[This article was originally published in Vol. 31 of the State & Local Law News by the ABA Section on State & Local Government (Spring 2008). ABA members can access it here. More on the case here.]
The Hawaii Constitution empowers “the counties” to determine propertytaxes.[1] On issues of local concern, theConstitution’s home rule provisions also give county voters the freedomto initiate amendments to their charters, propose ordinances, or refercouncil-enacted ordinances to the electorate for confirmation.[2] In County of
Toreach the merits, the three-justice majority sua sponteand afteroral argument rearranged the parties and arguments to confer standingupon the plaintiffto prosecute the lawsuit on behalf of a defendant. The case had beeninitiated by the County Attorney, who sued the Mayor, the CountyCouncil, and the County finance director, seekinga declaratory judgment that the voter-approved charter amendment wasvoid asbeyond the power of the voters. The court acknowledged that the suitwas, as filed, collusive and nonjusticiable, but remedied the problemby dropping the County Council as a defendant andattributing its claims to the plaintiff.
The dissenting justices excoriated the opinion, accusing the majority of factual manipulations and procedural sleight-of-hand,[4]suggesting the majority’s decision to define “county” as “countycouncil”and preclude popular votes on property taxes was more driven bypolitics and the majority’s notions of good policy than by a principledanalysis of the law.
The Baptiste decision attracted scant attention beyond Hawaii’s shores,[5]but it is important for two reasons. First, it granted Hawaiigovernment officials the power to seek advisory opinions whenever theydisagree with a voter-enacted measure. Second, and more troubling, thedecision excluded the people of Hawaii’s counties from the definitionof “county” under the state constitution.
Hawaii’s home rule property tax regime
Before 1978, the real property taxation power in Hawaii was vested solely in the State.[6]“Home rule” was a major concern of the 1978 Hawaii constitutionalconvention, and the resulting amendments to the constitution directedthe counties to govern themselves on matters of local concern, and toframe, adopt, and amend charters governing their internal structure.Among the delegated local powers was the power to tax real property:
The taxing power shall be reserved to the State, except so much thereofas may be delegated by the legislature to the political subdivisions,and except that all functions, powers and duties relating tothe taxation of real property shall be exercised exclusively by thecounties. . . [7]
Soaring property taxes
Fueledby retiring mainland baby boomers flush with cash and sensing a dwindlingsupply of a slice of paradise, and by speculators willing to pay top dollar,the price of homes across
Property tax revolt
Pursuantto the home rule powers delegated to the counties by the HawaiiConstitution,the charter of the County of Kauai allows for direct democracy in oneof three ways: initiative, referendum, and charter amendment. InNovember 2004, thepeople of Kauai County, after years of attempting toconvince their elected representatives to curb spending and to providemeaningful property tax relief, exercised their home rule powers byaddingArticle XXXI to the Kauai Charter by popular vote. The homeowners whoresearched anddrafted the language, circulated the petitions, and submitted themeasure were Kauai residents and property taxpayers.
Under the charter amendment, property taxes for owner-occupied homes were capped at1998-1999 amounts for taxpayers who purchased their homes in 1998 or earlier,and capped at the amount paid in the year of purchase for homes purchased after1998. The measure also limited taxincreases to 2% per year. It wasdesigned, like other property tax limitations such as
California’s Proposition 13, to bring a measure of certainty and predictability to residential real property taxes,as homeowners would know from year-to-year their maximum tax liability, andcounty officials would know how much tax revenue to expect from residenthomeowners.[10]
Thecharter amendment was placed on the November 2004 ballot, and in the run-up tothe vote, virtually every Kauai electedofficial attacked the measure, with the Mayor and the members of the CountyCouncil leading the charge. Theyclaimed rolling back property taxes and capping increases would hamstring theirability to deliver government services and would limit the County’sexpenditures on the public worker’s union.[11] However, since 1998, the
County vs. County
The County officials did not accept the political defeat lightly, andinstituted what can only be described as a “friendly” lawsuit. TheKauai County Attorney sued the Mayor, the County Council, and theFinance Director, claiming the Hawaii Constitution grants countycouncils a monopoly on the property tax issue; the voter-enactedmeasure was void because the term “counties” in the Constitution means“county councils.” The county vs. county lawsuit was, to say the least,a novel procedure: the County Attorney represented both the plaintiffand the defendants, and the litigation was funded by a $250,000 warchest of taxpayer money, budgeted by the defendant County Council tohire Hawaii’s largest private law firm to represent the plaintiff toattack the charter amendment.[12] Not unsurprisingly, the answer by the“defendants” to the complaint virtually confessed judgment.
