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Homeowner Group Loses in Solar Case

November 18, 1987|JOHN SPANO | Times Staff Writer

For the second time in nine months, a group saying it represents hundreds of homeowners defrauded by unscrupulous vendors of solar heating products lost in court Tuesday.

The victory for Western Financial Savings Bank leaves a West Covina couple threatened with foreclosure within 30 days for not paying monthly charges on a loan they used to buy a defective solar panel.

There is "no reasonable probability" that the Public Interest Homeowners Assn. will win the case at future hearings, Orange County Superior Court Judge Tully H. Seymour ruled Tuesday. Seymour dissolved a temporary restraining order against Western that had blocked foreclosure since Sept. 23.

"We will appeal," said Melvin Teitelbaum, the homeowners' lawyer.

His clients, Fred and Marilyn Straus, said they had not sought financing for their purchase of an $8,000 solar heating panel from the California Energy Bureau. They alleged that they were solicited by Western employees who made them believe they were obliged to sign the loan documents.

Unruh Act Cited

Teitelbaum said the bank and vendor were working together on a sales pitch for the solar equipment. Because the solar panel actually cost money to run, rather than saving energy, Teitelbaum said the sales approach violated California's Unruh Act, the basic consumer protection law.

But the bank said the loan transaction was made at the request of the Strauses. Western, which honored its end of the loan arrangement, should not be held responsible for a solar product, even if it is defective, argued the bank's lawyer, Steven M. Schott.

The association sued dozens of solar manufacturers and sellers, along with lenders, last year, alleging that hundreds of state homeowners were defrauded by faulty products and high-pressure sales tactics. Homeowners who have joined the lawsuit generally have paid their monthly bills to a trust fund run by the association. The funds are therefore available in the event the association loses in court, as is the case with Fred Straus, Teitelbaum said.

No Evidence of Connection

On Tuesday, Seymour told Teitelbaum that state law exempts consumer finance transactions from the Unruh Act unless the vendor and the seller are joint owners or split profits. Seymour noted that no evidence of any connection had been presented.

"Mr. Teitelbaum, I think your argument is with the Legislature, not with me," Seymour said.

Another bank used a similar defense to checkmate the group's attempts to stop foreclosure on more than 100 homeowners last March.

Oakland-based Central Bank successfully held that it was exempt from state consumer protection laws in parallel situations because it had nothing to do with building or selling the defective solar equipment.

Last year, state officials investigating consumer fraud concluded that thousands of state home owners had been defrauded out of millions of dollars by unscrupulous vendors. They found that the equipment often failed to work but that purchasers were stuck with a continuing obligation to pay off loans for the solar panels.

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