Cal. Corr. Peace Officers Ass'n Benefit Trust Fund v. Corbett (In re Corbett)
| Decision Date | 14 March 2016 |
| Docket Number | Adv. No. 14-01089-A,Case No. 08-10861-A-7 |
| Court | United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Eastern District of California |
| Parties | In re: JAMES W. CORBETT and DAISY A. CORBETT, Debtors. CALIFORNIA CORRECTIONAL PEACE OFFICERS ASSOCIATION BENEFIT TRUST FUND, Plaintiff, v. JAMES W. CORBETT and DAISY A. CORBETT, Defendants. |
NOT FOR PUBLICATION
MAS-3
MEMORANDUMAppearances:
D. Edward Hays, Marshack Hays LLP, Irvine, California, for California Peace Officers Association Benefit Trust Fund
Daisy A. Corbett, in propria persona, Corcoran, California
Resolution of this summary judgment motion pivots on a single issue: whether the California Correctional Peace Officers Association acquired a lien that attached to Daisy Corbett's workers' compensation claim before her bankruptcy and established in rem rights (which survive discharge) against her ensuing post-petition award. Finding that its lien did not attach to Corbett's workers' compensation claim before her bankruptcy, the motion will be denied.
Daisy Corbett ("Corbett") was employed by the California Department of Corrections as a correctional counselor. In late 1996, Corbett was assaulted by an inmate and suffered injuries. After convalescing, she returned to work. That same year, Corbett filed a claim with the Workers' Compensation Appeals Board ("WCAB").
During her tenure, Corbett was a member of the California Correctional Peace Officers Association (the "CCPOA"). The CCPOA offers its members the protections of benefit program offered by a disability benefit trust fund. Such a disability benefit trust provides injured members money for living expenses from the date an on-the-job injury occurs (and the employee incurs lost wages) until a workers' compensation award is made. The trust is funded by premiums paid by the plan's participants, by earnings received from investmentof those premiums, and, in cases in which the injured member later receives a workers' compensation award, by monies recouped from that settlement or award. Before her injury, Corbett had elected to participate in the disability benefit plan offered by the CCPOA's disability benefit trust fund.
By 2005, Corbett's injuries precluded her from continuing her work as a correctional counselor, and she made a claim for benefits from the trust and signed a "Reimbursement Agreement and Assignment of Proceeds." It provided that the CCPOA Benefit Trust Fund would pay Corbett's claim if Corbett agreed to reimburse the trust from workers' compensation benefits, when and if she received those benefits:
[S]uch payment is conditioned on the Trust's right of reimbursement up to the full extent of benefits paid by the [disability benefit fund] on the claims, in the event that [Corbett] recover[s] (i) damages or proceeds . . . by award, settlement, insurance, or otherwise, for medical and other expenses (regardless of how such award settlement or otherwise is structured or itemized); or (ii) any proceeds from occupational insurance purchased by [Corbett's] employer, or provided under state workers' compensation acts, employer liability laws, or other laws providing compensation for work-related injuries.
The Reimbursement Agreement also provided for the assignment of her workers' compensation proceeds to the trust:
In consideration of payment of benefits by the [disability benefit fund] related to the claims, [Corbett] agree[s] . . . to repay and hereby assign to the [disability benefit fund] the proceeds of any and all recovery/ies made from any responsible party or insurer to [her] or to any person or entity on [her] behalf, to the extent of any benefits provided by the [disability benefit fund] (minus any share of reasonable attorney's fees, determined according to the [disability benefit fund] rules.
The Reimbursement Agreement further stated that if Corbett failed to comply with the agreement, "the [disability benefit fund] may offset the amount which should be reimbursed against any benefit that may otherwise be (or become), payable under the [the CCPOA benefit program] on [her] behalf."
Corbett received monies from the disability benefit fund, which have never been repaid from any workers' compensation or other insurance covering work-related injuries.
As of 2008, Corbett's workers' compensation claim remained unresolved.
In 2008, Corbett filed a chapter 71 bankruptcy.2 James Salven was appointed as the trustee. Corbett did not list her workers' compensation claim on Schedule B, nor did she exempt it on Schedule C.3 Corbett did not list her workers' compensation claim in the Statement of Financial Affairs. She did list the CCPOA as a general unsecured creditor in the amount of $56,658.20 on Schedule F. The CCPOA received timely notice of Corbett's bankruptcy.4 After investigating the case and unaware of Corbett's pending workers' compensation claim, Salven filed a no asset report. Corbett then received her discharge.
