Coon v. City and County of Honolulu

• Decision Date: 30 May 2002
• Docket Number: No. 23246.,23246.
• Citation: 98 Haw. 233,47 P.3d 348
• Parties: David Paul COON, Francis Ahloy Keala, Ronald Dale Libkuman, Constance Hee Lau, and Robert Kalani Uichi Kihune, in their capacities as Trustees of Kamehameha Schools Bishop Estate, Plaintiffs-Appellants/Cross-Appellees, v. CITY AND COUNTY OF HONOLULU, Defendant-Appellee/Cross-Appellant, and Does 1-10, Defendants.
• Court: Hawaii Supreme Court

47 P.3d 348

98 Haw. 233

David Paul COON, Francis Ahloy Keala, Ronald Dale Libkuman, Constance Hee Lau, and Robert Kalani Uichi Kihune, in their capacities as Trustees of Kamehameha Schools Bishop Estate, Plaintiffs-Appellants/Cross-Appellees, v. CITY AND COUNTY OF HONOLULU, Defendant-Appellee/Cross-Appellant, and Does 1-10, Defendants.

No. 23246.

Supreme Court of Hawaii.

May 30, 2002.

Kelly G. LaPorte, Honolulu, on the briefs, (Gail M. Tamashiro, Honolulu, with her on the brief), of Cades Schutte Fleming & Wright, for plaintiffs-appellants/cross-appellees David Paul Coon, Francis Ahloy Keala, Ronald Dale Libkuman, Constance Hee Lau, and Robert Kalani Uichi Kihune, in their capacities as Trustees of Kamehameha Schools Bishop Estate.

Ann C. Teranishi, on the briefs, (Bert T. Kobayashi, and Lex R. Smith, Honolulu, with her on the brief), of Kobayashi Sugita & Goda, for defendant-appellee/cross-appellant City and County of Honolulu.

Martin Anderson, on the briefs, (Mark B. Desmarais and Lane C. Hornfeck, Honolulu, with him on the brief), of Goodsill Anderson Quinn & Stifel, for amicus curiae Association of Apartment Owners of The Kahala Beach.

MOON, C.J., LEVINSON, NAKAYAMA, RAMIL, and ACOBA, JJ.

Opinion of the Court by LEVINSON, J.

The present matter arises under Revised Ordinances of Honolulu (ROH) ch. 38 (1991).¹ The plaintiffs-appellants/cross-appellees David Paul Coon, Francis Ahloy Keala, Ronald Dale Libkuman, Constance Hee Lau, and Robert Kalani Uichi Kihune, in their capacities as Trustees of Kamehameha Schools Bishop Estate [hereinafter, "the Trustees"], appeal from the February 9, 2000 final judgment of the first circuit court, the Honorable Bode A. Uale presiding, entered in favor of the defendant-appellee/cross-appellant City and County of Honolulu [hereinafter, "the City"] and against the Trustees as to Counts I through V of the Trustees' complaint and in favor of the Trustees and against the City as to Counts VI through VIII. Specifically, the Trustees contest the circuit court's order, filed on October 20, 1998, denying their motions for partial summary judgment as to Counts I and II and its order, filed on January 5, 2000, granting the City's motion for summary judgment as to Counts I through V, upon which the circuit court's final judgment was partially based.

The City cross-appeals from the final judgment. Specifically, the City contests the circuit court's order, filed on February 10, 1999, granting the Trustees' motion for summary judgment as to Count VIII of the Trustees' complaint, upon which the circuit court's final judgment in favor of the Trustees and against the City as to Counts VI through VIII of the Trustees' complaint was based.

The Trustees advance four arguments on appeal as to why the circuit court erred in failing to grant them declaratory relief pursuant to Counts I and II of their complaint: (1) the circuit court erred in ruling that Rules for Residential Condominium, Cooperative and Planned Development Leasehold Conversion [hereinafter, "Rules"] § 2-3 (1993),² promulgated by the City's Department of Housing and Community Development [hereinafter, "the Department"], is valid and does not conflict with ROH § 38-2.2 (1991),³ on the basis that Rules § 2-3 impermissibly lowers the minimum number of applicants required to trigger ROH ch. 38 proceedings pursuant to ROH § 38-2.2; (2) the circuit court erred in ruling that ROH ch. 38 is valid as applied to oceanfront property, because Hawai`i Revised Statutes (HRS) § 46-1.5(16) (Supp.2000)⁴ prohibits the City from selling or otherwise disposing of oceanfront property; (3) the circuit court erred in ruling that the City may initiate eminent domain proceedings more than twelve months after having formally designated the property for lease-to-fee conversion pursuant to ROH ch. 38, because ROH § 38-5.2 (1991)⁵ mandates that the City proceed with condemnation within twelve months of designation; and (4) the circuit court erred in ruling that the City did not violate Rules § 1-2 (1993)⁶ and ROH ch. 38 by qualifying as applicants for lease-to-fee conversion certain trustees and trust beneficiaries, because, the Trustees claim, these applicants did not hold legal title to their condominium units while simultaneously residing therein, as required by ROH ch. 38.⁷

The City argues in its cross-appeal that the circuit court erred in awarding the Trustees out-of-pocket expenses pursuant to ROH § 38-5.2, see supra note 5, on the basis of the City's failure to proceed with condemnation of the Trustees' property within twelve months of designation for lease-to-fee conversion, because, inter alia, the Trustees encouraged the delay and thereby waived their right to recover these expenses.

