HONOLULU -- Honolulu taxpayers may end up paying millions of dollars in damages after a ruling on Monday from a federal appeals court.

One of Mayor Mufi Hannemann's first acts nearly three years ago was to end the city's use of its condemnation power to help leasehold condominium owners buy the land under their buildings.

Many lessees who already signed up for the city program were not allowed to finish.

The federal Ninth Circuit Court of Appeals handed the lessees what their lawyers called a "major victory."

"The court could award the lessees significant damages for the city's action in violating their constitutional rights and breaching their contract," attorney David Nakashima said.

The ruling directly involved the Discovery Bay Condo. Lessees Ralph and Lucy Mitchell had hoped to own their fee before this year when the lease rent will rise to full market value, potentially more than they can afford.

"It's a question of a person's home and the right to occupy it," Ralph Mitchell said.

The decision also affects a number of apartment buildings, including the Admiral Thomas. Attorneys said as many as 160 units were left in limbo by the city, and their owners could now be entitled to payoffs of hundreds of thousands of dollars each.

"One possible claim would be the difference between the leasehold value of the apartments and the fee value," Nakashima said.

The judge could also order the city to buy the fee value for the apartment owners who sued, who said their main goal is keeping their homes.

"No one is trying to make a fast buck here. No one has intention to sell it, but we intend most of us to live our life out here," Mitchell said.

The city's top lawyer said the city was disappointed with the ruling and is waiting for more direction from the courts.