LOCATION: Hawaii Public Housing Authority
DOCKET NO.: 83-141
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Ninth Circuit
CITATION: 467 US 229 (1984)
ARGUED: Mar 26, 1984
DECIDED: May 30, 1984
Clinton R. Ashford - Argued the cause for the appellees
Laurence H. Tribe - Argued the cause for the appellants
Facts of the case
In 1960 the Hawaii government was faced that the government had the ownership of 49 percent and 72 private proprietors had the ownership of 47 percent of the land from the general state territory. In 1967 because of such division and monopoly that reduced the price of the farmland and affected negatively on the economic situation in the region, the legislative authority implemented the Land Reform Act with the purpose to transfer some land from the private landowners to other private lessees.
This legal document considered this action as the deprivation of the private property and established the compensation for it that should be paid for proprietors. But that funds devoted to performing the compensation were provided by lessees.
The group of the owners brought the sue claiming that the law contradicted with the constitutional guarantees before the district court. The judgment stated that such normative act was legible.
However, the case study reflected that the plaintiffs filed an appellation. Thus, the court changed the opinion and found that the mentioned legislative document contravened with the Fifth Amendment and infringed the rights of the lessees.
The case brief found that the Supreme Court revised the ruling confirming that the Public Use Clause did not restrict the state to enact such document with the purpose to decrease the unfair ownership. The judges underlined that the Constitution empowered the state authority to implement such rulings that would facilitate the unprejudiced distribution of farmland in the society interest. Therefore the decision was overturned and confirmed the legibility of act and Hawaii`s government action.
Did the Land Reform Act of 1967 violate the Public Use Clause of the Fifth Amendment?
Media for Hawaii Housing Authority v. Midkiff
Audio Transcription for Oral Argument - March 26, 1984 in Hawaii Housing Authority v. Midkiff
Warren E. Burger:
We will hear arguments next in Hawaii Housing Authority against Frank E. Midkiff, et al.--
Mr. Tribe, I think you may proceed whenever you're ready.
Laurence H. Tribe:
Thank you, Mr. Chief Justice, and may it please the Court:
This case tests the limits of federal judicial intervention into the legislative and the judicial processes of a state that has grappled since entering the Union with a land oligopoly traceable to its monarchy, very much as the original 13 colonies struggled with large landholdings traceable to the English crown.
Now, Hawaii's legislature attacked that problem by using eminent domain with fair compensation, the approach that the Appellees themselves preferred for federal tax reasons, but an approach that the U.S. Court of Appeals for the Ninth Circuit denounced as forbidden taking from one private party to benefit another, as though the Land Reform Act somehow left the land market of Hawaii itself completely unchanged and merely substituted a favored group of lessees for the Bishop Estate and other supposedly disfavored owners as the ruling oligopolist of the Hawaiian Islands.
Now, I should like to begin by showing how wholly untenable that view is.
The Appellees talk repeatedly, as did the Ninth Circuit, of appeasing the desires for land owning of the landless majority.
As I think it will become clear, that radically distorts the aims of the legislation before this Court.
But it does, perhaps inadvertently, hit upon a very fundamental truth, and that is that people everywhere greatly prefer to own not only the home they live in and invest in and build, but also the land on which that home stands.
Now, of course there are unusual circumstances... and his Court has seen some of them... that might lead a perfectly well functioning land market to separate surface from subsurface ownership, to separate the ownership of the home on top of the land from the ownership of what's under the land.
For example, in the case of Pennsylvania Coal against Mahon, where the land contained valuable minerals, the perfectly natural development was for a few large mining companies to end up owning the mining rights under very large tracts of land, and selling only surface rights to a large number of individual homeowners.
But of course, in most places, both in the continental United States and in Hawaii, a normally functioning competitive market would never yield so bizarre a pattern, where literally tens of thousands of individual homeowners are forced to build on top of land that they must rent half a century at a gulp, despite the fact that they want to buy that land at what a court would approve as fair market value and are able to do so.
The situation is that a small number of owners simply refuse to sell, and indeed those owners, as the record unmistakeably shows, keep even more land off the residential market altogether, despite the great demand.
Now, one might ask, why did this happen in Hawaii if it doesn't happen elsewhere?
The legislature asked that question and, after extensive hearings, reached the conclusions elaborately articulated in 1967 and reaffirmed in 1975 that there were in Hawaii crucial artificial deterrents to the normal functioning of the market, deterrents to the landowners selling the land that those who lived on top of it wanted to buy.
Those deterrents included trust indentures inherited from the Hawaiian monarchs.
They included as a very practical and crucial matter federal tax disincentives, because the IRS made very clear to the major landowners that were they to sell in large quantities they would be treated as ordinary dealers in real estate and would be taxed at ordinary income rates on virtually 100 percent of the proceeds.
Now, that alone would not produce this bizarre pattern were it not also for the shortage of nearby competitors with land to sell.
That is, whatever the disincentives of the large landowners, if there were adjacent landowners who for some reason were perfectly happy to meet consumer preferences for a house on top of the land and the land beneath as well, then this pattern would not have developed.
But here, as the legislature found, there was a shortage of alternative competitors, and indeed, unlike some of the early American colonies, those that did not directly break up major landholdings from the crown but nonetheless found the holdings dissolved through natural forces because people could just cross the border and go to a place where they could buy the land under their homes, that wasn't exactly available because crossing the border plunks you in the middle of the ocean.
So that was the situation that the legislature confronted, and it found specifically that this land oligopoly would not just naturally fade away; that indeed it would persist because of these artificial deterrents to sale; that it would keep forcing up land prices and lease rents and the cost of living generally, with grave economic and social consequences for the entire state, unless the oligopoly was somehow broken up by law.
Now, it was against that background that the Hawaii Land Reform Act was passed.
As a brief reading of it will make plain to the Court, it does not simply substitute a favored for a disfavored group of owners.
What it does is create a neutral mechanism for identifying where it is that the land oligopoly was actually causing demonstrable, palpable market failure.
The concept of this Act is that such market failure is identifiable where large development tracts are available only in the form of long-term leasehold of the underlying land, despite the willingness and ability of a sufficiently large number of small lot lessees to buy individual lots at fair prices.
That is, where you have lessees who want to buy at fair prices, but all they can get is long-term leaseholds in part of a large tract, there is a demonstrable market failure.
Now, how would a legislature try to figure out when that had occurred?
Well, presumably it would wait for applications by lessees to say, we're able and willing to buy, but we're unable to do it because the sellers will not sell.
And that's the way this Act works.
That is, a number of lessees, 25 or half the number in the tract, whichever is less, file an application with the Hawaii Housing Authority.