

from Terminal operations, Penn Central submitted a

‘Statement of Revenues and Costs’’ for the years 1969 and

1971. These statements, which were prepared for the instant

litigation, improperly attribute a considerable amount of

railroad operating expenses (and some taxes) to their real

estate operations. For example, the expense items included

‘‘Station Master and Staff’’, ‘‘Information Clerks’’ and

‘“Gate Usher’. Such huge cost items (for 1971) as ‘‘main-

tenance, repairs and service plant operation’’ ($1,141,679),

‘‘eleaning’’ ($632,753), ‘‘policing’’ ($438,566), ‘*materials

and supplies’ ($69,692), and ‘‘utilities’’ ($660,710) were

related to the entire terminal operation and not segregated

as between the railroad and real estate portions thereof.

Moreover, and to compound the error, no rental value

whatsoever was imputed to the vast space in the Terminal

devoted to railroad purposes. (Cf. Matter of Seagram &

Sons v. Tax Comm. of City of N. Y., 14 N.Y.2d 314, 251

N.Y.S.2d 460, 200 N.E.2d 447.) Since Penn Central is in the

passenger railroad business it, of necessity, must have a

terminal (including trackage, platforms, concourse, waiting

rooms, ramps, ticket windows and public amenities) for

such service. The reasonable rental value of such space

cannot properly be omitted from any meaningful analysis

of the property’s capacity to yield a reasonable return.

Obviously, if the entire expense of operating a railroad

terminal is offset only by non-railroad rents generated by

the commercial and concession use thereof, even the most

profitable terminal] will show a ‘‘deficit’’.

Additionally, on the record before us, plaintiffs have

failed satisfactorily to show (a) an inability to increase the

Terminal’s commercial income by transforming vacant or

under-utilized space to revenue-producing use, or (b) that

26a

unused development rights over the Terminal could not

have been profitably transferred to one or more nearby

sites (see, New York City Zoning Resolution, Sec. 74-79 et

seq.), or (c) that Penn Central’s agreements with the Me-

tropolitan Transportation Authority and the Connecticut

Transportation Authority provide a basis for invalidating

the Terminal’s landmark designation.

Finally, the assertion that the Landmarks Preservation

Law unconstitutionally discriminates against Penn Central

because, as the recipient of partial tax exemption, it is in-

eligible for statutory hardship relief, has already been dis-

posed of by us. On an analogous claim in a comparable

situation we hold ‘‘that this does not render the statute un-

constitutional. It must be interpreted as giving power to

the commission to provide relief in the situation covered by

the statute, but not restricting the court from so doing in

others.’’ (Mtr. of Sailors’ Snug Harbor v. Platt, 29 A.D.2d

376, p. 378, 288 N.Y.S.2d 314, p. 316, supra.)

To summarize, in view of the nationwide ‘‘burgeoning

awareness that our heritage and culture are treasured na-

tional assets’’ (Maher v. City of New Orleans, 5 Cir., 516

F.2d 1051, 1060), New York City’s Landmarks Preservation

Law is a valid exercise of its police power. The need to

preserve structures worthy of landmark status is beyond

dispute; and the propriety of the landmark designation

accorded Grand Central Terminal is essentially unchal-

lenged.

Plaintiffs’ burden of proving the statute unconstitutional,

as applied to them, is exceedingly heavy (Cf. /.L.F.Y. Co.

v. City Rent and R. Admin., 11 N.Y.2d 480, 230 N.Y.S.2d

986, 184 N.E.2d 575; Wasmuth v. Allen, 14 N.Y.2d 391, 252

N.Y.S.2d 65, 200 N.E.2d 756); and, on the instant record,

has not been met. At best, they have shown that they have

been deprived of the property’s most profitable use. But

that is not the constitutional test. (Goldblatt v. Town of

Hempstead, 369 U.S. 590, 82 S.Ct. 987, 8 L.Ed.2d 130;

Pee See eo ee es ~

ee a

ee ee

ae wtteen o~

27a

United States v. Central Eureka Mining Co., 357 U.S. 155,

77 S.Ct. 1097, 2 L.Ed.2d 1228.)

The validity of the Landmarks Preservation Law, as

applied to Grand Central Terminal, does not depend on a

showing that the landmark parcel will be undiminished in

any degree by the regulation’s restrictions; only that it will

not ‘‘deprive the individual property owner ‘of all beneficial

use of his property’ * * *.’’ (Salamar Builders Corp. v.

Tuttle, 29 N.Y.2d 221, at p. 225, 325 N.Y.S.2d 933, at p. 937,

275 N.E.2d 585, at p. 588, supra.)

In short, ‘‘[pJlaintiffs have shown hardship but not con-

fiscation.’’ (Mary Chess, Inc. v. City of Glen Cove, 18

N.Y.2d 205, 210, 273 N.Y.S.2d 46, 49, 219 N.E.2d 406, 409.)

But such hardship, in the proper exercise of the City’s

police power, must be subordinated to the public weal, since

such regulatory auihority is not only ‘‘the least iimitable of

all the powers of government’’ (Matter of Engelsher v.

Jacobs, 5 N.Y.2d 370, 373, 184 N.Y.S.2d 640, 642, 157 N.E.2d

626, 627, cert. den., 360 U.S. 902, 79 S.Ct. 1286, 3 L.Ed.2d

1255), but it ‘‘is not to be limited to guarding the physical

or material interests of the citizen. His moral, intellectual,

and spiritual needs may also be considered. The eagle is

preserved, not for its use, but for its beauty.’’ (Barrett v.

State, 220 N.Y. 423, 428, 116 N.E. 99, 101.)

In light of the foregoing, the order and judgment of Su-

preme Court, New York County, entered, respectively, on

January 21, 1975 and February 4, 1975, and all findings

of fact and declarations of law inconsistent herewith, should

be reversed, on the law and the facts, said order, judgment

and findings vacated, and judgment entered declaring that

plaintiffs have failed to establish that the New York City

Landmarks Preservation Law is unconstitutional as applied

to them, with costs.

Order and judgment, Supreme Court, New York County,

entered on January 21, 1975 and February 4, 1975, and all

28a

findings of fact and declarations of law inconsistent with

the Opinion of this Court, reversed, on the law and the facts,

said order, judgment and findings vacated, and judgment

directed to be entered declaring that plaintiffs have failed

to establish that the New York City Landmarks Preserva-

tion Law is unconstitutional as applied to them. AppeHants

shall recover of respondents $60 costs and disbursements

of these appeals.

All coneur, except Markewicn and Lupino, JJ., who

dissent in an Opinion by Lupt1ano, J.

Settle order on notice providing, inter alia, for new find-

ings of fact consistent with the Opinion of this Court.

Luprano, Justice (dissenting) :

The historical, aesthetic and cultural significance of

Grand Central Terminal is not disputed. Similarly, the con-

tribution of the Terminal to the uniqueness of New York

City is not subject to polemics. Thus, the designation of

Grand Central Terminal as a Landmark under the Land-

marks Law of New York City is easily countenanced. How-

ever, the sole issue to be decided on this appeal is, as aptly

phrased by Justice Murphy: ‘‘ whether plaintiffs have satis-

factorily established that the law, as applied to them in

this case, imposes such a burden as to constitute a compen-

sable taking’’. Such issue narrows down to the impact of the

Landmarks Preservation Law on the particular parcel.

Plaintiff Penn Central Transportation Company (‘‘ Penn

Central’’) has a three-hundred year lease for the Terminal.

Plaintiff The New York and Harlem Railroad Company is

95% owned by the Trustees of Penn Central and is the

owner of the fee. The 51st Street Realty Corporation is also

a subsidiary of the Penn Central. Subsequent to the desig-

nation of the Terminal as a Landmark, agreements were

entered into between Penn Central and UGP Properties,

—

|

:

)

:

;

29a

Inc. (‘‘UGP’’) under date of January 22, 1968, whereby

UGP was to erect an office building, in keeping with ap-

plicable zoning laws, in and above that part of the Terminal

space now occupied by the waiting room and shops along

42nd Street. UGP engaged the renowned firm of Marcel

Breuer & Associates to prepare architectural designs. That

firm, winner of many awards for architectural distinction

(e. g., awards for the Whitney Museum and the H.U.D.

Headquarters Building in Washington, D.C.), designed a

high-quality building in compliance with the zoning laws

which would not alter the Main Concourse or any other

part of the Terminal actually used in railroad operations,

would provide ample access for pedestrians and, most sig-

nificantly, would preserve the facade of the Terminal build-

ing (Breuer Plan I). In providing for office building space

rising above the present Terminal frontage on 42nd Street

and set back some 30 feet from the facade of the present

building, this plan constituted a present-day application of

a principle which had been embodied in the original plans

for the present Terminal building. The original plans called

for an office building to be erected over the present facade

in essentially the same location as is proposed in Breuer

Plan I. The difference is that, in keeping with current build-

ing capabilities and practices, the Breuer I design calls for

a considerably taller building of more modern design. The

removal of certain shops and advertising signs on 42nd

Street and the creation of a pedestrian arcade, as envisioned

by this plan, was recognized by the Landmarks Commission

as considerably enhancing, ‘‘if sensitively handled, . . . the

exterior of Grand Central Terminal by providing a quieter

and more dignified base to support the monumental columns

that rise from the ramp level. Since the suggested changes

in the street level entrances would unquestionably improve

pedestrian access to the Terminal and to the subway, these

proposals might well be acceptable as a means of perpetuat-

ing the use of the Landmark and of protecting its main

exterior architectural features’’. However, Breuer Plan I

30a

was twice rejected by the Commission on applications for a

Certificate ~ No Exterior Effect (Admin.Code § 207-5.0)

and for a Certificate of Appropriateness (Admin.Code

§ 207-6.0) respectively. The Commission in response to the

‘‘applicant’s claim that the Pan Am Building has already

destroyed the silhouette of the south facade and that the

proposed tower, with its granite facing, would either pro-

vide a better background or that one more tower could not

do further damage’’ opined that the ‘‘great mass of the

Breuer I tower right on top of the Terminal facade tee

would reduce the Landmark itself to the status of a curios-

ity’’. An alternative design which came to be known as

Breuer II Revised was also submitted. The major difference

between the two plans is that Breuer II Revised does not

preserve the south facade of the Terminal building. A Cer-

tificate of Appropriateness was similarly denied for Breuer

II Revised.

At this point, after denial of a Certificate of No Exterior

Effect and a Certificate of Appropriateness, owners of land-

marks generally would have had available an important

administrative remedy: an application for relief (including

ultimately the lifting of the landmark restrictions) on the

ground of economic hardship. Such relief is denied with

respect to the Terminal and its site, however, because this

part of the law is so drawn as to exclude from its applica-

bility property having partial real estate tax exemption un-

der § 489-ff of the Real Property Tax Law, relating to com-

muter railroad real property (Admin.Code § 207-8.0a[2]).

Property exempt under Section 489-ff is one of the few

types as to which the Landmarks Law withholds relief and

the Terminal is the only 489-ff property which has been

designated a Landmark.

As a consequence, plaintiffs commenced the instant action

for declaratory judgment which resulted in a judgment of

the Supreme Court, New York County (Saypol, J.) declar-

ing that the Landmarks Law of the City of New York and

3la

the actions taken pursuant thereto by the Landmarks Pres-

ervation Commission as applied to Grand Central Terminal

and its site (a) constitute a taking of private property for

public use without compensation, and (b) deny to plaintiffs

due process of law and the equal protection of the laws.

Trial Term in its memorandum decision quoted at length

from the supplemental report of former Associate Judge

John Van Voorhis of our Court of Appeals, serving as Spe-

cial Master in the reorganization proceedings involving The

New York, New Haven and Hartford Railroad Company in

the United States District Court for the District of Con-

necticut. The following excerpt from that report is particu-

larly relevant:

‘*There is, of course, a precedent for this structure in

the Pan-American Building located about 200 feet to

the north. Whether the opposition to its construction

will succeed is not presently known, but it would seem

to me, that the probabilities are in its favor. The Grand

Central Station is not proposed to be removed. [cita-

tion] It is doubtful that the City could insist upon its

being maintained at Penn Central’s expense as a me-

morial to the golden age of railroading. The building,

as it is, is expensive to maintain, and even under the

broad scope of the police power in modern times it is

doubtful that it can be so constricted without there bhe-

ing a taking without payment of just compensation as

required by the state and federal constitutions. This is

particularly true in view of the similarity and close

proximity to the Pan-Am Building which, it might be

argued, could constitute discrimination denying the

equal protection of the law.’’

