DOUGLAS LEONE and PATRICIA A. PERKINS-LEONE, as Trustees under that certain unrecorded Leone-Perkins Family Trust Dated August 26, 1999, as amended, Plaintiffs-Appellants/Cross-Appellees,
COUNTY OF MAUI, a political subdivision of the State of Hawai'i; WILLIAM SPENCE, in his capacity as Director of the Department of Planning of the County of Maui, Defendants-Appellees/Cross-Appellants.
FROM THE CIRCUIT COURT OF THE SECOND CIRCUIT
(CAAP-15-0000599; CIVIL NO. 07-1-04 96(2))
V. Beaman, Leroy E. Colombe, and Daniel J. Cheng for
Patrick K. Wong, Brian A. Bilberry and Thomas Kolbe for
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON,
seventeen years ago, Plaintiffs-Appellants/Cross-Appellees
Douglas Leone and Patricia A. Perkins-Leone (collectively,
the Leones) bought a beachfront lot in Makena, Maui with the
expressed intent of building a family house on it. Today the
house has not yet been built, and the Leones contend that the
County of Maui's land use regulations and restrictions
prevented them from doing so. In 2007, the Leones filed suit
against Defendants-Appellees/Cross-Appellants County of Maui
and William Spence, in his capacity as Director of the
Department of Planning of the County of Maui (collectively,
the County), asserting, among other counts, that the
County's actions constituted a regulatory taking for
which the Leones were entitled just compensation. On May 5,
2015, a jury delivered a verdict in favor of the County.
case requires this court to decide, inter alia,
whether the County's land use regulations constituted a
regulatory taking of the Leones' property. But we do not
decide on a blank slate. The jury determined that the County
did not deprive the Leones of economically beneficial use of
their property. We conclude that there was evidence to
support the jury's verdict in favor of the County. As
such, we affirm the Circuit Court of the Second Circuit's
(circuit court): 1) June 1, 2015 judgment in favor of the
County and against the Leones, 2) August 5, 2015 order
denying the Leones' renewed motion for judgment as a
matter of law or, in the alternative, motion for a new trial,
and 3) August 5, 2015 order granting in part and denying in
part the County's motion for costs.
1996, the Maui County Council (county council) adopted
Resolution No. 96-121, authorizing the Mayor to acquire nine
beach lots at Palau'ea Beach in Makena, Maui for the
creation of a public park. The county council noted that
Palau'ea Beach was "one of the last undeveloped
leeward beaches on Maui" and that the community
supported the creation of a beach park. Because of budgetary
constraints, the County was able to buy only two of the nine
lots (Lots 18 and 19), and the seven remaining lots were sold
to private individuals.
beach lots were subject to the following regulations and
The 1998 Kihei-Makena Community Plan (the community plan),
which designated the lots as "park" land. Maui
Cty., Kihei-Makena Community Plan 59 (1998). This
designation "applies to lands developed or to be
developed for recreational use." Id.
Special Management Area (SMA) designation pursuant to the
Hawai'i Coastal Zone Management Act (CZMA) . Any
development within an SMA is prohibited unless the
developer applies for and receives an SMA
permit. Hawai'i Revised Statutes (HRS)
§§ 205A-21 and 205A-26 (2001).
"Hotel-Multifamily" zoning designation, which
permits, inter alia, the building of single-family
Declaration of Covenants and Restrictions (the
declaration), which states, "[a] lot shall be used
only for single family residential purposes regardless of
whether the applicable zoning would permit a more intensive
or different use."
February 2000, the Leones bought one of the lots ("Lot
15" or "the property") for $3.7 million. The
Leones initially relisted the property for $7 million and, in
2002, they received two offers for its purchase,
which the Leones refused.
years after buying Lot 15, the Leones hired a land use
planning firm, Munekiyo & Hiraga, Inc. (Munekiyo), to
prepare a draft environmental assessment (DEA) of Lot 15 so
that they could eventually apply for SMA and development
permits to build a single-family residence. As part of the
environmental assessment process, Munekiyo sent out an early
consultation letter, seeking comments from governmental
agencies and non-profits on the Leones' proposed
development of Lot 15. In this letter, Munekiyo described the
property and the development plan as follows:
The parcel is located within the "Urban" district,
is zoned Hotel "H-M" by the County of Maui and is
designated as "Park" under the Kihei-Makena
Community Plan. The owner intends to file a community plan
amendment and change in zoning application with the County of
Maui, Department of Planning for review by the Maui Planning
Commission, and final action by the Maui County Council to
achieve land use consistency for the parcel. Since a
community plan amendment will be sought, the applicant will
submit a Draft Environmental Assessment (DEA) in accordance
with Chapter 343, Hawaii Revised Statutes (HRS).
