Keystone Associates v. Moerdler, 19 N.Y.2d 78 (1966)

A temporary legislative moratorium on demolition of a building, designed to allow a private corporation to raise funds for condemnation, constitutes a taking of property requiring just compensation if it unreasonably interferes with the owner’s property rights.

Summary

Keystone Associates leased the Old Metropolitan Opera House with plans to demolish it and build an office tower. The New York legislature then passed a law creating a private corporation with the power to condemn the property and imposing a 180-day moratorium on demolition to allow the corporation time to raise funds. Keystone challenged the law. The New York Court of Appeals held that the moratorium, enacted solely to facilitate a potential future condemnation by a private entity, constituted an unreasonable interference with Keystone’s property rights and was therefore a taking requiring just compensation. The court further held that the statutory provision of $200,000 was insufficient to cover Keystone’s damages and that the legislature cannot set a maximum limit on compensation.

Facts

The Metropolitan Opera Association (the Association) leased its old opera house to Keystone Associates, who planned to demolish the building and erect a 40-story office building. Keystone was required to commence demolition within six months and posted $1,000,000 as security. After the Association vacated the premises and delivered possession to Keystone, the New York Legislature created The Old Met Opera House Corporation (the Corporation) and empowered it to condemn the property for use as a cultural auditorium. The legislation also allowed the city to delay demolition permits for 180 days at the Corporation’s request, provided the Corporation posted $200,000 as security for damages to the owner if no condemnation occurred.

Procedural History

Keystone initiated a proceeding to compel the issuance of a demolition permit, and the Association filed an action to declare the statute unconstitutional. Special Term declared the statute an unconstitutional taking. The Appellate Division affirmed. The Old Met Opera House Corporation appealed to the Court of Appeals of New York.

Issue(s)

Whether a temporary legislative moratorium on the demolition of a building, designed to allow a private corporation to raise funds for future condemnation, constitutes an unconstitutional taking of property requiring just compensation.

Holding

Yes, because the moratorium constituted an unreasonable interference with Keystone’s property rights, and the compensation provided was insufficient and improperly determined by the legislature.

Court’s Reasoning

The Court of Appeals determined that the statute’s purpose was to appropriate the Association’s and Keystone’s property for public use, as evidenced by the legislative declaration that preserving the building would serve the recreational and cultural needs of the state. The court emphasized that the 180-day delay was authorized solely to allow the Corporation to raise funds for the appropriation. Citing Forster v. Scott, 136 N.Y. 577, the court reaffirmed the principle that a law depriving an owner of the beneficial use and enjoyment of their property, or imposing restraints that materially affect its value without legal process or compensation, constitutes a taking. The court distinguished the case from valid exercises of police power, noting that the statute lacked findings that a shortage of auditoriums existed. The court rejected the argument that the $200,000 security deposit constituted just compensation, as it was demonstrably less than the damages Keystone would incur in rent, maintenance, and taxes. The court further reasoned that the determination of just compensation is a judicial function, not a legislative one. As the court stated, “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.”