Opinion ID: 1444915
Heading Depth: 2
Heading Rank: 1

Heading: Transmutation Theory and Gift

Text: We turn now to the issue whether the ICA erred in rejecting Wife's transmutation theory and in holding that there was no evidence that Husband's separate property, totaling $75,982 ($42,982 in cash and $33,000 NMV of the Mauna Luan), was gifted to Wife or to the marital estate. Wife argued that, although the $75,982 was Husband's separate property on the date of marriage, these assets were commingled in joint accounts and utilized to purchase the marital residence under joint title and were thus transmuted into marital assets. Transmutation is the conversion of separate property into marital property during marriage by expressed or implied acts. [8] Wife contended that under transmutation, the evidence raised a rebuttable presumption of gift from Husband to Wife or to the marital estate, which Husband failed to rebut by clear and convincing evidence. The ICA rejected the transmutation theory on the grounds that it requires tracing of funds. The ICA stated, [w]e have concluded that `[t]he categorization of Categories 1 and 3 NMVs does not involve tracing beyond the transaction by which the husband or wife acquired the property.' Gussin, ___ Haw.App. at ___, 836 P.2d at 504 (citing Gardner v. Gardner, 8 Haw. App. 461, 476, 810 P.2d 239, 247 (1991)). However, earlier in Hashimoto v. Hashimoto, 6 Haw.App. 424, 725 P.2d 520 (1986), the ICA rejected the transmutation theory for a completely different reason. In Hashimoto, the ICA stated: The more fundamental error, however, is an error of law. In a memorandum filed on May 28, 1985, Wife noted the different rules applied in other states with respect to the division of separate property upon divorce.... She referred to ... the transmutation of property rule.... It appears that the family court applied the transmutation of property rule in this case. In Hawaii, however, such fixed rules are prohibited. Cassiday, 68 Haw. at [388] 716 P.2d at 1137. Id. at 430, 725 P.2d at 520 (emphasis added). We agree with the ICA's holding in Hashimoto and with those jurisdictions which have rejected the doctrine of transmutation [9] that presumptions arising therefrom are fixed rules and are thus inconsistent under equitable distribution statutes such as HRS § 580-47. However, we disagree with the ICA in its holding, as a matter of law, that there is no evidence that Husband legally gifted any Category 1 NMVs to Wife or to Husband and Wife. The fact that after the DOM [date of marriage] Husband deposited some of his Category 1 NMV into a marital fund which was used to purchase a joint asset, is insufficient to prove the occurrence of a legal gift of that NMV to Wife. Gussin, ___ Haw.App. at ___, 836 P.2d at 504-05. The basis for such an evidentiary review by the ICA is improper. We acknowledge Husband's contentions that the family court assessed the credibility of the parties and weighed the evidence in determining that the value of these premarital assets was not gifted to Mrs. Gussin or the marital partnership during the marriage because of the absence of donative intent on Dr. Gussin's part. However, our review of the record indicates that the family court did not make any findings as to donative intent or any other issue bearing on whether a gift had been made. The ICA's analysis of the gift issue in this case is inconsistent with what it required of the family court in Bennett v. Bennett, 8 Haw.App. 415, 807 P.2d 597 (1991). In Bennett, the family court found that a premarital cash contribution made towards the purchase of a marital residence was a gift. Upon review of the family court's decision, the ICA remanded the case for the family court to determine whether all of the essential elements of a legal gift from wife to husband were met. Id. at 425, 807 P.2d at 603. The ICA stated: The questions for the family court to decide were: . . . . 2. Did [wife] legally gift any part of the NMV of her DOM cash and receivable to [husband] during the marriage? More specifically, when [wife] used her DOM cash and receivable in the purchase of 59-003 Holawa Place in joint ownership with [husband], did she legally gift the amount used, or any portion thereof, to [husband]? To constitute a gift, the essential elements are (1) donative intent, (2) delivery, and (3) acceptance.... Id. (emphasis added and citations omitted). Because the family court failed to make any findings as to donative intent or any other element bearing on whether a legal gift had been made, we conclude that the ICA erred in not remanding the issue of gift for the family court to decide.