Judge: Michael Small, Case: 24STCV27583, Date: 2025-04-28 Tentative Ruling

Inform the clerk if you submit on the tentative ruling. If moving and opposing parties submit, no appearance is necessary.

Case Number: 24STCV27583    Hearing Date: April 28, 2025    Dept: 57

The Court is overruling Defendant's demurrer to the Plaintiff's complaint for breach of a promissory note.  Plaintiff claims that Defendant has made no payment whatsoever of principal and interest under the note, beginning with the due date of the first installment, which was September 1, 2015. 

As a threshold matter, the Court rejects Defendant's contention that Plaintiff lacks standing to sue under the promissory note.  As alleged in the complaint, and as set forth in the promissory note attached to the complaint, Plaintiff's now-deceased wife was the holder of the note.  The complaint also alleges, however, that Plaintiff's wife transferred rights under the note to the trust that the wife and Plaintiff established.  Plaintiff alleges that he is the trustee of the trust.  In that capacity, he has standing to sue under the note, which, as alleged, is an asset of the trust.

Contrary to Defendant's additional contention, Plaintiff's claim for breach of a promissory note is not barred by the statute of limitations.  As alleged in the complaint, the promissory note is a negotiable instrument.  As such, Plaintiff's claim for breach of the promissory note is subject to the six-year statute of limitations in Commercial Code Section 3118(a) rather than the four-year statute of limitations in Code of Civil Procedure Section 337(a) for breaches of written contracts. 

This begs the question of when the six-year statute of limitations began to run on Plaintiff's claim.  Defendant posits that it began to run when Defendant is alleged to have breached the promissory note by missing the first due date of payment of principal and interest under the note, which as alleged was September 1, 2015.  If Defendant is correct, Plaintiff's claim is time-barred because Plaintiff sued on October 22, 2024, which was more than six-years after the September 1, 2015 breach.  

Defendant is not correct, however.   To be sure, the promissory note states that "[i]nterest and principal are payable in installments of $3,200.00, or more, on the 1st day of each month, beginning on the 1st day of September, 2015, and continuing on the same date of each month thereafter until paid in full."  Defendant overlooks, however, that the promissory note goes on to state that "[s]hould default be made in payment of any installment of principal or interest when due the whole sum of principal and interest shall become immediately due at the option of the holder of the note."   The phrase in bold (the Court has added the bold) signals that the due date of the entire principal and interest under the note can be accelerated whenever the note's holder demands payment following a breach.  Absent that demand, "the statute of limitations is not set in motion." (Trigg v. Arnott (1937) 22 Cal.App.2d 455, 458.)  The statute of limitations thus begins to run when the demand for payment in full is made.  (Ibid.)  Here, the complaint alleges that Plaintiff, as note holder, demanded payment via a letter to Defendant on April 15, 2024.  Plaintiff's suit on October 22, 2024 was well within the six-year statute of limitations following the demand.

Defendant's further contention in the demurrer that Plaintiff's claim fails for lack of consideration is equally unavailing.  The complaint alleges that Plaintiff and his late wife made a gift of $1,855,000 to Defendant.  It also alleges that Defendant promised to repay the wife, with interest, $500,000.  That repayment obligation is memorialized in the promissory note to the wife.  It reflects consideration for the balance that Plaintiff's wife gifted to Defendant.