Hamilton v. Hamilton.

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Electronically Filed
Supreme Court
SCWC-13-0001498
30-JUN-2016
07:46 AM

IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

---oOo---

DORINDA HAMILTON,
Petitioner and Respondent/Plaintiff-Appellant/Cross-Appellee,

vs.

DAVID HAMILTON,
Petitioner and Respondent/Defendant-Appellee/Cross-Appellant.

SCWC-13-0001498

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-13-0001498; FC-D NO. 10-1-163K)

JUNE 30, 2016

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

OPINION OF THE COURT BY McKENNA, J.

I. Introduction

This case arises from an appeal and cross-appeal from

monetary decisions in a Divorce Decree. David Hamilton

(“Husband”) and Dorinda Hamilton (“Wife”) seek review of the

Intermediate Court of Appeals’ (“ICA”) September 25, 2014

Judgment on Appeal, filed pursuant to its August 29, 2014
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Memorandum Opinion. The ICA affirmed in part and vacated in

part the June 7, 2013 Divorce Decree of the Family Court of the

Third Circuit (“family court”).1

The parties dispute the impact of a multi-million dollar

inheritance received by Husband on the family court’s

determinations of property division, alimony, and attorney’s

fees and costs. With respect to property division, the family

court found that a premarital economic partnership existed and

implied that proceeds from an illegal marijuana operation may

have constituted a portion of the marital real estate. In

ultimately dividing and distributing the property, the family

court awarded all inheritance funds remaining at trial to

Husband as his marital separate property. It credited Husband

for all sums withdrawn from his inheritance funds as a capital

contribution to the marital estate. It then deducted these sums

from the marital estate, thereby creating marital debt. That

marital debt was then equally split between the parties,

resulting in Wife owing Husband a substantial equalization

payment. The family court then found that equitable

considerations justified a deviation from marital partnership

principles and credited Wife with an amount equal to her

equalization payment. The family court awarded Wife spousal

support during the pendency of the divorce proceedings and until

1
The Honorable Aley K. Auna, Jr., presided.

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December 2016, and the court also awarded her attorney’s fees

and costs.

On appeal, the ICA ruled that the family court’s premarital

economic partnership finding was erroneous because it was based

in part on an illegal business enterprise. The ICA vacated and

remanded the portions of the Divorce Decree pertaining to

property division and spousal support to the family court for

recalculation after segregating proceeds from the illegal

marijuana operation.

We hold that, under the circumstances of this case, the ICA

erred in vacating the property division and alimony awards to

require a recalculation of these awards based on a segregation

of proceeds from the illegal marijuana operation. We also hold

that the family court erred, either by characterizing the entire

$1,511,477 expended from Husband’s inheritance account as

Marital Partnership Property or by characterizing the $2,051,293

remaining in his inheritance account as Marital Separate

Property, because the $1,511,447 expended included payment of

inheritance taxes on Husband’s entire inheritance, and if

inheritance taxes are paid out of Marital Partnership Property,

the remaining inheritance cannot be classified as Marital

Separate Property. We further hold that the family court erred

in summarily ruling before trial that all funds expended by

Husband from his Marital Separate Property inheritance account

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constituted Category 3 Marital Partnership Property for which he

was entitled to be repaid, without requiring Husband to fulfill

his burden of establishing that such expenditures were in the

nature of a contribution to or an investment in Marital

Partnership Property, and then compounded the error by failing

to allow and consider evidence of donative intent. We also hold

that the family court erred in ordering an equal distribution of

alleged partnership capital losses before deciding whether

equitable considerations justified deviation from an equal

distribution. Finally, we hold that the family court improperly

applied marital partnership principles to fashion a property

division award that was not just and equitable. We find no

error in the award of attorney’s fees and costs.

We therefore affirm in part the ICA’s Judgment on Appeal to

the extent that it vacated the property division and alimony

awards and remanded the case to the family court, but vacate the

portion of the ICA’s Judgment on Appeal directing the family

court on remand to segregate the proceeds of the alleged

marijuana operation from the property division. We remand the

case to the family court for further proceedings consistent with

this opinion.

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II. Background

Husband and Wife were married on June 21, 1985 (“date of

marriage”) and separated in June 2010. The couple has two adult

children.

The parties met in early 1976 in New Zealand and began

living together there soon after that. At the time, Wife had

just finished her final semester at the University of Hawai‘i at

Hilo, while Husband worked on repairing a home and a forest

restoration project. Approximately four or five months later,

the parties moved to Massachusetts, where they lived and worked

on Husband’s family’s farm and store for about three months.

After leaving Massachusetts, the parties moved to the

island of Hawai‘i (“Big Island”) in November 1976, where Husband

began working on a county road crew. While on the Big Island,

the parties apparently started an illegal marijuana operation.

Wife testified that she was involved in the processing and

transportation of the marijuana. Husband testified that the

parties did not have a joint or mutual marijuana operation. He

indicated it was a sideline with a few friends that continued

until his son was born in 1987.

At trial, the parties disputed whether marijuana proceeds

were used to purchase real property. Wife testified that

marijuana proceeds were used to purchase multiple properties

prior to the date of marriage, as well as one additional

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property after the date of marriage, while Husband denied that

allegation. On one of the properties, purchased in 1978 and

titled in Husband’s name, the parties jointly constructed a two-

story house.

In 1990, five years after the date of marriage, Husband

obtained his real estate brokerage license. In 2003, he opened

his own real estate firm. Husband testified that his income

declined in 2006 due to a falling market and his father’s

passing. After Wife’s 2010 divorce filing, Husband reported his

gross monthly income as $1,000.

Wife performed part-time work or was a housewife not

employed outside the home for much of the parties’ relationship.

From approximately 1996 to 2009, Wife worked part-time at her

children’s schools to obtain tuition assistance and health

insurance. She also sold hand-painted clothing. As of the date

of final separation in contemplation of divorce (“date of final

separation”), she was collecting unemployment benefits. At the

date of conclusion of the evidentiary portion of trial

(“conclusion of trial”),2 she earned approximately $1,500 per

month as a nanny.

Between 2007 and 2011, Husband inherited amounts totaling

$3,550,770 from his parents’ estates. He deposited the monies

2
The family court’s February 13, 2013 Order Re: Divorce Trial Held
on December 22 and 23, 2011 specified that December 22 and 23, 2011 should be
considered the conclusion of trial.

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into his separate Bank of Hawai‘i account (“inheritance

account”). At the conclusion of trial, the inheritance account

had $2,051,293 remaining.

Prior to marriage, the parties filed no joint tax returns.

A. Family Court Proceedings

1. Pre-Trial Proceedings

On June 23, 2010, Wife filed a Complaint for Divorce. She

then filed a motion for temporary relief, seeking, in part,

temporary spousal support. In granting this request, the family

court made the following finding:

Husband has historically used his existing inheritance
funds for payment of the marital expenses and Wife’s
support. Having reviewed Wife’s Income and Expense
statement filed, the [family court] finds that it would be
just and equitable to order that in addition to the above
support orders, Husband shall pay to Wife $2000 per month
in temporary spousal support beginning October 1, 2010.

Wife later moved for an advance of attorney’s fees,

indicating a gross monthly income of $2,080. Wife contended

that an advance for fees was necessary because Husband had filed

multiple pretrial motions for partial summary judgment. The

family court granted the request for attorney’s fees without

prejudice to additional subsequent requests from Wife for good

cause shown, and ordered Husband to advance $25,000 to Wife’s

counsel.

One of Husband’s pretrial motions for partial summary

judgment, entitled “Husband’s Motion for Partial Summary

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Judgment to Strike the Defense and/or Argument that Husband

Wasted his Category 3 Assets by Spending Money on Items Not

Related to the Marriage or the Children” (“Category 3 motion for

partial summary judgment”), asserted that Wife could not provide

admissible evidence to establish that he “wasted” Category 3

assets.3 In a declaration in support of the motion, Husband

asserted:

In response to Plaintiff’s Request for Answers to Interrogatories
and for Production of Documents and Things, request number 9, I
itemized all of the disbursements I made from my inheritance money with
the exception of $88,597.80, which was disbursed for the marriage and
children’s expenses. This amount was not itemized in Defendant’s
response to Plaintiff’s interrogatory number 9, either because it
consisted of small dollar transactions too numerous to breakdown [sic],
e.g.[sic] $70 to KTA, etc [sic], or the credit card amounts were too
difficult to itemize the family or children expenses [sic] without
additional extensive effort, i.e.[sic] recreating the complete
accounting.

Although Husband’s motion summarily asserted that all sums

expended were for marital and children’s expenses, his response

to interrogatory number 9 included amounts such as $111,885.00

to the Commonwealth of Massachusetts Taxes and $326,540.00 to

the United States Treasury. In addition, Husband’s heading for

his interrogatory 9 itemization of alleged Category 3

disbursements included the following characterization:

“Category 3 Inheritance Account.” After this heading, he

included the inheritance tax payments.
3
Category 3 property includes the date-of acquisition net market
value, plus or minus, of property separately acquired by one spouse by gift
or inheritance during the marriage but excluding the net market value
attributable to property that is subsequently legally gifted by the owner to
the other spouse, to both spouses, or to a third party. Tougas v Tougas, 76
Hawai‘i 19, 27, 868 P.2d, 437, 445 (1994) (citation omitted).

