County of Kauai v. Hanalei River Holdings Limited. , 139 Haw. 511 ( 2017 )

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Electronically Filed
Supreme Court
SCWC-14-0000828
16-MAY-2017
08:20 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---o0o---
COUNTY OF KAUA#I,
Respondent/Plaintiff-Appellee,
vs.
HANALEI RIVER HOLDINGS LIMITED, a Cook Islands corporation;
MICHAEL GUARD SHEEHAN;
Petitioners/Defendants-Appellants,
and
PATRICIA WILCOX SHEEHAN, as Trustee of that certain unrecorded
Revocable Trust Agreement of Patricia Wilcox Sheehan, dated
December 21, 1994; PATRICIA WILCOX SHEEHAN; GAYLORD H. WILCOX;
DANIEL H. CASE; GROVE FARM COMPANY, INC., a Hawai#i corporation;
HUGH W. KLEBAHN; DONN A. CARSWELL; PAMELA W. DOHRMAN;
ROBERT D. MULLINS; WILLIAM D. PRATT; RANDOLPH G. MOORE;
and the Heirs and/or Assigns of JOHN B. BROSSEAU, also known as
JOHN BROSSEAU, JOHN B. BRASSEAU and J.B. BRASSEAU;
Respondents/Defendants-Appellants.
SCWC-14-0000828
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-14-0000828; CIV. NO. 11-1-0098)
MAY 16, 2017
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
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OPINION OF THE COURT BY NAKAYAMA, J.
I. INTRODUCTION
This case concerns the condemnation of three parcels of
privately-owned property and presents the following three issues:
(1) whether two parcels of land must physically abut in order for
a condemnee to be entitled to severance damages when one of the
parcels is condemned; (2) whether blight of summons damages only
begin to accrue after each condemnee has established its
entitlement thereto and; (3) whether a condemnor may withdraw a
portion of its estimate of just compensation based on an updated
estimate of the property’s value, after the deposit has been made
and the condemnor has taken possession of the property.
For the reasons stated below, we hold that: (1) the
presence or lack of physical unity is not dispositive of whether
a condemnee is entitled to severance damages; (2) a deposit of
estimated just compensation does not become conditional, and
blight of summons damages do not begin to accrue, when a
condemning authority objects to a condemnee’s motion to withdraw
funds based on the fact that the condemnee’s entitlement to such
funds is unclear and; (3) the court in an eminent domain
proceeding has the discretion to permit a governmental entity to
withdraw a portion of a deposit of estimated just compensation
when the deposit has not been disbursed to the landowner, the
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government acted in good faith in seeking to adjust the estimate
to accurately reflect the value of the property on the date of
the summons, and the adjustment will not impair the substantial
rights of any party in interest.
Therefore, we affirm the Intermediate Court of
Appeals’s May 11, 2016 judgment on appeal entered pursuant to its
March 31, 2016 published opinion, which affirmed the Circuit
Court of the Fifth Circuit’s (circuit court) final judgment
except with regard to the award of blight of summons damages, but
on different grounds with regard to the defendants’ entitlement
to severance damages.
II. BACKGROUND
This case concerns the condemnation of three parcels of
privately-owned land (Parcels 33, 34, and 49). In October 2004,
Michael G. Sheehan (Sheehan) acquired his ownership interests in
Parcels 33 and 34 from the Patricia Wilcox Sheehan Trust. At
that time, a portion of Parcel 49 was also a part of Parcel 33.
Parcel 49 was later created through consolidation and re-
subdivision of neighboring lands. On October 19, 2011, Sheehan
transferred ownership of Parcels 33 and 34 to Hanalei River
Holdings, Ltd. (HRH), but retained his fee simple title to Parcel
49. Geographically, the subject area consists of “three
adjoining irregular shaped parcels[,]” Parcels 49, 33 and 34
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respectively, “located along the east side and toward the end” of
a road in Hanalei, Kaua#i. “Parcels 33 and 34 [are both adjacent
to each other, and] front along the Hanalei River along their
northern boundaries while Parcel 49 is one lot removed from the
river.”
Although it is not being condemned by the County of
Kaua#i (the County), a piece of property referred to by the
parties as Area 51 is also relevant to this case. Area 51
includes land immediately to the east of Parcel 34. Area 51 is
also a part of Lot 127, owned by Patricia Wilcox Sheehan.1 In
2004, Patricia Wilcox Sheehan granted Sheehan an easement over
Area 51 to operate a boatyard. This easement provided in
pertinent part:
AND THE GRANTEE does hereby covenant and agree:
(1) That Grantee his successors and assign’s easement to use
the premises shall be limited solely for a boat baseyard as
that use is permitted by the ‘Decision and Order’ of the
Planning Commission of the County of Kauai, under its
Special Management Area Use Permit, SMA(U)-87-8; Special
Permit SP-87-9; Use Permit U-87-32, and Class IV Zoning
Permit Z-IV-87-40, dated June 24, 1987.
. . . .
(3) That in the event the Special Management Area Use
Permit, SMA(U)-87-8; Special Permit SP-87-9; Use Permit U-
87-32, and Class IV Zoning Permit Z-IV-87-40, and the
1
In 2006, Patricia Wilcox Sheehan gave Sheehan a quitclaim deed
conveying Area 51, an unsubdivided portion of Lot 127; however, the Land Court
mistakenly construed the deed as a conveyance of the entirety of Lot 127. In
response, Sheehan quitclaimed Lot 127 back to Patricia Wilcox Sheehan on
February 18, 2013. As of August 8, 2013 however, the new Transfer Certificate
of Title had not yet been generated by the Land Court.
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authority to use the easement premises as a boat baseyard is
withdrawn, cancelled or revoked by the Planning Commission
of the County of Kauai, State of Hawai#i, this ‘Grant of
Easement’ shall expire and be null and void upon the
recordation at the Bureau of Conveyances of the State
of Hawai#i, of a certified copy of said action of the Kauai
County Planning Commission disallowing any further use of
the premises for a boat baseyard.
Sheehan’s permits to operate a boatyard were revoked in 2010.
Sheehan v. Cty. of Kaua#i, 134 Hawai#i 132, 337 P.3d 53 (App.
2014); Sheehan v. Cty. of Kaua#i, No. SCWC-11-601 (Haw. Jan. 16,
2015) (order rejecting application for writ of certiorari);
Although Area 51 has not been designated by the County as a
separate lot of record, it has been considered a separate lot of
record for tax purposes as TMK No. (4) 5-5-01:51.
A. Circuit Court Proceedings
On May 31, 2011, the County filed a complaint and
summons in the circuit court to condemn Parcels 33, 34, and 49
for use as a public park. In the County’s subsequently filed
first amended complaint, HRH, Sheehan, and Patricia Wilcox
Sheehan were listed among others as those who might have or claim
some right, title, or interest in the Parcels.
On April 30, 2012, the County filed an ex parte motion
for an order putting plaintiff in possession pursuant to Hawai#i
Revised Statutes (HRS) § 101-29. After the circuit court2
2
The Honorable Kathleen N.A. Watanabe presided.
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granted the County’s motion in an order filed on May 4, 2012, the
County deposited estimated just compensation of $5,890,000 with
the clerk of the court.
On July 3, 2012, Patricia Wilcox Sheehan filed an
answer to the County’s first amended complaint, which asserted
that she is the “owner of the fee simple interests, easements,
rights of way or the express contingent remainder man [sic], to
all or portions of the real property” identified as Parcels 33,
34, and 49. Patricia Wilcox Sheehan requested that the circuit
court dismiss the complaint, and if it did not, that
the respective interests of all Defendants in the
property be determined and that appropriate orders be
entered thereon, and that the Court determine and
award the just compensation, including but not limited
to blight of summons, to which Patricia W. Sheehan is
entitled by virtue of the taking, and severance
damages to the remaining property.
