Midkiff v. Tom

• Decision Date: 08 May 1979
• Docket Number: Civ. No. 79-0096.
• Citation: 471 F. Supp. 871
• Parties: Frank E. MIDKIFF et al., Plaintiffs, v. Paul A. TOM et al., Defendants, and Wai-Kahala Tract "H" Association, Inc., et al., Intervenors.
• Court: U.S. District Court — District of Hawaii

471 F. Supp. 871

Frank E. MIDKIFF et al., Plaintiffs, v. Paul A. TOM et al., Defendants, and Wai-Kahala Tract "H" Association, Inc., et al., Intervenors.

Civ. No. 79-0096.

United States District Court, D. Hawaii.

May 8, 1979.

Clinton R. Ashford, Ashford & Wriston, Rosemary T. Fazio, Honolulu, Hawaii, G. Richard Morry, Hamilton, Gibson, Nickelsen, Rush & Moore, Earl T. Sato, Honolulu, Hawaii, for plaintiffs.

Rick Tsujimura, Allen Kawada, Deputy Attys. Gen., Wayne K. Minami, Atty. Gen., State of Hawaii, Hawaii State Capitol, Honolulu, Hawaii, for defendants.

Dennis E. W. O'Connor, James K. Tam, John Francis Perkin, David A. Nakashima, Hoddick, Reinwald, O'Connor & Marrack, Honolulu, Hawaii, for intervenors, Wai-Kahala Tract H. Ass'n, Inc., et al.

James H. Case, A. Bernard Bays, Carlsmith, Carlsmith, Wichman & Case, Honolulu, Hawaii, for intervenors, Kahala Community Ass'n, Inc. and Kahala Community Ass'n Fee Purchase Fund.

Thomas T. Watts, Kemper & Watts, Honolulu, Hawaii, for intervenors Halawa Valley Estates Fee Conversion Corp.

DECISION ON MOTION FOR PRELIMINARY INJUNCTION

SAMUEL P. KING, District Judge.

The Trustees of the Estate of Bernice Pauahi Bishop¹ filed suit in this court on February 28, 1979, against the Commissioners and Executive Director of the Hawaii Housing Authority² and the Hawaii Housing Authority³ itself, praying for a declaration that the Hawaii Land Reform Act⁴ be declared unconstitutional.

A temporary restraining order against implementation of mandatory arbitration was granted pending a hearing and decision on a preliminary injunction.⁵ That hearing was held on April 24-27, 1979.

Motions to intervene were filed by several Bishop Estate lessee organizations.⁶ All motions were granted on March 23, 1979.

At this stage of the proceedings, the evidence adduced and arguments presented concentrated on the facial constitutionality of Chapter 516 of the Hawaii Revised Statutes.⁷ Some evidence related to the actual application of the law, but this was limited to setting the context within which the law was supposed to operate.⁸ For purposes of the hearing, it was agreed that the court could take as true the legislative findings set forth from time to time when this and related laws were enacted or amended.⁹

Chapter 516 authorizes the use of the State's power of eminent domain to permit lessees of residential lots to acquire the fee simple title to their homes.¹⁰ The Hawaii Housing Authority is given the power and duty to carry out the provisions of this chapter.¹¹ The Authority established the position of Land Reform Administrator to handle this function and adopted regulations implementing the statute.¹²

The Trustees object to the application of this land reform statute to the Bishop Estate lands on three principal grounds. First, they say that the State's power of eminent domain cannot constitutionally be used for the intended purpose in that the benefits derived from such use inure solely to private individuals.¹³ Second, they say that the statute unconstitutionally mandates less than fair market value as compensation for the taking of the owner's leased fee interests.¹⁴ Third, they say that the compulsory arbitration provisions of the statute violate constitutional guarantees.¹⁵

In making a preliminary determination of these issues at this time, I am governed by the test enunciated in Aguirre v. Chula Vista Sanitary Service,¹⁶ that is, that a preliminary injunction should issue "`upon a clear showing of either (1) probable success on the merits and possible irreparable injury, or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting preliminary relief.'"¹⁷ I shall analyze each of the listed objections in the light of this teaching from Aguirre.

