Court Opinion

ID: 4168480
Source: CourtListenerOpinion
Date Created: 2017-05-15 20:17:08.659757+00
Date Added: 2024-06-11T14:38:39.787916
License: Public Domain

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                                                              Electronically Filed
                                                              Supreme Court
                                                              SCWC-11-0001060
                                                              15-MAY-2017
                                                              07:58 AM

           IN THE SUPREME COURT OF THE STATE OF HAWAI#I

                                ---o0o---

       ANTHONY K. SELVAGE, Respondent/Plaintiff-Appellee,

                                    vs.

           LAURA MOIRE, Petitioner/Defendant-Appellant.

                            SCWC-11-0001060

         CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
              (CAAP-11-0001060; FC-D NO. 08-1-0252)

                              MAY 15, 2017

 RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

               OPINION OF THE COURT BY RECKTENWALD, C.J.

          This case requires us to review the Family Court of the

Third Circuit’s (family court) division and distribution of

marital property during the divorce action between Anthony

Selvage (Selvage), a 71-year-old retired musician and trust fund

beneficiary, and Laura Moire (Moire), a 56-year-old emergency

room doctor.
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          After prolonged and contentious divorce proceedings,

the family court1 awarded two parcels of real property and over

$2.8 million in inheritance monies and other assets--virtually

all of the spouses’ property--to Selvage, who was also receiving

court-ordered spousal support from Moire.         The family court

stated in its oral ruling that it found Selvage the more credible

party, whereas Moire provided no credible evidence of either her
assets or debts, and repeatedly ignored or disobeyed court

orders.   Furthermore, the court found that Moire was younger than

Selvage, a doctor, and earned over $6,000 a month; Selvage, on

the other hand, was unemployed, about 15 years older, and living

off of social security and his inheritance.          Thus, the court

found that Moire had significantly higher future earning

potential than Selvage.

          On appeal, the Intermediate Court of Appeals (ICA)

affirmed the family court’s decision in a Summary Disposition

Order (SDO), reasoning that the family court did not abuse its

discretion in declining to deviate from the partnership model of

property division.    In a concurring and dissenting opinion, Judge

Lisa Ginoza concluded that there were sufficient valid and

     1
          The Honorable Melvin H. Fujino presided.

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relevant considerations2 such that the family court should have

exercised its discretion and deviated from the partnership model.

            We conclude that remand to the family court is

necessary.     The vast financial inequity left between the parties

constitutes an equitable consideration that may have warranted a

deviation from the partnership model of marital property

division.     The family court’s written decision does not
adequately indicate that it considered Moire’s proposed equitable

considerations justifying deviation, and it is unclear why the

family court rejected Moire’s request to deviate from the

partnership model.

                                I. Background

A.    Divorce Proceedings in Family Court

            The parties were married on December 22, 1985, and

separated on December 22, 2006.         Selvage filed a Complaint for

Divorce on August 27, 2008.        The complaint alleged that the

marriage was “irretrievably broken,” that Selvage and Moire had

two adult daughters together who were still dependent on them for

support while attending college on the mainland, and that Selvage

was entitled to alimony from Moire.          Selvage stated that he was

retired and living in Mountain View on Hawai#i island, and that

Moire was a medical doctor living in Topanga, California.

      2
            In its SDO, the ICA used the term “VARC” to refer to “valid and
relevant considerations,” which warrant deviation from the partnership model.
In this opinion, we instead refer to those valid and relevant considerations
as “equitable considerations” justifying deviation.

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             In his first asset and debt statement, Selvage

indicated that he owned two properties:           an apartment in Topanga,

California, worth $600,000 that he owned individually and rented

out, and a house in Mountain View, Hawai#i, worth $390,000 that

he owned jointly with Moire.         Selvage’s financial assets totaled

$263,000.3    Selvage further listed his art collection and his

musical instruments, which he valued at about $10,000 each.               He
also noted his status as a beneficiary of a Sternoff Trust worth

$2-3 million.

             On August 29, 2008, Selvage filed a motion requesting a

fluctuating amount to pay Moire’s bills and $1,600 per month in

spousal support “to make ends meet without [him] drawing down on

[his] inheritance as [he has] no retirement” or income beyond

social security of $563 per month.          He explained that he is “a

minority beneficiary of a trust established by [his] parents, yet

[has] had to loan [his] Wife’s corporation approximately $55,000

to pay for the financial shortfalls.”

             In July 2009, Selvage filed updated Income and Expense

and Asset and Debt Statements.         He noted $11,200 in cash and bank

accounts, as well as $116,500 in inheritance funds, and $12,000

in securities held jointly with Moire.4          He estimated that the

value of both properties had fallen significantly.             According to

      3
            Selvage also stated that held $18,000 in securities jointly with
Moire, who had $19,000 in securities of her own.
      4
             He also noted that Moire had $23,000 in securities of her own.

