Seawall Associates et al., Appellants, v. City of New York et al., Respondents and Richard Wilkerson et al., Intervenors-Respondents. (And Two Other Actions.)
[NO NUMBER IN ORIGINAL]
Court of Appeals of New York
74 N.Y.2d 92; 542 N.E.2d 1059; 544 N.Y.S.2d 542; 1989 N.Y. LEXIS 879
May 3, 1989, Argued July 6, 1989, Decided
PRIOR HISTORY:
Appeal, on constitutional grounds, from an order of the Appellate Division of the Supreme Court in the First Judicial Department, entered December 1, 1988, which (1) reversed, on the law and on the facts, an order and judgment (one paper) of the Supreme Court (David B. Saxe, J.; opn 138 Misc 2d 96), entered in New York County, inter alia, converting a motion by plaintiffs for a preliminary injunction to a motion for summary judgment, declaring that various provisions of Local Laws, 1987, No. 9 of the City of New York are invalid and enjoining defendants from implementing those provisions, (2) vacated the injunction, and (3) declared Local Laws, 1987, No. 9 of the City of New York constitutional in its entirety.
Seawall Assocs. v City of New York, 142 AD2d 72.
DISPOSITION: Order reversed, with costs, Local Law No. 9 declared to be unconstitutional and defendants enjoined from implementing the local law's provisions.
HEADNOTES:
Constitutional Law -- Taking of Property without Just Compensation -- Local Law Mandating Preservation of Single-Room Occupancy Properties in City of New York -- Physical Taking
1. Local Laws, 1987, No. 9 of the City of New York, which prohibits the demolition, alteration, or conversion of single-room occupancy (SRO) properties and obligates the owners to restore all units to habitable condition and lease them at controlled rents for an indefinite period, is facially invalid as a physical taking in violation of the Federal and State Constitutions (US Const 5th Amend; NY Const, art I, § 7) and is, therefore, null and void. Local Law No. 9 requires the owners to rent their rooms or be subject to severe penalties; it compels them to admit persons as tenants with all of the possessory and other rights that that status entails; it compels them to surrender the most basic attributes of private property, the rights of possession and exclusion. Where, as here, owners are forced to accept the occupation of their properties by persons not already in residence, the resulting deprivation of rights in those properties is sufficient to constitute a physical taking for which compensation is required.
Constitutional Law -- Taking of Property without Just Compensation -- Local Law Mandating Preservation of Single-Room Occupancy Properties in City of New York -- Regulatory Taking -- Denial of Economically Viable Use of Property
2. Local Laws, 1987, No. 9 of the City of New York, which prohibits the demolition, alteration, or conversion of single-room occupancy (SRO) properties and obligates the owners to restore all units to habitable condition and lease them at controlled rents for an indefinite period, is facially invalid as a regulatory taking in violation of the Federal and State Constitutions (US Const 5th Amend; NY Const, art I, § 7) on the ground that it denies SRO owners economically viable use of their properties. The coerced rental provisions deprive owners the fundamental right to possess their properties. Moreover, these mandatory rental provisions -- together with the prohibition against demolition, alteration and conversion of the properties to other uses, and the requirement that uninhabitable units be refurbished -- deny owners of SRO buildings any right to use their properties as they see fit. In addition, Local Law No. 9, particularly in those provisions prohibiting redevelopment and mandating rental, inevitably impairs the ability of owners to sell their properties for any sums approaching their investments and, therefore, must also negatively affect the owners' right to dispose of their properties. Whether the property rights abolished or impaired are considered alone, or the values of these rights are compared with the values of the properties as a whole, the conclusion is inescapable that the effect of the local law's provisions is unconstitutionally to deprive owners of economically viable use of their properties.
