Leone v. County of Maui. ( 2017 )

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Electronically Filed
Supreme Court
SCAP-15-0000599
16-OCT-2017
09:19 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---O0O---
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,
vs.
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
APPEAL FROM THE CIRCUIT COURT OF THE SECOND CIRCUIT
(CAAP-15-0000599; CIVIL NO. 07-1-0496(2))
OCTOBER 16, 2017
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
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(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
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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
1
More specifically, under the CZMA, “development” does not include
the “[c]onstruction of a single-family residence that is not part of a larger
development.” HRS § 205A-22 (2001). However, if the “authority finds that
any excluded use . . . may have a cumulative impact, or a significant
(continued...)
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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
1
(...continued)
environmental or ecological effect on a special management area,” then the
excluded use, including the construction of a single-family residence, “shall
be defined as ‘development’ for the purpose of this part.” HRS § 205A-22.
2
The offers were for $4.5 million and $4.6 million.
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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
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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 Proceedings3
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
3
The Honorable Joseph E. Cardoza presided over the initial circuit
court proceedings.
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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
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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 application, satisfied the
finality requirement for ripeness, and that the Leones were not
required to seek a change in the community plan, which amounted
to seeking a change in the existing law, before they could bring
their inverse condemnation claims. Id. at 193-96, 284 P.3d at
966-69.
Of import to the proceedings on remand, the ICA
commented in a footnote on the inconsistencies of the Maui County
permitting process:
[T]he proposed use - the construction of single-family
residences - is not considered a “development” under the
CZMA unless the authority finds a cumulative impact or
significant environmental effects. HRS § 205A-22. Although
the CZMA does not expressly require consistency for proposed
land uses that are not considered “developments,” the Maui
County Code (MCC) renders the Community Plan binding on all
county officials. MCC 2.80B.030(B)(2006). Under the
express language of the code, neither the director nor the
Planning Commission may approve land uses that are
inconsistent with the Kihei-Makena Community Plan. The
language of the SMA Rules comports with this outcome,
stating in mandatory terms that “the director shall make a
determination . . . that the proposed action either: . . .
(5) Cannot be processed because the proposed action is not
consistent with the county general plan, community plan, and
zoning[.]” SMA Rule 12-202-12(f) (emphasis added). In any
case, the Director’s decision that Appellants’ assessment
applications could not be processed had the same effect as a
determination that it was a development. If, because of a
“cumulative impact or a significant environmental or
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ecological effect,” a single-family residence is considered
a development, then an SMA permit would be required. If a
permit were required, it could not be approved because it
would be inconsistent with the Community Plan. Thus,
regardless of the denomination of the assessment
application, the Director’s determination of inconsistency
with the Community Plan precludes further processing under
applicable law.
Id. at 194 n.8, 284 P.3d at 967 n.8 (alterations in original)
(citations omitted). Accordingly, the ICA vacated and remanded
the case to the circuit court for further proceedings. Id. at
196, 284 P.3d at 969.4
C. Circuit Court Proceedings on Remand5
A jury trial was held from March 30 through May 5, 2015
on the same five counts.6 During opening statements, the Leones
showed the jury a tax map that depicted the Palau#ea Beach
properties and explained who owned them and how they were
developed:
And these are the present owners of properties. The
north end of the beach you have Mr. Sweeney and Mr.
Lambert’s properties. They have homes on them today, and
the reason why they have homes on them, we’ll explore in
more detail.
This is the Leones’ property. It has a path on it
leading from Old Makena Road to the beach that is used every
day by members of the public.
This is the Larsons’ properties. These two lots are
owned by Bill and Nancy Larson. This parcel, Lot 52, is now
being built upon, and the reasons why Mr. Larson got
4
On October 29, 2012, the County applied for a writ of certiorari
to this court, which was denied on December 12, 2012. Leone v. Cty. of Maui,
No. SCWC-29696, 2012 WL 6200401 (Haw. Dec. 12, 2012).
5
The Honorable Peter T. Cahill presided.
6
Prior to the start of the jury trial, the circuit court entered an
order granting the County’s motion for summary judgment as to Count V of the
Leones’ complaint, which asserted a claim for punitive damages pursuant to 42
U.S.C. § 1983. As such, only counts I-IV proceeded to the jury trial.
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approval to build on his property we’ll go in to also.
These two lots in the middle of the beach are owned by
the County. The County bought them for beach-park purposes
back in the end of 1999, but never improved the property. .
. .
This property is owned by Mr. Altman. This next
property is owned by an associate of Mr. Leone’s named Dan
Warmhoven, Galando, and Luzco, and these three properties
are on the rocky point at the south end of the beach, and
they’re improved with homes on them today.
According to the Leones, the shifting political climate
on Maui was the reason why some landowners at Palau#ea Beach were
allowed to build homes on their properties, while the Leones were
denied that same right:
Under Mayor Apana’s administration, some of the other
lot owners were able to get those approvals. They got SMA
Assessment Applications filed. The exemptions were granted
by Planning Director Min, building permits were issued, and
they went forward and started building their homes; Lambert
and Sweeney among others.
After Mayor Arakawa took office, during his first
administration, he appointed a new Planning Director named
Michael Foley, and within eight days after taking office,
Planning Director Foley announced there would be no more
approvals for homes at Palauea Beach and stopped granting
extensions at Palauea.
The Leones contended that it was at that time that they sought to
obtain permits for building a single-family residence on their
property, after Mayor Arakawa took office and the new Planning
Director decided to stop development at Palau#ea Beach. The
Leones further explained that after Mayor Arakawa took office for
the second time, the policy shifted again, but it was too late
for the Leones to build at that point:
Now, after Mayor Arakawa takes office for the second
time, the political winds shift again, and beginning in
2012, the current Arakawa administration begins granting
approvals to some of the other lot owners to build.
The problem from the Leones’ perspective is that in
September of 2011, there was a 40-year storm off of New
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Zealand, which came up over the coastal dunes and into their
property and left debris much further inland than it had
been before. The debris line creates a shoreline, and since
the debris line came so much farther inland than it had
before, the Leones were unable to build. 7
As such, the Leones contended that the “effect of the County’s
actions was to deprive the Leones of all economically viable use
of their land.”
For its part, the County presented the following
opening argument:
The County submits that the evidence in this case is
not going to show that the Leones were denied the right to
build on their lot. The evidence in this case is going to
show that they did not want to go through the same process,
the difficult process that each of the other seven lot
owners out here who have single family residences on their
lot went through. That’s why we’re here today.
. . . .
Regulations are not inflexible. We’ve got seven other
lot owners out there who are, again, living in very
luxurious single family homes. They dealt with these
regulations. They built on the lot. There’s a guy out
there building now.
The testimony during trial focused almost exclusively
on two distinct but interrelated inquiries: 1) whether the
County’s regulations prevented the Leones from building a single-
family residence, and 2) if so, whether this deprived the Leones
of economically beneficial use of their property. As to the
7
The Leones contended that they applied for a shoreline
certification on January 10, 2014, but that they were informed by the
Department of Land and Natural Resources (DLNR) of this court’s recent opinion
in Diamond v. Dobbin, 132 Hawai#i 9, 29, 319 P.3d 1017, 1037 (2014), which
required DLNR to “consider historical evidence” in making its shoreline
determination. The Leones contended that, because of the 2011 storm and this
court’s decision in Diamond, the shoreline setback on the property would have
overlapped the front yard setback, leaving no buildable area on the property.