On August 16, 2012, HRH moved the circuit court to
vacate the aforementioned order of possession because the initial
appraisal of the subject property was seven months old on the
date of summons, and consequently, HRH alleged it was “stale as a
matter of law and did not in good faith represent the reasonable
fair market value of the property.” The circuit court denied
HRH’s motion on September 13, 2012.
On March 11, 2013, the defendants filed an application
for payment of estimated compensation pursuant to HRS §§ 101-31
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and -37. The memorandum in support of the motion asserted that
Sheehan was the legal owner of Parcel 49 and that HRH was the
legal owner of Parcels 33 and 34. Patricia Wilcox Sheehan filed
a statement of no position regarding HRH and Sheehan’s
application.
The County filed a memorandum in opposition to HRH and
Sheehan’s application on April 2, 2013. The County argued that
HRH and Sheehan should not be allowed to withdraw the deposit
until the respective interests of all the defendants was
judicially determined. The County noted that Patricia Wilcox
Sheehan, HRH, and Sheehan all had asserted an interest in the
deposited money.
Additionally, in the same memorandum, the County noted
that it was filing a separate motion to withdraw a portion of the
deposit, based on an updated appraisal that reflected a lower
estimate of compensation at $4,860,000. The County asserted that
it “should not be jeopardized by having Movants withdraw more
than the actual estimated value of the condemned property”
because “[o]nce Movants withdraw [all] the money, the County
would have no reliable means of recouping any excess payment.”
On the same date that the County’s opposition to HRH
and Sheehan’s application was filed, the County also filed a
motion to withdraw $1,030,000 from the amount it had deposited
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with the clerk of the court in light of the second appraisal.
Citing University of Hawaii Professional Assembly v. University
of Hawaii, 66 Haw. 214, 221, 659 P.2d 720, 725 (1983), the County
contended that “[p]ursuant to the doctrine of quasi estoppel,
[the defendants] cannot now object to the County’s obtaining an
updated appraisal as of the date of summons[,]” because they had
objected to the County’s reliance upon the previous appraisal.3
On April 5, 2013, Patricia Wilcox Sheehan filed a
waiver and release of any claims or interest in the proceeds
payable by the County and consented to the disbursement of the
proceeds to HRH and Sheehan. And on April 10, 2013, the County,
HRH, and Sheehan entered into an agreement regarding the
withdrawal of the deposit. In addition to an agreement that the
County would stipulate that Sheehan and HRH could withdraw
$4,860,000, Sheehan agreed to indemnify the County if HRH failed
to repay any money that exceeded the jury verdict on Parcels 33
and 34. That same day, the parties filed a stipulation agreeing
that Sheehan and HRH could withdraw $4,860,000 (the amount of the
3
In University, this court noted that “quasi estoppel is grounded
in the equitable principle that one should not be permitted to take a position
inconsistent with a previous position if the result is to harm another.” 66
Haw. at 221, 659 P.2d at 725.
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second appraisal) minus taxes, to be apportioned among the three
parcels as stated in the stipulation.
On April 22, 2013, the defendants filed a motion in
opposition to the County’s motion to withdraw a portion of the
deposit, alleging that there is no provision in HRS Chapter 101
permitting the County to offer a new estimate as a basis for
withdrawing funds after it had already seized the subject
property and the condemnees have applied for release of the
funds, that the defendants consequently waived all defenses to
the condemnation action besides an assertion of greater
compensation or damages, and that the funds deposited constituted
an estimate of the subject property’s value at the time the
County seized the property. Following a hearing, the County’s
motion to withdraw $1,030,000 was granted on May 13, 2013.
The circuit court’s scheduling order for trial required
Sheehan and HRH to produce their appraisal reports of the
properties. In the defendants’ expert report, Sheehan and HRH’s
valuation expert, Paul Cool (Cool), provided valuation estimates
for Parcels 33, 34, and 49. Additionally, Cool also included a
valuation of damages to Area 51 in his report. Specifically,
Cool’s report stated,
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Area 51 consists of the lands immediately east of
Parcel 33.[4] In the past, Michael G. Sheehan has
used this area, together with Parcels 33 and 34 as a
boatyard and in conjunction with boat and ocean
activity operators from the property since the late
1980s. Improvements include:
-Canoe pavilion with kitchen
-Restroom facility
-Outdoor shower
-Boat wash down facility.
Over the years, the relationship between Mr. Sheehan
and the County with regards to these operations have
been contentious. The County has challenged and
continues to challenge the legality of operations.
Matters are pending before the State of Hawai#i
Intermediate Court of Appeals.
The taking of the three Hanalei River parcels will
require operations to be consolidated onto Area 51.
While having no contributory value to the highest and
best use of the three Hanalei River parcels, the
improvements on Parcels 33 and 34 are integral to
continued activities that remain on Area 51.
Cool opined that Area 51 suffered severance damages in an amount
of $250,000 to $300,000 caused by the taking of Parcels 33, 34
and 49. Prior to Cool’s report, neither HRH nor Sheehan asserted
a claim for severance damages in their answers, their pretrial
statement, or elsewhere in the record. Sheehan claims an
interest in Area 51 due to the boatyard easement that was granted
to him by Patricia Wilcox Sheehan in 2004.
On August 13, 2013, the County moved for partial
summary judgment against HRH and Sheehan on the issue of
severance damages. On September 3, 2013, HRH and Sheehan opposed
4
While Cool stated that “Area 51 consists of lands immediately east
of Parcel 33[,]” he likely intended this as Parcel 34. Tax maps indicate that
Area 51 is in fact directly to the east of Parcel 34, and not 33.
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the motion, and supported the opposition with a declaration from
counsel, an unsigned declaration from Sheehan,5 and a Parcel
history report for Area 51.6 The circuit court granted the
County’s motion based on its finding, inter alia, that Area 51
and Parcel 49 did not meet the three unities test as set forth in
City and County of Honolulu v. Bonded Investment Co., 54 Haw.
523, 525, 511 P.2d 163, 165 (1973) [hereinafter “Bonded Inv.
II”], as there was neither unity of title, physical unity, nor
unity of use between Parcel 49, the condemned parcel, and Area
51, the area in which Sheehan had asserted a right to severance
damages.
Jury trial began on November 4, 2013, and the jury
reached a decision on the condemnation action on November 8,
5
Sheehan later filed a signed declaration with the court on
March 27, 2014. The declaration stated:
1. I am one of the Defendants in this case.
2. The boatyard is situated on lots 33, 34, 49, 50
and Area 51. I call it Area 51 because I received a
separate TMK for the lot and its last two numbers were
51. The maintenance shed, office structure, part of
the wash-down facility, and its leach field are
located on Area 51.
3. Contrary to the County’s position, the Grant of
Easement remains in full force and effect. It has not
been cancelled by my former wife.
4. All lots, including Area 51 were integral parts
of my boatyard. I have always considered and treated
the lots to be one larger tract of land –- my
boatyard.
6
A County Parcel History report retrieved on July 31, 2012 states,
“OWNERS REPRESENTATIVE REQUESTS NEW TMK: 5501-51” with an effective date of
October 24, 1991, and approval date of May 7, 1998. Owner is listed as the
Patricia Sheehan Trust.
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2013. The jury awarded compensation for each of the three
Parcels, valuing Parcel 33 at $2,030,000, Parcel 34 at
$3,016,000, and Parcel 49 at $754,000. The verdict thus totaled
$5.8 million.
