Owners of Koke`e Cabins Take Dispute over Leases to Court

posted in: August 2006 | 0

The long-simmering dispute before the state Board of Land and Natural Resources over what to do with more than a hundred cabins at Koke`e and Waimea on Kaua`i has shifted to 5th Circuit Court. There, last April 11, attorneys representing owners of about 16 of the cabins, including more than a dozen of the oldest, most historic ones, filed a complaint against the Department of Land and Natural Resources seeking to stop the sale of leases to the land on which the cabins rest or to require the state to pay the cabin owners full fair-market value.

As [i]Environment Hawai`i[/i] has reported, the Land Board in February decided to auction off leases for the cabin lands without compensating the current cabin leaseholders for the value of their cabins. With the current leases expiring in December, the DLNR’s Division of State Parks began to prepare for auction of the new leases in September.

Several of the lessees asked for a formal contested-case hearing on the board’s decision. In March, the board, acting on advice from its counsel, deputy attorney general Bill Wynhoff, voted to deny the request. Cabin owners could arrange to have their cabins moved before the lease expired, but no compensation would be paid to cabin owners who could not or would not move their cabins. Also, the board advised cabin owners that should they opt to remove their cabins, a Conservation District Use Permit would be required.

In their complaint, the attorney for the cabin owners, Daniel Hempey, states that in some cases, moving the cabins would require roads to be graded and improved. In any event, he says, moving a cabin would require at least a week. With CDUPs taking up to six months between application and award, he argues, “it would take time well beyond the December 2006 deadline to effect the removal of each cabin by plaintiffs.” What’s more, he writes, “it would be physically impossible to remove and rebuild several of the Plaintiff-owned cabins” and “the cost of removing the subject cabins (those cabins which could be removed and rebuilt) exceeds the fair market value of said cabins.”

“Any of the ‘options’ offered by the state results in an unconstitutional taking within the meaning of [the] Fifth Amendment,” he writes. The lawsuit asks the court to agree that the board’s actions constitute a taking; to prevent the DLNR from auctioning the leases without giving the plaintiffs sufficient time to remove their cabins; and to pay “just compensation” to owners of any cabins that are left on state land at the end of the lease term. The plaintiffs also claim that they were not given appropriate notice of the board’s intention to discuss compensation at the February 2006 meeting, and so any action regarding compensation to leaseholders that the board made at that meeting should be voided.

Within a month of the lawsuit’s filing, more than a third of the cabin owners had submitted to the DLNR’s Office of Conservation and Coastal Lands applications for the CDUPs required as a condition of removing or demolishing the structures on their leased lands. According to OCCL’s Dawn Hegger, the permit is an administrative one that need not be taken before the Land Board for approval.

[b]A Taking?[/b] Both the cabin owners and the state filed motions for summary judgment before Judge Kathleen Watanabe. The state’s position is that because the leases state that any improvements “shall vest in the Lessor” at the end of the lease, the cabin owners have no legal basis to seek compensation for the cabins.

In arguing for summary judgment, Wynhoff gives a bit of the history of the Koke`e and Waimea camps. The kingdom of Hawai`i leased parts of the area to Valdemar Knudsen in 1856. Knudsen built a vacation house there and allowed others to establish similar “camps.” Knudsen’s lease expired in 1917. After that, the territory of Hawai`i began issuing camp permits.

“By 1963,” Wynhoff continues, “all permits had expired. The [Land] Board … faced the issue of how to deal with the permittees, some of whose families had been using the land for generations.” As a result of changes to state law in 1965, the board could issue direct 20-year leases to the cabin owners. Those leases expired in 1985, and the Land Board then auctioned new 20-year leases, with many of the cabin owners winning the bids for the land under their cabins and some of the new lessees negotiating with prior lessees to purchase the improvements they had made. The leases awarded in 1985 were set to expire at the end of 2005, but were extended by a year so that they now expire on December 31, 2006.

“As it did in 1985,” Wynhoff writes, “the Board has decided to lease the lots to the highest bidder at auction. Plaintiffs claim that, even though their leases provide that leasehold improvements belong to the state at the end of the lease, the state must nevertheless compensate plaintiffs for the improvements.”

As to the claim that the cabin owners don’t have time to remove their improvements, Wynhoff dismisses that by noting that if true, it’s the plaintiffs’ own fault: “The leases have been in place since 1985. The terms have always been the same. If plaintiffs do not have time to remove the cabins, the problem is solely attributable to plaintiffs … [whose] failure to act in a timely manner does not require the state to pay for the cabins.”

But Hempey, the plaintiffs’ attorney, argues that such an argument is a sham. Whether the state takes ownership of the cabins left in place at the end of the leases or the cabin owners remove them, he writes, “the result is the same to the cabin owners: a complete and total loss of all value in the privately owned cabin… These cabins may be worth little more than salvage value outside of Koke`e. The cost to move them from Koke`e may exceed their value, even in Koke`e.” The cabin of Frank Hay, one of the plaintiffs, is assessed at $51,000, Hempey notes, adding that it would cost him $62,329.84 to move it. The cabin of Donn and Gale Carswell, assessed at $32,600, would cost nearly $31,000 to move.

“As faithful stewards of the land in Koke`e for decades,” Hempey writes, “plaintiffs are shocked that the state intends to ‘just take’ their cabins, lease them to the highest bidders, and pay nothing in return.”

The plaintiffs’ property rights to their cabins were “never validly waived,” Hempey says and none of them ever “agreed to donate their cabins to the state.” And, he says, even if the “court finds that plaintiffs agreed to surrender ownership of their cabins,” they never “waived their right to be compensated.”

[b]More to Come[/b] On July 6, less than 10 minutes before Judge Watanabe was scheduled to hear arguments on the motions for summary judgments, attorney Anthony Locricchio, himself a cabin owner, filed with the court a “motion for joinder,” asking on behalf of himself and others to be included in the case as plaintiffs. He also put the parties on notice that he and other joinder plaintiffs “intend to seek additional rememdies and actions not currently covered in the original claim.”

Judge Watanabe had not yet ruled on Locricchio’s motion by press time. She did, however, reject the motions for summary judgment, saying that too many issues remain in her mind to grant summary judgment for either party.

On August 14, a hearing is scheduled on the plaintiffs’ motion for a preliminary junction, requesting that the state be enjoined from moving forward with the scheduled auction until the issues in the lawsuit have been resolved.

— Patricia Tummons

Volume 17, Number 2 August 2006