Opinion
23460
November 7, 2001.
APPEAL FROM THE FAMILY COURT OF THE FIFTH CIRCUIT (FC-D. NO. 98-0009)
On the briefs: Kurt Bosshard for Defendant-Appellant. Ladye H. Martin for Plaintiff-Appellee.
BURNS, C.J., WATANABE AND FOLEY, JJ.
Defendant-Appellant Gerald Nakasone (Gerald or Defendant) appeals (1) the January 27, 2000 Order Denying Plaintiff's Request for Attorney's Fees and Granting Defendant's Request for Attorney's Fees in Part, (2) the January 27, 2000 Order on Plaintiff's Motion to Amend and Defendant's Motion for Reconsideration, and (3) the May 15, 2000 Order Denying Defendant's Motion for Reconsideration of the Order Denying Plaintiff's Request for Attorney's Fees and Granting Defendant's Request for Attorney's Fees in Part. We vacate all three orders entered by District Family Judge Max W. F. Graham, Jr., and remand for further proceedings consistent with this opinion.
This case involves the application of Rule 68 of the Hawai`i Family Court Rules (HFCR) (1999).
RELEVANT RULE AND STATUTE
HFCR Rule 68 (1999) states as follows:
Rule 68 of the Hawai`i Family Court Rules (HFCR) was amended effective January 1, 2000. With the additions or changes bolded and deletions bracketed, HFCR Rule 68 (2000) states as follows:
At any time more than 20 days before any contested hearing held pursuant to HRS sections 571-11 to 14 (excluding law violations and criminal matters) is scheduled to begin, any party may serve upon the adverse party an offer to allow a judgment to be entered to the effect specified in the offer. Such offer may be made as to all or some of the issues, such as custody and visitation. Such offer shall not be filed with the court, unless it is accepted. If within 10 days after service of the offer the adverse party serves written notice that the offer is accepted, any party may then file the offer and notice of acceptance together with proof of service thereof and thereupon the court shall treat [the matter as an uncontested proceeding and schedule an appropriate hearing, if necessary] those issues as uncontested. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible, except in a proceeding to determine costs and attorney's fees. If the judgment in its entirety finally obtained by the offeree is patently not more favorable than the offer, the offeree must pay the costs, including reasonable attorney's fees incurred after the making of the offer, unless the court shall specifically determine that such would be inequitable in accordance with the provisions of HRS section 580-47, [as amended. The fact that an offer is made but not accepted does not preclude a subsequent offer] or other applicable statutes, as amended.
HFCR Rule 68 (1999) permits an offer on certain issues such as custody and spousal support and, when the offer is not accepted, the question is whether the decree or order finally obtained by the offeree is patently not more favorable than the offer. In contrast, HFCR Rule 68 (2000) permits offers on the same issues but, when the offer is not accepted, the question is whether the judgment in its entirety finally obtained by the offeree is patently not more favorable than the offer. Comparing the offer on issues such as custody and spousal support with the decree or order finally obtained by the offeree on the same issues is reasonably possible. We are uncertain as to how the offer on issues such as custody and spousal support can be compared with the judgment in its entirety. We urge the amendment of HFCR Rule 68 (2000) to require a comparison of offers and judgments on the same issues.
At any time more than 20 days before any contested hearing for an order is scheduled to begin, either party may serve upon the adverse party an offer to allow a decree or order to be entered to the effect specified in the offer. Such offer shall not be filed with the court, unless it is accepted. If within 10 days after service of the offer the adverse party serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon the court shall treat the matter as an uncontested proceeding and schedule an appropriate hearing, if necessary. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible, except in a proceeding to determine costs and attorney's fees. If the decree or order finally obtained by the offeree is patently not more favorable than the offer, the offeree must pay the costs, including reasonable attorney's fees incurred after the making of the offer, unless the court shall specifically determine that such would be inequitable in accordance with the provisions of HRS section 580-47, as amended. The fact that an offer is made but not accepted does not preclude a subsequent offer.
Hawai`i Revised Statutes (HRS) § 580-47(a) (Supp. 2000) states, in relevant part, as follows:
Upon granting a divorce, . . . the court may make such further orders as shall appear just and equitable . . . (4) allocating, as between the parties, the responsibility for the payment of . . . the attorney's fees, costs, and expenses incurred by each party by reason of the divorce. In making such further orders, the court shall take into consideration: 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.