Constitutional Law -- Taking of Property without Just Compensation -- Local Law Mandating Preservation of Single-Room Occupancy Properties in City of New York -- Regulatory Taking -- Failure to Substantially Advance Legitimate State Interest
3. Local Laws, 1987, No. 9 of the City of New York, which prohibits the demolition, alteration, or conversion of single-room occupancy (SRO) properties and obligates the owners to restore all units to habitable condition and lease them at controlled rents for an indefinite period, is facially invalid as a regulatory taking in violation of the Federal and State Constitutions (US Const 5th Amend; NY Const, art I, § 7) because the burdens imposed by the local law do not "substantially advance" its putative purpose of relieving homelessness. The nexus between the obligations placed on SRO property owners and the alleviation of the highly complex social problem of homelessness is indirect at best and conjectural. Such a tenuous connection between means and ends cannot justify singling out this group of property owners to bear the costs required by the law toward the cure of the homeless problem.
Constitutional Law -- Taking of Property without Just Compensation -- Local Law Mandating Preservation of Single-Room Occupancy Properties in City of New York -- Buy-Out, Replacement and Hardship Exemptions
4. The invidious effects of Local Laws, 1987, No. 9 of the City of New York, which prohibits the demolition, alteration, or conversion of singleroom occupancy (SRO) properties and obligates the owners to restore all units to habitable condition and lease them at controlled rents for an indefinite period, are not mitigated by the local law's buy-out, replacement and hardship exemptions so that the local law becomes constitutionally acceptable. The effect of the moratorium and antiwarehousing measures is unconstitutionally to deprive owners of their basic rights to possess and to make economically viable use of their properties; merely allowing the owners to purchase exemptions from the law by paying cash or by providing an equal number of replacement units cannot alter this conclusion. Nor can the hardship exemption, which can do no more than permit the Commissioner of the Department of Housing Preservation and Development -- in the event that an owner could ever come within its provisions -- to exercise his discretion and lower the purchase price of escape from the law, make a difference. Local Law No. 9 creates an illegal taking notwithstanding the buy-out and replacement options; the local law does not become legal simply because an owner may, in some cases, buy his way out of the law by paying a lesser sum.
Courts -- Jurisdiction -- Facial Attack on Constitutionality of Land Use Regulation
5. It is entirely appropriate for a court to adjudge the facial validity of a land use regulation when challenged by a property owner claiming an unconstitutional "taking" or other deprivation of property rights.
COUNSEL: Joseph L. Forstadt, Nancy Hirschmann and Nathan Z. Dershowitz for Seawall Associates, appellant. I. Local Law No. 9 violates both the United States Constitution and the New York State Constitution as a taking of property without just compensation and without due process of law and it also violates the Equal Protection Clause. ( Armstrong v United States, 364 U.S. 40; First Lutheran Church v Los Angeles County, 482 U.S. 304; Agins v Tiburon, 447 U.S. 255; Penn Cent. Transp. Co. v New York City, 438 U.S. 104; Hall v City of Santa Barbara, 833 F2d 1270; Nollan v California Coastal Commn., 483 U.S. 825; Loretto v Teleprompter Manhattan CATV Corp., 458 U.S. 419; French Investing Co. v City of New York, 39 NY2d 587, 429 U.S. 990; Northern Westchester Professional Park Assocs. v Town of Bedford, 60 NY2d 492; Kaiser Aetna v United States, 444 U.S. 164.) II. The City lacked legislative power to enact the local law. ( Matter of United States Steel Corp. v Gerosa, 7 NY2d 454; Mobil