Leone v. Cnty. of Maui

• Decision Date: 16 October 2017
• Docket Number: SCAP-15-0000599.
• Citation: 404 P.3d 1257
• Parties: Douglas LEONE and Patricia A. Perkins-Leone, as Trustees under that certain unrecorded Leone-Perkins Family Trust Dated August 26, 1999, as amended, Plaintiffs-Appellants/Cross-Appellees, v. COUNTY OF MAUI, a political subdivision of the State of Hawai‘i; William Spence, in his capacity as Director of the Department of Planning of the County of Maui, Defendants-Appellees/Cross-Appellants.
• Court: Hawaii Supreme Court

404 P.3d 1257

Douglas LEONE and Patricia A. Perkins-Leone, as Trustees under that certain unrecorded Leone-Perkins Family Trust Dated August 26, 1999, as amended, Plaintiffs-Appellants/Cross-Appellees,

v.COUNTY OF MAUI, a political subdivision of the State of Hawai‘i; William Spence, in his capacity as Director of the Department of Planning of the County of Maui, Defendants-Appellees/Cross-Appellants.

SCAP-15-0000599.

Supreme Court of Hawai‘i.

OCTOBER 16, 2017

Andrew V. Beaman, Leroy E. Colombe, and Daniel J. Cheng, Honolulu, for plaintiffs-appellants/cross-appellees.

Patrick K. Wong, Brian A. Bilberry, Honolulu and Thomas Kolbe for defendants-appellees/cross-appellants.

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

OPINION OF THE COURT BY NAKAYAMA, J.

I. INTRODUCTION

Over seventeen years ago, Plaintiffs-Appellants/Cross-Appellees Douglas Leone and Patricia A. Perkins-Leone (collectively, the Leones) bought a beachfront lot in Makena, Maui with the expressed intent of building a family house on it. Today the house has not yet been built, and the Leones contend that the County of Maui's land use regulations and restrictions prevented them from doing so. In 2007, the Leones filed suit against Defendants-Appellees/Cross-Appellants County of Maui and William Spence, in his capacity as Director of the Department of Planning of the County of Maui (collectively, the County), asserting, among other counts, that the County's actions constituted a regulatory taking for which the Leones were entitled just compensation. On May 5, 2015, a jury delivered a verdict in favor of the County.

This case requires this court to decide, inter alia, whether the County's land use regulations constituted a regulatory taking of the Leones' property. But we do not decide on a blank slate. The jury determined that the County did not deprive the Leones of economically beneficial use of their property. We conclude that there was evidence to support the jury's verdict in favor of the County. As such, we affirm the Circuit Court of the Second Circuit's (circuit court): 1) June 1, 2015 judgment in favor of the County and against the Leones, 2) August 5, 2015 order denying the Leones' renewed motion for judgment as a matter of law or, in the alternative, motion for a new trial, and 3) August 5, 2015 order granting in part and denying in part the County's motion for costs.

II. BACKGROUND

In 1996, the Maui County Council (county council) adopted Resolution No. 96-121, authorizing the Mayor to acquire nine beach lots at Palau‘ea Beach in Makena, Maui for the creation of a public park. The county council noted that Palau‘ea Beach was "one of the last undeveloped leeward beaches on Maui" and that the community supported the creation of a beach park. Because of budgetary constraints, the County was able to buy only two of the nine lots (Lots 18 and 19), and the seven remaining lots were sold to private individuals.

The beach lots were subject to the following regulations and designations:

1) The 1998 Kihei-Makena Community Plan (the community plan), which designated the lots as "park" land. Maui Cty., Kihei-Makena Community Plan 59 (1998). This designation "applies to lands developed or to be developed for recreational use." Id.

2) A Special Management Area (SMA) designation pursuant to the Hawai‘i Coastal Zone Management Act (CZMA). Any development within an SMA is prohibited unless the developer applies for and receives an SMA permit.¹ Hawai‘i Revised Statutes (HRS) §§ 205A-21 and 205A-26 (2001).

3) A "Hotel-Multifamily" zoning designation, which permits, inter alia, the building of single-family residences.

4) A Declaration of Covenants and Restrictions (the declaration), which states, "[a] lot shall be used only for single family residential purposes regardless of whether the applicable zoning would permit a more intensive or different use."

In February 2000, the Leones bought one of the lots ("Lot 15" or "the property") for $3.7 million. The Leones initially relisted the property for $7 million and, in 2002, they received two offers for its purchase,² which the Leones refused.

