Santa Clarita Real Estate

Court Strikes Down Bond Requirement For Home Equity Sales Contract
The case of Schweitzer v. Westminster Investments involved a homeowner, Schweitzer who sued to reclaim real property he voluntarily sold to an investor the day before a scheduled foreclosure sale. The plaintiff in this case tried to reclaim the property by arguing that his sales contract was voidable because the buyer’s agent failed to comply with the bond requirement. The trial court agreed and awarded the title of the property to the plaintiff.  The buyer appealed that decision.  One of the statutory requirements is for the buyer’s agent to be bonded by an admitted insurer in an amount equal to twice the fair market value of the subject property.

• The day before a forclosure sale, the homeowner, Schweitzer sells real property to Westminster Investments.
• Later Schweitzer decides to reclaim the property by arguing that his sales contract was voidable because the buyer’s agent failed to comply with the bond requirement. (One of the statutory requirements is for the buyer’s agent to be bonded by an admitted insurer in an amount equal to twice the fair market value of the subject property).
• The trial court agreed and awarded the title of the property to the plaintiff.
• The buyer appealed that decision.

C.A.R. filed an amicus curiae or friend of the court brief supporting the buyer’s position. In striking down the bond requirement, the court ruled as follows: "[The bond requirement] provides no guidance on the amount, the obligee, the beneficiaries, the terms or conditions of the bond, the delivery and acceptance requirements, or the enforcement mechanisms of the required bond.  Instead, persons of ordinary intelligence must necessarily guess at what the statute requires for them to comply with its obligations.  Under these circumstances, the bond requirement of section 1695.17 [of the California Civil Code] is void for vagueness under the due process clause and may not be enforced." The appellate court, however, pointed out that the other requirements of home equity sales contract law are valid.

The Schweitzer decision does not become final and controlling authority on lower courts until January 14, 2008, and the plaintiff’s deadline to file a petition for review to the California Supreme Court is ten days thereafter.  If the Supreme Court grants review, this opinion is not binding until the Supreme Court rules on the case.