Court: Hawaii Intermediate Court of Appeals; December 30, 2014; Hawaii; State Appellate Court
Bennett Jacoby appeals the Family Court's April 14, 2011 Order and July 5, 2011 Divorce Decree dissolving his marriage to Nicoleta Jacoby. He raises sixteen points of error, including challenges to the valuation of his intellectual property, deviations from marital partnership principles, alimony and child support awards, and the requirement to maintain excessive life insurance. Nicoleta cross-appeals, contesting three aspects: the automatic termination clause for her alimony upon cohabitation, the inclusion of Bennett's tax-free disability earnings as income for child support calculations, and the failure to award her half of Bennett's future disability benefits.
The background indicates that Nicoleta filed for divorce on December 9, 2008, and both parties initially agreed to joint custody of their two children. Bennett sought a determination on whether his future disability benefits were marital property. The divorce trial occurred over several days in November 2009, where both parties and their experts provided testimony regarding the value of Bennett's intellectual property. Nicoleta, originally from Romania, faced significant health challenges, including paralysis after brain surgery and multiple sclerosis, which affected her employment. The couple married on June 12, 1993, and had two children.
In 1999, Nicoleta worked part-time at Hualalai Academy but had to resign due to worsening symptoms from multiple sclerosis (MS), requiring hospital treatment. In 2005, she briefly assisted Bennett with a charity project but left within a week due to her condition. During the trial, she reported ongoing health issues, including shoulder pain, fatigue, and optic neuritis, which raises concerns about potential blindness. In April 2009, she was diagnosed with brain hemorrhaging and required annual CT scans for an aneurysm. Additionally, she was diagnosed with carpal tunnel syndrome in May 2009, affecting her dominant left hand, and needed surgery for shoulder problems. Her medical expenses were significant, costing about $885 monthly despite insurance. Nicoleta received $5,500 per month in alimony and $1,970 in child support. She requested that Bennett maintain his $1.5 million life insurance policy. The marital home’s design and amenities helped her manage her MS, but its upkeep was financially burdensome.
Bennett married Mary Ann in May 1989 and divorced her in December 1992, signing a marital termination agreement that included a $10,000 payment to release her claims on his intellectual property (IP). Bennett's IP, related to a periodontal endoscope, was developed after Mary Ann signed the agreement, and he received a patent allowance shortly after. At the time of the hearing, he was receiving about $16,334 per month in tax-free disability payments, with annual increases, and earned approximately $1,500 monthly working part-time as a periodontist. He also received around $1,000 monthly in royalties from his invention until December 2011, and about $9,000 monthly from various investments.
Bennett's monthly family expenses from January 2007 to June 2008 averaged $9,348. In the valuation of Bennett's intellectual property (IP) asset, expert witnesses were presented: Gary Kuba for Bennett and Christian Tregillis for Nicoleta. Kuba valued the periodontal endoscopy device patent applications at $4,648,000 as of the date of marriage (DOM), using a cash flow projection from Wendell Ebling, a deceased former company president. His valuation model involved determining expected cash flows, applying a discount rate, and concluding the asset's value based on these variables. Kuba used a twenty percent discount rate, derived from a capital asset pricing model, and stated there was no evidence suggesting Ebling's projections were inflated, though he acknowledged they might have been exaggerated to entice Bennett into a partnership. He based his opinion on limited discussions with Bennett, the only surviving relevant party.
Conversely, Tregillis valued the IP asset at $101,000, arguing that his evaluation considered only known or knowable information as of the DOM, weighing the possibilities of success and failure to establish a more realistic value. He criticized Ebling's projections as inflated, created to attract Bennett into a partnership, and utilized the actual revenue stream as the expected scenario for his valuation. Tregillis applied a conservative 42.5 percent discount rate, reflective of Bennett's early investment stage.
