On January 14, 2008, the U.S. 9th Circuit Court issued an opinion in Matsuda v. City and County of Honolulu, No. 06-15337 (9th Cir. 2008) which addressed the following question: Can the City repudiate a contract to convey property to a private citizen in connection with its leasehold conversion program under Chapter 38, ROH? The crux of the Court's analysis was whether the City and the Lessees at Discovery Bay could enter into a valid contract for eminent domain. The Circuit Court's answer was, yes.
In short, Appellants/Lessees applied to the City under Chapter 38, ROH, to convert their leasehold interests at Discovery Bay into fee simple interests in their units and the appurtenant land. Upon receipt of the Lessees’ application, the City entered into individual written contracts with each Lessee. However, before the contract could be acted on, Chapter 38, ROH, was repealed.
The lower court dismissed Lessees appeal on the ground that a contract between the City and Lessees was unenforceable under the reserved powers doctrine. However, the Circuit Court disagreed, holing that a contract did exist and that it was enforceable.
Therefore, the lower court’s decision was vacated and the case remanded to the lower court so that it could rule on Lessees’ due process and contracts clause claims.