On November 18, 2013, the County filed its motion for
blight of summons damages. The County asserted that damages
should be measured for two time periods:
(1) from May 31, 2011 (the date of summons) until May
4, 2012 (the date the County deposited estimated just
compensation of $5.89 million pursuant to the Order
putting the County into possession) measured at 5%
simple interest/year on the jury verdict of $5.8
million, and (2) from April 29, 2013 (the date of
entry of the Order Granting the County’s Motion to
Withdraw Portion of Deposit) until the date the County
pays Defendants $940,000, which is the difference
between $4.86 million and the jury verdict.
In their response, Sheehan and HRH agreed that the first time
period on the $5.8 million jury verdict should be calculated
from May 31, 2011 through May 4, 2012. However, the defendants
contended that because the County moved to reduce the initial
estimate deposited with the court, the deposit was not an
unconditional deposit that was exempt from interest, and that
therefore, the proper calculation for the interest on the
$940,000 difference is from May 4, 2012 through the date that
the County paid the defendants in full.
At a hearing on the State’s motion held on January 8,
2014, the circuit court found that the County’s deposit was
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unconditional and that the blight of summons damages stopped
accruing on May 4, 2012. The circuit court granted the County’s
motion for blight of summons damages on January 16, 2014, and on
April 25, 2014, the circuit court issued its final judgment.
The circuit court concluded that total just compensation for the
condemned property was $5.8 million, and “[a]s additional just
compensation, blight of summons damages at the rate of five
percent (5%) per annum (without compounding) accrued” from
“May 31, 2011 until County deposited $5,890,000 with the Clerk
of Court,” and from April 29, 2013 until the County paid the
defendants in full.
B. Intermediate Court of Appeals Proceedings
The defendants appealed to the Intermediate Court of
Appeals (ICA) and asserted three points of error: (1) “The trial
court erred when it permitted the County to withdraw a portion
of the estimate of just compensation after Defendants-Appellants
applied for its release”; (2) “The trial court erred when it
granted summary judgment in favor of the County on the issue of
severance damages”; and (3) “The trial court erred in its
calculation of blight of summons damages.”
The ICA vacated the circuit court’s award for blight
of summons damages and affirmed the circuit court in all other
respects. Cty. of Kaua#i v. Hanalei River Holdings, Ltd., 137
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Hawai#i 471, 474, 375 P.3d 250, 253 (App. 2016). Addressing the
circuit court’s order allowing the County to withdraw a portion
of its estimated just compensation, the ICA reviewed HRS §§ 101-
29, -30, and -31 and noted that the statutes do not expressly
authorize the withdrawal of a portion of the deposit. Id. at
479-80, 375 P.3d at 258-59. However, the ICA held that HRS §
101-19 “provides the court in an eminent domain action with
broad authority to permit amendments to the proceeding . . .
[and] authorized the circuit court to allow amendments ‘in form
or substance’ of processes, motions, or other proceedings, as
long as the ‘amendment will not impair the substantial rights of
any party in interest.’” Id. at 480, 375 P.3d at 259 (footnote
omitted).
The ICA also held that under federal case law, which
was cited favorably by this court in City and County of Honolulu
v. Bonded Investment Co., 54 Haw. 385, 507 P.2d 1084 (1973)
[hereinafter “Bonded Inv. I”], the government is allowed to
withdraw the excess of the cash deposited following a revised
estimate of just compensation. Id. at 481, 375 P.3d at 260
(citing United States v. 1,997.66 Acres of Land, More or Less,
in Polk Cty., Iowa, 137 F.2d 8, 13 (8th Cir. 1943)). The ICA
concluded:
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Based on HRS § 101-19 and persuasive federal case law,
we hold that the court in an eminent domain proceeding
may permit a governmental entity to withdraw a portion
of the estimated just compensation deposit that has
not been dispersed to the landowner when the
governmental entity, acting in good faith, seeks to
adjust the estimate to accurately reflect the value of
the property on the date of summons and the adjustment
will not impair the substantial rights of any party in
interest.
Id.
Applying the new standard to this case, the ICA
concluded that the circuit court did not abuse its discretion in
allowing the County to withdraw part of its deposit because (1)
the deposit had not been disbursed yet; (2) the County appeared
to have acted in good faith because the withdrawal was based on
an updated appraisal, which the defendants had previously
requested; and (3) the withdrawal of a portion of the estimated
just compensation did not impair the defendants’ substantial
rights. Id. at 481-82, 375 P.3d at 260-61.
Regarding severance damages, the ICA first held that
Sheehan’s unsigned declaration, the sole paper upon which the
defendants relied to raise a genuine issue of material fact, did
not constitute admissible evidence under Rule 56(e) of the
Hawai#i Rules of Civil Procedure (HRCP) because it violated Rule
7(g) of the Rules of the Circuit Courts of the State of Hawai#i,
which sets forth the requirements for when a declaration may be
submitted in lieu of an affidavit. Id. at 483, 375 P.3d at 262.
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The ICA also rejected Sheehan’s contention that, under Bonded
Inv. II, there is no requirement that all of the pertinent lots
physically abut one another in order to meet the three unities
test. Id. The ICA concluded that no genuine issue of material
fact existed as to Sheehan’s inability to satisfy the three
unities test, and that therefore, Sheehan was not entitled to
severance damages for Area 51 as a matter of law. Id. at 483-
84, 375 P.3d at 262-63.
As for blight of summons damages, the ICA noted that
the only issue raised on appeal was whether the County’s deposit
of estimated just compensation was conditional, such that the
deposit did not stop accruing interest. Id. at 485, 375 P.3d at
264. The ICA determined that at the time the deposit was made,
there were no express conditions placed on the deposit. Id.
The ICA also held that the County’s opposition to the
defendants’ withdrawal of the deposit based on lack of clear
title was not a condition because, pursuant to HRS § 101-31, “a
party must be entitled to the just compensation in order to
receive payment of the estimated amount deposited with the
court. Requiring a party to demonstrate entitlement to the
money does not constitute placing a condition upon the deposit.”
Id. at 486, 375 P.3d at 265.
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Following this reasoning, the ICA concluded that it
was not until April 5, 2013 when Patricia Wilcox Sheehan waived
any interest in the just compensation that “it became clear that
the Sheehan Defendants were the parties entitled to just
compensation.” Id. at 487, 375 P.3d at 266. However, the ICA
held that the deposit became conditional because the County did
not agree to release the deposit until April 10, 2013, which is
when Sheehan agreed to indemnify the County. Id. Therefore,
the ICA concluded that blight of summons damages were as
follows: (1) from May 31, 2011 to May 4, 2012, 5% interest per
annum on the $5.8 million jury verdict; (2) from April 5, 2013
to April 10, 2013, 5% interest per annum on the $5.8 million
jury verdict and; (3) from April 10, 2013 to the date upon which
the defendants are paid in full, 5% interest per annum on
$940,000. Id.
The defendants filed an application for writ of
certiorari on July 11, 2016. Therein, the defendants presented
this court with three questions for review: (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
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deposit?” and; (3) “Does [HRS § 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?”
The County responded to the defendants’ application on
July 25, 2016. On August 22, 2016, this court accepted the
defendants’ application for writ of certiorari.
III. STANDARDS OF REVIEW
A. Interpretation of a Statute
The interpretation of a statute is a question of law
reviewable de novo.
When construing a statute, our foremost obligation is
to ascertain and give effect to the intention of the
legislature, which is to be obtained primarily from
the language contained in the statute itself. And we
must read statutory language in the context of the
entire statute and construe it in a manner consistent
with its purpose.
Ka Pa#akai O Ka#Aina v. Land Use Comm’n, 94 Hawai#i 31, 41, 7
P.3d 1068, 1078 (2000) (quoting Amantiad v. Odum, 90 Hawai#i
152, 160, 977 P.2d 160, 168 (1999)).
