New HAWSCT Cert Application: State Not Required To Preserve Encumbrances In Land Court Registration

by Robert Thomas, InverseCondemnation.com October 16, 2013

Here's one we've been meaning to post for a while, if only because it presents a fascinating issue about the nature of Torrens title (so much so that we filed an amicus brief on behalf of Pacific Legal Foundation in the Intermediate Court of Appeals).

The State of Hawaii has filed an Application for a writ of certiorari, asking the Hawaii Supreme Court to review for grave error the ICA's opinion in In re Trustees Under the Will of the Estate of James Campbell, No. 30006 (June 13, 2013).

In that case, the ICA held that the intent of the land court registration provisions in Chapter 501 of the Hawaii Revised Statutes is to "preserve the integrity of titles," slip op. at 11, and "a certificate of title is unimpeachable and conclusive except as otherwise provided by law." Id.  That seems straightfoward enough, as any dirt lawyer in a state with a Torrens registration system knows. These systems, in which the state guarantees indefeasable title to the rights and interests reflected in the register, remain active in a few states, including Hawaii (more background here). 

Thus, the ICA held that "[b]y virtue of the Land Court registration of the Subject Property, the Trustees held, and subsequent good faith purchasers of the Subject Property for value hold, the Subject Property free from all encumbrances, except for encumbrances noted on the certificate of title." Id.

We hold that the Original [1938] Decree and the Original Certificate of Title extinguished the express government reservations of mineral or metallic mines set forth in Royal Patent No. 5616, Royal Patent No. 5693, and Grant No. 550 and also extinguished any implicit reservation in the Kamehameha III deed.

Slip op. at 8. Again, seems straightfoward enough: an interest now claimed that is not reflected in a Land Court decree, does not exist. Res judicata, etc. etc.

The rub is that here, it is the State of Hawaii that is claiming the interest, the right to mineral and metallic mines (including geothermal rights) on several large parcels of Land Court registered property on the north shore of Oahu. The State is claiming these rights even though they are not reflected in the registered title, confirmed to Campbell in the 1930's after Land Court litigation in which the State's predecessor, the Territory of Hawaii, appeared and asserted other interests.

The case arose when Campbell submitted a petition to the Land Court in 2009 to consolidate and subdivide land it owns on Oahu. The land was registered and had been confirmed to Campbell by the Land Court in 1938. A portion of the land derived from a royal patent in which the government reserved mineral and metallic mining rights, and another parcel had no reservation at all. The State's predecessor (the Territory of Hawaii) appeared in the Land Court and asserted several claims, but did not claim mineral or mining rights or a flowage easement. The Land Court eventually confirmed fee simple title in Campbell and noted that it was subject to various encumbrances, but this list did not include a reservation of mineral or mining rights or a flowage easement in favor of the Territory.

Flash forward seventy years, and the when Campbell's 2009 petition came before the Land Court, the State appeared and claimed that Campbell's title is subject to the State's ownership of "all mineral and metallic mines of every kind or description on the property, including geothermal rights," and is subject to a flowage easement in favor of the State. The State argued that despite the 1938 Land Court registration, Campbell's title never included interests which the State had reserved, even though the State's predecessor had appeared in that case, and Campbell's title had been confirmed free of all unregistered interests. The Land Court rejected the State's arguments and held that its claim of mineral rights was extinguished by the 1938 judgment, and that the title was also not subject to a flowage easement.

The State's appeal to the ICA argued that the original grantor of the land -- the King, in his individual capacity -- did not own the mineral rights, so therefore could not have conveyed those rights to Campbell, and that the government's reservation of mineral rights is "self-effectuating" whether noted in the land grant or not. The ICA rejected the State's arguments and affirmed the Land Court.

Here's the Question Presented by the State's cert application:

Did the Intermediate Court of Appeals (ICA) gravely err when it denied Respondent-Appellant-Petitioner State of Hawaii's (State or Territory) claim of ownership of all mineral and metallic mines, including geothermal rights, in the Subject Property by incorrectly concluding that the 1938 Land Court registration of the Subject Property by the Trustees Under the Will and of the Estate of James Campbell, Deceased (Trustees) extinguished the State's ownership of minerals and metallic mines because the Territory's reservation was not noted as an encumbrance in the Original Decree or the Original Certificate of Title, even though: (a) the Territory owned the minerals and metallic mines on the Subject Property pursuant to Royal Patent No. 5616, Royal Patent No. 5693, Grant No. 550, and the Deed of Kamehameha III to Charles Gordon Hopkins; (b) the Trustees failed to disclose the State's ownership of minerals and metallic mines as an encumbrance in their application for Land Court registration; (c) Land Court registration cannot create and interest in land; and (d) extinguishing the State's ownership of minerals and metallic mines would result in manifest injustice.

As we noted here, we thought the ICA got it right. So we think that the Supreme Court should not accept cert.

We'll see, however. And if and when Campbell files its Brief in Opposition, we'll post it.

Application for Writ of Certiorari by the State of Hawaii, In re Application of the Trustees Under the Will...