BACKGROUND
The relevant chronological history of this case is as follows:
Gerald and Plaintiff-Appellee Carmen T. Nakasone (Carmen or Plaintiff) were married on August 3, 1974. On September 21, 1984, their first daughter was born (First Daughter). Their second daughter was born on May 2, 1988 (Second Daughter).
On January 14, 1998, Carmen filed a Complaint for Divorce.
On November 24, 1998, Gerald tendered to Carmen an HFCR Rule 68 offer of settlement (Gerald's Offer).
The HFCR Rule 68 offer by Defendant-Appellant Gerald Nakasone (Gerald) stated, in relevant part, as follows:
1. [Plaintiff-Appellee Carmen T. Nakasone (Carmen)] would have sole physical custody with the parties sharing legal custody. [Gerald] would pay [Carmen] child support according to the guidelines.
2. [Condominium Property Regime (CPR)] the Olohena property into three parcels as suggested by Dennis Esaki. The parties would divide equally the CPR costs.
3. Upon completion, the CPR lots and improvements would be valued by an independent appraiser. [Carmen] would have the first option to purchase any or all of the lots at the appraised value. Any lots [Carmen] did not want to be awarded would be sold and the value divided equally after payment of the encumbrances thereon. The net value of any lots chosen by [Carmen] would have to be determined and appropriate offsets made to come to an equalization of values.
4. [Gerald] would have the first option to purchase the Crossley Road property at the Nakahara appraised value. Again, the net value would have to be determined and appropriate offsets made.
5. [Carmen] would have the first option of purchasing J C, Inc. at the hard asset/account receivable/net cash account value. [Gerald] would have the second option to purchase at the same price.
6. Should [Carmecn] wish to have the children attend Island School, the children's accounts would be used. All of the children's accounts would remain the children's with both parties['] signatures required for withdrawals. These would be considered to be educational accounts.
7. All life insurance, cash, savings, and retirement accounts would be considered marital property to be divided equally after proper adjustments for property received pursuant to paragraphs 2 through 5 above.
8. Through such time as the property division was effectuated and the property(ies) sold, the parties would use their savings to pay the mortgages, taxes and insurance on the properties.
9. [Gerald or Carmen] would purchase the other's interest in the Montana property for $2,500.00 or the property would be sold and the proceeds divided equally.
10. [Carmen] can have all of the personal property and household effects at the marital residence should she accept this proposal.
11. Each party would pay their separate debts. [Carmen] would be responsible for the Bank of Hawaii Visa. The parties would divide equally the J C debt up to $10,000.00. The remainder of the J C debt would be the responsibility of [Carmen].
12. The parties would file a joint tax return for 1998 and divide any refund or liability equally. Through such time as the property division was effectuated and the properties sold, the parties would divide equally any tax deductions arising from the property and mortgages.
On December 3, 1998, Carmen responded to Gerald's Offer (Carmen's Response). In essence, except for paragraphs 1 and 8, Carmen's Response did not disagree with Gerald's Offer. It added clarifications, issues, and conditions.
The family court, on March 2, 1999, approved Carmen's and Gerald's Stipulation as to Certain Issues which resolved some of the issues regarding the division and distribution of property and debts.
Trial was held on March 23, 1999, April 6, 1999, April 9, 1999, and May 7, 1999.
On September 9, 1999, the family court filed its Findings of Fact; Conclusions of Law; Decree Granting Divorce and Awarding Child Custody (September 9, 1999 FsOF, CsOL, and Decree).
Defendant's Motion for Award of Attorney's Fees and Costs was filed on September 17, 1999 (Motion for Award of Attorney's Fees).
Defendant's Motion for Reconsideration and/or Clarification of the Findings of Fact, Conclusions of Law, Decree Granting Divorce and Awarding Child Custody was filed on September 28, 1999 (September 28, 1999 Motion for Reconsideration).
On October 25, 1999, Carmen filed a Motion to Amend Findings of Fact; Conclusions of Law; Decree Granting Divorce and Awarding Child Custody; Exhibit "A" Filed on September 9, 1999 (Motion to Amend).
A hearing was held on November 3, 1999, on (1) the Motion for Award of Attorney's Fees, (2) the September 28, 1999 Motion for Reconsideration, and (3) the Motion to Amend.
The family court, on January 27, 2000, entered its Order Denying Plaintiff's Request for Attorney's Fees and Granting Defendant's Request for Attorney's Fees in Part in which it stated findings of fact and conclusions of law (January 27, 2000 FsOF, CsOL and Order).
On January 27, 2000, the family court entered its Order on Plaintiff's Motion to Amend and Defendant's Motion for Reconsideration.