At this point, the Leones withdrew their shoreline certification application.
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first query, the circuit court ultimately instructed the jury
that the County’s actions had prevented the Leones from building
a house on their property:
Ladies and gentlemen, at an earlier point during the
trial, I read to you the law as you must apply in this case.
I’m going to read three additional portions of the law that
you must apply to the facts of this case.
The first instruction to you is as follows: Following
an appeal at an earlier stage of this case, the Hawaii
Intermediate Court of Appeals issued an opinion entitled
Leone, et al., vs. County of Maui, et al. That opinion is
the law of this case and is binding on the parties and this
Court.
Second instruction. In the Leone opinion, the
Intermediate Court of Appeals stated as follows: The
language of the SMA Rules state in mandatory terms that the
Director shall make a determination that the proposed action
either cannot be processed -- actually that’s either, five,
cannot be processed because the proposed action is not
consistent with the County General Plan, Community Plan, and
Zoning. That’s SMA Rule 12-202-12, subparagraph F.
In any case, the Director’s decision that the Leones’
Assessment Applications could not be processed has the same
effect as a determination that it was a development. If,
because of a cumulative impact or a significant
environmental or ecological effect, a single family
residence is considered a development then an SMA permit
would be required.
If a permit were required, it could not be approved
because it would be inconsistent with the Community Plan.
Thus, regardless of the denomination of the Assessment
Application, the Director’s determination of the
inconsistency with the Community Plan precludes further
processing under applicable law.
The final instruction at this point of the case is as
follows: Under the Maui SMA Rules, the Planning Director
may not legally process an application for an SMA exemption
for a land use that is inconsistent with the Kihei-Makena
Community Plan.
(Formatting altered.) These rulings shifted the parties’ focus
to the second inquiry: whether the County’s regulations deprived
the Leones of economically beneficial use of their property.
Both parties called expert witnesses to testify as to
the use and value of the Leones’ property. The County called Ted
Yamamura (Yamamura), a real estate appraiser with over thirty-
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five years of experience appraising Maui real property, to
testify on the value and use of the Leones’ property.8 At the
outset, Yamamura testified that he has done thousands of real
estate appraisals on Maui over decades and that he determines the
“best uses” for the real estate in doing an appraisal. Yamamura
explained the test that he uses for determining highest and best
use: “There’s a four-item test; that use must be legally
permissible, physically possible, financially feasible, and
maximally productive, which means that use will yield the highest
value for that land.”
Counsel for the County then asked Yamamura about
investment use:
[COUNTY:] Mr. Yamamura, let me start by asking, what is
meant by investment in land?
[YAMAMURA:] It’s the use of land as an investment tool. In
other words, people would buy land, hold it for a period of
time, and as it increases in value and depending on the
buyer’s strategy and financial objectives, sell it for
profit.
. . . .
[COUNTY:] Do you have an opinion as to whether investment is
a use of land?
. . . .
[YAMAMURA:] I consider investment as a bona fide use of
land. It happens all the time. People by [sic] land, hold
on to it; after it appreciates over time, people sell it for
profit. I think that’s a bona fide land use.
. . . .
8
Prior to trial, the Leones filed a motion to exclude or limit
Yamamura’s testimony on the basis that he was not qualified to opine on
“economically viable use.” The circuit court granted in part and denied in
part this motion, explaining that Yamamura could not testify on the current
value of the property.
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[COUNTY:] In your opinion, Lot 15 at Palauea –- based on
your analysis of Lot 15 at Palauea, does it have potential
use as an investment?
. . . .
[YAMAMURA:] Absolutely, yes.
[COUNTY:] And looking at the first factor of your analysis,
which is legally permissible, why do you draw that
conclusion based on that particular factor?
. . . .
[YAMAMURA:] Legally permissible. It’s –- the underlying
Zoning of that lot is HM.
[COUNTY:] Meaning?
[YAMAMURA:] Hotel.
[COUNTY:] Hotel.
[YAMAMURA:] But there’s a conflict in the Community Plan,
but if –- under the context of legally permissible, if the
issue of that conflict can be mitigated, then we can look at
it as being a legally permissible use in the context of
highest and best use because that issue or that conflict can
be mitigated.
The circuit court overruled the Leones’ objections to this
testimony.
Rick Tsujimura (Tsujimura), a real estate attorney,
testified as an expert witness for the Leones. Tsujimura opined
that the inconsistences between the community plan and the zoning
requirements left the Leones “deprived of all economically
beneficial use for that lot.” Tsujimura explained:
The Community Plan is designated park. On the Zoning it’s
hotel, multi-family. So as you can see, there’s an
inconsistency between those two. They don’t line up.
The original intent of the State Plan, the State land
use, the General Plan, the Community Plan was for all of
this to line up and, consequently, what has happened is
we’re in a situation, because of this inconsistency, when
the Leones come in for an SMA permit –- Assessment
Application, part of the law, both at the State level and
Chapter 205A and the County SMA law in Chapter 12-202-12, it
requires that these pieces align. And when they don’t, when
they’re not the same, these all end up causing the
Assessment Application to be denied.
And this is the problem for the landowner right now.
Because of this inconsistency, this prevents the Leones from
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doing anything to start the process to do anything with the
lot, no matter what they wanted to do because they can’t get
past this inconsistency.
So what happens is you’re basically left with a piece
of property that’s zoned for hotel family -- multi-family,
Community Plan park, and because of that, you can’t do
anything. And so there’s no economically beneficial use
that they can use on that lot because of this.
On cross-examination, Tsujimura explained why he did
not consider the property to have any investment value:
[TSUJIMURA:] Investment value is premised upon an ability to
use the property, and my opinion, as I’ve articulated, is
that because of the inconsistency between the Community Plan
and the Zoning, there is no ability to use the property.
So if you’re asking me from an investment perspective,
I would say in this particular case, it would be zero
because you could never harvest that value given the current
situation.
[COUNTY:] So would you disagree with me, then, that there’s
potential economic benefit in the ownership and possession
of a piece of real estate?
[TSUJIMURA:] In a general sense, yes. But specifically to
this particular property, no.
[COUNTY:] So are you saying there’s no economic benefit in
the Leones’ lot as a vehicle for an –- as an investment?
[TSUJIMURA:] Not in the current situation because of the
inconsistency.
[COUNTY:] Really? Are you familiar with the Doug Schatz’ lot
at Palauea?
[TSUJIMURA:] No.
[COUNTY:] Are you aware that after Doug Schatz got the very
same return –- the same letter returning his application
with the same language as the Leones’ lot, that he turned
around and sold that property to somebody named Altman who’s
got a house on it today?
[COUNSEL FOR LEONES] Objection; relevance and beyond the
scope.
[THE COURT:] Sustained.
Also on cross-examination, the County examined
Tsujimura about whether the Leones’ property could be used for
other purposes, to which Tsujimura conceded that the property
could potentially be used for commercial purposes:
[COUNTY:] Mr. Tsujimura, you were asked whether the Leones
could engage in commercial sales of concessions on their
lot, and I believe you acknowledged that under the hotel
district zoning, that they could, in fact, operate a park;
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correct?
[TSUJIMURA:] Yes.