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Wife objected to the motion based on Husband’s failure to

establish prima facie entitlement to a grant of the motion and

due to the existence of genuine issues of material facts as to

whether all sums were expended for marital purposes.

The family court nevertheless granted this motion, ruling4 that

“[Husband] spent his Category 3 assets for marital purposes[]

[for] which he is entitled to be repaid.”

2. Trial Order and Divorce Decree

After trial, on February 13, 2013, the family court entered

its Order Re: Divorce Trial Held on December 22 and 23, 2011.

The family court found that the parties had formed a premarital

economic partnership in 1976 that lasted until they married in

1985:

9. The parties met in New Zealand in 1976. They
began living together soon after they met. They continued
to cohabitate uninterrupted until DOM.

10. The parties financially supported each other
during their cohabitation before DOM.

11. They resided and worked together in New Zealand,
Massachusetts, and Hawaii prior to DOM.

12. Husband worked at various jobs while Wife
contributed her services to their living arrangement. Wife
did, however, work on Husband’s parents’ farm and store in
Massachusetts, which contributed to the parties’ living
expenses and support.

13. After moving to Hawaii and prior to DOM, Husband
worked for the County of Hawaii. The parties received food
stamps and Husband received a stipend from the State of
Hawaii. Wife was not employed, but contributed to the
parties’ living support.

4
The family court’s ruling appears in an order denying a different
amended motion for partial summary judgment.

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14. In 1977, the parties started growing marijuana
and both worked on growing, processing, transporting the
finished product, and selling it.

15. In 1978, the parties jointly purchased property
for $17,000. The parties jointly built a two-story house
on that property.

16. During 1977 and 1978 the parties travelled
together to Thailand to look for orchids to establish an
orchid company with other business partners. They
purchased orchids and shipped them back to Hawaii.

17. The parties also bought and sold other real
property prior to DOM from the proceeds of their joint
earnings.

From 2007 to 2011, Husband inherited from his parents’

estates amounts totaling $3,550,770, and he deposited these

funds into his separate inheritance account. As of the

conclusion of trial, $2,051,293 remained in Husband’s

inheritance account. The family court found that the parties

had no written premarital or post-marital agreement, and

categorized this sum as Husband’s Marital Separate Property,

finding:

24. Husband expressly classified his inherited funds
as his separate property by depositing them into the Bank
of Hawaii and labeled it “separate.” This account was
created solely for the purpose of holding and maintaining
Husband’s inheritance. No funds from any other source were
deposited into this account and this account was maintained
by itself and was funded only by interest earned.

The family court also found that the entire $1,499,477

withdrawn by Husband had been used “to invest in a business that

eventually failed and has no present value, for the purchase of

the Kala Cottage office, automobiles, and other assets, to fund

the Vanguard account in the amount of $50,000, to pay taxes, to

pay for the private school and post-high school education of the

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parties’ children, and to support and maintain the family and

the family’s lifestyle.” Consistent with its pretrial summary

judgment ruling, the family court then found that the entire

amount was a Category 3 capital contribution credit. With an

additional $12,000 for a 2009 cash gift from Husband’s mother to

him that had apparently been spent, the family court found that

Husband’s Category 3 credits totaled $1,511,477.

As noted earlier, the family court had already ruled before

trial that Husband was entitled to be repaid all of his Category

3 expenditures as having been used for marital purposes. After

trial, the family court found that “[that] Wife did not meet her

burden that Husband specifically intended these funds as a gift

to her.

By the conclusion of trial, the value of the parties’

assets was $466,522. Because of its finding of $1,511,477 in

Category 3 expenditures by Husband, the family court found a

marital estate valued at negative $1,044.955, for which Wife

would otherwise have to repay Husband $522,478 as an

equalization payment. For property division, Wife was awarded

$1,396 in bank accounts, a retirement account worth $13,000, and

a used Suzuki valued at $13,000. Wife’s equalization payment

increased by half of those amounts, to a total of $549,873.

In addition to retaining the $2,051,293 remaining in his

inheritance account, for property division, Husband was awarded

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$57,835 in liquid cash accounts, a $8,645 IRA account, a $32,865

Chevy Camaro, a $1,000 Jeep Cherokee, the marital residence with

equity of $243,781, and his office cottage then valued at

$95,000.

With respect to the marital residence and the office

cottage awarded to Husband, the family court found that in 2007,

Husband had purchased it for $180,000 with inheritance funds.

Prior to its purchase, Wife had co-signed a $250,000 equity loan

secured by the marital residence so that Husband could purchase

the cottage for his real estate business. The equity loan was

supposed to be paid off from the anticipated inheritance, and

Wife testified she would not have agreed to co-sign the home

equity loan if she had known that Husband was not going to pay

off the equity loan with his inheritance.

Both parties were awarded their respective personal and

household property.

Because of the significant equalization payment that would

otherwise be owed by Wife to Husband, the family court then
5
determined that sufficient “valid and relevant considerations”

5
Hawai‘i courts frequently refer to “valid and relevant
considerations”, “valid and relevant circumstances”, and “equitable
considerations” when discussing deviation from partnership principals.
Equitable considerations permit the family court to deviate from the
partnership model in dividing the parties’ Marital Partnership Property upon
divorce. Hussey v. Hussey, 77 Hawai‘i 202, 208, 881 P.2d 1270, 1276 (App.
1994) (“If the family court rightly decides that all valid and relevant
considerations are not equal, the family court must assess and weigh all
valid and relevant considerations, exercise its equitable discretion, and
decide whether and, if so, how much to deviate from the Partnership Model.”).

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existed to justify an equitable deviation from marital

partnership principles. It ruled that giving Wife a credit

equal to her equalization payment would be just and equitable.

In support of this deviation, the family court considered the

following:

57. . . . Wife’s equalization payment to Husband is
substantial.

58. Husband’s marital separate property and Category
1 and 3 capital contribution credits far exceed the value
of the property that is being allocated between the
parties.

. . . .

60. Wife is 57 years old and has been employed from
time to time at little over minimum wage over the years the
parties have been together. She needs further assistance
to meet her needs at the lifestyle she has been accustomed
to during the years the parties resided together.

61. Husband is 59 years old, has worked all his
life, has owned and operated several businesses, and has
sufficient assets to support himself very well for a number
of years.

62. Husband’s employability is much better than
Wife’s.

63. Husband is entitled a substantial capital
contribution credit due of his Category 1 and 3 assets.
Wife will be left with comparably very nominal assets.
Further, Husband has substantial marital separate property
he inherited from his parents’ estates.

64. The parties started their PEP in 1976 and have
resided together for about 34 years. This is a relatively
long relationship.

As to spousal support, the family court made the following

findings:

68. The parties have lived together since 1976 and
separated in 2010. Over these approximate 34 years, they
have enjoyed a modest life style; raising children
together, purchasing and selling real property, operating
several businesses, building the marital residence, etc.
Husband was the primary bread winner. Although Wife worked
from time to time, she remained primarily a homemaker the

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majority of the time and generally stayed at home to raise
the parties’ children and to support the family. The
children attended private school and they are now adults.

69. When Wife was laid off from Parker School in
2009, she began receiving unemployment benefits. In 2011
she found work as a nanny and makes approximately $1,600
gross a month.

70. Husband inherited over 3.5 million dollars from
his parents’ estates resulting in the parties enjoying a
relatively higher standard of living. Wife enjoyed regular
therapy, massages, new clothing, and elective cosmetic
dental work. Husband enjoyed an expensive vintage car and
multiple trips to Southeast Asia. They built a modest home
together.

71. Wife has received $2,000 per month in court-
ordered temporary spousal support.

72. Wife is employable, albeit limited, because of
her age.

73. After divorce, Wife will, however, need
continued support to pay for her health insurance and other
medical expenses as well as to assist her in other daily
and monthly expenses.

74. Following the divorce, Wife will no longer have
the benefit of residing at the marital residence. She will
now need further financial assistance.

75. Husband currently spends about $12,000 per month
for family support. He will now live at the marital
residence. His monthly expenses will go down.

76. It would be just and equitable to award Wife
continued spousal support for a period of five years
commencing January 2012 (the month following trial), as
follows: $2,000 per month until Wife moves out of the
marital residence, then $3,000 per month commencing the
first month after Wife moves out of the marital residence
and through December 2017.

Later, in response to Husband’s motion for reconsideration,

the family court amended finding of fact No. 76 regarding

spousal support to reduce Wife’s alimony award by one year.6

6
In addition to reducing the length of Wife’s alimony award,
the family court also added the following sentence: “Spousal support
shall terminate upon Wife’s remarriage or upon the death of either
Husband or Wife.”

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As to attorney’s fees and costs, the family court concluded

that because of Husband’s superior financial condition, it would

be just and equitable to award Wife a portion of her attorney’s

fees and costs up to $5,000. Wife’s counsel later submitted an

itemized accounting of fees incurred through preparation of the

closing argument and reply, reflecting fees and costs totaling

$86,126.17.7 On June 7, 2013, the Family Court entered its

Divorce Decree.