On February 4, 2000, Gerald filed a Motion for Reconsideration of the Order Denying Plaintiff's Request for Attorney's Fees and Granting Defendant's Request for Attorney's Fees in Part (February 4, 2000 Motion for Reconsideration). The hearing on the motion was held on February 25, 2000.
The family court, on May 15, 2000, entered its Order Denying the February 4, 2000 Motion for Reconsideration.
Gerald filed a notice of appeal on May 23, 2000.
In Gerald's Offer, he stated, in relevant part, as follows:
1. [Carmen] would have sole physical custody with the parties sharing legal custody. [Gerald] would pay [Carmen] child support according to the guidelines.
. . . .
6. Should [Carmen] wish to have the children attend Island School, the children's accounts would be used. All of the children's accounts would remain the children's with both parties signatures required for withdrawals. These would be considered to be educational accounts.
In all other respects, Gerald's Offer pertained to the division and distribution of most but not all of the property and debts of the parties. Gerald's Offer was silent on the issues of education of the children post-high school, visitation of the children, spousal support, and the remainder of the property and debts.
In Carmen's Response, she responded paragraph by paragraph, in relevant part, as follows:
1. [Carmen] will have sole legal and physical custody of the parties' minor children.. . . Child support to continue until each child is 23 years old or leaves school, etc.
. . . .
6. The parties had agreed that the children attend Island School and we do not believe the children should be negatively affected due to the divorce of their parents, therefore they should continue at Island School. The parents, putting the interest of their children above all, will equally pay the cost of tuition.
We agree that the savings accounts remain in the children['s] names and both parent signature be required for withdrawal of funds. Withdrawals are to be made for the benefit of the children specifically, education and if necessary for catastrophic medical expense.
We suggest that in additional [sic] to the child support to be paid while the children are in school, the parents pay equally higher education but the children would use their savings, student loans, scholarships, grants, etc. Once those sources of funds are exhausted, if they are still short funds, [Gerald] and [Carmen] pay one-half each of additional funds needed.
The family court's September 9, 1999 FsOF, CsOL and Decree state, in relevant part, as follows:
I. FINDINGS OF FACT
. . . .
CHILDREN'S ACCOUNTS.
. . . .
31. Early in the marriage, the parties agreed that when they had children they would set money aside for the children's educational needs, including attendance at private schools from grades K through 12 and attendance at college thereafter.
32. [Carmen] started saving for the children's educational fund in 1974, and by 1979 had opened a savings account for this purpose.. . . This first account was placed in [First Daughter's] name, and a second account was later opened and placed in [Second Daughter's] name upon her birth in 1988. Both of these savings accounts were funded with marriage income, although no further deposits were made after 1994.
33. On April 15, 1994, [Carmen] transferred each of the Children's savings accounts into two custodial accounts pursuant to the Hawaii Uniform Transfer To Minor's Act ("HUTMA") as set forth in [HRS] Chapter 553A. The HUTMA accounts were set up at the Bank of Hawaii, with [Carmen] being named as the custodian of each account. Initially, each account contained $36,000.00. As of March 31, 1999, [Second Daughter's] HUTMA Account . . . had a value of $51,240.67 and [First Daughter's] HUTMA Account . . . had a value of $51,624.17.
. . . .
35. In addition to the HUTMA accounts, [Carmen] also established two separate savings accounts at the Bank of Hawaii for the Children. One account is a joint savings account in the name of [Carmen] and [Second Daughter] which had a balance as of December 31, 1998, of $37,409.00. The second is a joint savings account in the name of [Carmen] and [First Daughter] which had a balance as of December 31, 1998, of $34,178.16. Both of these joint savings accounts . . . were established with marriage funds.
. . . .
38. In 1997, [Gerald] established a joint savings account for each child at the Bank of Hawaii with marriage funds . . . . The first was a joint savings account between [Gerald] and [First Daughter] which had an initial balance of $6,000.00. The second was a joint savings account in the name of [Gerald] and [Second Daughter] which had an initial balance of $6,000.00.
. . . .
III. DECREE GRANTING DIVORCE AND AWARDING CHILD CUSTODY
. . . .
3. [Carmen] is awarded legal and physical custody of the Children subject to [Gerald's] rights of reasonable visitation.
4. [Gerald] shall pay child support to [Carmen] in the amount of $120.00 per child per month, for a total of $240.00 per month, . . . Payments shall continue for each child until said child attains the age of 18 years and so long thereafter as said child continues her high school education or post high school education on a full-time basis at an accredited college or university, or in a vocational or trade school, and is under the age of 23 years, whichever occurs first.. . .