[COUNTY:] And then you said that they can only engage in
noncommercial uses under the hotel zoning, but I’m going to
read to you what the hotel zoning ordinance actually says.
And it says, “Permitted uses:” –- this is 19.14.020 –-
“Within Hotel Districts, the following uses shall be
permitted: Any use permitted in residential and apartment
districts.”
Then when you go to 19.08.020, which says, “Permitted
uses in Residential Districts,” what it actually says, Mr.
Tsujimura, is, “Parks and playgrounds, noncommercial:
Certain commercial, amusement, and refreshment sale
activities may be permitted when under the supervision of
the government agency in charge of the park or playground.”
Which means a private land owner can engage in these
commercial activities, but it’s just subject to permitting
requirements and regulations under the agency, in this
instance, the County; isn’t that correct?
[TSUJIMURA:] I agree with you, Mr. Corporation Counsel. It
should have been under the supervision of the County.
[COUNTY:] All right. And so, in fact, the answer to the
question, which you said, as to whether commercial uses
would be allowed and to which you answered no, your answer
is actually incorrect; right?
[TSUJIMURA:] Well, my answer was that it would be subject to
operation by the County.
[COUNTY:] And that’s where your answer was incorrect.
Because the ordinance which I actually just read to you said
under the –- wait. You got to let me finish –- says under
the supervision of the County, not the operation. That’s
different; right?
[TSUJIMURA:] Except if you –- as you read it –- it went
further to say that the agency would have control over the
park, which suggests that it’s who controls the park. If
the Leones control the park, it’s not controlled by the
Parks Department.
[COUNTY:] The word “control” didn’t appear anywhere in what
I just read –-
[TSUJIMURA:] Supervise.
[COUNTY:] –- so I’m going to read it again. There’s a
difference between the word “supervise” and the word
“control.” Correct?
[TSUJIMURA:] There could be.
[COUNTY:] . . . Isn’t what that says, is that the Leones can
engage in refreshment sales and certain commercial
activities as long as they get the proper permitting from
the Department of Planning? Isn’t that what that says?
[TSUJIMURA:] If you can get the proper permitting. If they
intentionally try to put any sort of hard scape [sic] on it,
it would lead to, again, this problem with the SMA.
[COUNTY:] So your answer to the question originally was
incorrect because a private land owner can, in fact, engage
in commercial sale activities on their lot as long as they
get the correct permits from the County of Maui; isn’t that
correct?
[TSUJIMURA:] If it’s supervised by the County.
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. . . .
[COUNTY:] So subject to permitting and supervision, it’s
allowed, isn’t it?
[TSUJIMURA:] Yes, if you can get an SMA assessment through.
Dr. William H. Whitney (Dr. Whitney), a real estate
economist, also testified as an expert witness for the Leones.
As part of his evaluation of the property’s economically
beneficial use, Dr. Whitney created a speculative real estate
investment model for Lot 15, which allowed him to predict the
profit value the Leones lost because they were not allowed to
develop their property. Dr. Whitney summarized his findings to
the jury, and estimated that, if the Leones had been allowed to
develop their property, they would have realized a value upwards
of $19 million by 2017.
On cross-examination, counsel for the County examined
Dr. Whitney about the possibility of using the Leones’ property
for commercial park uses. Dr. Whitney testified that one of the
main factors in determining whether the Leones’ property retained
economically beneficial use in a commercial context is whether
commercial activity is economically feasible. Dr. Whitney
explained that he did not fully study whether commercial
activities were economically feasible, because he was operating
under the assumption that commercial activities were not legally
permitted on the Leones’ property:
[COUNTY:] Okay. Let’s assume –- and I’m sure you can do
this. Let’s assume that your opinion on whether parks and
playgrounds and certain commercial activities are
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permissible at the Palauea lots are incorrect.
Let’s assume they are permitted as reflected in the
applicable Zoning Codes.
And then let’s talk about the second component of your
analysis, which is the financial feasibility. And I handed
you what was marked as -- what is marked as P-241, which is
in evidence, and your testimony yesterday was that, even if
you could engage in these activities, they’re not going to
cover the property taxes, and you said that in 2014 the
property taxes were $68,103.63.
So my question to you was, did you do any sort of
analysis to determine whether or not the types of activities
we’re talking about, recreational or amusement, would, in
fact, be able to generate $68,103.63, per annum, to cover
the property tax?
. . . .
[WHITNEY:] I did not do any analysis. I relied on my
judgment, as one who has provided leasing advisory services
over the years and done park feasibility studies, and I
would say, in my judgment, it’s very unlikely that that kind
of activity at that location, on my judgement, wouldn’t
cover the property taxes and perhaps the other costs that
the Leones would face; the provision of utilities, security,
and other activities that might be necessary to keep the
property in good standing.
. . . .
[COUNTY:] Did you do any exploration on Maui to determine
how amusement and concession refreshment actually work on
the beaches and parks in Maui?
[WHITNEY:] No. No investigation.
. . . .
[COUNTY:] Did you ask anybody on Maui, running that type of
concession, how much they’re able to generate annually in
income?
[WHITNEY:] No.
[COUNTY:] Renting surfboards, renting kayaks, selling
refreshments on crowded beaches; you didn’t ask anybody
that, did you?
[WHITNEY:] No.
Douglas and Patricia Leone also testified at trial.
Both testified on direct examination that they bought the
property with the expectation of building a single-family home on
it. Patricia testified that her family “love[d] Maui, and we
thought it would just be great to build a home where our family
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could come for years –- you know, for years and be together.”
Douglas similarly testified that he bought the property because
he “wanted a dream home for my wife, our four children, and
eventually our grandchildren.” On cross-examination, Patricia
testified that she and her husband, as trustees of the Leone
Family Trust, owned eight residential properties in addition to
Lot 15 at Palau#ea Beach. Patricia also acknowledged on cross-
examination that one of the purposes of the trust was to “invest
and reinvest in real estate.” Neither of the Leones could recall
at trial having relisted Lot 15 for $7 million soon after buying
it or receiving and refusing offers for it.
At the close of evidence, the Leones moved for judgment
as a matter of law on Counts I and II -- the inverse condemnation
claims.9 The circuit court denied this motion.
On May 1, 2015, the parties appeared before the court
to settle jury instructions. Of relevance to the issues raised
on appeal, the Leones requested the following three jury
instructions, which the circuit court either modified or refused.
First, the Leones requested a jury instruction
(proposed Jury Instruction No. 51) on economically beneficial
use:
9
During the trial, the Leones voluntarily dismissed Count IV, the
substantive due process claim, and Count III to the extent that it alleged a
denial of equal protection. As such, the only claims remaining for the jury
to determine were the inverse condemnation claims.
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Land has economically beneficial use, if, under the
applicable regulations, all three of the following are true:
(1) there is a permissible use for the land, other than
leaving the land in its natural state, (2) the land is
physically adaptable for such use and (3) there is a demand
for such use in the reasonably near future.
(Emphasis added.) The circuit court modified this jury
instruction (Jury Instruction No. 22) over the Leones’ objection,
deleting the underlined phrase “other than leaving the land in
its natural state[.]” The circuit court explained that it was
deleting that phrase because “this is a factual issue and better
left for argument[.]”