B. Appeal to the ICA

Wife appealed and Husband cross-appealed to the ICA. The

ICA first addressed Husband’s cross-appeal.

1. Husband’s Cross-Appeal

In his appeal, Husband argued that the family court erred

when it (1) found a premarital economic partnership existed

based on illegal marijuana sales, (2) denied Husband Category 1

credits for property in his name at the date of marriage, (3)

found equitable deviation and waived the equalization payment,

and (4) awarded Wife temporary spousal support and attorney’s

fees before trial based on his inheritance. Husband requested

that the family court’s decision be vacated and remanded and

that the attorneys’ fees and costs award be reversed.

7
Wife’s counsel stated that this amount did not include the
attorney’s fees incurred after the reply, which were still accumulating.

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Noting that “[t]he family court considered the parties’

joint financial acts, cohabitation since 1976, economic and non-

economic contributions, and other financial arrangements in

finding that the parties formed a premarital economic

partnership in 1976,” the ICA stated that one basis for the

premarital economic partnership finding was “the parties’

‘growing, processing, transporting the finished product, and

selling’ marijuana in 1977.” Hamilton v. Hamilton, No. CAAP-13-

1498, at 12 (App. Aug. 29, 2014) (mem.). The ICA ruled that the

family court’s equitable powers to divide marital property

pursuant to HRS § 580-47 do “not authorize [the family court] to

provide relief to parties to an illegal agreement.” Hamilton,

mem. op. at 13. The ICA concluded, however, that “[t]he fact

that the parties’ illegal marijuana operation provided funds for

their premarital economic partnership was not determinative of

whether the partnership was valid.” Hamilton, mem. op. at 15.

Therefore, the ICA rejected Husband’s argument that the illegal

marijuana business was the foundation of the premarital economic

partnership on the bases that (1) “[n]o evidence presented

reasonably supported a finding, that the purpose of the parties’

premarital cohabitation and financial arrangements was the

growing and sale of marijuana[,]” and (2) evidence of the

parties’ premarital non-marijuana operations sufficiently

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support a finding that a premarital economic partnership existed

as a matter of law. Id.

Although the ICA determined that the family court’s

premarital economic partnership finding was not in error, it

ruled that the “finding that the parties’ marijuana operation

was part of that premarital economic partnership constitutes an

error as a matter of law.” Id. In this regard, the ICA ruled

that “[t]he family court should have segregated the illegal

marijuana operation from its consideration of the parties’

alleged premarital economic partnership.” Id. (citing 59A Am.

Jur. 2d Partnership § 54 at 233 (separation of mixed legal and

illegal purposes)). Therefore, the ICA concluded that the

premarital economic partnership was “valid to the extent that it

included legal partnership activities and its ‘legitimate

objectives’ can be segregated from the illegal marijuana

business.” Hamilton, mem. op. at 16. Noting the parties’

conflicting testimony as to whether marijuana proceeds were used

to purchase real property, the ICA explained that “[s]egregating

the economic contribution of the marijuana operation to the

parties’ premarital economic partnership, however, would require

a credibility determination regarding [the parties’] testimony

as to whether proceeds from the marijuana operations were used

to purchase [certain properties] and, further, ascertaining how

the proceeds from the subsequent sales of those properties were

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allocated to marital and legitimate premarital assets.” Id.

The ICA vacated the family court’s Divorce Decree, in part, and

remanded with instructions to re-assess the property division in

consideration of a premarital economic partnership excluding the

marijuana operation. Hamilton, mem. op. at 16-17.

Next, as to equitable deviation, the ICA concluded that

“the family court’s application of its finding that a premarital

economic partnership existed to support deviation from the

Partnership Model constituted reversible error to the extent the

deviation was based on the illegal marijuana business.”

Hamilton, mem. op. at 17.

With respect to temporary alimony awarded to Wife during

the pendency of the divorce, the ICA held that “[t]here was no

abuse of discretion in the family court’s consideration of

[Husband’s] financial resources in ordering temporary spousal

support for [Wife].” Hamilton, mem. op. at 18.

As to attorney’s fees, the ICA rejected Husband’s argument,

noting a lack of authority in support of Husband’s contention

that the award would “invade” his inheritance, as well as the

family court’s authority to award attorneys’ fees and costs

during the pendency of divorce proceedings under HRS § 580-9 and

divide property under HRS § 580-47(a). Hamilton, mem. op. at

18. The ICA therefore concluded that the family court did not

err in “allocating responsibility for attorneys’ fees and costs

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amongst the parties upon granting the divorce.” Hamilton, mem.

op. at 19. Accordingly, the ICA held that “[t]he family court

did not abuse its discretion by awarding [Wife] $5,000 in

attorneys’ fees and costs in its Order Re: Divorce Trial.” Id.

The ICA also rejected Husband’s argument that the Order Re:

Fees and Costs was void for lack of jurisdiction, explaining

that the “Order Re: Fees and Costs confirmed the $5,000 award

that had already been set in the [] Order Re: Divorce Trial . .

. .” Hamilton, mem. op. at 20.

2. Wife’s Appeal

In her appeal, Wife argued that the family court erred when

it (1) treated 60% of Husband’s inheritance as Marital Separate

Property and 40% as Category 3 assets, (2) subtracted capital

contributions in excess of the marital assets and found that

Wife owed Husband for half of the partnership loss, (3) awarded

Wife virtually nothing from the marital estate, and (4) awarded

insufficient post-divorce alimony.

The ICA rejected Wife’s arguments regarding Husband’s

inheritance and capital contribution credits, holding that

“[t]he family court did not abuse its discretion in determining

that [Husband] could be credited for expenditures from the

Inheritance Account for household expenses.” Hamilton, mem. op.

at 23. Nevertheless, the ICA declined to affirm the family

court’s findings in support of the property division on the

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basis that the court’s “reliance on [an erroneous premarital

economic partnership finding] to justify equitable deviation

constitutes reversible error.” Id.; accord id. at 24.

Regarding post-divorce alimony, the ICA concluded that

“[t]he family court considered all required factors and

determined [Wife] would be able to find employment to support

herself by the end of December 2016.” Hamilton, mem. op. at 24

(citing HRS § 580-47(a)). Nevertheless, the ICA “vacate[d] the

[post-divorce] alimony award as reversible error[]” to the

extent that it “may have been premised, in part, on premarital

activities connected to the illegal marijuana operations,” and

directed the family court on remand to “exclude from its

determination of [Wife’s] alimony award any consideration of

those premarital economic activities connected to the marijuana

operation.” Hamilton, mem. op. at 25.

Accordingly, the ICA vacated Parts Four and Five of the

Divorce Decree regarding alimony and property division, affirmed

all other parts, and remanded the case for further proceedings.

C. Applications for Writs of Certiorari

1. Husband’s Application

In summary, Husband argues that the family court erred in

(1) finding that a premarital economic partnership based on an

illegal marijuana business venture existed, where the parties

kept their finances separate prior to marriage; (2) deviating

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from the Marital Partnership Model based on his inheritance; (3)

awarding Wife temporary alimony during the divorce proceeding;

(4) and awarding Wife attorneys’ fees and costs.

2. Wife’s Application

In summary, Wife alleges that the family court erred in its

(1) characterization of all amounts inherited by Husband as

Marital Separate Property, (2) characterization of the entire

$1,511,477 apparently then expended by Husband from his

inheritance as Category 3 Marital Partnership Property for which

Husband is entitled to be repaid; (3) finding that Wife incurred

a debt to Husband payable by an equalization payment when their

marital partnership assets were insufficient to repay the

alleged Category 3 expenditures; (4) application of equitable

deviation principles in it property division award; and (5)

failure to consider altering the amount and duration of alimony

to compensate Wife for the one-sided property division. Wife

also challenges the ICA’s decision to remand the case to the

family court on the “minor issue” of the illegal marijuana

operation, without addressing Husband’s $3.5 million

inheritance.

We address the issues on certiorari as follows.

III. Standards of Review

A. Family Court Decisions

Generally, the family court possesses wide discretion in
making its decisions and those decisions will not be set

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aside unless there is a manifest abuse of discretion. Thus,
we will not disturb the family court’s decision on appeal
unless the family court disregarded rules or principles of
law or practice to the substantial detriment of a party
litigant and its decision clearly exceeded the bounds of
reason.

Kakinami v. Kakinami, 127 Hawai‘i 126, 136, 276 P.3d 695, 705

(2012) (quoting Fisher v. Fisher, 111 Hawai‘i 41, 46, 137 P.3d

355, 360 (2006)).

It is well established that a family court abuses its
discretion where “(1) the family court disregarded rules or
principles of law or practice to the substantial detriment
of a party litigant; (2) the family court failed to
exercise its equitable discretion; or (3) the family
court’s decision clearly exceeds the bounds of reason.”

