Orden

March 1973, Crawshaw Mortgage & Investment Company (Mortgage Company), then and now licensed as a real estate broker by the State of California, agreed to loan to Ted Orden and Hedy Orden (the Ordens) $500,000 to be disbursed periodically as construction of a supermarket on land owned by the Ordens progressed. The loan was evidenced by a promissory note (the Note) bearing interest at 8 percent per annum with principal and interest payable on or before July 1, 1974, and secured by a first lien position on the land and the improvements thereon.

As monies were needed from time to time to fund the loan, Mortgage Company borrowed the funds from Security Pacific National Bank (the Bank). During the initial months of the loan, Mortgage Company charged the Ordens interest at 8 percent per annum on funds actually disbursed; the Bank charged Mortgage Company on those monies 7-1/2 or 8 percent per annum. In June 1974, the Bank was charging Mortgage Company 12 percent per annum on funds disbursed by the Bank. The Note was due on July 1, 1974, construction of the supermarket had not been completed, and only a portion of the $500,000 loan proceeds had been disbursed. Mortgage Company…