Also of particular relevance are the following findings of

fact enunciated by Trial Term:

**9. The Terminal is deteriorating at a substantial rate.

The condition of the Terminal was such that repairs

32a

and maintenance work costing approximately $1,278,-

135 were necessary in June 1972... .25. The Terminal

site is a valuable location for an office building. It is in

the heart of a commercial area occupied mainly by

high-rise commercial structures such as office buildings

and hotels... . 31. 1f construction of Brewer I had com-

menced in 1968, the City could have received substan-

tially increased property taxes from commencement of

construction.’’ (Emphasis supplied).

After further finding that the proposed venture would have

been successful and that substantial sums would have ac-

crued to the respective plaintiffs, Trial Term found:

‘*36. For the years 1967 to 1971, the cost to Penn Cen-

tral of operating the Terminal building itself, exclusive

of purely railroad operations, exceeded the revenues

received from concessionaires and tenants in the Termi-

nal. 37. The net deficit to Penn Central from operating

the Terminal was $1,165,470 in 1969 and $1,902,467 in

1971. 38. As of June 1, 1972, the Metropolitan Trans-

portation Authority leased the Terminal and, together

with the Connecticut Transportation Authority, re-

ceives all revenues from tenants and concessionaires

in it (with the exception of any rent Penn Central would

receive under its lease with UGP) and has assumed all

costs of operating the Termimal. Penn Central is obli-

gated to pay these agencies $4,500,000 a year for the

next five years and $2,000,000 thereafter. The Metro-

politan Transportation Authority received partial re-

imbursement for these costs from the City.’’

In light of the agreement which Penn Central found neces-

sary to make with the MTA and CTA and of the mainte-

nance and operating expenses of the terminal far exceed-

ing actual revenues therefrom, it is averred that the denial

of the opportunity to profit from the proposed development

leaves Penn Central in a position where it cannot make

33a

any return on the Terminal. Put another way, it is plain-

tiffs’ contention that the application of the Landmarks

Law to this parcel in the manner described above, effectively

deprives them of the reasonable beneficial use of their prop-

erty and thus amounts to a taking. It is aptly observed in

Lutheran Church v. City of New York, 35 N.Y.2d 121, 131,

359 N.Y.S.2d 7, 16, 316 N.E.2d 305, 311 (1974) that ‘‘(t)he

landmark preservation problem has received considerable

comment the net effect of which is general agreement that

attempts to designate individual landmarks in high eco-

nomic development areas is fraught with trouble (see, espe-

cially, Costonis, The Chicago Plan: Incentive Zoning And

The Preservation of Urban Landmarks, 85 Harv.L.Rev.

074; Wolf, The Landmark Problem in New York, 22 Intra-

mural L.Rev. of N.Y.U. 99).’’ Although title and use remain

in the record owner, Lutheran Church, supra recognized

that in a particular case the Landmarks Law may operate

to so severely restrict free use as to be confiscatory. Essen-

tially this is the manner in which Trial Term viewed the

problem presented by the instant action.

The majority cite specific instances in which plaintiffs are

alleged to have erred in attempting to carry the burden of

proving a net operating deficit. First, it is asserted that the

‘‘Statement of Revenues and Costs’’ for the years 1969 and

1971 improperly attribute a considerable amount of railroad

operating expenses to their real estate operations. Certain

substantial cost items for 1971, such as ‘‘maintenance, re-

pairs and service plant operation’’, ‘‘cleaning”’, ‘‘policing’’,

‘*materials and supplies’’ and ‘‘utilities’’, are criticized for

being presented as related to the entire Terminal operation

rather than segregated as between the railroad and real

estate portions thereof. Patently, the tenants and conces-

sionaires who provide the gross revenues of the Terminal

are there because the Terminal is an active railroad station

and provides a nexus with public transportation via subway

and bus, thus insuring the daily passage of thousands of

34a

people. Pragmatically, these tenants and concessionaires

can be attracted and retained if the building is operated as

a railroad station and is maintained, cleaned, repaired and

policed in all its parts. There is, therefore, a basis for claim-

ing that the expense of operating and maintaining the build-

ing is a proper expense in ascertaining the profitability or

unprofitability of its operation. The insubstantial nature of

the criticisms of the ‘‘Statement of Revenues and Costs’’ is

evident because excluding all items the defendants, the City

of New York and the Landmarks Preservation Commis-

sion, claim should be excluded ony reduces the deficit from

$1,902,467 to $1,089,672. That alone serves to establish the

economic burden borne by the Terminal. Further, though

difficult to apportion, it may not be gainsaid that the value

of the ‘‘real estate’’ aspect of the Terminal is dependent

upon the maintenance of the Terminal as an area which will

be visited for purposes other than transportation.

It is next claimed that plaintiffs’ failure to impute a

rental value to the vast space in the Terminal devoted to

railroad purposes is an error vitiating plaintiffs’ analysis

of the property’s capacity to yield a reasonable return. As

to this contention, the plain answer is that the defendants’

reliance on Matter of Seagram & Sons v. Tax Comm., 14

N.Y.2d 314, 251 N.Y.S.2d 460, 200 N.E.2d 447 (1964) is mis-

placed. This case dealt not with income from a building, but

with the determination of its appraisal value on the capital-

ization-of-rents method. Obviously, under those circum-

stances, rent had to be imputed to owner-occupied space in

order to have something to capitalize for that portion of the

building. That, of course, is not the case here which is con-

cerned with whether the owner is making any return from

his use of his property. Indeed, the Landmarks Law itself

in defining ‘‘reasonable return’’ states that for such pur-

poses ‘‘(n)et annual return shall be the amount by which

the earned income yielded by the improvement parcel during

a test year exceeds the operating expenses of such parcel

during such year .. .’’ (Admin.Code § 207-1.0v[3][a}).

(Emphasis supplied). As a matter of economic analysis, the

35a

argument treats the Terminal as if someone had made a

gift of it to Penn Central. The fact is that Penn Central paid

its own money for the Terminal and to the extent it has been

‘‘saved’’ money for Terminal rental, it has lost the interest

it would have made if it had never built the Terminal or had

sold it. These figures of rent and interest on the value of

the property are economic equivalents (See La Porte v.

State of New York, 6 N.Y.2d 1, 7, 187 N.Y.8.2d 737, 741, 159

N.E.2d 540, 542 [1959], appeal dismissed, 361 U.S. 116, 80

S.Ct. 207, 4 L.Ed2d 154 [1959]; Albany Country Club v.

State of New York, 37 Misc.2d 134, 144, 235 N.Y.S.2d 684,

694 [Ct. Claims 1962), modified on other grounds, 19 A.D.

2d 199, 241 N.Y.S.2d 604 [3rd Dept., 1963], affd., 13 N.Y.2d

1085, 246 N.Y.S.2d 407, 196 N.E.2d 62 [1963]). Further, it

has been held that the imputation of rent does not create

income from property as the term is defined by the Internal

Revenue Code (Harper v. Granger, 99 F.Supp. 216 [W.D.

Pa.1951]). In passing, note is taken of plaintiffs’ point that

it is ironic to have the argument made in this case that the

present Terminal should be assigned an enormous rental

value because of the rental vaues for comparable space in

mid-Manhattan. Rental values are high in that area in the

context of the owners’ freedom within the zoning laws to

develop their property in profitable ways. At issue here is

the application of the Landmarks Law in such manner as to

deprive the Terminal of such value. It may well be argued

that no one woud pay substantial rentals for a lease of the

Terminal when told that the only use to which he can put it

is an unprofitable railroading use. In this sense the value

which defendants would have the Court attribute to the

property is precisely the value that they have taken away

from it.

Next, it is maintained that plaintiffs have failed to satis-

factorily show an inability to increase the Terminal’s com-

mercial income by transferring vacant or under-utilized

space to revenue producing use. In this context it appears

that Penn Central has been assiduous in attempting to in-

36a

crease its Terminal income. Indeed, the commercialization

of the Terminal had reached such a point that one of the

things discussed in the proceedings before the Landmarks

Commission was the desirability of eliminating some of the

concessions which have disfigured the building. The simple

assertion that there is room for development of additional

office space, stores or recreational facilities is highly specu-

lative. As to existing leases, there is nothing to suggest that

they were not negotiated at arm’s length. As to additional

development, it is worthy of note that a proposed bowling

alley in place of the waiting room failed of approval by the

Public Service Commission. Also, a proposed mall failed of

accomplishment because of its impingement upon trackage.

Defendants next assert that the claimed hardship based

on deferred maintenance expenses, attributable to the Land-

marks Law provision (Admin.Code § 207-10.0) requiring

Penn Central to maintain the Landmark is spurious. This

assertion is seemingly premised on the argument that the

Landmarks Law mandates no more than that required by

ordinary prudent management for the preservation of the

investment. Maintenance is a prerogative of management.

To transform that prerogative into a duty is to clearly les-

sen Penn Central’s estate. It is as though a lien is asserted

against the property in the amount necessary to maintain

the Terminal and it mandates expenditures whether or not

justified by the operating statement. Otherwise stated, own-

ership entitles one to destroy as well as to preserve. Sub-

ject to the law of nuisance, inter alia, the vehicle of destruc-

tion may be neglect. To require maintenance or improve-

ments may be an idea whose time has come, but it may not

be required solely of Landmarks, and not in the context of

additional burdens or restrictions upon the parcel which on

a pragmatic, economic and financial Lasis cannot be com-

plied with. Though not here in issue, notice may be taken of

the fact that criminal penalties attach to the failure to main-

tain a Landmark.

37a

It is further asserted by defendants that the agreements

with the MTA and the CTA referred to above, were im-

properly found by Trial Term to impose a loss in that Penn

Central must pay additional sums to those agencies. Review

of the historical background of those agreements impels the

conclusion that defendants’ contention is without merit. Ap-

proximately two years prior to any agreement with the

MTA, Penn Central acquired all the assets of the New

Haven Railroad, specifically including all the New Haven’s

interest in the off-Terminal (Park Avenue) properties. For

this interest Penn Central was charged more than $28,000,-

000. At the same time, Penn Central became responsible for

all the operations and operating deficits of the New Haven.

Therefore, when Penn Central and the MTA negotiated

their agrements, the New Haven was in essence a mere cor-

porate shell. There were no assets of the New Haven to

which the MTA could ‘‘succeed’’ and the MTA in fact ac-

quired nothing from the New Haven. Defendants, though

acknowledging that all revenue inures to the benefit of the

MTA and that all costs are borne by the MTA, aver that the

$2,000,000 credit against expenses incurred is in reality a

sum due the MTA as the successor in interest to the New -

Haven. During the time when the New Haven still held an

interest in the off-Terminal properties and their revenues,

these revenues had been applied towards off-setting the op

erating deficits of the Terminal and, if any excess remained,

the New Haven asserted a claim to a share of the excess. It

was thought equitable for Penn Central to contribute

towards the operating deficits of the Terminal an amount

roughly equivalent to the part of the off-Terminal revenues

which had formerly been applied towards New Haven’s

share of the Terminal expenses. Penn Central’s acquisition

of the part of the off-Terminal revenues which was ‘‘not ex-

cess’? was accompanied by its assumption of the very ex-

penses (formerly the obligations of the New Haven) against

which the non-excess revenues had been applied. No benefit

was derived from the simultaneous acquisition of a debit

38a

and a credit in equal amounts. Thus, the credit of $2,000,000

provided by Penn Central to the MTA did not come out of

the assets of the New Haven to which the MTA had suc-

ceeded and the agreements between Penn Central and the

MTA delineate that this credit is to come out of Penn Cen-

tral’s own assets and is specifically applied towards oper-

ating expenses of the Terminal.

