Re: loan repayment without contract
Find and read Article 15, Section 1 of the California Constitution, which states that (a) the rate of interest on a loan is 7% unless the parties contract otherwise, and (b) the parties may not contract for a rate in excess of 10% (the anti-usury provision). Of course, there are MANY exceptions to the 10% usury ceiling rate, but they aren't important to your situation.
What is important is that the default interest rate, when no other rate is specified, appears to me to be 7%, not 10%. Caution: I haven't checked any case law. However, the 7% number should be a useful counter-argument for you; the state Constitution is a pretty reliable authority to cite.
If the question went to court, the judge would probably not use either the default rate or the usury ceiling rate, at least not as a first choice. He or she would try to figure out from the facts surrounding the loan what the parties intended at the time. The lack of documentation doesn't help this process, but there may be facts showing that the borrowers and lenders had in mind the then-current rate generally being charged on standard fixed-rate mortgages. There may be evidence showing that it was a zero interest loan. Possibly (not likely) there would be evidence that the $100,000 was a gift, and repayment wasn't expected.
You should also keep in mind that residential loans containing balloon payment provisions are subject to special legal requirements that your in-laws probably haven't met. Also, what is the basis for their apparent position that the loan is now due and payable? If nothing was written down, they may have a tough time showing the court that the divorce makes the loan due and payable (although they'd probably prevail on this issue, it isn't automatic).
It seems to me that the family law attorney representing you in the divorce should bring a joinder action to bring the in-laws into the case and before the court so that this issue can be heard and judicially decided. You do have a lawyer for your divorce, don't you?
