Opinion ID: 2805792
Heading Depth: 3
Heading Rank: 3

Heading: Property Division Chart

Text: It is well established that a family court is guided in divorce proceedings by partnership principles in governing division and distribution of marital partnership property. See Helbush, 108 Hawaiʻi at 513, 122 P.3d at 293. It is axiomatic that a family court cannot satisfactorily fulfill its responsibility under general partnership principles to determine each party’s contributions and equitably divide marital property 22 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER without first assessing the net market values of the parties’ respective properties at various time frames. See Jackson, 84 Hawaiʻi at 332, 933 P.2d at 1366 (describing what the partnership model requires of the family court). In Higashi v. Higashi, 106 Hawaiʻi 228, 103 P.3d 388 (App. 2004), the ICA held that, in applying partnership model principles and determining property categorizations, the family court should utilize a property division chart or other similar document. Higashi directs the family court to file, as part of its findings and conclusions, a property division chart that includes the following: (1) all of the parties’ assets stating the relevant net market values of the assets using the five-category scheme of the partnership model, (2) the partnership model division of the assets, (3) the actual division of the assets, and (4) an explanation of the reasons for the material differences between the partnership model division and the actual division. 16 Id. 16 Specifically, Higashi directs the family court to include the following in its property division chart: (a) an itemized list of each of plaintiff’s Category 1 and 3 assets/debts, stating (i) the Category 1 and 3 value/amount of each and (ii) the Category 2 and 4 net market value of each asset; (continued. . . ) 23 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER A family court that chooses to ignore the sound recommendation of the Higashi decision runs the risk that its decision will not appear “just and equitable” to the reviewing court and the parties. We endorse the recommendation made by the Higashi court and emphasize that a chart or equivalent itemization of the information required by the five-category partnership model is a valuable and important tool for the family court to properly divide property and afford transparency to the parties and reviewing court. See Higashi, 106 Hawaiʻi at 230, 103 P.3d at 390 (providing a detailed description of what the family court’s property division chart should include). (. . .continued) (b) an itemized list of each of defendant’s Category 1 and 3 assets/debts, stating (i) the Category 1 and 3 value/amount of each and (ii) the Category 2 and 4 net market value of each asset; (c) an itemized list of each of plaintiff’s and/or defendant’s Category 5 assets/debts stating the net market value of each; (d) an itemized statement of the Partnership Model Division of each of the assets/debts owned/owed at the time of the divorce; (e) an itemized statement of the actual division by the court of each of the assets/debts owned/owed at the time of the divorce; (f) an itemized statement of the specifics of each material difference between (i) the Partnership Model Division and (ii) the actual division by the court; and (g) a statement/explanation of the court’s reason(s) for each material difference. Higashi, 106 Hawaiʻi at 230, 103 P.3d at 390 (formatting added). 24 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER Given the numerous omissions of property categorizations and net market values in this case, the record is deficient to enable meaningful appellate review of the family court’s distribution of the marital estate. B. Whether the Family Court’s Deviation from a 50/50 Division of the Marital Estate in Addition to a Deduction for Marital Waste Was Justified While the ICA has remanded this case for re-division of the property, the ICA upheld the family court’s deviation from partnership principles. Thus, we consider whether Ira’s dissipation of marital assets through gifts and payments to his girlfriend and negligently late payments to the IRS constitute equitable considerations allowing deviation from marital partnership principles in the division of the marital estate. In its decision, the ICA found that Ira’s conduct with respect to the IRS tax debt constituted a valid and relevant circumstance for deviation from marital partnership principles. The ICA reasoned that the present and future garnishment of Susan’s social security check was an appropriate factor for the family court to consider in deviating from an equal division of their marital partnership property. Further, the ICA affirmed the family court’s designation of Ira’s financial misconduct as a waste of marital assets. In his Application, Ira suggests that the ICA’s analysis condones the family court’s punishing of him twice for the same conduct. 