Cnty. of Kaua‘i v. Hanalei River Holdings Ltd.

• Citation: 394 P.3d 741
• Decision Date: 16 May 2017
• Docket Number: SCWC-14-0000828
• Parties: COUNTY OF KAUA‘I, Respondent/Plaintiff-Appellee, v. HANALEI RIVER HOLDINGS LIMITED, a Cook Islands corporation; Michael Guard Sheehan; Petitioners/Defendants-Appellants, and Patricia Wilcox Sheehan, as Trustee of that certain unrecorded Revocable Trust Agreement of Patricia Wilcox Sheehan, dated December 21, 1994; Patricia Wilcox Sheehan; Gaylord H. Wilcox; Daniel H. Case; Grove Farm Company, Inc., a Hawai‘i corporation; Hugh W. Klebahn; Donn A. Carswell; Pamela W. Dohrman; Robert D. Mullins; William D. Pratt; Randolph G. Moore; and the Heirs and/or Assigns of John B. Brosseau, also known as John Brosseau, John B. Brasseau and J.B. Brasseau; Respondents/Defendants-Appellants.
• Court: Supreme Court of Hawai'i

394 P.3d 741

COUNTY OF KAUA‘I, Respondent/Plaintiff-Appellee,

v. HANALEI RIVER HOLDINGS LIMITED, a Cook Islands corporation; Michael Guard Sheehan; Petitioners/Defendants-Appellants,andPatricia Wilcox Sheehan, as Trustee of that certain unrecorded Revocable Trust Agreement of Patricia Wilcox Sheehan, dated December 21, 1994; Patricia Wilcox Sheehan; Gaylord H. Wilcox; Daniel H. Case; Grove Farm Company, Inc., a Hawai‘i corporation; Hugh W. Klebahn; Donn A. Carswell; Pamela W. Dohrman; Robert D. Mullins; William D. Pratt; Randolph G. Moore; and the Heirs and/or Assigns of John B. Brosseau, also known as John Brosseau, John B. Brasseau and J.B. Brasseau; Respondents/Defendants-Appellants.

SCWC-14-0000828

Supreme Court of Hawai‘i.

MAY 16, 2017

Richard E. Wilson, Honolulu, for petitioners.

Mauna Kea Trask, Rosemary T. Fazio, and James K. Mee, Honolulu, for respondent, County of Kaua‘i.

RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

OPINION OF THE COURT BY NAKAYAMA, J.

I. INTRODUCTION

This case concerns the condemnation of three parcels of privately-owned property and presents the following three issues: (1) whether two parcels of land must physically abut in order for a condemnee to be entitled to severance damages when one of the parcels is condemned; (2) whether blight of summons damages only begin to accrue after each condemnee has established its entitlement thereto and; (3) whether a condemnor may withdraw a portion of its estimate of just compensation based on an updated estimate of the property's value, after the deposit has been made and the condemnor has taken possession of the property.

For the reasons stated below, we hold that: (1) the presence or lack of physical unity is not dispositive of whether a condemnee is entitled to severance damages; (2) a deposit of estimated just compensation does not become conditional, and blight of summons damages do not begin to accrue, when a condemning authority objects to a condemnee's motion to withdraw funds based on the fact that the condemnee's entitlement to such funds is unclear and; (3) the court in an eminent domain proceeding has the discretion to permit a governmental entity to withdraw a portion of a deposit of estimated just compensation when the deposit has not been disbursed to the landowner, the government acted in good faith in seeking to adjust the estimate to accurately reflect the value of the property on the date of the summons, and the adjustment will not impair the substantial rights of any party in interest.

Therefore, we affirm the Intermediate Court of Appeals's May 11, 2016 judgment on appeal entered pursuant to its March 31, 2016 published opinion, which affirmed the Circuit Court of the Fifth Circuit's (circuit court) final judgment except with regard to the award of blight of summons damages, but on different grounds with regard to the defendants' entitlement to severance damages.

II. BACKGROUND

This case concerns the condemnation of three parcels of privately-owned land (Parcels 33, 34, and 49). In October 2004, Michael G. Sheehan (Sheehan) acquired his ownership interests in Parcels 33 and 34 from the Patricia Wilcox Sheehan Trust. At that time, a portion of Parcel 49 was also a part of Parcel 33. Parcel 49 was later created through consolidation and re-subdivision of neighboring lands. On October 19, 2011, Sheehan transferred ownership of Parcels 33 and 34 to Hanalei River Holdings, Ltd. (HRH), but retained his fee simple title to Parcel 49. Geographically, the subject area consists of "three adjoining irregular shaped parcels[,]" Parcels 49, 33 and 34 respectively, "located along the east side and toward the end" of a road in Hanalei, Kaua‘i. "Parcels 33 and 34 [are both adjacent to each other, and] front along the Hanalei River along their northern boundaries while Parcel 49 is one lot removed from the river."