20, 2004, the County of Maui's Department of Planning
(the Department) sent Munekiyo comments in response to the
early consultation letter. The Department initially noted
that "the proposed action requires a Community Plan
Amendment which therefore triggers Chapter 343, HRS."
The Department then provided the following comments:
1. Provide a view analysis from Makena-Keoneolo Road. The
analysis should assume a 60% buildable area and 40% open view
corridor for the property and address impacts of the
2. The Erosion Rate for the Property is approximately one
foot per year. As such, the shoreline setback area is
calculated as 60 feet from the certified shoreline.
3. Lateral access along the shoreline shall be provided.
4. In addition to the applications for a Community Plan
Amendment and Change in Zoning, the proposed action requires
a Special Management Area assessment.
3, 2004, the Leones directed Munekiyo to stop work on the
project. In an intra-office email, Munekiyo explained why the
Leones instructed the firm to halt work on the project:
I received a call from Doug Leone this morning. He asked that
we stop work and close the project. He felt that the
political climate is much too difficult to be seeking any
land use entitlements for the property. He was not willing to
accommodate a 40% road frontage view corridor and felt that
it would be better for him to just hold on to the property
2007, the Leones restarted the permitting process and
Munekiyo submitted the SMA assessment application to the
Department on September 28, 2007. One month later, the
Department sent a letter declining to process the SMA
application with the following explanation:
The subject property is designated "Park" on the
Kihei-Makena Community Plan (Community Plan) . The proposed
Single-Family dwelling is inconsistent with the Community
Plan. An application for a Community Plan Amendment was not
submitted concurrent with the subject application.
Section 12-202-12 (f) (5) states that an application
"cannot be processed because the proposed action is not
consistent with the County General Plan, Community Plan, or
Zoning, unless a General Plan, Community Plan, or Zoning
Application for an appropriate amendment is processed
concurrently with the SMA Permit Application."
letter further explained that, in order for the Leones to
proceed, they would have to file a new application consistent
with the community plan and with the appropriate submittals.
Initial Circuit Court Proceedings
November 19, 2007, the Leones filed a lawsuit against the
County, alleging that, because of the County's actions,
the Leones were left with no economically viable use of their
property. The Leones brought five counts against the County:
1) inverse condemnation pursuant to article I, section 20 of
the Hawai'i Constitution, 2) inverse condemnation
pursuant to the Fifth and Fourteenth Amendments of the United
States Constitution, 3) equal protection violation pursuant
to 42 U.S.C. § 1983, 4) substantive due process
violation pursuant to 42 U.S.C. § 1983, and 5) punitive
damages under 42 U.S.C. § 1983. The Leones asserted that
the County was required to provide the Leones with just
compensation for their property, and that they were also
entitled to punitive damages in the amount of $50 million.
County filed a motion to dismiss, which the circuit court
granted on March 2, 2009. The circuit court determined that
"there [were] effective remedies still available"
to the Leones, such as proceeding with a new application with
appropriate submissions, seeking an amendment to the
community plan, or applying for a special management use
permit pursuant to the provisions of HRS §§
12-202-13 and 12-202-15. Because "effective
remedies" were still available to the Leones, the
circuit court concluded that the Leones had "failed to
exhaust their administrative remedies." As such, the
circuit court ruled that the case was "not ripe for
adjudication" and that the circuit court lacked
jurisdiction over the subject matter of the case.
Initial ICA Proceedings
Leones appealed this decision and on June 22, 2012, the
Intermediate Court of Appeals (ICA) published an opinion
which vacated the circuit court's judgment and remanded
the case for further proceedings. See Leone v. Cty. of
Maui, 128 Hawai'i 183, 284 P.3d 956 (App. 2012)
(Leone I). The ICA concluded that the circuit court
erred in determining that it lacked subject matter
jurisdiction because the Leones' claims were not ripe for
adjudication. Id. at 196, 284 P.3d at 969. The ICA
specifically determined that the Department's letter,
which declined to process the Leones' SMA assessment
application, satisfied the finality requirement for ripeness,
and that the Leones were not required to seek a change in the
community plan, which amounted to seeking a change in the
existing law, before they could bring their inverse
condemnation claims. Id. at 193-96, 284 P.3d at
import to the proceedings on remand, the ICA commented in a
footnote on the inconsistencies of the Maui County permitting
[T]he proposed use - the construction of single-family
residences - is not considered a "development"
under the CZMA unless the authority finds a cumulative impact
or significant environmental effects. HRS § 205A-22.