The other credit of $2.5 Million per year for five years

required to be provided by Penn Central in connection with

the operation for MTA’s account of the Harlem-Hudson

Division is not related to the Terminal. The operating agree-

ments were not entered into for the benefit of Penn Central,

but for the purpose of maintaining commuter service. While

Penn Central may have been able to meet operating defi-

cits, it may also have been able to discontinue commuter

service. The $2.5 Million credit was the price it paid for

withdrawal from commuter service. Viewed in this context,

the credit is chargeable not to the operation of the Termi-

nal, but to the Penn Central itself. However, this does not

alter the fact that the several agreements leave Penn Cen-

tral with no possible source of return from the Terminal,

save development rights.

The majority view the plaintiffs as having failed to sat-

isfactorily show that unused development rights over the

Terminal could not have been profitably transferred to one

or more nearby sites (see, New York City Zoning Resolu-

tion, Sees. 74-79, et seq.). The Transfer Resolutions author-

ize the City Planning Commission to grant special permits,

if certain conditions are met, allowing the transfer of devel-

opment rights from a landmark site to adjacent sites. As

originally enacted, they neither provided compensation nor

significantly mitigated : plaintiffs’ harm. Defendants ac-

knowledged that development rights are not ipso facto

equated with compensation when the Zoning Resolution was

amended in 1969 to expand the number of sites that could

receive transfers of development rights from the Terminal

39a

site. Moreover, as defendants themselves note, the process

of transfer is fraught with obstacles. The City Pianning

Commission and the Board of Estimate must approve.

Neighbors may resort to the courts to protest the erection

in their vicinity of a structure which does not comport with

the Zoning Resolution. For these and numerous other rea-

sons it is difficult to assign a monetary value to the transfer

rights. However, not content with merely asserting the gen-

eral value of transfer rights, defendants detail the economic

benefit to be derived from a transfer to the Biltmore Hotel

site. This, of course, requires the demolition of the Biltmore

Hotel, a viable profit-making entity and ignores the fact

that the vast square footage could not be transferred to any

adjacent site, unless the Biltmore site was to be occupied

by a 103-story structure. In the context of this discussion,

it ill-behooves defendants to in effect control the deploy-

ment of the Penn Central’s financial resources and usurp

its management prerogative. In light of the substantial costs

that may attend the transfer of development rights because

the Landmark owner must submit a program for continuing

maintenance of the Landmark as part of his application for

the special permit, the value of the development rights are

less attractive.

It is, therefore, concluded on the record herein that plain-

tiffs have sustained their burden of demonstrating that the

Terminal site, as restricted, is incapable of producing a

reasonable economic return. Concededly the operation of

the Terminal represents an economic hardship. Conjecture

that Penn Central could have ‘‘done better’’ may not oper-

ate as a talisman in the resolution of this matter. It is only

required that Penn Central do the best it can. The possible

transfer of development rights cannot be viewed under the

circumstances herein as offsetting the restrictions placed on

the Terminal site. The benefits to both the City and the citi-

zenry to be derived from the designation of the Terminal

as a Landmark are self-evident. Yet in the manner of its

40a

application as delineated above, lies the inequity of this

particular case. The Terminal is to be preserved in its pris-

tine state for the benefit of all and the bill for this is pre-

sented solely to Penn Central. Assuming the Terminal is

and represents all that defendants claim (an assumption

easily indulged in), the relevant considerations and circum-

stances may well warrant resort to the power of eminent

domain as an appropriate solution. If for cogent reasons

resort to such power is not feasible, defendants may have

to forego this particular objective. In this connection, it

should be noted that Breuer I appears to be more suited to

a compromise of the rival interests of defendants and of

plaintiffs. Further, if the power of eminent domain is

deemed here inappropriate, society is left with an inchoate

right.

At this point the following lengthy excerpt from the Court

of Appeals opinion in Forster v. Scott, 136 N.Y. 577, 583-

585, 32 N.E. 976, 977 (1893) is most apt:

‘‘The constitutional guarantees against the appropria-

tion of private property for public use, except upon

just compensation, as well as that against depriving

the owner of its enjoyment and possession without due

process of law, have been the subject of much judicial

discussion in the manifold aspects in which the ques-

tions have been presented in the numerous cases... .

The validity of a law is to be determined by its purpose

and its reasonable and practical effect and operation,

though enacted under the guise of some general power,

which the legislature may lawfully exercise, but which

may be and frequently is used in such a manner as to

encroach, by design or otherwise, upon the positive

restraints of the Constitution. What the legislature

cannot do directly, it cannot do indirectly, as the Con-

stitution guards as effectively against insidious ap-

proaches as an open and direct attack. Whenever a law

deprives the owner of the beneficial use and free enjoy-

4la

ment of his property, or imposes restraints upon such

use and enjoyment, that materially affect its value,

without legal process or compensation, it deprives him

of his property, within the meaning of the Constitu-

tion. All that is beneficial in property arises from its

use and the fruits of that use, and whatever deprives a

person of them deprives him of all that is desirable or

valuable in the title and possession. It is not necessary,

in order to render a statute obnoxious to the restraints

of the Constitution, that it must in terms or in effect,

authorize an actual physical taking of the property or

the thing itself, so long as it affects its free use and en-

joyment, or the power of disposition at the will of the

owner. Though the police and other powers of govern-

ment may sometimes incidentally affect property

rights, according to established usages and recognized

principles familiar to courts yet even these powers are

not without limitations, as they can be exercised only

to promote the public good, and are always subject to

judicial scrutiny. (Citations. )

‘*As the plaintiff in the case at bar was virtually de-

prived of the right to build upon his lot by the statute

in question, and as this circumstance obviously im-

paired its value and interfered with his power of dis-

position, it was to that extent void as to him, and

created no encumbrance upon it.’’

Manifestly, the competing meritorious interests of the

City and the Landmarks Preservation Commission in seek-

ing to preserve the historical, aesthetic and cultural heritage

represented by Grand Central Terminal and the interest of

Penn Central as owner in the free use of its property un-

burdened by restrictions imposed by the former under cir-

cumstances and in such manner as to be confiscatory in

nature, must be reconciled, It is submitted that given the

present economic conditions prevalent in New York City

and, indeed in the United States, given the financial situa-

tion of Penn Central with due regard for the reasonable

42a

efforts on the part of management to obtain an adequate

return on the property at issue, and given the grandeur of

the Terminal, somewhat faded in the physical sense but

fully vital from an historical and cultural perspective,

Breuer I represented a patently good faith effort to do

homage to the Terminal within the ambit of its Landmark

designation, and at the same time to recognize the preroga-

tive of private ownership and the economic necessities of

this commercial parcel.

In the Amici Curiae brief submitted on behalf of the Com-

mittee to Save Grand Central Station, et al., it is stated

that ‘‘(r)egulation for the purpose of the preservation of

. . . [landmarks] has been upheld in all states where the

matter has been tested in court’’, citing in support of this

proposition the following: City of New Orleans v. Levy,

223 La. 14, 64 So.2d 798 (1953); Opinion of the Justices to

the Senate, 333 Mass. 773, 128 N.E.2d 557 (1955) ; Opinion

of the Justices to the Senate, 333 Mass. 783, 128 N.E.2d 563

(1955) ; City of Santa Fe v. Gamble-Skogmo, Inc., 73 N.M.

410, 389 P.2d 13 (1964); Town of Deering ex rel. Bittenben-

der v. Tibbetts, 105 N.H. 481, 202 A.2d 232 (1964); Rebman

v. City of Springfield, 111 Ill.App.2d 430, 250 N.E.2d 282

(1969) ; Bohannan v. City of San Diego, 30 Cal.App.3d 416,

106 Cal.Rptr. 333 (Ct.App. 4th Dist., 1973). A reading of

these cases indicates that, with one exception, each case

was concerned with the preservation ot a district, not an

individual parcel. This is so analogous to zoning that the

statutory scheme is oft referred to as zoning. The one ex-

ception was a prohibition against the erection of any build-

ing within 14 mile of the town common unless the plans

were approved (Town of Deering ex rel. Btttenbender v.

Tibbetts, supra). Again, hardly the sort of taking here

present. We refer again to the Court of Appeals decision

in Lutheran Church v. City of New York, supra, wherein

it was observed in the able opinion, per Gabrielli, J. that

zoning regulation is different than, and not to be equated

43a

with, Landmarks Preservation. Nevertheless, the Court pro-

ceeded to demonstrate that even zoning is void if confisca-

tory. Further, it is confiscatory if it may fairly be stated

that the regulation serves to add property remaining in pri-

vate hands to the government’s resources. Citing Forster v.

Scott, supra, the Court also noted that a statute which af-

fects the free use and enjoyment of property or the power

of disposition at the will of the owner is ‘‘obnoxious to the

restraints of the constitution’’ (Lutheran Church v. City

of New York, supra, 35 N.Y.2d at p. 130, 359 N.Y.S.2d at p.

15, 316 N.E.2d at p. 311). ‘‘What has occurred here, how-

ever, where the commission is attempting to force plaintiff

to retain its property as is, without any sort of relief or ade-

quate compensation, is nothing short of a naked taking’’

(Lutheran Church v. City of New York, supra, at p. 132, 359

N.Y.S.2d at p. 16, 316 N.E.2d at p. 312.) (Emphasis sup-

plied). It thus appears that Mr. Justice Saypol correctly

analyzed the .pinion of the Court of Appeals and that se-

vere criticism of the Justice in this respect by defendants

is unwarranted. Of particular note is the fact that in Luth-

eran Church, the landowner wished to demolish the mansion

which had been designated a Landmark and to accomplish

this parpose it was necessary to have the ‘‘landmark desig-

nation’”’ itself removed. It was ‘‘ uncontested that the exist-

ing building [was] totally inadequate for [the landowner’s]

legitimate needs and must be replaced if [the landowner]

is to be able freely and economically to use the premises

especially as it appears that adjoining structures have been

integrated with [the landowner’s] operation’’ (Lutheran

Church v. City of New York, supra, at 132, 359 N.Y.S.2d at

17, 316 N.E.2d at 312). However, the declaratory judgment

action initiated by plaintiffs herein has its inception not in

a desire to demolish the landmark, but rather to alter it;

that is, to use it in a manner which will insure a reasonable

economic return while preserving the Landmark in a feasi-

ble and consonant manner. To phrase it another way: plain-

tiffs desire to build an office tower over the Landmark and

44a

not to remove the Landmark and replace it with such office

tower. Consequently, the declaratory relief afforded by the

Supreme Court must be viewed as not removing the ‘‘land-

mark designation’’ from the Terminal, but rather perceived

as holding that the manner of applying such designation as

above delineated, constitutes a taking of plaintiffs’ private

property for public use without just compensation. It is

beyond cavil that if defendants, especially the Landmarks

Preservation Commission, acted favorably in respect of any

of the plaintiffs’ applications seeking to construct the tower,

the instant action would not have been maintained. By vir-

tue of the fact that plaintiffs retained an outstanding archi-

tect firm and even submitted Breuer I which retains the

famed south facade of the Terminal, their good faith in com-

ing to terms with the landmark designation has been ex-

hibited. The presence of the Pan Am building and the fact

that the original plans for the present Terminal envisioned

an office tower over such Terminal militate in persuasive

fashion against the defendants’ intransigent position. In

this context, such rigid application of the Landmarks Law

designation may well be self-defeating. Self-defeating not

only because it calls into question the propriety of such law,

but also because the individuals who designed, built, indeed

underwrote the great structures now deemed worthy of des-

ignation as Landmark, undoubtedly did so for a variety of

reasons, among which was their intention to profit there-

from. It is not reasonable to assume that if the result of

structural distinctiveness is to be a lessening of the entre-

preneurial estate, there may well be no structures to desig-

nate as Landmarks in the years to come?

Defendants’ claim that Trial Term erred in declaring that

the Landmarks Law as applied to plaintiffs denies them the

equal protection of the laws. It will be recalled that Penn

Central is precluded from seeking relief available to others

because of its receipt of a partial real estate tax exemption.

