DW Aina Le‘a Dev., LLC v. Bridge Aina Le‘a, LLC.
| Decision Date | 25 November 2014 |
| Docket Number | No. SCAP–13–0000091.,SCAP–13–0000091. |
| Citation | 134 Hawai'i 187,339 P.3d 685 |
| Court | Hawaii Supreme Court |
| Parties | DW AINA LE‘A DEVELOPMENT, LLC, Respondent/Co–Petitioner–Appellant–Appellee, v. BRIDGE AINA LE‘A, LLC., Respondent/Co–Petitioner–Appellant–Appellee, and State of Hawai‘i Land Use Commission, Petitioner/Appellee–Appellant, and State of Hawai‘i Office of Planning, County of Hawaii Planning Agency, Respondents/Appellees, Bridge Aina Le‘a, LLC., Respondent/Appellant–Appellee, v. State of Hawai‘i Land Use Commission, Respondent/Appellee–Appellant, and State of Hawai‘i Office of Planning and County of Hawai‘i, Respondents/Appellees, and DW Aina Le‘a Development, LLC., Respondent/Appellee–Appellant. |
William J. Wynhoff, for petitioner.
Bruce D. Voss and Matthew C. Shannon, Honolulu, for respondent Bridge Aina Le‘a, LLC.
David J. Minkin, Dayna H. Kamimura–Ching, and Troy J.H. Andrade, Honolulu, for respondent DW Aina Le‘a Development, LLC.
Opinion
This appeal turns on whether the Land Use Commission (the LUC) properly reverted land to its former land use classification pursuant to Hawai‘'i Revised Statutes § 205–4(g) (2001 & Supp. 2007). We hold that the LUC erred in reverting the land without complying with the requirements of HRS § 205–4 because the land owners had substantially commenced use of the land in accordance with the representations they had made to the Commission.
The instant dispute concerns the classification of land in Waikoloa on Hawai‘i Island. In 1989, the land was reclassified from agricultural to urban, in order to allow for the development of a residential community. The reclassification was made subject to numerous conditions, including a condition that at least sixty percent of the residential units be affordable. Over time, the land changed hands several times and the LUC granted requests to amend the affordable housing condition.
By 2005, the condition required the landowner, Bridge Aina Le‘a, LLC (Bridge), to construct no fewer than 385 affordable units, i.e., twenty percent of the total units to be constructed. It further required Bridge to provide certificates of occupancy for all of these units within five years, and submit a joint venture agreement and mass grading contract within a year.
In December 2008, the LUC issued an order to show cause (OSC) why the land should not revert to its former agricultural land use classification. The LUC stated that it had reason to believe that Bridge and its predecessors in interest had “failed to perform according to the conditions imposed and to the representations and commitments made to [the LUC] in obtaining reclassification of the Subject Area and in obtaining amendments to conditions of reclassification.” Soon thereafter, Bridge informed the LUC that it intended to assign its interest in the land to DW Aina Le‘a Development, LLC (DW) through an installment sale. DW subsequently invested more than $20 million in developing the site. Nevertheless, after proceedings over the course of several years, the LUC issued an order reverting the land to the agricultural use district. Bridge and DW each sought judicial review of the LUC's decision and order, and their cases were consolidated in the circuit court.
The circuit court reversed and vacated the LUC's decision and order. The circuit court concluded that the LUC: (1) exceeded its statutory authority and violated HRS chapter 205; (2) violated HRS §§ 205–4(h), 205–17, and 205–4(g) ; (3) violated HRS chapters 91 and 205 and Hawai‘i Administrative Rules (HAR) chapter 15; and (4) violated Bridge's and DW's due process and equal protection rights.
On appeal, the LUC raises three arguments. First, the LUC argues that HRS § 205–4(g) expressly authorizes it to issue an OSC why reclassified land should not revert to its former land use classification. Second, the LUC argues that the circuit court erred in denying its motion to strike certain documents from other LUC cases, which had been included in the record on appeal. Third, the LUC argues that the circuit court erred in considering Bridge's and DW's constitutional arguments, and that those arguments were unfounded.
We hold that the LUC erred in reverting the property without complying with the requirements of HRS § 205–4 that are generally applicable when land use boundaries are changed. See infra at 714. Once the LUC issues an OSC, the procedures it must follow before reverting land depend upon whether the petitioner has substantially commenced use of the land. Once use of the land has substantially commenced, the LUC is bound by the requirements of HRS § 205–4. Here, by the time the LUC reverted the property to the agricultural land use district, Bridge and DW had substantially commenced use of the land in accordance with their representations. Specifically, they had constructed sixteen townhouses on the property, commenced construction of numerous other townhouses, and graded the site for additional townhouses and roads. At that point, more than $20 million had been spent on the project. Although Bridge and DW had substantially commenced use of the land, the LUC failed to comply with the requirements of HRS § 205–4. The circuit court therefore correctly concluded that the LUC erred in reverting the property.
The circuit court erred, however, in denying the LUC's motion to strike. The disputed documents are portions of dockets from other cases in the LUC. Because these documents were not part of the administrative record, and neither Bridge nor DW sought to supplement the record in the circuit court, these documents should not have been included in the record on appeal.
The circuit court also erred in concluding that Bridge's and DW's procedural and substantive due process rights and equal protection rights were violated. With respect to procedural due process, both Bridge and DW had notice of the OSC and that the LUC might revert the property. They also each had a meaningful opportunity to be heard on the proposed reversion. With regard to substantive due process, the LUC's reversion was not “clearly arbitrary and unreasonable,” given the project's long history, the various representations made to the LUC, and the petitioners' failure to meet deadlines. With respect to Bridge's and DW's equal protection arguments, the record does not establish that the LUC's imposition of a condition and subsequent reversion of the property constituted a violation of the petitioners' equal protection rights.
We therefore affirm the circuit court's second amended judgment in part because the LUC failed to comply with the requirements of HRS § 205–4. We vacate the second amended judgment to the extent it is based on the circuit court's conclusion that the LUC violated Bridge's and DW's constitutional rights.
The following factual background is taken from the record on appeal.
This appeal arises out of a dispute over the classification of approximately 1,060 acres of land in Waikoloa. In 1989, the LUC granted a petition to reclassify the land from the agricultural to the urban land use district to allow for the development of a residential community. The original proposal, submitted by Signal Puako Corporation (Signal), included approximately 2,760 residential units. Signal offered to provide thirty percent of the units at prices which families with an income range of 80–120% of the County of Hawaii's median income could afford.
On January 17, 1989, the LUC reclassified the land subject to eleven conditions, including the following relevant condition related to the affordable housing units:
In 1991, Puako Hawaii Properties (PHP), Signal's successor-in-interest, filed a motion to amend the LUC's findings of fact, conclusions of law, and decision and order. PHP's revised proposal included two “world class championship golf courses,” and 1,550 residential units, including multi-family units and single-family lots. PHP offered to construct affordable units off-site, in a number equal to sixty percent of the unit count on the property.
On July 9, 1991, the LUC issued amended findings of fact, conclusions of law, and decision and order, which included the following fifteen conditions:
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