Id. at 155-56, 276 P.3d at 724-25 (emphasis omitted) (quoting

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

B. Property Division

Hawaii’s appellate courts “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 HRS § 580-47 and partnership principles.” Tougas, 76 Hawai‘i

at 26, 868 P.2d at 444 (quoting Gussin v. Gussin, 73 Haw. 470,

486, 836 P.2d 484, 492 (1992) (footnote omitted)). “The family

court’s determination of whether facts present valid and

relevant 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

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(2015) (citing Jackson v. Jackson, 84 Hawai‘i 319, 332–33, 933

P.2d 1353, 1366–67 (App. 1997)).

C. Findings of Fact and Conclusions of Law

The family court’s FOFs are reviewed on appeal under the
“clearly erroneous” standard. A FOF is clearly erroneous
when (1) the record lacks substantial evidence to support
the finding, or (2) despite substantial evidence in support
of the finding, the appellate court is nonetheless left
with a definite and firm conviction that a mistake has been
made. “Substantial evidence” is credible evidence which is
of sufficient quality and probative value to enable a
person of reasonable caution to support a conclusion.

On the other hand, the family court’s COLs are
reviewed on appeal de novo, under the right/wrong
standard. COLs, consequently, are [ ]not binding
upon an appellate court and are freely reviewable for
their correctness.

Kakinami, 127 Hawai‘i at 136, 276 P.3d at 705 (quoting Fisher,

111 Hawai‘i at 46, 137 P.3d at 360).

IV. Discussion

A. Illegality and the Premarital Economic Partnership

The ICA ruled that although there was substantial other

evidence of a premarital economic partnership, the property

division and alimony awards needed to be recalculated to exclude

consideration of premarital economic activities connected to the

marijuana operation.

Husband argues that the ICA erred in concluding that (1)

the fact that the parties’ illegal marijuana operation provided

funds for their premarital economic partnership was not

determinative of whether the partnership was valid; and (2)

legal partnership activities existed that could be segregated

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from the marijuana operation. He contends that “even a partial

reliance on an illegal enterprise would be contrary to public

policy and would require a finding that no PEP existed.” In

addition, Husband asserts that insufficient evidence existed to

support the premarital economic partnership insofar as “it is

clear that both the parties did not intend to create a PEP.”

Wife contends that the ICA did not err in affirming the

premarital economic partnership finding because (1) Husband’s

“trial testimony flatly contradicts [his] position asserted on

appeal[]” to the extent that Husband denied having a “joint or

mutual marijuana operation” at trial and testified that

premarital properties held in his name were purchased with

“savings,” “not marijuana money[;]” (2) Husband failed to raise

his illegality argument below; and (3) Husband “cannot use this

couple’s marijuana business 25 years ago to eliminate the PEP,

but also demand $125,000 in Category 1 credits for assets

purchased in his name before DOM with [marijuana proceeds].” In

addition, Wife asserts that the family court found independent

grounds for the premarital economic partnership.

It is true that, generally, courts will not enforce an

illegal agreement. According to the United States Supreme

Court, “[i]n case any action is brought in which it is necessary

to prove the illegal contract in order to maintain the action,

courts will not enforce it, nor will they enforce any alleged

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rights directly springing from such contract.” McMullen v.

Hoffman, 174 U.S. 639, 654 (1899). With respect to cases that

involve partly illegal and partly legal partnership purposes,

however, courts are split as to whether recovery is available to

parties to the illegal transaction. For example, although the

Court stated in McMullen that “[i]t has been sometimes said that

where a contract, although it be illegal, has been fully

executed between the parties, so that nothing remains thereof

for completion, if the plaintiff can recover from the defendant

moneys received by him without resorting to the contract the

court will permit a recovery in such case[,]” 174 U.S. at 654-

55, it held in Bruce’s Juices v. American Can Co., 330 U.S. 743

(1947) that “[w]here a contract is outlawed by statute or is

otherwise contrary to public policy, the illegality may be set

up as a defense to a suit for enforcement despite the absence of

a legislative recognition of that defense.” 330 U.S. at 761.

The Court has also held, however, that where proceeds from

an illegal operation have changed form, recovery may be possible

despite the initial illegality. In Brooks v. Martin, 69 U.S. 70

(1864), the Court held that “[a]fter a partnership contract

confessedly against public policy has been carried out, and

money contributed by one of the partners has passed into other

forms, . . . a partner, in whose hands the profits are, cannot

refuse to account for and divide them on the ground of the

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illegal character of the original contract.” 69 U.S. at 71

(emphasis omitted).

Hawai‘i cases have also addressed enforcement of illegal

contracts. In Beneficial Hawaii, Inc. v. Kida, 96 Hawai‘i 289,

30 P.3d 895 (2001), this court stated, “the general rule is that

severance of an illegal provision of a contract is warranted and

the lawful portion of the agreement is enforceable when the

illegal provision is not central to the parties’ agreement and

the illegal provision does not involve serious moral turpitude,

unless such a result is prohibited by statute.” 96 Hawai‘i at

311, 30 P.3d at 917. In analyzing the availability of relief to

parties to an illegal transaction in Rego v. Bergstrom Music

Co., 26 Haw. 407 (Terr. 1922), the territorial court initially

explained that recovery is not available to a plaintiff who

resorts to an illegal transaction, either in whole or in part,

to establish a prima facie case or defense despite joint

participation by the opposing party. 26 Haw. at 410-11

(“Neither a plaintiff nor a defendant may found his case, either

in whole or in part, upon a fraudulent transaction, although his

antagonist may have participated therein.” (internal quotation

marks and citation omitted)). Despite holding that a party may

not base his or her case upon an illegal transaction, however,

Rego further held that “a plaintiff may recover if he is able to

make out his case without calling upon the fraud for help[;

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however,] he must fail if such help is indispensable.” 26 Haw.

at 411.

In this case, Wife is not requesting enforcement of an

illegal agreement. Rather, she requests a division of marital

property and an alimony award. In a divorce case, the family

court’s obligation is to rule in a “just and equitable” manner.

HRS § 580-47(a). At trial, Husband denied that proceeds from

the marijuana operation were included in any marital property,

denied keeping records, and denied depositing marijuana proceeds

into bank accounts. Thus, it appears that the ICA’s mandate to

exclude consideration of such proceeds to recalculate property

division and alimony is impracticable. In addition, the illegal

enterprise is no longer in existence, and Wife is requesting a

property division award from proceeds that have changed form,

into real estate.

Furthermore, as the ICA otherwise correctly concluded,

substantial other evidence of the parties’ premarital, non-

marijuana operations sufficiently supports the finding that a

premarital economic partnership existed as a matter of law.

Fisher, 111 Hawai‘i at 46, 137 P.3d at 360 (quoting In re Doe, 95

Hawai‘i 183, 190, 20 P.3d 616, 623 (2001)) (“‘Substantial

evidence’ is credible evidence which is of sufficient quality

and probative value to enable a person of reasonable caution to

support a conclusion.”).

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“[A] premarital economic partnership is formed when, ‘prior

to their subsequent marriage, [two people] cohabit and apply

their financial resources as well as their individual energies

to and for the benefit of each other’s person, assets, and

liabilities.’” Collins v. Wassell, 133 Hawai‘i 34, 45, 323 P.3d

1216, 1227 (2014) (citation omitted). The formation of a

premarital economic partnership depends upon the parties’

intentions. Id. In determining whether the parties intended to

form a premarital economic partnership, in the absence of an

express agreement, “the family court must consider the totality

of the circumstances, including both the economic and non-

economic contributions of the parties.” 133 Hawai‘i at 46, 323

P.3d at 1228 (citation omitted). “[R]elevant considerations may

include, but are not limited to, joint acts of a financial

nature, the duration of cohabitation, whether — and the extent

to which — finances were commingled, economic and non-economic

contributions to the household for the couple’s mutual benefit,

and how the couple treated finances before and after marriage.”

Id.

First, the family court’s findings that the parties resided

and worked together in New Zealand, Massachusetts, and Hawai‘i

prior to their date of marriage, and financially supported each

other during their cohabitation before marriage are supported by

the parties’ testimony. The testimony established that over the

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course of one year, the parties met in New Zealand, flew to

Honolulu where they stayed with Wife’s mother for one to two

weeks, flew to Los Angeles where they purchased a van with funds

provided by Wife’s mother, drove to Husband’s family’s farm in

Massachusetts where they worked unpaid, and eventually moved to

Hawai‘i where they jointly purchased property. In addition to

working at Husband’s family’s store, Wife also helped with the

construction of a house purchased in 1978 and traveled to

Thailand with Husband to research orchids for a prospective

business. Therefore, as the ICA stated, “[t]he family court

considered the parties’ joint financial acts, cohabitation since

1976, economic and non-economic contributions, and other

financial arrangements in finding that the parties formed a

premarital economic partnership in 1976[.]” Accordingly, the

ICA correctly concluded that substantial evidence of the

parties’ pre-marital, non-marijuana operations sufficiently

supported the premarital economic partnership finding. See

Fisher, 111 Hawai‘i at 46, 137 P.3d at 360.