Homeowner intervention
Asthere was no party actually defending the charter amendment or the people ofthe County, four local homeowners intervened in theofficials-against-themselves case. They asserted the plaintiff lacked standing and the complaint sought anadvisory opinion, and that government officials should not be able tomanufacture a lawsuit in which they were both the plaintiff and the defendants,fund the case with public money, and represent both sides in litigation.
TheKauai county trial court disagreed, held the case was justiciable, and voidedthe charter amendment, ruling that only county councils may set property taxpolicy, and the people have no right to vote to amend the county charterregarding property taxes. Thehomeowners’ appeal to the Hawaii Supreme Court presented two majorissues. First, whether such a casewas was capable of judicial review or sought an advisory opinion, and second,whether the delegation of property tax power to “the counties” inthe Hawaii Constitution precluded the voters of a county from exercising thatpower by vote.
Judicially manufacturing a controversy
Although not subject to the Article III limitations of federal courts, the jurisdiction of the Hawaii courts generally is limited to “cases of actual controversy,”[13] and standing to sue in Hawaii courts is held out as a prudential doctrine of judicial self-restraint groundedin separation of powers, designed to insulate the courts from entanglement inpolitics. Standing is measured bywhether the plaintiff was “injured in fact” by the defendant.[14] In Baptiste, the plaintiff County did claim it was injured bythe enactment of the charter amendment, and the only injuries alleged in thecomplaint by the plaintiff were allegedly suffered by the defendants(loss of their exclusive property tax power as members of the countycouncil). These justiciabilityhurdles seemed nearly insurmountable, and the standing defects presented athreshold issue of subject matter jurisdiction that would be difficult tounravel.[15]
Thecourt’s majority, however, found its Rosetta Stone in Rule 21 of theHawaii Rules of Civil Procedure, characterizing the friendly lawsuit asa meremisjoinder problem. The majorityused a two-step process to mold the case into a justiciablecontroversy. First, the court agreed that the plaintiff County was notasserting its own injury but was asserting the claims of the defendantCounty Council, which was the real party in interest. This conclusionis at odds with the usual rule that municipal corporations may onlybring suit in their own corporate name, and not on behalf of theirelected and appointed officials.[16]Second, having the plaintiff County argue on behalf of the defendantCounty Council placed the County Council on both sides of the issue anddestroyed whatever illusion may have been left that the plaintiff andthe defendants were adversaries, so the court applied Rule 21 to dropthe County Council as a defendant:
[P]laintiff-County, by asserting that the CharterAmendment usurps the taxing authority of the County Council, has asserted aninjury on behalf of the Council. Areview of the first amended complaint clearly demonstrates that the entityidentified as having been injured throughout the complaint is the CountyCouncil. Thus, by dropping theCounty Council as a defendant an actual controversy exists.[17]
The Baptiste decision effectively grants government officialsdesiring tochallenge a voter-approved measure the ability to institute lawsuits inHawaii courts without having to find an injured party willing to act asplaintiff, and demonstrates that Hawaii courts do not adhere to theprinciple that courts exist to resolve actual disputes betweenadversarial parties. Hawaii courts may now provide local governmentofficials what amounts to legal counsel.[18]
The dangers of unreviewable sua spontedecisions are well known,[19] and the Baptistedecision exemplifies that risk because the majority charted its own pathwithout the benefit of the argument of the parties.[20] Baptiste continues the HawaiiSupreme Court’s slide towards de facto advisory opinions incases of the court’s choosing.[21]
“County”means “county council”