Oil Corp. v Town of Huntington, 85 Misc 2d 800; Matter of Town of Moreau v County of Saratoga, 134 Misc 2d 380, 142 AD2d 380; Society of Plastics Indus. v City of New York, 68 Misc 2d 366; People v Board of Managers, 123 Misc 2d 188; County Sec. v Seacord, 278 NY 34; Stuart v Palmer, 74 NY 183; Matter of Long Is. R. R. Co. v Hylan, 240 NY 199; Jenad, Inc. v Village of Scarsdale, 18 NY2d 78; People ex rel. Moskowitz v Jenkins, 202 NY 53.), Philip H. Schaeffer, Jane D. Connolly and S. Alexander Gisser for 459 West 43rd Street Corp. and others, appellants. I. Local Law No. 9 is a taking of private property without payment of just compensation; it therefore violates the Fifth and Fourteenth Amendments to the United States Constitution and article I, § 7 of the New York State Constitution. ( Pennsylvania Coal Co. v Mahon, 260 U.S. 393; Penn Cent. Transp. Co. v New York City, 438 U.S. 104; Agins v Tiburon, 447 U.S. 255; Hawaii Hous. Auth. v Midkiff, 467 U.S. 229; Loretto v Teleprompter Manhattan CATV Corp., 458 U.S. 419; Hodel v Irving, 481 U.S. 704; Nollan v California Coastal Commn., 483 U.S. 825; Armstrong v United States, 364 U.S. 40; First Lutheran Church v Los Angeles County, 482 U.S. 304; Hudson Water Co. v McCarter, 209 U.S. 349.) II. The courts below erred as a matter of law in holding SEQRA and CEQR inapplicable to the City's enactment of Local Law 9. ( H.O.M.E.S. v New York State Urban Dev. Corp., 69 AD2d 222; Chinese Staff & Workers Assn. v City of New York , 68 NY2d 359; Inland Vale Farm Co. v Stergianopoulos, 65 NY2d 718; Matter of Tri-County Taxpayers Assn. v Town Bd. of Town of Queensbury, 55 NY2d 41; Jackson v New York State Urban Dev. Corp., 67 NY2d 400; Matter of Board of Visitors -- Marcy Psychiatric Center v Coughlin, 60 NY2d 14; Matter of Greenpoint Renaissance Enter. Corp. v City of New York, 137 AD2d 597, 72 NY2d 810; McCaffrey v Board of Estimate, 130 AD2d 465; Spring-Gar Community Civic Assn. v Homes for Homeless, 135 Misc 2d 689; Matter of Holmes v Brookhaven Town Planning Bd., 137 AD2d 601, 72 NY2d 807.), Gary M. Rosenberg, Franklin R. Kaiman and Theresa Hecker for Sutton East Associates-86 and another, appellants. I. The City of New York does not have the power to enact Local Law No. 9 of 1987. ( Consolidated Edison Co. v Town of Red Hook, 60 NY2d 99; Robin v Incorporated Vil. of Hempstead, 30 NY2d 347; La Guardia v Cavanaugh, 53 NY2d 67; Matter of 89 Christopher v Joy, 35 NY2d 213; Matter of Tartaglia v McLaughlin, 190 Misc 266, 273 App Div 821; Teeval Co. v Stern, 301 NY 346, 340 U.S. 876; F. T. B. Realty Corp. v Goodman, 300 NY 140; Mayer v City Rent Agency, 46 NY2d 139; Matter of New York Univ. v Temporary State Hous. Rent Commn., 304 NY 124; Matter of 241 E. 22nd St. Corp. v City Rent Agency, 33 NY2d 134.) II. The SRO "fix up/rent up" law is a "taking" without just compensation in violation of the Constitution. ( Chicago, Burlington & Quincy R. R. Co. v Chicago, 166 U.S. 226; Loretto v Teleprompter Manhattan CATV Corp., 458 U.S. 419; Nollan v California Coastal Commn., 483 U.S. 825; Kaiser Aetna v United States, 444 U.S. 164; Penn Cent. Transp. Co. v New York City, 438 U.S. 104; Loab Estates v Druhe, 300 NY 176; Help Hoboken Hous. v City of Hoboken, 650 F Supp 793; Bowles v Willingham, 321 U.S. 503; United States v 50 Acres of Land, 469 U.S. 24; United States v 564.54 Acres of Land, 441 U.S. 506.), Marvin L. Schwartz for Anbe Realty Co., appellant. Local Law No. 9 of 1987 and Local Law No. 22 of 1986 violate the Fifth Amendment rights of Anbe. Neither statute is constitutional. ( First Lutheran Church v Los Angeles County, 482 U.S. 304; San Diego Gas & Elec. Co. v San Diego, 450 U.S. 621; Armstrong v United States , 364 U.S. 40; Nollan v California Coastal Commn., 483 U.S. 825; Loretto v Teleprompter Manhattan CATV Corp., 458 U.S. 419; de St. Aubin v Flacke, 68 NY2d 66; Spears v Berle, 48 NY2d 254; French Investing Co. v City of New York, 39 NY2d 587, 429 U.S. 890.)