B. Summary Judgment
“On appeal, the grant or denial of summary judgment is
reviewed de novo.” Nuuanu Valley Ass’n v. City & Cty. of
Honolulu, 119 Hawai#i 90, 96, 194 P.3d 531, 537 (2008).
[S]ummary judgment is appropriate if the pleadings,
depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if
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any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to
judgment as a matter of law. A fact is material if
proof of that fact would have the effect of
establishing or refuting one of the essential elements
of a cause of action or defense asserted by the
parties. The evidence must be viewed in the light
most favorable to the non-moving party. In other
words, we must view all of the evidence and inferences
drawn therefrom in the light most favorable to the
party opposing the motion.
Id. (alteration in original) (quoting Kahale v. City & Cty. of
Honolulu, 104 Hawai#i 341, 344, 90 P.3d 233, 236 (2004)).
C. Blight of Summons Damages Calculation
Blight of summons damages calculations are reviewed
under the abuse of discretion standard. Hous. Fin. & Dev. Corp.
v. Ferguson, 91 Hawai#i 81, 92, 979 P.2d 1107, 1118 (1999).
IV. DISCUSSION
HRH and Sheehan present the following questions to
this court:
QUESTION NO. 1.: Must two parcels physically abut in order
for the jury to consider whether they are part of a larger
parcel?
QUESTION NO. 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?
QUESTION NO. 3.: Does [HRS § 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?
A. Sheehan’s Entitlement to Severance Damages
The defendants claim that the ICA erroneously
concluded that properties must actually abut in order to meet
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the three unities test for severance damages. The defendants
assert that the majority of other jurisdictions treat the unity
of use factor as controlling, and have awarded severance damages
even if the properties are not physically contiguous.
HRS § 101-23 (1993) provides in pertinent part:
If the property sought to be condemned constitutes
only a portion of a larger tract, the damages which will
accrue to the portion not sought to be condemned by reason
of its severance from the portion sought to be condemned,
and the construction of the improvements in the manner
proposed by the plaintiff shall also be assessed, and also
how much the portion not sought to be condemned will be
specifically benefited, if at all, by the construction of
the improvement proposed by the plaintiff.
(Emphasis added.) This court has held that “the test generally
used by courts to determine whether a parcel to be acquired by
eminent domain proceeding is a part of a larger tract of land to
entitle owners to severance damages is that there must be unity
of title, physical unity and unity of use of the parcel taken
and parcel left.” Bonded Inv. II, 54 Haw. at 525, 511 P.2d at
165.
In Bonded Inv. II, the City and County of Honolulu
commenced eminent domain proceedings for the acquisition of Lot
65 of the Maili Beach Lots, and subsequently commenced another
proceeding to acquire Lots 59 and 60. Id. at 524, 511 P.2d at
164. Lot 65 adjoined Lot 59, and Lots 59 and 60 were contiguous
lots. Id. Consequently, the issue decided by this court in
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Bonded Inv. II was whether Lots 65, 59, and 60 comprised one
parcel or tract of land for purposes of severance damages. Id.
Prior to the condemnation proceedings, the owners had
“consolidated Lots 57 and 58 into Lot 65 for the purpose of
constructing a condominium apartment building[,]” and they
contended that expenses incurred for the condominium project had
enhanced the value of Lot 65. Id.
The Bonded Inv. II court concluded that Lot 65 and
Lots 59 and 60 did not constitute one parcel. Id. at 527, 511
P.2d at 166. This court noted:
[T]he owners not only by choice and design had
separated the use of Lot 65 from Lots 59 and 60, but
also based on the use for which they had committed Lot
65 for a condominium apartment building, attempted to
show that the value of the lot had been enhanced by
the expenses incurred by them for the project.
Id. at 527, 511 P.2d at 166. This court stated that “this
factor is controlling here on the question whether Lots 65, 59
and 60 constituted one tract of land.” Id. This court only
briefly mentioned the other two unities, stating:
There is no question as to the unity title and
physical unity of the three lots. However, we do not
agree with the owners that these factors make Lot 65
part and parcel of a larger tract of land comprising
Lots 59, 60 and 65 as they contend. Here, as pointed
out above, the uncontradicted evidence is that Lot 65
had been committed by the owners for a condominium
apartment building independent and separate from Lots
59 and 60. Thus, under the record of this case, we
hold that as a matter of law Lot 65 was a separate and
independent lot and not a part of a larger tract or
parcel of land.
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Id.
This court did not address the issue of whether
parcels must physically abut in order to satisfy the three
unities test for severance damages in Bonded Inv. II. More
important, this court has yet to address whether each of the
unities should be treated as essential elements, where it is
necessary to satisfy each of the unities to satisfy the test, or
as factors, where a court is given discretion to consider the
totality of the circumstances.
Here, the ICA has interpreted the three unities as
elements, given that it held that because Parcel 49 and Area 51
were not physically contiguous, the requirements of the three
unities test had not been met. This interpretation appears to
be supported by the general statement of the law, which states
that “there must be unity of title, physical unity and unity of
use of the parcel taken and parcel left.” Bonded Inv. II, 54
Haw. at 525, 511 P.2d at 165 (emphases added). Employment of
the words “must” and “and” suggests that all three unities are
required. Morever, Bonded Inv. II’s conclusion that the three
unities test is not satisfied as a matter of law when just one
of the unities is not present also supports an element-like
approach.
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However, there is also indication that Bonded Inv. II
intended to present the three unities as factors, rather than
elements. The opinion twice refers to the unities as factors.
Bonded Inv. II, 54 Haw. at 527, 511 P.2d at 166 (“[T]his factor
is controlling here . . . we do not agree with the owners that
these factors make Lot 65 part and parcel of a larger tract[.]”
(emphases added)). More significantly, the court stated that
HRS § 101-23 “is an enactment of the common law rule established
by courts of other jurisdictions” and that “the test adopted by
other courts is fair and reasonable and should be followed by
this court.” Id. at 525, 511 P.2d at 165. A review of cases
from other jurisdictions shows that the unities are generally
treated as factors and not elements.
One of the cases that Bonded Inv. II cites to is
Barnes v. North Carolina State Highway Commission, 109 S.E.2d
219 (N.C. 1959). Therein, the North Carolina Supreme Court
stated:
There is no single rule or principle established for
determining the unity of lands for the purpose of awarding
damages or offsetting benefits in eminent domain cases. The
factors most generally emphasized are unity of ownership,
physical unity and unity of use. Under certain
circumstances the presence of all these unities is not
essential. The respective importance of these factors
depends upon the factual situations in individual cases.
Usually unity of use is given greatest emphasis.
. . . .
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The general rule is that parcels of land must be contiguous
in order to constitute them a single tract for severance
damages and benefits. But in exceptional cases, where there
is an indivisible unity of use, owners have been permitted
to include parcels in condemnation proceedings that are
physically separate and to treat them as a unit.
Id. at 384, 109 S.E.2d at 225. Barnes clearly describes the
three unities as factors and not as elements. See id.
Several other jurisdictions have also recognized that
where unity of use and unity of title are present, the lack of
physical unity may not be determinative. State ex. rel. Comm’r
of Dep’t of Corr. v. Rittenhouse, 634 A.2d 338, 343 (Del. 1993)
(“[W]hen there is physical separation but unity of use can be
demonstrated, a finding that a single tract existed is
appropriate.”); M & R Inv. Co v. State, 744 P.2d 531, 534 (Nev.
1987) (“The parcels damaged need not be physically contiguous to
those taken so long as the evidence discloses an actual and
existing unity of use and purpose and an existing, lawful and
utilized access between the parcels.” (footnote omitted)); Hous.