The statutory scheme, without explanation therefor, treats

differently three classes of landmark owners. Penn Central

Aetidr bt

45a

is relegated to that category which cannot obtain relief from

the Landmarks Law. Moreover, as demonstrated by plain-

tiffs, there is neither a common thread nor a commor sense

segregation of classes of property. It is this feature which

denies to plaintiffs the equal protection of the laws. The

power of classification cannot be arbitrarily exercised. The

distinctions made must have some reasonable basis ( Rosen-

thal v. New York, 226 U.S. 260, 33 S.Ct. 27, 57 L.Ed. 212

[1912]; Cf. Brown v. Board of Trustees, 303 N.Y. 484, 104

N.E.2d 866 [1952}).

The remaining contentions raised by defendants have

been considered and found to be without merit. Accordingly,

the order and judgment of the Supreme Court, New York

County (Saypol, J.), entered respectively on January 21,

1975 and February 4, 1975 declaring that the Landmarks

Law of New York City and the actions taken pursuant there-

to by the Landmarks Preservation Commission as hereto-

fore applied to Grand Central Terminal and its site (a)

constitute a taking of private property for public use with-

out compensation and (b) deny to plaintiffs due process of

law and the equal protection of the laws, should be affirmed,

with costs and disbursements.

MaRKEWICH, J., concurs.

(2)

Order (with Findings of Fact) of the New York Supreme Court,

| Appellate Division

(Filed April 7, 1976)

At a term of the Appellate Division of the Supreme Court

of the State of New York, held in and for the First Judicial

Department, in the County of New York, on the 7th day of

April, 1976.

PRESENT:

Hon. Harold A. Stevens, Presiding Justice.

46a

Hon. Arthur Markewich, Hon. Theodore R. Kupferman,

Hon. Francis T. Murphy, Jr., Hon. Vincent R. Lupiano,

Justices.

(Caption OmITTeD in PRINTING)

The defendants-appellants the City of New York and the

Landmarks Preservation Commission of the City of New

York having appealed from an order of the Supreme Court,

New York County (Saypol, J.), entered on or about Janu-

ary 21, 1975, severing plaintiffs’ causes of action for com-

pensation from their causes of action for declaratory and

equitable relief, and from a judgment of said Court entered

on or about February 4, 1975, adjudging that certain actions

of the defendants constitute a taking of private property

without just compensation and enjoining defendants from

taking said action; and said appeal having duly come on to

be heard before this Court, and having been argued by Ms.

Nina G. Goldstein, of counsel for the defendant-appellants,

and by Mr. John E. F. Wood, of counsel for the plaintiffs-

respondents; and due deliberation having been had thereon;

and upon the opinion of this Court by Mr. Justice Murphy

filed herein and made a part hereof ; with two of the Justices

dissenting upon an opinion by Mr. Justice Lupiano, and

upon the findings of fact made by this Court herein; it is

hereby

OrperRED and ApJupcep that the order and judgment of

Supreme Court, New York County (Saypol, J.) entered,

respectively, on January 21, 1975 and February 4, 1975, here

appealed from, be and the same hereby are reversed, on the

law and the facts, with costs; and it is further

OrpeRED and ApJunpceEp that all declarations of law by the

Supreme Court, New York County, accompanying the judg-

ment appealed from be and the same hereby are reversed,

on the law and the facts; and it is further

OrpERED and ApJvupcep that all the findings of fact made

by the Supreme Court, New York County, accompanying

47a

the judgment appealed from, inconsistent with the new find-

ings of fact set forth in the opinion of this Court, be and the

same hereby are reversed, and this Court in lieu thereof

makes the following new findings of fact:

1. In recent years, there has been an increasing national

growth of interest in preserving irreplaceable buildings and

sites which have historical, aesthetic or cultural significance.

2. Urban landmarks are now acknowledged to merit rec-

ognition as ‘‘an imperiled species.’’ If destruction of such

landmarks continues at its present pace, by 1976 the nation

will have lost an essential part of its architectural and cul-

tural heritage.

3. The preservation of landmarks in urban areas is of

special importance. Grand Central Terminal is an important

and irreplaceable component of the special uniqueness of

New York City. It is unquestionably one of New York City’s

best known buildings. Along with the Empire State Building

and the Statue of Liberty, the image of its facade symbolizes

New York City for millions of visitors and residents.

4. From its formal opening to the public in 1913 (as a

replacement for the ‘‘Grand Central Depot’’ built by Cor-

nelius Vanderbilt in 1871) the Terminal has been recognized

not only for its architecture, but as a superb example of

comprehensive urban design.

5. The need to preserve structures worthy of landmark

status is beyond dispute; and the propriety of the landmark

designation accorded Grand Central Terminal is essentially

unchallenged.

6. Plaintiff Penn Central is the successor to the New

York Central Railroad Company and the Pennsylvania Rail-

road. For purposes herein, ‘‘Penn Central’’ includes its

subsidiaries plaintiffs The New York and Harlem Railroad

Company and The 51st Street Realty Corporation. Plaintiff

UGP Properties, Inc. (‘‘UGP’’) was incorporated after the

48a

landmark designation here in issue; it is a wholly owned

subsidiary of a British Company.

7. Penn Central’s losses over the last several years

brought it to insolvency and bankruptcy. In order to mini-

mize such losses and provide offsetting revenues, it entered

into a lease with UGP in January, 1968, pursuant to which

UGP was to erect a tower exceeding 50 stories over the

Terminal. UGP undertook to pay to Penn Central $1,000,000

per year during construction and thereafter an amount that

was guaranteed to equal not less than $3,000,000 annually.

In addition, UGP assumed a portion of Penn Central’s real

estate taxes estimated at $578,500. These rental payments

were to be offset in part by the elimination of approximately

$700,000 to $1,000,000 in net rents presently received from

eoncessionairies whose space would be occupied by the pro-

posed new building.

8. Commencing in July, 1968, plaintiffs submitted to the

Landmarks Commission several building designs prepared

by the architectural firm of Marcel Breuer & Associates

(called Breuer I, Breuer II and Breuer II Revised) and

requested an appropriate certificate (of no exterior effect

or of appropriateness). Plaintiffs have indicated a prefer-

ence for Breuer II Revised, which would have preserved the

Terminal’s Main Concourse, but not its famous south fa-

cade. On August 26, 1969, a certificate of appropriateness

was denied.

9. Grand Central Terminal receives partial real estate

tax exemption pursuant to Real Property Tax Law, § 489 ff.

10. The landmark parcel at issue is not devoted to a

charitable purpose; and no claim is made that it cannot be

used for its prime function—as a railroad terminal.

11. Plaintiffs failed to meet their burden of establishing

that they are incapable of obtaining a reasonable return

from Grand Central Terminal operations.

49a

12. To support the claim that it is actually sustaining a

loss from Terminal operations, Penn Central submitted a

‘Statement of Revenues and Costs’’ for the years 1969

and 1971. These statements, which were prepared for the

instant litigation, improperly attribute a considerable

amount of railroad operating expenses (and some taxes) to

their real estate operations. For example, the expense items

included ‘‘Station Master and Staff’’, ‘‘Information

Clerks’’ and ‘‘Gate Usher’’. Such huge cost items (for

1971) as ‘‘maintenance, repairs and service plant opera- |

tion’’ ($1,141,679), ‘‘cleaning’’ ($632,753), ‘‘policing”’

( $438,566), **materials and supplies’’ ($69,692), and ‘‘utili-

ties” ($660,710) were related to the entire terminal opera-

tion and not segregated as between the railroad and real

estate portions thereof.

13. No rental value whatsoever was imputed to the vast

space in the terminal devoted to railroad purposes. Since

Penn Central is in the passenger railroad business it, of

necessity, must have a terminal (including trackage, plat-

forms, concourse, waiting rooms, ramps, ticket windows and

public amenities) for such service. The reasonable rental

value of such space was improperly omitted.

14. Plaintiffs have failed to show that they are unable to

increase the Terminal’s commercial income by transforming

vacant or under utilized space to revenue producing use.

15. Plaintiffs have failed to show that unused develop-

ment rights over the terminal could not have been profitably

transferred to one or more nearby sites.

16. Plaintiffs have failed to show that Penn Central’s

agreements with the Metropolitan Transportation Author-

ity and the Connecticut Transportation Authority provide

a basis for invalidating the Terminal’s landmark designa-

tion.

17. On the instant record, plaintiffs have failed to meet

their burden of proving that the City’s Landmarks Law is

unconstitutional as applied to them.

50a

18. On the instant record, plaintiffs have failed to meet

their burden of demonstrating that the regulation in issue

deprives them of all reasonable beneficial use of their prop-

erty.

And it is further

Orperep, Apsupcep and Dectarep that plaintiffs have

failed to establish that the New York City Landmarks Pres-

ervation Law is unconstitutional as applied to them; and it

is further ,

OrpereD that the Clerk of the County of New York is

directed to enter judgment in favor of the defendants-appel-

lants as herein provided, with $60 costs and disbursements

of this appeal.

ENTER:

F. T. M.

Justice

dla

APPENDIX C

(1)

Findings of Fact and Declarations of Law of the New York

Supreme Court, Trial Term

At a Trial Term, Part XII, of the Supreme Court of the

State of New York, held in and for the County of New York

at the Courthouse thereof, on the 29 day of May, 1974.

Present: Hon. Irvine H. Saypot, Justice.

Penn Centra Transportation Company et al., Plaintiff s-

Respondents,

Vv.

The Crry or New York and the Landmarks Preservation

Commission of the City of New York, Defendants-

Appellants.

Finpincs or Fact

The Court hereby finds as follows:

GENERAL

1. Plaintiff Penn Central Transportation Company

(‘‘Penn Central’’) is a corporation organized and existing

under the laws of the Commonwealth of Pennsylvania with

a general office at 466 Lexington Avenue, New York, New

York. It is the successor to The New York Central Railroad

Company and the Pennsylvania Railroad Company, which

were merged as of February 1, 1968.

2. Penn Central was declared bankrupt on June 21, 1970

and has remained bankrupt since that time.

3. Plaintiff The New York and Harlem Railroad Com-

pany (‘‘The New York and Harlem’’) is, and has been at

52a

all times relevant to this action, a corporation organized

and existing under the laws of the State of New York with

approximately 95% of its stock owned by the Trustees of

Penn Central and with a general office at 466 Lexington

Avenue, New York, New York.

4. Plaintiff The 51st Street Realty Corporation is, and

has been at all times relevant to this action, an indirectly

wholly owned subsidiary corporation of Penn Central, or-

ganized and existing under the laws of the State of New

York with a general office at 466 Lexington Avenue, New

York, New York.

5. Plaintiff UGP Properties, Inc. (‘‘UGP”’’) is, and has

been at all times since its formation on December 5, 1967,

a corporation organized and existing under the laws of the

State of New York.

6. Defendant The City of New York (the ‘‘City’’) is a

municipal corporation of the State of New York.

7. Defendant The Landmarks Preservation Commission

of the City of New York (the ‘‘ Landmarks Commission’’)

was established as a commission of the City pursuant to

Local Law 46 of the City for the year 1965, which amended

the Charter and the Administrative Code of the City so as

to add to each of them a new Chapter 8-A.

8. Grand Central Termina! (the ‘‘Terminal’’) was con-

structed in the early 1900’s aud opened to the public in 1913.

It is located in the Borough of Manhattan. The building

faces on Forty-Second Street to its south and is bounded on

the west by Vanderbilt Avenue at street level. On the east,

it adjoins the Commodore Hotel at street level. Above street

level it is bounded on its south, east and west by the Park

Avenue overhead roadway. To its north, the Terminal is

bounded by the Pan Am Building. It is and always has been

used in the interstate and intrastate carriage of railroad

passengers.

53a

9. The Terminal is deteriorating at a substantial rate.

The condition of the Terminal was such that repairs and

maintenance work costing approximately $1,278,135 were

necessary in June, 1972.

10. The Terminal was originally intended to be a combi-

nation railroad terminal and office building. The original

plan for the Terminal provided for a 20-story office tower to

be constructed on top of the present Terminal and columns

were built into the Terminal, which are still in place today,

whose purpose is to support such a tower.

11. The land on which the Terminal stands (the ‘‘ Termi-

nal site’’) is designated in the Tax Map of the City as

Block 1280, Lot 1, Borough of Manhattan.