On April 14, 2011, the Family Court issued an Order Re: Divorce Trial, detailing its findings and conclusions. Key findings include: 1) Bennett and Nicoleta established a Premarital Economic Partnership (PEP) from June 1992 until their Date of Marriage (DOM) on June 12, 1993, with Bennett’s prior marriage to Mary Ann being irrelevant to this determination. 2) Expert Tregillis provided a more credible valuation of Bennett’s intellectual property (IP) at $101,000 as of DOM. 3) Nicoleta was awarded permanent spousal support of $4,000 per month, terminating upon either party's death or Nicoleta's remarriage/cohabitation. 4) Bennett is required to pay Nicoleta $2,069 monthly in child support. 5) Bennett agreed to cover Nicoleta's health insurance premiums or provide a reasonable equivalent. 6) Bennett must maintain a $1.5 million life insurance policy with Nicoleta as the sole beneficiary while obligated for child support or alimony. 7) The marital residence was awarded to Nicoleta. 8) Valid considerations justified not requiring Nicoleta to pay an equalization payment.
On July 5, 2011, the Family Court entered a Divorce Decree, mandating Bennett to pay Nicoleta $4,000 monthly in alimony, granting joint legal and physical custody of their two minors, requiring Bennett to maintain the children's medical insurance, awarding the marital home to Nicoleta (who will pay property taxes), and directing Bennett to pay off Nicoleta’s car loan for her 2008 Honda using marital assets. Bennett filed a notice of appeal on August 3, 2011, and Nicoleta cross-appealed on August 16, 2011. On October 17, 2011, Nicoleta sought to enforce the Divorce Decree, requesting Bennett to pay for a new, more expensive medical insurance plan after the original plan was unavailable. The Family Court granted this request on November 28, 2011, determining the new plan was a reasonable equivalent and ordered Bennett to pay interest on $594,805 from July 5 to October 5, 2011.
Bennett raises several points of error on appeal regarding the Family Court’s decisions.
1. The Family Court incorrectly determined that Bennett and Nicoleta established a PEP in June 1992 while Bennett was still married to Mary Ann.
2. The Family Court made errors in its IP valuation of Bennett’s periodontal endoscope and failed to apply the precedent set in *Teller v. Teller*.
3. The Family Court abused its discretion by awarding Nicoleta permanent spousal and child support without considering the impact of property division on the parties’ monthly incomes, citing specific findings of fact (FOFs) regarding Nicoleta’s expenses, Bennett’s income, and the awarded spousal support amount.
4. The Family Court deviated from marital partnership principles by waiving Nicoleta’s $588,677 equalization payment.
5. The Family Court extended temporary support orders for nineteen months excessively.
6. The Family Court undervalued a 2008 Honda awarded to Nicoleta at $2,488, failing to account for the vehicle's payoff and misvaluing it despite evidence indicating a worth of $24,300.
7. The Family Court improperly allowed Nicoleta to claim real property tax deductions for 2011 despite Bennett making the payments post-divorce filing.
8. The court’s order for Bennett to maintain life insurance was deemed excessive and inconsistent with other financial orders, particularly regarding liability for child support in the event of his death.
9. The Family Court erred in ordering Bennett to cover Nicoleta’s increased medical insurance premiums without recalculating child and alimony awards, lacking jurisdiction to grant increased payments pending appeal.
These points highlight alleged errors in judgment, valuation, and legal principles applied by the Family Court, which Bennett contends warrant appeal.
The Family Court made several errors in the Divorce Decree. Firstly, it improperly ordered Bennett to pay child support directly to Nicoleta without including necessary findings and statutory language. Secondly, the court abused its discretion by mandating Bennett to maintain health insurance for their children while also requiring him to cover all uncovered medical and dental costs.
Additionally, the court incorrectly addressed the equalization of unforeseen tax consequences from property division, as Bennett did not consent to the proposed decree or assume responsibility for any tax implications resulting from Nicoleta's asset decisions. The court also erred in awarding both parties their bank accounts but then listed those same assets for equal division in the Allocation Chart.