Second, the Leones requested the following jury
instruction (proposed Jury Instruction No. 73) on the burden of
production:
Plaintiffs initially bear the burden to produce
evidence that they lack economically beneficial use of their
property. Once Plaintiffs have produced such evidence, the
burden of production shifts to the Defendants. To meet
their burden of production on a proposed economically
beneficial use, Defendants must produce evidence of
reasonable probability that the land is both physically
adaptable for such use and that there is a demand for such
use in the reasonably near future.
However, the circuit court refused that jury instruction.
Instead, the circuit court issued the following jury instruction
on burdens (Jury Instruction No. 9): “Plaintiffs have the burden
of proving by a preponderance of the evidence every element of
each claim that plaintiffs assert. Defendants have the burden of
proving by a preponderance of the evidence every element of each
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affirmative defense that defendants assert.”10 The circuit court
explained why it modified the Leones’ proposed jury instruction:
[T]his is an issue to be determined by the Court and has
been determined by the Court in terms of the motions for
directed verdict and judgment by the plaintiffs and [to]
instruct the jury on burdens of production would
unnecessarily and potentially confuse the jury and suggest
to them that the burden of proof has somehow shifted.
Even though the words burden of production, this is a
very complex area even for evidence professors at law
school, and to now start to discuss all of these issues, I
think, would be unduly confusing to the jurors, and also I
am not sure that it’s –- while it may be an accurate
reflection of what the law is, it’s not an accurate
reflection of what has occurred in this case, based on my
rulings.
Lastly, the Leones requested the following jury
instruction (proposed Jury Instruction No. 71) regarding the
effect of the declaration of covenants and restrictions:
Plaintiffs’ lot is subject to a declaration of
covenants and restrictions (“DCR”) that restricts what
Plaintiffs may do with their land. Under the DCR,
Plaintiffs may use their land only for single-family
residential purposes. You may consider the DCR when
determining whether Plaintiffs have any economically
beneficial use of their land.
The circuit court refused this instruction.
The circuit court also issued the following relevant
jury instruction:
• Jury Instruction No. 23:
There is a difference between economically beneficial
use and value. A property that has value may not have
“economically beneficial use.” To determine whether a
defendant denied Plaintiffs economically beneficial use of
their property, you may consider whether Plaintiffs were
able to use their property in an economically beneficial
way.
10
Additionally, Jury Instruction No. 10 explained that “[t]o ‘prove
by a preponderance of the evidence’ means to prove that something is more
likely so than not so. It means to prove by evidence which, in your opinion,
convinces you that something is more probably true than not true.”
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On May 5, 2015, the jury returned a verdict in favor of
the County, concluding that the County had not deprived the
Leones of economically beneficial use of their land. On June 1,
2015, the circuit court entered judgment in favor of the County
and against the Leones.
On August 5, 2015, the circuit court: 1) denied the
Leones’ June 10, 2015 renewed motion for judgment as a matter of
law and, alternatively, motion for a new trial, and 2) granted in
part and denied in part the County’s June 12, 2015 motion for
taxation of costs, awarding the County $40,522.72 in costs.
The Leones appealed and challenged the County’s expert
testimony, certain jury instructions, the circuit court’s denial
of the Leones’ motion for judgment as a matter of law, and the
award of costs to the County. The County cross-appealed and
filed an application for transfer of the appeal to this court,
which was granted on June 29, 2016.
III. STANDARDS OF REVIEW
A. Expert Witness Qualifications and Testimony
[I]t is not necessary that the expert witness have the
highest possible qualifications to testify about a
particular manner [sic], . . . but the expert witness must
have such skill, knowledge, or experience in the field in
question as to make it appear that his opinion or
inference-drawing would probably aid the trier of fact in
arriving at the truth. . . . Once the basic requisite
qualifications are established, the extent of an expert's
knowledge of subject matter goes to the weight rather than
the admissibility of the testimony.
“‘Whether expert testimony should be admitted at trial
rests within the sound discretion of the trial court and
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will not be overturned unless there is a clear abuse of
discretion.’”
Estate of Klink ex rel. Klink v. State, 113 Hawai#i 332, 352, 152
P.3d 504, 524 (2007) (alterations in original) (citations
omitted) (quoting Tabieros v. Clark Equip. Co., 85 Hawai#i 336,
351, 944 P.2d 1279, 1294 (1997)).
B. Jury Instructions
When jury instructions, or the omission thereof, are
at issue on appeal, the standard of review is whether, when
read and considered as a whole, the instructions given are
prejudicially insufficient, erroneous, inconsistent, or
misleading. Erroneous instructions are presumptively
harmful and are a ground for reversal unless it
affirmatively appears from the record as a whole that the
error was not prejudicial.
Nelson v. Univ. of Haw., 97 Hawai#i 376, 386, 38 P.3d 95, 105
(2001) (quoting Hirahara v. Tanaka, 87 Hawai#i 460, 462-63, 959
P.2d 830, 832-33 (1998)).
C. Judgment as a Matter of Law
It is well settled that a trial court's rulings on
motions for judgment as a matter of law are reviewed de
novo.
When we review the granting of a [motion
for judgment as a matter of law], we apply the
same standard as the trial court.
A [motion for judgment as a matter of law]
may be granted only when after disregarding
conflicting evidence, giving to the non-moving
party's evidence all the value to which it is
legally entitled, and indulging every legitimate
inference which may be drawn from the evidence
in the non-moving party's favor, it can be said
that there is no evidence to support a jury
verdict in his or her favor.
Miyamoto v. Lum, 104 Hawai#i 1, 6-7, 84 P.3d 509, 514-15
(2004) (internal citations omitted).
Aluminum Shake Roofing, Inc. v. Hirayasu, 110 Hawai#i 248, 251,
131 P.3d 1230, 1233 (2006) (brackets in original).
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IV. DISCUSSION
Before addressing the arguments, a brief summary of the
relevant law on takings provides useful context.
A. The Takings Clause
The Fifth Amendment to the United States Constitution
provides that private property shall not “be taken for public
use, without just compensation.” This -- the Takings Clause --
is made applicable to the states through the Fourteenth
Amendment. Murr v. Wisconsin, 137 S. Ct. 1933, 1942 (2017).
Similarly, article 1, section 20 of the Hawai#i Constitution
provides, “[p]rivate property shall not be taken or damaged for
public use without just compensation.”
The United States Supreme Court (Supreme Court) has
established two discrete categories of government action as
compensable: physical and regulatory takings. Lucas v. S.C.
Coastal Council, 505 U.S. 1003, 1015 (1992). The first are
“regulations that compel the property owner to suffer a physical
‘invasion’ of his property.” Id. The second are “regulation[s
that] den[y] all economically beneficial or productive use of
land.” Id.; see also Pub. Access Shoreline Haw. v. Haw. Cty.
Planning Comm’n, 79 Hawai#i 425, 451-52, 903 P.2d 1246, 1272-73
(1995) (“A regulatory taking occurs when the government’s
application of the law to a particular landowner denies all
economically beneficial use of his or her property without
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providing compensation.”). The relevant inquiry in the current
case is whether a regulatory taking occurred.
The Supreme Court in Lucas explained that a
regulatory taking occurs when the “regulation denies all
economically beneficial or productive use of land.” 505 U.S. at
1015 (emphasis added). The Supreme Court explained that
“regulations that leave the owner of land without economically
beneficial or productive options for its use -- typically, as
here, by requiring land to be left substantially in its natural
state -- carry with them a heightened risk that private property
is being pressed into some form of public service . . . .” Id.
at 1018.