Auth. of Norfolk Realty Co., 364 A.2d 1052, 1056 (N.J. 1976)
(“The mere fact that the condemned parcel is physically
separated from the remaining parcel does not foreclose a
condemnee from recovering severance damages.”); Sauvageau v.
Hjelle, 213 N.W.2d 381, 389 (N.D. 1973) (“[T]racts physically
separated from one another may constitute a ‘single’ tract if
put to an integrated unitary use. . . . Integrated use, not
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physical contiguity, therefore, is the test.” (alterations in
original)); State ex rel. Road Comm’n v. Williams, 452 P.2d 548,
549 (Utah 1969) (“[A]n award of severance damages to the
remaining property is appropriate where two or more parcels of
land, although not contiguous, are used as constituent parts of
a single economic unit.”); City of Los Angeles v. Wolfe, 491
P.2d 813, 819 (Cal. 1971) (“Unity of use if not the controlling
factor is relevant, however, and may be considered where the
properties are not physically contiguous”).
Additionally, the Ninth Circuit has held that “the
owner of one parcel in fee may be compensated for loss in market
value thereof as a result of the taking of another parcel owned
in fee by him, even if the latter is not contiguous, provided
that, by actual and permanent use, a unitary purpose is served
by both parcels.” United States v. Honolulu Plantation Co., 182
F.2d 172, 178-79 (9th Cir. 1950). The Ninth Circuit has
concluded that contiguity is not a requirement because a
condemnee may still be harmed by a taking through a loss of
unitary use of the condemned property. See Cole Inv. Co. v.
United States, 258 F.2d 203, 204 (9th Cir. 1958) (“Integrated
use, not physical contiguity, therefore, is the test.” (citing
Baetjer v. United States, 143 F.2d 391, 395 (1st Cir. 1944)).
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In sum, the majority of jurisdictions have treated the
unities as factors and not elements, and Bonded Inv. II
expressed an intent to adopt the standard used by other courts.
Accordingly, we hold that when determining whether a claimant is
entitled to severance damages under the three unities test as
articulated in Bonded Inv. II, the three unities should be
evaluated and weighed against one another as factors, and should
not be viewed as essential elements. The unity of use should be
accorded more weight compared to the unity of title and physical
unity. Consequently, a lack of physical unity will not be
dispositive of a condemnee’s claim for severance damages.
Therefore, the ICA gravely erred to the extent that it applied
the three unities as elements and barred Sheehan from claiming
severance damages as a matter of law because Parcels 49 and Area
51 are not physically contiguous.
However, even under an application of the three
unities as factors, Sheehan is not entitled to severance
damages. None of the three unities are present in this case.
Unity of use, the most important factor to this analysis, has
not been met. Sheehan’s claim to unity of use is based solely
on the operation of a commercial boatyard. However, Sheehan’s
permits allowing him to operate the boatyard were revoked in
June 2010, nearly a year before the County instituted the
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condemnation action relevant to this appeal on May 31, 2011.
Sheehan therefore could not have legitimately been using Area 51
as a boatyard when the County condemned Parcel 49. Thus, unity
of use is not present.
Moreover, the other two unities, which are probative
but receive less weight compared to the unity of use factor, are
also not present here. There is no physical unity because
Parcels 33 and 34 separate Parcel 49 and Area 51. Additionally,
there is also no unity of title, because Sheehan does not own
both of the properties that are purportedly two portions of a
larger tract--he retained fee simple title to Parcel 49, but
Patricia Wilcox Sheehan owned and continues to own Area 51.
While Sheehan claims that he has a cognizable property interest
in Area 51 by virtue of the easement that Patricia Wilcox
Sheehan had granted him in 2004, his claim is not valid.
Pursuant to the easement itself, the easement expired when
Sheehan’s permits to operate the boatyard were revoked.
To conclude, although we elect to interpret the three
unities test articulated in Bonded Inv. II differently than the
ICA, we affirm the ICA’s judgment to the extent that it affirmed
the circuit court’s order granting summary judgment in favor of
the County on the issue of severance damages. There is no
genuine dispute of material fact that none of the three unities
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are present between Area 51 and Parcel 49. Sheehan therefore
cannot prevail on his claim for severance damages as a matter of
law.
B. Calculation of Blight of Summons Damages
The defendants contend that the ICA erroneously
calculated blight of summons damages based on its conclusion
that blight of summons interest will not accrue until
entitlement thereto is established by a condemnee. The
defendants argue that as the ICA concluded that the deposit was
conditioned on Sheehan’s agreement to indemnify the County,
there should have been no tolling because there is nothing in
HRS Chapter 101 that requires a condemnee to prove entitlement
in order for interest to accrue on a conditional deposit. The
defendants assert that the ICA’s holding should be reversed, and
that they be allowed 5% interest per annum on the $5.8 million
jury verdict from the date of summons to the date that the
County agreed to release the conditional deposit.7 The County
responds that it stands by its position that the trial court did
not abuse its discretion, and while it “disagrees with the
7
The defendants actually state that they should be allowed interest
on $4.86 million during this period, but this appears to have been stated in
error. Consistent with the approach they took at the circuit court and the
ICA, it is presumed that the defendants intended this to be $5.8 million.
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conclusion of the ICA, it contends that the difference is not of
a magnitude warranting this Court’s further review.”8
HRS § 101-33 (1993) provides in pertinent part:
If an order is made letting the plaintiff into
possession as provided for in sections 101-28, 101-29,
and 101-32, the final judgment shall include, as part
of the just compensation and damages awarded, interest
at the rate provided in section 101-25 from the date
of the order until paid by the plaintiff; provided
that . . . interest shall not be allowed upon any sum
paid by the plaintiff to the clerk of the court from
the date of the payment.
(Emphasis added.)
Blight of summons damages refers to “the
indemnification due a condemnee for the damages resulting from
the government’s delay in paying the full cash equivalent of the
property taken on the date of summons.” City & Cty. of Honolulu
v. Mkt. Place, Ltd., 55 Haw. 226, 235, 517 P.2d 7, 15 (1973)
[hereinafter “Market Place”]. Specifically, “the purpose of
blight of summons damages is to compensate a condemnee for the
loss of use of the cash equivalent of the taken property[.]”
Id. at 237, 517 P.2d at 16.
This court has held that
There are two basic varieties of blight of summons damages
in Hawaii. One arises during the period between the date of
order of possession under HRS §§ 101-28 or 29 and the date
of final payment of just compensation to the defendant, and
consists of interest at the statutory rate of 5% per annum
provided in HRS §§ 101-33 and 25 applied during this period
8
The County notes that the ICA’s blight of summons interest
calculation results in an additional $6,419.18 for the defendants.
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to the amount by which the final award of just compensation
exceeds the deposit of estimated just compensation upon
which the order of possession was based. The other arises
during the period between the date of summons and the date
of order of possession, and consists of interest also at a
rate fo [sic] 5% per annum applied during this period to the
final award of just compensation.
Id. at 235, 517 P.2d at 15–16 (emphases added) (footnote
omitted) (citations omitted). Although this court referred to
the “date of the order of possession” in both periods, this
court later used the date of the deposit as the operative date
because HRS § 101-33 states that “interest shall not be allowed
upon any sum paid by the plaintiff to the clerk of the court
from the date of the payment.” Id. at 237, 517 P.2d at 16-17.
Therefore, in Market Place, even though the order of possession
was not issued until after the date that the City and County of
Honolulu (the City) deposited its estimated just compensation
with the court, this court held that the interest on the
unconditional deposit stopped running on the date that it was
deposited, not on the date of the order of possession. Id.