Moreover, the Family Court imposed non-standard and overreaching custody provisions not discussed in trial or agreed upon by the parties, including restrictions on inappropriate conduct around the children and additional custody language.
Bennett was wrongly held financially accountable for the children's extracurricular activities while those costs were counted in Nicoleta's support needs. The court's order for Bennett to pay interest on his delayed property distribution payment was also unjustified, as it lacked jurisdiction to issue such an order during the pending appeal, and no monetary judgment warranted statutory interest.
The standards of review indicate that family courts have broad discretion in decision-making, which will only be overturned upon a clear showing of abuse or disregard for legal principles. The determination of property awards in divorce actions is also discretionary, governed by HRS 580-47, and will not be disturbed absent evidence of abuse.
The division and distribution of property in divorce cases, according to Hawaii law, must be just and equitable rather than equal. The Partnership Model guides family courts in these cases, requiring them to first ascertain relevant facts and determine if there are grounds for deviating from the standard division. If deviations are justified, the court must specify the reasons and the extent of those deviations. Findings of Fact (FOFs) made by the family court are subject to a "clearly erroneous" standard on appeal, meaning they can be overturned if not supported by substantial evidence or if a mistake is evident despite supporting evidence. Conclusions of Law (COLs), however, are reviewed de novo, allowing for full reconsideration. The family court has discretion in evaluating child care and custody matters, and its decisions must be upheld if they are backed by the record and not clearly erroneous. Appellate courts do not reevaluate witness credibility or evidence weight, which are the responsibilities of the trial court, and rulings on interest are reviewed for abuse of discretion. The concept of a premarital economic partnership (PEP) is recognized in Hawaii law, formed when two individuals cohabit and combine their financial resources and efforts for mutual benefit. The Family Court found that Bennett and Nicoleta established a PEP in June 1992, despite Bennett's prior marriage, noting that his separation from Mary Ann was sufficient to validate the formation of the PEP.
Bennett's argument that the Family Court erred in determining that his marriage to Mary Ann did not affect the formation of a premarital economic partnership (PEP) with Nicoleta is acknowledged but ultimately rejected. The court affirms that a PEP was established between Bennett and Nicoleta in June 1992, despite Bennett's ongoing marriage to Mary Ann. Referencing the case of Chen v. Hoeflinger, the court clarifies that the existence of a PEP is not negated by a party's prior marriage, as HRS 580-47 does not allow for the division of property based solely on cohabitation. It emphasizes that the division of property can consider premarital cohabitation, even if one party is legally married to someone else at that time.
The Family Court found that Bennett and Mary Ann separated in February 1992 and divorced in April 1993, while Bennett and Nicoleta began cohabiting in June 1992. The court noted that Bennett financially supported Nicoleta during their cohabitation, and she contributed to his periodontal clinic without compensation. They maintained joint bank accounts starting in 1992, demonstrating mutual financial support and collaboration. Despite Bennett's claims that the PEP finding could allow Nicoleta to assert property rights against Mary Ann's claims, he provided no evidence for this assertion.
The court concludes that the Family Court's statement regarding Bennett's marital status having "no bearing" on the PEP formation was a harmless error, and the finding that a PEP existed is substantiated by substantial evidence, thus not clearly erroneous.
The Family Court favored the IP valuation provided by Nicoleta’s expert, Tregillis, over that of Bennett’s expert, Kuba, determining Tregillis's findings to be "reasonable, trustworthy, and credible." The appellate court affirmed this decision, stating it does not assess witness credibility or evidence weight, which falls under the trial judge's discretion. The Family Court found Kuba’s testimony unreliable regarding the net equity of Bennett’s endoscope prototype as of the date of marriage (DOM). Bennett’s assertion that the Family Court erred by distinguishing the precedent set in Teller was rejected. The court noted that in Teller, the IP had been sold, thus justifying the use of fair market value, while in Bennett's case, the endoscope had not been commercialized, making the fair market value less applicable. Tregillis employed the Income Approach, deemed appropriate given the circumstances, while Kuba's Relief from Royalty Approach lacked sufficient data support.
