Baker v. Department of Hawaiian Home Lands ( 2010 )

NOT IA*`OR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER
NO. 29503
IN THE INTERMEDIATE COURT OF APPEALS
umw
oF THE sTATE oF HAwAr1
FREDERICK H. K. BAKER, JR., and HAUNANI Y. BAKEH,
Appellants-Appellants,
v.
DEPARTMENT OF HAWAIIAN HOME LANDS,
MICAH A. KANE, BILLIE BACLIG, MILTON PA,
TRISH MORIKAWA, MAHINA MARTIN, FRANCIS LUM,
MALIA KAMAKA, PERRY ARTATES, STUART HANCHETT,
and TO ALL TO WHOM IT MAY CONCERN,
DONALD S.M. CHANG,
Appellees~Appellees
APPEAL FRoM THE cIRcUIT coURT oF THE THIRD cIRcUIT
(cIvIL NO. 07-1-0371)
SUMMARY DISPOSITION ORDER
(By: Nakamura, C.J., Foley, J., and Circuit
Judge Steven S. Alm, in place of Fujise,
Leonard, Reifurth, and Ginoza, JJ., all recused)
In this secondary appeal involving a canceled lease,
(Baker) and
Appellants-Appellants Frederick H. K. Baker, Jr.
appeal from the
Haunani Y. Baker (collectively, Appellants)
2008 in the Circuit Court of the
Judgment filed on November 7,
Third Circuit1 (circuit court). The circuit court entered
judgment in favor of Appellees-Appellees Department of Hawaiian
Micah A. Kane, Billie Baclig, Milton Pa, Trish
Francis Lum, Malia Kamaka, Perry
Home Lands (DHHL),
Morikawa, Mahina Martin,
Artates, Stuart Hanchett, and Donald S.M. Chang (collectively,
and against Appellants.
On appeal, Appellants contend:
Appellees)
The cancellation of Baker's Agricultural Lot Lease
(l)
(farm
5lO7 (Lease)
as the result of his default on his loan
from DHHL's Hawaiian Home Farm Loan Fund violates the
NO.
loan)
1 The Honorable Glenn S. Hara preSided.
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intent, spirit, purpose of, and applicable rights/duties under
the Hawaiian Homes Commission Act, 1920 (HHCA).2
(2) The Hawaiian Homes Commission (the Commission)
failed to consider Appellants' evidence at the September 2l, 2006
contested case hearing and therefore based its decision on an
incomplete record, in violation of Hawafi Administrative Rules
(HAR> §§ 10-5-4l(a) (l998) and 10-5-42(a) (l998).
(3) Deputy Attorneys General George K.K Kaeo, Clayton
Lee Crowell (Crowell), and Kumu B. Vasconcellos (collectively,
Deputy AGs) misrepresented that the civil complaint against Baker
would be dismissed and the parties permitted to resolve the
dispute informally, to Baker's detrimental reliance; _
(4) DHHL was not authorized to charge 8-3/4% annual
interest on Baker's farm loan at the time Baker entered into the
loan agreement.
(5) Appellants had no notice that Appellees required
strict performance of the contract terms or of the impending
default absent prompt payment of arrearage.
Upon careful review of the record and the briefs
submitted by the parties and having given due consideration to
the arguments advanced and the issues raised by the parties, as
well as the relevant statutory and case law, we resolve
Appellants' points of error as follows:
(l) Appellants contend the cancellation of the Lease
as a result of Baker's farm loan default violates the intent,
spirit, and purpose of the HHCA. Appellants further contend that
under the HHCA, Baker has vested rights and Appellees have
fiduciary duties, which Appellees breached by canceling the
Lease.
Appellees respond to Appellants' argument as follows:
Section l0l, HHCA, does not provide for an "inherent"
right to occupy Hawaiian homelands [sic]. A lessee must
still comply with other requirements of the HHCA and the
2 The HHCA is part of the Hawafi Constitution and can be found in
Hawaii Revised Statutes (HRS), vol. 1, at 261-308 (2009 Repl.).
2
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terms of the homestead lease, including payment of
loans. . . . Moreover, cancellation of Mr. Baker's Lease
does not affect the general rights of native Hawaiians to
the land. The Department will award the premises under a
new lease to the next eligible native Hawaiian on the
Department of Hawaiian Home Lands' waiting list.
we agree with Appellees. In Office of Hawaiian Affairs
v. Housing & Community Development Corp. of HawaFi, 117 HawaiH
174, 177 P.3d 884 (2008), rev'd on other grounds, Hawaii v.