Thus, we hold that, under the circumstances of this case,

the ICA erred in vacating the property division and alimony

awards because the family court had not excluded possible

proceeds from an illegal marijuana operation. Although the ICA

erred in setting aside the family court’s property division

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award based on illegality, we affirm the vacating of these

awards for the reasons provided below.

B. Property Division

1. Overview of Hawaii’s Property Division Framework

In Hawai‘i, “[t]here is . . . no fixed rule for determining

the amount of property to be awarded each spouse in a divorce

action other than as set forth in HRS § 580–47.” Gussin, 73

Haw. at 479, 836 P.2d at 489 (citation omitted). Under HRS §

580-47 (Supp. 2011),8 the family court has wide discretion to

divide Marital Partnership Property in a manner that is “just

and equitable” under the facts and circumstances of each case.

Tougas, 76 Hawai‘i at 26, 868 P.2d 444. “In addition to HRS §

580–47, Hawai‘i case law has created a framework based on

partnership principles that provides further guidance for family

courts to use in dividing property upon divorce.” Kakinami, 127

Hawai‘i at 137, 276 P.3d at 706. See also Tougas, 76 Hawai‘i at

28, 868 P.2d at 446 (“The partnership model is the appropriate

law for the family courts to apply when exercising their

discretion in the adjudication of property division in divorce

proceedings.”); Gussin, 73 Haw. at 471, 836 P.2d at 486 (“The

partnership model of marriage provides the necessary guidance to

8
HRS § 580–47(a) provides, in relevant part, that upon granting a
divorce, the family court “may make any further orders as shall appear just
and equitable . . . finally dividing and distributing the estate of the
parties, real, personal, or mixed, whether community, joint, or separate[.]”

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the family court in exercising its discretion and for appellate

review.”).

Under the Marital Partnership Model, “[m]arriage is a

partnership to which both parties bring their financial

resources as well as their individual energies and efforts. In

divorce proceedings regarding division and distribution of the

parties’ estate, partnership principles guide and limit the

range of the family court’s choices.” Gussin, 73 Haw. at 470-

71, 836 P.2d at 485-86. Moreover, “the family court shall

consider ‘the respective merits of the parties, the relative

abilities of the parties, the condition in which each party will

be left by the divorce, the burdens imposed upon either party

for the benefit of the children of the parties, . . . and all

other circumstances of the case.’” HRS § 580–47(a).

The Marital Partnership Model recognizes the following

general classifications of property in a divorce proceeding:

Premarital Separate Property. This was the property owned
by each spouse immediately prior to their marriage or
cohabitation that was concluded by their marriage. Upon
marriage, this property became either Marital Separate
Property or Marital Partnership Property.

Marital Separate Property. This is the following property
owned by one or both of the spouses at the time of the
divorce:

a. All property that was excluded from the marital
partnership by an agreement in conformity with the
Hawai‘i Uniform Premarital Agreement Act (HUPAA), HRS
chapter 572D (Supp. 1992)[;]

. . . .

b. All property that was excluded from the marital
partnership by a valid contract[;] and

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c. All property that (1) was acquired by the spouse-
owner during the marriage by gift or inheritance, (2)
was expressly classified by the donee/heir-spouse-
owner as his or her separate property, and (3) after
acquisition, was maintained by itself and/or sources
other than one or both of the spouses and funded by
sources other than marital partnership income or
property.

Marital Partnership Property. All property that is not
Marital Separate Property.

Hussey, 77 Hawai‘i at 206–07, 881 P.2d at 1274–75 (internal

citations omitted), overruled on other grounds by State v.

Gonsales, 91 Hawai‘i 446, 984 P.2d 1272 (App. 1999). “Upon

marriage, Premarital Separate Property becomes either Marital

Separate Property or Marital Partnership Property.” Kakinami,

127 Hawai‘i at 131, 276 P.3d at 700 (citing Hussey, 77 Hawai‘i at

206, 881 P.2d at 1274).

With respect to Marital Partnership Property, this court

has established five categories of net market values (“NMVs”) as

guidance in divorce cases:

Category 1. The net market value (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

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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 (citation omitted).

The significance of these category classifications is as

follows:

the NMVs in Categories 1 and 3 are the parties’ “capital
contributions,” and pursuant to general partnership law,
they are returned to each spouse. Categories 2 and 4 are
the “during-the marriage increase in NMVs of the Categories
1 and 3 Properties owned at DOCOEPOT[,]” which similar to
partnership profits, are generally to be shared equally. In
sum, this court stated, “if there is no agreement between
the husband and wife defining the respective property
interests, partnership principles dictate an equal division
of the marital estate where the only facts proved are the
marriage itself and the existence of jointly owned
property.”

Kakinami, 127 Hawai‘i at 138, 276 P.3d at 707 (internal citations

omitted) (quoting Tougas, 76 Hawai‘i at 27-28, 868 P.2d at 445-

46).

We recently reaffirmed the manner in which the family court

is to address the division of property, as follows:

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.

Gordon, 135 Hawai‘i at 350, 350 P.3d at 1018 (internal citations

omitted) (citing Jackson, 84 Hawai‘i at 332, 933 P.2d at 1367).

“Each partner’s individual contributions to the marriage, i.e.,

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the values of Category 1 and Category 3, are to be repaid to the

contributing spouse absent equitable considerations justifying a

deviation.” 135 Hawai‘i at 349, 350 P.3d at 1017 (footnote

omitted).

We address the parties’ arguments in light of these guiding

principles.

2. Categorization and Assignment of Values
As stated above, “[t]he 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.” Gordon, 135 Hawai‘i at 350, 350 P.3d at 1018

(internal citations omitted).

a. Funds Remaining in Husband’s Account
Wife alleges that the family court erred in characterizing

the $2,051,293 remaining in Husband’s inheritance account as

Marital Separate Property, instead of characterizing it as

Marital Partnership Property subject to division in this

divorce. In Kakinami, this court clarified the distinction

between Marital Separate Property and “separately owned” Marital

Partnership Property,9 and addressed the issue of whether Marital

9
“Separately owned” Marital Partnership Property is Category 1 or
3 Marital Partnership Property that may be titled in the name of one spouse.
As Marital Partnership Property, such property is subject to division in a
divorce proceeding. See Myers v. Myers, 70 Haw. 143, 144, 764 P.2d 1237,
1238 (1988) (quoting Kastely, An Essay in Family Law: Property Division,
Alimony, Child Support, and Child Custody, 6 U. Haw. L. Rev. 318, 393 (1984).

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Separate Property can be awarded to the non-owner spouse in

divorce. A majority of this court held that Marital Separate

Property is a narrow category of separate property “that has

been excluded from the marital partnership, and thus, not

subject to division.” 127 Hawai‘i at 142, 276 P.3d at 711. See

also 127 Hawai‘i at 141 n.9, 276 P.3d at 710 n.9 (“Marital

Separate Property is a narrow category of ‘separate property’

that, in our view, provides a practical means of segregating

certain property from the marital estate, the segregation of

which can influence the equitable distribution of the parties’

other assets.”). Although Marital Separate Property is not

subject to division, if marital assets are used to maintain a

gift or inheritance, then the gift or inheritance is subject to

division as Marital Partnership Property:

if a party receives a gift or inheritance during the
marriage, but the party does not expressly classify that
gift or inheritance as separate property, or uses marital
assets or efforts to maintain that gift or inheritance,
then the gift or inheritance would be subject to division
as Marital Partnership Property.

Kakinami, 127 Hawai‘i at 141, 276 P.3d at 710.

In this case, Husband placed his inheritance funds in a

separate account, and labelled it as such. The family court

ruled that the $2,051,293 remaining in Husband’s “separate”

inheritance account was Marital Separate Property because the

account had been created solely for the purpose of holding and

maintaining his inheritance, no funds from any other source were

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deposited into the account, and the account was maintained by

itself and funded only by interest earned. If, as stated above,

however, “marital assets” were used to maintain the inheritance,

then the inheritance is subject to division as Marital

Partnership Property.

At trial, Wife’s forensic accounting expert testified

pursuant to his report that a total of $463,455 had been paid

for Husband’s inheritance taxes. He referenced his report,

which included the itemized listing in Husband’s answers to

interrogatory number 9. The inheritance taxes were included in

the amounts that the family court had ruled, before and after

trial, were “Category 3 assets [used] for marital purposes for

which Husband is entitled to be repaid.”

Thus, those alleged “Category 3” disbursements included the

$463,455 paid by Husband as inheritance taxes for his entire

inheritance. The entire $2,051,293 remaining in that

inheritance was nonetheless characterized by the family court as

“Marital Separate Property.” Pursuant to Kakinami, however, if

a party uses marital assets to maintain an inheritance, the

inheritance is no longer Marital Separate Property, but becomes

subject to division as Marital Partnership Property. Thus, if

the $463,455 in inheritance taxes for the entire inheritance

came out of Category 3 Marital Partnership Property for which

Husband was entitled to be repaid, as ruled by the family court,

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then Marital Partnership Property was used to maintain the

“separate” inheritance account, disqualifying the remaining

funds from being characterized as Marital Separate Property.