Additionally, the Family Court awarded Nicoleta permanent monthly alimony of $4,000 and child support of $2,069, based on Bennett's gross monthly income of $29,402, which included various income sources. For child support calculations, Bennett's income was adjusted to $25,112 after deducting alimony and medical insurance premiums.
Bennett contests the $4,000 monthly spousal support granted to Nicoleta, arguing it exceeds her reasonable needs. He specifically challenges findings of fact (FOFs) 108 and 109, which declare her monthly expenses of $6,237 as reasonable based on their lifestyle. Under HRS 580-47(a), the court must consider various factors in determining spousal support, including both parties' financial resources, the duration of the marriage, and the needs and abilities of each party. The Intermediate Court of Appeals (ICA) has outlined key considerations: the payee’s need for support, their ability to meet that need independently, the payor’s need, and their capacity to provide support.
The Family Court found significant health issues affecting Nicoleta's ability to work and determined she was medically unable to pursue gainful employment. Additionally, it noted the couple had been married for sixteen years, during which Bennett was the primary financial provider. The Family Court's conclusion to award Nicoleta permanent spousal support was upheld, as Bennett failed to demonstrate that the court made a clear error in assessing her reasonable monthly expenses.
Bennett contends that the Family Court improperly included the entire Investment Income of $9,064 in his income while excluding it from Nicoleta's income, despite awarding her 50% of the underlying assets generating this income. This misallocation led to erroneous income assumptions for both parties, affecting the determination of Nicoleta's spousal support entitlement of $4,000 per month. Bennett also argues that the court failed to consider future changes in his disability income upon turning 65 and Nicoleta's eligibility for social security benefits after ten years of marriage. However, it is noted that HRS 580-47(a) does not require the court to predict such future income changes. The determination of alimony should reflect the parties' current circumstances, with HRS 580-47(d) allowing for future modifications based on material changes. Although the Family Court appropriately focused on present circumstances during the divorce, this does not bar future modifications regarding Bennett's disability payments.
In terms of child support, Bennett argues that the Family Court's erroneous calculation of both parents' Monthly Gross Incomes resulted in an incorrect child support award of $2,069 to Nicoleta. The Family Court's findings indicated that Bennett's gross monthly income, which included various sources, was inaccurately calculated, leading to the flawed determination of his Monthly Gross Income for child support purposes. Specifically, the court found Bennett's total gross monthly income as $29,402 before deductions, but the final calculation for child support was recorded as $25,112, which is deemed erroneous.
Monthly income calculations indicated a total of $29,402 before spousal support and medical premiums, which were adjusted by subtracting $4,000 for spousal support and $290 for Nieoleta’s medical insurance, resulting in a gross monthly income for Nieoleta of $4,290. The Family Court erroneously attributed $9,064 in investment income entirely to Bennett, despite awarding Nicoleta half of the underlying income-generating assets. Thus, Nicoleta should have received credit for her share when calculating her income and consequently reducing Bennett’s income as well. This miscalculation led to an incorrect monthly child support figure of $2,069.
Regarding the waiver of an equalization payment, Bennett contested the Family Court's finding that it was just to exempt Nicoleta from paying $588,677. The Court justified this waiver based on valid considerations to deviate from marital partnership principles, determining that sufficient valid and relevant considerations (VARCs) existed to support this deviation, which did not constitute an abuse of discretion. Despite Bennett asserting that the deviation denied him full repayment of his Category 1 and 3 capital contribution credits totaling $505,766, the Court maintained that equitable deviations are permissible under the Partnership Model when VARCs are present. In evaluating these VARCs, the Family Court is required to consider the parties' respective merits, future conditions post-divorce, and the burdens placed on either party for the children's benefit, focusing on current and future circumstances rather than past events.