Havingdisposed of the procedural roadblocks, the Baptiste majority addressedthe merits, and held that the term “counties” in article VIII,section 3 of the Hawaii Constitution means “county councils.”[22] The majority abandoned the court’susual rule of constitutional construction which requires initial reliance onthe “plain meaning” of constitutional terms.[23] In the absence of ambiguity, the expresslanguage in the constitution should be applied as it reads.[24] The court rejected the argument that theterm “the counties” means political subdivisions, not “countycouncils,” and that allocation of the taxation power within the county isa matter of internal structure and governance. The court, however, failed to square itsdecision with earlier cases in which it held the language of article VIII wasunambiguous,[25] and thatin matters of property taxes, the counties “may act as they seefit.”[26]
The court also paid little heed to thefact that other provisions in the constitution define “counties” as“political subdivisions,” without further requiring the counties toadopt a particular form of government.[27]There is no requirement in the Hawaii Constitutionthat the counties govern through representative bodies on matters oflocalconcern. For example, Hawaii does not permit statewide initiative andreferendum, but the counties are free to enact or repeal county lawswith direct democracy. On local matters – and real property taxation isthe most local of local concerns – Hawaii’s home rule provisions allow the counties to decide how to implement the delegated power.[28] The framers of the home rule provisionsin the 1978 constitutional amendments were not concerned with how the countiesimplemented the delegations of authority on local matters. It was simply a question of passing suchauthority from the state to the counties. And whatever might have been included within its meaning, the term“county” certainly could not have been read explicitly to excludethe people of the county from self-government, a power expressly reserved tothe people by constitution and in their charter.[29]
Conclusion
Thefriendly lawsuit represented county officials’ cynical political beliefthat decisions on issues such as property taxes are simply too sensitive to betrusted to the voters. A majorityof the Hawaii Supreme Court agreed, and because of the tortured procedural paththe Baptiste majority utilized to reach the merits, its conclusion thatthe term “county” excludes the people of the county and means only“county councils” is subject to the criticism that it morerepresents a philosophical and political judgment than a principled legalconclusion.
[4]. Baptiste, 165P.3d at 949 (Acoba, J., dissenting) (“With all due respect, our role isto protect the judicial process, not to subvert it.”).
[5]. But seeMalia Zimmerman, This Side of Paradise, The Wall Street Journal (Sep. 1,2007).
[8]. See, e.g.,Associated Press, Mainlanders Pinch Housing, Honolulu Star-Bulletin,Sep. 6, 2005 (“A survey says that one-fifth of Maui and Kauai owners aremainland residents.”).
[9]. See County of Kauai Dep’t ofTaxation, County of Kauai Real Property Tax Valuation for Fiscal Year 1998-99.
[10]. See, e.g.,Nordlinger v. Hahn, 505 U.S. 1, 13 (1992) (Under California’s Proposition13, new owners have full information about future tax liability at the time ofpurchase and can decide not to buy, whereas an existing homeowner“already saddled with his purchase, does not have the option of decidingnot to buy his home if taxes become prohibitively high. To meet his tax obligations, he might beforced to sell his home or to divert his income away from the purchase of food,clothing, and other necessities. Inshort, the State may decide that it is worse to have owned and lost, than neverto have owned at all.”)
[12]. Cf. City of Riverside v.Stansbury, Nos. E040125 & E040973, 2007 WL 2966507 (Cal. Ct. App. Oct. 12,2007) (city sued proponents of initiative asserting an eminent domain measurewas reserved to the state, and therefore beyond a city’s home rulepowers).
[13]. Haw. Rev. Stat. § 632-1(2003). Statutes conferringadvisory jurisdiction clearly state so. For example, compare section 632-1 with Haw. Rev. Stat. § 37D-10(2004).
[14]. State of Hawaii ex rel.Bronster v. Yoshina, 932 P.2d 316, 321-22 (Haw. 1997) (quoting Bush v. Watson,918 P.2d 1130, 1135 (Haw. 1996)).
[15]. See, e.g.,Amantiad v. Odum, 977 P.2d 160, 167 (Haw. 1999) (“Questions regardingsubject matter jurisdiction may be raised at any stage of a cause ofaction.”).