In order for the $2,051.293 remaining in Husband’s

inheritance account to be his Marital Separate Property, as

ruled by the family court, the $463,455 paid as inheritance

taxes had to be excluded from Category 3 Marital Partnership

Property. Thus, we hold that the family court erred, either by

characterizing the entire $1,511,477 expended from Husband’s

inheritance account as Category 3 Marital Partnership Property

or by characterizing the $2,051,293 remaining in the account as

Marital Separate Property. To reiterate, if inheritance taxes

are paid out of Marital Partnership Property, the inheritance

cannot be classified as Marital Separate Property.

We therefore vacate the property division award. The

family court must, on remand, address this inconsistency in its

decision.

b. Funds Expended from Husband’s account

There are additional issues that must be addressed on

remand with respect to the $1,511,447 expended from Husband’s

account, which the family court characterized in its entirety as

Category 3 Marital Partnership Property.

Under the Marital Partnership Model, each partner is

entitled to be repaid his or her contributions to partnership

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property, whether made by way of capital or advances. Tougas,

76 Hawai‘i at 27, 868 P.2d at 445. Under partnership principles,

Husband has the burden of proving that he contributed property

to the marital partnership and of establishing the property’s

value at the time of contribution. See Mark IV Pictures, Inc.

v. C.I.R., 969 F.2d 669, 672 (8th Cir. 1992) (“The [partner]

bears the burden of proving that he contributed property to the

partnership and of establishing the property’s value at the time

of contribution.”). According to Epp v. Epp, 80 Hawai‘i 79, 905

P.2d 54 (App. 1995), “[u]nder the Partnership Model, a spouse’s

Category 1 and 3 NMVs are that spouse’s ‘partner’s

contributions’ to the Marital Partnership Property that,

assuming all relevant and valid considerations are equal, are

repaid to the contributing spouse-partner . . . .” 80 Hawai‘i at

82, 905 P.2d at 57. In addition, pursuant to Wong v. Wong, 87

Hawai‘i 475, 960 P.2d 145 (App. 1998), “a [marital] partner who

invests money into partnership accounts and/or real and/or

personal property into the partnership name or the names of the

partners does not thereby gift the invested money and/or real

and/or personal property to his/her partners.” 87 Hawai‘i at

482, 960 P.2d at 152 (emphasis added).

Therefore, as a threshold issue, in order to be categorized

as Category 3 Marital Partnership Property, Marital Separate

Property must be expended as a contribution to or an investment

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in Marital Partnership Property. This would include

expenditures for down payments, improvements, or toward the

principal of loans related to Marital Partnership Property real

estate, expenditures for Marital Partnership Property stock or

business interests, or other advances or payments toward Marital

Partnership real or personal property or Marital Partnership

investments. Accordingly, expenditures for things such as a

spouse’s or children’s educations, meals, trips, socializing,

entertainment, requirements for daily living, etc., do not

qualify, unless they are in the nature of a contribution to or

investment in Marital Partnership Property.

In this case, the family court summarily categorized all

expenditures made by Husband from his Marital Separate Property

account as Category 3 Marital Partnership Property for which he

was entitled to be repaid upon divorce as a capital

contribution. This already improperly included the $463,455

paid as inheritance taxes, as noted in Section IV.B.2.a above.

It also appears to have included expenditures for Wife and the

children’s trips, private school and university tuition and

expenses, cars, extracurricular activities, restaurant meals,

birthday and holiday presents, etc. This does not comport with

our case law, as explained above. If such sums are

automatically characterized as Category 3 Marital Partnership

Property, a wealthy spouse could summarily be entitled to

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reimbursement for half of all sums arguably expended on behalf

of the spouse or children upon divorce. It would be highly

unusual for a wealthy spouse to make expenditures during a

marriage with a non-wealthy spouse for items not related to

investment funds or assets while expecting to be repaid half of

such expenditures upon divorce. It defies logic to allow a

wealthy spouse to make substantial expenditures that a non-

wealthy spouse would never choose to make, has no control over,

and probably never envisioned having to repay, and then to order

the non-wealthy spouse to reimburse the wealthy spouse for half

of such expenditures at the time of divorce. Under our case

law, expenditures made from a Marital Separate Property account

qualify for characterization as Category 3 Marital Partnership

Property only where they are in the nature of a contribution to

or an investment in Marital Partnership Property.

Even if expenditures pass the threshold of being able to

qualify as Category 3 Marital Partnership Property, the family

court must still address the secondary issue of whether they

were actually contributions or investments with an expectation

of repayment upon divorce. In this regard, Category 3 Marital

Partnership Property includes property separately acquired by

gift or inheritance during the marriage, but excludes the net

market value attributable to property “that is subsequently

legally gifted by the owner to the other spouse, to both

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spouses, or to a third party.” Tougas, 76 Hawai‘i at 27, 868

P.2d at 445 (emphasis added, citation omitted). To constitute

a gift, there must be: (1) donative intent; (2) delivery; and

(3) acceptance. 76 Hawai‘i at 27, 31, 868 P.2d at 445, 449.

In this case, the family court first erroneously ruled that

all of Husband’s expenditures from the Marital Separate Property

account qualified as Category 3 Marital Partnership Property

without examining the expenditures to ascertain whether they

were in the nature of contributions to or investments in Marital

Partnership Property. The family court then also erred by

ruling, before hearing evidence on donative intent, that Husband

was entitled to be repaid the entire $1,511,447 expended from

his inheritance account. Even though Wife briefly attempted to

testify at trial that Husband had not expected to be paid back

any of this money, the family court had already ruled before

trial that none of these amounts were gifts, effectively

precluding evidence and argument on either issue.

Thus, we hold that, under the circumstances of this case,

the family court erred in ruling before trial that all funds

expended by Husband from his Marital Separate Property

constituted Category 3 Marital Partnership Property for which he

was entitled to be repaid. Upon remand, the family court must

also address the two issues discussed in this section.

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3. Equitable Deviation

The family court followed an erroneous approach to

equitable deviation. As stated above, the partnership model

requires the family court to “identify any equitable

considerations justifying deviation from an equal distribution”

of the marital estate before deciding “whether or not there will

be a deviation[.]” Gordon, 135 Hawai‘i at 350, 350 P.3d at 1018

(internal citations omitted). If the family court decides

equitable considerations justify deviation from an equal

distribution, then it must “decide[] the extent of any

deviation.” Id.

In this case, the family court first ordered an equal

distribution of alleged partnership losses, to the extent it

ruled that Husband was entitled to an equalization payment from

Wife of $549,873, before deciding whether equitable

considerations justified deviation from such an equal

distribution.

Whether equitable considerations exist to justify deviation

must be determined, however, at the time the family court

decides whether to credit one partner for all of his or her

capital contributions, whether and how to distribute marital

assets, and whether to award alimony. See Gordon, 135 Hawai‘i at

349, 350 P.3d at 1017 (“Each partner’s individual contributions

to the marriage, i.e., the values of Category 1 and Category 3,

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are to be repaid to the contributing spouse absent equitable

considerations justifying a deviation.”). In determining

whether the circumstances justify deviation from the partnership

model, the family court must consider the following: the

respective merits of the parties, the relative abilities of the

parties, the condition in which each party will be left by the

divorce, the burdens imposed upon either party for the benefit

of the children of the parties, and all other circumstances of

the case. 135 Hawai‘i at 350, 350 P.3d at 1018. See also

Tougas, 76 Hawai‘i at 32, 868 P.2d at 450 (“The court may,

nevertheless, alter alimony, child support and . . . the

ultimate distribution of the marital estate based on the

respective separate conditions of the spouses.”).

In this case, the family court should have considered

whether equitable considerations justifying deviation from an

equal distribution of Marital Partnership Property existed

before ordering a 100% credit of Husband’s alleged Category 3

contributions. In this regard, Husband’s arguments based on

Wong, 87 Hawai‘i 475, 960 P.2d 145, are unpersuasive. In that

case, the family court did not award the husband the full value

of his capital contribution. In Wong, a husband and wife

jointly purchased two parcels of real property with $400,000 for

down payments received from the husband’s parents. Upon

divorce, the family court ruled that the $400,000 was the

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husband’s Category 3 property. 87 Hawai‘i at 480, 960 P.2d at

150. The family court recognized that “[i]f [the husband] were

to be returned his capital contribution, not only would [the

husband] be awarded all of the parties’ assets but [the wife]

would also need to reimburse [the husband] about $109,000,

because [] the current net market value of the marital estate”

had declined. Id.

This statement does not require the family court’s

deduction of capital contributions in excess of the marital

estate, as Husband asserts. In ultimately dividing the marital

estate, the family court in Wong awarded the husband three out

of four jointly owned properties, one of which had a negative

net market value. The value of real property awarded to each

spouse totaled $96,454 to the husband and $81,000 to the wife.

See id. In affirming the property division on appeal, the ICA

noted that the husband left the marriage with less than his

capital contribution, while the wife left with “much more” than

her negative capital contribution. Id. Thus, contrary to

Husband’s assertion, Wong does not stand for the proposition

that a complete return of capital contributions is always

required. Rather, pursuant to the principles above, the family

court must first decide whether equitable considerations justify

deviation from such an equal distribution of marital assets.