25 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER Because the family court appeared to treat Ira’s financial misconduct as an equitable consideration justifying deviation from partnership principles and as marital waste during the divorce to be charged to Ira, we discuss both concepts below. 1. Deviation from Partnership Principles and Marital Waste As discussed, Hawaiʻi law follows a partnership model that governs the division and distribution of marital partnership property. Helbush, 108 Hawaiʻi at 513, 122 P.3d at 293. “[W]hile the family court judges are accorded wide discretion pursuant to HRS § 580-47 in adjudicating the rights of parties to a divorce, the family court strives for ‘a certain degree of uniformity, stability, clarity or predictability in its decision-making and thus are compelled to apply the appropriate law to the facts of each case and be guided by reason and conscience to attain a just result.’” Tougas, 76 Hawaiʻi at 28, 868 P.2d at 446 (alteration omitted) (quoting Gussin, 73 Haw. at 486, 836 P.2d at 492). Accordingly, our law provides certain parameters for a family judge’s discretion. While a family court is not required to presume specific percentage splits in the division of each category of property, Gussin, 73 Haw. at 481, 836 P.2d at 490, it must exercise its discretion within the framework provided by our 26 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER law. The family court’s first step is to find the requisite facts under the partnership model (i.e., utilize the five categories and assign net market values) before proceeding to the second step of deciding whether or not the facts present any equitable considerations warranting deviation from the partnership model. Jackson, 84 Hawaiʻi at 332, 933 P.2d at 1366. Whether equitable considerations exist justifying deviation from partnership principles is a separate issue from whether or not the court should charge a divorcing party for wasted marital assets. A family court may charge a divorcing party for wasted marital assets when, during the divorce, “a party’s action or inaction caused a reduction of the dollar value of the marital estate under such circumstances that he or she equitably should be charged with having received the dollar value of the reduction.” Higashi, 106 Hawaiʻi at 241, 103 P.3d at 401. As discussed below, in the case of marital waste, the wasted assets are treated as a part of the marital partnership property that has already been awarded to the spouse responsible for the waste. This is a separate consideration from whether or not to deviate from partnership principles. Because these are distinct legal considerations, we discuss equitable deviation from the partnership model separately from chargeable deductions for marital waste. 27 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER 2. Equitable Deviation from the Partnership Model In determining whether the circumstances justify deviation from the partnership model, the family court must consider the following: the respective merits of the parties, the relative abilities of the parties, the condition in which each party will be left by the divorce, the burdens imposed upon either party for the benefit of the children of the parties, and all other circumstances of the case. HRS § 580-47(a) (2006); see also Jackson, 84 Hawaiʻi at 333, 933 P.2d at 1367. “Other than relative circumstances of the parties when they entered into the marital partnership and possible exceptional situations, the above-quoted part of HRS § 580–47(a) requires the family court to focus on the present and the future, not the past.” Jackson, 84 Hawaiʻi at 333, 933 P.2d at 1367. 17 In other words, deviation from the partnership model should be based primarily on the current and future economic needs of the parties rather than on punishing one party for financial misconduct. 18 In its Findings of Facts and Conclusions of Law, the family court found that there were valid and relevant 17 See also Jacoby v. Jacoby, 134 Hawaiʻi 431, 448, 341 P.3d 1231, 1248 (App. 2014); Epp v. Epp, 80 Hawaiʻi 79, 89, 905 P.2d 54, 64 (App. 1995). 18 Under the 2011 amendments to HRS § 580-47(a), a court must also consider “the concealment of or failure to disclose income or an asset, or violation of a restraining order.” See HRS § 580-47(a) (Supp. 2011). These amendments do not apply in this case. See 2011 Haw. Sess. Laws Act 140, § 3 at 356 (providing an effective date of October 1, 2011, and stating that the act “does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date”). 