Office of Hawaiian Affairs, __ U.S. __, 129 S. Ct. 1436 (2009),
the Hawafi Supreme Court noted:
The Hawaiian Homes Commission Act was enacted by the
United States Congress (Congress) to set aside over 200,000
acres of ceded lands for exclusive homesteading by native
Hawaiians. H.R, Rep. NO. 839, 66th Cong., 2d Sess. 4
(1920). As a condition of statehood, the United States
required the State to adopt the act as a provision of the
state constitution, see Hawafi Const. art. XI, § 2 (1959)
(renumbered art. XII, § 2 (1978)).
office of Hawaiian Affairs, 117 Hawai‘i at 182 n.s, 177 P.zd 892
n.5. The HawaFi Supreme Court further noted that "the primary
purpose of the HHCA was the rehabilitation of native Hawaiians"
on lands given the status of Hawaiian home lands. Ahuna v. Dep't
of Hawaiian Home Lands, 64 Haw. 327, 336, 640 P.2d 1161, 1167
(l982).
HHCA §§ 207 and 208 expressly grant DHHL the power to
lease tracts of Hawaiian home lands to native Hawaiians and
stipulate conditions for these leases, including the lessee's
payment of taxes. Should a lessee allegedly violate these
conditions, § 210 permits DHHL to conduct a hearing to determine
whether to cancel the lessee's 1ease:
§210. Cancellation of leases. Whenever the
department has reason to believe that any condition
enumerated in section 208, or any provision of section 209,
of this title has been violated, the'department shall give
due notice and afford opportunity for a hearing to the
lessee of the tract in respect to which the alleged
violation relates or to the successor of the lessee's
interest therein, as the case demands. If upon such hearing
the department finds that the lessee or the lessee's
successor has violated any condition in respect to the
leasing of such tract, the department may declare the
lessee's interest in the tract and all improvements thereon
to be forfeited and the lease in respect thereto canceled,
and shall thereupon order the tract to be vacated within a
reasonable time.
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Section 214 further grants DHHL the power to make loans
from revolving funds to any lessee or native Hawaiian who holds a
lease under the HHCA. Section 215(2) stipulates conditions for
these loans:
§2l5. Conditions of loans.
(2) The loans shall be repaid in periodic
installments, such installments to be monthly,
quarterly, semiannual, or annual as may be
determined by the department in each case. The
term of any loan shall not exceed thirty years.
Payments of any sum in addition to the required
installments, or payment of the entire amount of
the loan, may be made at any time within the
term of the loan. All unpaid balances of
principal shall bear interest at the rate of two
and one-half per cent a year for loans made
directly from the Hawaiian home loan fund, or at
the rate of two and one-half per cent or higher
as established by law for other loans, payable
periodically or upon demand by the department,
as the department may determine.
when a borrower breaches these conditions, § 216 permits DHHL to
conduct a hearing to determine whether to accelerate the loan
and/or enforce a lien on the borrower's interest in property:
§216. Insurance by borr0wers; acceleration of loans;
lien and enforcement thereof.
(b) whenever the department has reason to believe
that the borrower has violated any condition enumerated in
paragraph (2),(4),(5), or (6) of section 215 of this Act,
the department shall give due notice and afford an
opportunity for a hearing to the borrower or the successor
or successors to his interest, as the case demands. If upon
such hearing the department finds that the borrower has
violated the condition, the department may declare all
principal and interest of the loan immediately due and
payable notwithstanding any provision in the contract to the
contrary.
(d) The department may, subject to this Act and
procedures established by rule, enforce any lien by
declaring the borrower's interest in the property subject to
the lien to be forfeited, any lease held by the borrower
canceled, and shall thereupon order such leasehold premises
vacated and the property subject to the lien surrendered
within a reasonable time.
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These provisions clearly demonstrate that where the
lessee/borrower fails to comply with applicable rules, DHHL may
accelerate the borrower's unpaid principal and interest, cancel
the lease, and/or force the lessee/borrower to vacate the
property.
The evidence demonstrates that Baker entered into a
lease with DHHL. Baker further entered into a $27,000 farm loan
with DHHL and agreed to assign to DHHL 30% of gross proceeds from
the sale of crops. Baker failed to pay property taxes. Baker
further failed to make monthly payments on the farm loan and as
of August 20, 2006 was delinquent in the amount of $49,168.40.
Under these facts, we conclude that DHHL lawfully
canceled the Lease for Baker's failure to comply with the HHCA
applicable rules.