Peter L. Zimroth, Corporation Counsel (Elizabeth Dvorkin, Leonard Koerner and Gabriel Taussig of counsel), for respondents. I. Local Law No. 9 is constitutional on its face. The ban on destroying, converting or warehousing SROs is directly related to the City's goal of preventing homelessness by preserving the housing stock and does not deny plaintiffs the opportunity to earn a reasonable rate of return on their property. Therefore, it does not take plaintiffs' property. ( Matter of Replan Dev. v Department of Hous. Preservation & Dev., 70 NY2d 451; Pennell v San Jose, 485 U.S. 1, 108 S Ct 849; McCain v Koch, 70 NY2d 109; Midtown S. Preservation & Dev. Comm. v City of New York, 130 AD2d 385; Loretto v Teleprompter Manhattan CATV Corp., 458 U.S. 419; Penn Cent. Transp. Co. v New York City, 438 U.S. 104; Benson Realty Corp. v Beame, 50 NY2d 994, 449 U.S. 1119; Nollan v California Coastal Commn., 483 U.S. 825; Keystone Bituminous Coal Assn. v DeBenedictis, 480 U.S. 470; Lutheran Church v City of New York, 35 NY2d 121.) II. Local Law No. 9 is proper in all other respects. ( Matter of Legum v Goldin, 55 NY2d 104; Jenad, Inc. v Village of Scarsdale, 18 NY2d 78; Nollan v California Coastal Commn., 483 U.S. 825; Chinese Staff & Workers Assn. v City of New York, 68 NY2d 359; Board of Visitors -- Marcy Psychiatric Center v Coughlin, 60 NY2d 14; Matter of Greenpoint Renaissance Enter. Corp. v City of New York, 137 AD2d 597; Midtown S. Preservation & Dev. Comm. v City of New York, 130 AD2d 385; Council for Owner Occupied Hous. v Koch, 119 Misc 2d 241, 61 NY2d 942; City of New York v Park S. Assocs., 139 Misc 2d 997; People v New York Trap Rock Corp., 57 NY2d 371.)
Saralee E. Evans, Robert M. Hayes, Virginia G. Shubert, Marvin Wexler, Norman Siegel, Arthur Eisenberg, Wayne G. Hawley, Anne R. Teicher and Jacqueline C. Burger for intervenors-respondents. I. The court below properly held that Local Law No. 9 is a valid regulatory enactment which does not impermissibly burden appellants' properties. ( Marcus Assocs. v Town of Huntington , 45 NY2d 501; Lighthouse Shores v Town of Islip, 41 NY2d 7; Golden v Planning Bd. of Town of Ramapo, 30 NY2d 359, 409 U.S. 1003; de St. Aubin v Flacke, 68 NY2d 66; Penn Cent. Transp. Co. v New York City, 438 U.S. 104; Nollan v California Coastal Commn., 483 U.S. 825; Hodel v Irving, 481 U.S. 704; Loretto v Teleprompter Manhattan CATV Corp., 458 U.S. 419; Kaiser Aetna v United States, 444 U.S. 164; Andrus v Allard, 444 U.S. 51.) II. Local Law No. 9 is consistent with applicable rent regulations. ( Consolidated Edison Co. v Town of Red Hook, 60 NY2d 99; New York State Club Assn. v City of New York, 69 NY2d 211; Council for Owner Occupied Hous. v Koch, 119 Misc 2d 241, 61 NY2d 942; People v Judiz, 38 NY2d 529; Robin v Incorporated Vil. of Hempstead, 30 NY2d 347; Matter of Kress & Co. v Department of Health, 283 NY 55; Bryant Westchester Realty Corp. v Board of Health, 91 Misc 2d 56; Rose Towers Realty v Aviv, 121 Misc 2d 1016.) III. The environmental laws cited by appellants have no bearing on this court's consideration of the validity of Local Law No. 9. ( Chinese Staff & Workers Assn. v City of New York, 68 NY2d 359; Matter of Greenpoint Renaissance Enter. Corp. v City of New York , 137 AD2d 597, 72 NY2d 810; McCaffrey v Board of Estimate, 130 AD2d 465; H.O.M.E.S. v New York State Urban Dev. Corp., 69 AD2d 322.)
