H. William Burgess
H. William Burgess

BY H. WILLIAM BURGESS – I am in opposition to H.B. 175, H.D. 1, which calls for the State of Hawaii to transfer $10 million of funds derived from the public land trust to the Department of Hawaiian Homelands (DHHL) to be expended by DHHL for the development of farm and home ownership.

The bill would require the Department of Agriculture and other State departments and agencies that collects revenue from the lands within the public land trust to transfer to DHHL an aggregate amount of $2.5 million within thirty days of the close of each fiscal quarter; provided that the transfer is not prohibited by federal law.

Background of the public land trust

        Hawaii’s public land trust is sometimes referred to as the “ceded lands trust” and sometimes as the “§ 5(f) trust.”

The Supreme Court of the State of Hawaii has held:

The history of the trust begins with the cession of sovereignty by the Republic of Hawaii under the “Joint Resolution To provide for annexing the Hawaiian Islands to the United States,” 30 Stat. 750, adopted by Congress on July 7, 1898.  Along with sovereignty, the Republic cede[d] and transfer[red] to the United States the absolute fee and ownership of all public, Government, or Crown lands … belonging to the Government of the Hawaiian Islands, together with every right and appurtenance thereunto appertaining[.]”Trustees of OHA v. Yamasaki, 69 Hawaii 154, 159 (1987).

The resolution made “[t]he existing laws of the United States relative to public lands [inapplicable] to such lands in the Hawaiian Islands; but [stated] Congress … shall enact special laws for their management and disposition.”  Id.

Yamasaki further provided:

“That all revenue from or proceeds of the [public lands], except as regards such part thereof as may be used or occupied for the civil, military, or naval purposes of the United States, or may be assigned for the use of the local government, shall be used solely for the benefit of the inhabitants of the Hawaiian Islands for educational and other public purposes.” Id.

“The effect of [the foregoing language was] to subject the public lands in Hawaii to a special trust, limiting the revenue from or proceeds of the same to the uses of the inhabitants of the Hawaiian Islands for educational or other purposes.  22 Op. Att’y Gen. 574 (1899)”  Id

“The concept that the public lands of Hawaii were impressed with a special trust, implicit in the joint resolution of annexation, See 22 Op. Atty Gen. 574, was reiterated in section 5(f) of the Admission Act.”  Id. at 160.

“Hawaiian” means any descendant of the aboriginal peoples inhabiting the Hawaiian Islands which exercised sovereignty and subsisted in the Hawaiian Islands in 1778, and which peoples have thereafter continued to reside in Hawaii.”

The noun “native Hawaiian” means any descendant of not less than one-half part of the blood of the races inhabiting the Hawaiian Islands previous to 1778.”  

The government as trustee has the same fiduciary duty as private trustees.

Ahuna v. Department of Hawaiian Home Lands, 64 Haw. 327, 339, 640 P.2d 1161, 1189 (1982) (the conduct of the government as trustee is measured by the same strict standard applicable to private trustees, citing United States v. Mason, 412 U.S. 391 (1973). See also Price v. Akaka, 928 F.2d 824, 827 (9th Cir. 1991) citing the Restatement 2d of the Law of Trusts as applicable to conduct of the State of Hawaii as trustee of Hawaii’s public land trust.

The same considerations apply to OHA and its trustees and officials.  Under Price v. Akaka , 928 F.2d 824, 827 (9th Cir. 1991), so long as § 5(f) trust income remained in the hands of the state, as it did when transferred from the § 5(f) corpus to the OHA corpus, the § 5(f) obligations applied.

The United States Circuit Court of Appeals for the Ninth Circuit has held (“There is no free floating federal common law of trusts, but we have no doubt that we would have the power to formulate a body of law for the purpose of enforcing the Act if that were appropriate under the circumstances. No doubt that would not present insuperable difficulties, since the common law of trusts is well developed in this country and speaks with a good deal of uniformity across the length and breadth of the land.” (citations omitted)).

For example, HRS Chapter 554A, Uniform Trustees’ Powers Act “UTPA.”[1]  “Except as specifically provided in the trust, the provisions of this chapter apply to any trust with a situs in Hawaii, whenever established.”  HRS § 554A-8.

The UTPA, HRS §554A-5(b), allows a trustee to exercise a trust power, such as the power “to effect distributions of money and property,” only by court authorization “if the duty of the trustee and the trustee’s interest as trustee of another trust, conflict in the exercise of the trust power.”

The Restatement (Third) of Trusts § 66(b) underlines a trustees’ affirmative duty to petition the court, “If a trustee knows or should know of circumstances that justify judicial action … and of the potential of those circumstances to cause substantial harm to the trust or its beneficiaries, the trustee has a duty to petition the court for appropriate modification of or deviation from the terms of the trust.”

Trust beneficiaries, as well as trustees, have standing to apply to the court for instructions regarding distributions to beneficiaries, as Petitioners seek here.  Under Restatement (Third) of Trusts § 71, “A trustee or beneficiary may apply to an appropriate court for instructions regarding the administration or distribution of the trust if there is reasonable doubt about the powers or duties of the trusteeship or about the proper interpretation of the trust provisions.”  (Emphasis added.)

Disregarding their fiduciary duties under the Equal Protection, Supremacy and other clauses of the Constitution and laws of the United State, the State of Hawaii and its officials, including the Governor, the board and officials of DHHL and the OHA Trustees, have sought, promoted, and lobbied for distributions of public lands trust monies and properties to OHA and DHHL for “native Hawaiian” beneficiaries at the expense of those beneficiaries who lack the favored racial ancestry.