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Selvage, the value of the Sternoff Trust had almost doubled, and

he was debt-free, but he alleged without explanation that Moire

owed $39,500 to him personally and another $79,000 to the

Sternoff Trust.

          Moire shortly thereafter filed her own income, expense,

asset, and debt statements with the family court.           Moire stated

that she only had a $1,000 monthly income and $2,835 in “regular
monthly expenses.”    Moire’s estimated real property values were

significantly different from Selvage’s:         she estimated that the

Topanga property was worth $1.2 million (where Selvage declared

that it was worth $450,000), and the Hawai#i island property was

worth $500,000 (where Selvage declared that it was worth

$300,000).   Moire listed several outstanding debts, including

credit card debts of $36,181.

          At the following court hearing, Selvage’s attorney

submitted a request for spousal support, alleging that Moire was

“not being forthright in her filings with the court” and was

stringing the trial along “waiting for [Selvage] to die[.]”

Moire’s attorney responded that his understanding was “that Mr.

Selvage is the beneficiary of a rather large trust and he can

withdraw as he wishes.”     He also added that although Selvage

correctly identified Moire’s “gross numbers,” he failed to take

into account the fact that the nature of her work as a traveling

doctor required more expenditures like airline transportation,

temporary housing, rental cars, and “more expensive food.”             He

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also added that Moire had lost her full-time job at Kahuku

Hospital, and the lack of jobs available in Hilo put her in a

“financial scramble.”

           The court stated that “it is not clear to me that Dr.

Moire has been all together straight forward [sic] with the

Court.”   The court also found that Selvage’s income, “although

not nonexistent, [is] quite limited[,]” and “Dr. Moire has a
vastly more significant income of earning capacity.           And again,

the precise extent to which she is generating income is difficult

to assess.”   The court then ordered Moire to pay temporary

spousal support to Selvage in the amount of $l,500 a month, with

Selvage “entitled to a credit back to the date of the initial

filing[,]” totaling $22,500.

           Several months later, Selvage filed motions asserting

that Moire had not paid him any court-ordered spousal support and

that he needed financial assistance from Moire to help fund their

daughter’s college tuition and living expenses.          After a hearing

on Selvage’s motions, the court entered judgment in favor of

Selvage and against Moire for $36,000 in delinquent spousal

support and ordered the parties to “equally share the expenses

for [Daughter]’s college expenses.

           In his second updated income and expense statement,

Selvage listed $29,010 in personal bank accounts, $6,587 in a

Bank of Hawai#i account belonging to Daughter, and $336,686 in a

Wells Fargo Portfolio Management Account.         He also listed

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$1,566,227 in the Sternoff Trust.        Selvage stated that the value

of the Topanga property had risen from $450,000 to $490,000, but

the value of the Mountain View property had fallen even farther,

from $300,000 to $135,000.

          Moire also filed an updated Income and Expense

Statement, in which she listed her total monthly income as $3,100

and her total monthly expenses as $10,514 (including $7,633 in
monthly debt servicing payments).        Moire’s and Selvage’s

statements continued to differ drastically.          She listed the

Topanga property as valued at $800,000, but listed no value for

the Mountain View property, stating instead that the property had

not been appraised.     Her debts jointly held with Selvage included

$5,223.58 to the State of Hawai#i in taxes; $13,472 for their

daughter’s Chase credit card; $47,500 to “NAMASTE”; and $20,000

in a 1999 tax lien to the State of California.          Her individual

debts included $34,795 in credit card debt and $19,000 to

“E.M.H.P.”

          Relevant to the issues at hand, Selvage testified to

the following during the trial:       that he wanted Moire to equally

share Daughter’s college expenses with him, that he had put about

$112,000 over time from his trust into Moire’s corporation and

had only received $17,000 back, that he had recently received a

“bulk figure” of $1,540,000 in inheritance, that he spent

$135,000 in arbitration and $225,000 in attorneys’ fees in

litigation over his inheritance with his half-sister through

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“owner draws” on his trust account, that Moire came into the

marriage with “around $90,000” of student loan debt, and that

Moire had removed Selvage’s posters and two of his violins from

the Topanga property.

