Chuck Liddell wins $2 million lawsuit against escrow company

A jury awarded retired mixed martial arts champion Chuck Liddell nearly $2 million Tuesday against an escrow company he says helped developer Kelly Gearhart defraud him.

Liddell, a Cal Poly business graduate and former UFC light heavyweight champion, had invested $2 million with Gearhart to purchase four lots at his Vista Del Hombre development project. But he said Cuesta Title Company, which handled all of Gearhart’s escrows for the project, released his funds before the close of escrow and without transferring title to the properties. Meanwhile, Gearhart was using investor money to pay other investors and himself.

During the trial, Liddell’s attorney, Warren Paboojian, said Cuesta Title escrow officer Melanie Schneider had a conflict of interest because she was close friends with Gearhart and his wife — and had invested $50,000 of her own money in the Vista Del Hombre project.

Paboojian told jurors in his closing argument that Schneider, as an escrow officer, was supposed to be neutral. But he said Schneider did not warn Liddell about possible improprieties committed by Gearhart because she had a financial stake in seeing the project go through.

“You have to disclose actual fraud that’s being perpetrated,” he told jurors.

On the stand, Schneider said she didn’t know Gearhart was committing fraud. Attorney Gerard Kelly, representing Cuesta Title, said his clients merely followed escrow instructions, as required.

Liddell, he argued, should have done more research before investing with Gearhart and later signing documents that released his money.

Liddell claimed his signatures on addendums and additional escrow documents were forged.

Gearhart defrauded hundreds of investors. However, because he declared bankruptcy, those who sued focused on Cuesta Title and their related companies, Stewart Title of California and Stewart Title Guaranty.

Verdicts in two previous trials favored the defendants.

Liddell was joined by two other parties with multiple defendants. Although the jury awarded Liddell $1,982,727, it has yet to decide on the other plaintiffs.

Although Liddell testified that he had only invested in homes and education for his family prior to the Gearhart project, he did make significant money as a fighter.

In his biography, “Iceman: My Fighting Life,” Liddell wrote that he made $500,000 for his loss to Quinton Jackson in 2007.

“And six months after my fight with Tito (Ortiz, 2006) I was still getting checks in the mid-six figures from my share of the pay-per-view,” he told co-writer Chad Millman. “In June 2007 I spent $1 million buying my mom some property and a house and fixing it up. And I still had plenty of money left over.”

That same year, after suffering back-to-back losses, Liddell invested $2 million with Gearhart.

Liddell now promotes ultimate fighting as an executive for UFC. He also stars in a series of Duralast commercials and is set to appear in two movies.

A wrestler while attending Cal Poly, he lived in San Luis Obispo for 20 years before moving to Southern California in 2011.

Gearhart is scheduled to be sentenced on federal fraud charges in Los Angeles on Monday.

This story was originally published June 23, 2015 at 5:03 PM with the headline "Chuck Liddell wins $2 million lawsuit against escrow company."