Selvage v. Moire. , 139 Haw. 499 ( 2017 )

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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.
2
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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.
4
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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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