28 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER circumstances for departure from the partnership model. The family court considered the outstanding federal tax liability and the liquidation of Susan’s three Texas properties during the marriage to be equitable considerations. In the Decree, the court found that the equities in this case were skewed in favor of Susan, and the court explained that Ira’s “actions throughout the relationship . . . time and again placed” Susan “in worsening financial circumstances.” Thus, the family court apparently found an equitable consideration based on Ira’s financial misconduct. The family court focused on Ira’s financial misconduct while “underemphasiz[ing] the relative abilities of the parties and the condition in which each party will be left after the divorce.” See Hatayama v. Hatayama, 9 Haw. App. 1, 11, 818 P.2d 277, 282 (1991). This evidences “a fundamental misunderstanding of the economic consequence of being married.” Id. Divorce “is not a vehicle by which one spouse is compensated for having given more than he or she received during the marriage or for having had to suffer during the marriage from the other spouse’s inadvertent, negligent, or intentional inadequacies, failures, or wrongdoings, financial or otherwise.” Id.; cf. Richards v. Richards, 44 Haw. 491, 509, 355 P.2d 188, 198 (1960) (explaining that “respective merits of the parties” as used in HRS § 580-47 does not have “any reference to personal conduct of the spouse” 29 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER but only means the “merits of the respective claims of the spouses”). Thus, the court’s analysis in deciding whether or not to apply a deviation should focus on the abilities of the parties and the circumstances in which each party will be left by the divorce. Consequently, Ira’s financial misconduct during the marriage should not have been considered by the family court when deciding whether to deviate from an equal division of marital partnership property in the absence of a finding of extraordinary circumstances. 19 Instead, the family court should have focused on the factors set forth in HRS § 580-47(a) in making its determination of whether or not equitable considerations justified a deviation from an equal division of the marital partnership property. Accordingly, the family court’s decision to deviate from an equal division to a 75/25 division was an abuse of discretion to the extent the family court considered Ira’s financial misconduct to be a “valid and relevant consideration.” Although financial misconduct is not a proper consideration in determining a deviation from partnership 19 In Hatayama the ICA noted that a spouse’s financial misconduct may justify a deviation in “extraordinary circumstances.” 9 Haw. App. at 12, 818 P.2d at 283. The family court may, on remand, consider whether this case presents “extraordinary circumstances.” 30 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER principles in the absence of a finding of exceptional circumstances, our law does allow for a court to charge a divorcing party for marital waste during the pendency of a divorce, which is discussed in the next section. 3. Chargeable Deduction for Marital Waste Hawaiʻi courts charge a divorcing party for marital waste during the divorce when doing so would be equitable. See Chen v. Hoeflinger, 127 Hawaiʻi 346, 358, 279 P.3d 11, 23 (App. 2012); Higashi, 106 Hawaiʻi at 241, 103 P.3d at 401. It is fundamental to recognize that marital waste is only a chargeable deduction if it occurs during the divorce; thus, “a reduction of the value of the marital estate during the marriage, but prior to the time of the divorce, is not a chargeable reduction.” Higashi, 106 Hawaiʻi at 241, 103 P.3d at 401. Thus, a court cannot find that a party’s use of marital partnership property is chargeable as marital waste without first finding the date on which the divorce commenced. See id. The divorce commences on the earliest of the following dates:
(2) the date of final separation (i.e., the earlier of the date the trial is completed or the unconditional, unmodified communication from one spouse to the other that the marriage has ended and divorce is desired); or 31 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER (3) a substantial step is taken toward final separation, which later occurs, or filing the complaint, which later is filed. See Higashi, 106 Hawaiʻi at 241, 103 P.3d at 401; Myers v. Myers, 70 Haw. 143, 151-52, 764 P.2d 1237, 1243 (1988) (defining the date of final separation). In the present case, the family court did not make a finding that the parties’ divorce commenced on a specific date. While the family court found that Ira purchased airline tickets for his girlfriend and her daughter in December 2008 and began dating and living with her in 2009, the court did not make a specific finding of the date the divorce commenced for the purpose of determining whether dollar reductions to the value of the marital estate were chargeable to Ira. Although the family court found that the exact date at which Ira “moved out” of the marital residence was “unclear,” the family court’s findings referred to the “July 2010” date as the “time of separation.” Notwithstanding the absence of a finding regarding the date the divorce commenced, the ICA held that the parties’ divorce date occurred prior to 2010 because Ira took a substantial step towards the date of separation through the purchases expended on his girlfriend. The family court awarded Susan $41,830 representing wasted marital assets with regard to Ira’s relationship with his girlfriend. Presumably, the family court awarded Susan this 32 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER amount in light of the $10,000 Ira paid for his girlfriend’s criminal defense in addition to the $30,000 he spent on jewelry in 2010. 