Nakasone v. Nakasone

Citations: 102 Haw. 108; 73 P.3d 62; 2002 Haw. App. LEXIS 26Docket: No. 23460

Court: Hawaii Intermediate Court of Appeals; February 26, 2002; Hawaii; State Appellate Court

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Defendant-Appellant Gerald Nakasone appeals two orders from the District Family Court: (1) the January 27, 2000 order that denied Plaintiff Carmen T. Nakasone's request for attorney's fees and partially granted Gerald's request for attorney's fees, and (2) the May 15, 2000 order denying Gerald's motion for reconsideration of the first order. The court vacates both orders and remands for further proceedings, referencing the application of Hawai'i Family Court Rules (HFCR) Rule 68 as amended on January 1, 2000. 

HFCR Rule 68 allows parties to serve offers of judgment more than 20 days before a contested hearing, covering issues like custody and visitation. If the offer is not accepted, it is considered withdrawn and not admissible in court, except for determining costs and attorney's fees. If the final judgment obtained by the offeree is not more favorable than the offer, the offeree must pay the other party's costs and reasonable attorney's fees incurred after the offer was made, unless deemed inequitable by the court.

Hawaii Revised Statutes (HRS) 580-47(a) permits the court to allocate responsibility for attorney's fees and costs upon granting a divorce, considering factors such as the merits of the parties, their respective financial abilities, and the overall circumstances of the case. 

The background indicates that Gerald and Carmen were married in 1974, had two daughters, and that Carmen filed for divorce in January 1998. Gerald made an HFCR Rule 68 settlement offer to Carmen on November 24, 1998.

On December 3, 1998, Carmen responded to Gerald’s Offer, disagreeing with certain aspects and providing clarifications, issues, and conditions. The family court approved a Stipulation on March 2, 1999, addressing some property and debt division issues. Trials occurred on multiple dates in March and May 1999, leading to the court's Findings of Fact, Conclusions of Law, and Decree Granting Divorce and Awarding Child Custody on September 9, 1999. Subsequently, Gerald filed a Motion for Attorney’s Fees on September 17, 1999, followed by a Motion for Reconsideration on September 28, 1999. Carmen then filed a Motion to Amend on October 25, 1999. A hearing on these motions took place on November 3, 1999, but the court deferred its decision. 

On January 27, 2000, the court denied Gerald's request for attorney's fees while partially granting Carmen's request and amended the earlier findings and decree. Gerald filed a Motion for Reconsideration regarding the fee order on February 4, 2000, which was denied on May 15, 2000, leading Gerald to file a notice of appeal on May 23, 2000. The applicability of HFCR Rule 68 was addressed, concluding that there was no substantive difference between the 1999 and 2000 versions, so the 2000 rule applied. Gerald’s Offer included provisions for custody, child support, and educational accounts but did not address post-high school education, visitation, spousal support, or the complete division of property and debts.

Carmen has been awarded sole legal and physical custody of the parties' minor children, with child support obligations lasting until each child turns 23 or completes their education. The parties agreed that the children will continue attending Island School, with both parents sharing tuition costs. Their children's savings accounts will remain in the children's names, requiring both parents' signatures for withdrawals, which are to be used solely for educational needs or catastrophic medical expenses. For higher education, both parents will contribute equally after any available savings, loans, or grants are exhausted.

The family court's findings indicate that the couple had previously agreed to set aside funds for their children's education, starting from 1974, with specific savings accounts established for each child. Carmen transferred these accounts into custodial accounts under the Hawaii Uniform Transfer to Minors Act (HUTMA) in April 1994, with initial values of $36,000 each. As of March 1999, the accounts had grown, with values of approximately $51,240 and $51,624 for the second and first daughters, respectively. Additionally, Carmen opened two joint savings accounts for each child, funded with marital income, and Gerald established similar accounts in 1997. 

In the divorce decree, Carmen retains custody of the children, with Gerald responsible for child support payments of $240 per month until the children reach 18 or continue full-time education until age 23.

Gerald is required to maintain medical, dental, and optical insurance for the children as long as it is provided at no cost by the County of Kauai. Both parties will equally share all uncovered medical and health care expenses for the children while child support is active. Gerald must also maintain term life insurance of $75,000 per child, naming each child as the beneficiary, as long as a child support obligation exists.