(2) Appellants argue that the hearing officer
erroneously noted in his October 13, 2006 "Amended Findings of
Fact Conclusions of Law and Recommended Order" (Recommended
Order) that Baker "appeared at the April 6, 2006 hearing and
refused to participate because he was under the impression thati
the hearing was being held before the Commission and not a
hearing officer." Appellants allege that they, in fact,
participated in the hearing by submitting evidence (an answer
with supporting exhibits) and presenting two important points
(one, a summary possession action had been filed by DHHL and two,
Appellants had drafted a settlement proposal to resolve the loan
dispute). Appellants contend the absence of any mention in the
Recommended Order of their evidence or points violates HAR § 10-
5-41(a). HAR § 10-5-41(a) provides that "[a]ll findings,
conclusions and orders recommended by the hearing officer shall
be based upon the whole record and supported by the reliable,
probative and substantial evidence, including facts of which he
may take official notice."
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Appellants filed a timely exception to the Recommended
Order, detailing their disagreement with the order. On
November 20, 2006, the Commission held a hearing on the matter
and approved and adopted the Recommended Order,
The Commission's December 15, 2006 "Findings of Fact,
Conclusions of Law, Decision and Order" (2006 D&O), approving and
adopting the Recommended Order, did not violate HAR § 10-5-
41(a).3 Appellants were permitted to submit evidence, and they
did. The Commission need not provide a written assessment of
every piece of evidence or testimony. In re water Use Permit
Applications, 94 Hawafi 97, 163, 9 P.3d 409, 475 (2000) ("we
[Hawafi Supreme Court] do not demand from the Commission a
written assessment of every piece of evidence or testimony.").
The absence of written commentary on Appellants' submitted
evidence does not invalidate the 2006 D&O under HAR § 10-5-41(a).
(3) Appellants contend the Deputy AGs intentionally,
wilfully, and/or fraudulently misled Baker by representing that
if he agreed to dismissal of the district court summary
possession case, then there would be an informal resolution of
the dispute. Appellants allege that this misrepresentation
amounts to fraud and invokes the doctrine of unclean hands.
we disagree. Appellants point to no evidence to
substantiate the claim that the Deputy AGs intentionally,
wilfully, or fraudulently misled Baker into stipulating to the
dismissal of the district court summary possession case.
The evidence demonstrates that in 1996 the Commission
held a contested hearing addressing Baker's farm loan
delinquency. The Commission issued its November 28, 1997
"Findings of Fact, Conclusions of Law, Decision and Order" (1997
D&O), permitting Baker to remain on his land as long as he
complied with certain conditions. Because Baker did not comply
3 Although Appellants direct their argument at the language in the
Recommended Order, we discern that this argument also addresses similar
language in the 2006 D&O.
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with the conditions, the Lease was canceled pursuant to the terms
of the 1997 D&O.
On May 4, 2005, DHHL filed a summary possession
complaint against Baker. After filing a motion for summary
judgment, DHHL could not find evidence that Baker had been served
with the 1997 D&O. DHHL and Baker agreed to dismiss the district
court case. Baker submitted a settlement proposal to Crowell on
July 15, 2005, but received no response from Crowell.
Appellants claim that the Deputy AGs, specifically
Crowell, made representations about resolving the dispute
informally as a means of inducing Baker's assent to dismissal;
however, Appellants point to no evidence in the record to support
this claim.
The record does not support Appellants' claim that the
Deputy AGs engaged in wilful, intentional, and/or fraudulent
behavior, inducing Baker's detrimental reliance. §§§ Hawaii's
Thousand Friends v. Anderson, 70 Haw. 276, 286, 768 P.2d 1293,
1301 (1989) (noting that "[t]he evidence must be clear and
convincing to support a finding of fraud").
(4) Appellants contend DHHL was not authorized to
charge Baker 8-3/4% interest on his farm loan.
Baker entered into the farm loan contract with DHHL on
July 7, 1982. Funds for this loan came from the "Hawaiian Home
Farm Loan Fund," under the authority of and subject to the
provisions of the HCCA. In 1982, portions of the HCCA were
amended, including § 215.4 1982 Haw. Sess. Laws Act 274.
Section 215(2) provided in relevant part:
All unpaid balances of principal shall bear interest at the
rate of two and one-half percent a year for loans made
directly from the Hawaiian home loan fund, or at the rate of
two and one-half percent or higher as established by law for
other loans, payable periodically or upon demand by the
department, as the department may determine.
4 Only subsection (1) of § 215 was amended. 1982 Haw. Sess. Laws Act
274, § 3 at 709-10.
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1982 Haw. Sess. Laws Act 274, § 3 at 709-10.5 Section 5 of Act
274 stated that "[t]his Act shall take effect upon its approval.
(Approved June 18, 1982)." 1982 Haw. Sess. Laws Act 274, § 5 at
7ll.
