Crofford v. Adachi

150 Hawai‘i 518

506 P.3d 182

Joe CROFFORD, Petitioner/Plaintiff-Appellee,

v.Kristi ADACHI, Respondent/Defendant-Appellant.

SCWC-16-0000365

Supreme Court of Hawai‘i.

FEBRUARY 28, 2022

Michael A. Glenn for petitioner

RECKTENWALD, C.J., NAKAYAMA, McKENNA, WILSON, and EDDINS, JJ.

OPINION OF THE COURT BY RECKTENWALD, C.J.

I. INTRODUCTION

At issue is whether marital agreements that consider fault or misconduct when dividing the marital property are enforceable. The parties entered into a post-marital agreement expressing, among other things, that if Joe Crofford (Husband) engaged in extramarital affairs or physically harmed his wife Kristi Adachi (Wife), Wife would receive most of the parties’ joint assets. Husband contends on certiorari that the agreement is void because it violates Hawai‘i's public policy favoring no-fault divorce and equitable distribution of marital property.

We have not previously considered whether marital agreements that account for misconduct or fault when dividing the marital property are enforceable. Upon review, we conclude these agreements are not enforceable.

II. BACKGROUND

The parties were married in 1999.¹ At the time of their marriage, Wife owned significant assets, including two homes in Kailua, Hawai‘i and a medical practice, Hawaiian Island ENT Specialists, Inc. Husband did not have significant marital assets and owed more than $200,000.00 in past child support for two children from prior marriages. Together, the parties have one child, who was twelve years old when they separated.

Over the course of their marriage, Husband engaged in several extramarital affairs. In March 2013, after Wife found Husband in bed on their yacht with another woman, Wife wanted to file for divorce. Husband pleaded with Wife not to leave the marriage and proposed that the parties sign a postnuptial agreement, which Wife agreed to.

In or around May 2013, Wife presented Husband with the first draft of the Marital Agreement, which provided that Husband would receive $200,000 in the event the parties divorced.² Husband rejected the first draft and refused to make any edits to it. About two months later, Wife sent Husband a second draft of the Marital Agreement. Husband made handwritten edits to the second draft, but neither party executed the agreement. Instead, the parties drafted a Marital Agreement Addendum (Addendum) to address the issues that Husband lined or struck out in the second draft. The Addendum, which was primarily drafted by Husband, provided as follows:

I, [Husband] on this date of June 24, 2013 propose this post-nuptial agreement.

I have been married to [Wife] since July 24, 1999. She was the love of my life until I did not feel important to her due to her career. Instead of being the leader of the family in the godly way that I should have been, I acted out because of my sinful nature. I have been unfaithful to my wife on numerous occasions. ... I desire to break away from my destructive behaviors and truly become the man that our Lord Jesus Christ would want me to be.

....

I ask my wife for forgiveness for all my sins and will uphold my verbal, and now written promise to her regarding agreeing to leave this marriage with honor and dignity without monetary compensation if I a[m] unable [to] change my sinful ways. Specifically, have another affair[,] either emotional or consummated, or physically harm [Wife].

In return, I ask of my wife to give me the [l]ove and [r]espect I so long for and to truly forgive my sins ... I [also] ask her to spend more time with me[.]

(Emphasis added.)

Additionally, the Addendum addressed the allocation of certain property. It explained:

The Sunreef 62 foot Catamaran Yacht ... will remain the property [of Husband] and will be put in [Husband's] trust with [Wife] named as the beneficiary in the event of [Husband's] [d]eath and will remain the property of the trust in the event of a divorce with exception in the case of infidelity and physical harm by [Husband]. At which time the [o]wnership of the Yacht Spartan Queen will be transferred to [Wife].

The Penthouse 4501 located at One Waterfront Towers 415 South St. will remain in [Wife's] [t]rust with [Husband] named as the [b]eneficiary.

In the event of divorce with the exception of infidelity or physical harm by [Husband], [Husband] will maintain ownership of the [yacht], which has been effectively paid in full by [Wife]. All monies invested in the yacht up until November 2012 were contributions directly from money earned through [Wife's] business ... and will be considered monetary compensation for the years invested in this [m]arriage. [Husband] will waive any separation of property rights; except as described below and alimony.

....

We will also both have to agree on all future financial decisions to secure our financial future together. I accept her proposal to place the proceeds from the sale of apartment 425 South Street in a [t]rust under both of our names. ... In the event of a divorce, any monies gained or properties invested in will be split equally between the two of us; with the exception of infidelity and physical harm.