12. The Terminal and the Terminal site have received

partial tax exemption amounting to $11,083,489 since the

early 1960’s under Section 489ff of the Real Property Tax

Law of the State of New York.

13. On August 2, 1967, over Penn Central’s objection, the

Terminal was designated a Landmark and the Terminal

site a Landmark site by the Landmarks Commission.

OWNERSHIP AND LEASEHOLD INTERESTS IN THE

TERMINAL PROPERTY

14. The ownership and leasehold interests in the Termi-

nal and the Terminal site, held by the respective plaintiffs,

are, and have been at all times relevant to this action,

unless otherwise noted, as follows:

(a) The New York and Hariem Railroad Company

owns the fee;

(b) Penn Central has a lease, expiring in the year

2274 A.D. from The New York and Harlem Railroad

Company;

(c) UGP entered into a lease, dated as of January

22, 1968, with The 51st Street Realty Corporation (the

54a

‘‘Lease’’) which, at that time, had a grant of term of

the Terminal and the Terminal site from Penn Central.

The 5ist Street Realty Corporation assigned all of its

interest in the Lease, the Terminal and the Terminal

site to Penn Central and The New York and Harlem on

July 21, 1969.

15. The Lease was the result of arms-length negotiations

and is for a term of 50 years after its commencement date

with UGP having an option to renew for an additional 25

years thereafter. Under the Lease, UGP is to construct and

operate a multi-story office building on the southerly portion

of the Terminal site.

Brever I, II anv II Revisep

16. UGP retained the architectural firm of Marcel Breuer

& Associates in February, 1968, to design an office building

for the Terminal site.

17. By June, 1968, Marcel Breuer & Associates completed

the first schematic plans, Breuer I for an office building

with 55 office floors which would rise above the Terminal

and would preserve the exterior of the Terminal.

18. On July 18, 1968, plaintiffs submitted proposed build-

ing plans for Breuer I to the Landinarks Commission and

applied for a Certificate of No Exterior Effect permitting

its construction. These plans were also filed with the De-

partment of Buildings of The City of New York to obtain

zoning approval. The application was denied by the Land-

marks Commission on September 20, 1968.

19. Mareel Breuer & Associates following negotiations

and discussions between the parties thereafter designed

Breuer II, a building with 53 office floors which would have

necessitated replacing part of the exterior of the Terminal.

20. On January 20, 1969, plaintiffs applied to the Land-

marks Commission for a Certificate of Appropriateness,

55a

under Section 207-6.0 of the Landmarks Law, permitting

construction of either Breuer I or Brewer II.

21. Because of the plaintiffs’ concern that the possible

adverse effect of Breuer II on the City’s easement rights

in the elevated roadway surrounding the perimeter of the

Terminal might be used as a basis for the refusal of a per-

mit to build Breuer II, Marcel Breuer & Associates designed

Breuer II Revised which plaintiffs submitted in place of

Breuer JI. Breuer II Revised was substantially similar to

Breuer II, except that it would not encroach upon the ele-

vated roadway. During the course of the proceedings, plain-

tiffs expressed a preference for Breuer II as revised over

Breuer I.

22. Plaintiffs’ application for a Certificate of Appro-

priateness was denied as to both Breuer I and II Revised

on August 26, 1969.

23. Breuer II would be 254 feet southerly from the ad-

joining Pan Am Building; Breuer I and II Revised would

be approximately 225 feet southerly from the Pan Am

Building.

24. If Marcel Breuer & Associates had begun work on

the plans for Breuer II and II Revised at the time that

schematic plans for Breuer I were prepared, schematic

plans for Breuer II and II Revised could have been com-

pleted by June, 1968.

Harm TO PLAINTIFFS

25. The Terminal site is a valuable location for an office

building. It is in the heart of a commercial area occupied

mainly by high-rise commercial structures such as office

buildings and hotels. Any of the plaintiffs’ proposed strue-

tures over the Terminal site would be directly above a trans-

portation hub of commuter, railroad and subway lines, with

ready access internally by occupants of the building to such

facilities.

56a

26. In 1968 there was a favorable office rental market in

favor of landlords in the Grand Central area. Rental activ-

ity for space in an office building on the Terminal site would

have started on the basis of architects’ plans beginning in

June, 1968. Construction of the building would have been

completed within three to three and one-half years there-

after.

27. Plaintiffs were prepared to undertake renting and

commencement of construction of an office building on the

Terminal site in 1968, but were precluded from proceeding

because of the defendants’ refusal to permit this.

28. Diesel Construction Company, builder of the Pan Am

Building, was retained in early 1968 by UGP to construct a

building on the Terminal site.

29. Collins, Tuttle & Company, engaged in the sale, rental

and management of real estate, was retained by UGP in

December, 1967, to rent, obtain financing and as consultant

for a building on the Terminal site. Collins, Tuttle & Com-

pany began a renting and financing program in early 1968.

At that time Collins, Tuttle & Company solicited prospective

tenants primarily to lease the space in Breuer I, principally

on a single floor occupancy basis, for terme of 20 to 30 years,

but these activities were halted due to defendants’ denial

of a Certificate of No Exterior Effect. Investors financing

the building at a favorable interest rate were likewise solic-

ited, but their participation was deferred for the same

reason.

30. The total cost of Breuer I would have been $108,554,-

‘+1, ineluding construction costs of $82,344,400; Breuer II

would have cost $196,541,730, of which $77,306,500 would

have been construction costs; and Breuer II Revised would

have cost $108,486,444, of which $79,365,000 would have

been construction costs.

31. If construction of Breuer I had commenced in 1968,

the City would have received substantially increased prop-

erty taxes upon commencement of construction.

57a

32. Under the Lease, Penn Central is to receive $1,000,000

per year during the construction of a building by UGP on

the Terminal site. Upon completion, Penn Central is to re-

ceive an annual rent of $1.10 per square foot of net rentable

space, exclusive of ground floor space, plus $400,000, plus

5% of the gross income, with a guaranteed minimum of

$3,000,000 per year. Upon completion of construction Penn

Central would have received an annual rent of up to $3,738,-

977 from Breuer I.

33. As additional compensation to Penn Central, UGP is

to pay under the Lease all taxes on the Terminal site con-

sidered as unimproved from the time UGP is permitted to

construct a building. From June, 1968, through July, 1972,

these taxes totaled $1,372,530. UGP is also to pay all taxes

on the Terminal (the building) within the area demised to

it, thereby reducing the amount of taxes that Penn Central

would have to pay on the Terminal.

34. UGP expected to receive a yearly cash flow of at least

$2,839,131 from Breuer I upon its completion, $3,325,620

from Breuer II and $3,181,702 from Brewer II Revised. By

the end of the first five years, UGP’s anticipated aggregate

profit would have been $20,495,655 from Breuer I, $22,928,-

100 from Breuer II and $22,208,510 from Breuer IT Revised.

35. Due to defendants’ actions preventing plaintiffs from

constructing a building on the Terminal site, Penn Central

and The New York and Harlem Railroad Company have

been deprived of the rent they would have received from

UGP and the taxes UGP would have assumed ; and UGP has

been deprived of the profit it would have made from such a

building.

36. For the years 1967 to 1971, the cost to Penn Central

of operating the Terminal building itself, exclusive of

purely railroad operations, exceeded the revenues received

from concessionaires and tenants in the Terminal.

58a

37. The net deficit to Penn Central from operating the

Terminal was $1,165,470 in 1969 and $1,902,467 in 1971.

38. As of June 1, 1972, the Metropolitan Transportation

Authority leased the Terminal and, together with the Con-

necticut Transportation Authority, receives all revenues

from tenants and concessionaires in it (with the exception

of any rent Penn Central would receive under its lease with

UGP) and has assumed all costs of operating the Terminal.

Penn Central is obligated t> pay these agencies $4,500,000 a

year for the next five years and $2,000,000 thereafter. The

Metropolitan Transportation Authority received partial re-

imbursement for these costs from the City.

TRANSFER OF DeveLopMENT Ricuts (Arr Riauts)

Zontnc Reso.utions 74-79 Turoven 74-793

39. Zoning Resolutions 74-79 through 74-793 (the ‘‘ Trans-

fer Resolutions’’) contemplated compensatory relief for

owners of landmarks, including long-term lessees such as

UGP, for the taking caused by the designation of such

properties as landmarks.

40. As originally en.ected in May, 1968, the Transfer

Resolutions neither provided compensation to plaintiffs nor

minimized the harm suffered by plaintiffs due to the desig-

nation of the Terminal as a landmark.

41. The pertinent Transfer Resolutions as last amended

in December 1969, although affording increased trausfer

rights from the Terminal site to other properties owned by

Penn Central, do not provide compensation to plaintiffs or

minimize the harm suffered by plaintiffs due to the desig-

nation of the Terminal as a landmark.

42. The property principally suggested for the transfer

of development rights is the present site of the Biltmore

Hotel. Development rights could not be economically trans-

ferred to the Biltmore site because:

59a

(1) The Biltmore Hotel is and has been a profitable

operation.

(2) A building on the Biltmore site could not have

been profitable because (a) the ground rent required of

UGP by Penn Central for a lease of the Biltmore site

was $2,000,000 a year more than in the Terminal lease,

and (b) there would have been increased costs of con-

struction, financing, taxes and building operation.

(3) Rents from an office building on the Biltmore

site would be significantly lower than from one on the

Terminal site which is a superior location.

DecLaRATIONS OF Law

It is hereby concluded and declared that:

1. The Landmarks Law as applied to plaintiffs, and the

actions of defendants, constitute a taking of plaintiffs’ pri-

vate property for public use without just compensation, in

violation of the Constitution of the United States, Amend-

ments V and XIV, and the Constitution of the State of New

York, Article I, Section 7.

2. The Landmarks Law as applied to plaintiffs, and the

actions of defendants, deprive plaintiffs of the equal pro-

tection of the laws, in violation of the Constitution of the

United States, Amendment XIV, and the Constitution of

the State of New York, Article I, Section 1).

3. The Landmarks Law as applied to plaintiffs, and the

actions of defendants, deprive plaintiffs of their property

without due process of law, in violation of the Constitution

of the United States, Amendment XIV, and the Constitu-

tion of the State of New York, Article I, Section 6.

4. There is no provision of the Landmarks Law which

affords relief to the plaintiffs, with respect to the Terminal

or the Terminal site, against the economic hardship which

60a

they have suffered as a result of the defendants’ actions

under the Landmarks Law. Although Section 207-8.0 of the

Landmarks Law affords such relief to landmark owners

generally (including ultimately the lifting of landmark re-

strictions) upon a showing of economic hardship, the provi-

sions of Section 207-8.0a(2) deny such relief to the plain-

tiffs, whether by way of certificate of appropriateness,

notice to proceed or otherwise, because the Terminal and

the Terminal site are partially exempted from taxation

under Section 489ff of the Real Property Tax Law.

ENTER:

Irvine H. Saypou

Irving H. Saypol, J.S.C.

(2)

Order of Severance of the New York Supreme Court,

Trial Term

At a Trial Term, Part XII, of the Supreme Court of the

State of New York, held in and for the County of New

York at the Courthouse thereof, on the 12 day of January,

1975.

Present: Hon. Irvine H. Saypon, Justice.

(Caption OMITTED IN PRINTING)

Pursuant to CPLR Rule 5012, it is ordered that plain-

tiffs’ causes of action for compensation for the taking of

their property are severed from their causes of action for

declaratory and equitable relief, that jurisdiction of the

causes of action for compensation is reserved in this Court,

and that decision with respect to the right to compensation

and the amount of compensation, if any, is deferred pending

completion of appellate review of the final judgment to be

entered herein upon the causes of action for declaratory and

6la

equitable relief or expiration of the time for such review

without an appeal having been taken, or until further order

of this Court.

Enter:

Irvine H. Saypou

Irving H. Saypol, J.S.C.

Filed

Jan 21 1975

New York

County Clerk’s Office

(3)

Memorandum Decision of the New York Supreme Court,

Trial Term

SUPREME COURT

New York County

TriaL TermM—Part XII

(Caption Omitrep In Printine)

Saypoi, J.:

This is an action for declaratory judgment. In addition

to the admitted allegations of the complaint and the facts

found as indicated in the accompanying marked findings,

presentation here is greatly facilitated in the following

excerpted recitals from the supplemental report of former

Associate Judge John Van Voorhis of our Court of Ap-

peals serving as special master in related debtor reor-

ganization proceedings in the United States District

Court, District of Connecticut.