Glenn S. Goldstein for Rent Stabilization Association of New York City, Inc., and others, amici curiae. I. Local Law No. 9 constitutes a taking because it mandates the nonconsensual physical occupation of appellants' property. ( Loretto v Teleprompter Manhattan CATV Corp., 458 U.S. 419; Nollan v California Coastal Commn., 483 U.S. 825; First Lutheran Church v Los Angeles County, 482 U.S. 304; Armstrong v United States, 364 U.S. 40.) II. Local Law No. 9 so interferes with appellants' property rights as to constitute a taking. ( Pennsylvania Coal Co. v Mahon, 260 U.S. 393; Penn Cent. Transp. Co. v New York City, 438 U.S. 104; Kaiser Aetna v United States, 444 U.S. 164.)
Herbert Teitelbaum and Robert Hermann for Council for Owner Occupied Housing, amicus curiae. Local Law No. 9 constitutes a taking of private property without payment of just compensation. ( Loretto v Teleprompter Manhattan CATV Corp., 458 U.S. 419; Hodel v Irving, 481 U.S. 704; Nollan v California Coastal Commn., 483 U.S. 825; Armstrong v United States, 364 U.S. 40; Penn Cent. Transp. Co. v New York City, 438 U.S. 104; Kaiser Aetna v United States, 444 U.S. 164; Benson Realty Corp. v Beame, 50 NY2d 994, 449 U.S. 1119.)
Carol S. Keenan, Ruben Klein, Ronald A. Zumbrun, Edward J. Connor, Jr., and R. S. Radford for Pacific Legal Foundation, amicus curiae. I. The court below erred in its application of the United States Supreme Court's threshold test for regulatory takings. ( Chicago, Burlington & Quincy R. R. Co. v Chicago, 166 U.S. 226; Agins v Tiburon, 447 U.S. 255; Nebbia v New York, 291 U.S. 502; Pennsylvania Coal Co. v Mahon, 260 U.S. 393; Penn Cent. Transp. Co. v New York City, 438 U.S. 104; Andrus v Allard, 444 U.S. 51.) II. Local Law No. 9 violates the Takings Clause even if it survives the threshold test. ( Penn Cent. Transp. Co. v New York City, 438 U.S. 104; First Lutheran Church v Los Angeles County, 482 U.S. 304; Nollan v California Coastal Commn ., 483 U.S. 825; Armstrong v United States, 364 U.S. 40.)
Ira Karasick for Community Action for Legal Services and others, amici curiae. I. Local Law No. 9 is not a per se taking. ( Loretto v Teleprompter Manhattan CATV Corp., 458 U.S. 419; United States v Causby, 328 U.S. 256; United States v Pewee Coal Co., 341 U.S. 114; United States v Central Eureka Min. Co., 357 U.S. 155; FCC v Florida Power Corp., 480 U.S. 245; Pennell v San Jose, 485 U.S. 1, 108 S Ct 849; Troy Ltd. v Renna, 727 F2d 287; Fresh Pond Shopping Center v Callahan, 464 U.S. 875; Hall v City of Santa Barbara, 833 F2d 1270; Help Hoboken Hous. v City of Hoboken, 650 F Supp 793.) II. Local Law No. 9 does not effect a regulatory taking of appellants' SRO properties. ( Pennsylvania Coal Co. v Mahon, 260 U.S. 393; Keystone Bituminous Coal Assn. v DeBenedictis, 480 U.S. 470; Usery v Turner Elkhorn Min. Co., 428 U.S. 1; Penn Cent. Transp. Co. v New York City, 438 U.S. 104; Armstrong v United States, 360 U.S. 40; Matter of Replan Dev. v Department of Hous. Preservation & Dev., 70 NY2d 451; Kaiser Aetna v United States, 444 U.S. 164.) III. Local Law No. 9 does not warrant heightened scrutiny. ( Nollan v California Coastal Commn., 483 U.S. 825; Agins v Tiburon, 447 U.S. 255.)
JUDGES: Judges Simons, Kaye, Alexander and Titone concur with Judge Hancock, Jr.; Judge Bellacosa dissents and votes to affirm in a separate opinion in which Chief Judge Wachtler concurs.