Garver

In June 1989, appellants James and Georgann Garver (buyers) purchased real property and signed a promissory note containing a prepayment fee clause which is payable to respondents William and Marylou Brace (sellers). In November 1993, the buyers prepaid the note, incurring a fee of over $180,000. They seek restitution of the prepayment fee on the grounds, among others, that it violates Civil Code section 2954.9, subdivision (b).

The trial court sustained the sellers’ demurrer without leave to amend, finding the buyers’ claims were time-barred because the applicable statutes of limitation began to run when the buyers signed the note in 1989. Alternatively, it found that section 2954.9 did not apply to this loan because the property was not owner-occupied residential real property when the note was executed. These rulings were in error. The limitation periods began to run when the sellers demanded payment of the fee. Under the unique facts alleged in the complaint, section 2954.9 applies to this note because, by prior agreement, the property securing the note became an owner-occupied residence shortly after the note was executed. The judgment must, therefore, be reversed.…