Four years after buying Lot 15, the Leones hired a land use planning firm, Munekiyo & Hiraga, Inc. (Munekiyo), to prepare a draft environmental assessment (DEA) of Lot 15 so that they could eventually apply for SMA and development permits to build a single-family residence. As part of the environmental assessment process, Munekiyo sent out an early consultation letter, seeking comments from governmental agencies and non-profits on the Leones' proposed development of Lot 15. In this letter, Munekiyo described the property and the development plan as follows:

The parcel is located within the "Urban" district, is zoned Hotel "H-M" by the County of Maui and is designated as "Park" under the Kihei-Makena Community Plan. The owner intends to file a community plan amendment and change in zoning application with the County of Maui, Department of Planning for review by the Maui Planning Commission, and final action by the Maui County Council to achieve land use consistency for the parcel. Since a community plan amendment will be sought, the applicant will submit a Draft Environmental Assessment (DEA) in accordance with Chapter 343, Hawaii Revised Statutes (HRS).

On May 20, 2004, the County of Maui's Department of Planning (the Department) sent Munekiyo comments in response to the early consultation letter. The Department initially noted that "the proposed action requires a Community Plan Amendment which therefore triggers Chapter 343, HRS." The Department then provided the following comments:

1. Provide a view analysis from Makena-Keoneolo Road. The analysis should assume a 60% buildable area and 40% open view corridor for the property and address impacts of the structure's massing.

2. The Erosion Rate for the Property is approximately one foot per year. As such, the shoreline setback area is calculated as 60 feet from the certified shoreline.

3. Lateral access along the shoreline shall be provided.

4. In addition to the applications for a Community Plan Amendment and Change in Zoning, the proposed action requires a Special Management Area assessment.

On June 3, 2004, the Leones directed Munekiyo to stop work on the project. In an intra-office email, Munekiyo explained why the Leones instructed the firm to halt work on the project:

I received a call from Doug Leone this morning. He asked that we stop work and close the project. He felt that the political climate is much too difficult to be seeking any land use entitlements for the property. He was not willing to accommodate a 40% road frontage view corridor and felt that it would be better for him to just hold on to the property for now.

In 2007, the Leones restarted the permitting process and Munekiyo submitted the SMA assessment application to the Department on September 28, 2007. One month later, the Department sent a letter declining to process the SMA application with the following explanation:

The subject property is designated "Park" on the Kihei-Makena Community Plan (Community Plan). The proposed Single-Family dwelling is inconsistent with the Community Plan. An application for a Community Plan Amendment was not submitted concurrent with the subject application.

Section 12-202-12 (f) (5) states that an application "cannot be processed because the proposed action is not consistent with the County General Plan, Community Plan, or Zoning, unless a General Plan, Community Plan, or Zoning Application for an appropriate amendment is processed concurrently with the SMA Permit Application."

The letter further explained that, in order for the Leones to proceed, they would have to file a new application consistent with the community plan and with the appropriate submittals.

A. Initial Circuit Court Proceedings²

On November 19, 2007, the Leones filed a lawsuit against the County, alleging that, because of the County's actions, the Leones were left with no economically viable use of their property. The Leones brought five counts against the County: 1) inverse condemnation pursuant to article I, section 20 of the Hawai‘i Constitution, 2) inverse condemnation pursuant to the Fifth and Fourteenth Amendments of the United States Constitution, 3) equal protection violation pursuant to 42 U.S.C. § 1983, 4) substantive due process violation pursuant to 42 U.S.C. § 1983, and 5) punitive damages under 42 U.S.C. § 1983. The Leones asserted that the County was required to provide the Leones with just compensation for their property, and that they were also entitled to punitive damages in the amount of $50 million.

The County filed a motion to dismiss, which the circuit court granted on March 2, 2009. The circuit court determined that "there [were] effective remedies still available" to the Leones, such as proceeding with a new application with appropriate submissions, seeking an amendment to the community plan, or applying for a special management use permit pursuant to the provisions of HRS §§ 12-202-13 and 12-202-15. Because "effective remedies" were still available to the Leones, the circuit court concluded that the Leones had "failed to exhaust their administrative remedies." As such, the circuit court ruled that the case was "not ripe for adjudication" and that the circuit court lacked jurisdiction over the subject matter of the case.

B. Initial ICA Proceedings

The Leones appealed this decision and on June 22, 2012, the Intermediate Court of Appeals (ICA) published an opinion which vacated the circuit court's judgment and remanded the case for further proceedings. See Leone v. Cty. of Maui, 128 Hawai‘i 183, 284 P.3d 956 (App. 2012) ( Leone I ). The ICA concluded that the circuit court erred in determining that it lacked subject matter jurisdiction because the Leones' claims were not ripe for adjudication. Id. at 196, 284 P.3d at 969. The ICA specifically determined that the Department's letter, which declined to process the Leones' SMA assessment...