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Following the proper process could have significantly

different results for property division. For example, in this

case, the family court could have found equitable considerations

justifying departure from an equal distribution of partnership

property based on the fact that Wife had virtually no assets and

would be left without a home in which to reside if an equal

distribution was made, before ordering a 100% credit of

Husband’s alleged Category 3 contributions. The family court

could then have decided the extent of the deviation with a view

toward reaching a just and equitable result, as more fully

discussed in Section IV.B.5 below. Instead, the family court

ordered an equal distribution of the alleged partnership losses.

Therefore, we also hold that the family court erred in

ordering an equal distribution of alleged partnership losses

before deciding whether equitable considerations justified

deviation from an equal distribution. On remand, the family

court must first address whether any equitable considerations

justifying deviation from an equal distribution exist, then

address whether or not there will be a deviation, then decide

the extent of any deviation.

4. Consideration of Husband’s Inheritance to Deviate
from the Marital Partnership Model
Husband argues that the ICA erred in affirming the family

court’s deviation from the Marital Partnership Model based on

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his Marital Separate Property inheritance. He requests a

determination that the family court’s reliance on his

inheritance to justify a deviation was erroneous, or

alternatively, that the property division be vacated and

remanded with instructions to modify the equalization payment to

eliminate any consideration of his inheritance.

In response, Wife argues that Husband unfairly received

both 100% of his remaining Marital Separate Property inheritance

and 100% of the Marital Partnership Property. She contends that

she would have received at least 50% of the approximately

$450,000 marital assets if they had filed for divorce before

Husband received the inheritance.

Although we have already set aside the family court’s

property division, we address these arguments to provide

guidance on remand. In Kakinami, we affirmed the ICA’s ruling

that “the mere existence of [] an inheritance does not, without

more, mandate deviation from the Marital Partnership Model.”

127 Hawai‘i at 143, 276 P.3d at 712 (internal quotation marks and

brackets omitted) (quoting Kakinami v. Kakinami, No. 29340 (App.

May 11, 2011) (SDO)). This court also stated, however, that

“although Marital Separate Property cannot be awarded to the

non-owner spouse [in divorce], it can influence the division of

Marital Partnership Property.” 127 Hawai‘i at 142, 276 P.3d at

711 (emphasis added). See also Hussey, 77 Hawai‘i at 207, 881

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P.2d at 1275 (“Although Marital Separate Property cannot be used

by the family court to offset . . . the award of Marital

Partnership Property to the other spouse, it can be used by the

family court to alter the ultimate distribution of Marital

Partnership Property based on the respective separate conditions

of the spouses.” (internal citations, quotation marks, ellipses,

and brackets omitted)), overruled on other grounds by Gonsales,

91 Hawai‘i 446, 984 P.2d 1272.

Moreover, in determining whether equitable considerations

justify a deviation from the partnership model, the family court

must consider the following: “the respective merits of the

parties, the relative abilities of the parties, the condition in

which each party will be left by the divorce, the burdens

imposed upon either party for the benefit of the children of the

parties, and all other circumstances of the case.” Gordon, 135

Hawai‘i at 352-53, 350 P.3d at 1020-21 (citing HRS § 580-47(a)).

“The family court’s determination of whether facts present valid

and relevant 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, 135 Hawai‘i at 348, 350 P.3d at 1016 (citing Jackson, 84

Hawai‘i at 332–33, 933 P.2d at 1366–67).

Here, the family court’s findings in support of deviation

reference Wife’s “substantial” equalization payment to Husband,

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Husband’s “substantial” Marital Separate Property and capital

contribution credits in excess of the marital estate, and the

parties’ thirty-four year economic partnership, ages, and

employability. Thus, the deviation was not based on the mere

existence of Husband’s inheritance. 127 Hawai‘i at 143, 276 P.3d

at 712. Therefore, the family court did not err in considering

the existence of Husband’s Marital Separate Property inheritance

to deviate from partnership principles.

5. A Property Division Award Must Be Just and
Equitable
Under HRS § 580-47, the family court has wide discretion to

divide Marital Partnership Property in a manner that is “just

and equitable” under the facts and circumstances of each case.

“In addition to HRS § 580–47, Hawai‘i case law has created a

framework based on partnership principles that provides further

guidance for family courts to use in dividing property upon

divorce.” Kakinami, 127 Hawai‘i at 137, 276 P.3d at 706; Gussin,

73 Haw. at 471, 836 P.2d at 486 (“The partnership model of

marriage provides the necessary guidance to the family court in

exercising its discretion and for appellate review.”).

Under the Marital Partnership Model, “[m]arriage is a

partnership to which both parties bring their financial

resources as well as their individual energies and efforts. In

divorce proceedings regarding division and distribution of the

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parties’ estate, partnership principles guide and limit the

range of the family court’s choices.” Gussin, 73 Haw. at 470-

71, 836 P.2d at 485-86. However, “the family court shall

consider ‘the respective merits of the parties, the relative

abilities of the parties, the condition in which each party will

be left by the divorce, the burdens imposed upon either party

for the benefit of the children of the parties, . . . and all

other circumstances of the case.’” HRS § 580–47(a).

Importantly, the family court is empowered to make orders that

are “just and equitable.” Id. (emphasis added).

With respect to Wife’s assertion that the family court

erred in failing to divide and distribute Husband’s inheritance

in a just and equitable manner, she cites to Carson v. Carson,

50 Haw. 182, 436 P.2d 7 (1967), and Cassiday v. Cassiday, 68

Haw. 383, 716 P.2d 1133 (1986), in support of her contention

that the family court can award separate property to the non-

owning spouse. The separate property at issue in both cases was

actually Marital Partnership Property, not Marital Separate

Property that is now clearly governed by Kakinami. If on

remand, the family court determines that Husband’s remaining

inheritance is actually Marital Partnership Property, then the

inheritance will be subject to division. If not, pursuant to

Kakinami, it will not.

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Other principles in Carson and Cassiday, however, remain

instructive. In Carson, this court held that the family court

must fully and properly consider all of the factors enumerated

in Revised Laws of Hawai‘i (RLH) § 324-37 (1955), the precursor

to HRS § 580-47, including the respective merits of the parties,

the ability of the husband, the condition in which the parties

will be left by the divorce, and all other circumstances of the

case, and further, that “[u]ndue emphasis on a particular

factor, [such as the source of the asset,] excluding the

consideration of other factors, constitutes an abuse of

discretion.” 50 Haw. at 182, 436 P.2d at 8; accord 50 Haw. at

183, 436 P.2d at 9. This court clarified that “all other

circumstances of the case” encompass “all other matters which

would have a bearing on the division and distribution of

property.” 50 Haw. at 187, 436 P.2d at 11.

In Cassiday, this court recognized that other unique

factors beyond those set out in HRS § 580-47 may come into play,

such as “the length of the marriage, the separate financial

contribution of each party to the upkeep of those assets, and

the involvement, direct or indirect, in the management and

maintenance of them.” 68 Haw. at 389, 716 P.2d at 1137. In

reversing the property division award, this court stated that

the family court had failed to consider “the extent to which the

marriage in and of itself affected the accumulation or

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preservation of [the husband’s] separate property.” 68 Haw. at

387, 716 P.2d at 1137.

Cases such as Carson and Cassiday demonstrate the manner in

which the family court, in its application of the partnership

model, can unduly emphasize money or property brought into a

marriage over other non-economic considerations, such as the

contribution of services during the marriage, the value of which

is not as readily quantifiable. These cases demonstrate how one

spouse’s non-economic contributions to the marriage can affect

the accumulation or preservation of the other spouse’s separate

holdings, whether Marital Separate Property or Marital

Partnership Property, and that the family court must take those

factors into consideration in fashioning a just and equitable

distribution of Marital Partnership Property under the

circumstances of the case. “[M]arriage is a partnership to

which both partners bring their financial resources as well as

their individual energies and efforts.” Collins, 133 Hawai‘i at

43, 323 P.3d at 1225 (quotation marks and citations omitted).

“That one partner brings to the marriage substantially greater

assets than the other does not make this any less the case.”

Cassiday, 68 Haw. at 387, 716 P.2d at 1136.

In this case, the family court’s property division award,

awarded Wife, who has few employment prospects after a thirty-

four year partnership, $1,396 in bank accounts, a retirement

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account worth $13,000, and a used Suzuki valued at $13,000,

while awarding Husband, who had $2,051,293 in his bank account,

the marital residence with equity of $243,781, an office cottage

valued at $95,000, a $32,875 Camaro, a $1,000 Jeep, $57,835 in

liquid cash accounts, and an IRA account valued at $8,645. This

simply does not meet a “just and equitable” standard. For this

reason, also, the property division award would have been set

aside for abuse of discretion, even if we had not already

ordered it set aside for the reasons above.

C. Temporary Spousal Support

1. During the Pendency of Divorce Proceedings

Turning to other issues on certiorari, Husband argues that

the ICA erred in affirming the family court’s award of temporary

support to Wife during the pendency of the divorce proceedings

because Wife was “effectively awarded [Husband’s] inheritance”

despite its subsequent classification as Marital Separate

Property. He further argues that the ICA and family court

failed to consider that Wife’s gross monthly income was greater.