It is obvious that the phrase "whichever occurs first" should be omitted.
5. [Gerald] shall continue to carry medical, dental and optical insurance coverage for the Children as long as it is offered to him by the County of Kauai at no cost. . . . The parties shall equally divide all costs of the medical, dental, optical, or other medical or health care expenses for each child not covered by insurance as long as there is a child support obligation for said child.
6. As a condition of child support, [Gerald] shall maintain term life insurance on his life for each child in the amount of $75,000.00 per child naming the child as beneficiary for so long as a child support obligation is owed to the particular child.
7. The Children are awarded their individual savings accounts at the Bank of Hawaii and their individual life insurance policies. The parties shall both continue to be the beneficiaries of the Children's life insurance polices.
8. The Children each are awarded their individual HUTMA accounts at the Bank of Hawaii. [Carmen] shall continue to be the custodian of these accounts. [Carmen] shall have the right, in her discretion, to use the HUTMA funds for the Children's current educational needs through high school, and thereafter for college or other higher education.
9. [Gerald] shall be required to contribute to the Children's private school expenses through high school in an amount equal to one-third of the tuition for each child. . ..
10. The Children/[Carmen] Joint Savings Account, the Children/[Gerald] Joint Savings Account and the Joint BOH Account shall be equally divided between the parties as provided herein.
(Footnote added.)
In the Motion for Award of Attorney's Fees, Gerald's counsel asserted, in relevant part, as follows:
26. [Carmen's] conduct in these proceedings has been in extreme bad faith and has caused substantial unnecessary expense.
27. The Findings of Fact; Conclusions of Law filed by the Court clearly are not more favorable as a whole to [Carmen] than as contained in [Gerald's] Rule 68 proposal of November 24, 1998. In fact, the Court's ruling is more favorable to [Gerald] than his Rule 68 proposal.
28. He believes that virtually all of [Gerald's] attorney's fees and costs [Gerald] incurred in these proceedings were needlessly incurred due to [Carmen's] conduct.
29. [Gerald] requests judgment in the total amount of [Gerald's] attorney's fees and costs over and above that which [Gerald] would have incurred for an uncontested divorce. Affiant estimates this cost at $750.00.
In an affidavit attached to the Motion for Award of Attorney's Fees, Gerald's counsel submitted a time sheet showing that, commencing on July 17, 1998, through September 13, 1999, he worked 136.30 hours at $125 per hour for a total of $17,037.50. Subtracting $750 for the "[l]egitimate cost of proceedings" and adding $1,501.11 costs, including $672.50 for photocopies, the total amount requested was $17,788.61.
The family court's January 27, 2000 FsOF, CsOL, and Order state, in relevant part, as follows:
I. FINDINGS.
. . . .
21. On September 9, 1999, the Family Court entered its Findings of Fact; Conclusions of Law; Decree Granting Divorce And Awarding Child Custody, which was modified by the Family Court's Order On Plaintiff's Motion To Amend And Defendant's Motion For Reconsideration (collectively referred to as the "Divorce Decree").
. . . .
23. [Carmen] requested that she be awarded attorney's fees in her Complaint For Divorce, but did not file a motion for an award of attorney's fees pursuant to the HFCR.
24. The issues raised in the following identified paragraphs in [Gerald's] Offer were resolved as follows:
a. Paragraph 1. As set forth in [Carmen's] Response and agreed to by the parties, the custodial issue was settled. The issue as to child support was contested only with respect to the amount of [Gerald's] Income. However, the amount of [Gerald's] Income was not specifically raised in [Gerald's] Offer.
b. Paragraph 2. In [Carmen's] Response, she conditionally agreed to the three-unit condominium of the Olohena Property, but not as suggested by [Gerald]. However, this issue was resolved in the Stipulation.
c. Paragraph 3. In [Carmen's] Response, [Carmen] accepted the issues related to the acquisition and/or sale of the condominium units, although she questioned how the offsets for value would be determined or equalized. However, all these issues were resolved by the Stipulation.
d. Paragraph 4. In [Carmen's] Response, [Carmen] agreed to the issue concerning [Gerald's] acquisition of the Crossley Road Property. This was also resolved in the Stipulation.
e. Paragraph 5. In [Carmen's] Response, [Carmen] did not accept the offer to purchase JC, Inc. as set forth in [Gerald's] Offer. However, this issue was resolved by the Stipulation.
