Legal Embers : Luxury Homes Have Been Rebuilt, but Lawsuits Still Smolder 4 Years After Crest de Ville Blaze

It was the American League championship series that commanded James M. Yeager’s attention that October morning in 1982, not the black plume rising on a distant hillside.

“We saw smoke coming up over the mountains, but it was miles away,” Yeager, 56, said recently. “We watched it throughout the morning, burning down through the canyons. But it wasn’t coming directly at us.”

And the California Angels were battling for a berth in the World Series.

Then around noon, Yeager’s wife, Joan, heard some “commotion” outside their Crest de Ville home in northeastern Orange.

“It was a policeman,” Yeager recalled. “He told us to get out, right away: ‘Don’t take anything with you. Just go.’ ”

Minutes later, Yeager and his wife, who had fled with literally nothing but the clothes on their backs, watched their house burn to the ground after the brush fire made a sudden shift and roared into Crest de Ville.

It has now been four years since the fire--the biggest in Orange County in two decades--raged out of control. But the legal aftermath still is unraveling in slow motion.

Fueled by fierce Santa Ana winds, the fire swept out of Gypsum Canyon on Oct. 9, 1982, into the city of Orange, burning more than 16,000 acres, destroying 12 luxury homes and damaging many other structures within a few hours. Four years later, dozens of lawyers are sifting through more than $20 million in claims contained in a maze of 20 lawsuits in Orange County Superior Court.

So tight is the legal knot that the first settlement agreements came only last month. They involved six firms--including an architect and several landscapers--that agreed to pay a total of $165,000, just a fraction of the total claims. Under the terms of the settlement, all of that amount went to the two main defendants.

$7.5 Million Paid

Fourteen insurance companies have paid out an estimated $7.5 million in claims, said Michael J. O’Neill, attorney for State Farm Fire & Casualty Co.

The majority of those claims went to the 12 owners of $250,000 to $600,000 homes in the Crest de Ville development that were destroyed in the fire.

Many of those families did not have enough insurance to cover their losses, attorney Daniel W. Dunbar said. Some, Dunbar said, are seeking additional damages for property loss and emotional distress from the developer who built their homes, G. L. Lewis Co., and McDonnell-Douglas Corp. McDonnell-Douglas was leasing the land in Gypsum Canyon where the fire started, and it is alleged that the company was negligent in not preventing the blaze or containing it earlier.

Uninsured loss claims amount to about $9 million for the 13 Crest de Ville families he represents, Dunbar said.

While O’Neill and Dunbar complained about delays in the case, defense attorneys voiced a different perspective.

“To say the case is complex in one breath and dragging on in the next is a contradiction in terms,” said Calvin D. Bayles, an attorney for the developer.

“Our position is that the fire did not start as a result of any negligence by McDonnell-Douglas,” said Rob F. Scoular, an attorney representing the aerospace firm. “Given the number of parties, the case has proceeded quite expeditiously.”

Complications in the case are both factual and legal:

- The fire, according to county fire officials, began when a power line snapped and sparked a blaze in the brush on McDonnell-Douglas Corp.’s now-defunct A-12 facility in Gypsum Canyon, once used by the aerospace giant as a test site. The county Fire Department sent McDonnell-Douglas a $266,000 bill for firefighting costs; it was the first time the county had used a state law permitting collection of costs from parties causing or contributing to brush fires.

Depositions of McDonnell-Douglas employees suggest the blaze was started at a campfire set by three unidentified hunters who were trespassing on the first day of deer-hunting season.

- G. L. Lewis, the developer, allegedly failed to comply with building codes in force in the City of Orange in 1977 that required fire-retardant material or tile on the roofs of homes in Crest de Ville. Lewis has denied the allegation and argues that, regardless of code requirements, the City of Orange approved the developer’s building plans--which did not include the safer roofing material--before construction.

- Some of the homeowners are being sued by McDonnell-Douglas and Lewis. Both have claimed that the homeowners failed to comply with city code provisions requiring that a 500-foot-wide greenbelt be maintained around the Lewis development to inhibit the spread of fire.

“Our contention is that the homeowners were responsible for maintaining common areas around their property in a fire-hazard-free manner and that they failed to do so,” Bayles said.

‘Totally Inaccurate’

Yeager, a past president of the Crest de Ville homeowners’ association, characterized that allegation as “totally inaccurate.”

“We had a 35-foot greenbelt, a collar completely around the development,” Yeager said. “The city approved that before the development was built. We landscaped it and maintained it.”

His insurance firm paid his claim “promptly,” Yeager said. But that was about the only good news he had in the year after the fire.

First came a hassle with the bank that held the mortgage on his home over how to finance reconstruction. Then the Internal Revenue Service questioned the casualty losses he claimed from the fire. He also discovered that he did not have enough fire insurance coverage. And during that year, in the course of a business merger and reorganization, he was laid off his job after 27 years.

“I was just totally underinsured,” Yeager said. He had anticipated the possibility of limited damage from a fire starting in a fireplace or the kitchen, but never “thought or dreamed that you could lose the whole house and everything you acquired over a lifetime.”

Left Him in Court

That left Yeager in court, an experience he described as “depressing and agitating.”

He is now co-owner of Pacific Abrasive Supply Co. of Buena Park. He decided not to rebuild in Orange and has bought a home in Newport Beach. But the legal aftermath of the fire has left him confused and angry.

“They’re kind of like blaming me as if I did something wrong,” Yeager said. “It’s like they’re trying to say, ‘Your house got in the way of my fire.’ ”

The next round of court-supervised negotiations is scheduled for January.

Before that comes another round of motions and maneuvering. G.L. Lewis’ attorneys will try to convince a judge that any reimbursement to insurance firms for money they paid to homeowners should come only from McDonnell-Douglas. Dunbar and O’Neill, representing the homeowners, will try to force McDonnell-Douglas attorneys to reveal their theory of how the fire started.

If McDonnell-Douglas, Lewis and their insurance companies had agreed to pay half of the amount claimed from them immediately after the fire, the homeowners might have accepted, Dunbar said.

“Now, with all the discovery, we’re convinced we have a pretty good case,” Dunbar said. “We probably wouldn’t settle now for less than 100%.”