Yesterday, the Hawaii Intermediate Court of Appeals issued an opinion in In re Trustees Under the Will of the Estate of James Campbell, No. 30006 (June 13, 2013), a fascinating case involving the nature of Torrens title. In doing so, the court rebuffed the State of Hawaii's attempted land grab, which would have undermined the sanctity of all Land Court titles, and, in a sense, the very notion of property rights and settled expectations. The ICA also rejected the State's attempt to transform the "public trust" doctrine into a physical servitude that would have allowed the State to flood land without consequence.
Before we go further, this disclosure: we filed an amicus brief on behalf of Pacific Legal Foundation in the case in support of the property owner.
Torrens (Land Court) Title
With that out of the way, some background. Hawaii is one of the few remaining states retaining its Torrens system of title registration (two others are Massachusetts and Minnesota). We call it "Land Court," a system in which the State guarantees indefeasible title to the rights and interests reflected in the title register. Torrens title derives its name from Sir Robert Torrens, an Australian by way of Ireland who became the first premier of South Australia. Largely through his efforts, South Australia adopted a system of land registration which was adopted by other common law jurisdictions, including several in the United States.
The Torrens system, in general, is a method of creating a certificate of title and then registering a legal and basically absolute title to real property. This procedure, utilizing none the less, a judicial hearing to adjudicate all claims at the outset, was at one time in effect in 20 states. At the present time only ten states still utilize the (one step) Torrens system. Eleven states have repealed the Torrens statutes. In the remaining ten, in which the Torrens system is still in effect, the system is voluntary, and it functions side by side with the "old style," evidence of title recording system. The ten states are Colorado, Georgia, Hawaii, Massachusetts, Minnesota, North Carolina, Ohio, Virginia, Pennsylvania and Washington. New York recently repealed its registration of title law. In New York State around Buffalo and on Long Island there has been some use of the registration procedure. The registration system, until fairly recently at least, was in substantial use only in Massachusetts, Minnesota and Hawaii.
Todd Barnet, The Uniform Registered State Land and Adverse Possession Reform Act, A Proposal for Reform of the United States Real Property Law, 12 Buff. Envt'l. L.J. 1, 19-20 (2004) (footnotes omitted). Hawaii first adopted the Torrens Land Act in 1903, and it is currently codified at Haw. Rev. Stat. ch. 501.
The 1938 Land Court Judgment
The Campbell case arose when Campbell submitted a petition to the Land Court in 2009 to consolidate and subdivide land it owns on the north shore of Oahu. The land was registered and had been confirmed to Campbell by the Land Court in 1938. A portion of the land derived from a royal patent in which the government reserved mineral and metallic mining rights, and another parcel had no reservation at all. The State's predecessor (the Territory of Hawaii) appeared in the Land Court and asserted several claims, but did not claim mineral or mining rights or a flowage easement. The Land Court eventually confirmed fee simple title in Campbell and noted that it was subject to various encumbrances, but this list did not include a reservation of mineral or mining rights or a flowage easement in favor of the Territory. .
The 2009 Land Court Ruling
Seventy years later, the State appeared in Campbell's new Land Court action, and claimed that Campbell's title is subject to the State's ownership of "all mineral and metallic mines of every kind or description on the property, including geothermal rights," and is subject to a flowage easement in favor of the State. The State argued that despite the 1938 Land Court registration, Campbell's title never included interests which the State had reserved, even though the State's predecessor had appeared in that case, and Campbell's title had been confirmed free of all unregistered interests. The Land Court rejected the State's arguments and held that its claim of mineral rights was extinguished by the 1938 judgment, and that the title was also not subject to a flowage easement.
The State's appeal to the ICA argued that the original grantor of the land -- the King, in his individual capacity -- did not own the mineral rights, so therefore could not have conveyed those rights to Campbell, and that the government's reservation of mineral rights is "self-effectuating" whether noted in the land grant or not. It also claims that the government always possesses a flowage easement as a function of the public trust in water resources.
ICA: Land Court Title Is "Unimpeachable and Conclusive"
The ICA soundly rejected those arguments. The court held that the intent of the registration provisions in chapter 501 is to "preserve the integrity of titles," slip op. at 11, and "a certificate of title is unimpeachable and conclusive except as otherwise provided by law." Id. As a consequence, "[b]y virtue of the Land Court registration of the Subject Property, the Trustees held, and subsequent good faith purchasers of the Subject Property for value hold, the Subject Property free from all encumbrances, except for encumbrances noted on the certificate of title." Id.
We hold that the Original  Decree and the Original Certificate of Title extinguished the express government reservations of mineral or metallic mines set forth in Royal Patent No. 5616, Royal Patent No. 5693, and Grant No. 550 and also extinguished any implicit reservation in the Kamehameha III deed.
Slip op. at 8.
The court noted that at oral argument the State conceded that the reservation of mineral or metallic mines is an "encumbrance" and an alienable right. The court concluded that the state had appeared in the 1938 Land Court action to assert some of its rights (but not the mineral rights), and the Land Court's judgment thus "extinguished the reservations of mineral or metallic mines." Slip op. at 14.
Public Trust Doesn't Give a Flowage Easement
The court also rejected the State's attempt to transform the State's "public trust" in water resources into much more than it is. In Hawaii's version of the public trust doctrine, the State owns all water and holds it in a trust for the benefit of the public. As Professor David Callies and Cal Chipchase have pointed out, our version has already distorted the public trust's usual scope, but in the Campbell case, the State sought to make it even broader. It claimed this power gives the government a flowage easement that should be reflected on Land Court title. A flowage easement is an inherent right to flood land without consequence. In other words, the State argued that its duty to "preserve and protect" water resources virtually eliminated any claim any landowner may have for State-caused flooding. Recognizing that this claim was just too much, the ICA held:
While the State's ownership of reserved water rights under the public trust doctrine is established by Hawaii precedents, the State provides no persuasive support for its argument that the ownership of such water rights means that the State is entitled to have an easement for the free flowage of waters noted as an encumbrance on the Subject Property. We affirm the Land Court's decision to deny the State's claim for a reserved easement for the free flowage of waters on the Subject Property.
Slip op. at 19. The court rightly recognized that the State was, in effect, throwing up a wildly excessive argument just to see if it would stick: the State provided no authority and "no specifics" to support a reading of the public trust doctrine that would stray the public trust doctrine even further from its moorings than it already has, it did not identify where the easement would run on the land, it did not idenfity the scope of the claimed easement, and it did not "demonstrate that the notation of an easement for the free flowage of waters as an encumbrance on the Subject Property at the present time and in the context of this case is needed to perform such duties [under the trust]." Slip op. at 21. But these are the kind of arguments you get in these type of cases, where invocations of the magical public trust often get results, even where they should not.
The bottom line in this case is that the ICA rejected two vastly overreaching claims by the State, and in the process thwarted what would have amounted to massive land grabs.