More recently, in Palazzolo v. Rhode Island, 533 U.S.
606 (2001), the Supreme Court considered whether a taking could
still occur even though the regulation did not deprive a
landowner of all beneficial use of land. Palazzolo owned a
waterfront parcel of land in Rhode Island and almost all of it
was designated as coastal wetlands under state law. Id. at 611.
Because of this designation, Palazzolo’s development proposals
for portions of his property were rejected by the Rhode Island
Coastal Resources Management Council (the Council), and Palazzolo
sued, claiming that the Council’s application of its wetland
regulations constituted a taking without just compensation. Id.
In Palazzolo, the Supreme Court expanded the rule
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established in Lucas when it stated:
Where a regulation places limitations on land that fall
short of eliminating all economically beneficial use, a
taking nonetheless may have occurred, depending on a complex
of factors including the regulation’s economic effect on the
landowner, the extent to which the regulation interferes
with reasonable investment-backed expectations, and the
character of the government action.
Id. at 617 (citing Penn Cent. Transp. Co. v. City of New York,
438 U.S. 104, 124 (1978)). Utilizing this test, the Supreme
Court concluded that Palazzolo was left with more than a “token
interest” in his land because of the regulations. Id. at 631.
The Supreme Court explained that, while some portions of
Palazzolo’s property could not be developed because of the
regulations, an upland portion of the property could be improved
and actually retained $200,000 in development value even under
the State’s wetlands regulations. Id. at 630-31. As such, the
Supreme Court concluded that a “regulation permitting a landowner
to build a substantial residence on an 18-acre parcel does not
leave the property ‘economically idle.’” Id. at 631 (quoting
Lucas, 505 U.S. at 1019).
As the Supreme Court most recently noted, adjudication
of regulatory takings cases “requires a careful inquiry informed
by the specifics of the case.” Murr, 137 S. Ct. at 1943.
However, “[i]n all instances, the analysis must be driven ‘by the
purpose of the Takings Clause, which is to prevent the government
from forcing some people alone to bear public burdens which, in
all fairness and justice, should be borne by the public as a
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whole.’” Id. (quoting Palazzolo, 533 U.S. at 617-18).
With this framework in mind, we turn to the arguments
on appeal.
B. The Leones’ Arguments on Appeal
The Leones present four points for our review. The
Leones contend that the circuit court erred in: 1) denying the
Leones’ motion for judgment as a matter of law, 2) allowing
Yamamura to testify that “investment use” is an “economically
beneficial use” of land, 3) modifying Jury Instruction No. 22,
refusing proposed Jury Instruction No. 73 and replacing it with
Jury Instruction No. 9, and refusing proposed Jury Instruction
No. 71, and 4) awarding costs to the County.
We address the second and third points first, as their
resolution is helpful in considering the Leones’ renewed motion
for judgment as a matter of law.
1. The circuit court did not abuse its discretion in
allowing Yamamura to testify.
The Leones take issue with the following testimony from
the County’s expert witness, real estate appraiser, Yamamura:
[COUNTY:] Do you have an opinion as to whether investment is
a use of land?
. . . .
[YAMAMURA:] I consider investment as a bona fide use of
land. It happens all the time. People by [sic] land, hold
on to it; after it appreciates over time, people sell it for
profit. I think that’s a bona fide land use.
. . . .
[COUNTY:] In your opinion, Lot 15 at Palauea –- based on
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your analysis of Lot 15 at Palauea, does it have potential
use as an investment?
. . . .
[YAMAMURA:] Absolutely, yes.
The Leones argue that the circuit court abused its discretion in
allowing Yamamura to testify on investment use for two reasons.
First, the Leones argue that “investment use” is not an
economically beneficial use as a matter of law. Second, the
Leones argue that Yamamura was not qualified to opine on
“economically beneficial use.”
a. Testimony on investment use
The Leones contend that the circuit court abused its
discretion in allowing the County to introduce evidence that
“investment use” is an economically beneficial use of land.
While there is no Hawai#i legal authority on this
point, there is case law from other jurisdictions that discusses
this issue. For instance, in Del Monte Dunes at Monterey, Ltd.
v. City of Monterey, 95 F.3d 1422, 1425 (9th Cir. 1996) (Del
Monte Dunes I), aff’d, 526 U.S. 687 (1999), the City of Monterey
persistently denied Del Monte Dunes’ development permits for
thirty-seven ocean-front acres in which Del Monte Dunes sought to
build a residential complex. Del Monte Dunes sued the City, and
the jury found that the City’s actions denied Del Monte Dunes
equal protection and were an unconstitutional taking. Id. On
appeal before the Ninth Circuit, the City argued, inter alia,
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that it was entitled to a judgment as a matter of law on both the
equal protection and inverse condemnation claims. Id.
In arguing that the City had not denied Del Monte Dunes
of all economically viable use of its property, the City noted
that Del Monte Dunes sold the property to the State of California
for $800,000 more than it originally paid for it. Id. at 1432.
The Ninth Circuit was not persuaded by this argument, noting that
“[f]ocusing the economically viable use inquiry solely on market
value or on the fact that a landowner sold his property for more
than he paid could inappropriately allow external economic
forces, such as inflation, to affect the takings inquiry.” Id.
at 1432-33 (emphasis added). Then, the Ninth Circuit explained
that “[a]lthough the value of the subject property is relevant to
the economically viable use inquiry, our focus is primarily on
use, not value” and that “the mere fact that there is one willing
buyer of the subject property, especially where that buyer is the
government, does not, as a matter of law, defeat a taking claim.”
Id. at 1433 (emphases added).
Thus, Del Monte Dunes I established that, while
property value should not be considered to the exclusion of other
factors, it is still a relevant factor in the economically viable
use analysis. See also MacLeod v. Santa Clara Cty., 749 F.2d
541, 547 n.7 (9th Cir. 1984) (“Holding property for investment
purposes can be a ‘use’ of property.”); Fla. Rock Indus., Inc. v.
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United States, 791 F.2d 893, 902-03 (Fed. Cir. 1986) (noting that
a “qualified real estate dealer” testified that the property had
“fair market value subject to the regulation” because there were
“investors willing to forego immediate income in hope of long-
term gain” and concluding that this was evidence of “sufficient
remaining use of the property to forestall a determination that a
taking had occurred”); City of San Antonio v. El Dorado Amusement
Co., 195 S.W.3d 238, 245 (Tex. App. 2006) (“A restriction denies
a landowner all economically viable use of the property or
totally destroys the value of the property if the restriction
renders the property valueless.”).
In the present case, Yamamura testified that the
Leones’ property had “investment use” or, in other words, that
the property had value because the Leones could hold on to
property, wait until it increased in value, and sell it for a
profit. While Del Monte Dunes I established that property value
should not be the sole focus in an economically viable use
inquiry, the Ninth Circuit did not foreclose the admissibility of
such evidence. In fact, the Ninth Circuit noted that “the value
of the subject property is relevant.” Del Monte Dunes I, 95 F.3d
at 1433. Thus, guidance from other jurisdictions suggests that
testimony on investment use is appropriate in takings cases.
Additionally, the circuit court took mitigating
measures in order to ensure that the jury did not improperly give
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the “value” evidence more weight than it was legally entitled.