            Moire testified that although she did not recall the

exact amount of student loan debt, it had been much less than the

$90,000 Selvage had testified to, and that at least $30,000 of
the debt had been paid off as a personal gift to her.5            Moire

further testified that she had received $276,000 in compensation

for a hand injury, which she later invested in extensive

construction on the Mountain View property.           In addition, Moire

testified that half of the Mountain View property was purchased

“out of [her] earnings.”       She denied that she had removed the

violins, and she claimed to have left the posters in a storage

area.   When asked why Moire had not included any documentation

for her claimed credit card debt, she testified that she had, in

fact, supplied her “several different attorneys” with the

relevant documents.      Finally, Moire testified that there was at

least $200,000 worth of personal and joint property within the

Mountain View home, but that she had been unable to appraise any

of it because of a restraining order against her.

      5
            In its Findings of Fact, the family court found that, upon the
date of marriage, Moire had $30,000 in student debt. The court made no
finding regarding Moire’s testimony that she had received a large gift from
Selvage’s mother to pay off that debt.

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          After the trial, Selvage filed a Proposed Findings of

Fact (FOF), Conclusions of Law (COL), and Decision of the Court.

On the same day, Moire filed her Written Closing Argument in

place of a proposed decision.       Moire argued that she should be

awarded the Hawai#i property because it was bought during the

marriage, and it would be equitable for both parties to have

residences.    She also argued that the court should deny Selvage’s
claim seeking Category 3 reimbursement for the money he spent on

litigation over his trust inheritance.         She argued that Selvage’s

interest in the trust vested when his mother passed away in 2004.

According to Moire, “any appreciation of income from that point

forward would be construed as category 4 property subject to

division[.]”

          Moire also argued that deviation from Hawaii’s standard

partnership model of property division was warranted given the

circumstances of this case and “the condition that each party

will be left in at the conclusion of this case.”           Noting that

“Hawai#i law requires the distribution to be equitable, and does

not limit the Court to an equal division,” she added that “this

was a very long marriage with substantial assets at stake.             Wife

worked and paid the bills, and when could not, paid them with her

disability settlement. . . .      If Husband’s requests are followed,

it will result in Husband receiving all, or a disproportionate

share of the marital estate.”

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          The court ruled against Moire on the majority of the

issues.   Specifically, the court stated that it found “[Selvage]

to be more--[Selvage]’s testimony to be credible.           And [found]

that [Moire]’s just reference [sic] to the Income and Expense and

Asset and Debt Statement is not to be [sic] sufficient for this

Court to award her any type of credit regarding those accounts as

well as debts.”    The court made no comment on Moire’s request for
deviation in her closing argument and did not explain how it

arrived at its property divisions.

          In its FOFs relevant to this appeal, the court

determined that Moire was a licensed physician with a monthly

income of $6,666, and Selvage was unemployed.          The court

repeatedly stated that it declined to assign debts or assets to

Moire because it did not find her testimony credible and because

the court had not received evidence of them.          The court also

found that Moire’s failure to provide a password for a website to

Selvage was “another example of how [Moire] fails to cooperate

and ignores court Orders.”      Regarding Moire’s student loans, the

court found the value at $30,000.        The court further found that

Selvage had been gifted $251,940 from his parents, which had been

used for “marital expenses as as [sic] well as to supplement and

support [Moire]’s business when [Moire] failed to have sufficient

funds in her professional corporation.”         The final relevant FOF

was that Selvage had received inheritance in the amount of

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$2,270,199.90 and been gifted personal property valued at $52,000

in October 2010, which “is [Selvage]’s category three claim.”

          The only relevant COLs were the following:

          B. Property Division Chart/Allocation of
          Assets/Debts/Equalization Payment:
          All Category 1 and Category 3 assets and debts are
          allocated as noted in Property Division Chart attached
          hereto as Exhibit 1. It should be noted that for the
          purposes of this chart, the Court included
          assets/debts of [Moire] even though there was no
          evidence of such asset and debt other than the mere
          reference in [Moire]’s recent asset/debt statement.

          C. Alimony/Spousal Support: [Moire] has a judgment
          of $36,000 for spousal support arrearage [previously
          entered on August 24, 2010], which is noted in FOF 21.
          [Moire] owes a present balance of $37,400 to [Selvage]
          pursuant to FOF 26. Alimony is terminated as of the
          date of trial.

          The court then issued its Divorce Decree and

distributed the relevant property as follows:          Selvage was

awarded the Topanga property “inasmuch as [he] owned this

property prior to marriage[,]” the Mountain View property, and

all interest in the Sternoff Trust.        The family court also

awarded Selvage an equalization payment from Moire in the amount

of $29,219.76.

