State of Hawaii v. Don Howard Williams

NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
15-APR-2024
08:08 AM
Dkt. 86 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAIʻI

STATE OF HAWAIʻI, by its Attorney General,
Plaintiff-Counterclaim Defendant-Appellee, v.
DON HOWARD WILLIAMS, JR., TRUSTEE OF THE WILLIAMS OPPORTUNITY
TRUST; et al., Defendant-Counterclaimant-Appellant,
AMERUS LIFE INSURANCE COMPANY, an Iowa corporation;
Defendant-Appellee, JOHN DOES 1–100; MARY ROES 1–100;
DOE PARTNERSHIPS 1–100; DOE TRUST 1–100; DOE ENTITIES 1–100;
DOE ESTATES 1–100; and DOE CORPORATIONS 1–100,
Defendants.

APPEAL FROM THE CIRCUIT COURT OF THE SECOND CIRCUIT
(CASE NO. 2CC131000724)

SUMMARY DISPOSITION ORDER
(By: Hiraoka, Presiding Judge, Nakasone and McCullen, JJ.)

Defendant-Counterclaimant-Appellant Don Howard

Williams, Jr., as Trustee of the Williams Opportunity Trust
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(Williams) 1 appeals from the Circuit Court of the Second

Circuit's October 10, 2018 Final Judgment. 2

On appeal, Williams contends the circuit court erred

in (1) denying his motion in limine to exclude evidence of the

condemned property's valuation on a date other than the date of

summons and (2) granting Plaintiff-Counterclaim Defendant-

Appellee State of Hawaii's (State) motion in limine to value

property solely on the basis of the undivided fee rule.

As a brief background, in 1994, the State Department

of Land and Natural Resources' Division of Boating and Ocean

Recreation (DOBOR) and Williams as an individual entered into a

thirty-year lease covering his Mā‘alaea property (Property)

located adjacent to the Mā‘alaea Small Boat Harbor. The lease

stated DOBOR would occupy and use the Property "for marine and

ocean recreation purposes, including: a staging area during

[Mā‘alaea] Boat Harbor improvements, a maintenance baseyard, fish

processing center, Marine Patrol operations, boat repair and dry

storage of vessels and marine equipment." (Emphasis omitted.)

1 Don Howard Williams, Jr. filed his answer and counterclaim as an
individual in the Circuit Court of the Second Circuit. The parties later
filed a stipulation to substitute "Don Howard Williams, Jr., as Trustee of
the Williams Opportunity Trust" as the real party in interest in place of Don
Howard Williams, Jr. (Formatting altered.)
2 The Honorable Rhonda I.L. Loo presided.

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In 2013, the State filed a "Complaint in Eminent

Domain" (Complaint) in circuit court, seeking to condemn the

Property. It noted "[t]he public use to be served by the

condemnation of the Property is the construction, preservation,

and improvement of a public harbor to wit: [Mā‘alaea] Small Boat

Harbor development expansion at [Waikapū], Wailuku, Maui,

[Hawaiʻi]." A summons date stamped June 27, 2013 was also

appended to the Complaint.

The case, however, never went to trial. Instead, the

parties settled after the circuit court ruled on two motions in

limine.

In the first motion in limine, the State asked the

circuit court to "(1) determine . . . the appropriate valuation

procedure in this condemnation proceeding is based on Hawaii's

undivided fee rule; and (2) exclude evidence or testimony of

valuation based on the divided fee interests in the subject

property." The circuit court granted the State's motion.

In the second motion in limine, Williams asked the

circuit court to limit evidence of valuation under Hawaiʻi

Revised Statutes § 101-24 (2012) to the date of the summons,

June 27, 2013. Williams asked the circuit court to exclude the

testimony of the State's appraiser, James Hallstrom (Hallstrom),

because his valuation was dated fourteen days before the date of

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summons. The circuit court granted in part and denied in part

Williams' motion, concluding the date of summons was the date of

valuation, but Hallstrom could testify as a valuation witness.

Based on these rulings, Williams noted "it's kind of

pointless to go to trial." The parties settled and stipulated

as follows:

1. Williams was the owner of the Property;

2. the public use to be served by the condemnation of the

Property was "the construction, preservation and

protection of" the Mā‘alaea Small Boat Harbor

development expansion;

3. the public use required "the taking of the Property in

fee simple absolute, free and clear of all liens and

encumbrances";

4. total just compensation and any damages "for the

condemnation of the undivided fee simple estate of the

Property on June 27, 2013 was $4,165,000.00";

5. stipulated valuation of the undivided fee simple

estate was based on the $4,165,000.00 estimated just

compensation the State deposited with the Clerk of

Court on July 2, 2013;

6. following the "Stipulation and Order to Disburse Funds

on Deposit with the Clerk of the Court" Aviva, a

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mortgagee of the Property, received $2,510,857.61 and

Williams received $1,654,142.39, "which together

constitute all payments . . . required by the final

judgment to be entered in this case";

7. there were "no other outstanding or unresolved

claims"; and

8. final judgment would "be entered as to all claims,

counterclaims, and parties, in favor of" the State and

against all defendants.

