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Gordon v. Gordon

Supreme Court of Hawai'i

June 4, 2015

SUSAN P. GORDON, Respondent/Plaintiff-Appellee,
IRA GORDON, Petitioner/Defendant-Appellant

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Peter Van Name Esser and Huilin Dong for petitioner.

Samuel P. King, Jr. for respondent.



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[135 Hawai'i 344] POLLACK, J.

Hawai'i law follows a framework based on partnership principles for the division of marital partnership property during divorce proceedings. This opinion addresses the application of partnership principles and a family court's discretion to deviate from an equal division of property when there are equitable considerations justifying such deviation. Of central importance in this case is the family court's duty to provide sufficient documentation of its findings for its division of marital partnership properties so that the parties and reviewing court may ensure the division is equitable and free from miscalculations or other errors.


This case arises out of the Family Court of the First Circuit's[1](family court) August 22, 2012 divorce decree dissolving the marriage between Ira Gordon (Ira) and Susan Gordon (Susan).[2]

A. Factual Background

1. Relationship Prior to Marriage

Susan and Ira, who married in December of 1997, first met in Las Vegas in the summer of 1992. At the time they met, Ira was living in Hawai'i and was married but separated. Between 1992 and 1993, Ira made several trips to Las Vegas to work and to spend time with Susan, who lived and worked in Las Vegas. Susan also made several trips to Hawai'i to visit Ira, and she would typically stay with Ira at his residence during her visits.

In 1993, Susan moved to Hawai'i to live with Ira at his residence. On January 12, 1995, Susan purchased a residence, which the parties moved into a few months later. By the time Ira's divorce was finalized on March 14, 1996, Ira and Susan had been living together at the residence purchased by Susan for one year. Susan paid the mortgage on the residence without contribution from Ira during this time.

2. Marriage and Tax Liability

Ira and Susan were married on December 16, 1997, and they subsequently filed their joint tax return for 1997. Ira was responsible for filing and paying the taxes. The parties received a home interest tax deduction in the amount of $40,605 for the residence initially purchased by Susan. The 1997 joint tax return, which was considered by the family court to be the best evidence of the parties' pre-marital property, listed thirteen rental properties and three businesses. The return included reference to three Texas properties owned by Susan, and several properties that were distributed to Ira in the divorce decree relating to his prior marriage.

The parties continued to live in the residence initially purchased by Susan until July 2010. During that time, the parties twice obtained equity lines of credit against the residence. The first line of credit was $150,000, and it was used primarily for the down payment on two investment properties, with the remaining $58,119.67 balance being deposited into a bank account held by Susan.

The second line of credit in the amount of $450,000 was obtained in March 2010, and the family court found that the parties obtained it, in part to satisfy the couple's outstanding tax liability. On March 12, 2010, Ira deposited $280,000 from the second equity line into his personal bank account, and he withdrew $103,000 from that account in the form of a cashier's check payable to the Internal Revenue Service (IRS), with the memo line stating " various tax returns." However, this payment did not satisfy the couple's entire debt owed to the IRS, and by the time of trial, the couple still owed approximately $140,000 to the IRS originating from past tax liability for the principal amount of $116,000, plus penalties and accruals. Susan testified that she believed the $280,000 had been used to pay off the parties' entire tax debt.

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[135 Hawai'i 345] 3. Ira's Girlfriend

At some point as early as the beginning of 2009, Ira began dating a woman, whom he eventually lived with at one of Susan and Ira's properties.[3] On May 20, 2009, Ira opened a massage parlor for his girlfriend, which was listed on Ira and Susan's 2009 joint income tax return. In 2010, the massage parlor was raided by Honolulu police, resulting in the arrest of Ira's girlfriend for prostitution, and Ira paid at least $10,000 out of the business's account for her criminal defense.

As mentioned earlier, Ira deposited $280,000 from the second equity line into his personal account, which Susan believed would be used to satisfy their tax liability. Following his deposit of the money, Ira made purchases of jewelry for his girlfriend on March 13, 2010, and April 9, 2010, totaling over $30,000. He also traveled with his girlfriend and her daughter to the Big Island and Las Vegas, and he remodeled the unit they all lived in together.

4. Separation and Divorce

On July 24, 2010, Ira and Susan argued at their residence regarding Ira's infidelity and his desire to end the marriage.[4] That month, Ira permanently left the residence he shared with Susan, and Susan filed for divorce on July 28, 2010. The family court found that the exact date at which Ira " moved out" of the marital residence was " unclear," but the family court's findings repeatedly referred to the " July 2010" date as the time at which the parties separated.