62a

Plaintiff Penn Central Transportation Company (Penn

Central) controls co-plaintiff New York and Harlem Rail-

road which owns the fee of Grand Central Terminal lo-

cated on 42nd Street in the heart of Manhattan in one of

the most valuable commercial areas in the world, sur-

rounded by multi-story office buildings and similar struc-

tures. Penn Central has a 300-year lease from New York

and Harlem Railroad. Penn Central’s wholly owned sub-

sidiary, co-plaintiff 51st Street Realty Corporation, has a

grant from Penn Central for a term co-terminous with a

lease from 5lst Street Realty Corporation to co-plaintiff

UGP Properties Inc., the latter under its lease undertak-

ing to erect and operate a multi-story office building over

the Terminal. When the Terminal was erected the plan

and construction of its foundation contemplated the fu-

ture super-imposition of twenty stories over the Termi-

nal. In this background, the following is from Judge

Van Voorhis’ report:

‘*IN THE

UNITED STATES DISTRICT COURT

For tHe District or CONNECTICUT

In Proceedings for the Reorganization of a Railroad

No. 30226

‘ In the Matter of

Tut New York, New Haven anv Hartrorp

talLnoaD ComMPaNny,

Debtor

SuppLeMENTAL Report or SprcraL Master Respectine

Desror’s Rieut, Trrte or INTEREST IN THE GRAND

CrentrraL TERMINAL PROPERTIES

63a

This report, as authorized June 25, 1968 at New

Haven, by the United States District Court for the

District of Connecticut, Honorable Robert P. Ander-

sou, United States Circuit Judge, sitting by designa-

tion, supplements the report previously submitted by

me as Special Master under date of June 17, 1968.

The most important development since April 19,

1965, * * * has been the lease agreement between a

Penn-Central subsidiary and a corporation known as

UGP Properties, Inc. of the air rights above the Grand

Central Terminal building for the construction of a

proposed fifty-five story office building planned (ac-

cording to a press release mentioned by Penn-Cen-

tral’s counsel) to have 1.9 million square feet of

office space. The lease agreement is in evidence,

marked BH 1, A, B, C, and provides for the pay-

ment of 1 million dollars annual rent for four years

and thereafter at a $1.10 per square foot of net rent-

able space, exclusive of ground floor space, which

may from time to time exist in the new building plus

$400,000 per annum all payable monthly in [6075]

advance. The term of the lease is 50 years. The

tenant agrees to pay the taxes and an additional per-

centage rent of 5 per cent of gross income which,

plus the flat rent, is guaranteed to be not less than 3

million dollars per year commencing not later than

four years after the commencement date of the lease.

It was conceded that the plans for this proposed

building, designed to float over the Terminal building,

comply with the existing regulations of the City

Planning Commission and the zoning regulations.

This lease was, to be sure, delivered to the tenant

subject to a letter providing that if the tenant has

used its best efforts ‘to obtain a certificate of ap-

propriateness or notice to proceed from the Land-

64a

marks Preservation Commission* and has failed

after appropriate order of the Supreme Court of the

State of New York and provided, further, that there

exists an outstanding designation by the Landmarks

Preservation Commission of Grand Central Terminal

as a landmark, Tenant and said Sublandlord shall

have the right to rescind Lease and Sublease, respec-

tively, by giving to Landlord ten days’ written no-

tice of such intention’, and in exerting its ‘best ef-

forts’ the tenant is required to file an application

with the Landmarks Preservation Commission prior

to August 1, 1968 and to bring an action or proceed-

ing through counsel approved by the landlord against

any adverse ruling by the Landmarks Preservation

Commission. The landlord is given the right to res-

cind the lease if the tenant has not obtained this re-

sult by January 1, 1970 [extended by agreement of

the parties until July 1, 1975) and upon any rescision

[sie] of the lease the tenant is required to assign to

the landlord its interest in any action or proceeding

pending in the New York Courts relating to the ap-

plication of the Landmarks Preservation Commission

or relating to the designation of Grand Central Term.

inal as a landmark or pertaining to any rights or

entities under the statute pursuant to which Grand

Central Terminal is designated a landlord [land-

mark]. In event of adverse decision the landlord is au-

thorized to appeal and the tenant is required to co-

operate with the landlord in all matters pertaining

to any such action or proceeding. When asked at the

hearings whether Penn-Central had abandoned this

project, the answer was unqualifiedly ‘No’. Counsel

for Penn-Central informed the Court on May 8, 1968,

in the earlier hearings that an Article 78 proceeding

65a

{this plenary action for declaratory judgment in-

stead) has been commenced by Central to contest the

designation of Grand Central Station as a landmark,

and that that this suit includes a test of the consti-

tutionality of the Landmarks Preservation Act which

is subdivision 25-a of the General City Law providing

that cities are empowered :

‘To provide, for places, buildings, structures,

works of art, and other objects having a special

character or special historical or aesthetic inter-

est or value, special conditions or regulations, for

their protection, enhancement, perpetuation

(6086] or use, which may include apropriate and

reasonable control of the use or appearance of

the neighboring private property within public

view, or both. In any such instance such measures

if adopted in the exercise of the police power,

shall be reasonable and appropriate to the pur-

pose, or if constituting a taking of private prop-

erty shall provide for due compensation which

may include the limitation or remission of taxes.’

[Emphasis supplied] [1]

The New York City Landmarks Preservation Com.

mission is constituted pursuant to sections 205-207 of

the New York City Charter constituting Chapter 8-A

added by local law No. 46, April 19, 1965, The consti-

tutionality, in certain situations of the Landmarks

Preservation Act was upheld at special term in Man-

hattan Club v. Landmarks Preservation Commission,

51 Mise 2d 566 and but [sic] not in Trustees of Sailors

Snug Harbor v. The Landmarks Preservation Com-

mission 53 Mise 2d 933.* A landlord has been held to

__— [1] {former General City Law § 20, subd, 25-a, repealed L, 1968,

* Pursuant to Chapter 8-A of the N.Y, City Administrative Code ¢. 513, $2; similar provision is now General Municipal Law

§§ 205-1.0 through 207-21.0. § 96-a, L. 1968, ¢, 513, § 3)

*''The regulation imposes so disproportionate a burden upon

the landowner that it must be set aside in this case as an unlaw-

66a

be entitled to test the constitutionality as applied to

his property by action for a declaratory judgment

(Lutheran Church in America v. New York, 27 App.

Div. 2d 237). The same statute was obliquely involved

in Keystone Associates v. Moerdler, 19 N. Y. 2d 78,

(although there it was a different statute which was

held to be unconstitutional), wherein an injunction

was denied to restrain the demolition of the old

Metropolitan Opera House. The Court said: ‘It is

not necessary, at this time, to enter into a diseussion

of the Landmarks Preservation Law or any other

statute which appears to have been enacted in the

exercise of the police power.’

If this new project is accomplished, it appears like-

ly to add at least $2,300,000 to the annual income of

the Terminal Account. The parties stipulated that the

facts stated at pages 600-05 of the transcript of the

hearing held before me on May 8, 1968 are correct,

and it was indicated at page 601 that the rent for

these air rights would be in part offset by the dis-

placement of some stores and concessions in the

Terminal building now bringing in approximately

$700,000 per year. This apparently refers to stores

on 42nd Street and some concessions in the waiting

room entrance and on the south wall of the main ro-

tunda of the station.

There is, of course, a precedent for this structure

in the Pan-American Building located about 200 feet

to the north, Whether the opposition to its construc-

tion will sueceed is not presently known, but it would

seem to me, that the probabilities are in its favor. The

67a

Grand Central Station is not proposed to be removed,

[6087-6088] It is doubtful that the City could insist

upon its being maintained at Penn Central’s expense

as a memorial to the golden age of railroading. The

building, as it is, is expensive to maintain, and even

under the broad scope of the police power in modern

times it is doubtful that it can be so constricted with-

out there being a taking without payment of just

compensation as required by the state and federal

constitutions. This is particularly true in view of the

similarity and close proximity to the Pan-Am Build-

ing which, it might be argued, could constitute dis-

crimination denying the equal protection of the law.

If, under a reorganization plan, all right, title and

interest of New Haven in the GCT properties is to

be transferred to Penn-Central, a large potential in-

crease in the surplus revenue to be computed of the

Terminal Account should result from these valuable

air rights. The fairest way might be to insert a pro-

vision in the reorganization plan and purchase agree-

ment which would require substantially more to be

paid for New Haven’s rights if a building is erected

above the Grand Central Station.

Dated: July 22, 1968

Respectfully submitted,

Joun Van Voornis

Special Master’’

Lutheran Church supra cited in Judge Van Voorhis’ re-

port ultimately was resolved by a divided court, 42 A D 2d

547, the majority rejecting the landmarks designation as an

ful taking of property without just compensation [citing cases) "’: abuse of administrative discretion, the minority disagreeing

Last paragraph of opinion. saying that the majority decision constituted the substitu-

tion of judicial for administrative discretion. When Trus-

68a

tees of Sailors’ Snug Harbor supra, Judge Van Voorhis,

reached the Appellate Division, 29 A D 2d 376 (relied on

here by both sides) it was held that the state had the power

to restrict use for the cultural and aesthetic benefit of the

community where the conditions exist favoring such a re-

striction and where Constitutional rights are not infringed.

But, continued Associate Justice Aaron Steuer for the unan-

imous court:

‘*Conceding the validity of regulation, the question

presented is whether in the particular instance regula-

tion goes so far that it amounts to a taking (Pennsyl-

vania Coal Co, v. Mahon, 260 U.S, 393, 415). If it does,

it is constitutionally prohibited (Vernon Park Realty

v. City of Mount Vernon, 307 N.Y. 493, 498). Chapter

8-A [Administrative Code of the City of New York]

provides some guidelines as to what constitutes an un-

due burden on commercial realty and provides relief

in such instances (4 207-8.0, subd. a). * * * The criterion

for commercial property is where the continuance of

the landmark prevents the owner from obtaining an

adequate return.’’ (Emphasis supplied)

The New York City Landmarks Law distinguishes be-

tween a landmark and a landmark site which is defined as:

‘** * * An improvement parcel or part thereof on which

is situated a landmark and any abutting improvement

parcel or part thereof used as and constituting part of

the premises on which the landmark is situated, and

which has been designated as a landmark site pursuant

to the provisions of this chapter.’’ [2 New York City

Administrative Code Ch. 8A, § 207-1.0(1)]

It then provides that:

‘se * * [I]t shall be unlawful for any person in

charge of a landmark site * * * to alter, reconstruct or

demolish any improvement constituting a part of such

69a

site * * * or to construct any improvement upon land

embraced within such site * * * or to cause or permit

any such work to be performed upon such improvement

or land, unless the commission has previously issued a

certificate of no exterior effect, a certificate of appro-

priateness or a notice to proceed authorizing such work,

and it shall be unlawful for any other person to perform

such work or cause same to he performed, unless such

certificate or notice has been previously issued,’’ [4 207-

4.0(a)(1)),

It also mandates:

‘"* © * a. Every person in charge of an improvement

on a landmark site or in an historic district shall keep

in good repair (1) all of the exterior portions of such

improvement and (2) all interior portions thereof

which, if not so maintained, may cause or tend to cause

the exterior portions of such improvement to deterior-

ate, decay or become damaged or otherwise to fall into

a state of disrepair.

‘*h. The provisions of this section shall be in addition

to all other provisions of law requiring any such im.

provement to be kept in good repair.’’ [4 207-10.0)

‘** © * (T)t shall be unlawful for any person in charge

of any improvement located on a landmark site or in an

historic district to perform any minor work thereon, or

to cause or permit such work to be performed, and for

any other person to perform any such work thereon or

cause same to be performed, unless the commission has

issued a permit, pursuant to this section, authorizing

such work.’’ [§ 207-9.0]

Violations of § 207-4.0, § 207-9.0 or § 207-10.0 are subject

to criminal penalties as provided in § 207-16.0.