Bennett was entitled to $2,027,403 based on the Allocation Chart but received only $1,438,726 of marital assets, while Nicole-ta had an entitlement of $1,537,037 but was allocated $2,125,714. Consequently, Bennett was due an equalization payment of $588,677 from Nicoleta under marital partnership principles, absent any Variations in Assets, Resources, or Circumstances (VARCs). However, the Family Court found sufficient VARCs to justify deviating from these principles due to Nicoleta's inability to work and future employment prospects being nil, alongside chronic medical issues and potential increased medical expenses. In contrast, Bennett remained self-sufficient as a skilled periodontist and inventor, with tax-free monthly disability payments that would increase annually.
The Family Court's findings were supported by the precedent established in Schiller v. Schiller, where health issues significantly limited the wife's employment opportunities, leading the court to determine that VARCs warranted deviation from the Partnership Model, resulting in no equalization payment from the wife and leaving the husband with a negative net worth. The Intermediate Court of Appeals (ICA) upheld these findings, affirming that the Family Court did not err in recognizing the disparity in work prospects between the parties, which justified the deviation from the traditional asset division model.
The court assessed the financial conditions of both parties following their divorce, particularly highlighting Nicoleta's health issues and limited job prospects. The Family Court's findings regarding the sufficient variance in circumstances (VARCs) were upheld and deemed not clearly erroneous, justifying the waiver of Nicoleta's equalization payment of $588,677. Bennett's contention that the Family Court improperly extended Nicoleta's temporary support orders for 19 months was rejected; the court is authorized to grant temporary spousal and child support, and such awards can continue until a final decree is established. Modifications to temporary support can occur based on changing circumstances, but Bennett did not seek any changes in the Family Court, thus forfeiting claims for restitution in the Divorce Decree.
Regarding the 2008 Honda, Bennett contended that the Family Court miscalculated its value during asset division, valuing it at $2,488 instead of its market value of $24,330, as testified by Nicoleta. The court's failure to consider the full value of the vehicle was recognized as an error. Lastly, Bennett argued that the Family Court abused its discretion regarding property tax deductions for 2011, implying potential issues with the allocation of tax benefits in the divorce decree.
Bennett was ordered to make property tax payments post-Divorce Decree until the property's title was transferred to Nicoleta, who would then be solely responsible for those taxes. Bennett could have avoided these payments by promptly transferring the home but did not provide evidence of any payments made. For the year 2011, Bennett claimed both children as dependents, while Nicoleta received a tax deduction for the property taxes. The Family Court's allocation of tax payments and deductions was deemed appropriate.
Regarding life insurance, Bennett contested the Family Court's order requiring him to maintain a $1.5 million policy with Nicoleta as the beneficiary, linked to his child support and alimony obligations. He argued that his spousal support obligation ends at his death, and his children's support obligations would cease as they approach adulthood. Bennett asserted that the life insurance amount was excessive and that, should he die without it, his estate should only be liable for any actual outstanding support, not the full policy amount. Nicoleta maintained that the order was justified to secure Bennett’s support obligations. The relevant statute, HRS 580-13, allows the court to require security for maintenance and, upon non-compliance, to take measures to ensure that support is provided.
Hawai'i law allows the Family Court discretion to require life insurance to secure child support and alimony obligations. However, since Bennett's alimony obligation ceases upon his death, the Family Court misused its discretion by mandating life insurance for alimony that had not accrued by his death. An excessive life insurance amount of $1.5 million was deemed unreasonable, far surpassing any spousal support owed at that time. The amount also exceeded what would be necessary to secure support for the children during their dependency period. Consequently, the order for life insurance is vacated, and upon remand, the Family Court may consider alternative means for securing support obligations.
Regarding Nicoleta's medical insurance, the Family Court found that the originally specified Kaiser HIPPA Platinum Plan was no longer available, and determined that the Kaiser HIPPA Plan 20/RX was a reasonable equivalent, costing $429.13 per month. Bennett was ordered to pay the difference between what he had been paying and the actual cost for five months, totaling $695.65. Bennett contends that the Family Court lacked jurisdiction to issue the Post-Decree Enforcement Order after he filed a notice of appeal. However, the court retains the authority to enforce its own judgments, leading to the question of whether the post-decree order enforced or modified the prior order.