For example, Jury Instruction No. 23 instructed the jury that:
There is a difference between economically beneficial
use and value. A property that has value may not have
“economically beneficial use.” To determine whether a
defendant denied Plaintiffs economically beneficial use of
their property, you may consider whether Plaintiffs were
able to use their property in an economically beneficial
way.
(Emphasis added.) This instruction specifically explained to the
jury that the determination of whether property has any
economically beneficial use does not turn on whether the property
has value.
As such, we cannot conclude that the circuit court
abused its discretion in allowing testimony on investment use.
b. Testimony on economically beneficial use
The Leones also argue that Yamamura was not qualified
to opine on “economically beneficial use” and that the trial
court abused its discretion in permitting him to testify on that
topic. According to the Leones, Yamamura “is an appraiser, not
an economist, and his testimony should have been limited to the
field of real estate appraisal.”
Hawai#i Rules of Evidence (HRE) Rule 702 (1993)
provides:
If scientific, technical, or other specialized
knowledge will assist the trier of fact to understand the
evidence or to determine a fact in issue, a witness
qualified as an expert by knowledge, skill, experience,
training, or education may testify thereto in the form of an
opinion or otherwise. In determining the issue of
assistance to the trier of fact, the court may consider the
trustworthiness and validity of the scientific technique or
mode of analysis employed by the proffered expert.
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HRE Rule 702 commentary explains that “[t]he rule liberalizes the
traditional common law stricture limiting expert testimony to
some science, profession, business or occupation . . . beyond the
ken of the average layman” and that, now, “Rule 702 requires only
that the testimony be of assistance to the trier of fact.” HRE
Rule 702 cmt. (1993) (ellipsis in original) (quotations and
citations omitted).
In line with this rule, Hawai#i courts have noted that
“[i]t is not necessary that the expert witness have the highest
possible qualifications to testify about a particular [matter;]”
instead, “the expert witness must have such skill, knowledge, or
experience in the field in question as to make it appear that his
opinion or inference-drawing would probably aid the trier of fact
in arriving at the truth.” Klink, 113 Hawai#i at 352, 152 P.3d
at 524 (quoting State v. Wallace, 80 Hawai#i 382, 419 n.37, 910
P.2d 695, 732 n.37 (1996)). Additionally, “the determination of
whether or not a witness is qualified as an expert in a
particular field is largely within the discretion of the trial
judge and, as such, will not be upset absent a clear abuse of
discretion.” State v. Torres, 60 Haw. 271, 277, 589 P.2d 83, 87
(1978).
Yamamura testified to the following: he has been a
real estate appraiser for almost forty years, and that he has
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been working for his current Maui-based firm, ACM Consultants,
Inc., for approximately thirty-five years; he has been a licensed
real estate appraiser in Hawai#i since 1991; as part of his job,
he conducts real estate appraisals on “single-family residential
properties, individual condominium units, improved and unimproved
vacant land,” as well as on commercial and industrial properties,
and open space and park uses; he conducts about 200 appraisals a
year, and that he is “intimately familiar with real estate on
Maui”; as part of his work, he has “to determine what the best
uses for those lands would be every time [he does] an appraisal”;
he determines the “highest and best use[es] of the property” by
conducting a “four-item test[:] that use must be legally
permissible, physically possible, financially feasible, and
maximally productive”; he has used this highest and best use test
“in connection with thousands of properties that [he] appraised
on Maui in [his] 35 years of experience.”
The Leones contend that “[a]s an appraiser, Mr.
Yamamura’s expertise is in opining as to the value, not the use,
of real property” and that Yamamura was not familiar with the
term “economically viable use.” However, Yamamura’s testimony
establishes that he has extensive knowledge and experience in
evaluating the “use” of real property. Yamamura testified that,
for over thirty-five years, he has been a real-estate appraiser
on Maui and that, as part of his work, he has to determine the
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“highest and best use” of the properties he evaluates. Yamamura
estimated that he conducted this highest and best use test “in
connection with thousands of properties . . . on Maui.” Under
the parameters set by HRE Rule 702 and Hawai#i case law, this
testimony is enough to qualify Yamamura as an expert witness in
this area of expertise.
As such, given Yamamura’s considerable experience and
expertise in appraising real property, and specifically Maui real
property, the circuit court did not abuse its discretion in
allowing Yamamura to testify as an expert witness.
2. The circuit court did not err in issuing the challenged
jury instructions.
The Leones also argue that the circuit court erred in
the issuance of three jury instructions. First, the Leones
contend that the circuit court erroneously defined “economically
beneficial use” in Jury Instruction No. 22. Second, the Leones
contend that the circuit court refused to instruct the jury, per
the Leones’ request, on the burden-shifting paradigm in takings
cases. Third, the Leones contend that the circuit court failed
to instruct the jury on the effect of the declaration. Each of
these arguments will be addressed in turn.
a. Jury Instruction No. 22: economically beneficial
use
First, the Leones assert that they requested the
following jury instruction on economically beneficial use:
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Land has economically beneficial use, if, under the
applicable regulations, all three of the following are true:
(1) there is a permissible use for the land, other than
leaving the land in its natural state, (2) the land is
physically adaptable for such use and (3) there is a demand
for such use in the reasonably near future.
(Emphasis added.) The Leones assert that the circuit court’s
Jury Instruction No. 22, which omitted the underlined text, was
erroneous because “it failed to correctly state the law by
omitting that such use cannot leave the land in its natural
state.”
The Leones’ interpretation of the law on this point is
too restrictive for a number of reasons. First, a regulation
could potentially require land to be left substantially in its
natural state and still not be considered a taking. It is true
that case law provides that regulations that require land to be
left “substantially in its natural state” suggest that the owner
of the land is being deprived of all economically beneficial use
of the land. See Lucas, 505 U.S. at 1018 (“[R]egulations that
leave the owner of land without economically beneficial or
productive options for its use –- typically, as here, by
requiring land to be left substantially in its natural state –-
carry with them a heightened risk that private property is being
pressed into some form of public service . . . .” (emphasis
added)). However, this rule does not state that regulations that
leave land in its natural state always constitute a taking. As
such, Jury Instruction No. 22 is an accurate articulation of the
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law.
Second, as the circuit court noted when modifying the
language of the instruction, the issue of whether the government
has deprived the landowners of economically beneficial use of
their land is a factual query better left for the jury to decide:
Okay. I’m familiar with the cases. I am deleting it,
principally, on the grounds that I do think that, although
the language is used, this is a factual issue and better
left for argument, but the balance of the instruction is an
accurate reflection of the law as we’ve discussed.
The circuit court’s reasoning is in line with well-established
case law. See City of Monterey v. Del Monte Dunes at Monterey,
Ltd., 526 U.S. 687, 720 (1999) (Del Monte Dunes II) (“In actions
at law predominantly factual issues are in most cases allocated
to the jury.”). Specifically, regulatory takings cases are “ad
hoc, factual inquiries” that are “informed by the specifics of
the case.” Murr, 137 S. Ct. at 1942, 1943. As such, “the issue
whether a landowner has been deprived of all economically viable
use of his property is a predominantly factual question” and “is
for the jury.” Del Monte Dunes II, 526 U.S. at 720-21.