70a

Summarizing, the owner of a landmark site is prohibited

from making any changes not only to a landmark on the

site, but also to any other improvement on the landmark site

without express Landmarks Commission approval. The

landmark may not be replaced with a structure permitted

under the zoning law of the City; it is prohibited to add

another structure on the site which would not even touch

the landmark, or from making a slight change im the exter-

ior of any improvement on the site; one may not construct

fences or barriers around his property to exclude intruders ;

he may not even replace multipane windows on non-land-

mark buildings on a landmark site with pieture windows.

The list is virtually endless, In short one is limited to main-

taining all of the property in its original condition as of the

time of designation as a landmark site at one’s own expense.

Such a severe restriction on the use and enjoyment of prop-

erty, it is argued by the plaintiffs, constitutes a taking of

property as a matter of law.

The clerk is now directed to file the annexed findings of

fact, judgment and order of severance.

The findings of fact and conclusions of law and the judg-

ment were completed and signed on May 29, 1974, after re-

view with counsel in extensive hearings. Filing was withheld,

however at the request of the parties. Meanwhile the Court

of Appeals decided Lutheran Church v. City of N.Y. on

July 25, 1974 (35 N Y 2d 121). Gabrielli, J., for the major-

ity of the Court, held that landmarks designation generally

constitutes a taking for which compensation is mandated.

What was said for the majority and for the dissenters in

Lutheran, supra, as to the lack of findings of fact is not

present here. The findings here adequately cover such ele-

nents as economic hardship, lack of compensatory alterna-

tive to alleviate economic hardship, inadequacy of relief by

tax rebate, etc., ete. This establishes unconstitutionality of ©

the statute as applied. ‘

Tla

Aesthetics is not for decision here. However, beauty or

art deserving preservation where those competent in the

field might disagree would not be for a court’s conclusion.

Visualized in the mind’s eye, looking up South Park Avenue

towards Grand Central Station, set as it is in a canyon sur-

mounted by sky scrapers with the Pan American Building

immediately behind it, it looks like part of that Pan Ameri-

can Building. More closely viewed, surrounded as Grand

Central is by the heavily travelled roadway around its pe-

rimeter on three sides, it leaves no reaction here other than

that of long neglected faded beauty. The point of decision

here is that the authorities empowered to make the desig-

nation may do so but only at the expense of those who will

ultimately have to bear the cost, the taxpayers.

Declaration is for the plaintiffs invalidating the designa-

tion on Constitutional grounds. On the agreement of the

parties the defendants’ order of severance is signed, reserv-

ing the question of damages.

Dated: January 21, 1975.

JHS

J. 8. C.

(4)

Judgment of the New York Supreme Court,

Trial Term

At a Trial Term, Part XII of the Supreme Court of the

Stat of New York, held in and for the County of New York

at the Courthouse thereof, on the 29 day of May, 1974.

Present: Hon. Irvine H. Saypot, Justice.

(Caption OmitTep 1n Printina)

The issues in the above-entitled action having duly come

on for trial before the Hon. Irving H. Saypol without a jury

72a

at a Trial Term, Part XII, of this Court, held at the Court-

house thereof, and the allegations and evidence of the par-

ties having been heard, and a severance having been ordered

pursuant to CPLR Rule 5012 severing plaintiffs’ causes of

action for compensation from their causes of action for

declaratory and equitable relief, and the Court having made

and signed its findings-of fact and declarations of law,

Now, it is Ordered, Adjudged, Decreed, and Declared,

that:

1. Chapter 8-A of the Charter and Administrative Code

of the City of New York (the ‘‘Landmarks Law’’) as ap-

plied to plaintiffs, and the actions of defendants under the

Landmarks Law with respect to the property designated in

the Tax Map of the City of New York as Section 5, Block

1280, Lot 1, Borough of Manhattan, or any improvements

thereon (the ‘‘Property’’), constitute a taking of plaintiffs’

private property for public use without just compensation,

in violation of the Constitution of the United States,

Amendments V and XIV, and the Constitution of the State

of New York, Article I, Section 7.

2. The Landmarks Law as applied to plaintiffs, and the

actions of defendants under the Landmarks Law with re-

spect to the Property, deprive plaintiffs of the equal pro-

tection of the laws, in violation of the Constitution of the

United States, Amendment XIV, and the Constitution of

the State of New York, Article I, Section 11.

3. The Landmarks Law as applied to plaintiffs, and the

actions of defendants under the Landmarks Law with re-

spect to the Property, deprive plaintiffs of their property

without due process of law, in violation of the Constitution

of the United States, Amendment XIV, and the Constitution

of the State of New York, Article I, Section 6.

4. Defendants are permanently enjoined from using or

threatening to use the Landmarks Law or any provision

thereof, or from taking any action thereunder, to prevent,

73a

impede or obstruct, directly or indirectly, the construction,

use or oceupancy, of an otherwise lawful improvement on

the Property.

5. The plaintiffs shall recover of the defendants the costs

and disbursements of this action to be taxed by the clerk

of the Court.

Enter:

Irvine H. Saypou

Irving H. Saypol, J.S.C.

Filed |

Feb 4—1975

| New York

County Clerk’s Office

74a

APPENDIX D

SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK

Penn CentraL TRansportaTion Company, THe New York -

AnD Hariem Rariroap Company, Tue 51st Street Reatty

Corporation and UGP Properriss, Inc., Appellants,

—against—

Tue Crry or New Yor and Tue Lanpmarks PRESERVATION

ComMISSsION OF THE Crry or New York, Appellees.

Notice of Appeal to the

Supreme Court of the United States

NoTICE IS HEREBY GIVEN that the appellants above named

hereby appeal to the Supreme Court of the United States

from the final judgment of the Court of Appeals, State of

New York, entered in this action on June 23, 1977 affirming

an order of the Appellate Division of the State of New

York, First Department, which reversed on the merits

an order of the Supreme Court, New York County, and

granted judgment in favor of appellees dismissing the

complaint.

This appeal is taken pursuant to 28 U.S.C. § 1257(2).

Dated: August 31, 1977.

/s/ Carl Helmetag

Cart Hetmetac, Esq.

Suite 3100 IVB Building

1700 Market Street

Philadelphia, Pa. 19103

/s/ Covington & Burling

Covincton & BuRLING

888 Sixteenth St. N.W.

Washington, D.C. 20006

Consoy, Hewitt, O’Brien

& BoaRDMAN

20 Exchange Place

New York, N.Y. 10005

Attorneys for Appellants

75a

To: CLERK oF THE SuPREME CouRT

New York County

W. Berwarp Ricuwianp, Esq.

Corporation Counsel

Municipal Building

New York, N.Y. 10007

Attorney for Appellees

(1)

CHAPTER 8-A

PRESERVATION OF LANDMARKS AND

Historica, Districts

§ 205-1.0 Purpose and declaration of public policy.—a.

The council finds that many improvements, as herein de-

fined, and landscape features, as herein defined, having a

special character or a special historical or aesthetic interest

or value and many improvements representing the finest

architectural products of distinct periods in the history of

the city, have been uprooted, notwithstanding the feasibility

of preserving and continuing the use of such improvements

and landscape features, and without adequate consideration

of the irreplaceable loss to the people of the city of the aes-

thetic, cultural and historic values represented by such im-

provements and landscape features. In addition distinct

areas may be similarly uprooted or may have their distinc-

tiveness destroyed, although the preservation thereof may

be both feasible and desirable. It is the sense of the council

that the standing of this city as a world-wide tourist center

and world capital of business, culture and government can-

not be maintained or enhanced by disregarding the histor-

ical and architectural heritage of the city and by coun-

tenancing the destruction of such cultural assets.

b. It is hereby declared as a matter of public policy that

the protection, enhancement, perpetuation and use of im-

provements and landscape features of special character or

special historical or aesthetic interest or value is a public

necessity and is required in the interest of the health, pros-

perity, safety and welfare of the people. The purpose of

this chapter is to (a) effect and accomplish the protection,

enhancement and perpetuation of such improvements and

landscape features and of districts which represent or re-

flect elements of the city’s cultural, social, economic, political

and architectural history; (b) safeguard the city’s historic,

77a

aesthetic and cultural heritage, as embodied and reflected in

such improvements, landscape features and districts; (c)

stabilize and improve property values in such districts; (d)

foster civie pride in the beauty and noble accomplishments

of the past; (e) protect and enhance the city’s attractions to

tourists and visitors and the support and stimulus to busi-

ness and industry thereby provided; (f) strengthen the

economy of the city; and (g) promote the use of historic

districts, landmarks, interior landmarks and scenic land-

marks for the education, pleasure and welfare of the people

of the city.

§ 207-1.0 Definitions——As used in this chapter, the fol-

lowing terms shall mean and include:

a. ‘‘Alteration’’. Any of the acts defined as an alteration

by the building code of the city.

bh. ‘‘ Appropriate protective interest’’. Any right or inter-

est in or title to an improvement parcel or any part thereof,

including, but not limited to, fee title and scenic or other

easements, the acquisition of which by the city is determined

by the commission to be necessary and appropriate for the

effectuation of the purpose of this chapter.

ce. ‘‘Capable of earning a reasonable return’’. Having the

capacity, under reasonably efficient and prudent manage-

ment, of earning a reasonable return. For the purposes of

this chapter, the net annual return, as defined in subpara-

graph (a) of paragraph three of subdivision v of this sec-

tion, yielded by an improvement parcel during the test year,

as defined in subparagraph (b) of such paragraph, shall be

presumed to be the earning capacity of such improvement

parcel, in the absence of substantial grounds for a contrary

determination by the commission.

d. ‘‘City-aided project’’. Any physical betterment of real

property, which:

(1) may not be constructed or effected without the

approval of one or more officers or agencies of the city;

and

78a

(2) upon completion, will be owned in whole or in

part by any person other than the city; and

(3) is planned to be constructed or effected, in whole

or in part, with any form of aid furnished by the city

(other than under this chapter), including, but not lim-

ited to, any loan, grant, subsidy or other mode of finan-

cial assistance, exercise of the city’s powers of eminent

domain, contribution of city property, or the granting

of tax exemption or tax abatement; and

(4) will involve the construction, reconstruction, al-

teration or demolition of any improvement in a historic

district or of a landmark.

e. ‘‘Commission’’. The landmarks preservation commis-

sion,

f. “Day’’. Any day other than a Saturday, Sunday or

legal holiday; provided, however, that for the purposes of

subdivision d of section 207-16.0 of this chapter, the term

‘‘day” shall mean every day in the week.

g. ‘*Exterior architectural feature.’’ The architectural

style, design, general arrangement and components of all of

the outer surfaces of an improvement, as distinguished from

the interior surfaces enclosed by said exterior surfaces, in-

cluding, but not limited to, the kind, color and texture of

the building material and the type and style of all windows,

doors, lights, signs and other fixtures appurtenant to such

improvement.

h. “Historie district.” Any area which:

(1) contains improvements which:

(a) have a special character or special historical

or aesthetic interest or value; and

(b) represent one or more periods or styles of

architecture of one or more eras in the history of

the city; and

79a

(c) cause such area, by reason of such factors,

to constitute a distinct section of the city; and

(2) has been designated as a historic district pursu-

ant to the provisions of this chapter.

i. ‘‘Improvement.’’ Any building, structure, place, work

of art or other object constituting a physical betterment of

real property, or any part of such betterment.

j. ‘Improvement parcel.’’ The unit of real property

which (1) includes a physical betterment constituting an

improvement and the land embracing the site thereof, and

(2) is treated as a single entity for the purpose of levying

real estate taxes; provided however, that the term ‘‘im-

provement parcel’’ said* also include any unimproved area

of land which is treated as a single entity for such tax

purposes,

k. ‘‘Interior.’’ The visible surfaces of the interior of an

improvement.

l. ‘‘Interior architectural feature.’’ The architectural

style, design, general arrangement and components of an

interior, including but not limited to, the kind, color and

texture of the building material and the type and style of

all windows, doors, lights, signs and other fixtures appur-

tenant to such interior.

m. ‘‘Interior landmark.’ An interior, or part thereof, any

part of which is thirty years old or older, and which is cus-

tomarily open or accessible to the public, or to which the

public is customarily invited, and which has a special his-

torical or aesthetic interest or value as part of the develop-

ment, heritage or cultural characteristics of the city, state

or nation and which has been designated as an interior land-

mark pursuant to the provisions of this chapter.