The Family Court had jurisdiction over Ni-eoleta’s post-decree motion as it sought enforcement of the Divorce Decree rather than modification. The court had previously mandated that Nieoleta receive her medical insurance premiums or a reasonable equivalent. It correctly determined that the Post-Decree Enforcement Order enforced an existing obligation, despite the differing amount Bennett was ordered to pay. The Divorce Decree acknowledged potential variations in actual healthcare premiums from the stated $290.
Bennett contested that the Kaiser HIPPA Plan 20/RX was not a reasonable equivalent to the Kaiser Platinum Plan, but he did not dispute the court's finding that the Kaiser Platinum Plan was no longer available or provide evidence of a suitable alternative. The court's conclusion that the Kaiser HIPPA Plan was a reasonable equivalent was upheld.
Regarding child support, Bennett claimed the Family Court erred by not adjusting his child support obligations in light of increased health insurance premiums. However, he did not file a motion to amend the child support award nor cited legal authority requiring the court to independently reduce child support due to the enforcement order, rendering his argument meritless.
The Divorce Decree stipulated that Bennett must directly pay Nicoleta $2,069 monthly for child support, a provision that did not comply with HRS 576D-10(f) because it lacked a clause allowing either parent to void the direct payment arrangement to apply for services from the Child Support Enforcement Agency (CSEA). Thus, the Family Court erred by enforcing direct payment without this provision.
Bennett also argued that the Family Court abused its discretion by ordering him to maintain the existing healthcare coverage levels for the children while he was responsible for all uncovered medical and dental expenses. The court has broad discretion in such matters, and its decision was not deemed a manifest abuse of discretion.
Finally, Bennett contended that the Family Court abused its discretion regarding the inclusion of specific tax consequences in the property division section of the Divorce Decree.
The parties intend that the division of property during their divorce will not trigger tax consequences, with each party receiving property at its pre-divorce basis. Taxes incurred from subsequent sales or exchanges of these properties will be the responsibility of the party who sold or exchanged the interest. If unexpected tax consequences arise, the party who benefits must compensate the other to restore parity as if no unexpected tax consequence had occurred. Information regarding the basis of the awarded property must be shared by the party who possesses it. Bennett disputes the assumption of no tax consequences, asserting that tax implications are likely due to asset liquidation. This language was introduced in Nicoleta's Divorce Decree form without prior agreement or statutory support. The court found the provision vague and ambiguous, lacking a clear basis for tax assumptions, and concluded that it should be removed upon remand.
Regarding checking and savings accounts, both parties agree that the Family Court did not consider these accounts in the property equalization calculation. While the court did not err in allowing each party to retain their accounts, it failed to factor their value into the final calculations.
In child custody matters, Bennett objects to a clause preventing either party from engaging in inappropriate discussions in front of the children. He argues that this restriction limits his ability to discuss necessary topics with his teenage children. The court concurs, stating that the Family Court cannot infringe on parental rights to make decisions regarding appropriate conversations without extraordinary circumstances.
The document highlights a significant conflict between the parents, leading to the establishment of a detailed parenting plan. Bennett contests specific orders related to child custody and visitation outlined in the Decree, particularly those with non-standard provisions like the right of first refusal. Given that the children are nearing the age of majority, the court does not need to address holiday visitation matters.
Regarding children’s extracurricular activities, Bennett argues that the Family Court incorrectly assigned him sole financial responsibility for these expenses, as this issue was neither agreed upon nor litigated. Although Nicoleta claims Bennett accepted this arrangement in the Pre-Trial Stipulation, the language of that agreement suggests it was a temporary measure during the divorce proceedings. The precise nature of the extracurricular activities covered remains unclear, and there is no justification for not including these costs under child support or the parents’ financial discretion. Consequently, the Family Court is deemed to have abused its discretion in imposing additional support obligations.