f. Paragraph 6. [Gerald] offered to allow the Children's HUTMA Accounts (as defined in the Divorce Decree) and the Children/[Carmen] Joint Savings Accounts and Children/[Gerald] Joint Savings Accounts (as defined in the Divorce Decree, both of which will be collectively referred to as the "Children's Savings Accounts") to be kept intact and used for the Children's education. [Carmen], in [Carmen's Response], rejected this proposal and instead wanted the parties to be equally responsible for elementary and high school costs, as well as college costs not covered by the HUTMA Accounts and Children's Savings Accounts. At trial, the Family Court determined: that the HUTMA Accounts were the Children's property; that the Children's Savings Accounts funds were marital property to be distributed between the parties; that [Gerald] was to pay 1/3 of the educational costs for the Children through high school; and that [Carmen] had the right to use the HUTMA funds for the Children's educational needs through high school and thereafter for college and other higher education.
g. Paragraph 7. In [Carmen's] Response, [Carmen] agreed to equally divide all life insurance, cash, savings and retirement accounts as marital property, but rejected the proposal as to [Gerald's] life insurance policy. [Carmen] insisted that [Gerald] maintain a life insurance of [sic] coverage of $250,000.00 as long as he had a child support obligation to the Children. In the Divorce Decree, the property was divided as set forth in [Gerald's] Offer, except that [Gerald] was required to maintain life insurance in the amount of $75,000.00 per child for as long as he had a child support obligation.
h. Paragraph 8. In [Carmen's] Response, [Carmen] rejected the proposal that the parties use their savings to pay the mortgages and expenses on the properties. This matter was eventually settled in the Stipulation.
i. Paragraph 9. In [Carmen's] Response, [Carmen] agreed that [Gerald] could purchase the Montana Property for $2,500.00. This matter was also addressed in the Stipulation.
j. Paragraph 10. Both parties seemingly agreed that they would retain their household effects and personal property at their individual residences. The Divorce Decree eventually awarded certain other personal property which was not itemized in either [Gerald's] Offer or [Carmen's] Response to the parties.
k. Paragraph 11. In [Carmen's] Response, [Carmen] agreed to the division of debts as offered. These matters were resolved by the Stipulation.
l. Paragraph 12. In [Carmen's] Response, [Carmen] only conditionally agreed to file joint tax returns for 1998. However, these matters were resolved in the Stipulation.
. . . .
II. CONCLUSIONS OF LAW.
. . . .
2. If the requirements under HFCR Rule 68 are met, then the Court shall make an award of reasonable attorney's fees and costs unless the Court specifically determines that such an award would be inequitable considering the provisions of Hawaii Revised Statutes ("HRS") Section 580-47.
. . . .
5. In determining whether it would be inequitable to award attorney's fees and costs pursuant to HFCR Rule 68, the Court must consider the standards of HRS Section 580-47(f) and consider "the respective merits of the parties; the relative abilities of the parties; the economic conditions of each party at the time of the hearing; the burdens imposed upon either party for the benefit of the Children of the parties; and all other circumstances of the case".
6. The reference in HFCR Rule 68 to the equitability [sic] provisions in HRS Section 580-47 gives the Family Court the discretion, in the light of the consideration stated in HRS Section 580-47, to award such attorney's fees and costs as shall appear just and equitable.
7. The Court concludes that where one party makes a HFCR Rule 68 offer which is rejected by the other party, but where they subsequently enter into a settlement agreement resolving some of the issues contained in the Rule 68 offer, and where no provision is made in the settlement agreement for an award of attorney's fees, then those Rule 68 issues which are resolved shall not be subject to a further award of attorney's fees under HFCR Rule 68.
8. As a result, the Court concludes that the matters raised in [Gerald's] Offer which were rejected by [Carmen] in [Carmen's] Response, but were later settled pursuant to the Stipulation, are not subject to a further award of attorney's fees or costs.
. . . .
10. Paragraph 6 of [Gerald's] Offer would have resolved the contested issue concerning the characterization . . . and the use of the Children's Savings Accounts and HUTMA Accounts and the payment of educational expenses. In [Carmen's] Response, [Carmen] rejected this element of [Gerald's] Offer. The Court concludes that the Divorce Decree was favorable to [Gerald] on these issues and thus the Divorce Decree was not more favorable to [Carmen] than the Offer.
11. The Court concludes that as set forth in the Divorce Decree, the parties after the divorce will be left with equal abilities to work and support themselves, that they will both be placed on an equal footing economically after the distribution of the marital property, and that the burden placed on [Carmen] as the custodial parent has been offset by the provisions of the Divorce Decree, including [Gerald's] duty of child support.
