Shadoan

Richard and Antje Shadoan (the Shadoans) paid the balance of an August 1980 loan obtained by them from World Savings and Loan Association (World). Pursuant to the loan agreement, the Shadoans on October 19, 1987, paid a $5,189.18 prepayment penalty to World. They then brought the instant action on behalf of themselves and others similarly situated, alleging that the prepayment penalty provision was an unfair business practice, seeking to enjoin World from collecting prepayment penalties from other borrowers and seeking recovery of the prepayment penalty they paid.

The superior court granted World’s demurrer to the complaint and dismissed the action. The superior court also awarded World a portion of its attorney fees, pursuant to an attorney fees provision in the loan agreement. The Shadoans appeal, and World cross-appeals insofar as the court’s order awarding attorney fees limited the amount of fees awarded.

The Appeal

1. Allegations of Unfair Business Practice and Unconscionability

The Shadoans’ theory is that World committed an unfair business practice by including in its loan agreement both a prepayment penalty clause, and a clause permitting the lender to…