For the reasons discussed infra, we hold: (1) that the circuit court misconstrued ROH § 38-2.2, see supra note 3, in determining the minimum number of applicants required to initiate the ROH ch. 38 lease-to-fee conversion process and that Rules § 2-3, see supra note 2, does violate ROH § 38-2.2 by impermissibly lowering the minimum number of applicants required to trigger ROH ch. 38 proceedings; (2) that the circuit court correctly concluded that HRS § 46-1.5(16), see supra note 4, does not prohibit ROH ch. 38 lease-to-fee conversions of oceanfront property; (3) that the circuit court misconstrued ROH § 38-5.2, see supra note 5, as enunciating a directory rather than a mandatory time limitation and that the City may not initiate a condemnation action pursuant to ROH ch. 38 more than twelve months after the property has been designated for acquisition; (4) that the circuit court correctly ruled that condominium owners are not barred from purchasing their leased fee interests pursuant to ROH ch. 38 simply because the legal title to their condominium unit is held in trust; and (5) that the circuit court correctly awarded out-of-pocket expenses to the Trustees, pursuant to ROH § 38-5.2, see supra note 5, because the City failed to proceed with condemnation of the Trustees' property within the twelve months mandated by the ordinance. Accordingly, we partially affirm and partially vacate the circuit court's final judgment, entered on February 9, 2000, and remand the matter to the circuit court for further proceedings consistent with this opinion.

I. BACKGROUND

The Trustees own fee simple title to the land underlying two residential condominium developments known as The Kahala Beach and Kuapa Isle, which are located in the City and County of Honolulu. The land underlying The Kahala Beach borders the ocean, and the land underlying Kuapa Isle borders Kuapa Pond. The Kahala Beach comprises 196 residential condominium units, and Kuapa Isle comprises 234 residential condominium units. The owners of the condominium units, some of which are held in trust, lease fee interests in the land from the Trustees.

The present matter arises out of the City's attempt to condemn some of the Trustee's land underlying the aforementioned condominium developments pursuant to Ordinance 91 95 (1991), codified as ROH ch. 38 [hereinafter, variously, "ROH ch. 38" or "the ordinance"]. ROH ch. 38 authorizes the City, under certain circumstances, to acquire a landowner's interest in the land beneath condominium developments in order to convey fee simple title to the condominium unit owners who desire to own, rather than lease, the fee interest in the land (so-called, "lease-to-fee conversions").⁸ See ROH ch. 38, arts. 1 & 2; see generally Richardson v. City and County of Honolulu, 76 Hawai`i 46, 868 P.2d 1193,

reconsideration denied, 76 Hawai`i 247, 871 P.2d 795 (1994). The Trustees and the City disagree over the interpretation and application of the ordinance.

A. Kuapa Isle Condominiums

On July 13, 1995, the Department advised the Trustees that it had designated the land underlying the Kuapa Isle condominium development for acquisition, through the exercise of the power of eminent domain or by purchase under the threat of eminent domain, pursuant to ROH § 38-2.2, see supra note 3. The City informed the Trustees that thirty-six owner-occupants of condominium units in the project, six of whom were denominated as "trustees," had applied for lease-to-fee conversions. The Department submitted a resolution authorizing condemnation proceedings in order to acquire the leased fee interests in the land underlying Kuapa Isle to the City Council in March 1996;⁹ the City Council deferred action on the resolution at its March 19, 1996 Policy Committee meeting, at which the Trustees, as landowner, opposed the resolution. The City requested, however, that the Trustees waive any claim to out-of-pocket expenses that they might be entitled to recover pursuant to ROH § 38-5.2, see supra note 5, due to the City Council's deferral of the resolution. In a subsequent letter to the Trustees, the City reminded the Trustees that "these expenses would not be recoverable if the City were to institute the condemnation action prior to July 12, 1996"—i.e., within twelve months of the City's designation of the leased fee interests for acquisition. An agreement was apparently reached, which the City described in a letter, dated July 11, 1996 and written by Jon Yoshimura, Chair of the City Council's Committee on Policy, acting on behalf of the City:

After telephonic discussion with you and discussion between my committee staff and [the Trustees'] counsel, I am gratified that [the Trustees] would be willing to waive and release these claims on the condition that the City will not pass any resolution authorizing condemnation of any leased fee interest at Kuapa Isle until the claims for relief in Richardson v. City and County of Honolulu, 802 F.Supp. 326 (D.Haw.1992), appeal docketed, No. 94-16041, 94-16142, and 94-16143 (9th Cir.1994) and Small Landowners v. City and County of Honolulu, 832 F.Supp. 1404 (D.Haw.1993), appeal docketed, No. 94-16327 (9th Cir.1994) [hereinafter, "the Richardson appeals"] have been

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