Opinion ID: 1172280
Heading Depth: 2
Heading Rank: 3

Heading: The BLNR's Valuation Method is Consistent With Legislative Intent.

Text: Appellant, however, fails to explain or distinguish the section of HRS § 171-99(a) highlighted in bold, supra, and relies primarily on his characterization of the legislative history of the statute. The 1949 legislative history of JR 12 states that: The purpose of [JR 12] is to provide for the issuance of fee simple patent to every homesteader who has contracted for a 999 year homestead of public lands and which lands have been improved under said lease and have been occupied as a place of residence by the lessee for a period of not less than ten years. It provides that said issuance shall be made upon the payment to the Commissioner of Public Lands of a fair price of the land involved without regards to the value of improvements made by said lessee. Hse. Stand. Comm. Rep. No. 621, in 1949 House Journal, at 1610. Appellant acknowledges, in his amended opening brief that it was the clear intent of the legislature that all homestead lessees be provided with the opportunity to obtain fee patents. Nevertheless, he claims that limiting the class of fee purchasers to homestead lessees who were financially capable of paying the fair market price, without regard to the encumbrance of the remaining term of the homestead lease ... would frustrate the intent of the legislature to phase out the Homestead Lease program.... Appellant mistakenly equates an opportunity with a guarantee. This interpretation fails, not only on the basis of plain language analysis as discussed, supra, but for the following reasons as well. First, the BLNR asserts that it has always viewed a 999-year homestead lease as being in the nature of a rent-free grant that terminates upon the sale of the fee interest. This contention has merit when one examines the nature of a residential lease and compares it with that of a homestead lease. Under our system of real property ownership, title in fee simple absolute affords an owner the greatest number of rights and the highest degree of power: The modern fee simple absolute represents the highest concentration of rights and privileges in the hands of an individual that can arise in a particular stage of the political economy. In a fee simple absolute all possible rights and privileges with respect to land are either in the control of the individual owner or of the sovereign. . . . . The absolute in the fee simple implies the right of the owner to have uncontrolled use and disposition of all of the legal and physical properties therefor. It contemplates the untrammeled power of alienation. Such alienation may be inter vivos or post mortem. It may be voluntary or involuntary.... Thus the holder of the fee simple absolute may: (a) freely alienate inter vivos and create any estate in the grantee recognized by law; (b) he may devise the property by exercising the legal method authorized by the jurisdiction and so may cut off without condition any prospective heir; (c) subject the property or any portion thereof to sale for payment of debts; (d) treat the property in any manner without anyone being legally able to object to waste so long as the holder does not transgress public policy. Thompson on Real Property § 17.07 at 453 (David A. Thomas ed. 1994) (emphases added). The property interests of lessees are more limited. Nevertheless, absent contractual or statutory provisions to the contrary, [8] lessees may freely assign or transfer their interests to others, in keeping with the general policy against restraints on alienation. Roger A. Cunningham et al, The Law of Property § 6.71, at 391 (2nd ed. 1993). In contrast, homesteaders may not encumber or alienate the property in any way. Appellant cites one example in 1953 where an appraiser followed the BLNR's procedures but filed a dissenting report, arguing that under normal circumstances, the value of the remaining term of a lease should be taken into account. He acknowledged, however, that homestead lessees, unlike traditional residential lessees, do not possess the right to: (1) sublet the premises, (2) assign the lease, (3) dispose or alienate the property by will, gift, or otherwise, [9] (4) use the land as collateral, (5) live elsewhere, (6) maintain anything other than a home upon the land, and (7) subdivide the land. [10] See Board of Appraiser, Oahu Land District, Territory of Hawai`i, Appraisal Report on Homestead Lease numbers 30, 36, October 29, 1953, Dissenting Report by Y.T. Lum, M.A.I. In other words, a homestead lease, unlike most other leases, has no market value. Consequently, Appellant's analysis is flawed inasmuch as it would result in homesteaders receiving compensation for a land interest that has no value on the open market, an illogical result. [11] Second, the length of Appellant's lease is not absolutely secured for a set term, rather, its total duration is speculative. Unlike residential leases, a homestead lease may be terminated for reasons other than default, as provided in HRS § 171-99. For example, in the event that there is no successor to the homesteader's interest, the lease ceases. Again, it is logically unsound to hold that Appellant receive credit for an interest he does not currently possess and that, in fact, may never vest. Third, other subsections within HRS § 171-99 itself support the argument that the lease encumbrance should not be considered when evaluating the fee simple interest. A fundamental rule of statutory construction is that we must give, if possible, effect to all parts of the statute. Kaakimaka, 84 Hawai`i at 289-90, 933 P.2d at 626-27 (citation omitted). HRS §§ 171-99(c) and (d) provide in pertinent part: (c) ... At the end of three years from the date of the payment of the first installment, the holder of a freehold agreement is entitled to a land patent for the premises described therein, if the following conditions, in addition to those set forth herein, have been substantially performed: (1) Payment of the balance of the purchase price in equal installments, in one, two and three years