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Barrett Business Services, Inc v. Workers' Compensation Appeals Board and Rafael Rivas

March 22, 2012


(Los Angeles County W.C.A.B. Case No. ADJ2596770) PROCEEDING to review a decision of the Workers' Compensation Appeals Board. Order affirmed.

The opinion of the court was delivered by: Kitching, J.



In this proceeding we address the issue who must bear the loss when a stolen check with a forged endorsement is cashed and the payee never receives the check. A compromise and release of the workers' compensation claim of applicant Rafael Rivas contained an incorrect address for Rivas. His employer, Barrett Business Services, Inc. (Barrett), sent a $17,000 check to Rivas at the incorrect address. Rivas never received the check, which was stolen and negotiated with a forged endorsement at a check-cashing service and was paid by Barrett's bank. We hold that because delivery of the check to Rivas did not occur, issuance of the check did not discharge Barrett's underlying obligation to Rivas and Barrett remains liable to Rivas on that obligation. Thus the Workers' Compensation Administrative Law Judge's order and award correctly found that Barrett was liable to pay settlement proceeds of $17,000 to Rivas. Barrett petitioned to the Workers' Compensation Appeals Board (WCAB) for reconsideration of that order and award. The WCAB denied reconsideration. Barrett filed a petition for writ of review of the WCAB order denying reconsideration. We granted Barrett's petition and issued a writ of review. We affirm the WCAB order.


Barrett employed Rafael Rivas as a laborer. On May 14, 2005, Rivas sustained injury to his low back arising out of and in the course of employment. Rivas filed and served an application for adjudication, claim form, and disclosure statement on May 26, 2005, at which time Rivas lived at 2633 W. 5th Street in San Bernardino. Also in May 2005, Rivas executed a power of attorney empowering his attorney, Carl Feldman, to sign legal documents, including settlement, that were in Rivas's best interests. Rivas moved to 1556 W. Evans Street in San Bernardino some time before April 2007, although no notice of this change of address was in the workers' compensation file. On April 19, 2007, Rivas's attorney filed a notice of Rivas's change of address to 2095 Walnut Street in San Bernardino, and served that notice of change of address on Barrett but not on defense counsel or on Barrett's adjusting agent, Pinnacle Claims Services in Rocklin, California.

In 2007, Barrett stopped using Pinnacle Claims Services as its claims adjusting agent and moved its claims unit in-house. No notice of this change was in the worker's compensation file, which still listed Pinnacle Claims Services as adjuster of record as late as February 10, 2010.

On May 21, 2008, Rivas moved to 12040 Peach Street, Lynwood, California. On June 11, 2008, Rivas's attorney filed and served a notice of Rivas's change of address to 214 S. Fairmont Avenue, Tyler, Texas. The notice was served on defense counsel and on Pinnacle Claims Service, as it was still listed as adjusting agent of record. There was no copy of this change of address in Barrett's claims file. Rivas has since moved to Florida.

Based on prior settlement negotiations, before September 4, 2008, Barrett prepared and forwarded a Compromise and Release (C&R) to Rivas's attorney. That C&R bore Rivas's incorrect address of West 1556 Evans Street, San Bernardino. Rivas's attorney, Carl Feldman, signed the C&R for Rivas pursuant to the Special Power of Attorney executed by Rivas. Feldman returned the C&R to Barrett's attorneys, who signed and returned it to Rivas's attorney for "walk-through." A Worker's Compensation Judge approved the $20,000 settlement less $3,000 payable to Feldman as attorney fees. The C&R was served on Barrett or on Barrett's counsel. At no point did Feldman change the incorrect address on the C&R.

On September 30, 2008, Barrett mailed a $3,000 check to Feldman and mailed a $17,000 check to Rivas to the address on the C&R, 1556 West Evans Street, San Bernardino, California. The $17,000 check was fraudulently endorsed by "Rafal Rivas" and cashed at American Check Cashing in Rancho Cucamonga, California. The fraudulent endorser presented a permanent address residence card from Mexico with a date of birth different from Rivas's date of birth. Rivas denied having any permanent residence card and presented an El Salvador driver's license instead.

In December 2008 Rivas informed Barrett that he did not receive the settlement check. Barrett tried to stop the check, but it had already been cashed. At Barrett's request Rivas executed an Affidavit and Indemnity Agreement on January 2, 2009. Rivas received no further correspondence from Barrett.

At 1556 West Evans Street, Rivas and his wife lived with her nephew, Gabriel Pastillo, who owns the house at 1556 West Evans Street and still lives there. Rivas knew of no specific information that would lead him to believe that Pastillo cashed the check, and Rivas had never talked to Pastillo about the check. Rivas did not recognize the signature on the check as being the handwriting of Pastillo or of anyone else he knows.

On January 25, 2010, Rivas filed a declaration of readiness to proceed, seeking WCAB assistance because Rivas had not received the settlement check. After being continued, the matter came for trial on December 6, 2010.

On February 10, 2011, the Workers' Compensation Administrative Law Judge (WCALJ) issued an opinion on decision and "Findings, Order and Award." The WCALJ agreed with cases placing the unsatisfied obligation of payment on a defendant that agreed to pay pursuant to a settlement agreement. The WCALJ found that Rivas should not be the one to pursue remedies from other responsible parties where he was not at fault and was the designated beneficiary of this benefits delivery system, and that Barrett was in a better position to pursue legal action against responsible parties. The WCALJ thus held Barrett liable to pay settlement proceeds to Rivas. The Findings, Order and Award determined that because ...

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