Appellants argue that the 1982 amendments to § 215 were
ineffective when Baker signed his farm loan contract with DHHL on
July 7, 1982 because Congress had not consented to the amendments
pursuant to § 4 of The Admission Act.6
The United States Congress approved the 1982 amendments
on October 27, 1986:
Resolved by the Senate and House of Representatives of
the United States of America in Congress Assembled, That, as
required by section 4 of the Act entitled "An Act to provide
for the admission of the State of Hawaii into the Union,"
approved March 18, 1959 (73 Stat. 4), the United States
hereby consents to all amendments to the Hawaiian Homes
Commission Act, 1920, as amended, adopted between August 21,
1959, and June 30, 1985, by the State of Hawaii, either in
the Constitution of the State of Hawaii or in the manner
required for State legislation, except for Act 112 of 1981.
H.J. Res. 17, 99th Cong., 2d Sess., 100 Stat 3143 (1986).
5 The amendment to § 215(2) requiring that unpaid balances of principal
bear interest at a rate of two and one-half percent per year or higher as
established by law for loans not made directly from the Hawaiian home loan
fund was originally enacted in 1976 by Act 72. 1976 Haw. Sess. Laws Act 72,
§Zat 97,
6 Section 4 provides in relevant part:
§4. As a compact with the United States relating to the
management and disposition of the Hawaiian home lands, the
Hawaiian Homes Commission Act, 1920, as amended, shall be adopted
as a provision of the Constitution of said State, as provided in
section 7, subsection (b) of this Act, subject to amendment or
repeal only with the consent of the United States, and in no other
manner: Provided, That (1) sections 202, 213, 219, 220, 222, 224,
and 225 and other provisions relating to administration, and
paragraph (2) of section 204, sections 206 and 212, and other
provisions relating to the powers and duties of officers other
than those charged with the administration of said Act, may be
amended in the constitution, or in the manner required for State
legislation, but the Hawaiian home-loan fund, the Hawaiian home-
operating fund, and the Hawaiian home-development fund shall not
l be reduced or impaired by any such amendment, whether made in the
constitution or in the manner required for State Legislation[.]
The Admission Acf § 4, 1 HRs af 136 <2009 Rep1.>.
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we conclude, however, that the 1982 amendments were
effective on the date of approval: June 18, 1982. Congress's
consent in 1986 relates back and retroactively applies to the
date of approval in 1982.7 Therefore, DHHL lawfully charged
Baker 8-3/4% interest on his farm loan under the HHCA.
(5) Appellants claim Baker had no notice that
Appellees required strict performance of the contract terms or
that his debt would be accelerated.
Baker had notice that Appellees intended to require
strict performance of the contract terms. On April 29 and
August 26, 1996, contested case hearings were held regarding
Baker's loan delinquency. As a result of these hearings, the
Commission, in its 1997 D&O, found that Baker had failed to make
payments according to the terms and conditions of his farm loan
and therefore was in default. The Commission declared Baker's
interest on Lot 185 forfeited and his farm loan canceled unless
Baker made amends as specified in the Commission's 1997 D&O.
DHHL mailed a copy of the 1997 D&O to Baker on November 28, 1997,
certified mail, return receipt requested.
On August 15, 2006, Baker again received notice of a
contested case hearing to be held on September 21, 2006 "to show
cause why [Baker's] lease should not be canceled." The hearing
officer concluded that Baker was delinquent on payments and
therefore in default on his farm loan. The hearing officer
recommended that Baker's interest in Lot 185 be forfeited and his
lease canceled. Baker was present at this hearing.
Baker had notice that his loan would be accelerated.
HHCA § 216(b), §up;a, permits DHHL to accelerate loans when
borrowers violate certain terms of § 215 as long as due process
is afforded the borrower. Baker was afforded due notice and an
7 The same applies to Act 72, which took effect on May 10, 1976.
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opportunity to be heard. Moreover, Baker agreed to pay the
8-3/4% interest rate when he signed the loan agreement and
accepted the loan proceeds on that basis.
(6) Finally, any other point, question, or argument
raised by Appellants is without merit.
Therefore,
The Judgment filed on November 7, 2008 in the Circuit
Court of the Third Circuit is affirmed.
DATE:D= Honolulu, Hawai‘i, Augusf 27, 2010.
On the briefs:
Frederick H. K. Baker, Jr.
and Haunani Y. Baker,
Appellants-Appellants pro se.
Chief Judge
Clayton Lee Crowell and
Diane K. Taira,
Deputy Attorneys General,
for Appellees-Appellees. ~ 0§)_}::
Associate Judge
Acting Associate Judge
lO