          Based on the family court’s Property Division Chart, it

appears that Moire’s equalization payment was based on the

court’s calculation that Moire was responsible for a $34,000

decrease in net value of the partnership during the marriage,

based on $30,000 in student loans and $4,000 for Selvage’s art

collection posters and musical instruments that Moire removed

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from the Topanga property during the time leading up to the

trial.    The family court appears to have utilized a formula

located at the bottom of the chart, which resulted in Moire

receiving a total value of $37,059.11.6          When the alimony

judgment against Moire for $37,400 is factored in, she is

essentially left no assets or cash and owes Selvage $340.89.

B.    Moire’s Appeal and the ICA’s Decision
            In her appeal to the ICA, Moire alleged three points of

error by the family court:7

            (1) The trial court erred in failing to deduct
            [Selvage’s] costs of litigation from the award of
            Category 3 credit for [Selvage].

            (2) The trial court erred in counting the trust income
            and interest [Selvage] received from 2005-2010 after
            his mother’s 2004 death as a Category 3 asset.

            (3) The trial court erred in failing to deviate from
            the partnership model of divorce. . . . The trial
            court made no findings at all about whether there
            should be an equitable deviation, made no equitable
            deviation, and followed the partnership model to the
            letter.

      6
            The bottom of the chart provides certain formulas for calculating
awards, one of which indicates that to calculate an equalization payment, the
family court subtracts a party’s “Capital Contributions” from the “Proposed
Division of Marital Partnership Property.” Because the court found that
Moire’s “Capital Contribution” to the partnership was actually a $34,000 loss,
it added $34,000 to the $66,278.87 that was Moire’s “Proposed Division of
Marital Partnership Property,” giving her a “Partnership Profit” of
$100,278.87. In contrast, the family court found that Selvage contributed
$2,754,030.65 in total to the Partnership, which it subtracted from his
proposed division of $2,795,870.00, leaving him with $41,839.95 in Partnership
Profits. To equalize this amount, the family court ordered Moire to pay
$29,219.76, leaving each party with an “Equal Division of Profits/Losses” of
$71,059.11.
      7
            Moire asserted four points of error in her opening brief, but
after reviewing Selvage’s response to her third point of appeal, she withdrew
Point 3 in her reply brief. Thus, this point is omitted from this discussion.

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          In its SDO and subsequent Judgment, the ICA affirmed

the family court’s Findings of Fact, Conclusions of Law, and

Divorce Decree.    On the first point of error, where Moire argued

that the $385,000 that Selvage spent in litigation with his half-

sister “did not ‘contribute’ to the couple’s marital partnership

and should therefore be deducted from Selvage’s Category 3

Credit,” the ICA explained that “Hawai#i courts have never held
that an inheritance’s [net market value (NMV)] reflects the

inheritance minus any acquisition or maintenance costs. . . .

Hawai#i law requires only that, if all valid and relevant

considerations are equal, Category 3 NMVs are repaid to the

contributing spouse.”     (Quoting Hussey v. Hussey, 77 Hawai#i 202,

207, 881 P.2d 1270, 1275 (App. 1994), overruled on other grounds

by State v. Gonsalves, 91 Hawai#i 446, 984 P.2d 1272 (App. 1999)

(emphasis added)).

          The ICA noted that “Selvage paid the expenses with

trust funds, which he requested and received from the trust.”

The ICA thus concluded that “the Family Court did not abuse its

discretion in declining to deduct the litigation expenses from

Selvage’s Category 3 Credit Award[.]”

          On Moire’s second point of error, the ICA concluded

that although Moire correctly stated the point of law, she

“fail[ed] to establish that the trust distributions in question,

although denominated as ‘Trust income,’ represented anything

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other than periodic distributions to Selvage of the trust

corpus.”   Therefore, the “Family Court did not abuse its

discretion in not excluding any increase in the value of the

inheritance corpus before its acquisition by Selvage.”

           As to Moire’s third point of error, the ICA

acknowledged that the “Family Court did not make an express

finding regarding inequity[.]”       However, after considering the
family court’s findings that Moire failed to provide credible

evidence on this point, the ICA “[could not] say that the Family

Court erred in not finding the alleged inequity to be [an

equitable consideration justifying deviation]” because no

authority “requires a court to enter explicit findings if it

finds no [equitable considerations] that warrant deviation” from

the partnership model.

           Judge Ginoza concurred with the majority opinion on

Moire’s first and second points of error, but dissented on the

third point.   According to the dissent, when deciding the

division and distribution of marital partnership property, the

family court is required to:

           (1) find the relevant facts; start at the Partnership
           Model Division and (2)(a) decide whether or not the
           facts present any valid and relevant considerations
           authorizing a deviation from the Partnership Model
           Division and, if so, (b) itemize those considerations;
           if the answer to question (2)(a) is “yes,” exercise
           its discretion and (3) decide whether or not there
           will be a deviation; and, if the answer to question
           (3) is “yes,” exercise its discretion and (4) decide
           the extent of the deviation.

