Hawaii’s appeals court has vacated a $7 million compensation judgment involving Williams’ property. (Photo: Civilbeat.org)
In August 1994, Don Howard Williams Jr. paid $1.35 million for roughly 1.137 acres of waterfront property beside Maui’s Maalaea Small Boat Harbor. Four weeks later, he entered into a 30-year lease with the State of Hawaii. On September 30, 2026, the Intermediate Court of Appeals of the State of Hawaii vacated a 2025 Circuit Court order and final judgment that had granted Williams’ motion for summary judgment and determined that he was entitled to $7 million in just compensation based on the evidence before the lower court, according to court document published on Justia.
More than three decades later, that property remains at the center of a prolonged legal battle over how much the state should pay after seeking to take the land through eminent domain.
Earlier appeals court ruling reopened the valuation dispute
State payments began at approximately $150,000 a year in 1994 and had increased to around $350,000 annually by 2013. The arrangement changed in June 2013, when the State filed a complaint seeking to condemn the property rather than continue making lease payments. In June 2018, before trial, the parties entered into a stipulation agreeing that just compensation for the property was $4.165 million. In April 2024, the appeals court ruled that the Circuit Court had abused its discretion by excluding evidence concerning the leased interest. Back in the Circuit Court, Williams filed a motion for summary judgment in February 2025. He argued that the property interest he owned on June 27, 2013, the statutory valuation date, was worth $7 million. The state filed its own motion for partial summary judgment in March 2025. Under the parties’ 2018 stipulation, the appellate court said, Williams remained bound by that ruling. The annual rent rose from approximately $150,000 when the lease began to around $350,000 by 2013. The state’s condemnation complaint was filed on June 27, 2013.
Because the lease was producing hundreds of thousands of dollars annually, the dispute became especially important. As a result, the Circuit Court should not have granted summary judgment in his favor. Because the property had generated actual lease income, williams argued that the earlier appellate decision meant the income-capitalization method was controlling. Because of the property’s location and its use, the legal battle has also drawn attention. The state therefore sought to acquire the land rather than continue making lease payments. Because the property generated actual lease income, but the comparable-sales approach can also be presented, the income-capitalization approach can be considered.
The state said it sought the property in connection with improvements to the adjacent Maalaea Small Boat Harbor. “Because the 2018 Stipulation bars Williams from arguing the Hallstrom report should be excluded, the Circuit Court erred by excluding it,” the appeals court ruled. The court said the competing valuations meant Williams’ motion had not established that there was no genuine issue of material fact. The appeals court said evidence based on income capitalization was admissible, but that did not make comparable-sales evidence automatically inadmissible. “If an appraisal relied upon sales of similarly encumbered property, a jury could find the appraisal was reasonable,” the court said. When the land went up for sale in the early 1990s, Williams said he immediately saw an opportunity. He described the property as a “mini-Ilikai,” referring to the landmark Ilikai hotel in Honolulu.