First, I am of the opinion that the State may use the power of eminent domain to redefine, rearrange, or redistribute interests in land.¹⁸ Throughout recorded history, the manner in which land is permitted to be held and used has been of critical importance to all members of a given society.¹⁹ It is not enough to acquiesce in legislation that looks only to the future. The ingenuity of man could postpone the future to an unacceptable remoteness in time.²⁰

Furthermore, the legislature has defined the public interest and the public purpose behind Chapter 516.²¹ Whether or not the prohibition of the Fourteenth Amendment against depriving any person of property without due process of law is the same as the prohibition of the Fifth Amendment against the taking of private property for public use without just compensation,²²

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under either Amendment "public use" includes "public interest."²³

Second, I am of the opinion that the statutory definition of "owner's basis"²⁴ raises serious constitutional questions. The first two sentences of Haw.Rev.Stat. 516-1(14) are not objectionable.²⁵ Thereafter, the definition attempts to qualify "fair market value" and "just compensation" by setting forth two and only two methods by which just compensation "shall" be determined, and by mandating that method which "gives the greater consideration to the lessee's interest."²⁶ Without going into the details of Method A²⁷ and Method B,²⁸ it is clear to me that the definition can pass constitutional scrutiny under the Fourteenth Amendment only if everything after the first two sentences in this definition of "owner's basis" is ignored. That, in essence, is what I understand defendants and intervenors to argue that I should do.²⁹

Third, I am of the opinion that the mandatory arbitration provisions of Part IIA³⁰ are unconstitutional on their face.³¹ The statute provides that mandatory arbitration shall be in advance of and not any part of any action in eminent domain,³² that mandatory arbitration shall be conducted and carried into effect before a condemnation action has been commenced,³³ and that the purpose of the mandatory arbitration is "to establish the amount of just compensation which will be paid to lessor for the lessor's leased fee interest" in the event of condemnation³⁴ All defendants agree that the lessor eventually is accorded a right to a jury trial on the issue of just compensation,³⁵ that just compensation is equivalent to fair market value,³⁶ and that fair market value is to be determined by the jury based on all relevant evidence.³⁷

The statute provides that the "effect of the arbitration award and all matters relating thereto shall be prima facie evidence as to just compensation in any condemnation proceeding under this chapter."³⁸ But the mandatory arbitration is to proceed pursuant to Haw.Rev.Stat. Chap. 658,³⁹ which provides for proceedings in a circuit court confirming, vacating, modifying, or correcting an award, and a further appeal to the State supreme court.⁴⁰ By the time these procedures have been completed, considerable time will have elapsed.⁴¹ Yet the date of valuation in condemnation is the date of designation by the Hawaii Housing Authority,⁴² which has no necessary relationship to the date as of which "just compensation" is determined pursuant to the mandatory arbitration, and would be expected to come after the final completion of the mandatory arbitration proceedings and a further refusal by the lessor to convey.⁴³

And then when the final judgment has been entered determining the arbitration award, the lessee does not have to purchase the lessor's leased fee interest,⁴⁴ and the Hawaii Housing Authority does not have to commence condemnation proceedings.⁴⁵ Nevertheless, and even if there is a purchase or a condemnation, the lessor must pay one-half of all expenses and fees of arbitration proceedings incurred by the arbitrators,⁴⁶ without reimbursement.⁴⁷ This in itself may be a taking of property without just compensation.⁴⁸

Having reached the conclusions set forth above, I must still decide whether a preliminary injunction should issue and if so what should be enjoined. The statute in question contains a very comprehensive severability clause.⁴⁹ Thus, unless the statute must stand or fall as a whole, specific provisions that may be invalid may be separated out, leaving the other provisions in force.

I am of the opinion that those portions of the definition of the "owner's basis" to which the Trustees object are severable. I frankly do not believe that striking everything after the first two sentences in Haw.Rev.Stat. 516-1(14) would have any effect whatsoever on the operation of the statute or on the manner in which appraisers value the lessor's leased fee interest.⁵⁰ In any event, there is no pending matter involving these objected-to provisions that requires a preliminary injunction.

I am of the opinion that the mandatory arbitration provisions of the statute likewise are severable. In fact, the statute as originally passed did not contain this part, which was added in 1976.⁵¹ Unlike the objectionable features of the "owner's basis" definition, however, the Trustees are presently faced with a demand by the Hawaii Housing Authority to enter into mandatory arbitration pursuant to the statute.⁵² As I have indicated that in my opinion the Trustees will probably succeed on the merits of this issue, I must determine whether there is possible irreparable injury to the Bishop Estate or a balance of hardships tipping decidedly toward the Trustees so as to make just and proper the issuance of a preliminary injunction enjoining the implementation of Part IIA of Chapter 516 of the Hawaii Revised Statutes.

A preliminary injunction limited to mandatory arbitration affects only one pending group of lessees of 102 lots.⁵³ It is not likely that many other lessees would be similarly affected for several months. Even those prevented by a preliminary injunction from starting the mandatory arbitration procedures may seek a designation...