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(Quoting Jackson v. Jackson, 84 Hawai#i 319, 332, 933 P.2d 1353,

1366 (App. 1997)).      Judge Ginoza emphasized that in determining

whether any equitable considerations justify deviation, the

proper considerations are “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.”          Id. at 333, 933 P.2d at

1367 (emphasis in original) (quotation and block format omitted).

The dissent contended that the vast disparity in the parties’

circumstances after the divorce, and the limited assets with

which Moire will be left, constitute equitable considerations

warranting that deviation be considered.8

C.    Moire’s Application for Writ of Certiorari

            Moire timely filed her application for writ of

certiorari on September 29, 2015.          Moire presents essentially the

same three issues that she presented to the ICA:

            I.    Did the ICA gravely err in refusing to deduct
                  inheritance-related litigation expenses paid
                  from Category 3 property from [Selvage]’s
                  Category 3 credit award?

            II.   Did the ICA gravely err in refusing to recognize
                  “trust income” from [Selvage]’s mother’s trust
                  as Category 4 property?

      8
            Judge Ginoza noted that Selvage received a net award of
$2,825,089.79 (including both of the couple’s residences), while Moire
received a net award of $37,059.11.

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            III.   Did the ICA gravely err in refusing to remand
                   this case to the family court to make a
                   determination regarding whether there should be
                   a deviation from the partnership model
                   applicable to property division?

                          II. Standard of Review

A.    Property Division

            “We review the family court’s final division and

distribution of the estate of the parties under the abuse of
discretion standard, in view of the factors set forth in [Hawai#i

Revised Statutes (HRS)] § 580-47[9] and partnership principles.”

Tougas, 76 Hawai#i 19, 26, 868 P.2d 437, 444 (1994) (internal

quotation marks, citation, and footnote omitted).             The family

      9
            HRS § 580-47 provides in relevant part:

                  In addition to any other relevant factors considered,
            the court, in ordering spousal support and maintenance,
            shall consider the following factors:

            (1)    Financial resources of the parties;
            (2)    Ability of the party seeking support and maintenance
                   to meet his or her needs independently;
            (3)    Duration of the marriage;
            (4)    Standard of living established during the marriage;
            (5)    Age of the parties;
            (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.

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court’s determination of whether facts present equitable

considerations authorizing a deviation from the partnership model

division is a question of law that this court reviews under the

right/wrong standard of appellate review.           Gordon v. Gordon, 135

Hawai#i 340, 348, 350 P.3d 1008, 1016 (2015) (citation omitted).

                              III.   Discussion

            The ICA appropriately affirmed the family court’s
refusal to deduct costs of litigation from Selvage’s separate

inheritance award as well as the family court’s determination

that Selvage’s inheritance did not generate partnership income.

However, the financial disparity between the parties constituted

an equitable consideration justifying deviation, such that the

family court abused its discretion by not considering whether to

deviate from the Partnership Model.

A.    Selvage’s Category 3 Credit Award Was Properly Calculated.

            The family court did not abuse its discretion when it

refused to deduct inheritance-related expenses from Selvage’s

separate Category 3 credit award.          “Hawai#i law follows a

framework based on partnership principles for the division of

marital partnership property during divorce proceedings.”

Gordon, 135 Hawai#i at 344, 350 P.3d at 1012.           In divorce cases,

our family courts utilize five categories of net market values

(NMV) during property division:

            Category 1. The [NMV], plus or minus, of all property
            separately owned by one spouse on the date of marriage
            (DOM) but excluding the NMV attributable to property

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            that is subsequently legally gifted by the owner to
            the other spouse, to both spouses, or to a third party.

            Category 2. The increase in the NMV of all property
            whose NMV on the DOM is included in category 1 and
            that the owner separately owns continuously from the
            DOM to the DOCOEPOT [date of the conclusion of the
            evidentiary part of the trial].

            Category 3. The date-of-acquisition NMV, plus or
            minus, of property separately acquired by gift or
            inheritance during the marriage but excluding the NMV
            attributable to property that is subsequently legally
            gifted by the owner to the other spouse, to both
            spouses, or to a third party.

            Category 4. The increase in the NMV of all property
            whose NMV on the date of acquisition during the
            marriage is included in category 3 and that the owner
            separately owns continuously from the date of
            acquisition to the DOCOEPOT.

            Category 5. The difference between the NMVs, plus or
            minus, of all property owned by one or both of the
            spouses on the DOCOEPOT minus the NMVs, plus or minus,
            includable in categories 1, 2, 3, and 4.

Tougas, 76 Hawai#i at 27, 868 P.2d at 445 (internal citations

omitted).