The appeals court did not rule that Williams was not entitled to compensation. Instead, it found that the Circuit Court had improperly excluded evidence from the state’s expert appraiser and had erred in resolving the valuation dispute through summary judgment while competing evidence remained. The long-running eminent-domain dispute over Williams’ Maui property has been sent back for further proceedings. (Photo: Civilbeat.org) The lease provided Williams with a long-term income stream from the waterfront property. That condemnation action transformed the property’s lease into a legal dispute over how its value should be calculated. The central question became whether the value of Williams’ interest in the existing lease should be taken into account when determining the compensation owed to him. The State of Hawaii initially argued that the value of the lease should be considered when determining just compensation. Williams argued that excluding the economic value of the lease could prevent him from receiving the full compensation required when private property is taken by the government. The court held that evidence relating to possible future lease income could be presented in determining the property’s value. The Hawaii Supreme Court later rejected applications from both the state and Williams seeking further review. The case then returned to the Circuit Court. Williams relied on an appraisal by his expert, R.W. Spangler, and argued that the income-capitalization method was the appropriate way to value the leased property interest. It argued that the comparable-sales approach should be used instead. The Circuit Court ultimately granted Williams’ motion and denied the state’s motion. That decision led to the latest appeal. It argued that the Circuit Court had wrongly granted summary judgment when material facts remained disputed, improperly excluded the state’s expert appraisal and wrongly determined that the income-capitalization method should be used instead of comparable sales. The appeals court agreed that the Circuit Court had erred. A key issue was the state’s expert, James Hallstrom. That ruling had not been reversed or vacated. The appeals court also addressed the dispute over how the property should be valued. The state argued that comparable sales should be used. Differences between the properties and their lease encumbrances, it added, would go to the weight of the evidence rather than its admissibility. The Maalaea property sits beside the small boat harbor on Maui’s South Shore. Historical accounts describe the land as prime waterfront property that remained largely undeveloped for years. Williams had long been familiar with the area. He began visiting Maui in the 1970s and later lived in Maalaea, where he rented a condominium. He recalled regularly seeing the vacant property next to the Maalaea Mermaid and wondering why it had not been developed. Williams’ lease with the state was structured around the market value of the waterfront property and prevailing rental rates in Maalaea. As property values increased, so did the state’s payments. That income became the heart of the dispute over just compensation. Williams argued that the economic value of the lease represented an important component of what he owned when the state moved to condemn the property. The state eventually argued that the jury should instead focus on the value of the underlying property without separately considering the lease income. The lease contained a provision under which the agreement would terminate if the property were condemned. But the question of what Williams was entitled to receive remained unresolved. The dispute has moved through the Circuit Court, the Intermediate Court of Appeals and the Hawaii Supreme Court system for years. The latest ruling does not settle the amount of compensation. The ultimate amount of compensation remains unresolved. You use AI every day. Now get your AI Quotient. Take the AIQ test.
The case reached the Intermediate Court of Appeals previously. The state raised three main arguments before the Intermediate Court of Appeals. In earlier proceedings, the Circuit Court had ruled that Hallstrom could testify as a valuation witness for the state. The court noted that the earlier decision had not established that comparable sales were invalid. Instead, it reopens the valuation process by requiring the Circuit Court to consider the evidence that had previously been excluded.
Williams purchased the Maalaea property on August 4, 1994, from FSO Oklahoma Investments Corp., an entity connected to the Church of Scientology’s Flag Service Organization. After financial difficulties, the property was transferred to Pioneer Federal in 1981. By 1992, FSO Oklahoma Investments Corp. had acquired the parcels that would eventually form part of Williams’ property. Williams bought the land for $1.35 million in August 1994. Four weeks later, on September 1, the State of Hawaii entered into a 30-year lease with him. When the condemnation case was filed in 2013, the state deposited approximately $4.17 million based on its estimated compensation for the property. The September 30 appeals court ruling vacated the Circuit Court’s April 2, 2025 order and July 9, 2025 final judgment and remanded the case for further proceedings. That means the $7 million figure that Williams successfully obtained in the Circuit Court is no longer the operative final judgment.
The case was sent back to the Circuit Court for further proceedings. The land had a complicated ownership history stretching back more than a decade before Williams’ purchase. In the late 1970s, two of the parcels that eventually became part of Williams’ property were acquired by Maalaea Landing Inc., which planned to develop a condominium project there. The development plans never came to fruition. It subsequently changed hands through a series of transactions involving private investors, Oceanfront Associates and entities connected to the Church of Scientology. The state’s appraisal at the time included the land and the value of the lease. But the state later changed its position and argued that the lease income should not be presented to the jury when determining the property’s value. The agreement also stated that the parties would remain bound by trial-court rulings that were not subsequently reversed or vacated by an appellate court. That provision became central to the latest appeals court decision. The lower court must now reconsider the case in light of the appellate ruling, including the competing appraisals and the permissible valuation methods.
However, Williams expressly retained the right to appeal earlier rulings in the case.