20 However, the family court should have first determined the parties’ date on which the divorce commenced before designating Ira’s expenditures on his girlfriend as marital waste. If the starting date of the divorce was a date in early 2009, any subsequent dissipation of marital assets, which would include the jewelry expenditures, could be chargeable to Ira as marital waste, and the family court may accordingly “treat that dollar amount as having been awarded to the divorcing party who caused that chargeable reduction.” 21 Higashi, 106 Hawaiʻi at 241-42, 103 P.3d at 401-02. However, if the divorce began in July 2010, Ira’s dissipation of marital 20 Ira’s purchasing of the $30,000 in jewelry for his girlfriend is closely related to his failure to pay the IRS tax debt in full with the second home equity line. The family court found that the money Ira used for the purchase of the jewelry “was intended to be utilized for the payment of taxes.” On remand, the family court may consider whether the excess penalties and fees incurred because of Ira’s failure to pay the IRS debt with the second equity line should be considered a wasted marital asset. This determination will depend on the court’s determination of the date of the commencement of the divorce. 21 Instead of considering Ira’s expenditures on his girlfriend as having been awarded to Ira, the family court awarded Susan a property settlement to be paid from Ira’s share of the escrow account for the marital residence, and if the funds from the escrow account were insufficient, Ira would have to make payment in full within a certain number of days from the filing of the Decree. The amount of the settlement awarded to Susan appeared to be the full value of the waste. This is contrary to Higashi, which requires the court to treat the dollar amount as being a part of the marital partnership property and treating it as already awarded to Ira. In requiring Ira to pay the full amount of the waste to Susan, the family court required Ira to pay more than he was required under the Higashi approach. 33 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER assets could not be considered a chargeable reduction because the March and April 2010 jewelry purchases would be considered as having occurred during the marriage. Id. at 241, 103 P.3d at 401. Thus, absent a finding by the family court regarding the date the divorce commenced, it is unclear as to whether or not Ira’s dissipation of marital assets should have qualified as a chargeable reduction in the division of marital assets. The ICA therefore erred in affirming the family court’s award to Susan for wasted marital assets. 22 C. Whether the Family Court Erred by Basing the Alimony Award on Ira’s Financial Misconduct In his third question presented, Ira argues that the family court erroneously based its alimony ruling on its finding of his financial misconduct while failing to consider Susan’s “actual expenses” and his “age, health, ability to pay, and “adverse financial condition after the divorce.” The ICA declined to find that the family court’s alimony award to Susan constituted an abuse of discretion in light of the family court’s finding that Ira was “not credible.” 22 Consequently, we do not address Ira’s argument that the family court and the ICA also erred by penalizing him twice for the asserted financial misconduct by treating it both as an equitable consideration justifying deviation from partnership principles and as marital waste. 34 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER However, because the court’s division of property likely had an impact in determining Susan’s entitlement to alimony, the ICA should have also vacated the family court’s alimony award. 