In the Conservation District

Court Considers Renewed Claim Against Holder of Kohala CDUA

On November 22, 1991, Michael Rearden appeared before the Board of Land and Natural Resources at its meeting in Honolulu. The Board voted, without discussion, to approve the recommendation of its staff that Rearden be granted a 12-month extension to his permit to build a house along the Big Island’s North Kohala coast, near Lapakahi State Park.

The extension was the third Rearden had been granted since the permit was awarded in 1987. Immediately after the perfunctory Board vote, Rearden, who had informed the Board by letter that the extensions were needed because of protracted litigation involving his ex-wife, approached the Board. He thanked Board members for their just-granted approval, then added: “I’d like to bring you up on a couple of developments in this case.

“One, the Circuit Court did dismiss the last action with prejudice… And at the same time she [his ex-wife] has now brought another action in Circuit Court which will require that we file motions to dismiss. And at the same time we’re going to ask the court to prohibit any further actions from this person, because they have been shown to be frivolous [and] without court approval.

“But this again is going to take some time… And our thinking” – Rearden quite frequently refers to himself in the first-person plural “is that from the time we are actually free and clear to be able to start to obtain the loan, financing for the construction, to actually do the construction and complete it, will actually take a year….

“So, I’m going to see if I can ask you to give us six months to get all of the legal entanglements cleared up. And, again, I think it has to be obvious at this point that these are harassment techniques that are being used.

“And then give us the year for obtaining the financing and completing the construction, which would be a total of a year and six months.”

‘I Was Very Truthful’

Christopher Yuen, Board member from the Big Island, was open to the request, but wanted to add to Reardens permit two now-standard conditions that had not been included in standard permit language at the time Rearden’s permit was first granted. The first one binds the permittee to carrying out any environmental mitigation measures discussed and agreed to in meetings with the Land Board, whether or not those mitigation measures are spelled out in the permit.

The second condition, as explained by Yuen to Rearden, provides that if any of the statements or representations made by Rearden to the Land Board are false, “Then the permit becomes null and void.”

Rearden responded: “Obviously, I was very truthful in my applications, so I’m not concerned about that.” But, he added, he was worried that Board policy toward single-family houses in the Conservation District had changed so that such uses would no longer be allowed. “I just feel like I’ve been admonished that this could be the last extension that we’ll be granted, and I’m just concerned about that – that this being the last opportunity, you know – the property’s not going to be worth a great deal without the ability to build something on it.”

He went on to suggest that the Board add the new conditions only if he was not able to complete his work within 12 months: “Why don’t we use that as an incentive for everybody to get going – that it [the permit] is unchanged if we do it within a year, but if we need the extra six months, then we add those things.”

New Conditions

Yuen, however, made a motion to extend the permit to March 22, 1993 – 18 months -“but that two additional conditions – one on environmental mitigation and the other on truthful representation – shall be added.”

Rearden indicated puzzlement, prompting another explanation of the new conditions by Yuen. Of the second condition, regarding truthful representation, Yuen told Rearden it made the permit contingent on everything Rearden had told the Board being true – “like, … if it turns out you’re still happily married and your wife never did any of those things, then we’re going to be very unhappy and your permit becomes null and void.”

Rearden: “So, with anything through the whole permitting process? Not just the original application?”

Yuen: “That’s right.”

Rearden (laughing): “Well, that might take some looking at.”

After still further reassurances by Land Board members to Rearden – that the truthful-representation condition related only to “significant” matters – the Board voted on Yuen’s motion. It passed unanimously. On December 13, 1991, then-Board Chairman William Paty officially notified Rearden of the approval of the 18-month time extension, subject to the following condition, among others:

“That in issuing this time extension, the Department and Board has relied on the information and data which the permittee has provided in connection with his permit application. If subsequent to the issuance of this permit, such information and data prove to be false, incomplete or inaccurate, this permit may be modified, suspended or revoked, in whole or in part, and/or the Department may, in addition, institute appropriate legal proceedings.”

Gaps in the Record

As described in the October 1993 issue of Environment Hawai’i, Rearden did not notify the Land Board of a number of developments that, on their face, would seem to have a bearing on Land Board deliberations.

Those developments include Rearden’s efforts to sell the property. At the time of the November 22, 1991, meeting, an offer to purchase the 10.6-acre lot for $2.8 million was pending approval of the Third Circuit Court and parties seeking damages against Rearden in civil litigation. As tapes of the November 22 meeting indicate, Rearden represented to the Board that it was his intention to complete construction of a house on the land within the 18-month duration of the time extension.

Further evidence of Rearden’s intention to sell rather than build may be seen in an affidavit he filed, in yet another lawsuit, barely four months after the November 1991 Board meeting. The plaintiff in that suit, Rearden stated, “is seeking to sabotage a bonafide sale [of the Kohala property] to a purchaser for value that will provide the funds to clear all judgments against defendant.”

Frivolous?