Accordingly, blight of summons damages appear to be calculated
as follows: (1) 5% per annum on the final award of just
compensation from the date of the summons until the date of the
deposit of estimated just compensation, and (2) 5% per annum on
the amount by which the final award of just compensation exceeds
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the amount of the deposit of estimated just compensation from
the date of the deposit until the date of final payment.
In Market Place, this court addressed the blight of
summons interest calculation on sums deposited by the plaintiff
with the court. 55 Haw. at 236, 517 P.2d at 16. The City
commenced eminent domain proceedings on August 25, 1969 for a
parcel of oceanfront property for the purpose of extending a
park. Id. at 227, 517 P.2d at 11. On May 28, 1970, the City
deposited estimated just compensation in the amount of $961,500
with the trial court (first deposit) and on June 5, 1970, the
trial court filed an order of possession for the City, to become
effective on June 20, 1970, and approved the City’s deposit with
the court. Id. at 229, 517 P.2d at 12. The condemnees were
served on June 10, 1970, but did not withdraw the deposit until
June 15, 1970. Id.
On April 14, 1972, the jury determined that just
compensation for the property was $1,036,571.61. Id. On May
19, 1972, prior to the entry of judgment, the City deposited an
additional estimated just compensation in the amount of
$75,071.61 with the court (second deposit), representing the
difference between the jury verdict and the City’s first deposit
of estimated just compensation. Id. at 229-30, 517 P.2d at 12.
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The second deposit was accompanied by a motion to approve the
deposit with the following restriction on distribution:
Plaintiff hereby consents to a court order of distribution
of the additional deposit, provided that such order contain
such protective measures to insure the return of any monies
not lawfully due the distributees together with such
additional interest, damages or charges for wrongful
withdrawal of funds to which distributees may not be
entitled.
Id. at 238, 517 P.2d at 17 (internal quotation marks omitted).
“Because certain conditions were attached to this deposit . . .
this sum was not withdrawn by the condemnees until June 2,
1972.” Id. at 230, 517 P.2d at 12.
The trial court in Market Place “continued the running
of interest on the amount of the first estimate of just
compensation during the time lag of eighteen days between the
deposit of the estimate and withdrawal thereof by the
condemnees.” Id. at 237, 517 P.2d at 16. However, this court
held that the trial court erred in this conclusion because the
City’s first estimated deposit was unconditional, and pursuant
both to HRS § 101-30 and HRS § 101-33:
[I]t appears that there is no obligation on the part of the
condemnor to pay interest to the extent that it makes an
unconditional deposit of estimated just compensation with
the clerk of the court. The City and County made such a
deposit on May 28, 1970, and that is the date on which the
trial court should have stopped the running of interest on
the deposited sum as non-statutory blight of summons
damages. . . . While the deposit was held by the court
pending its ‘further order or orders,’ this was standard
practice in the course of which the condemnees at any time
could have moved for the withdrawal of the deposited sum
under HRS § 101-31. There was, of course, a hiatus of 13
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days between the date of deposit and the date that the order
of possession was served on the condemnees, during which the
condemnees may not have been aware of the existence of the
deposit. However, this appears to be a necessary
consequence of the legislative choice to stop the running of
interest on the date of the payment of a deposit to the
clerk of court rather than on the date of service of the
order of possession. Certainly this gap was not the fault
of the City and County, which made an unconditional deposit
on May 28, 1970. In view of the clear statutory mandate of
HRS § 101-33 against the running of interest beyond this
date, the City and County should not have been penalized by
an interest charge for the failure of the condemness [sic]
to demand promptly their right to the deposited estimate.
Id. at 237-38, 517 P.2d at 16–17 (footnote omitted).
However, this court concluded that the City’s second
deposit on May 19, 1972 was conditional and that interest
accrued from May 19, 1972 until the second deposit was released
on June 2, 1972. Id. at 238-40, 517 P.2d at 17-18. The court
noted that
[i]t was not until June 2, 1972 that the trial court
released the additional deposit to the condemnees,
with interest computed at the rate of 5% to that date.
The record shows that this delay was a direct result
of the condition noted above and the opposition to
immediate withdrawal voiced by counsel for the City
and County at the hearing on his motion to approve the
deposit.
Id. at 238-39, 517 P.2d at 17. This court held that if a
condemnor could arbitrarily withhold its consent to a
distribution of deposited estimated just compensation, the
condemnee’s right to interest could be substantially
circumvented. Id. at 239, 517 P.2d at 18. As such, this court
emphasized again that in order to avoid depriving a condemnee of
the use of an additional deposit of estimated just compensation
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made subsequent to an order of possession, “money ‘paid by the
plaintiff to the clerk of the court’ must be unconditionally for
the use of the persons entitled thereto, in order to escape
interest charges under HRS § 101-33.” Id. at 240-41, 517 P.2d
at 18-19 (citation omitted).
As applied to this case, there has never been a
question at trial or on appeal that the defendants are entitled
to interest of 5% per annum on the $5.8 million jury verdict
from May 31, 2011 (the date of summons) until May 4, 2012 (the
date of the deposit of estimated just compensation). The
contention lies in the period from May 4, 2012 through the date
of final payment.
1. The Initial Deposit Made On May 4, 2012 Was
Unconditional.
The County’s deposit of estimated just compensation
was unconditional when it was initially made with the clerk of
the court. Similar to the first deposit in Market Place, when
the County deposited its estimated just compensation with the
clerk of the court on May 4, 2012, the County did not enumerate
any restrictions or limitations that would have prevented
entitled individuals from withdrawing the funds immediately.
See Market Place, 55 Haw. at 236-37, 517 P.2d at 16-17. Because
entitled condemnees could have withdrawn the funds on the date
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of deposit, the deposit was unconditional, and interest stopped
accruing on the final award of just compensation on that date.
See id. at 237-38, 517 P.2d at 16-17.
2. The Deposit Did Not Become Conditional on
April 5, 2013.
With respect to the County’s first objection to the
defendants’ motion to withdraw the funds, the defendants assert
that under HRS § 101-31, condemnees are not required to prove
their entitlement to compensation prior to receiving the funds.
We disagree. Upon review of HRS § 101-31 and our opinion in
Market Place, we agree with the ICA and hold that the deposit
did not become conditional when the County opposed the release
of the estimated just compensation on the grounds that title to
the Parcels was not clear, and that requiring a party to
demonstrate entitlement to the funds does not constitute placing
a condition upon the deposit.
The plain language of a statute is the fundamental
starting point for statutory interpretation. State v. Wheeler,
121 Hawai#i 383, 390, 219 P.3d 1170, 1177 (2009). “It is a
cardinal rule of statutory construction that courts are bound,
if rational and practicable, to give effect to all parts of a
statute, and that no clause, sentence, or word shall be
construed as superfluous, void, or insignificant if a
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construction can be legitimately found which will give force to
and preserve all the words of the statute.” Camara v. Agsalud,
67 Haw. 212, 215-16, 685 P.2d 794, 797 (1984). This court must
presume that the legislature meant what it said, and is barred
from rejecting otherwise unambiguous statutory language. Sato
v. Tawata, 79 Hawai#i 14, 23, 897 P.2d 941, 950 (1995).
HRS § 101-31 (1993) provides, in pertinent part:
Upon the application of the parties entitled thereto
the court may order that the amount of the estimated
compensation or damages stated in the motion and paid
to the clerk of the court, or any part thereof, be
paid forthwith for or on account of the just
compensation to be awarded in the proceedings . . . If
the compensation or damages finally awarded in respect
of the land or any parcel thereof exceeds the amount
of the money so received by any person entitled, the
court shall enter judgment for the amount of the
deficiency.
