Opinion ID: 746291
Heading Depth: 3
Heading Rank: 3

Heading: The Just Compensation Clause

Text: 41 When a government uses its powers of eminent domain to condemn property, it must provide the property owner with just compensation. U.S. Const. amend V.; accord Haw. Const. art. I, § 20. Just compensation is the full monetary equivalent of the property taken. United States v. Reynolds, 397 U.S. 14, 16, 90 S.Ct. 803, 805, 25 L.Ed.2d 12 (1970). 42 The landowners argue that Ordinance 91-95 does not fully compensate them for the taking of their property. In particular, they argue that the Ordinance fails to provide compensation for their loss of rental income or for the diminution in the value of their remaining fee simple interest in any land that is involuntarily converted from their sole ownership to a cotenancy under the ordinance. 6 Both district courts dismissed these claims as unripe. Richardson, 802 F.Supp. at 341; Small Landowners, 832 F.Supp. at 1411. 43 Ripeness is a question of law reviewed de novo. Carson Harbor Village Ltd. v. City of Carson, 37 F.3d 468, 474 (9th Cir.1994). If a claim is unripe, federal courts lack subject matter jurisdiction and the complaint must be dismissed. Southern Pac. Transp. Co. v. City of Los Angeles, 922 F.2d 498, 502 (9th Cir.1990). Whether a claim is ripe generally turns on the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration. Pacific Gas & Elec. Co. v. State Energy Resources Conserv. & Devel. Comm'n, 461 U.S. 190, 201, 103 S.Ct. 1713, 1720, 75 L.Ed.2d 752 (1983). The central concern [of the ripeness inquiry] is whether the case involves uncertain or contingent future events that may not occur as anticipated, or indeed may not occur at all. 13A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3532 at 112 (2d ed. 1984). 44 Here, the Bishop Estate came to federal court the same day the City enacted the Ordinance. The condemnation procedure at issue is not self-executing. Rather, several events must occur before any taking will occur. First, at least 25 condominium owners or the owners of 50% of the units, whichever is less, must file an application with the Department to trigger the Ordinance's procedures. Then, after [d]ue notice is given and a public hearing held, the Department must determine whether the exercise of the power of eminent domain requested by the applicants will effectuate the public purposes of [the Ordinance]. Honolulu City & County, Haw. Ordinance 91-95 § 2.2(a)(2). The Ordinance also requires that, before the Department exercises its power of eminent domain, that the lessor and lessees negotiate the just compensation which will be paid. Honolulu City & County, Haw. Ordinance 91-95 § 4.6. Only then will the Department set forth to condemn property. 45 At this juncture, no group of tenants has asked the Department to invoke the condemnation procedures created by the Ordinance. It is possible that any one of the conditions precedent to the exercise of the Department's eminent domain power might not occur. A sufficient number of qualifying tenants, see Honolulu City & County, Haw. Ordinance § 4.4 (setting forth seven requirements that lessee must meet before a sale takes place), might not file an application with the Department. The Department might conclude in any given case that exercising its power of eminent domain would not further the public purpose of the Ordinance. In any event, the required preliminary negotiations could result in an agreement as to the appropriate compensation. Because any one of these contingent events might not occur, we conclude that the landowners' claim under the Just Compensation clause is not ripe for federal adjudication. 46 The Supreme Court's clear guidance regarding application of the ripeness doctrine to takings claims reinforces our conclusion that the landowners' claim is not ripe. The Court has placed two hurdles in the way of a takings claim brought in federal court against states and their political subdivisions. Levald, Inc., v. City of Palm Desert, 998 F.2d 680, 686 (9th Cir.1993) (internal quotation omitted). It is the second of these two hurdles, which requires that plaintiffs seek compensation through the procedures the State has provided for doing so before turning to the federal courts, id. (internal quotation omitted), that has not been met here. Because no property has been targeted for taking, the landowners have not sought and been denied condemnation by the Department. Moreover, the landowners have not invoked the processes provided by Hawaii's courts for obtaining just compensation. 47 The landowners argue and the dissent concludes, however, that their claims are ripe because the Ordinance's plain language fails to provide for full compensation. Requiring the landowners to seek compensation through Hawaii's procedures, they argue, would be futile under existing state law. See id. at 686. The landowners burden of showing that complying with the state's procedures would be futile is a heavy one. American Savings & Loan Ass'n v. County of Marin, 653 F.2d 364, 371 (9th Cir.1981). We conclude that the landowners have not carried their burden. 48 The Ordinance provides that [t]he compensation to be paid ... shall be the current fair market value of the leased fee interest. Honolulu City & County, Haw. Ordinance § 1.2. It defines leased fee interest as the reversionary interests of the fee owner ... other than the lessee's or sublessee's interest. Id. The dissent argues that the plain meaning of the Ordinance deprives the landowners of compensation for the lost stream of rental payments and, therefore, unless the Ordinance means something other than what it very clearly says, it does not authorize the Department to give landowners just compensation. Dissenting Opinion at 1170. We disagree. 49 The Ordinance speaks of reversionary interests as being in the plural. This points to a recognition of multiple factors to be included in the valuation. The Fifth Circuit has stated that a reversionary interest is any future interest left in a transferor or his successor in interest. United States v. 50.822 Acres of Land, More or Less, 950 F.2d 1165, 1169 n. 4 (5th Cir.1992) (internal quotation omitted) (emphasis added). The Department could well interpret the reversionary interests of the fee owner as his entire interest in the land under the condominiums as of the date the eminent domain action is commenced. 50 Basic principles of property law, in fact, practically compel that interpretation. The reversionary interest of a lessor, as the dissent notes, is [t]he property that reverts to the grantor after the expiration of an intervening income interest. Blacks Law Dictionary 1186 (5th ed. 1979). In other words, a reversionary interest is [a] right to the future enjoyment of property, at present in possession or occupation of another. Id. The Ordinance thus directs the Department to pay the fair market value of the property which reverts to the lessor at the expiration of the lease. What reverts to the lessor is a fee interest in the ground underneath the condominium. The projected earning of that property would be a normal factor in determining the value of the property that reverts to the lessor. See Ordinance 91-95 at § 1.2 (defining fair market value as the price to which a willing buyer and seller taking into consideration all uses to which the land is adapted or might in reason be applied). 51 We hold that the landowners' challenge is not ripe. There are obviously many different ways the Department could approach the valuation of the lessors' reversionary interest. The Department has not issued regulations regarding the compensation of the landowners and there is no basis for determining that the landowners will not be fully compensated for their interests. It is apparent that the plain meaning of the Ordinance does not foreclose the payment of constitutionally adequate compensation for the landowners' reversionary interests. Moreover, the City's intent to pay the current fair market value of the leased fee interest is clear. The Ordinance anticipates a complete valuation of the lessors' property interests. It is only if the definition of leased fee interest is given a restricted meaning that the landowners would not receive constitutionally adequate compensation. Until that happens, federal adjudication of the landowners' just compensation claim is premature.