            The NMVs “in Categories 1 and 3 are the parties’

‘capital contributions,’ and pursuant to general partnership law,

they are returned to each spouse.”         Kakinami v. Kakinami, 127

Hawai#i 126, 138, 276 P.3d 695, 707 (2012).          Here, the fact that

Selvage spent money from his inheritance on litigation expenses

did not alter the date-of-acquisition NMV of his Category 3

property.    See Tougas, 76 Hawai#i at 27, 868 P.2d at 445

(defining category 3 property as “[t]he date-of-acquisition NMV,

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plus or minus, of property separately acquired by gift or

inheritance during the marriage”).

           Under Hawai#i partnership law, “each partner is deemed

to have an account that is credited with an amount equal to the

money plus the value of any other property, net of the amount of

any liabilities, the partner contributes to the partnership and

the partner’s share of the partnership profits[.]”            HRS
§ 425-120(a)(1) (emphasis added, list formatting omitted).              Thus,

unless there is a debt against a particular capital contribution,

expenditures from that capital contribution do not change its

original NMV.10

           All of the money that Selvage spent on litigation came

from his inheritance trust funds.         Because Selvage was the one

who contributed to the litigation expenses--not Moire--and

because those expenses were paid with trust fund money

constituting Category 3 property, the family court did not abuse

its discretion in crediting that property back to him.

           Additionally, Selvage did not spend hundreds of

thousands of dollars in litigation to only obtain money for

      10
            We note that the instant case is distinguishable from Hamilton v.
Hamilton, 138 Hawai#i 185, 378 P.3d 901 (2016). In Hamilton, the family court
determined that a husband’s inheritance was Marital Separate Property and
thus, analyzed the issue of whether marital assets were used to maintain that
Marital Separate Property. Id. at 192–93, 378 P.3d at 908–09. Marital
Separate Property is a narrow category of separate property that is excluded
from the marital partnership, and thus, not subject to division. See id. at
202, 378 P.3d at 918. In contrast, the instant case involves Category 3
Marital Partnership Property, which is subject to division. Thus, the facts
of the instant case and Hamilton are distinguishable.

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himself.11    Moire directly benefitted from the result of the

litigation and Selvage’s inheritance funds.            So did their

daughters; notably, Daughter was still enrolled in college and

dependent on her parents for her expenses.           Moreover, the family

court found that Selvage “used those funds for marital expenses

as well as to supplement and support [Moire’s] business when

[Moire] failed to have sufficient funds in her professional
corporation.”     Thus, the ICA properly found that the family court

did not abuse its discretion when it awarded Selvage the entire

amount of his inheritance as Category 3 property.12

B.    Selvage’s Category 3 Inheritance Did Not Generate Category 4
      Income.

             Moire argues that the ICA committed grave error in

affirming the family court’s ruling that the $597,330.59 that

Selvage received as “trust income” from June 2005 to May 2010

should be classified as Category 3 property.            Moire asserts that

because these payments were received before the corpus of the

trust was distributed in 2010, they represent an “increase in

value” of Category 3 property (the corpus) that should be

categorized as Category 4 property and divided equally between

Selvage and Moire.

      11
            Additionally, neither party disputed that the trust in its
entirety would become marital partnership property. Further, Moire does not
argue that the litigation expenses were unreasonable or purposeless, or that
the expenses occurred outside of the marital partnership.
      12
            Hamilton is also distinguishable in that Moire does not argue that
amounts expended from Selvage’s inheritance constitute gifts.

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          In response, Selvage argues that “Moire offers no

authority that payments received by a spouse from a trust before

the trust corpus is resolved constitute Category 4 marital assets

that must be shared with the non-owning spouse.”           He also argues

that “Moire offered no evidence that any of Selvage’s Category 3

capital contributions between 2005 and 2010 generated any

profits, or that these payments generated Category 4 income.”
          The ICA correctly concluded that the family court did

not abuse its discretion when it refused to treat Selvage’s trust

income as a Category 4 asset.       The family court found that

Selvage “received the balance of the inheritance sometime in

October 2010,” totaling $2,270,199.90 in both income and corpus

added together.    That entire sum constituted Category 3 property.

Therefore, Selvage should be awarded the entire interest in the

Sternoff Trust as his “sole and separate property.”

