Cord Meyer Development Co. v. Bell Bay Drugs, Inc., 20 N.Y.2d 214 (1967)

A property owner does not have standing to sue for a zoning violation based solely on economic harm from business competition; special damages require a showing of depreciation in the value of the real property itself due to the violation, not merely lost profits.

Summary

Cord Meyer, a shopping center owner, and Crestview Chemists, a pharmacy renting space in the center, sued Bell Bay Drugs, a competing pharmacy located in a nearby medical building, alleging that Bell Bay’s operation violated zoning ordinances. The plaintiffs sought an injunction and damages, claiming that Bell Bay’s presence diverted business from Crestview. The New York Court of Appeals held that the plaintiffs lacked standing to sue because they failed to demonstrate special damages beyond mere business competition. The court emphasized that special damages require proof of a decrease in the real property’s value caused by the zoning violation, not just a loss of profits.

Facts

Crestview Chemists rented a pharmacy in a shopping center owned by Cord Meyer in a commercially zoned area. Bell Bay Drugs operated a pharmacy in a nearby professional medical building owned by 212-26 Realty Co., Inc., located in a zoning district that permitted medical offices but excluded commercial businesses like pharmacies. Crestview’s lease with Cord Meyer included a fixed rental fee plus a percentage based on sales volume. Crestview claimed that Bell Bay’s operation violated the zoning ordinance and diverted customers, causing financial harm.

Procedural History

The trial court dismissed the complaint, finding no zoning violation. The Appellate Division reversed, holding that Bell Bay’s pharmacy violated zoning restrictions and ordered a new trial to determine if the plaintiffs had standing to sue. Bell Bay and Realty appealed to the New York Court of Appeals, stipulating for judgment absolute.

Issue(s)

Whether a property owner and its tenant have standing to sue a competitor for violating a zoning ordinance based solely on the claim of lost business and reduced rental income due to competition, without demonstrating a decrease in the value of the real property itself.

Holding

No, because to have standing, the property owner and tenant must demonstrate special damages, which requires showing a depreciation in the value of the real property due to the zoning violation, not merely a loss of business profits due to competition.

Court’s Reasoning

The court held that property owners do not have vested rights to monopolies created by zoning laws, and these laws are not enforced to prevent competition. The court emphasized that a competitor cannot obtain an injunction merely because they are a competitor. To establish standing, the plaintiffs must demonstrate “special damage” resulting from the zoning violation. The court distinguished between a decrease in property value due to competitors and depreciation resulting from other factors. The court stated that loss of business volume due to competition is insufficient to establish special damage. The court reasoned that the plaintiffs failed to demonstrate that the value of their property had decreased due to the presence of Bell Bay’s pharmacy, regardless of whether Bell Bay was operating in compliance with the zoning ordinance. The court emphasized that, “In order to sue, a private property owner has to show that his real estate has been damaged by the nonconforming use which he seeks to restrain in some other manner than by interfering with his business.” The Court cited with approval the holding in Circle Lounge & Grille v. Board of Appeals of Boston, 324 Mass. 427, stating that “a proprietor in a less restricted zone is not a ‘person aggrieved’ within the meaning of the statute by the introduction into a more restricted zone of any use permitted in the zone in which the proprietor’s property is located.” The court found the evidence offered by the plaintiffs related solely to lost business due to competition, and was therefore, irrelevant to the issue of whether the plaintiffs sustained special damage.