The children will retain their individual savings accounts and life insurance policies, with both parents as beneficiaries. Additionally, they will each have HUTMA accounts at the Bank of Hawaii, with Carmen as custodian, who can use the funds for their educational needs through high school and for higher education thereafter. Gerald is obliged to contribute one-third of private school tuition for each child until high school graduation.

The joint savings accounts for the children will be divided equally between the parties. Gerald's counsel alleges that Carmen acted in bad faith during the proceedings, causing unnecessary expenses. Gerald's request for attorney's fees totals $17,788.61, which includes $17,037.50 for 136.30 hours of work at $125 per hour, minus $750 for illegitimate costs, plus additional expenses. 

The family court's findings, established in the January 27, 2000 order, confirm the divorce and custody arrangements, acknowledging that Carmen sought attorney’s fees but did not file a formal motion for them. Issues raised in Gerald’s offer were resolved through mutual agreements, particularly regarding custody, child support amounts, and property matters, with all issues settled in a stipulation.

Carmen agreed to Gerald's acquisition of the Crossley Road Property and the purchase of the Montana Property for $2,500.00, with both matters resolved in the Stipulation. However, Carmen rejected the offer to purchase J.C., Inc., and the proposal for the Children’s HUTMA Accounts and joint savings accounts, insisting on equal responsibility for educational costs. The Family Court ruled that the HUTMA Accounts were the children's property, that the joint savings were marital property, and mandated Gerald to cover a portion of educational expenses through high school, with Carmen authorized to use HUTMA funds for education. 

Carmen accepted the equal division of life insurance and retirement accounts but insisted Gerald maintain a $250,000 life insurance policy linked to his child support obligation. The Divorce Decree stipulated a $75,000 policy per child instead. Carmen also rejected using savings for mortgage payments, but this was resolved in the Stipulation. 

Both parties agreed to retain their personal property, with some awarded in the Divorce Decree. Carmen conditionally agreed to file joint tax returns for 1998, a matter settled in the Stipulation. 

The Court highlighted that if HFCR Rule 68 is satisfied, reasonable attorney's fees and costs will be awarded unless deemed inequitable. Factors for this determination include the parties' merits, relative abilities, economic conditions, burdens for the children's benefit, and other relevant circumstances.

HFCR Rule 68 grants the Family Court discretion to award attorney's fees and costs deemed just and equitable based on HRS Section 580-47. When one party rejects a Rule 68 offer but later settles some issues without including attorney's fees in that settlement, those issues are not eligible for further fee awards under Rule 68. The Court determined that Gerald's offer, which Carmen rejected, encompassed matters later settled through a stipulation, thus precluding any additional fee awards.

The Court found that the Divorce Decree favored Gerald regarding the characterization and use of the Children’s Savings and HUTMA Accounts, contrary to Carmen's assertions. Post-divorce, both parties are positioned equally to support themselves, with the Divorce Decree balancing the custodial burden on Carmen through Gerald's child support obligation.

Upon considering the totality of the case, the Court ordered Carmen to pay Gerald $5,000 for attorney's fees, while denying Carmen's request for fees. Carmen must pay this amount within 20 days of the order's filing. Gerald's counsel provided an affidavit detailing $19,300 in attorney fees and additional costs, totaling $20,439.35, but Gerald contested the Family Court's limited fee award, arguing it should cover the entire amount incurred post-offer, warning that upholding the Court's interpretation of Rule 68 would render it redundant given existing provisions in HRS Section 580-47.

Rule 68 may disadvantage a prevailing party by increasing litigation costs regarding the implications of a successful offer in relation to HRS Section 580-47(a) factors. Gerald disputes the accuracy of Findings of Fact (FsOF) and Conclusions of Law (CsOL) from a January 27, 2000 ruling, particularly CsOL nos. 7 and 8, and their impact on the family court's $5,000 award. Carmen, despite not cross-appealing, challenges multiple FsOF and CsOL, arguing that Gerald’s Offer failed to adequately define children's accounts, improperly implicated their private school education, and was an attempt to evade financial responsibilities. She also claims discrepancies in the court's findings regarding her response to Gerald’s Offer and the classification of the Children’s Savings Accounts as marital property. 