Accordingly, the circuit court properly instructed the
jury on economically beneficial use.
b. Jury Instruction No. 9: burden of production
Second, the Leones assert that the circuit court erred
by refusing the following proposed jury instruction:
Plaintiffs initially bear the burden to produce
evidence that they lack economically beneficial use of their
property. Once Plaintiffs have produced such evidence, the
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burden of production shifts to the Defendants. To meet
their burden of production on a proposed economically
beneficial use, Defendants must produce evidence of
reasonable probability that the land is both physically
adaptable for such use and that there is a demand for such
use in the reasonably near future.
Instead, the circuit court instructed the jury that “[p]laintiffs
have the burden of proving by a preponderance of the evidence
every element of each claim that plaintiffs assert.” The Leones
argue that the circuit court prejudiced the Leones by not giving
the requested instruction because it relieved the County of
meeting its burden of production.
As support for their argument, the Leones ask us to
rely on two cases from other jurisdictions: Bowles v. United
States, 31 Fed. Cl. 37 (1994) and Loveladies Harbor, Inc. v.
United States, 21 Cl. Ct. 153 (1990). These cases, while
persuasive, are not binding on Hawai#i courts. Moreover, these
cases were federal bench trials and, as such, are distinguishable
from this case, which was tried by a jury. The circuit court
implicitly acknowledged this distinction when it explained why it
refused the proposed burden-shifting instruction:
[To] instruct the jury on burdens of production would
unnecessarily and potentially confuse the jury and suggest
to them that the burden of proof has somehow shifted.
Even though the words burden of production, this is a
very complex area even for evidence professors at law
school, and to now start to discuss all of these issues, I
think, would be unduly confusing to the jurors . . .
Additionally, even if this court were to rely on the
cases cited by the Leones, the Leones’ proposed jury instruction
regarding burden shifting is not an accurate articulation of the
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law as reflected in Bowles and Loveladies. For instance, the
Leones requested that the court instruct the jury that
“[p]laintiffs initially bear the burden to produce evidence that
they lack economically beneficial use of their property. Once
Plaintiffs have produced such evidence, the burden of production
shifts to the Defendants.” This proposed instruction, as
written, suggests that once the Leones have produced any evidence
that their property lacks economically beneficial use, they have
satisfied their burden on that issue. This is incorrect.
Instead, a plaintiff in a takings case must produce sufficient
evidence to persuade the court that “it is more likely true than
not that there remains no economically viable use for their
property” before the burden shifts to the defendant.11
Loveladies, 21 Cl. Ct. at 158 (brackets omitted); Bowles, 31 Fed.
Cl. at 47. Thus, the Leones’ proposed jury instruction on this
topic is an inaccurate articulation of the law that they
themselves rely upon. The circuit court did not err in refusing
it.
c. Proposed Jury Instruction No. 71: effect of the
declaration
Third, the Leones argue that the circuit court erred
when it “failed to instruct the jury that the only permissible
11
And, in fact, this is what the circuit court told the jury in Jury
Instruction No. 10: “To ‘prove by a preponderance of the evidence’ means to
prove that something is more likely so than not so. It means to prove by
evidence which . . . convinces you that something is more probably true than
not true.” (Emphases added.)
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economically beneficial use of the Property is as a single-family
residence.” The Leones explain that they requested the following
jury instruction, which was refused by the circuit court:
Plaintiffs’ lot is subject to a declaration of
covenants and restrictions (“DCR”) that restricts what
Plaintiffs may do with their land. Under the DCR,
Plaintiffs may use their land only for single-family
residential purposes. You may consider the DCR when
determining whether Plaintiffs have any economically
beneficial use of their land.
The Leones contend that “[t]he jury must consider restrictive
covenants when making takings determinations.” The Leones’
argument here is unpersuasive for two reasons.
First, there is no authoritative legal support for the
Leones’ contention that a jury must be instructed on the effect
of a private restrictive covenant on a regulatory takings
analysis. The circuit court, in giving jury instructions, is
limited to instructing the jury on the applicable law. See
Tittle v. Hurlbutt, 53 Haw. 526, 530, 497 P.2d 1354, 1357 (1972)
(“The function served by jury instructions is to inform the jury
of the law applicable to the current case.”); Udac v. Takata
Corp., 121 Hawai#i 143, 149, 214 P.3d 1133, 1139 (App. 2009)
(“The boundaries of the trial judge’s discretion in informing the
jury of the law applicable to the current case are defined ‘by
the obligation to give sufficient instructions and the opposing
imperative against cumulative instructions.’” (quoting Tittle, 53
Haw. at 530, 497 P.2d at 1357)). The Leones cite to no Hawai#i
or Supreme Court case for their contention that a jury must be
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informed on the effect of private restrictive covenants. As
such, the circuit court acted well within its discretion when it
refused a jury instruction not grounded in the law.
Second, the two cases relied upon by the Leones for
their persuasive weight are inapposite to the issue before this
court. In both Bowles v. United States and Knight v. City of
Billings, the government defendants argued that the restrictive
covenants -- not their own action -- were responsible for the
taking. Bowles, 31 Fed. Cl. at 49 (“[T]he government also argues
that the diminution in value of Lot 29 was somehow ‘caused’ by
non-federal action.”); Knight, 642 P.2d 141, 146 (Mont. 1982)
(“We turn now to consider whether the declaration of restrictions
of Lillis Subdivision limiting the use of plaintiffs’ lots to
residential purposes until the year 2000 prevents recovery
through inverse condemnation.”). Both courts rejected this
argument, determining that it was the government action, not the
private restriction, that resulted in the elimination of the
economically beneficial use of the property. Bowles, 31 Fed. Cl.
at 49 (“In this case it is only because of the federal
government’s refusal to issue a fill permit that Lot 29 has no
fair market value or economically viable use.”) (emphasis in
original); Knight, 642 P.2d at 146 (“It is not the restrictions
that are damaging plaintiffs’ properties; it is the action of the
City in making the improvements that is making their properties
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nearly unusable and unmarketable for residential purposes.”).
Essentially, these cases assert that the existence of a
restrictive covenant is irrelevant to a takings analysis.
Here, the Leones argue the opposite -- that “[t]he jury
must consider restrictive covenants when making takings
determinations.” (Emphasis added.) This is certainly not the
holding of Bowles and Knight.12 Additionally, such a reading of
the law contravenes takings jurisprudence, which contemplates,
first and foremost, government action. Just as the Bowles and
Knight courts determined that the existence of private
restrictive agreements cannot be used as a defense for government
actions, we similarly determine that the existence of such
private agreements cannot saddle the government with liability in
a takings analysis. At all times in a takings analysis, it is
solely the government action that must be evaluated.
For these reasons, the circuit court did not err in
declining to instruct the jury on the effect of the declaration.
3. The circuit court did not err in concluding that the
Leones were not entitled to judgment as a matter of
law.
Next, we must determine whether the trial court erred
in concluding that the Leones were not entitled to a judgment as
a matter of law. The Leones assert that the evidence presented
12
Significantly, Bowles and Knight did not touch on the issue of
whether jury instructions must include information about the existence of
restrictive covenants.
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at trial permitted only one reasonable conclusion: the County’s
regulation of the Leones’ property constituted a taking for which
they are owed just compensation. We review a trial court’s
ruling on a motion for judgment as a matter of law de novo.
