Fred F. French Investing Co. v. City of New York, 39 N.Y.2d 587 (1976)
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A zoning regulation that prohibits all reasonable income-producing or private use of property, effectively destroying its economic value, is an unconstitutional deprivation of property rights without due process, even if the owner retains bare title and the ability to transfer development rights.
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Summary
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Fred F. French Investing Co., the mortgagee of the Tudor City complex, sued New York City, arguing that a 1972 zoning amendment creating a “Special Park District” and rezoning two private parks exclusively as public parks constituted an unconstitutional taking. The amendment allowed the transfer of development rights to other areas in midtown Manhattan. The court held that the rezoning, which deprived the owners of any reasonable income-producing use of the property, was an unconstitutional deprivation of property rights without due process. The attempted severance of development rights did not adequately preserve those rights because their value became uncertain and contingent.
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Facts
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Tudor City is a residential complex in Manhattan consisting of apartment buildings, a hotel, brownstones, and two private parks. Fred F. French Investing Co. sold the complex, taking back purchase money mortgages partially secured by the two parks. The new owner announced plans to construct a large building over East 42nd Street, requiring the transfer of development rights from the parks and a zoning change. Alternatively, the owner proposed constructing buildings on each park site. In response to public opposition, the city amended the zoning resolution, creating a “Special Park District” that limited park use to “passive recreational uses” and required the parks to be open to the public.
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Procedural History
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The plaintiff, Fred F. French Investing Co., brought an action to declare the zoning amendment unconstitutional and sought compensation for an inverse taking. Special Term declared the amendment unconstitutional and restored the prior zoning classification. The Appellate Division affirmed. The city appealed the declaration of unconstitutionality, and the plaintiff cross-appealed the denial of compensation for a taking.
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Issue(s)
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Whether the rezoning of private parks exclusively as public parks, prohibiting all reasonable income-productive or other private use, is a deprivation of property rights without due process of law in violation of constitutional limitations.
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Holding
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Yes, because the city, by rezoning the private parks exclusively as parks open to the public, deprived the owners of the reasonable income-productive or other private use of their property. The attempted severance of development rights with uncertain market value did not adequately preserve those rights, rendering the zoning amendment unconstitutional.
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Court’s Reasoning
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The court reasoned that while the state’s police power allows for zoning regulations, it cannot deprive an owner of reasonable income-producing use of their property, effectively destroying its economic value. The court distinguished between a compensable taking (eminent domain) and a non-compensable regulation (police power). A regulation that imposes an onerous burden on property, depriving the owner of reasonable use, is not a “taking” requiring compensation but an invalid exercise of the police power violating due process.
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The court emphasized that the zoning amendment rendered the park property unsuitable for any reasonable income-producing or other private use, destroying its economic value. Although the city attempted to preserve value by allowing the transfer of development rights, the court found this inadequate. These severed development rights became “floating development rights, utterly unusable until they could be attached to some accommodating real property.” The court found the arrangement to be “contingency-ridden,” making the value of the development rights uncertain and severely impaired. The court contrasted this situation with schemes where the owner receives just compensation upfront for the development rights, which are then placed in a