12. On the basis of HFCR Rule 68, and taking into consideration the factors set forth in HRS Section 580-47, and giving consideration to all of the circumstances of this case, the Court concludes that it would be just and equitable to order [Carmen] to pay a portion of [Gerald's] costs and attorney's fees in the amount of FIVE THOUSAND AND NO/100 DOLLARS ($5,000.00).
. . . .
III. ORDER.
On the basis of the Court's findings of fact and conclusions of law, the arguments of counsel, and the memoranda and affidavits presented, the records and files herein, and good cause appearing,
IT IS HEREBY ORDERED, ADJUDGED AND DECREED AS FOLLOWS:
1. [Carmen's] request for attorney's fees and costs is denied.
2. [Gerald's] request for attorney's fees and costs is granted in part and [Carmen] is ordered to pay for a portion of [Gerald's] attorney's fees the sum of FIVE THOUSAND AND NO/100 DOLLARS ($5,000.00).
3. [Carmen] shall pay [Gerald's] attorney's fees and costs as set forth herein within 20 days of the filing of this Order.
In an affidavit attached to the February 4, 2000 Motion for Reconsideration, Gerald's counsel states that, from July 17, 1998, through January 31, 2000, he worked 154.40 hours at $125 per hour for a total of $19,300. Subtracting $750 for the "[l]egitimate cost of proceedings" and adding $1,889.36 costs, including $947 for photocopies, the total amount requested was $20,439.35.
DISCUSSION
In this appeal, Gerald challenges only the January 27, 2000 CsOL nos. 6, 7, 8, and 12. Gerald contends that, in light of the January 27, 2000 FOF no. 25 and CsOL nos. 9, 10, and 11, the family court was required to award Gerald all of the $19,488.36 attorney fees and costs he reasonably incurred for the period following Gerald's Offer on November 24, 1998, not merely $5,000. In Gerald's view,
[s]hould this Court allow the Family Court's interpretation of Rule 68 to stand, then Rule 68 stands for nothing more than the proposition that the Family Court can award attorney's fees and costs when it "shall appear just and equitable". As HRS Section 580-47(f) already authorizes the Family Court to award such attorney's fees and costs "as shall appear just and equitable" should the Family Court's ruling be upheld, Rule 68 shall be made redundant and irrelevant. In fact, the existence of Rule 68 could do more harm than good to a prevailing party where, as here, added expense is incurred in litigating the significance of a successful Rule 68 offer in relation to the HRS Section 580-47(a) factors.
Gerald also contends that the January 27, 2000 CsOL nos. 7 and 8 are wrong. We note, however, that the January 27, 2000 FsOF and CsOL are not clear as to what influence, if any, either or both had on the January 27, 2000 COL no. 12 and the family court's decision to award only $5,000 costs and attorney fees.
Although she did not cross-appeal and, therefore, is not authorized to assert such challenges, Carmen challenges the January 27, 2000 FsOF nos. 24 f, h, and k, and CsOL nos. 7, 10, and 12. Carmen contends that (1) Gerald's Offer did not define the separate children's accounts as stated in the family court's findings, (2) Gerald's Offer placed the children's continuing private high school education at issue, (3) Gerald's Offer was a sly attempt to avoid his legal responsibility to pay a portion of the private high school tuition costs, (4) the January 27, 2000 FOF no. 24f states that Carmen's Response rejected Gerald's Offer whereas it should have stated that Carmen's Response agreed with Gerald's Offer, and (5) contrary to Gerald's Offer and Carmen's Response, the family court decided in the January 27, 2000 FOF no. 24f "that the Children's Savings Accounts funds were marital property to be distributed between the parties[.]"
A.
Hawaii divorce cases involve a maximum of four discrete parts: (1) dissolution of marriage; (2) child custody, visitation, and support; (3) spousal support; and (4) division and distribution of property and debts. Eaton v. Eaton, 7 Haw. App. 111, 748 P.2d 801 (1987). Carmen notes that Gerald's Offer pertained to parts (2) and (4) but involved less than all of the visitation and support issues and less than all of the property and debts of the parties and, therefore, did not satisfy the requirements of HFCR Rule 68. With respect to part (4), she states that
[t]he real issue before the Court is whether or not HFCR Rule 68 contemplated an award of attorney fees regarding an offer with respect to property and debt division when said offer is for the division and distribution of less than all property and debts and when the offer was not sufficiently specific to allow judgment to be entered. The HFCR Rule 68 in effect at the time of this action did not contemplate and provide for an offer of settlement with respect to an award of less than all the property and debts.
