Property Division in Hawaii Divorces After Gordon v. Gordon

• Jurisdiction: Hawaii,United States
• Citation: Vol. 20 No. 02
• Publication year: 2016

Property Division in Hawaii Divorces After Gordon v. Gordon

by Rebecca A. Copeland and John W. Schmidtke, Jr.

As attorneys who practice family law in Hawaii know, our state follows the partnership model in determining the division and distribution of assets at divorce. A recent opinion by the Hawaii Supreme Court discusses how the partnership model impacts property division in cases of financial misconduct. Gordon v. Gordon, 135 Hawaii 340, 350 P.3d 1008 (2015). The Gordon case also addresses the impact of financial misconduct during marriage on the ability to obtain alimony (spousal support).

Although Gordon settles some issues, it also raises questions about the way property is divided and alimony is awarded. Mr. Gordon spent marital funds on his girlfriend—a non-partnership expense that adversely affected Mrs. Gordon. Mr. Gordon's conduct caused the trial court to award Mrs. Gordon more of the remaining marital assets, and to award her alimony. The Hawaii Supreme Court reversed and remanded with instructions on how to approach Mr. Gordon's conduct, how to analyze marital waste, and how to determine alimony. In reaching its decision, the Hawaii Supreme Court restated the law of property division in Hawaii, emphasizing the partnership model and promoting the use of a Property Division Chart ("PDC") to reach a just and equitable result.

But does the PDC yield a just and equitable result? Under facts such as Gordon presents, is the partnership model fair? Does it make sense? Do married couples know the rules? Do couples know what records to keep? Does the court expect couples to keep track of capital contributions to their marriage in the same way bookkeepers and accountants routinely keep track for businesses? Should alimony awards be based on the couples' expenses or their income? As several hypothetical scenarios explore, the partnership model might not meet the statutory requirement for the family court to divide a couple's assets and debts justly and equitably, and the case law regarding alimony might be forcing the family court to decide alimony on unreliable information.

The Partnership Model in Hawaii Divorce Cases

Hawaii Revised Statutes § 580-47 governs property division, the allocation of debts, and support orders in Hawaii divorce cases. The statute specifically provides that the family court's orders be "just and equitable." Id. In addition to this statutory authority, the division and distribution of property is also governed by the partnership model. Hawaii divides marital property into three categories: "(1) Premarital Separate Property; (2) Marital Separate Property; and (3) Marital Partnership Property." Kakinami v. Kakinami, 127 Hawaii 126, 131 n.4, 276 P.3d 695, 700 n.4 (2012) (citation omitted). When the parties marry, "Premarital Separate Property becomes either Marital Separate Property or Marital Partnership Property." Id. "Marital Separate Property includes: (1) property covered by a valid premarital agreement; (2) property covered by a valid contract; and (3) property that was (a) acquired through gifts and inheritances during the marriage; (b) expressly classified as separate property; and (c) maintained and funded through non-partnership assets or efforts." Id. Moreover, "Marital Separate Property is not subject to division." Id.

Hawaii courts have constructed five categories of net market values ("NMV"s) applied in divorce cases:

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 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 v. Tougas, 76 Haw. 19, 27, 868 P.2d 437, 445 (1994). According to the Hawaii Supreme Court:

The NMVs in Categories 1 and 3 are the parties' capital contributions to the marital partnership. The NMVs in Categories 2 and 4 are the during-the-marriage increase in the NMVs of the Categories 1 and 3 properties owned at DOCOEPOT. Category 5 is the DOCOEPOT NMV in excess of the Categories 1, 2, 3, and 4 NMVs. In other words, Category 5 is the net profit or loss of the marital partnership after deducting the partners' capital contributions and the during-the-marriage increase in the NMV of property that was a capital contribution to the partnership and is still owned at DOCOEPOT.

Id. Additionally, "[t]he Category 1 and 3 NMVs are the "partner's contributions" to the Marital Partnership Property that, assuming all valid and relevant considerations are equal, are repaid to the contributing spouse," and "[t]he Category 2, 4, and 5 NMVs are Marital Partnership Property that, assuming all valid and relevant considerations are equal, are awarded one-half to each spouse." Helbush v. Helbush,...