respectively, from the date of the freehold agreement with interest annually at the rate of four per cent; provided that the freeholder may pay the installment before it is due, and thereby stop the corresponding interest [.] . . . . (d) Right of purchase lease; termination, forfeiture, or surrender. Upon the termination of a right of purchase lease... the board may in its discretion and within the limit of its authority open the premises or any part thereof for disposition.... Before the disposition the fair market value thereof shall be established by appraisal. The value attributable to the improvement in the appraisal shall be paid to the surrendering lessees or freeholders, upon resale of the premises, and the director of finance shall pay the amount of the valuation upon the requisition of the board out of such funds. [12] (Emphases added.) Subsection (c) contemplates payment for the fee patent in installments. Once again, it would be illogical to assume that the legislature intended that the lease encumbrance be factored into an appraisal, inasmuch as the value of the fee would always be a nominal sum, e.g., $1.00, and then require that this amount be paid in three installments. In addition, subsection (d) clearly authorizes the BLNR to take into account only the improvements upon the land, not the remaining term of the lease. Taken together, these provisions further strengthen the conclusion that the BLNR has correctly excluded the remaining term of the leasehold from the appraisal process. Fourth, in 1994, the legislature rejected the argument that the fee patents on homestead leases should be sold for $1.00. House Bill No. 3113 was submitted in an effort to amend HRS § 171-99 to that effect, but the bill died in committee. A court may look to subsequent legislative history or amendments to confirm its interpretation of an earlier statutory provision. Franks v. City and County of Honolulu, 74 Haw. 328, 340 n. 6, 843 P.2d 668, 674 n. 6 (1993). Presumably, the legislature was aware of the status of the law and the policies of the BLNR, yet declined to amend the statute. Cf. Hawai`i State AFL-CIO v. Yoshina, 84 Hawai`i 374, 377, 935 P.2d 89, 92 (1997) (drafters of a constitutional provisions `are presumed to have known the existing law and to have drafted the .... provisions in light of that knowledge.'). Therefore, if the legislature had intended the BLNR to charge $1.00 for the fee interest, it would have done so directly, rather than use the term fair market price. Moreover, it would not have required (1) an appraisal that (2) excluded the value of improvements on the land, if the fee were to be reduced by the 999-year leasehold interest, which, in turn, would always diminish the value of the fee interest to a nominal sum. If that were the case, an appraisal would be patently unnecessary, and the relevant portion of the statute would be superfluous. Finally, [it] is a well established rule of statutory construction that, where an administrative agency is charged with the responsibility of carrying out the mandate of a statute which contains words of broad and indefinite meaning, courts accord persuasive weight to administrative construction and follow the same, unless the construction is palpably erroneous. Treloar v. Swinerton & Walberg Co., 65 Haw. 415, 424, 653 P.2d 420, 426 (1982) (citations omitted). In Treloar, this court overruled an ICA decision in favor of the party challenging the Labor and Industrial Relations Appeals Board's interpretation of HRS § 386-89(c). Quoting Waikiki Resort Hotel, Inc. v. City & County of Honolulu, 63 Haw. 222, 242-43, 624 P.2d 1353, 1368 (1981), the court restated its prior holding that administrative practice, consistent and generally unchallenged, will not be overturned except for very cogent reasons if the scope of the command is indefinite and doubtful.... The practice has peculiar weight when it involves a contemporaneous construction of a statute by the men charged with the responsibility of setting its machinery in motion, of making the parts work efficiently and smoothly while they are yet untried and new. Treloar, 65 Haw. at 424, 653 P.2d at 426 (emphasis added). Moreover, In order to preserve the function of administrative agencies in discharging their delegated duties and the function of this court in reviewing agency determinations, a presumption of validity is accorded to decisions of administrative bodies acting within their sphere of expertise and one seeking to upset the order bears the heavy burden of making a convincing showing that it is invalid because it is unjust and unreasonable in its consequences. In re Application of Hawaii Elec. Light Co. Inc., 60 Haw. 625, 629, 594 P.2d 612, 617 (1979) (citations omitted). Since the enactment of JR 12, the contemporaneous construction of those mandated to enforce the statute consistently has been to exclude the speculative valueif anyof the lease from the appraisal process. For example, in 1953, the Board of Appraisers requested guidance from the Public Land Commissioner, who stated that: The law does not require a Homesteader to give up any rights he may presently be enjoying as a lessee but leaves the matter of whether he desires a change in status squarely up to him. Consequently, this appraisal should be made on the premise that the homestead lease will be canceled, and the value of the lessees' interest under the 999 year homestead lease should be disregarded. John H. Bay & Jane vanSchaick, Analysis of the 999 Year Homestead Lease Program, January 10, 1994 (quoting Letter from Marguerite K. Ashford, Public Lands Commission to Board of Appraisers, June 1, 1953). Thus, the BLNR's interpretation of HRS § 171-99 should be accorded deference, inasmuch as (1) it is consistent with the contemporaneous constructionin the 1950sof those responsible for implementing the statute, (2) it is not palpably erroneous, and (3) the results are neither unreasonable nor unjust. The legislature afforded homesteaders the right to either remain on the land, rent-free, or to purchase the fee patent of their leasehold at a fair market price.