Rio Mesa developer wins $25 million judgment in San Joaquin River case

A Fresno jury has awarded a Madera County development company $25 million in damages against Fidelity National Title Insurance in a civil trial over the developer’s blocked access to the San Joaquin River.

Attorneys James Ardaiz and John G. Michael of the Fresno law firm of Baker Manock & Jensen said Monday the verdict in Fresno County Superior Court involved Rio Mesa Holdings LLC’s attempt to turn nearly 1,600 acres east of Highway 41 into an upscale residential development north of the river on the old Peck Ranch. Known as Tesoro Viejo, it’s expected to break ground later this year and is part of the Rio Mesa Area Plan where development on other projects already has begun.

A key selling point of the project was allowing residents of the development and the public access to the river.

In 2004, Rio Mesa bought a $25 million title policy from Fidelity National to protect its rights and title to the property. The jury found that Fidelity National’s lawyers failed to protect the development’s access to the river after property owners in the area claimed they had a right to block it and prevailed in court.

According to Ardaiz and Michael, the jury found Fidelity National liable for improperly delaying Rio Mesa’s insurance claim, insurance misconduct, and for handling Rio Mesa’s claims in bad faith.

Irvine-based attorney Michael Busch, major claims counsel for Fidelity National, said Monday that the company respects the hard work of the jury and the court during the trial. But, he said, “the company continues to believe it fulfilled all of its obligations under the insured’s policy and anticipates its position will be upheld in further proceedings.”

The case was tried in Fresno because Fidelity National, the largest title company in the United States, has an office here.

The verdict was reached last week after nearly eight weeks of testimony in Judge Donald Black’s courtroom. Former federal judge Oliver W. Wanger, who is now in private practice in Fresno, testified as an expert witness for Rio Mesa about Fidelity National’s handling of the developer’s claims in bad faith.

Once the verdict was announced, Black thanked the jury, saying it was one of the most complicated cases he had ever seen as a judge or tried as a lawyer in Fresno County.

The case stems from a May 2012 Fresno appellate court ruling that upheld a jury’s award of more than $3.2 million to homeowners in a Madera County river bluff neighborhood in their nearly six-year legal battle against the Rio Mesa developers.

Back then, the 5th District Court of Appeal affirmed Judge James E. Oakley’s ruling in Madera County Superior Court in 2008 that the 49-lot Sumner Hill subdivision is a private, gated community that has exclusive rights to the river. Therefore, it can bar the public and the Rio Mesa developers from going through the subdivision to get to the river, the ruling said.

The homeowners were pitted against a Rio Mesa partnership of three major builders including the McCaffrey Group, which is headed by local builder Bob McCaffrey.

Around 2004, the McCaffrey Group and two partners – fellow home builder Gary McDonald (who no longer is part of the group, Ardaiz said) and commercial developer Lyles Diversified – bought almost 1,600 acres of the Peck Ranch, east of Highway 41 on both sides of Road 204. The proposed development called for about 5,200 homes, a trail, and public access that would pass through Sumner Hill to reach the river.

But soon after close of escrow, it became apparent that Sumner Hill property owners had a right to block Rio Mesa’s access to the river, so they sued Rio Mesa Holdings in 2006, putting the development in jeopardy, Ardaiz and Michael said.

After Fidelity National lawyers failed to successfully defend Rio Mesa’s access to the river, it left Rio Mesa Holdings no choice but to seek restitution from the title company through the courts, Ardaiz and Michael said Monday.

The successful verdict has severe repercussions for title companies across the country, the lawyers said. “It effectively says to the title company industry to be more careful about what they do and that California insurance laws are very strict and are designed to protect,” the lawyers said in a news release.

Ardaiz and Michael said the $25 million was the biggest judgment in recent Fresno County history. But the money does not cover all of the damage done to the Rio Mesa development by losing access to the river.

Because Fidelity National was found to be operating in bad faith, Ardaiz said, a second phase of the trial could result in the title company paying millions of dollars in attorneys’ fees.

This story was originally published March 21, 2016 at 4:35 PM with the headline "Rio Mesa developer wins $25 million judgment in San Joaquin River case."