Then there is Rearden’s characterization of his ex-wife’s “frivolous” suit against him. While a lawsuit against him by his ex-wife, Stacy Steffens, was dismissed with prejudice in September 1991, the basis of the dismissal was Steffens’ failure to appear at a court hearing. In 1992, Steffens prevailed on a motion for reinstatement of the same lawsuit, which claims the Kohala property was used by Rearden as security in an unrecorded agreement between Steffens and Rearden. That agreement, signed by Rearden on April 30, 1990, provides for Rearden to pay Steffens $1 million, in return for which Steffens would drop all pending lawsuits against him.

More than a year after reinstatement of this suit, Rearden has still not notified the Board.

The Big One

Nor did Rearden detail to the Board another series of lawsuits that culminated in the Third Circuit Court upholding a lien against the property for $577,000 plus interest at 10 percent a year, accumulating since 1987.

As reported in our October edition, those suits trace back to Rearden’s management of a trust established by his former wife’s grandparents. The trust sued Rearden (then known as Roark McGonigle) and a California court in 1987 issued the $577,000 judgment against him. When the trust caught up with Rearden (who assumed his new name upon leaving California), it sought to place a lien against the Kohala property – which, at the time Rearden applied for the Conservation District permit, he indicated was held by a corporation of which he was sole owner.

In defending himself against the trust, however, Rearden indicated that he was not the owner of the parcel. To Judge Shunichi Kimura, in fact, Rearden assented to the description of himself as a “legal stranger” to the land’s then owner, the Foundation Epsil, a trust fund Rearden established for his son – to which title to the property was registered on September 2, 1987. (The warranty deed is actually dated 25 months earlier, on July 28, 1985, but it was not forwarded to the Bureau of Conveyances until the September 1987 date. Perhaps coincidentally, Rearden had been served with divorce papers just 13 days earlier.)

The protracted litigation ended in February of this year. The outcome left the Kohala property saddled with a lien for the total amount of principal and interest (at 10 percent per year) from the California judgment. While the file for Rearden’s Conservation District Use Permit does contain a copy of the stipulated judgment – provided by the DLNR’s land agent in Hilo – that document contains no indication of the dollar amount of the California judgment against Rearden. Rearden has informed the OCEA staff that the lien may force him to sell the property, but, as of press time, he had not informed OCEA of the actual amount of the lien.

Survey of Garden Land Done by HTBG Director

Ownership of an old government road running through the Hawai’i Tropical Botanical Garden, north of Hilo, has become the subject of some dispute (as we have reported on several occasions). Daniel J. Lutkenhouse, president of the garden, has now provided the Department of Land and Natural Resources with a survey that purports to show that the government “road” really is nothing more than a remnant parcel.

While fee ownership may rest with the state in either case (road or remnant), the state is generally willing to sell remnant parcels to adjacent landowners. In the case of old roads, however – especially roads that provide access to the sea – it is not so easy to get the state to relinquish ownership.

Lutkenhouse survey bears the date of May 14, 1993 and the stamp of Donald J. Murray. According to the garden’s annual report for the year ended 1992, and forwarded to the state Department of Commerce and Consumer Affairs, Donald J. Murray serves also as a member of the garden’s board of directors.

In fact, Lutkenhouse, his agents and associates appear to be among a dwindling few who do not regard the “shuttle road” as a part of a larger road that loops down from the Old Mamalahoa Highway, fords Onomea Stream, and returns to the highway along the right-of-way now called the Donkey Trail. A letter dated November 9, 1992, from the Hawai’i County Planning Department to James Pederson, consultant to Lutkenhouse, states:

“The state has recently acknowledged ownership of the old government roadway which loops down into and through the garden from the south, and returns to the Scenic Drive [Old Mamalahoa Highway] along the north side of Onomea Stream…. Given that the garden’s interior access road follows an old jeep road, it is likely that it occupies a portion of the government road alignment. Additionally, the location of the 50-by-70-foot fish pond may include another part of the roadway. Currently the roadway loop is blocked at both ends. The garden uses a portion for exclusive bus and staff entry, a portion appears to have been incorporated into garden grounds, and the portion along Onomea Stream is restricted only to pedestrian access to the shoreline.”

A Federal Case

In 1991, Lutkenhouse applied for a Conservation District permit that would have allowed him to pave the “Donkey Trail” and undertake other activities. Following that application, the state began to look into the matter of ownership of the trail. In July 1992, the DLNR notified Lutkenhouse that, in fact, the land under the trail belonged to the state and was a public right of way.

Four months later Lutkenhouse lodged a claim against Security Union Title Insurance Company, which had issued him a title insurance policy. On October 4, 1993, the title company sued in U.S District Court, asking for a determination that it has no duty to defend Lutkenhouse title against the state’s claim of ownership.

According to the suit, Lutkenhouse knew that a trail crossed the property long before he purchased it in 1989. The lawsuit quotes from letters Lutkenhouse himself wrote to the county of Hawai’i in 1982, wherein he “admitted that there was a trail on the… property which was – and would continue to be – used for public access to the shoreline.” In fact, the lawsuit continues, in one letter (June 29, 1982) Lutkenhouse referred to “a well-used existing trail between the County Road and the shoreline … along the north bank of the Onomea Stream. That access trail is safe and presently well used.” By failing to inform the title insurance company about the existence of the trail, the suit claims, Lutkenhouse breached “reasonable standards of fair dealing.”