Although it is not being condemned by the County of Kaua‘i (the County), a piece of property referred to by the parties as Area 51 is also relevant to this case. Area 51 includes land immediately to the east of Parcel 34. Area 51 is also a part of Lot 127, owned by Patricia Wilcox Sheehan.¹ In 2004, Patricia Wilcox Sheehan granted Sheehan an easement over Area 51 to operate a boatyard. This easement provided in pertinent part:

AND THE GRANTEE does hereby covenant and agree:

(1) That Grantee his successors and assign's easement to use the premises shall be limited solely for a boat baseyard as that use is permitted by the ‘Decision and Order’ of the Planning Commission of the County of Kauai, under its Special Management Area Use Permit, SMA(U)-87-8; Special Permit SP-87-9; Use Permit U-87-32, and Class IV Zoning Permit Z-IV-87-40, dated June 24, 1987.

....

(3) That in the event the Special Management Area Use Permit, SMA(U)-87-8; Special Permit SP-87-9; Use Permit U-87-32, and Class IV Zoning Permit Z-IV-87-40, and the authority to use the easement premises as a boat baseyard is withdrawn, cancelled or revoked by the Planning Commission of the County of Kauai, State of Hawai‘i, this ‘Grant of Easement’ shall expire and be null and void upon the recordation at the Bureau of Conveyances of the State of Hawai‘i, of a certified copy of said action of the Kauai County Planning Commission disallowing any further use of the premises for a boat baseyard.

Sheehan's permits to operate a boatyard were revoked in 2010. Sheehan v. Cty. of Kaua‘i , 134 Hawai‘i 132, 337 P.3d 53 (App. 2014) ; Sheehan v. Cty. of Kaua‘i , No. SCWC-11-601 (Haw. Jan. 16, 2015) (order rejecting application for writ of certiorari); Although Area 51 has not been designated by the County as a separate lot of record, it has been considered a separate lot of record for tax purposes as TMK No. (4) 5-5-01:51.

A. Circuit Court Proceedings

On May 31, 2011, the County filed a complaint and summons in the circuit court to condemn Parcels 33, 34, and 49 for use as a public park. In the County's subsequently filed first amended complaint, HRH, Sheehan, and Patricia Wilcox Sheehan were listed among others as those who might have or claim some right, title, or interest in the Parcels.

On April 30, 2012, the County filed an ex parte motion for an order putting plaintiff in possession pursuant to Hawai‘i Revised Statutes (HRS) § 101-29. After the circuit court² granted the County's motion in an order filed on May 4, 2012, the County deposited estimated just compensation of $5,890,000 with the clerk of the court.

On July 3, 2012, Patricia Wilcox Sheehan filed an answer to the County's first amended complaint, which asserted that she is the "owner of the fee simple interests, easements, rights of way or the express contingent remainder man [sic], to all or portions of the real property" identified as Parcels 33, 34, and 49. Patricia Wilcox Sheehan requested that the circuit court dismiss the complaint, and if it did not, that

the respective interests of all Defendants in the property be determined and that appropriate orders be entered thereon, and that the Court determine and award the just compensation, including but not limited to blight of summons, to which Patricia W. Sheehan is entitled by virtue of the taking, and severance damages to the remaining property.

On August 16, 2012, HRH moved the circuit court to vacate the aforementioned order of possession because the initial appraisal of the subject property was seven months old on the date of summons, and consequently, HRH alleged it was "stale as a matter of law and did not in good faith represent the reasonable fair market value of the property." The circuit court denied HRH's motion on September 13, 2012.

On March 11, 2013, the defendants filed an application for payment of estimated compensation pursuant to HRS §§ 101-31 and -37. The memorandum in support of the motion asserted that Sheehan was the legal owner of Parcel 49 and that HRH was the legal owner of Parcels 33 and 34. Patricia Wilcox Sheehan filed a statement of no position regarding HRH and Sheehan's application.

The County filed a memorandum in opposition to HRH and Sheehan's application on April 2, 2013. The County argued that HRH and Sheehan should not be allowed to withdraw the deposit until the respective interests of all the defendants was judicially determined. The County noted that Patricia Wilcox Sheehan, HRH, and Sheehan all had asserted an interest in the deposited money.

Additionally, in the same memorandum, the County noted that it was filing a separate motion to withdraw a portion of the deposit, based on an updated appraisal that reflected a lower estimate of compensation at $4,860,000. The County asserted that it "should not be jeopardized by having Movants withdraw more than the actual estimated value of the condemned property" because "[o]nce Movants withdraw [all] the money, the County would have no reliable means of recouping any excess payment."

On the same date that the County's opposition to HRH and Sheehan's application was filed, the County also filed a motion to withdraw $1,030,000 from the amount it had deposited with the clerk of the court in light of the second appraisal. Citing University of Hawaii Professional Assembly v. University of Hawaii , 66 Haw. 214, 221, 659 P.2d 720, 725 (1983), the County contended that "[p]ursuant to the doctrine of quasi estoppel, [the defendants] cannot now object to the County's obtaining an updated appraisal as of the date of summons [,]" because they had objected to the County's reliance upon the previous appraisal.³

On April 5, 2013, Patricia Wilcox Sheehan filed a waiver and release of any claims or interest in the proceeds payable by the County and consented to the disbursement of the proceeds to HRH and Sheehan. And on April 10, 2013, the County, HRH, and Sheehan entered into an agreement regarding the withdrawal of the deposit. In addition to an agreement that the County would stipulate that Sheehan and HRH could withdraw $4,860,000, Sheehan agreed to indemnify the County if HRH failed to repay any...