In the stipulation, Williams reserved his right to appeal:

Williams shall have the right to appeal the Judgment
to seek reversal or vacatur of the Judgment and the court's
orders and rulings, and in the event that such appeal
results in a remand of these proceedings to this court, the
parties, otherwise bound by the rulings of this court which
are not reversed or vacated by an appellate court, shall
not be bound by their stipulation herein that the total
just compensation, and damages if any, for the condemnation
of the undivided fee simple estate of the Property on
June 27, 2013 was $4,165,000.00.

The circuit court entered final judgment in favor of

the State and against Williams, dismissing "[a]ll other claims,

cross-claims, . . . counterclaims, and . . . parties[.]" The

circuit court determined the $4,165,000.00 "deposited with the

Chief Clerk of this Court" was the total just compensation and

damages payable for the taking; and the Williams Opportunity

Trust with Williams as trustee was the owner of the Property.

The circuit court also entered the Final Order of

Condemnation in the case pursuant to the final judgment and

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provided the Property was "condemned for the construction,

preservation, and protection of a public harbor, to wit:

[Mā‘alaea] Small Boat Harbor development expansion . . . and

title to [the Property] is hereby vested in the State[.]"

Williams timely appealed.

Upon careful review of the record and the briefs

submitted by the parties and having given due consideration to

the issues raised and the arguments advanced, we resolve the

points of error as discussed below.

(1) Williams contends the circuit court erred in

denying his motion in limine to exclude evidence of the

condemned property's valuation on a date other than the date of

summons. Williams argues "[t]he circuit court should have

precluded the State from presenting to the jury evidence about

the value of the property on any date but June 27, 2013," the

date of summons.

The circuit court held a hearing on Williams' motion

in limine on June 1, 2017, and its order granting in part and

denying in part Williams' motion in limine particularly relied

on the grounds announced during that hearing. But a transcript

of the June 1, 2017 hearing was not included in the record on

appeal before this court. As Williams is the appellant in this

case and contends error with the circuit court's decision on his

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motion in limine, he bore the burden of requesting the

transcript or including the transcript in the record. Hawai‘i

Rules of Appellate Procedure Rule 10(b)(1)(A) and (b)(4); Hous.

Fin. & Dev. Corp. v. Ferguson, 91 Hawai‘i 81, 92, 979 P.2d 1107,

1118 (1999) (leaving the trial court's decision in an eminent

domain case undisturbed where appellant did not provide a

relevant transcript, noting "the burden is upon appellant in an

appeal to show error by reference to matters in the record, and

[appellant] has the responsibility of providing an adequate

transcript") (citation and bracket omitted).

With no transcript of the relevant hearing in the

record on appeal, we will not conclude the circuit court's

denial of Williams' motion in limine was reversable error.

(2) Williams also contends the circuit court erred in

granting the State's motion in limine to value the Property

solely on the basis of the undivided fee rule. Williams argues

"the circuit court overlooked that valuing the income stream is

valuing the fee simple estate." He further maintains the

condemnation clause in the lease is "irrelevant to the

calculation of compensation." 3

3 In its answer, the State argues inter alia that "[t]here can be no
harm from the Court's preliminary rulings and no reversible error until the
State's challenged evidence is actually offered to a jury[.]"

(continued . . .)

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In its order granting the State's motion in limine,

the circuit court found "the Undivided Fee Rule is the

applicable valuation procedure under Hawaii law and the facts of

this condemnation proceeding, and evidence or testimony of

valuation based on the value of the divided fee interests in the

subject property is excluded from the jury[.]"

Williams moved for reconsideration. In denying his

motion for reconsideration, the circuit court found that "the

condemnation clause in the lease is binding, and City and County

of Honolulu v. Market Place, Ltd., 55 Haw. 226, 517 P.2d 7

(1973) makes clear that the State is only obligated to pay the

fair market value of the unencumbered fee value."

In Market Place, the City and County of Honolulu

initiated eminent domain proceedings for oceanfront land in

order to extend Kapi‘olani Park. 55 Haw. at 227, 517 P.2d at 11.