In August 2010, without Ira's knowledge and consent, Susan changed the beneficiary designation on Ira's existing life insurance policy; obtained another life insurance policy, naming herself as the beneficiary and authorizing the premium to be paid out of Ira's checking account; and terminated their home equity line, removing around $7,000.

Susan first learned of her and Ira's outstanding tax liability when she received a letter from the IRS notifying her that her monthly social security check of $484 would be garnished in the amount of $72.60 for nonpayment of taxes. Susan filed for innocent spouse relief, but her application and subsequent appeal were both denied by the IRS.

Susan remained at the couple's marital residence until it was sold on May 24, 2011, in conjunction with the divorce proceedings. The family court found that Susan's only regular sources of income were her monthly social security check, money given to her by her sister, and the periodic disbursements made from the marital funds that were held in escrow at the time. However, statements from Susan's personal bank account indicate that from December 2009 to April 2012, approximately $390,000 was deposited into her account.[5] In her Income and Expense Statement filed November 7, 2011, eight months before trial, Susan stated that her monthly personal expenses amounted to $1,390.

At the time of trial, Susan was living in a rented room in Waikiki and was renting a vehicle because the one left in her possession was broken-down. Ira was living at the property he moved into with his girlfriend and was receiving regular income from three businesses, including the massage parlor.

B. Court Proceedings

On July 28, 2010, Susan filed a Complaint for Divorce against Ira in the family court.

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[135 Hawai'i 346] A two-day divorce trial took place in June of 2012.

On July 17, 2012, Ira filed a closing argument, proposed findings of fact and conclusions of law, and a property division chart identifying and valuing the assets at the date of marriage and date of the trial's conclusion. On July 18, 2012, Susan filed a closing argument and proposed findings of fact and conclusions of law, and, on August 22, 2012, she filed a proposed divorce decree.

1. Family Court Minute Order and Ira's Motion for Reconsideration

On July 24, 2012, the family court, by minute order, adopted Susan's recommended findings of fact and conclusions of law with modifications. On August 3, 2012, Ira filed a motion for reconsideration of the family court's minute order decision and the amended minute order. Ira contended that the family court made a multitude of errors in its property division. Ira pointed out that the family court made the " colossal mistake of $538,200" by awarding real property to Ira that was no longer in the parties' possession as it was sold prior to 2005.

2. Divorce Decree

On August 22, 2012, the family court filed its Findings of Fact and Conclusions of Law, Decree Granting Absolute Divorce (Decree), and Order Denying Defendant's Motion for Reconsideration, Filed August 3, 2012.

In its Decree, the family court found that the equities in this case were skewed in favor of Susan, and the court concluded that the record fully supported deviation from equal distribution of the marital estate to a 75%/25% distribution in favor of Susan. The court found that Ira's " actions throughout the relationship, including the pre8 partnership phase through and including the post-filing phase, time and again placed [Susan] in worsening financial circumstances." In its Findings of Facts and Conclusions of Law, the family court noted that there were valid and relevant considerations authorizing a deviation from the partnership model. The family court stated that it would use the outstanding federal tax liability as a factor to deviate from a strict 50/50 division although the court noted that it had a " sufficient basis" to allocate the entirety of the debt to Ira. The court also found the liquidation of Susan's three Texas properties and a bond she held prior to the marriage to be valid and relevant considerations in deviating from the marital partnership model.

The family court found that Susan purchased the couple's marital residence for $685,000 on January 12, 1995, and the court noted that Susan paid for the property as follows: (1) $21,674.13 in deposit/earnest money; (2) $486,500.00 in the form of a mortgage; and (3) $200,000 as an option payment. The court concluded that " these funds" constituted a pre-marital capital contribution to the partnership.

With respect to one of the Texas properties, the family court found that the property was not encumbered by a mortgage, was sold in February or March 1999, and generated proceeds in the amount of $29,270.40, which also constituted a pre-marital capital contribution to the partnership. In regard to the other two Texas properties, the family court found that the properties were encumbered by a mortgage and were sold at some point during the marriage. The court additionally found that Susan was entitled to a pre-marital credit for the value of the bond Susan liquidated in support of the marital partnership.

As for Ira's pre-marital capital contributions, the court found that Ira " brought numerous real properties into the economic partnership and marriage" with Susan and that the best evidence reflecting this was Ira's first divorce decree and separation agreement. The family court also found that these properties " were not unencumbered by debt." However, the family court did not make any findings as to the value of Ira's premarital contribution but instead found " that the appraised values of the properties are irrelevant to [Ira's] equity interest in the properties."

In its Decree, the family court divided the parties' real properties into three groups: (1) properties awarded to Susan; (2) properties awarded to Ira; and (3) properties to ...

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