(Emphases added.) In HRS § 101-31, the legislature took care to
explicitly specify not once, but twice, that only “entitled”
parties may withdraw or otherwise receive funds pursuant to HRS
§ 101-31. It follows that based on the plain language of HRS §
101-31, a condemnee who seeks to withdraw a portion of an
estimated just compensation must meet the statutory prerequisite
of being entitled to such funds by showing that he or she has
clear and undisputable title to the condemned property.
Taken together with the principles from Market Place,
it appears that requiring a party to demonstrate that it meets
the statutory prerequisite under HRS § 101-31 does not render
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the deposit conditional. As was the case with the first deposit
in Market Place, any delay between the date of the deposit and
the date of withdrawal that is a consequence of an issue as to
whether a party is properly entitled to withdraw the funds is
“not the fault of [the County].” 55 Haw. at 238, 517 P.2d at
17. The County therefore should not be “penalized by an
interest charge” for delays stemming from the condemnees’
disputed ability to demonstrate they meet the statutory
precursor to withdrawing funds under HRS § 101-31 prior to
seeking the withdrawal of funds thereunder. Id.
Accordingly, a deposit of estimated just compensation
does not become conditional when a condemning authority objects
to a condemnee’s motion to withdraw funds based on the fact that
the condemnee’s entitlement to such funds is not clear. The ICA
did not err when it held that “until April 5, 2013, any delay in
the availability of deposited funds was not due to conditions
placed by the County upon payment of the money,” because “it was
not clear which party was entitled to the just compensation[,]”
due to the fact that Patricia Wilcox Sheehan had asserted that
she was the “owner of the fee simple interests, easements,
rights of way, or the express contingent remainder man [sic], to
all or portions of the real property” in her answer to the
County’s first amended complaint.
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3. The Deposit Became Conditional on April 5, 2013.
Although the deposit was initially unconditional when
made, and remained unconditional in the wake of the County’s
first objection to the defendants’ motion to withdraw the
deposit, the deposit ultimately became conditional on April 5,
2013. On April 5, 2013, Patricia Wilcox Sheehan waived all
claims or interests in the proceeds payable by the County and
consented to the disbursement of the proceeds to the defendants.
At that point, the defendants were clearly entitled to withdraw
and utilize the deposited estimate of just compensation, and
thereby satisfied the statutory prerequisite to receiving funds
under HRS § 101-31. See HRS § 101-31.
The County did not agree to release the funds until
April 10, 2013, when Sheehan agreed to indemnify the County in
the event that HRH did not repay the County for funds in the
excess of the jury verdict. Consequently, as was the case with
the second deposit in Market Place, there was a delay between
the date that the defendants were rightfully entitled to
withdraw the funds and the date that they ultimately received
them. See 55 Haw. at 238, 517 P.2d at 17. This “delay was a
direct result of the condition” that the County imposed upon the
release of the funds. Id. at 239, 517 P.2d at 17. Thus, the
ICA did not err when it held: “The County’s requirement of an
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assurance that it could recover any excess payment made to HRH
further delayed payment to the Sheehan Defendants, and this
constituted a condition placed upon the deposit of estimated
just compensation.”
We therefore hold that a deposit made unconditionally
at the outset may later become conditional if, after the initial
unconditional deposit, the condemning authority opposes the
withdrawal of the deposit to an entitled condemnee by imposing a
subsequent condition upon the withdrawal of the funds. The ICA
explained how our holding rests on sound policy and is necessary
to ensure the integrity of the statutory framework concerning
the right to blight of summons damages when it stated:
The supreme court noted in Market Place that ‘[i]f a
condemnor were free to withhold arbitrarily its
consent to a distribution of an additional deposit of
estimated just compensation, it is evident that the
right to interest under HRS [§] 101-33 could be
circumvented in substantial measure.’ 55 Haw. at 239,
517 P.2d at 18. This statement is equally applicable
in this case to the initial deposit of estimated just
compensation where the County, on the eve of
distribution, required conditions be satisfied to
merit the County’s acquiescence to the payment. The
County’s position would, in effect, allow it to
circumvent HRS §§ 101-29, 101-30, 101-31 and 101-33,
by first depositing estimated just compensation to
stop the running of interest on that amount, but then
also conditioning access to that money by the ‘persons
entitled thereto’ on the acceptance of ‘protective
measures.’
Hanalei River Holdings, 137 Hawai#i at 487, 375 P.3d at 266.
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4. Final Calculation of Blight of Summons Damages
Based on the foregoing, we affirm the ICA’s
calculation of blight of summons damages, which is as follows:
(1) 5% interest per annum on the value of the jury verdict
($5.8 million) from May 31, 2011 (the date of the summons) to
May 4, 2012 (the date on which the County initially deposited
the estimated just compensation); (2) 5% interest per annum on
the value of the jury verdict ($5.8 million) from April 5, 2013
(the date that the defendants were entitled to withdraw the
funds) to April 10, 2013 (the date Sheehan agreed to indemnify
the County if HRH failed to repay any money that exceeded the
jury verdict on Parcels 33 and 34) and; (3) 5% interest per
annum on $940,000, reflecting the difference between the
initial deposit and the jury verdict, from April 10, 2013 to
the date upon which the defendants are paid in full.
C. Withdrawal of Estimated Just Compensation
Lastly, the defendants ask this court to decide
whether the ICA erred by holding that a condemnor may withdraw
a portion of its estimate of just compensation deposited with
the court after the condemnor has already taken possession of
the condemnee’s property. HRS §§ 101-29, -30, and -31 (1993)
state the following regarding estimated just compensation:
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HRS § 101-29. Possession pending action; alternative
procedure
Where the plaintiff is the State or any county, the
following alternative procedure may be followed. At
any time after the commencement of an action pursuant
to this part, the State or any county may file a
motion for an order of possession invoking this
section and supported by an affidavit alleging, or by
oral evidence prima facie showing:
. . . .
(3) The sum of money estimated by the State or
county to be just compensation or damages for
the taking of the real property.
Upon such motion and upon payment of such estimated
sum of money to the clerk of the court for the use of
the persons entitled thereto, the court shall issue an
order ex parte putting the State or county in
possession of the real property sought to be condemned
. . . .
HRS § 101-30. Order of possession
No order of possession shall issue unless the
plaintiff has paid to the clerk of the court issuing
the order, for the use of the persons entitled
thereto, the amount of estimated compensation or
damages stated in the motion for the issuance of the
order . . . .
HRS § 101-31. Payment of estimated compensation;
effect thereof
Upon the application of the parties entitled thereto
the court may order that the amount of the estimated
compensation or damages stated in the motion and paid
to the clerk of the court, or any part thereof, be
paid forthwith for or on account of the just
compensation to be awarded in the proceedings. . . . A
payment to any party as aforesaid shall be held to
constitute an abandonment by the party of all defenses
interposed by the party, excepting the party’s claim
for greater compensation or damages. If the
compensation or damages finally awarded in respect of
the land or any parcel thereof exceeds the amount of
the money so received by any person entitled, the
court shall enter judgment for the amount of the
deficiency. The unexpended moneys and any additional
security so deposited with the clerk of the court
shall be available for, or for enforcement of, the
payment of any final judgment awarded by the court.
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These statutes do not expressly give the court
authority to permit a plaintiff to withdraw estimated
compensation once it has already been deposited with the court.
However, HRS § 101-19 (1993) grants the court express authority
to allow amendments to condemnation proceedings:
In all proceedings under this part the court shall
have power at any stage of the proceeding to allow
amendments in form or substance in any complaint,
citation, summons, process, answer, motion, order,
verdict, judgment, or other proceeding, including
amendment in the description of the lands sought to be
condemned, whenever the amendment will not impair the
substantial rights of any party in interest.