In response, Wife contends that Husband’s argument lacks merit

because he was ultimately credited with these payments when the

family court treated his spent inheritance funds as his Category

3 property and deducted it from the marital estate.

The family court is authorized to order temporary support

under HRS § 580-9 (2006), which provides, in relevant part:

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After the filing of a complaint for divorce or separation
the court may make such orders relative to the personal
liberty and support of either spouse pending the complaint
as the court may deem fair and reasonable and may enforce
the orders by summary process.

“An award for temporary support is a sum necessary for the

maintenance of a party pending litigation.” Farias v. Farias,

58 Haw. 227, 233, 566 P.2d 1104, 1109 (1977). “If one party has

insufficient income but the other party has sufficient income

for both, then neither’s capital should be impaired [while the

action is pending] absent special circumstances.” Horst v.

Horst, 1 Haw. App. 617, 622, 623 P.2d 1265, 1269 (1981). See

also Richards v. Richards, 44 Haw. 491, 497, 355 P.2d at 193

(1960) (affirming an award of temporary alimony where wife had

insufficient income to maintain her standard of living without

impairing the capital of her separate estate). As the ICA

stated, “‘financial resources of the husband’ are given ‘due

consideration’ in awarding the spouse temporary support.”

Hamilton, mem. op. at 18 (quoting Richards, 44 Haw. at 497, 355

P.2d at 193, superseded on other grounds in Epp, 80 Hawai‘i at

91, 905 P.2d at 66). Moreover, Marital Separate Property may

factor into the family court’s decision to “alter alimony . . .

based on the respective separate conditions of the spouses.”

Tougas, 76 Hawai‘i at 32, 868 P.2d at 450, overruled on other

grounds by Gonsales, 91 Hawai‘i 446, 984 P.2d 1272.

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In this case, neither spouse had sufficient income to

maintain each’s respective standard of living. Wife received

approximately $1,380 per month as a nanny. Comparatively,

Husband reported a lower gross monthly income of $1,000;

however, Husband held significantly greater assets. Therefore,

the temporary spousal support award appears to have been “fair

and reasonable” in light of Husband’s significant financial

resources, which were sufficient to cover expenses for both

himself and Wife during the divorce. Moreover, the family

court’s finding in support of the pre-divorce temporary spousal

support award refers to Wife’s Income & Expense statement and

the parties’ previous use of Husband’s inheritance funds for

marital expenses. Thus, the family court properly considered

the parties’ respective incomes and Husband’s large assets as

compared to Wife’s in requiring Husband to pay temporary alimony

for the purpose of Wife’s maintenance pending litigation. See

HRS § 580-9. Accordingly, the ICA did not err in ruling that

“[t]here was no abuse of discretion in the family court’s

consideration of [Husband’s] financial resources in ordering

temporary spousal support for [Wife].” Hamilton, mem. op. at

18.

2. Failure to Award Permanent Spousal Support

The family court ordered Husband to pay spousal support of

$2,000 per month until Wife moved out of the marital residence

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then $3,000 per month thereafter until December 2016. Wife

argues that the family court erred in failing to consider

altering the amount or duration of post-divorce temporary

spousal support to compensate her for the “grossly unequal

property division caused by [Husband’s] inheritance.” Comparing

the award of spousal support during the divorce proceedings to

the post-divorce award, Wife contends that an increase of $1000

per month was “obviously inadequate” to cover her expenses where

pre-divorce spousal support also included housing and medical

expenses.

We have vacated the family court’s property division award.

As the need for spousal support will be related to the property

division, we hereby also vacate the spousal support award. See

Gordon, 135 Hawai‘i at 355, 350 P.3d at 1023. On remand, the

family court is to decide spousal support in light of the

following considerations.

HRS § 580-47(a) requires the family court to consider the

following criteria when making further orders for the support

and maintenance of either spouse: “the respective merits of the

parties, the relative abilities of the parties, the condition in

which each party will be left by the divorce, the burdens

imposed upon either party for the benefit of the children of the

parties, . . . and all other circumstances of the case.” The

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family court must also consider all of the following factors in

ordering spousal support and maintenance:

(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.

HRS § 580-47(a). See Cassiday, 6 Haw. App. at 215, 716 P.2d at

1151 (“When deciding in a divorce case whether one party must

pay periodic support to the other, for how long, and how much,

the family court must consider all of the factors enumerated in

HRS § 580–47(a)[.]”), aff’d in part, rev’d in part, 68 Haw. 383,

716 P.2d 1133 (1986).

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D. Attorneys’ Fees

Over the course of the entire divorce proceeding, Wife

received from Husband $60,450 out of $86,126.17 in attorney’s

fees and costs. Wife’s counsel declared that the amount

requested did not include attorney’s fees incurred after

preparation of the closing argument and reply, which were still

accumulating.

Husband argues that the attorneys’ fees and costs award to

Wife constituted an abuse of discretion because he had

insufficient income and the award “invaded” his inheritance,

which he contends should have been “taken out of the equation”

as Marital Separate Property. Wife contends that Husband’s

argument lacks merit because he was ultimately credited with

these payments when the family court treated his spent

inheritance as a Category 3 asset and deducted it from the

marital estate.

This court has explained that “an award of attorney’s fees

is in the sound discretion of the trial court, limited only by

the standard that it be fair and reasonable.” Farias, 58 Haw.

at 233, 566 P.2d at 1109 (citing Carson, 50 Haw. at 188, 436

P.2d at 11; Richards, 44 Haw. at 496, 355 P.2d at 192). With

respect to attorney’s fees and costs advanced to Wife during the

pendency of the divorce, HRS § 580-9 (2006) provides, in

relevant part:

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The court may also compel either spouse to advance
reasonable amounts for the compensation of witnesses and
other expenses of the trial, including attorney’s fees, to
be incurred by the other spouse and may from time to time
amend and revise the orders.

We have further stated:

In determining the fair and reasonable amount of attorney’s
fees, the trial court should consider the financial ability
of the parties and the amount necessary for the efficient
prosecution or defense of the action. The latter depends
on the character of the litigation, services to be
performed, and all other circumstances which may tend to
lessen or increase the probable expenses of the litigation.

58 Haw. at 233, 566 P.2d at 1109 (citations omitted).

In this case, the family court’s award of attorney’s fees

and costs appears to be fair and reasonable under the

circumstances. Wife’s trial expenses were increased by

Husband’s filing of five motions for partial summary judgment,

which required extensive expert review of voluminous financial

documents; a motion for reconsideration of an order granting and

denying in part a motion to compel; and a motion in limine.

Considering the parties’ financial abilities, discussed above,

the family court did not abuse its discretion in requiring

Husband to advance amounts totaling $55,450 for trial expenses.

Regarding attorney’s fees awarded after divorce, HRS § 580-

47(f) provides, in relevant part:

(f) Attorney’s fees and costs. The court hearing
any motion for orders either revising an order for the
custody, support, maintenance, and education of the
children of the parties, or an order for the support and
maintenance of one party by the other, or a motion for an
order to enforce any such order or any order made under
subsection (a) of this section, may make such orders
requiring either party to pay or contribute to the payment
of the attorney’s fees, costs, and expenses of the other

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party relating to such motion and hearing as shall appear
just and equitable after consideration of the respective
merits of the parties, the relative abilities of the
parties, the economic condition of each party at the time
of the hearing, the burdens imposed upon either party for
the benefit of the children of the parties, the concealment
of or failure to disclose income or an asset, or violation
of a restraining order issued under section 580-10(a) or
(b), if any, by either party, and all other circumstances
of the case.

Here, the family court concluded that Husband’s “superior

financial condition” justified requiring him to pay Wife’s

attorney’s fees. This finding is supported by the parties’

Asset and Debt statements, which show Husband as having

significantly greater assets than Wife. As stated supra,

Husband’s individually held assets totaled more than $2 million,

while Wife’s individually held assets totaled approximately

$19,000. Therefore, the evidence shows the family court

properly considered the factors in HRS § 580-47(f), in

particular the parties’ relative abilities and post-divorce

economic conditions. Given the family court’s broad discretion,

its award of attorney’s fees to Wife did not amount to an abuse

of discretion. Accordingly, the ICA did not err in affirming

the attorney’s fees and costs award to Wife.

V. Conclusion

For the foregoing reasons, we affirm in part and vacate in

part the ICA’s September 25, 2014 Judgment on Appeal, filed

pursuant to its August 29, 2014 Memorandum Opinion, which

affirmed in part, vacated in part, and remanded the family

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court’s June 7, 2013 Divorce Decree. We remand this case to the

family court for further proceedings consistent with this

opinion.

Peter Van Name Esser and /s/ Mark E. Recktenwald
Michael S. Zola
for petitioner/cross-appellee /s/ Paula A. Nakayama

Rebecca A. Copeland /s/ Sabrina S. McKenna
for petitioner/cross-appellant
/s/ Richard W. Pollack

/s/ Michael D. Wilson

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