* So in original, Should probably be ‘‘shall’’.

80a

n. ‘*Landmark.”’ Any improvement, any part of which is

thirty years old or older, which has a special character or

special historical or aesthetic interest or value as part of

the development heritage or cultural characteristics of the

city, state or nation and which has been designated as a

landmark pursuant to the provisions of this chapter.

o. ‘‘Landmark site.’’ An improvement parcel or part

thereof on which is situated a landmark and any abutting

improvement parcel or part thereof used as and constituting

part of the premises on which the landmark is situated, and

which has been designated as a landmark site pursuant to

the provisions of this chapter.

p. ‘‘Landseape feature.’’ Any grade, body of water,

stream, rock, plant, shrub, tree, path, walkway, road, plaza,

fou.tain, sculpture or other form of natural or artificial

landscaping.

q. ‘‘Minor work.’’ Any change in, addition to or removal

from the parts, elements or materials comprising an im-

provement including, but not limited to, the exterior archi-

tectural features or interior architectural features thereof

and, subject to and as prescribed by regulations of the com-

mission if and when promulgated pursuant to section 207-

18.0 of this chapter the surfacing, resurfacing, painting,

renovating, restoring, or rehabilitating of the exterior archi-

tectural features or interior architectural] features or the

treating of the same in any manner that materially alters

their appearance, where such change, addition or removal

does not constitute ordinary repairs and maintenance and is

of such nature that it may be lawfully effected without a

permit from the department of buildings.

r. ‘‘Ordinary repairs and maintenance.’’ Any:

(1) work done on any improvement; or

(2) replacement of any part of an improvement; for

which a permit issued by the department of buildings

8la

is not required by law, where the purpose and effect of

of such work or replacement is to correct any deteriora-

tion or decay of or damage to such improvement or any

part thereof and to restore same, as nearly as may be

practicable, to its condition prior to to the occurrence

of such deterioration, decay or damage.

s. “Owner.’’ Any person or persons having such right to,

title to or interest in any improvement so as to be legally

entitled upon obtaining the required permits and approvals

from the city agencies having jurisdiction over building

construction, to perform with respect to such property any

demolition, construction, reconstruction, alteration or other

work as to which such person seeks the authorization or

approval of the commission pursuant to section 207-8.0 of

this chapter.

t. ‘‘Person in charge.’’ The person or persons possessed

of the freehold of an improvement or improvement parcel or

a lesser estate therein, a mortgagee or vendee in possession,

assignee of rents, receiver, executor, trustee, lessee, agent

or any other person directly or indirectly in control of an

improvement or improvement parcel.

u. ‘‘Protected architectural feature.” Any exterior archi-

tectura! feature of a landmark or any interior architectural

feature of an interior landmark.

v. ‘‘Reasonable return.’’ (1) A net annual return of six

per centum of the valuation of an improvement parcel.

(2) Such valuation shall be the current assessed

valuation established by the City, which is in effect at

the time of the filing of the request for a certificate of

appropriateness; provided that:

(a) The commission may make a determination

that the valuation of the improvement parcel is an

amount different from such assessed valuation

where there has been a reduction in the assessed

82a

valuation for the year next preceding the effective

date of the current assessed valuation in effect at

the time of the filing of such request; and

(b) The commission may make a determination

that the value of the improvement where there has

been a bona fide sale of such parce] within the pe-

riod between March fifteenth, nineteen hundred

fifty-eight, and the time of the filing of such request,

as the result of a transaction at arms’ length, on

normal financing terms, at a readily ascertainable

price, and unaffected by special circumstances such

as, but not limited to, a forced sale, exchange of

property, package deal, wash sale or sale to a co-

operative. In determining whether a sale was on

normal financing terms, the commission shall give

due consideration to the following factors:

(1) The ratio of the cash payment received by the

seller to (a) the sales price of the improvement parcel

and (b) the annual gross income from such parcel;

(2) The total amount of the outstanding mortgages

which are liens against the improvement parcel (in-

cluding purchase money mortgages) as compared with

the assessed valuation of such parcel;

(3) The ratio of the sales price to the annual gross

income of the improvement parcel, with consideration

given, where the improvement is subject to residential

rent control, to the total amount of rent adjustments

previously granted, exclusive of rent adjustments be-

cause of changes in dwelling space, services, furniture,

furnishings or equipment, major capital improvements,

or substantial rehabilitation ;

(4) The presence of deferred amortization in pur-

chase money mortgages, or the assignment of such

mortgages at a discount;

(5) Any other facts and circumstances surrounding

such sale which, in the judgment of the commission,

may have a bearing upon the question of financing;

and

(3) For the purposes of this subdivision v:

(a) Net annual return shall be the amount by

which the earned income yielded by the improve-

ment parcel during a test year exceeds the operat-

ing expenses of such parcel during such year, ex-

cluding mortgage interest and amortization, and ex-

cluding allowances for obsolescence and reserves,

but including an allowance for depreciation of two

per centum of the assessed value of the improve-

ment, exclusive of the land, or the amount shown

for depreciation of the improvement in the latest

required federal income tax return, whichever is

lower; provided, however, that no allowance for

depreciation of the improvement shall be included

where the improvement has been fully depreciated

for federal income tax purposes or on the books

of the owner; and

(b) Test year shall be (1) the most recent full

calendar year, or (2) the owner’s most recent fiscal

year, or (3) any twelve consecutive months ending

not more than ninety days prior to the filing (a) of

the request for a certificate, or (b) of an applica-

tion for a renewal of tax benefits pursuant to the

provisions of section 207-8.0 of this chapter, as the

case may be.

w. ‘Scenic landmark.’’ Any landscape feature or aggre-

gate of landscape features, any part of which is thirty years

or older, which has or have a special character or special

historical or aesthetic interest or value as part of the de-

velopment, heritage or cultural characteristics of the city,

state or nation and which has been designated a scenic land-

mark pursuant to the provisions of this chapter.

4a

§ 207-2.0 Establishment of landmarks, landmark sites,

interior landmarks, scenic landmarks and historic districts.

—a. For the purpose of effecting and furthering the protec-

tion, preservation, enhancement, perpetuation and use of

landmarks, interior landmarks, scenic landmarks and his-

toric districts, the commission shall have power, after a

public hearing:

(1) to designate, and as herein provided in subdi-

vision j in order to effectuate the purposes of this chap-

ter, to make supplemental! designations as additions to,

a list of landmarks which are identified by a description

setting forth the general characteristics and location

thereof;

(2) to designate and, in order to effectuate the pur-

poses of this chapter, to make supplemental designa-

tions as additions to, a list of interior landmarks, not

including interiors utilized as places of religious wor-

ship, which are identified by a description setting forth

the general characteristics and location thereof;

(3) to designate and, in order to effectuate the pur-

poses of this chapter, to make supplemental designa-

tions as additions to, a list of scenic landmarks, located

on property owned by the city, which are identified by

a description setting forth the general characteristics

and location thereof; and

(4) to designate historie districts and the location

and boundaries thereof, and in order to effectuate the

purposes of this chapter, to designate changes in such

locations and boundaries and designate additional his-

toric districts and the location and boundaries thereof.

b. It shall be the duty of the commission, after a public

hearing, to designate a landmark site for each landmark and

to designate the location and boundaries of such site.

85a

ec. The commission shall have power, after a public hear-

ing, to amend any designation made pursuant to the pro-

visions of such subdivisions a and b of this section.

d. The commission may, after a public hearing, whether

at the time it designates a scenic landmark or at any time

thereafter, specify the nature of any construction, recon-

struction, alteration or demolition of any landscape feature

which may be performed on such scenic landmark without

prior issuance of a report pursuant to subdivision c of

section 207-17.0. The commission shall have the power, after

a public hearing, to amend any specification made pursuant

to the provisions of this subdivision d.

e. Subject to the provisions of subdivisions g and h of

this section, any designation or amendment of a designation

made by the commission pursuant to the provisions of sub-

divisions a, b and c of this section shall be in full force and

effect from and after the date of the adoption thereof by the

commission.

f. Within five days after making any such designation or

amendment thereof, the commission shall file a copy of same

with the secretary of the board of estimate and with the

department of buildings, the city planning commission, the

board of standards and appeals, the fire department and the

health services administration.

g. (1) The secretary of the board of estimate, within five

days after the filing of such copy with such secretary, shall

refer such designation or amendment thereof to the city

planning commission, which, within thirty days after such

referral, shall submit to such board a report with respect

to the relation of such designation or amendment thereof

to the master plan, the zoning resolution, projected public

improvements and any plans for the renewal of the area in-

volved.

(2) Such board may modify or disapprove such designa-

tion or amendment thereof within ninety days after a copy

86a

thereof is filed with the secretary of the board. If the board

shall disapprove such designation or amendment thereof, it

shall cease to be in effect on the date of such action by the

board. If the board shall modify such designation or amend-

ment thereof, such modification shall be in effect on and af-

ter the date of the adoption thereof by the board.

h. (1) The commission shall have power, after a public

hearing, to adopt a resolution proposing rescission, in whole

or in part, of any designation or amendment or modification

thereof mentioned in the preceding subdivisions of this sec-

tion. Within five days after adopting any such resolution,

the commission shall file a copy thereof with the secretary

of the board of estimate, who shall, within five days after

such filing, refer such resolution to the city planning com-

mission.

(2) Within thirty days after such referral, the city plan-

ning commission shall submit to such board a report with

respect to the relation of such proposed rescission to the

master plan, the zoning resolution, projected public im-

provements and any plans for the renewal of the area in-

volved.

(3) Such board may approve, disapprove or modify such

proposed rescission within ninety days after a copy of the

resolution proposing same is filed with the secretary of the

board. If such proposed rescission is approved or modified

by the board, such rescission or modification thereof shall

take effect on the date of such action by the board. If such

proposed rescission is disapproved by the board, or is not

acted on by the board within such period of ninety days, it

shall not take effect.

i. The commission may at any time make recommenda-

tions to the city planning commission with respect to

amendments of the provisions of the zoning resolution ap-

plicable to improvements in historic districts.

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j. All designations and supplemental designations of

landmarks, landmark sites, interior landmarks, scenic land-

marks and historic districts made pursuant to paragraph a

shall be made pursuant to notices of public hearings given,

as provided in § 207-12.0.

k. Upon its designation of any improvement parcel as a

landmark and of any landmark site, interior landmark,

scenic landmark or historic district or any amendment of

any such designation or rescission thereof the commission

shall cause to be recorded in the office of the register of the

city of New York in the county in which such landmark, in-

terior landmark, scenic landmark or district lies, or in the

case of landmarks, interior landmarks, scenic landmarks

and districts in the borough and county of Richmond in the

office of the clerk of said county of Richmond, a notice of

such designation, amendment or rescission describing the

party affected by, in the case of the county of Richmond,

its land map block number or numbers and its tax map,

block and lot number or numbers and in the case of all other

counties, by its land map block and lot number or numbers.

§ 207-3.0 Scope of commission’s powers.—a. Nothing con-

tained in this chapter shall be construed as authorizing the

commission, in acting with respect to any historic dis-

trict or improvement therein, or in adopting regulations in

relation thereto, to regulate or limit the height and bulk of

buildings, to regulate and determine the area of yards,

courts and other open spaces, to regulate density of popu-

lation or to regulate and restrict the locations of trades and

industries or location of buildings designed for specific uses

or to create districts for any such purpose.

b. Except as provided in subdivision a of this section, the

commission may, in exercising or performing its powers,

duties or functions under this chapter with respect to any

improvement in a historic district or on a landmark site or

containing an interior landmark, or any landscape feature

of a scenic landmark, apply or impose, with respect to the

88a

construction, reconstruction, alteration, demolition or use

of such improvement, or landscape feature or the perform-

ance of minor work thereon, regulations, limitations, de-

terminations or conditions which are more restrictive than

those prescribed or made by or pursuant to other provisions

of law applicab

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