23 Kuroda v. Kuroda, 87 Hawaiʻi 419, 430, 958 P.2d 541, 552 (App. 1998) (vacating an alimony award and remanding for reconsideration in light of the court’s decision to vacate the corresponding property division of the divorce decree). Secondly, although the ICA characterized the family court as having relied on the financial condition of the parties in determining the alimony award, the family court’s justification for the award apparently took into account Ira’s financial misconduct. Because alimony will be re-determined on remand, we discuss the appropriate circumstances that may be considered in an award of spousal support. HRS § 580-47(a) (2006) requires the family court upon decreeing a separation to take into consideration the following criteria when making further orders for the support and maintenance of either spouse: “the respective merits of the parties, the relative abilities of the parties, the condition in which each party will be left by the divorce, the burdens imposed upon either party for the benefit of the children of the parties, and all other circumstances of the case.” The court 23 We do not suggest that vacating a division of property would require vacating an award of alimony in all cases. 35 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER must also consider all of the following factors in ordering spousal support and maintenance: (1) Financial resources of the parties;
maintenance to meet his or her needs independently;

marriage;
(6) Physical and emotional condition of the parties; (7) Usual occupation of the parties during the marriage; (8) Vocational skills and employability of the party seeking support and maintenance; (9) Needs of the parties; (10) Custodial and child support responsibilities; (11) Ability of the party from whom support and maintenance is sought to meet his or her own needs while meeting the needs of the party seeking support and maintenance; (12) Other factors which measure the financial condition in which the parties will be left as the result of the action under which the determination of maintenance is made; and (13) Probable duration of the need of the party seeking support and maintenance. HRS § 580-47(a); Cassiday v. Cassiday, 6 Haw. App. 207, 215, 716 P.2d 1145, 1151 (1985) (“When deciding in a divorce case whether one party must pay periodic support to the other, for how long, and how much, the family court must consider all of the factors enumerated in HRS § 580- 36 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER 47(a)[].”), aff’d in part, rev’d in part, 68 Haw. 383, 716 P.2d 1133 (1986). In its Decree the family court provided four reasons as the basis for its awarding of $3,000 per month for ten years to Susan: “the length of the marriage”; “the financial conduct of the parties”; “the small amount of social security income” as Susan’s “only source of continuing income (said source having been compromised by [Ira’s] actions)”; and Susan’s age. (Emphasis added). While the ICA characterized the family court as actually relying on the financial condition of the parties and not Ira’s financial conduct, the family court’s specified justification for the alimony award appears to have taken into account Ira’s financial misconduct. Further, the family court’s Decree incorrectly states that Susan’s social security check would continue to be garnished by the IRS. However, given that the family court also ordered the outstanding IRS debt to be paid in full from the escrow account of the marital property, there could be no genuine concern for the future garnishment of Susan’s social security check. Additionally, Ira argues that the family court erred in its alimony award to Susan because it awarded more money than Susan’s actual needs required. Susan provided the family court with a statement of actual expenses. In her Income and Expense 37 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER Statement filed November 7, 2011, Susan stated that her monthly personal expenses amounted to $1,390. In her proposed divorce decree, Susan requested that the court award her alimony in a single lump-sum payment of $250,000. In its Decree, the court ordered monthly alimony in the amount of $3,000 per month for ten years, totaling $360,000 without making a finding as to the actual monthly spousal support that Susan would require based on her demonstrated needs. Even if Ira is able to pay the additional amount of alimony, Susan is not entitled to more spousal support than is required to satisfy her demonstrated needs. See Cassiday, 6 Haw. App. at 215, 716 P.2d at 1151. The family court did not make a finding that Susan required $3,000 in monthly support and maintenance. The family court should not have awarded Susan this amount absent a finding that she required funds beyond the amount provided in her Income and Expense Statement. Furthermore, the family court did not make any finding with respect to the large sums of money (approximately $390,000) that were deposited into Susan’s personal bank account between December 2009 and April 2012, which included the reimbursement checks from her sister’s convent totaling $98,034.74 and the $49,221.91 in “cashed out” funds. On remand, the family court should make any award of alimony in accordance with the factors set out in HRS § 580- 38 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER 47(a) (2006). This requires, among other things, consideration of the needs of both of the parties and Ira’s ability to pay.