On the topic of post-judgment interest, Bennett asserts the Family Court erred in ordering him to pay Nicoleta 10% statutory interest on a sum from the date of the Divorce Decree until payment. The statute grants interest on judgments, and the Divorce Decree is recognized as a final judgment entitling Nicoleta to payment. Bennett’s argument that no judgment was entered is dismissed, affirming that the Divorce Decree constitutes a final judgment in family court, thus supporting the entitlement to post-judgment interest.
Nicoleta contends that the Family Court erred in terminating her permanent alimony and medical insurance payments upon her cohabitation. While Hawaii Revised Statutes (HRS) § 580-51 mandates automatic termination of spousal support upon remarriage, it does not extend this provision to cohabitation. The court has established that cohabitation is not pertinent to spousal support obligations unless explicitly addressed in the Divorce Decree, as noted in Amii v. Amii, which emphasizes that a decree must specifically authorize reductions or terminations based on cohabitation. Nicoleta argues this authority should not apply, despite acknowledging the Amii court's stance on decrees that do include such provisions. She also highlights the difference between marriage and cohabitation but lacks factual or legal evidence supporting her claim that cohabitation could be confused with temporary guests. Additionally, she overlooks that HRS § 580-47(a) provides the Family Court broad discretion regarding the duration of spousal support. Nicoleta argues that the burden should be on Bennett to demonstrate that her cohabitation represents a significant change in circumstances. However, case law indicates that cohabitation alone, absent a specific decree provision, does not constitute such a change. Despite her health limitations impacting her work capacity, Nicoleta was awarded the family home and substantial investment assets that are expected to generate income. The economic benefits associated with cohabitation, recognized in other jurisdictions, could imply a reduced need for spousal support. The court's focus should be on how cohabitation affects the recipient's financial situation rather than solely on the status of cohabitation itself, as illustrated in various case precedents.
Cohabitation is relevant solely for assessing the ongoing need for alimony and its amount. Bennett contends that the Family Court's order aligns with practices in other states, which place the initial burden on the payor to demonstrate cohabitation, after which the payee must prove a lack of economic benefit. However, the Divorce Decree lacks such a procedural framework, terminating spousal support and healthcare coverage entirely upon Nicoleta's cohabitation. This approach potentially disregards Nicoleta's need for support, despite her cohabitation, particularly concerning her motion under HRS 580-47(d). Without modifying the termination provision to allow Nicoleta to establish her continued need for support, the Family Court abused its discretion by mandating complete termination upon cohabitation. Upon remand, the Family Court should evaluate the appropriateness of a more flexible termination or reduction provision in light of the circumstances.
In regard to child support calculations, Nicoleta argues that the Family Court erred by not adjusting Bennett's tax-free disability payments in his Monthly Gross Income for the CSG worksheet and failing to mandate automatic annual increases in child support to align with Bennett's disability payments. Under HRS 576D-7(a), child support guidelines must consider all earnings and income of both parents, with "net amount" reflecting post-tax figures. The CSG worksheet is designed to simplify calculations and ensure uniform application while addressing the complexities of determining actual monthly net taxable income. Bennett's Monthly Gross Income includes significant tax-exempt disability payments, which complicates accurate income assessment under existing guidelines.
Nicoleta contends that the Family Court should have increased Bennett's Monthly Gross Income to account for his tax-free income. This tax-free income raises concerns about the accuracy of the CSG Worksheet, which reduces Monthly Gross Income by set percentages based on income brackets, potentially underestimating Bennett's available resources. However, there is no provision in the CSG for artificially inflating Bennett's Monthly Gross Income, as such an adjustment would lead to inaccuracies. The Family Court declined to grant Nicoleta's request for this upward adjustment, and it did not err in its decision.