[17]. Baptiste, 165 P.3d at936. Haw. R. Civ. P. 21 provides“Parties may be dropped or added by order of the court on motion of anyparty or of its own initiative at any stage of the action and on such terms asare just.”
[18]. Cf. Kona Old HawaiianTrails Group v. Lyman, 734 P.3d 161, 165 (Haw. 1987) (mootness principles avoidissuing advisory opinions which are prohibited by “the prudential rulesof judicial self-governance founded in concern about the proper – andproperly limited – role of the courts in a democratic society”);Sierra Club v. Hawaii Tourism Auth., 59 P.3d 877, 920 (Haw. 2002) (Moon, C.J.,and Levinson, J., dissenting) (plurality’s discussion of the merits wasnothing more than an advisory opinion, and “ill-advised”); City ofSanta Monica v. Stewart, 24 Cal. Rptr. 3d 72 (Cal. Ct. App. 2005). In that case, the city soughtdeclaratory relief against its own city clerk after the Clerk refused toimplement a voter-approved tax relief measure. The court of appeals held that theaction was not justiciable. Id.at 85-86.
[19]. See, e.g., Adam A.Milani & Michael R. Smith, Playing God: A Critical Look at SuaSponte Decisions by Appellate Courts, 69 Tenn. L. Rev. 1 (2002) (listingarguments against courts making sua sponte decisions withoutparty input).
[20]. For example, the majority basedits refusal to dismiss the case on speculation regarding future actions of theparties if the case were remanded rather than affirmed: “If this courtwere to remand this case with instructions that the first amended complaint bedismissed, it is highly likely that the County will simply re-file its casewith the proper alignment of parties and minimal revisions to itscomplaint. The focus will remainthe validity of the Charter Amendment, which has already been extensivelybriefed; nothing will have changed, except for the absence of the CountyCouncil as a defendant.” Baptiste,165 P.3d at 936. If the case hadbeen remanded and dismissed, there is no telling what Kauai officials mighthave done, especially with county elections on the near horizon and anoverwhelming majority of voters in favor of the charter amendment.
[21]. Baptiste, 165 P.3d at 950(Acoba, J., dissenting) (“Under these circumstances, there are nomanageable limits to the approach employed by the majority-moving a party fromone position to another position in the same lawsuit allows this court todecide what case will be deemed justiciable at its own behest.”). See also Life of the Landv. Land Use Comm’n, 623 P.2d 431, 439 (Haw. 1981) (Hawaii courts willavoid dismissing certain cases for lack of standing if required by “theneeds of justice”). Cf.City of Santa Monica v. Stewart, 24Cal. Rptr. 3d 72, 93 (Cal. Ct. App. 2005) (“An otherwise nonjusticiableaction may not be entertained simply because it involves issues of publicconcern.”).
[23]. Blair v. Harris, 45 P.3d 798,800-801 (Haw. 2002) (text should be followed because constitutions derive theirpower and authority from the people, whose intent is found “in theinstrument itself;” error for a court to base its ruling on itsperception of the intent of the framers).
[24]. In re Janklow, 530 N.W.2d367, 370 (S.D. 1995). See alsoMalyon v. Pierce County, 935 P.2d 1272, 1281-82 (Wash. 1997) (appropriate stateconstitutional analysis begins with the text and, for most purposes, should endthere as well).
[25]. Gardens at West Maui VacationClub v. County of Maui, 978 P.2d772, 779 (Haw. 1999) (language of article VIII, section 3 is“plain”).
[28]. See Haw. Const. art.VIII, § 2 (on matters of local concern, county laws supercede conflictingstate law); Gardens at West Maui Vacation Club v. County of Maui, 978 P.2d 772,779 (Haw. 1999) (county real property tax law supercedes state statute).
[29]. See Haw. Const. art. I,§ 1; Kauai Charter art. I, § 1.01; Kauai Charter art. XXIV, §24.01. The Kauai Charter defines“the county” as “the people of the county of Kauai,”and contains no prohibition against the voters amending the charter to addressproperty taxes. See Kauai Charter art. XXIV (the charter may be amendedby the people, with no limitation on the provisions that may be amended).