Although the CZMA does not expressly require consistency for
proposed land uses that are not considered
"developments, " the Maui County Code (MCC) renders
the Community Plan binding on all county officials. MCC 2 . 8
OB . 030 (B) (2006) . Under the express language of the code,
neither the director nor the Planning Commission may approve
land uses that are inconsistent with the Kihei-Makena
Community Plan. The language of the SMA Rules comports with
this outcome, stating in mandatory terms that "the
director shall make a determination . . . that the
proposed action either: (5) Cannot be processed
because the proposed action is not consistent with the county
general plan, community plan, and z oning[.]" SMA Rule
12-202-12 (f) (emphasi s added). In any case, the
Director's decision that Appellants' assessment
applications could not be processed had the same effect as a
determination that it was a development. If, because of a
"cumulative impact or a significant environmental or
ecological effect, " a single-family residence is
considered a development, then an SMA permit would be
required. If a permit were required, it could not be approved
because it would be inconsistent with the Community Plan.
Thus, regardless of the denomination of the assessment
application, the Director's determination of
inconsistency with the Community Plan precludes further
processing under applicable law.
Id. at 194 n.8, 284 P.3d at 967 n.8 (alterations in
original) (citations omitted). Accordingly, the ICA vacated
and remanded the case to the circuit court for further
proceedings. Id. at 196, 284 P.3d at
Circuit Court Proceedings on Remand
trial was held from March 30 through May 5, 2015 on the same
five counts. During opening statements, the Leones
showed the jury a tax map that depicted the Palau'ea
Beach properties and explained who owned them and how they
And these are the present owners of properties. The north end
of the beach you have Mr. Sweeney and Mr. Lambert's
properties. They have homes on them today, and the reason why
they have homes on them, we'll explore in more detail.
This is the Leones' property. It has a path on it leading
from Old Makena Road to the beach that is used every day by
members of the public.
This is the Larsons' properties. These two lots are owned
by Bill and Nancy Larson. This parcel, Lot 52, is now being
built upon, and the reasons why Mr. Larson got approval to
build on his property we'll go in to also.
These two lots in the middle of the beach are owned by the
County. The County bought them for beach-park purposes back
in the end of 1999, but never improved the property.
This property is owned by Mr. Altman. This next property is
owned by an associate of Mr. Leone's named Dan Warmhoven,
Galando, and Luzco, and these three properties are on the
rocky point at the south end of the beach, and they're
improved with homes on them today.
to the Leones, the shifting political climate on Maui was the
reason why some landowners at Palau'ea Beach were allowed
to build homes on their properties, while the Leones were
denied that same right:
Under Mayor Apana's administration, some of the other lot
owners were able to get those approvals. They got SMA
Assessment Applications filed. The exemptions were granted by
Planning Director Min, building permits were issued, and they
went forward and started building their homes; Lambert and
Sweeney among others.
After Mayor Arakawa took office, during his first
administration, he appointed a new Planning Director named
Michael Foley, and within eight days after taking office,
Planning Director Foley announced there would be no more
approvals for homes at Palauea Beach and stopped granting
extensions at Palauea.
Leones contended that it was at that time that they sought to
obtain permits for building a single-family residence on
their property, after Mayor Arakawa took office and the new
Planning Director decided to stop development at Palau'ea
Beach. The Leones further explained that after Mayor Arakawa
took office for the second time, the policy shifted again,
but it was too late for the Leones to build at that point:
Now, after Mayor Arakawa takes office for the second time,
the political winds shift again, and beginning in 2012, the
current Arakawa administration begins granting approvals to
some of the other lot owners to build.
The problem from the Leones' perspective is that in
September of 2011, there was a 40-year storm off of New
Zealand, which came up over the coastal dunes and into their
property and left debris much further inland than it had been
before. The debris line creates a shoreline, and since the
debris line came so much farther inland than it had before,
the Leones were unable to build.
such, the Leones contended that the "effect of the
County's actions was to deprive the Leones of all
economically viable use of their land."
part, the County presented the following opening argument:
The County submits that the evidence in this case is not
going to show that the Leones were denied the right to build
on their lot. The evidence in this case is going to show that
they did not want to go through the same process, the
difficult process that each of the other seven lot owners out
here who have single family residences on their lot went
through. That's why we're here today.
