Oct 6, 2016: HAWSCT Oral Argument In Eminent Domain Case: Do Parcels Need To Touch To Be Part Of A "Larger Parcel"

by Robert Thomas, Inverse Condemnation, October 5, 2016

Thursday, October 6, 2016, at 10:00 a.m. at Aliiolani Hale, the Hawaii Supreme Court will hear oral arguments in a case we've been following (we filed an amicus brief in the case, supporting the property owner on the first Question Presented), County of Kauai v. Hanalei River Holdings, Ltd., No. SCWC-14-0000828.

The case is a taking by the County of several parcels on the north short of Kauai, but the main issue in the case -- do parcels need to physically touch in order for the jury to consider them part of a larger economic parcel -- goes well beyond this one case. The Honolulu rail project, probably the biggest eminent domain project in Hawaii's history, is underway, and the larger parcel issue could arise is more than a few cases there. What we thought was settled doctrine in Hawaii law was thrown into question by the Court of Appeals' decision in this case.

The case involves three parcels on Kauai -- one of which is owned by a fellow who has been a thorn in the County's side -- which were condemned by the County for the expansion of a public beach park. The County was taking Parcels 49, 33, and 34. Sheehan owned 49, and HRH, a corporation, owned 33 and 34. Sheehan asserted his use of Parcel 49 stretched across 33, 34, and Area 51 -- a portion of another Parcel but not a separate record lot. He claimed to use Area 51 pursuant to an easement.

Parcel 49 (green)  --  Parcel 33 (pink)  --  Parcel 34 (yellow)  --  Area 51 (blue)

The court of appeals held that Hawaii law requires that two parcels abut before a jury can consider them part of a larger parcel. The property owned by the condemnee was separated from the other parcel he claimed to use, and not physically connected. The condemnee claimed he used the two parcels together as a boat yard, and therefore the taking of his property damaged his use of the other.

The ICA held that the owner "cannot satisfy the physical unity requirement” because the two parcels Petitioners claim to use together are separated by two others. County of Kauai v. Hanalei River Holdings, Ltd., No. CAAP-14-0000828, slip op. at 31; 2016 Haw. App. LEXIS 224, at *10 (2016). The ICA asserted the "must touch" test was established by the Hawaii Supreme Court in City and County of Honolulu v. Bonded Investment Co., Ltd., 54 Haw. 523, 511 P.2d 163 (1973), which, in the ICA's view, required "that all of the pertinent lots abut one another." Slip op. at 20.

Here is the description of the case and the Questions Presented from the Judiciary's web site:

Petitioners/Defendants-Appellants Hanalei River Holdings, Ltd. (HRH) and Michael G. Sheehan (Sheehan) apply for writ of certiorari, challenging the Intermediate Court of Appeals’s (ICA) May 11, 2016 Judgment issued pursuant to its March 31, 2016 Published Opinion. The ICA affirmed the Final Judgment As to All Claims and All Parties of the Circuit Court of the Fifth Circuit (circuit court), filed on April 25, 2014, except with regard to the award of blight of summons damages. The ICA vacated the award of blight of summons damages and remanded to the circuit court for further proceedings.

This case arises from the County of Kauaʻi’s (the County) condemnation of three parcels of property owned by HRH and Sheehan. The County deposited $5.89 million with the circuit court as estimated just compensation, and the circuit court issued an order of possession in favor of the County. In addition to HRH and Sheehan, Patricia Wilcox Sheehan also claimed an interest in the properties. Almost a year later, HRH and Sheehan submitted an application to withdraw the estimated just compensation. The County opposed their application arguing that it still had not been determined that HRH and Sheehan were the owners of the properties and that an updated appraisal showed that the value of the properties on the date that the condemnation action was filed was only $4.86 million. The County also moved to withdraw the $1.03 million excess from its original deposit. Subsequently, Patricia Wilcox Sheehan waived her claims, and HRH and Sheehan entered into an agreement with the County, whereby the County agreed to HRH and Sheehan’s withdrawal of $4.86 million on the condition that Sheehan indemnify the County for any failure of HRH to return excess payments. HRH and Sheehan withdrew $4.86 million, and the circuit court granted the County’s motion to withdraw the remaining $1.03 million.

Prior to trial, HRH and Sheehan claimed that they had a right to severance damages for a piece of property referred to by the parties as Area 51, that was actually a part of a larger parcel owned by Patricia Wilcox Sheehan. The County opposed HRH and Sheehan’s claim and moved for partial summary judgment on the severance issue. The circuit court granted partial summary judgment in favor of the County, holding that there was no unity of title because Area 51 was owned by Patricia Wilcox Sheehan, no unity of use because Sheehan’s permits to operate a boatyard on the condemned parcels and Area 51 had been revoked, and no physical unity because Sheehan’s parcel did not abut Area 51.

At the end of the jury trial, the jury determined the total value of the condemned parcels to be $5.8 million. The circuit court also awarded HRH and Sheehan blight of summons damages on the jury verdict from the date of the summons until the date that the County deposited $5.89 in estimated just compensation and from the date that the County amended its deposit to $4.86 million to final payment on the $940,000 difference between the jury verdict and the amended deposit.

HRH and Sheehan appealed to the ICA, arguing that the trial court erred when it permitted the County to withdraw a portion of the estimated of just compensation, when it granted summary judgment in favor of the County on the issue of severance damages, and in its calculation of blight of summons damages. The ICA affirmed the circuit court on the first two issues. However, the ICA disagreed with the circuit court’s calculation of blight of summons damages and held that the interest should have been tolled from the date that the County made its unconditional deposit of estimated just compensation until the date that Patricia Wilcox Sheehan waived her claims and it became clear that HRH and Sheehan were entitled to receive the compensation.

HRH and Sheehan’s application for writ of certiorari present the following questions to this court:

1. Must two parcels physically abut in order for the jury to consider whether they are part of a larger parcel?

2. Where there are multiple properties being condemned from different owners, does statutory interest on a conditional deposit only accrue after each condemnee establishes an entitlement to its portion of the deposit?

3. Does Hawaiʻi Revised Statutes § 101-19 enable a condemnor to withdraw a portion of its estimate of just compensation after deposit with the Court and after taking possession of the property?

Stay tuned. The court usually posts oral argument recordings shortly after the case is submitted. We'll bring you some post-argument thoughts as warranted.