▪ 2006 Land Use in Review: Land Reform Revisited

City & County of Honolulu v. Sherman, 110 Haw. 39, 129 P.3d 542 (Feb. 28, 2006), is the latest chapter in the use of eminent domain to effect "land reform" in Hawaii.

I.  Background

The story begins long ago when the Hawaii legislature enacted the statute that was challenged and sustained in Hawaii Hous. Auth. v. Midkiff, 467 U.S. 229 (1984).  Finding that the economic ills purportedly caused by the concentrated ownership of private single-family residential property in Hawaii, Haw. Rev. Stat. ch. 516 allowed homeowner/lessees to petition the Hawaii Housing Authority to exercise eminent domain on the homeowner's behalf and condemn the fee simple interest underneath their homes from the lessor, and transfer it to the lessee upon payment of just compensation.

After that statute was upheld by the U.S.Supreme Court against a Fifth Amendment public use challenge in Midkiff, and under the Hawaii Constitution's public use clause by the Hawaii Supreme Court in Hawaii Hous. Auth. v. Lyman, 68 Haw. 55, 704 P.2d 88 (1985), efforts were made to pass similar legislation affording condominium owners the same ability to force condemnation of their leasehold interests. 

At the state level, those efforts were ultimately unsuccessful, but the City & County of Honolulu eventually enacted a local version, codified as Hon. Rev. Ord. ch. 38.  That ordinance, like the Land Reform Act, was challenged under the public use clauses of the U.S. and Hawaii Constitutions, but as in Midkiff and Lyman, those challenges were rejected by both federal (Richardson v. City and County of Honolulu, 124 F.3d 1150 (9th Cir. 1997)) and state courts (Richardson v. City and County of Honolulu, 76 Haw. 46, 868 P.2d 1193 (1994)). 

Under chapter 38, the owners of many Honolulu condominium projects were permitted to condemn and take the leasehold interests from their lessors.  By 2005, however, public sentiment regarding eminent domain had turned, and the City Council surprisingly repealed chapter 38. 

The story does not end there, however, because at the time of repeal, several condominiums had begun the process to condemn their leaseholds, and were entitled to continue. 

II.  Taking of a Church's Private Property - RLUIPA

Sherman involved one of those condominiums in the process of condemnation.  In that case, the apartment owners petitioned to condemn the leasehold interest from the owner, a church, which raised the federal Religious Land Use and Institutionalized Persons Act (RLUIPA) as a defense, asserting that the lease-to-fee conversion was a "land use regulation" that impermissibly interfered with the church's free exercise of religion.  The trial court denied the church the opportunity to prove these allegations, ruling against it on a motion for summary judgment.  Relying on federal cases, the Hawaii Supreme Court held that chapter 38's condemnation scheme was not a "land use regulation" as defined by RLUIPA, and the defense was therefore unavailable. 

The text of RUIPA defines "land use regulation" as a "zoning" or "landmark" law.  There is a split of federal authority on whether an exercise of eminent domain is a "land use regulation," with most courts holding that a typical condemnation of property that is owned by a religious organization does not trigger RLUIPA, while a few other courts disagree. 

It does seem odd for Congress to have excluded an outright appropriation of a church's property, while requiring strict scrutiny for mere regulation. If onerous regulatory decisions should be judged strictly by the courts to insure they do not interfere with the free exercise of religion, how is that actually depriving a church of its property should be immune from such scrutiny?  Alas, such questions are not the province of the courts -- especially state courts -- and despite the apparent logical gap in RLUIPA, it is up to Congress to amend the statute, not the courts, so the Hawaii Supreme Court's decision appears sound. 

III.  Delegation of Eminent Domain Power

The court also rejected the church's claim that the City improperly delegated the power of eminent domain to the City Department of Community Service.  The church argued that even though the City Council ultimately had the duty to approve chapter 38 takings, the DCS and the lessees were, in reality, the parties that actually determined what property was to be condemned. 

The court did not really address the church's argument, holding instead that the legality of delegation to DCS had already been decided in a prior case, Richardson v. City and County of Honolulu, 76 Haw. 46, 868 P.2d 1193 (1994).  In that case, the court had reviewed the chapter 38 procedures and held that DCS "merely" designated property, and it was the City Council's ultimate decision whether to actually take it. 

While that may be how chapter 38 was designed to work, the church alleged the reality was much different, and once DCS and apartment owners designated property, the City Council would never be anything more than a "rubber stamp."  The church was denied the opportunity to support that argument with evidence, however, because the Supreme Court upheld the trial court's grant of summary judgment to the City. 

Thus, under Sherman, it seems not to matter what actually happened in the decision whether to take property, but only what the law states is supposed to happen.  If read to apply broadly, this conclusion does not hold up to the standards of Kelo v. City of New London, particularly the warning in Justice Kennedy's concurring opinion that an exercise of eminent domain is not automatically immune from judicial review, and plausible allegations of extra-legal conduct must be taken seriously.  Thus,Sherman must be read narrowly in the context of the facts of the case; the property owner only alleged that the delegation violated Haw. Rev. Stat. § 101-13, and Haw. Rev. Stat. § 101-14, not that the delegation  violated federal and state constitutional standards.  That issue, apparently, must be decided in some other case.

IV.  Impact

Finally, the court addressed technical issues of the City's compliance with chapter 38, and the number of apartment owners who qualified for conversion, but since the ordinance has been repealed, this analysis holds little current interest.  If you need to know more, it's best to read the opinion.

In the end,Sherman will probably not be remembered as a landmark eminent domain case, since it dealt primarily with an ordinance that had already been repealed.  But the two key issues in Sherman are sure to arise again, as governments become even more aggressive taking property in the wake of Kelo -- including church property -- and more willing to delegate that authority to third parties.