Hillgren

FACTS

In 2003 Tarnutzer borrowed $300,000.00 from his long-time friend Hillgren in order to start a new business (we refer to this as the first loan). The first loan was documented by a written promissory note, and it bore interest at 10 percent per year. It was secured by a lien on Tarnutzer’s yacht and a second deed of trust on Tarnutzer’s home in Newport Beach. The note was to be paid in full on January 23, 2006. Not long afterward, Tarnutzer was experiencing financial difficulties and the bank that held the first deed of trust on his home was threatening to foreclose. In order to prevent his friend from losing his house, Hillgren loaned Tarnutzer $130,000 to cure the default (we refer to this as the second loan). Because this money was needed urgently and the first loan had taken three months to document, the second loan was given pursuant to oral promises. Hillgren testified that he told Tarnutzer that the second loan was conditioned on paying 10 percent interest per annum, and that it was to be paid back after the first loan had been paid off. Tarnutzer testified that he never agreed to the 10 percent interest. Notwithstanding that the second loan was not documented,…