Carmen emphasizes that divorce cases in Hawai'i consist of four components: marriage dissolution, child custody and support, spousal support, and property distribution. She contends Gerald's Offer inadequately addressed all issues related to child support and property distribution, thus not complying with HFCR Rule 68. She raises the question of whether HFCR Rule 68 allows attorney fees for offers regarding partial property and debt distribution, asserting that the rule did not support offers that addressed less than all property and debts. Reference is made to the Criss v. Kunisada case, which clarified that HFCR Rule 68 permits offers concerning specific issues, such as custody, without being overly restrictive. The court found that custody offers could be made independent of related visitation rights and that a decree could be entered on custody alone.

HFCR Rule 68 was amended on January 1, 2000, allowing offers to settle various issues, including dissolution of marriage, child custody and support, spousal support, and division of property and debts. Gerald's Offer addressed child custody, child support, and property division but was deemed insufficient under HFCR Rule 68 because it did not cover all joint and separate properties and debts. Specifically, while he offered Carmen all personal property at the marital residence, he omitted the 1989 Ford 350 and guns from his offer, indicating they were not included.

The family court's findings from January 27, 2000, concluded that if a HFCR Rule 68 offer is rejected but some issues are later settled, those resolved issues cannot lead to an award of attorney’s fees unless specified in the settlement. This ruling was contested, as it incorrectly placed the burden of attorney fees on the offeror who settled rather than the offeree who rejected the initial offer. The court did not address whether the resolution of custody and support issues was more favorable to Carmen than Gerald's Offer, which must be determined on remand.

HFCR Rule 68 aligns with HRS 580-47(a), stipulating that if the judgment on custody and support issues is not more favorable to Carmen than Gerald's Offer, she must cover attorney fees and costs incurred after the offer, unless deemed inequitable. The family court must assess whether an award of costs and fees is appropriate and determine if any such award would be inequitable under the relevant statutes.

The family court ordered Carmen to pay Gerald $5,000 for costs and attorney's fees but did not explicitly address an additional $14,488.36 in fees, which was deemed insufficient by the appellate court. Under HFCR Rule 68, the court is required to order the party who rejected an offer to cover the costs and reasonable attorney's fees incurred thereafter unless it specifically finds such an order inequitable according to HRS section 580-47 or other relevant statutes. The family court's finding that $5,000 was just and equitable does not satisfy the requirement for a specific determination regarding the additional fees. Furthermore, if the court deems it inequitable to award more, it must provide reasons for that decision. As a result, the appellate court vacated the previous orders related to attorney's fees and remanded the case for further proceedings.

Additionally, the excerpt outlines Gerald's HFCR Rule 68 offer, which included various terms regarding custody, property division, and financial arrangements between the parties, emphasizing shared responsibilities and specific rights concerning property valuation and purchase options. Key elements included custody arrangements, division of the Condominium Property Regime (CPR), options for property purchases, and the handling of children's educational accounts and marital property. The intention behind the rule changes from 1999 to 2000 was clarified, focusing on the overall evaluation of decrees in relation to offers.

Carmen may retain all personal property and household effects at the marital residence if she accepts the proposal. Each party will be responsible for their separate debts; Carmen will handle the Bank of Hawaii Visa, while they will equally split up to $10,000 of the J.C. debt, with any excess falling to Carmen. They will file a joint tax return for 1998, sharing any resulting refund or liability equally. Until the property division is completed, they will equally divide any tax deductions related to the property and mortgages. 

HFCR Rule 86 (1999), concerning the applicability of amendments, was repealed by the Hawaii Supreme Court effective January 1, 2000. The HFCR (2000) does not include a Rule 86. HFCR Rule 1 governs civil procedures in family courts, and HFCR Rule 81(i) applies these rules to all civil actions in family court and related appeals. A suggestion is made to amend HFCR Rule 68 to exclude child custody and visitation issues, as its intent is to encourage early settlements and protect parties willing to settle from additional costs. 

Contrastingly, HRS 571-46(1) (2000) mandates that custody decisions be made based on the child's best interests, indicating that financial implications should not influence custody determinations. There is concern that applying a cost-related rule to custody disputes may deter genuine efforts to contest custody for the child's welfare. The family court's existing authority under HRS 580-47 (2000) to award attorney fees and costs is deemed sufficient and equitable.