United States District Court, E.D. California
In re JAMES W. CORBETT and DAISY A. CORBETT, Debtors.
DAISY A. CORBETT, Appellee. CALIFORNIA CORRECTIONAL PEACE OFFICERS ASSOCIATION BENEFIT TRUST FUND, Appellant,
MEMORANDUM DECISION AND ORDER RE BANKRUPTCY
Lawrence J. O'Neill, UNITED STATES CHIEF DISTRICT JUDGE
matter comes before the Court on California Correctional
Peace Officers Association Benefit Trust Fund's
(“Appellant” or “Trust”) appeal,
pursuant to 28 U.S.C. § 158(a), from the September 21,
2016, oral decision and order of the United States Bankruptcy
Court for the Eastern District of California. See
ECF Document No. (“Doc.”) 8 at 598-653. Appellant
filed its notice of appeal on October 7, 2016. Doc. 1.
Appellant filed a brief on January 6, 2017. Doc. 6. Appellee
did not file a responsive brief. On April 6, 2017, at the
Court's request, Appellant filed a brief pertaining to
the effect of Appellee's failure to file a responsive
brief. Doc. 11. The Bankruptcy Court found that
Appellant was not entitled to an equitable lien against funds
awarded to Daisy Corbett (“Appellee” or
“Ms. Corbett”) as worker's compensation. For
the reasons set forth below, the decision of the Bankruptcy
Court as it pertains to the existence of an equitable lien
under federal law is vacated.
following facts are drawn from the uncontroverted facts, the
facts stipulated to for the Bankruptcy Court trial, and
Appellant's brief. Appellant does not dispute the factual
findings made by the Bankruptcy Court.
was employed as a Correctional Counselor at Corcoran State
Prison, and was a participant in the employee welfare benefit
plan administered by the California Correctional Peace
Officers Association (“CCPOA”). Doc. 8 at 417.
Appellant is a trust fund and a “self-insured employee
welfare benefit plan” maintained by CCPOA which
advances money to enrollees prior to their receipt of
worker's compensation benefits. Doc. 8 at 417. The Trust
is self-funded and self-insured, and is a Disability Benefit
Program and a self-funded Employee Welfare Benefit Plan under
(“ERISA”). Id. at 133. Appellant has a
fiduciary obligation to obtain reimbursement where an injured
worker received benefits from Appellant and subsequently
receives duplicate benefits for the same period of disability
as worker's compensation. Id.
was injured at work in 1996 and filed a claim with the
Workers' Compensation Appeals Board (“WCAB”),
and in 2005 she became unable to work. Id. at 134,
417. While her claim was pending before the WCAB, Appellee
sought an advance from the Trust. On October 1, 2005,
Appellee signed a reimbursement agreement and assignment of
proceeds (the “Agreement”). Id. at 417,
421. The Agreement provided, in part, that payment to
conditioned on the Trust's right of reimbursement up to
the full extent of benefits paid by the Program on the
claims, in the event [Appellee recovers] (i) damages or
proceeds (or if any party or entity recovers damages or
proceeds on [Appellee's] behalf), 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 [Appellee's]
employer, or provided under state workers' compensation
acts, employer liability laws, or other laws providing
compensation for work-incurred injuries. In consideration of
payment of benefits by the Program related to the clams,
[Appellee agrees] as follows: To repay and hereby assign to
the Trust the proceeds of any and all recovery/ies made from
any responsible party or insurer to [Appellee] or to any
person or entity on [her] behalf, to the extent of any
benefits provided by the Program (minus any share of
reasonable attorney's fees, determined according to the
Id. at 420. Between August 5, 2005, and May 4, 2007,
Appellee was advanced a total of $85, 986.90 from the Trust,
which was equal to 65% of Appellee's base pay for that
period of time. Id. at 136; 419.
February 21, 2008, Appellee filed a voluntary bankruptcy
petition under Chapter 7 of U.S. Code Chapter 11.
Id. at 418. Appellee did not list her workers'
compensation claim on Schedule B, exempt it on Schedule FC,
or list the claim in her Statement of Financial Affairs.
Id. at 418. Appellee listed CCPOA as a general
unsecured creditor to the amount of $56, 658.20 on Schedule
F. Id. A Trustee was appointed, who filed a No Asset
Report, and on June 3, 2008, Appellee's bankruptcy
discharge was entered and her bankruptcy case closed on June
10, 2008. Id. at 137; 418.
March 25, 2009, the Trust filed a claim with the WCAB in Ms.
Corbett's worker's compensation case in the amount of
$85, 986.90. Id. at 418. Pursuant to an agreement
between Appellee and the California Department of Corrections
and Rehabilitation, Appellee was awarded temporary disability
benefits equal to 66.67% of her base pay from November 17 to
19, 1997, November 21 to December 5, 1997, July 14, 1998, to
November 1, 1999, and July 11, 2005 to August 5, 2009.
Id. at 136-37; 419. The award provided for $85,
986.90 to be withheld pending the resolution of the CCPOA
claim. Id. at 429.
February 7, 2011, the Trust filed a motion to reopen the
bankruptcy case, which was granted on February 11.
Id. at 300-01. The Bankruptcy Court reappointed the
trustee, who successfully moved the Bankruptcy Court to order
the withheld award monies turned over to him. Id. at
303; 608. Appellant filed a proof of claim in Appellee's
bankruptcy case asserting its lien against the awarded funds.
Id. at 609. The Trustee's final report, filed on
July 17, 2012, proposed allocating $76, 202.18 to Appellant.
Id. at 332. No objection to the proposed allocation
was filed, and the Trustee paid Appellant the proposed sum.
Id. at 609. Appellee objected after the Trustee
distributed the funds, and filed amended schedules claiming
that the $85, 986.90 was exempt. Id. The Trustee
objected to the amendment, and, after a hearing, the
Bankruptcy Court overruled Appellee's objection.
Id. Appellee appealed to the Bankruptcy Appellate
Panel (“BAP”), which vacated the Bankruptcy
Court's decision and remanded the case. Id.
subsequently brought this action to determine the validity,
priority, and extent of its lien and seeking declaratory
relief that the lien was not discharged and was superior to
any claim of exemption. Id. at 610. On September 21,
2016, the Bankruptcy Court entered oral findings of fact and
conclusions of law. Id. at 598. The Bankruptcy Court
found that the worker's compensation claim was an asset
of Appellee's bankruptcy estate and remained an asset of
the estate after the bankruptcy case closed. Id. at
617. The Bankruptcy Court also found that Appellant was not
entitled to an equitable lien against the award funds under
federal law. Id. at 639.