Regulations are not inflexible. We've got seven other lot
owners out there who are, again, living in very luxurious
single family homes. They dealt with these regulations. They
built on the lot. There's a guy out there building now.
testimony during trial focused almost exclusively on two
distinct but interrelated inquiries: 1) whether the
County's regulations prevented the Leones from building a
single-family residence, and 2) if so, whether this deprived
the Leones of economically beneficial use of their property.
As to the first query, the circuit court ultimately
instructed the jury that the County's actions had
prevented the Leones from building a house on their property:
Ladies and gentlemen, at an earlier point during the trial, I
read to you the law as you must apply in this case. I'm
going to read three additional portions of the law that you
must apply to the facts of this case.
The first instruction to you is as follows: Following an
appeal at an earlier stage of this case, the Hawaii
Intermediate Court of Appeals issued an opinion entitled
Leone, et al., vs. County of Maui, et al. That
opinion is the law of this case and is binding on the parties
and this Court.
Second instruction. In the Leone opinion, the
Intermediate Court of Appeals stated as follows: The language
of the SMA Rules state in mandatory terms that the Director
shall make a determination that the proposed action either
cannot be processed - actually that's either, five,
cannot be processed because the proposed action is not
consistent with the County General Plan, Community Plan, and
Zoning. That's SMA Rule 12-202-12, subparagraph F.
In any case, the Director's decision that the Leones'
Assessment Applications could not be processed has the same
effect as a determination that it was a development. If,
because of a cumulative impact or a significant environmental
or ecological effect, a single family residence is considered
a development then an SMA permit would be required.
If a permit were required, it could not be approved because
it would be inconsistent with the Community Plan. Thus,
regardless of the denomination of the Assessment Application,
the Director's determination of the inconsistency with
the Community Plan precludes further processing under
The final instruction at this point of the case is as
follows: Under the Maui SMA Rules, the Planning Director may
not legally process an application for an SMA exemption for a
land use that is inconsistent with the Kihei-Makena Community
(Formatting altered.) These rulings shifted the parties'
focus to the second inquiry: whether the County's
regulations deprived the Leones of economically beneficial
use of their property.
parties called expert witnesses to testify as to the use and
value of the Leones' property. The County called Ted
Yamamura (Yamamura), a real estate appraiser with over
thirty- five years of experience appraising Maui real
property, to testify on the value and use of the Leones'
property. At the outset, Yamamura testified that he
has done thousands of real estate appraisals on Maui over
decades and that he determines the "best uses" for
the real estate in doing an appraisal. Yamamura explained the
test that he uses for determining highest and best use:
"There's a four-item test; that use must be legally
permissible, physically possible, financially feasible, and
maximally productive, which means that use will yield the
highest value for that land."
for the County then asked Yamamura about investment use:
[COUNTY:] Mr. Yamamura, let me start by asking, what is meant
by investment in land?
[YAMAMURA:] It's the use of land as an investment tool.
In other words, people would buy land, hold it for a period
of time, and as it increases in value and depending on the
buyer's strategy and financial objectives, sell it for
[COUNTY:] Do you have an opinion as to whether investment is
a use of land?
[YAMAMURA:] I consider investment as a bona fide use of land.
It happens all the time. People by [sic] land, hold on to it;
after it appreciates over time, people sell it for profit. I
think that's a bona fide land use.
[COUNTY:] In your opinion, Lot 15 at Palauea - based on your
analysis of Lot 15 at Palauea, does it have potential use as
[YAMAMURA:] Absolutely, yes.
[COUNTY:] And looking at the first factor of your analysis,
which is legally permissible, why do you draw that conclusion
based on that particular factor?
[YAMAMURA:] Legally permissible. It's -- the underlying
Zoning of that lot is HM.
[YAMAMURA:] But there's a conflict in the Community Plan,
but if - under the context of legally permissible, if the
issue of that conflict can be mitigated, then we can look at
it as being a legally permissible use in the context of
highest and best use because that issue or that conflict can
circuit court overruled the Leones' objections to this
Tsujimura (Tsujimura), a real estate attorney, testified as
an expert witness for the Leones. Tsujimura opined that the
inconsistences between the community plan and the zoning
requirements left the Leones "deprived of all
economically beneficial use for that lot." Tsujimura
The Community Plan is designated park. On the Zoning it's
hotel, multi-family. So as you can see, there's an
inconsistency between those two. They don't line up.
The original intent of the State Plan, the State land use,
the General Plan, the Community Plan was for all of this to
line up and, consequently, what has happened is we're in
a situation, because of this inconsistency, when the Leones
come in for an SMA permit - Assessment Application, part of
the law, both at the State level and Chapter 205A and the
County SMA law in Chapter 12-202-12, it requires that these
pieces align. And when they ...