As noted above, HFCR Rule 68 (1999) states, in relevant part, as follows:
At any time more than 20 days before a contested matrimonial trial or a contested hearing for an order is scheduled to begin, either party may serve upon the adverse party an offer to allow a decree or order to be entered to the effect specified in the offer. . . . An offer not accepted shall be deemed withdrawn . . . . If the decree or order finally obtained by the offeree is patently not more favorable as a whole than the offer, the offeree must pay the costs, including reasonable attorney's fees incurred after the making of the offer, unless the court shall specifically determine that such would be inequitable in accordance with the provisions of HRS section 580-47, as amended.
In Criss v. Kunisada, 89 Haw. 17, 968 P.2d 184 (App. 1998), this court permitted an HFCR Rule 68 offer pertaining to child custody. In disagreeing with the family court's conclusion that HFCR Rule 68 may not pertain to less than all the issues in the case, the opinion stated, in relevant part, that
HFCR Rule 68 is not so limiting. Under its express terms an offer may be made concerning an item as to which "a decree or order" may "be entered." Plainly, a decree or order may be entered as to custody. Therefore, we conclude that any party may properly serve upon the adverse party a HFCR Rule 68 offer with regard solely to custody.
Id. at 25, 968 P.2d at 192 (footnote omitted). Footnote 12 of the opinion instructed that "[t]o avoid any confusion as to the nature of the offer, the offeror should make clear whether the offer relates only to custody."
In other words, HFCR Rule 68 does not require a decree or order that is or may become final and/or appealable. The HFCR Rule 68 offer may pertain to one or more relevant, material and separable issues in the case. The HFCR Rule 68 offer may pertain to any one or more of the following issues: legal custody of one or more children; physical custody of one or more children; child support, maintenance and education through high school of one or more children; child support, maintenance and education post-high school of one or more children; visitation of one or more children by the spouse who does not have physical custody; spousal support; and the division and distribution of all of the property and debts.
We urge the amendment of HFCR Rule 68 to exclude from its scope the issues of the legal and physical custody and visitation of one or more children. The purpose of HFCR Rule 68 is to encourage early settlements of litigation and to protect the party who is willing to settle from the burden of costs that subsequently accrue. Staffend v. Lake Central Airlines, Inc., 47 F.R.D. 218, 219 (D.C. Ohio, 1969). In other words, the possible impact on a party's pocketbook is used to motivate that party to settle. In contrast, HRS § 571-46(1) (2000) specifies that "[c]ustody should be awarded to either parent or to both parents according to the best interests of the child." In other words, the possible impact on a party's pocketbook should have no influence on the child custody issue. In our view, the possibility that a party is contesting the award of child custody and/or visitation for reasons other than the best interests of the child is insufficient to justify imposition of an HFCR Rule 68 type bright line rule that would deter a party whose genuine concern for the best interests of the child is motivating him or her to contest the award of child custody and/or visitation from continuing to contest the award of child custody and/or visitation. The family court's general discretion, pursuant to HRS § 580-47 (2000), to order the payment of attorney fees and costs is adequate and more equitable.
When an HFCR Rule 68 offer pertains to spousal support and not to the division and distribution of all of the property and debts, the court must consider the ramifications of HFCR Rule 68 if and when it decides to award an additional property net market value in lieu of spousal support.
On the other hand, the HFCR Rule 68 offer may not pertain to only a part of the issue and must completely resolve the issue. For example, the HFCR Rule 68 offer may not pertain to the division and distribution of less than all of the property and debts. If such was permitted, it would be difficult if not impossible to answer the question whether "the decree or order finally obtained by the offeree is patently not more favorable as a whole than the offer[.]" This is especially true because this question is reviewed from an objective and/or quantitative point of view rather than a subjective and/or qualitative point of view.
For example, suppose the HFCR Rule 68 offer specified that a joint marital debt should be paid by the offeree and the decree ordered the debt to be paid by the offeree but, in consideration thereof, also awarded the offeree joint marital property valued at an amount equal to or greater than the debt. In such case, the offeree lost regarding the debt itself but won regarding the net values distributed. In other words, the offeree lost the battle but won the war.
For example, suppose the HFCR Rule 68 offer specified that the offeror shall be awarded the jointly owned marital residence and the decree granted the request but in consideration thereof awarded the offeree other jointly owned marital property valued at an amount equal to or greater than the net market value of the residence. The offeror's subjective valuation of the marital residence is not considered when comparing the offer and the decree or order.