(Emphases added.)

Wife executed the Addendum in the presence of a notary public on June 24, 2013 and Husband executed the Addendum in the presence of a notary public the following day. Although Husband contested whether the Marital Agreement itself was properly executed, he acknowledged signing the Addendum.³

The parties separated in September 2013 after Husband exhibited aggressive behavior towards Wife. Husband filed his Complaint for divorce on October 7, 2013 and Wife filed her Answer to Complaint for Divorce on November 18, 2013.

A. Family Court Proceedings

Following a bench trial, the Family Court of the First Circuit⁴ entered its findings of fact and conclusions of law and decree granting absolute divorce and awarding child custody. First, the family court determined that Wife "never coerced or unduly influenced Husband to sign the Addendum." The family court also concluded that the parties entered into the Marital Agreement and Addendum voluntarily, and that Husband violated the infidelity conditions in the Addendum. However, the family court held that the Marital Agreement and Addendum were unenforceable because "the essence of the Marital Agreement [and Addendum] violates the statutory policy and principles of no fault divorce and equitable distribution." The family court divided the marital property based on what it determined would be just and equitable, rather than as set forth in the parties’ marital agreements.⁵ The family court relied upon a 2015 tax assessment valuation of the parties’ penthouse apartment submitted by Wife, which at $2,454,500, was almost $600,000 less than the value reached by a private appraiser that Husband and Wife jointly hired.

B. Proceedings on Appeal

The parties cross-appealed to the ICA. On appeal, Wife argued that the family court erred in rejecting the Marital Agreement and Addendum. Wife argued that "no Hawaii appellate court has ever held ... that a marital agreement attaching contingencies of fault" renders the agreement unenforceable. Wife explained that

both the Hawaii appellate courts and courts in other jurisdictions have held that marital agreements in which the parties agree to a certain manner in which to divide and distribute marital property, effective upon one of the parties being unfaithful, are valid and enforceable even if the division of property is not otherwise "equitable," and even in light of public policy favoring no-fault divorces.

(Citing Balogh v. Balogh, 134 Hawai‘i 29, 43-45, 332 P.3d 631, 645-47 (2014) ; In re Marriage of Tabassum & Younis, 377 Ill.App.3d 761, 317 Ill.Dec. 228, 881 N.E.2d 396, 413 (2007) ; Gilley v. Gilley, 778 S.W.2d 862, 864 (Tenn. Ct. App. 1989) ).

Husband contended that Hawai‘i's "no-fault divorce standards preclude enforcement of the [Addendum]," and allowing Wife "to ‘revive’ the long deceased, fault-based divorce by contract would frustrate the legislatively-expressed policy that the [f]amily [c]ourt should not waste its limited time and resources attempting to resolve competing claims of marital misconduct." Husband also argued that he signed the agreement involuntarily and that the agreement was unconscionable. Finally, Husband argued that the family court abused its discretion in valuing the parties’ penthouse apartment at $2,454,500, based on the property's 2015 tax assessment value, instead of $3,000,000, the value reached by a private appraiser that Husband and Wife agreed to hire.

In a memorandum opinion, the ICA agreed with Wife, and concluded that the family court erred with regard to the Marital Agreement and Addendum's enforceability. The ICA explained that "[a]lthough Hawai‘i has implemented a no-fault divorce scheme, there is no law that invalidates a marital agreement because it provides for distribution of marital property based on the conduct of the parties." Crofford v. Adachi, 148 Hawai‘i 535, 479 P.3d 153, 2020 WL 7775540 at *5 (App. Dec. 30, 2020) (mem. op.) After noting the family court's finding that both Husband and Wife signed the Addendum and entered into the Marital Agreement by referencing it in the signed Addendum, the ICA concluded that the Marital Agreement and Addendum were valid and enforceable.

Additionally, the ICA disagreed with Husband that the Marital Agreement and Addendum were unconscionable because it awarded almost all joint assets to Wife. Noting that "the [Addendum] only contemplated an inequitable division of property if [Husband] had another affair or physically harmed [Wife]," the ICA found it "unlikely that the Marital Agreement and Addendum would have been construed by the parties as demonstrative of Husband's commitment to the marriage if it had not contained the contingencies of fault and the resulting inequitable distribution of property." Id. at *8 (citing Balogh, 134 Hawai‘i at 43, 332 P.3d at 645 ). The ICA concluded:

Given [Wife's] contributions to the marriage,

...