(Emphases added.)
Because the eminent domain statute does not state
whether the County could or could not withdraw a portion of its
deposited estimated just compensation, the ICA looked to both
Bonded Inv. I and to federal case law for guidance.
In Bonded Inv. I, the City deposited $608,000 as
estimated just compensation for parcel 63, but the jury awarded
only $491,981.28 to the condemnees as just compensation for
parcel 63. 54 Haw. at 388, 507 P.2d at 1087. The circuit court
allowed the condemnees to retain the full amount of estimated
just compensation and disregarded the jury’s verdict. Id. As
to this ruling, this court concluded that the circuit court had
erred, and held that after a determination is made on the final
amount of just compensation, “any excess deposit must be set off
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against a deposit that is deficient.” Id. at 395, 507 P.2d at
1091.
The Bonded Inv. I court observed that although HRS §
101-31 only “provides for a deficiency judgment for the
condemnee, in the event that the final award exceeds the
estimate [and] HRS makes no provision to cover the situation
where the verdict of the jury is less than the deposited
estimate[,]” equitable principles required that the City be
allowed to recover any excess and be awarded blight of summons
damages on that excess. Id. In arriving at this conclusion,
this court cited to United States Supreme Court case law
interpreting the Federal Declaration of Taking Act on a similar
provision:
The purpose of the statute is twofold. First, to give
the Government immediate possession of the property
and to relieve it of the burden of interest accruing
on the sum deposited from the date of taking to the
date of judgment in the eminent domain proceeding.
Secondly, to give the former owner, if his title is
clear, immediate cash compensation to the extent of
the Government’s estimate of the value of the
property. . . .
Id. at 393-94, 507 P.2d at 1090 (alteration in original)
(quoting United States v. Miller, 317 U.S. 369, 381-82 (1943)).
The Bonded Inv. I court held:
We find that the [Federal Declaration of Taking Act’s]
purpose is similar to the purpose of HRS § 101. It is
apparent that the statute’s purpose is to avoid undue
hardship by either party caused by protracted
litigation. To hold the City rigidly to its estimate
would penalize the City for utilizing a statutory
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procedure designed to alleviate hardships caused by
the condemnation proceedings. City officials would
tend to make low estimates so as to avoid any
possibility that the deposit is excessive. The result
of such understimation [sic] would be that the City
would be compelled to pay interest on a larger sum
from the date of taking to final award. In effect the
condemnee gets less cash than what he would normally
have received and the City must pay interest on a
larger amount. Clearly, the policy of this statute
cannot be served by such a harsh approach
. . . .
[W]e are of the opinion that an ‘estimate of just
compensation and damages’ is just that-an estimate. It
was not intended in any manner to be dispositive,
final or binding as a settlement on the amount due.
Its singular purpose is to serve the policy of HRS §
101-29-to alleviate the hardship due to the action.
Thus, this estimate has no relevance to the conduct of
the primary eminent domain proceeding to determine
just compensation. It follows also that the estimate
cannot serve as an admission against interest.
Id. at 394–95, 507 P.2d at 1090-91 (emphasis added).
Because Bonded Inv. I does not directly address the
question of whether a plaintiff may withdraw a portion of its
deposited estimated just compensation, the ICA looked to federal
case law addressing this same issue under the Federal
Declaration of Taking Act. In 1,997.66 Acres of Land, the
Eighth Circuit Court of Appeals addressed this issue and held
that:
[T]here is nothing in the Declaration of Taking Act,
inconsistent with an exercise of the implied, inherent
authority of the district court to allow the United
States to amend the declaration of taking filed in a
condemnation proceeding, for the purpose of reducing
(or increasing) an erroneous estimate of just
compensation for the land taken, and to permit the
Government to withdraw the excess of the cash
deposited over the revised estimate.
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137 F.2d at 13. Consequently, in light of two established
purposes of the Federal Declaration of Taking Act, which the
court recognized were “to minimize the interest burden of the
Government in a condemnation proceeding, and to alleviate the
temporary hardship to the landowner and the occupant from the
immediate taking and deprivation of possession[,]” the Eighth
Circuit concluded that
as a matter of fairness and sound practicality, the
right should exist in the Government to amend its
declaration of taking, for the purpose of correcting
an erroneous estimate of just compensation and of
enabling the Government to withdraw any excess of
public funds deposited, in order to apply them to
other uses and to pre vent [sic] waste. The
Declaration of Taking Act ought therefore to be
construed as being consistent with the existence of
such a right, unless this construction will do
violence to the legislative language or to some
substantive right of the landowner, created by the Act
or otherwise existing.
Id. at 11. The Eighth Circuit next addressed the issue of
whether the district court has the authority to refuse to allow
the government to revise its compensation estimate and withdraw
the excess where an error has been made, and held that the court
may refuse the above when either compensation has already been
paid out to the condemnee, or the government is found not to be
acting in good faith. Id. at 14.
The ICA applied this test to the present case, and
concluded that the circuit court did not abuse its discretion in
allowing the County to withdraw $1.03 million of the estimated
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deposit, because (1) estimated compensation had not been
distributed to the defendants at the time the County moved to
amend its estimate, (2) the County was acting in good faith on
an updated appraisal that reflected a current value of the
subject property as of May 31, 2011 (the date of summons), and
(3) the County’s withdrawal of partial estimated just
compensation did not impair the substantial rights of the
defendants.
Given our previous citation to and reliance on federal
law interpreting the Federal Declaration of Taking Act, the ICA
did not gravely err in similarly looking to federal case law
regarding a condemnor’s right to withdraw a portion of its
estimated just compensation based on an erroneous or outdated
appraisal. The rule adopted by the ICA is consistent with the
purposes of HRS § 101-31 expressed by this court in Bonded Inv.
I: avoidance of undue hardship to either party caused by
protracted litigation. Accordingly, we agree with the ICA and
hold that the court in an eminent domain proceeding has the
discretion to permit a governmental entity to withdraw a portion
of a deposit of estimated just compensation when the deposit has
not been disbursed to the landowner, the government acted in
good faith in seeking to adjust the estimate to accurately
reflect the value of the property on the date of the summons,
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and the adjustment will not impair the substantial rights of any
party in interest.
We also agree that under the foregoing rule, the
circuit court in the present case did not abuse its discretion
by permitting the County to withdraw a portion of the deposit of
estimated just compensation. The County moved to withdraw the
funds before the funds had been disbursed to the defendants.
Moreover, the County was acting in good faith when it moved to
withdraw the portion of the deposit, as its motion was based on
an updated appraisal of the properties’ value, which HRH had
impliedly requested when HRH had challenged the County’s initial
appraisal as being stale as a matter of law. Finally, the
defendants’ burden of having their properties condemned was
alleviated because they were able to withdraw $4.6 million prior
to the final determination of just compensation. The defendants
were further awarded blight of summons damages, and thus
received full just compensation under the law.
Therefore, the circuit court did not abuse its
discretion when it permitted the County to withdraw $1,030,000
from the amount that it had deposited with the clerk of the
court in light of the second appraisal of the properties’ value.
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V. CONCLUSION
For the foregoing reasons, we affirm the ICA’s May 11,
2016 judgment on appeal, which affirmed the circuit court’s
April 25, 2014 final judgment as to all claims and all parties,
but on different grounds with regard to the defendants’
entitlement to severance damages.
Richard E. Wilson /s/ Mark E. Recktenwald
for petitioners
/s/ Paula A. Nakayama
Mauna Kea Trask,
Rosemary T. Fazio, /s/ Sabrina S. McKenna
and James K. Mee
for respondent /s/ Richard W. Pollack
County of Kaua#i
/s/ Michael D. Wilson
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