Gerald's Offer made offers regarding the issues of legal and physical custody of the children, child support, maintenance and education (including private school expenses) through high school, and the division and distribution of some but not all of the real and personal property and the liability for some but not all of the joint and separate debts. We conclude that Gerald's Offer contained valid offers with respect to each mentioned issue except the issue of the division and distribution of property and debts.
B.
As noted above, in its January 27, 2000 CsOL nos. 7 and 8, the family court decided as follows:
7. The Court concludes that where one party makes a HFCR Rule 68 offer which is rejected by the other party, but where they subsequently enter into a settlement agreement resolving some of the issues contained in the Rule 68 offer, and where no provision is made in the settlement agreement for an award of attorney's fees, then those Rule 68 issues which are resolved shall not be subject to a further award of attorney's fees under HFCR Rule 68.
8. As a result, the Court concludes that the matters raised in [Gerald's] Offer which were rejected by [Carmen] in [Carmen's] Response, but were later settled pursuant to the Stipulation, are not subject to a further award of attorney's fees or costs.
We disagree with the January 27, 2000 CsOL nos. 7 and 8. The family court erroneously imposes the burden of settling the question of attorney fees and costs on the settling offeror whereas that burden should be imposed on the settling offeree who rejected the offer. With respect to HFCR Rule 68, the fact that the decree or order resulted from a post-offer stipulation rather than a contested trial is irrelevant. The question is whether, solely with respect to the valid offer or offers contained in Gerald's Offer, "the decree or order finally obtained by [Carmen] is patently not more favorable as a whole than the offer[.]" The family court did not decide this question or questions. On remand, it must do so.
Under HFCR Rule 68 (1999), the comparison pertains to the issue(s) involved in the offer and compares (a) the decree or order finally obtained by the offeree as against (b) the offer. Under HFCR Rule 68 (2000), the comparison pertains to the issue(s) involved in the offer and compares (a) "the judgment in its entirety" as against (b) the offer. Query, pertaining to the issue(s) involved in the offer, how does one compare "the judgment in its entirety" against the offer?
For example, Gerald's Offer sought joint legal custody of the children. The divorce decree awarded Carmen sole legal custody of the children.
C.
HFCR Rule 68 was drafted so as not to contradict the relevant provisions of HRS § 580-47(a). Assuming the family court's decree was patently not more favorable than the valid parts of Gerald's Offer, Carmen "must pay the costs, including reasonable attorney's fees incurred after the making of the offer, unless the court shall specifically determine that such would be inequitable in accordance with the provisions of HRS section 580-47 or other applicable statutes, as amended." The language of the rule is clear. The relevant costs and attorney fees are solely those pertaining to the issue(s) involved in the valid offer or offers. After the family court validly decides that the movant's request qualifies for an award, the family court then must decide whether an award of all or part of the relevant costs and attorney fees would be inequitable pursuant to HRS § 580-47 or other applicable statutes.
The family court decided in COL No. 12 that "it would be just and equitable to order [Carmen] to pay a portion of [Gerald's] costs and attorney's fees in the amount of FIVE THOUSAND AND NO/100 DOLLARS ($5,000.00)." In other words, the family court only implicitly decided that it would be unjust and inequitable to order Carmen to pay an additional $14,488.36 attorney fees and costs. This implicit decision is insufficient. HFCR Rule 68 expressly requires that the court shall order the party who did not accept the offer to "pay the costs, including reasonable attorney's fees incurred after the making of the offer, unless the court shall specifically determine that such would be inequitable in accordance with the provisions of HRS section 580-47 or other applicable statutes, as amended." A decision that it is just and equitable to order the party to pay $5,000 is not a specific determination that it would be inequitable in accordance with the provisions of HRS § 580-47 to order the party to pay more than $5,000. Moreover, when the family court, pursuant to HFCR Rule 68, specifically determines that it would be inequitable in accordance with the provisions of HRS § 580-47 to order a party to pay an amount of attorney fees and costs, the family court must state its reason(s) for its decision.
CONCLUSION
Accordingly, we vacate (1) the January 27, 2000 Order Denying Plaintiff's Request for Attorney's Fees and Granting Defendant's Request for Attorney's Fees in Part, (2) the January 27, 2000 Order on Plaintiff's Motion to Amend and Defendant's Motion for Reconsideration, and (3) the May 15, 2000 Order Denying Defendant's Motion for Reconsideration of the Order Denying Plaintiff's Request for Attorney's Fees and Granting Defendant's Request for Attorney's Fees in Part and remand for further proceedings consistent with this opinion.