Such conduct meets the definition of HRS §708-974 (Misapplication of entrusted property, a misdemeanor) and/or Theft, HRS §708-830(6)(a) (Failure to make required Disposition of funds, a felony).  As a result, most of the trust beneficiaries for over three decades have been deprived of the benefit of over a $ billion worth of public land trust funds and lands through 2012; and such unlawful deprivations would still continue to accrue under color of the law of the State of Hawaii if H.B. 175 is enacted.    

The State’s “bombshell” revelation.  On June 4, 2008 in the Federal District Court in Day v. Apoliona, the State of Hawaii acknowledged and proved by the declarations of Georgina Kawamura, Director of B&F and other responsible State officials, that the public land trust costs the State every year many times more than the 1.2 million acres bring in; and that the disparity between trust expenses and trust revenues has occurred in every year since statehood in 1959.

Basic trust law as to distributions to beneficiaries.  Except as otherwise provided by the terms of the trust, the trustee’s duty to pay income to beneficiaries is limited to paying the net income after deducting, from the revenues or gross income, the expenses properly incurred in the administration of the trust.

Why is that important?   Because it means the hundreds of millions the State and its officials have caused to be distributed to OHA and DHHL from public land trust revenues exclusively “for the betterment of the conditions of native Hawaiian” beneficiaries over the last three decades (while making no distributions of money or lands exclusively for non-native Hawaiian beneficiaries) have all been improper diversions of trust funds held for the benefit of all the people of Hawaii.

Thus, no public land trust funds or lands should ever have been distributed to OHA or DHHL because the trust has never generated any net income from which distributions could lawfully have been made to any beneficiaries.

Neither the State, nor its officials nor its legislature has the power to modify or terminate the public land trust. 

Trustees of Dartmouth College v. Woodward.

In 1819, Chief Justice John Marshall held that the charter granted by the British Crown to the trustees of Dartmouth College, in New Hampshire, in the year 1769, was a contract within the meaning of that clause of the Constitution of the United States (Art. I, §10), which declares, that no state shall make any law impairing the obligation of contracts.  The state of Vermont was a principal donor to Dartmouth College. The lands given lie in that state and are of “great value.” The State of New Hampshire also donated lands of “great value.” Trustees of Dartmouth College v. Woodward, 17 U.S. 518, 574 (1819).

After the trustees had operated the college beneficially for nearly 50 years and after the American Revolution, the New Hampshire legislature, controlled by Republican supporters of Thomas Jefferson, passed a bill revising the charter of Dartmouth College, adding new trustees and a board of overseers. The trustees refused to accept the changes and filed suit to invalidate them.  C.J. Marshall held that the royal charter had “every ingredient of a complete and legitimate contract.”  He ruled that the trustees were “one immortal being” whose powers continued forever and could not be abridged by legislative acts.

Hawaii’s Ceded Lands Trust, for “educational and other public purposes” was also endowed with public lands and also founded with every ingredient of a complete and legitimate contract.  On June 16, 1897 the Republic of Hawaii, by its proposed Treaty of Annexation, offered to cede to the United States its public lands (about 1.8 million acres formerly called the Crown lands and Government lands of the Kingdom of Hawaii) with the requirement that all revenue from or proceeds of the lands, except those used for civil, military or naval purposes of the United States or assigned for the use of local government, “shall be used solely for the benefit of the inhabitants of the Hawaiian Islands for educational and other public purposes.” Another condition of the Republic’s offer was that “The public debt of the Republic of Hawaii” was to be “assumed by the government of the United States, but the liability of the United States in this regard shall in no case exceed $4,000,000.”

A year later, on July 7, 1898, by the Newlands Resolution, the United States accepted the offer, expressly including the conditions that it hold the lands in trust and that it assume the debts accumulated by the Kingdom and Republic up to $4 million.

As the Supreme Court of the United States held, “Where there is a charter, vesting proper powers of government in trustees or governors, they are visitors; and there is no control in anybody else; except only that the courts of equity or of law will interfere so far as to preserve the revenues, and prevent the perversion of the funds, and to keep the visitors within their prescribed bounds.” Id., 17 U.S. 565.

That basic legal principle of trust law enforcing contractual obligations undertaken by the sovereign, announced 194 years ago, is now embodied in Restatement (Third) of Trusts §64 (2003) current through August 2008, §64. Termination Or Modification By Trustee,

Beneficiary, Or Third Party

(A) Except as provided in §§65 and 68, the trustee or beneficiaries of a trust have only such power to terminate the trust or to change its terms as is granted by the terms of the trust. 

(B) The terms of a trust may grant a third party a power with respect to termination or modification of the trust; such a third-party power is presumed to be held in a fiduciary capacity.

Since the Ceded Lands Trust gives no trustee, beneficiary or third party any right to modify or change the terms of the Ceded Lands Trust, as a matter of law, neither the State of Hawaii, nor the Hawaii Supreme Court, nor Congress, whether by the Apology resolution or any other law, has the power to impair the obligations to all the people of Hawaii undertaken by the United States in 1898 in the Annexation Act, and assumed by the State of Hawaii in 1959.

CONCLUSION

H.B. 175, H.D. 1 should be rejected or amended to require that DHHL and OHA forthwith restore to State control all funds and trust lands distributed to and still held or controlled by them, to be held and used impartially for the benefit of all the citizens of Hawaii, including but not limited to those of Hawaiian ancestry.

 

H. WILLIAM BURGESS is an attorney in the state of Hawaii

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