Salven did not file an adversary proceeding to avoid the CCPOA's lien based on lack of perfection or otherwise. 11 U.S.C. § 545(2).
Later in 2008, Corbett's chapter 7 bankruptcy was closed.
In 2009, the CCPOA filed a claim with the WCAB for $85,986.90.5 In 2011, Corbett and the California Department of Corrections attempted to resolve Corbett's long-standing workers' compensation claim. Toward that end, they entered into a "Stipulation with Request for Award." As pertinent here, the stipulation provided that Corbett was injured on the job, disabled temporarily during specified dates in the years 1996-1999 and 2005-2009, and deemed 82% permanently disabled. The stipulation also entitled her to reimbursement of medical or legal expenses and payment of specified amounts for temporary and for permanent disability less offsets for amounts paid by the defendant in those proceedings. Apparently, because Corbett believed that her debt to the CCPOA was discharged before any lien attached, the stipulation provided,
The stipulation was captured in the award rendered by the WCAB in favor of Corbett and against defendant California Department of Corrections. The award reserved a determination of the lien issue, stating, "$85,986.90 to be withheld by State Fund from [permanent disability] and/or life pension amounts to resolve the CCPOA lien."
Shortly after the WCAB issued its award, the CCPOA successfully moved to reopen Corbett's bankruptcy case to determine the validity of its lien. Salven was reappointed the chapter 7 trustee.
After the case was reopened, the court granted Salven's motion to compel the State Compensation Insurance Fund (the "State Fund") to turn over the $85,986.90 withheld pursuant to the WCAB Award. Both Corbett and the CCPOA supported the motion. The court ordered the State Fund to turn over the disputed funds to Salven and Salven to place those funds in a blocked account pending resolution of the lien dispute. The State Fund complied, but Salven did not.
In 2011, the CCPOA filed a proof of claim with this court for $85,986.90, which it contended was secured based on the Reimbursement Agreement.
Without ever obtaining resolution of the lien, Salven issued his Final Report, which proposed distribution of the disputed sum of $85,986.90 by paying administrative expenses and the CCPOA's "securedclaim" in the amount of $76,202.18. When Corbett failed to file an objection, Salven distributed estate funds accordingly.
After Salven's distribution, Corbett objected and filed amended Schedules B and C, both disclosing and claiming exempt the $85,986.90 withheld on account of the lien claimed by the CCPOA. Salven objected to Corbett's amended claim of exemption and responded to her objection to his Final Report. After a hearing, the court sustained Salven's objection to Corbett's amended exemption claim. The court overruled Corbett's objection to the Final Report based on waiver. Corbett appealed, and the Bankruptcy Appellate Panel vacated the court's orders on these objections and remanded the case for further proceedings. See Corbett v. Salven (In re Corbett), 2014 WL 1647393 (B.A.P. 9th Cir. Apr. 24, 2014).
The CCPOA filed the present adversary proceeding against Corbett requesting a determination of the validity, priority, and extent of its lien, declaratory relief that its lien was not discharged, and declaratory relief that its lien was superior to any claim of exemption in Corbett's workers' compensation award.
The CCPOA moves for summary judgment under Rule 56, arguing that it is entitled to a statutory lien, i.e., a lien under California Labor Code § 4903.1(a)(3)(A), or to an federal common law equitable lien, which trumps Corbett's claim of exemption in the award.
Corbett filed a verified "Response to Complaint to Determine Validity, Priority and Extent of Lien." Her response requests that the court deny the CCPOA's motion for summary judgment, allow her toseek redress for "extreme and willful violations of court orders and discharge order pursuant to [§] 524(a)" and give her "permission to file debtor's motion for contempt and sanctions against the trustee and defendants for conspiresy (sic) bankruptcy funds."6
This court has jurisdiction. See 28 U.S.C. §§ 1334, 157(a); General Order No. 182 of the U.S. District Court for the Eastern District of California. This is a core proceeding in which this court may enter final orders and judgment. See 28 U.S.C. § 157(b)(2)(I), (K). Even in a proceeding that is non-core, a bankruptcy court may issue final orders and judgments with the express or implied consent of the parties. 11 U.S.C. § 157(c)(1), (2); Wellness Int'l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015). Here, the parties so consented. Status Conf. Hr'g, ...
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