Aluminum Shake Roofing, 110 Hawai#i at 251, 131 P.3d at 1233. A
motion for judgment as a matter of law can be granted only when
“it can be said that there is no evidence to support a jury
verdict in [the non-moving party’s] favor.” Id. Additionally, a
court must give to the non-moving party’s evidence “all the value
to which it is legally entitled,” and to indulge “every
legitimate inference which may be drawn from the evidence in the
non-moving party’s favor.” Id.
This point on appeal presents a two-part inquiry: 1)
whether the County’s regulations prohibited the Leones from
building a single-family residence, and, if so, 2) whether the
County’s regulations deprived the Leones of economically
beneficial use of their land. Because the circuit court
instructed the jury that the County’s regulations prohibited the
Leones from building a single-family residence on their property,
see supra Section II.C, we need only address the second inquiry:
whether there is evidence to support the jury’s finding that the
County did not deprive the Leones of economically beneficial use
of their land.
The parties offered conflicting testimony on whether
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the Leones’ property retained economically beneficial use. The
Leones’ expert witnesses included Tsujimura and Dr. Whitney, who
both testified unequivocally on direct examination that the
County’s regulations deprived the Leones of all economically
beneficial use of their property. Tsujimura testified that
“[b]ecause of this [community plan] inconsistency, this prevents
the Leones from doing anything to start the process to do
anything with the lot” and that “there’s no economically
beneficial use that they can use on that lot because of this.”
Dr. Whitney similarly testified that the community plan
prohibited the Leones from building a single-family home on their
property, and that this regulation prevented the Leones from
realizing upwards of $19 million in value for their property.
On the other hand, the County introduced expert
testimony from Yamamura, who testified on direct examination that
the Leones’ property had great “investment use.” Yamamura
testified that “investment in land” means “the use of land as an
investment tool” and further explained that this occurs when
“people . . . buy land, hold it for a period of time, and as it
increases in value and depending on the buyer’s strategy and
financial objectives, sell it for profit.” When asked if the
property had potential as an investment, Yamamura answered,
“[a]bsolutely, yes.” Yamamura then explained that the property
had “tremendous opportunities for increases in value[]” because
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it was “a very scarce commodity” and “an ocean front lot on one
of the best beaches in south Maui . . . .”
Indeed, the Leones’ attempts at selling their property
soon after buying it support Yamamura’s investment use testimony.
A year after purchasing the property, the Leones relisted it for
$7 million, a $4 million increase in the price they paid for it,
and received two offers, which the Leones eventually refused.
The offers –- one for $4.5 million and the other for $4.6 million
–- would have garnered the Leones, if accepted, close to $1
million in profit. Also supporting Yamamura’s investment use
theory is the fact that the property is included in the Leone
Family Trust, which Patricia Leone conceded at trial was created,
at least in part, for the purpose of “invest[ing] and
reinvest[ing] in real estate.” Because we have already
determined that investment use is a relevant consideration in a
takings analysis, see supra Section IV.B.1.a, we conclude here
that the record adduces some evidence that the property retained
a reasonable, economically viable use, specifically in the form
of an investment.
In addition to Yamamura’s testimony about investment
use, there is also some evidence to support the County’s
contention that the property had economically beneficial use in
the commercial context. For instance, on cross-examination,
Tsujimura conceded that the Leones could potentially conduct
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commercial activities on their property as a park.
Additionally, on cross-examination, Dr. Whitney similarly
conceded that point, and also conceded that he did not undertake
any research to determine whether commercial activity on the
Leones’ property was economically viable.
As such, there is evidence to support the jury’s
finding that the property retained some economically beneficial
use. Although the Leones were prevented from building a single-
family residence on the property, evidence was presented showing
that the property had value as an investment property and could
potentially be used in the commercial context as well. See Penn
Cent., 438 U.S. at 130 (“[T]he submission that appellants may
establish a ‘taking’ simply by showing that they have been denied
the ability to exploit a property interest that they heretofore
had believed was available for development is quite simply
untenable.”).
In sum, we conclude that there is evidence to support
the jury’s verdict that the County’s regulations did not amount
to a taking of the Leones’ property. See Aluminum Shake Roofing,
110 Hawai#i at 251, 131 P.3d at 1233 (“A [motion for judgment as
a matter of law] may be granted only when . . . it can be said
there is no evidence to support a jury verdict in [the non-moving
party’s] favor.” (first brackets in original) (emphasis added)).
Accordingly, the circuit court did not err in denying the Leones’
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motion for judgment as a matter of law.13
4. The circuit court did not err in awarding costs to the
County.
The Leones argue that the circuit court erred in
awarding costs to the County because the County is not the
“prevailing party” under Hawai#i Rules of Civil Procedure (HRCP)
Rule 54(d). This argument is contingent on this court’s decision
to vacate and remand this case on the grounds the Leones raised
in the previous sections. Because we affirm the circuit court’s
judgment, the Leones’ argument that the circuit court erred in
awarding costs to the County is unavailing.
C. The County’s Arguments on Cross-appeal
Because we rule in favor of the County, we may quickly
dispense with its cross-appeal. In its cross-appeal, the County
raises seven points for our review. The Leones argue that the
County’s cross-appeal is not permitted by law because the County
is not an aggrieved party.
“Generally, the requirements of standing are (1) the
person must first have been a party to the action; (2) the person
seeking modification of the order of judgment must have had
standing to oppose it in the trial court; and (3) such person
must be aggrieved by the ruling.” Waikiki Malia Hotel, Inc. v.
13
The Leones also contend that they are entitled to a judgment as a
matter of law on their civil rights act claim. Because we affirm the circuit
court’s judgment that a taking did not occur, we need not address the Leones’
civil rights argument here.
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Kinkai Props. Ltd. P’ship, 75 Haw. 370, 393, 862 P.2d 1048, 1061
(1993) (emphasis added). This court defines an aggrieved party
in the civil context “as ‘one who is affected or prejudiced by
the appealable order.’” Id. (quoting Montalvo v. Chang, 64 Haw.
345, 351, 641 P.2d 1321, 1326 (1982)). Thus, under the general
rule, the County is not an aggrieved party and would not be able
to appeal its case.
However, as this court noted in City Exp., Inc. v.
Express Partners, 87 Hawai#i 466, 468 n.2, 959 P.2d 836, 838 n.2
(1998), “[w]hile the general rule is that a prevailing party may
not file a direct appeal, there is an exception for cross-
appeals.” This court specifically determined that “[i]f the
appellate court reverses the ruling of the lower court, then it
must address any relevant issues properly raised on cross-
appeal.” Id. In Express Partners, because we affirmed the
circuit court’s directed verdict in favor of the cross-
appellants, we concluded that the cross-appeal was moot. Id.
Similarly, because we affirm the circuit court’s
judgment in favor of the County, we find its cross-appeal moot.
V. CONCLUSION
For the foregoing reasons, we affirm the circuit
court’s: 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
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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.
Andrew V. Beaman, /s/ Mark E. Recktenwald
Leroy E. Colombe,
and Daniel J. Cheng /s/ Paula A. Nakayama
for plaintiffs-appellants/
cross-appellees /s/ Sabrina S. McKenna
Patrick K. Wong, Brian A. /s/ Richard W. Pollack
Bilberry and Thomas Kolbe
for defendants-appellees/ /s/ Michael D. Wilson
cross-appellants
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