          The ICA correctly stated that Moire “fail[ed] to

establish that the trust distributions in question . . .

represented anything other than periodic distributions . . . of

the trust corpus.”    Although the distributions were classified as

“trust income,” this term does not fall within the meaning of

Category 4 property, which only “includes the increase in the

[NMV] of Category 3 property during the marriage[.]”            Gordon, 135

Hawai#i at 349, 350 P.3d at 1017 (emphasis added).          Nothing in

the record indicates that the NMV of Selvage’s inheritance

increased during the marriage.       In fact, the family court found

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that, at the time of trial, the balance of Selvage’s inheritance

was $1,844,999.00, which reflects a decrease in value of

$425,200.90 since October 2010.         Thus, because Category 4

property is the increase in a Category 3 property’s NMV during

marriage, no Category 4 property can exist in this case.

            Accordingly, without any evidence that the trust income

or corpus earned interest or increased in net value after
becoming part of the marital estate, the ICA did not err and the

family court did not abuse its discretion in finding there was no

Category 4 property related to Selvage’s inheritance.

C.    The Inequitable Property Division Between The Parties
      Constituted An Equitable Consideration That Likely Warranted
      Deviation From The Partnership Model.

            Moire argues that the family court should have deviated

from the partnership model.        She contends that the court’s

property division was not equitable because, after subtracting

the spousal support judgment against her, she will be left with

virtually nothing--but Selvage would be “awarded about $2.85

million[.]”13    Moire further argues that although Selvage brought

the Topanga property into the marriage, the property had been

“sustained by marital assets[,]” including replacing a wall and

mitigating smoke damage after a fire.          Thus, awarding both

residential properties to Selvage would be inequitable.

      13
            On appeal, Selvage’s spousal support award is not challenged.

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             In response, Selvage’s primary argument is that HRS

§ 580-47(a) “requires the family court to focus on the present

and the future, not the past” (quoting Gordon, 135 Hawai#i at

353, 350 P.3d at 1021), and that “no other potential [equitable

consideration justifying deviation] exists in this case, since

Moire is younger, healthier, better educated, and possesses an

obviously greater earning capacity, both now and in the future,
than 71-year-old Selvage.”

             Family courts typically do not deviate from the

partnership model without equitable considerations that justify

doing so.      See Jackson, 84 Hawai#i at 332-33, 933 P.2d at 1366-

67.    In Gordon, this court set forth the analysis a family court

must follow under the partnership model of property division.

             The partnership model requires the family court to
             first find all of the facts necessary for
             categorization of the properties and assignment of the
             relevant net market values. Second, the court must
             identify any equitable considerations justifying
             deviation from an equal distribution. Third, the
             court must decide whether or not there will be a
             deviation, and in its fourth step, the court decides
             the extent of any deviation.

135 Hawai#i at 350, 350 P.3d at 1018 (citations and internal

quotation marks omitted).

             Here, the family court failed to comply with the second

part of the Gordon analysis by identifying the disparate

financial conditions in which the divorce left Selvage and Moire.

Selvage received a net award of $2,825,089.79 and the couple’s

two properties, while Moire received a net award of $37,059.11

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that was essentially wiped out by the alimony judgment against

her.   There is no indication from the record that the family

court “identif[ied] any equitable considerations justifying

deviation from an equal distribution[,]” despite Moire’s request

for deviation, and the ICA majority acknowledges that the “Family

Court did not make an express finding regarding inequity[.]”

            Gordon explains that in cases of inequity, the family
court must consider the following circumstances to determine

whether the situation warrants a deviation from the partnership

model:   “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.”       Id. at 352-53, 350 P.3d at 1020-21

(quoting HRS § 580–47(a) (2006)).14

            The family court did not explain its rationale for

ignoring Moire’s request for deviation.          It is therefore unclear

to what extent the family court followed Gordon’s requirement to

consider the merits of the parties, the relative abilities of the

parties, the condition that each party would be left in after the

property division, or any other circumstances of the case.

      14
            Effective October 1, 2011, HRS § 580-47 was amended to also
require the consideration of “the concealment of or failure to disclose income
or an asset, or violation of a restraining order.” See HRS § 580–47(a) (Supp.
2011). This amendment did not have an effect on the family court’s
November 16, 2011 Decree. See 2011 Haw. Sess. Laws Act 140, §§ 3, 5 at 356
(providing that although the Act had an effective date of October 1, 2011, it
did “not affect . . . proceedings that were begun before its effective date”).

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            The family court has “wide discretion” in determining

whether circumstances justify deviation from the partnership

model.   Kakinami, 127 Hawai#i at 136, 276 P.3d at 705.

Nevertheless, given the vast differences in sums awarded to the

two parties--over $2.8 million and two properties to one party

and virtually nothing to the other party--the family court erred

by not identifying any equitable considerations justifying
deviation or explaining on the record the reasons for allowing

the inequity beyond repeatedly stating that it did not find

Moire’s testimony credible.

