County of Hawai'i v. C&J Coupe Family Ltd. Partnership (HSC December 24, 2008)
Background. A large housing development by Oceanside was planned for Kona District. Between the housing area and the main highway running through Kona sits the Coupe family land. Oceanside and the County entered into a development agreement, which required Oceanside to build a by-pass to the highway. If Oceanside could not purchase the land needed for the bypass, the mayor was authorized to condemn the necessary properties. Discretion in choosing the necessary lands, however, remained with Oceanside and the bypass was under the supervision of Oceanside. After the Coupes refused to sell, Oceanside requested the County to condemn the property for the building of a road. The Council adopted a resolution finding it necessary to exercise eminent domain and the County filed a condemnation proceeding for 2.9 acres of Coupe land. As that prepared for trial, the County brought a second action seeking condemnation of 3.348 acres of Coupe land. The Coupes filed a motion to dismiss or, in the alternative, consolidate. The circuit court consolidated the actions and both went to trial. The circuit court, after a bench trial, concluded that the first condemnation was invalid, but the second one was for a public purpose and allowed it to proceed. The Coupes then filed a motion for fees and costs under the first condemnation proceeding, but it was never ruled upon and, thus, deemed denied.
The "Denied" Motion for Fees. Whenever a property is "not finally taken for public use, a defendant who would have been entitled to compensation or damages had the property been finally taken, shall be entitled, in such proceedings, to recover from the plaintiff" damages, including fees and costs. HRS § 101-27. The HSC agreed with the Coupes that even though the County prevailed on the second condemnation, it did not win the first one. This was a separate action and, thus, the Coupes were entitled to statutory damages because the property was not "finally taken for public use." And so the HSC held that the Coupes are entitled to damages. But because the motion was never ruled upon within 90 days, it was deemed denied. HRAP Rule 4(a)(3). This default denial, therefore, created an insufficient record for the HSC to determine the scope of damages and remanded the case.
The Pretext Defense. The Coupes argued that the resolution by the County was an unconstitutional taking because although it may have stated a public purpose, it was actually a pretext for the transfer of lands to Oceanside. "Private property shall not be taken or damaged for public use without just compensation." Haw. Const. Art. I § 20. The term "public use" means that it must be for "public purposes." Hawai'i Housing Authority v. Lyman, 68 Haw. 55, 68, 704 P.2d 888, 896 (1986). When the government articulates a public purpose for the condemnation, courts afford great weight to the government and will presume it to be correct. Hawai'i Housing Authority v. Ajimine, 39 Haw. 543, 549 (Terr. 1952). But according to the HSC, this deference is not unlimited. The courts will review the decision to see if it is "manifestly wrong." Id.
Based on that, the HSC held that once the government demostrated a legitimate public use for the exercise of emninent domain, a landower can challenge the stated public use on the grounds that it is a mere pretext for something "clearly and palpably of a private character." Id. This burden appears to be a heavy one. The courts still give great weight to the government's public purpose. The HSC also pointed out that the transfer of the condemned property to another private entity "may be a relevant factor in consideration of the pretext defense."
But what about Kelo? The HSC pointed out that affording the pretext defense to the condemnation proceedings is consistent with the Fifth Amendment's takings clause and the recent United States Supreme Court case, Kelo v. City of New London, Conn., 545 U.S. 469 (2005). The HSC explained that the Kelo court did not condone the transfer of property "for the sole reason that [the new landowner] will put the property to a more productive use and thus pay more taxes." Id. at 486-87. The HSC also pointed out that the Kelo court also indicated that the government may not take property "under the mere pretext of a public purpose, when its actual purpose was to bestow a private benefit." Id. at 477-78.
The HSC ultimately held that the public purpose here appeared to comport with the public use requirement under the state and federal constitutions. After all, condemnation for a road may be a "classic" case. And the transfer of condemned property to a private entity is not in itself an invalid taking. Thus, there was a prima facie showing of a legitimate public purpose. However, the HSC held that the circuit court did not allow the Coupes to demonstrate that the purpose was "clearly and palpably of a private character" so it remanded the matter back to the Big Island.
Other Issues. The HSC also held that the first condemnation proceeding did not deprive the circuit court of subject matter of the second proceeding mainly because the proceedings were not identical. They involved different parts of the Coupes property. In other words, the doctrine of abatement did not apply here. See Shelton Eng'g Contractors, Ltd. v. Hawaiian Pac. Indus., Inc., 51 Haw. 242, 249, 456 P.2d 222, 226 (1969).
Chief Justice Moon's Dissent and Concurrence. Chief Justice Moon agreed with the majority on all points, but the constitutional question. Justice Levinson joined him. According to Chief Justice Moon, the U.S. Supreme Court, in Kelo, made it clear that "a taking should be upheld as consistent with the Public Use Clause . . . as long as it is rationally related to a conceivable public purpose." Kelo, 545 U.S. at 490 (Kennedy., J., concurring.). Chief Justice Moon believed that the the rational basis test--"which includes deference to the government's statement of public purpose--remains the appropriate test for determining the constitutionality of a 'public use' under the federal constitution." But even for Chief Justice Moon, the deference afforded to the government is not absolute. He explained that "deference to the government's public purpose determination may be overcome only if the party challenging the taking makes a 'clear showing' that the government's stated public purpose is 'irrational.'" Chief Justice Moon also believed that under the Hawai'i Constitution's takings clause, the HSC has consistently applied the rational-basis test in determining the stated public use. See Kau v. City and County of Honolulu, 104 Hawai'i 468, 478, 92 P.3d 477, 487 (2004). Even under the Hawai'i Constitution, the deference is not absolute. Chief Justice Moon explained that the burden is on the party "challenging the legislative judgment to convince the court that the legislative facts on which the legislation is apparently based could not reasonably be conceived to be true[.]" HFDC v. Castle, 79 Hawai'i 64, 86, 898 P.2d 576, 598 (1995).
Under these formulations of the rational basis test, Chief Justice Moon believed the stated purpose--a bypass road to connect up with the highway--was for a legitimate public use. And this was enough for the Chief Justice. He was careful not to foreclose the possibility of a pretext defense in some cases, but the record did not warrant that this was such a case.
So what Happens now? It appears that the HSC has adopted a defense to condemnation proceedings. Under the Fifth Amendment takings clause there were two things checks on the seizure of private property by the government: (1) the taking is for a public purpose; and (2) the landowner is "justly compensated." The U.S. Supreme Court has, for some time now, adopted a deferential stance toward the first limitation. But everyone on the HSC--including the Chief Justice and Justice Levinson--believes that that deference is not unlimited. When the stated public use is a mere pretext for something impermissible--such as the condemnation for sole private benefit--the landowner should be permitted to make his or her case before the court. The dispute in the HSC appeared to be over the case itself. Chief Justice Moon and Justice Levinson found ample evidence in the record that the circuit court considered the pretext argument and defense, but disagreed. The bare majority, however, disagreed and remanded.
Has the HSC moved into uncharted waters with this pretext defense? The U.S. Supreme Court has not exactly adopted this defense just yet. Perhaps this is the case in which it may do so. The case has raised another question: which constitutional affords the pretext defense? Has the HSC looked to the federal cases in support of its interpretation of the Hawai'i Constitution? If so, then as a matter of state constitutional law, there is a pretext defense. But if the HSC distinguished Kelo and allowed the pretext defense to go through because the Fifth Amendment was not offended, then it cuts closer to an interpretation of the federal constitution, which makes it a candidate for resolution in Washington.