DLNR Review Committee Mulls Draft Report

As we have reported in the past, the Department of Land and Natural Resources recently established a committee to review Conservation District rules, statutes, and policies. To judge by drafts of a report purporting to summarize its deliberations, however, most of the issues raised in the Rearden case – and many other Conservation District disputes that Environment Hawai’i has reported on before – have not been the subject of the committee’s deliberations.

One can wade through the preliminary discussion draft report’s large type – a concession to the visually impaired? – and elaborate, stylized computer graphics – a bone to the analphabetic? – without finding any mention of the problems that arise from the liberal award of time extensions, the future of staff to run even the most cursory check of claims made by applicants, or the inability of the public to get the Board to do anything about these problems.

Instead, the report would have readers believe that the chief problem facing the Land Board and its staff is the volume of relatively minor permits that it must process. To address this – and, the report says, to make the process more “user friendly” (“users” being the class of those parties seeking permits) – a “three-tier permit hierarchy” is proposed. Requiring no review or permit whatsoever would be “allowable uses.” “Some uses should be ‘of right’ and not subject to permitting,” the report states. (The phrase ‘of right’ is problematic, since the uses proposed as being ‘allowable’ would be those described now as “permitted” in Chapter 183-41 of Hawai’i Revised Statutes. One might reasonably contend that what the law “permits” is not always the same thing as what it protects as a matter of right.)

“Administrative permits,” the report suggests, would require staff to review and make recommendations on some applications, with final decisions being made by the Land Board chairman. Projects having greatest impact would be subject to full Land Board approval.

Variances?

No criteria are provided for determining onto what level of the hierarchy various proposals should be placed. Rather, the draft report attempts to provide for each Conservation District subzone (except the special subzone) an exhaustive catalogue of activities that should be “allowable,” condoned by administrative permit, or subject to full Board approval. A paragraph in the revised report states: “The purpose of utilizing a permit hierarchy is to target uses with limited impacts on resources for administrative review, and uses with more extensive impacts (in terms of range and severity) for BLNR review.”

Committee members proposed increased use of management plans for the larger Conservation District areas and “multi-use situations [not further explained] on both public and private lands.” Once such management plans were approved by the Land Board, activities undertaken to carry them out would not require further review (i.e., they would be considered “allowable,” in the proposed language of the new regime).

In lieu of the current Board practice of granting “conditional use permits” for proposals that are neither non-conforming, “permitted” (pursuant to existing rules), or temporary (under one year), the report proposes establishing a system for the award of variances. According to proposed revisions to the draft, the advisory committee is divided on this point. Some members favor variances as a means of dealing with unanticipated uses or proposals where denial would cause hardship. Others regard variances simply as “conditional use permits” by another name.

Enforcement

On the matter of enforcement, the report proposes another hierarchy – albeit this time with just two tiers. This recommendation follows the advice of an “inter-divisional enforcement task force” established in February of this year by the DLNR. That body is “co-chaired by the Office of Conservation and Environmental Affairs and the Division of Conservation and Resources Enforcement,” the report states.

Level 1 of the new enforcement structure concerns “major violations,” which would be “presented to BLNR for review and resolution due to their severity.” Level 2 would concern “minor violations,” which “would be reviewed by DLNR staff with a recommendation to the Chairperson,” and perhaps with the help of a hearing officer. Level 2 penalties could be appealed to the full Board. There is no discussion in the report on the criteria to be used to determine whether a violation was major or minor. All the report says is that this determination would be made “following staff evaluation of severity.”

On the related matter of permit compliance, the report finds that DLNR “has established a data base to track landowners’ pledged start and completion dates for projects,” with DOCARE conducting one- and three-year inspections. Revisions to the preliminary discussion draft suggest adding to this, “There is also a need to educate permit holders and hold them responsible for reporting compliance on specific permit conditions.”

‘Enhance Public Input’

Revisions to the initial draft add to the list of intended purposes to be served by this review the statement: “Another aim is to make sure that the process of change includes provision for public overview and input on decision-making. Ideally, a new system will actually enhance the level and quality of public participation.”

Just how public input will be enhanced is not clearly set forth. As a result of committee discussion, future revisions to the “Enforcement, Compliance and Education” section will probably recommend the institution of procedures for citizen reporting of violations and follow-up.

At one point, the revised report considers – but does not recommend – allowing private citizens to sue in court for enforcement of Conservation District rules and permit conditions: “Some citizens contend that if the Department is unable or unwilling to pursue violations aggressively, legislation should be developed to allow private citizens to sue alleged violators. Citizen suit enforcement was strongly supported among at least some of the Conservation District Review Project participants.” (Actually, citizen suits for enforcement usually name as defendant not the alleged violator, but the government agency whose failure to act has led to the citizen complaint.)

Volume 4, Number 5 November 1993