            In Gordon, the family court’s findings were

“incomplete” for lack of identification of the NMVs of properties

at the date of marriage or their increase in value during the

marriage.    135 Hawai#i at 350, 350 P.3d at 1018.        Here, as in

Gordon, the family court’s findings are incomplete.           Just as we

could not adequately review the Gordon property division without

understanding the court’s rationale, we cannot adequately review

the family court’s actions in this case without a more complete

explanation of the reasons for the family court’s decision.

            When assessing whether a situation warrants deviation

from the partnership model, the family court must “focus on the

present and the future, not the past.”         Id. at 353, 350 P.3d at

1021 (quoting Jackson, 84 Hawai#i at 333, 933 P.2d at 1367)

(internal quotation marks omitted, emphasis in original).             The

family court here failed to adequately explain the “present and

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the future” financial resources of the parties because the only

relevant findings that the family court made were that Selvage

was fifteen years older than Moire and was not currently

employed, and that Moire is licensed to practice medicine in four

states, has an “approximate monthly income [of] $6,666.00[,]” and

significantly higher earning potential than Selvage.

            Furthermore, Gordon held that a family court’s property
division is an abuse of discretion if it considers one spouse’s

misconduct to be a “valid and relevant consideration,” instead of

considering “the factors required by [HRS § 580-47].”             135

Hawai#i at 347, 350 P.3d 1015.       Here, the family court did not

explain why it declined to find an equitable consideration

justifying deviation in the disparate awards, but it did

frequently reiterate its concern with Moire’s credibility, noting

that Moire presented no “credible evidence” at trial regarding

her assets or debts,15 that she “continues not to abide by” an

existing court order requiring her to provide Selvage with the

password for his website, and that she “failed to provide any

specific evidence or accounting of monies provided for” their

      15
            The family court found that Selvage’s appraisal values for the
Topanga property were more accurate, and that Selvage’s testimony was more
credible regarding the value of art collection posters and instruments removed
by Moire. According to the court, Moire failed to provide bank statements for
her Bank of Hawai#i accounts, and Moire was not credible regarding the amount
of her Category 1 student loans. The court further found that Moire provided
no trial exhibits pertaining to five individual accounts, and as such, the
accounts were awarded to her with no debt balance. Finally, the court held
that there was no evidence of the existence of four joint debts claimed by
Moire, and they were thus assigned to Moire with no credit or offset.

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daughter.    Just as the family court in Gordon erred by

inappropriately focusing on the husband’s financial misconduct,

the family court here erred by focusing on Moire’s lack of

credibility as the primary justification for its decision.              While

the family court should assess credibility in determining factual

matters in the record, it cannot punish a party for misconduct

when deciding whether deviation from the partnership model is
appropriate.    See Gordon, 135 Hawai#i at 353, 350 P.3d at 1021

(“[D]eviation 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 [their] misconduct.”).

            Even though the family court determined that Moire had

greater future earning potential than Selvage, that should not

have been the end of its analysis.         The vast disparity in the

parties’ circumstances after the divorce, and the limited assets

with which Moire will be left, constitutes an equitable

consideration justifying deviation, and therefore, the family

court should have explicitly stated why it chose not to deviate

from the partnership model.16

      16
            Moire appears to have approximately $140,000 of debt and
essentially no monies remaining after the divorce, since her net award of
$37,059.11 would be depleted by the alimony judgment against her. This
constitutes an equitable consideration justifying deviation from an equal
distribution when compared to Selvage’s net award of $2,825,089.79 along with
the couple’s two properties. However, due to Moire’s refusal to present
“credible evidence” at trial, she may have additional unknown assets, which
the family court may consider on remand in determining whether there will be a
deviation, and if so, to what extent. If Moire continues to be unwilling to
produce the necessary information regarding her pertinent assets, the family
                                                                (continued...)

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                              IV.   Conclusion

            For the foregoing reasons, we hold that the family

court erred in not identifying equitable considerations that

could have justified deviating from the partnership model when

the divorce left significant financial disparity between the

spouses.    The family court further erred by not explaining why it

rejected Moire’s request to deviate from the partnership model.
Accordingly, we vacate in part the ICA’s August 3, 2015 judgment

on appeal and remand to the family court for determination of

whether and to what extent it will exercise its discretion in

deviating from the partnership model, and to enter appropriate

findings on the record.

Samuel P. King for                        /s/ Mark E. Recktenwald
petitioner
                                          /s/ Paula A. Nakayama
Peter Van Name Esser
and Brian J. De Lima                      /s/ Sabrina S. McKenna
for respondent
                                          /s/ Richard W. Pollack

                                          /s/ Michael D. Wilson

      16
       (...continued)
court may consider other discovery measures to obtain production of the
information.

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