Court Opinion

ID: 9558416
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:09:09.791431+00
Date Added: 2024-06-11T09:09:12.994836
License: Public Domain

Dissenting Opinion of
ACOBA, J.
I respectfully dissent. Although I rely on grounds different from those relied on by the first circuit court (the circuit court), I believe the circuit court properly ruled that payments by Third-Party Defendant Choong Gill Lee (Choong) must be applied to the 1992 child support arrearages owed Plaintiff-Appellant Lorrin D. Lee (Lorrin). This court may affirm summary judgment based on grounds different from the circuit court. GGS Co., Ltd. v. Masuda, 82 Hawai'i 96, 101, 919 P.2d 1008, 1013 (App.1996) (holding that “this court may affirm a grant of summary judgment on any ground appearing in the record, regardless of whether the circuit court relied on it”).
I.
First, I favor the application of Restatement (Second) of Contracts § 259(1) (1981) [hereinafter Restatement (2nd)]. Sections 259 and 260 are part of chapter 10 of Restatement (2nd), and the rules therein “are based on fundamental principles of fairness and justice.” Id. at 193. In pursuance of such principles, the Restatement notes that parties “should be encouraged to communicate with each other and seek to resolve [problems] without outside intervention.” Id. Thus, Restatement (2nd) § 259(1) states that in the absence of a direction by the debtor, a creditor may direct application of a debtor’s payments but such application is not effective unless, within a reasonable time, the creditor notifies the debtor or otherwise makes the application known to the debtor. Under the Colorado Supreme Court approach favored by the majority, the creditor may apply the payments in any way the creditor desires.1 I do not believe the Colorado rule is consistent with fundamental principles of fairness and justice as such principles have evolved, and that such an approach only engenders the type of controversy which presents itself in this case. Cf. Bank of Hawaii v. Kunimoto, 91 Hawai'i 427, 436, 984 P.2d 1253, 1262 (App.1997) (holding that a bank is required to notify the maker of a promissory note “by some affirmative act” upon exercise of its option to accelerate the maturity date of the note).
II.
Second, I agree that we should adopt Restatement (2nd) § 260, but unlike the majority, I would apply it here and affirm the circuit court’s summary judgment order.
A.
The pertinent facts may be briefly reiterated.
*154The March 16, 1992 family court order stated:
Based, wpon the representations made and the agreement of [Choong and Lorrin], IT IS HEREBY ORDERED that the [motion for child support] is granted in part/denied in part as follows: Arrearage[s] for child support ($4,800) and attorney’s fee[s] ($750) totalling ($5,500) [sic] to be [p]aid [by Choong to Lorrin] by 12/1/92 with 11% interest (Payable monthly)
(Capitals in original; emphases added.) That same day, Choong executed the promissory note in favor of Lorrin as creditor and with Defendanl/Third-Party Plaintiff-Appellee Francis H. Yano (Yano) as guarantor of Choong’s promise. The terms of the note reiterated the provisions of the family court order for child support owed, referring to the total principal sum due at an annual 11% interest rate. Lorrin’s responses to Yano’s interrogatories explain the note was “a compromise of past due child support payments.” (Emphasis added.) Hence, the note was intended to execute the March 16, 1992 order. I believe, therefore, that by virtue of the consensual court order and the related note, there was an agreement among the parties that payments made were to be applied, at the least, in satisfaction of the court order still outstanding.
Despite the fact that Lorrin had begun receiving payments from Choong in July 1993 and had received more than $19,000 by March 1996,2 she applied none of the payments to the outstanding 1992 arrearages. The circuit court found correctly that Lorrin received an amount in excess of the amount due under the promissory note.
B.
Under Restatement (2nd) § 260(1), the creditor is obligated to act with “due regard” to the interests of third persons, as well as the debtor and the creditor. Within that context, Lorrin would be obligated to apply the payments to the “earliest matured debt,” Restatement (2nd) § 260(2), with the proviso that preference be given to a debt as to which Choong was under a duty to a third person, such as Yano, to pay. Restatement (2nd) § 260(2)(a). Extending § 260 to the 'facts of our case, it is plain that Lorrin should have applied Choong’s payments to satisfy the older matured arrearages ordered paid by the family court. The preference for such payment was buttressed by the fact that the debt was one which Choong was under a duty to the guarantor, Yano, to pay.
Similarly, under the “notions of justice” standard in Union Trust v. Nichols, Ltd., 35 Haw. 482 (1940), I believe that Choong’s payments must be applied by Lorrin to pay off the older debt represented by the promissory note and, thus, that summary judgment should be affirmed.3 The notions of justice standard was adopted from United States v. Kirkpatrick, 22 U.S. (9 Wheat.) 720, 6 L.Ed. 199 (1824). In Kirkpatrick, there were “long and running accounts, where debits and credits [we]re perpetually occurring, and no balances [we]re otherwise adjusted than for the mere purpose of making rests.”4 Id. at 737-38. In that ease, the United States Supreme Court held that “payments ought to be applied to extinguish the debts according to the priority of time: so that credits [we]re to be deemed payments pro tanto of the debts antecedently due.” Id. at 738 (emphasis added). Thus, under somewhat analogous facts, application of the “notions of justice” standard would require payment of older debts first.
III.
Therefore, I would hold that Restatement (2nd) § 260 and/or Union Trust’s notions of justice standard, would apply to the facts of this case, and accordingly applied, that summary judgment should be affirmed.

. Were Restatement (Second) of Contracts § 259 (1981) [hereinafter Restatement (2nd)) in effect in this case, notification to the debtor would remove the uncertainty otherwise inherent in the Colorado rule.

. Plaintiff-Appellant Lorrin D. Lee (Lorrin) included an itemized payment list in her response to Defendanl/Third-Party Plaintiff-Appellee Francis Yano's request for interrogatories, revealing the total amount of $19,900 was paid by Third-Party Defendant Choong Gil Lee (Choong), her ex-husband. This payment list is referred to as the 1998 Lorrin payment record in the majority opinion.

. Conceivably, the notions of justice standard may be broader in scope than Restatement (2nd) § 260.

. As used in United States v. Kirkpatrick, 22 U.S. (9 Wheat.) 720, 6 L.Ed. 199 (1824), the word "rest” appears to have meant "an amount still unpaid[;j a balance due[J” Webster’s New Int’l. Dictionary 1936 (3d ed. 1981), a use of the term now obsolete.