The CSG employs an automated Worksheet for calculating child support but also provides manual calculation instructions. For individuals earning over $13,000 monthly, specific guidelines detail the calculation of Monthly Net Income, which includes adding all gross income and subtracting applicable taxes (FICA, state, and federal taxes) and a self-support allowance. The guidelines specify that net income is not equivalent to take-home pay, acknowledging that variances in calculations are expected. The Family Court adhered to the CSG by including Bennett's unadjusted disability income in his Monthly Gross Income.
The Family Court's decision not to implement automatic annual increases in child support based on Bennett's rising disability payments is upheld, as it lacks legal backing and contradicts HRS 576D-7(d,e), which outlines the proper procedures for modifying child support obligations. Nicoleta's claim that Bennett's future disability payments should be classified as Category 5 marital assets under HRS 580-47(a) is rejected. Disability payments are deemed entitlements akin to post-employment income, not divisible property in divorce proceedings, as established in the cases of Perez v. Perez and Jones v. Jones. These payments replace income lost due to Bennett's disability and do not include any pension or retirement components, thus they are not subject to marital asset division. The court affirms the Family Court's July 5, 2011, Divorce Decree in part, vacates it in part, and remands for further proceedings consistent with this Opinion. Bennett's assertion that these disability benefits cannot be divided or considered for present value calculations is noted. Furthermore, the Family Court awarded Nicoleta one-half of the total value of marital assets, valued at $1,345,726, and she retained assets worth $750,921.
The Family Court waived Nicoleta's equalization payment of $588,677, resulting in Bennett owing her $594,805. Additionally, Bennett was ordered to pay $14,666.40 in interest on this amount, calculated at $162.96 per day for 90 days. Relevant statutes include HRS § 478-3, which allows a maximum interest rate of ten percent per annum on court judgments, and HRS § 636-16, which gives judges discretion to determine the start date for interest based on case circumstances. The Family Court's valuation of the parties' capital contributions using the Doctrine of Marital Property (DOM) remains unchallenged on appeal. HRS § 580-47(d) allows for the amendment of orders upon showing a material change in circumstances, while the 2010 Hawai'i Child Support Guidelines provide further context for support determinations. Bennett was initially ordered to pay $7,470 monthly in temporary support, consisting of $1,970 for child support and $5,500 for spousal support, but this was later reduced to $4,000 for spousal support and $2,069 for child support, totaling $6,069 monthly. As the children approach adulthood, the Family Court may reassess whether Nicoleta should remain the primary beneficiary of any necessary life insurance. HRS § 576D-10(e) allows for alternative arrangements for child support payments if good cause is shown or a written agreement is signed by both parties, and HRS § 576D-10(f) permits either parent to void such arrangements at any time.
The provision in question may apply to tax implications that arise long after the divorce and property division, potentially undermining the goal of a definitive property settlement. This could lead to future claims requiring parties to adjust their property division for taxes owed by an ex-spouse. A party awarded an asset retains control over its disposition, influencing any taxable gains or losses, which are affected by their tax situation and changes in tax laws. Nicoleta contends that any error is moot since the Family Court waived her equalization payment. On remand, interest due may be recalculated based on the Family Court's adjustments to account for both parties' checking and savings accounts.
The Family Court's findings indicate that spousal support should terminate upon the death of either party or upon Nicoleta's remarriage or cohabitation. The Family Court denied her request to eliminate cohabitation as a basis for terminating her alimony. The Divorce Decree states that alimony ends upon the death or remarriage of either party or Nicoleta’s cohabitation. According to HRS 580-51(a), alimony obligations automatically terminate after remarriage unless specified otherwise in the decree. California law provides a rebuttable presumption of decreased need for spousal support if the supported party cohabits with a nonmarital partner, contrasting with HRS 580-51(a). Other states have statutes allowing alimony termination upon cohabitation, unlike Hawaii's law.
The document references guidelines for calculating support based on income over $13,000, discussing both employed and self-employed individuals, while focusing on the former for brevity. The analysis does not preclude the application of self-employment guidelines to Bennett's income if relevant. The Family Court factored in Bennett's future disability benefits when calculating Nicoleta's permanent alimony and child support payments.
