Regulatory Takings Claims Controlled by Six-Year Statute of Limitations

 DW Aina Le‘a Development, LLC v. Land Use Commission (HSC December 17, 2020)

Background. The Hawai'i Land Use Commission reclassified 1,060 acres of land in South Kohala on the Big Island from agricultural to urban. In exchange for the reclassification allowing development, the LUC required that some of the development be deemed “affordable” and imposed other conditions. In 2008, the LUC issued a show-cause order to the landowner to show why certain conditions were not met. The landowner sold the property to DW Aina Le‘a Development, LLC, which invested more than $28 million in development. The LUC then reclassified the land back to agricultural. The HSC vacated the reclassification order on other grounds. In 2011, DW filed a lawsuit against the LUC on the grounds that its reclassification was an unconstitutional taking in violation of the federal and Hawai'i constitutions. The LUC moved proceedings to federal court and moved to dismiss the complaint on the grounds that the statute of limitations to bring the lawsuit expired. The USDC agreed and applied the two-year statute of limitations pursuant to HRS § 657-7. DW appealed to the Ninth Circuit.

 

The United States Court of Appeals certified a question for the Hawai'i Supreme Court:

 

What is the applicable statute of limitations for a claim against the State of Hawai'i alleging an unlawful taking of “private property . . . for public use without just compensation” [pursuant to Article I, Section 20 of the Hawai'i Constitution?]

 

There are three possible answers. The LUC urges the two-year limitations pursuant to HRS §§ 661-5 and 661-1 based on a theory of implied contract with the State. The developer urges the six-year statute of limitations pursuant to HRS § 657-1(4) based on the catch-all “personal actions of any nature[.]” The Owners’ Counsel of America in an amicus brief posited a twenty statute of limitations pursuant to HRS § 657-31 based on an adverse possession theory.

 

The Hawai'i Taking’s Clause is Self-Executing. The Takings Clause in Hawai'i reads that “Private property shall not be taken or damaged for public use without just compensation.” Haw. Const. Art. I, Sec. 20. As a preliminary matter, the HSC determined that the Takings Clause is self-executing allowing suits based on the provision itself without enabling or implementing legislation.

 

A constitutional provision is “self-executing if it supplies a sufficient rule by means of which the right given may be enjoyed and protected, or the duty imposed may be enforced[.]” State v. Rodrigues, 63 Haw. 412, 414, 629 P.2d 1111, 1113 (1981). It is not self-executing when “it merely indicates principles, without laying down rules by means of which those principles may be given the force of law.” Id.

 

Rights, duties, and provisions in the Hawai'i Constitution are generally self-executing. Haw. Const. Art. XVI, Sec. 16. However, the phrase “as provided law” signals that the provision is not self-executing and needs implementing legislation. Rodrigues, 63 Haw. at 415, 629 P.2d at 1114. Here, the Takings Clause does not contain the “as provided by law” language and, therefore, no further legislation is needed. DW can bring a claim and directly invoke the Takings Clause without implementing legislation. See, e.g., Cty of Hawai'i v. Ala Loop Homeowners, 123 Hawai'i 391, 413, 235 P.3d 1103, 1125 (2010) (right of enforcing Art. XI, Sec. 9 is self-executing because nothing suggests “legislative action is needed before the right can be implemented.”).

 

A Takings Claim is not an Implied Contract with the State. The HSC rejected the LUC’s argument that a takings claim is an implied contract with the State and is controlled by the two-year statute of limitations. The HSC found the Kansas Supreme Court’s assessment persuasive and adopted its reasoning:

 

Although inverse condemnation actions have been described as being in the nature of implied contract actions, the right to just compensation for property taken is also a firmly grounded constitutional right. While our earlier cases primarily discus the implied contract theory of recovery, both eh Fifth Amendment to the United States Constitution and [the Takings Clause] of the Kansas Constitution guarantee payment for private property appropriated for public use. Thus, the right to recover damages for property taken does not rest solely upon a contract . . ., but rests primarily upon a vested constitutional right. Regardless of how the cause of action is described or what theory of recovery is applied, the basic right to recover compensation for property taken for public purposes is a constitutional one.

 

Hiji v. City of Garnett, 804 P.2d 950, 957-958 (Kan. 1991).

 

The Two-Year Limitations in HRS § 657-7 Doesn’t Apply to Non-Physical Injuries to Property. “Actions for the recovery of compensation for damages or injury to persons or property shall be instituted within two years after the cause of action accrued, and not after[.]” HRS § 657-7. The HSC rejected the LUC’s interpretation of the statute to include an inverse condemnation claim. “Injury” means a “violation of another’s legal right, for which the law provides a remedy.” Black’s Law Dictionary (11th ed. 2019). A takings claim is not a claim alleging an injury. According to the HSC, a taking claim merely is the assertion that the property owner is entitled to just compensation. It is seeking compensation for something the government is entitled to do. The HSC held that this claim is not a claim for an “injury” at all, but really a claim that the property was taken without just compensation. See also Higa v. Mirikitani, 55 Haw. 677, 170, 517 P.2d 1, (1973) (“Virtually all cases having occasion to construe that section have done so in the context of claims for damages resulting from physical injury to persons or physical injury to tangible interests in property”). Absent a physical injury to tangible interests in the property, the two-year limitation in HRS § 657-7 does not apply. Au v. Au, 63 Haw. 210, 216, 626 P.2d 173, 178 (1981).

 

The Twenty-Year Statute of Limitations Does not Apply to Regulatory Takings Because it is not a Form of Adverse Possession. The HSC also rejected the amicus’s position. The twenty-year limitation is for claims “to recover possession of any lands[] or make any entry thereon[.]” That statute of limitations is limited to claims arising from the “physical invasion of land.”

 

The HSC noted the “longstanding distinction between acquisitions of property for public use, on one hand, and regulations prohibiting private uses, on the other[.]” Tahoe-Sierra Prs. Council, Inc. v. Tahoe Reg’l Planning Agency, 535 U.S. 302, 323 (2002). The difference between a physical taking and a regulatory taking makes a difference when it comes to the statute of limitations. The case here is a regulatory taking and the twenty-year state of limitations did not apply.

The Catchall Six-Year Statute Applies. The HSC answered the certified question with the six-year statute. “Personal actions of any nature whatsoever not specifically covered by the laws of the State” must be brought within six years after the cause of action accrued. HRS § 657-1(4). The HSC turned again to Black’s for the definition of a “personal action”—an “action in which the named defendant is a natural or legal person.” The HSC noted that the State is a “legal person.” In the end, this catchall provision proved to be best fit for the HSC. A regulatory taking claim is controlled by the six-year statute of limitations in Hawai'i.