Green

FACTS

Paul D. Johnson is a licensed real estate broker. He is married to Sheila Newman, an attorney. Johnson's business included selling fractionalized interests in notes and deeds of trust. The loans were for the construction and rehabilitation of single family residences. Kevin and Susan Green met Johnson in 2002. They were referred to Johnson by Kevin's father. Kevin's father had invested with Johnson and had been satisfied with the investments. Although susan Green was a licensed real estate agent, she had limited experience. Neither of the Greens had any experience with fractionalized interests in trust deeds. The Greens invested in a number of loans brokered by Johnson. Three of the loans developed problems. Sand Quill Loan Johnson arranged for a construction loan for a project on San Quill Street in Salton City, California. Johnson invited the Greens to participate in funding the loan. The Greens agreed to fund $50,000 of the $140,000 loan. The loan was to bear interest at a rate of 14 percent and be due within a year. They deposited $47,666.67 into escrow. The difference was prepaid interest. Johnson prepared a disclosure statement on his own form. The form…