As compensation for the taking, the circuit court ordered

$86,373.61 payable to the lessee of the property and $950,198.00

(. . . continued)

Although the State correctly recites the law, the State's argument is
disingenuous because as part of the settlement to avoid trial it stipulated
Williams shall have a right to appeal for reversal or vacatur of the judgment
and rulings of the circuit court. See supra at 5.

The State is cautioned that it has a duty of candor towards this court.
See Hawai‘i Rules of Professional Conduct Rule 3.3; 7 C.J.S. Attorney & Client
§ 87 (2024) (explaining "[t]he requirement of candor goes beyond simply
telling a portion of the truth; it requires every attorney to be fully honest
and forthright").

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payable to the owner, which were two separate entities. 55 Haw.

at 229, 517 P.2d at 12.

On appeal, the Hawai‘i Supreme Court explained the

general rule "of determining just compensation for property

subject to several, independently held interests is to value it

as an unencumbered freehold estate, with allocation of fair

market value thus determined to be made thereafter among the

various interests." 55 Haw. at 233, 517 P.2d at 14. This is

the "undivided fee" rule. Id.

The supreme court held it was wrong for the circuit

court to award $86,373.61 to the lessee as compensation for

damages for developing the property. 55 Haw. at 234, 517 P.2d

at 15. And it explained, "[t]hese expenditures are, at best,

admissible as evidence of the land's enhanced value in the sense

that the anticipated condominium project may have been brought

closer to fruition thereby." Id.

The supreme court also explained that "market value is

not limited to the value for the use to which the land is

actually devoted, but it may have a potential use value." 55

Haw. at 242, 517 P.2d at 19 (cleaned up). "In determining

potential use value, any competent evidence of matters, not

merely speculative, which would be considered by a prospective

vendor or purchaser or which tend[s] to enhance or depreciate

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the value of property is admissible." Id. (cleaned up). "As

the foregoing principles suggest, the general aim of proceedings

in eminent domain is to arrive at an amount of just compensation

which as nearly as possible approximates the value which a free

market would attach to the taken property." Id.

If there is a reasonable argument for a probable use,

"competent evidence tending to show the value of that use should

be admitted." 55 Haw. at 243, 517 P.2d 20. "Perhaps the most

important consideration in the valuation of income-producing

property is the anticipated income from that property." Id.

Although the proposed use in Market Place was in the planning

stages, the supreme court opined "this factor alone should not

operate to exclude competent evidence of the value . . . the

market would apply to the enterprise in light of its chances of

success; rather, it should affect the weight . . . the jury may

properly give to such evidence." Id.

Unlike Market Place, here there is no separate lessee

seeking an order for "damages." But the supreme court's

analysis regarding admissible evidence remains on point.

Williams attached a portion of R.W. Spangler's

(Spangler) appraisal of the leased fee interest in the Property

to his opposition to the State's motion in limine. 4 At the

4 Spangler's entire appraisal was attached to Williams' motion in
limine.

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hearing on the State's motion in limine, the circuit court

stated it would grant the motion because the lease was

terminated "so there [was] no property interest to be

compensated for."

Spangler's appraisal was not rendered inadmissible

simply because it was based on the leased fee interest the

condemnation action ultimately terminated. The supreme court

has explained, a condemnee "is permitted to 'advance any

reasonable argument for a probable future use' when calculating

just compensation for a taking." City & Cnty. of Honolulu by &

through Honolulu Auth. for Rapid Transp. v. Victoria Ward, Ltd.,

153 Hawai‘i 462, 488, 541 P.3d 1225, 1251 (2023) (citation

omitted). And, Market Place established a condemnee's asserted

use "may be presented to a jury even if the asserted use is

hypothetical and disputed." Id. Therefore, a future income

stream from leasing the Property would not be speculative

because Williams had received actual income from leasing the

Property and appraisal of the leased interest could have been

presented to a jury.

Thus, to the extent the circuit court's granting of

the State's motion in limine precluded admission of possible

future lease income as evidence in determining the value of just

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compensation for taking Williams' property, the circuit court

abused its discretion.

For the above reasons, we vacate the circuit court's

October 10, 2018 Final Judgment, and remand this case for

further proceedings consistent with this summary disposition

order.

DATED: Honolulu, Hawai‘i, April 15, 2024.

On the briefs: /s/ Keith K. Hiraoka
Presiding Judge
Robert H. Thomas,
(Damon Key Leong Kupchak /s/ Karen T. Nakasone
Hastert), Associate Judge
for Defendant-
Counterclaimant-Appellant. /s/ Sonja M.P. McCullen
Associate Judge
Daniel A. Morris,
Fawn Y.J. Yamada,
Deputy Attorneys General,
for Plaintiff-Counterclaim
Defendant-Appellee.

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