Metropolitan News-Enterprise


Friday, March 23, 2012


Page 1


C.A. Rules on Liability Following Theft of Settlement Check

Employer Must Pay Again Because Payment Not Received in Workers’ Compensation Case, Panel Says


By a MetNews Staff Writer


An employer whose workers’ compensation settlement check was sent to the wrong address, stolen, and cashed by the employer’s bank with a forged endorsement remains liable to the injured employee, the Court of Appeal for this district ruled yesterday.

Div. Three affirmed an order by the Workers’ Compensation Appeals Board in favor of Rafael Rivas. The court held that because Rivas never received the $17,000 payment from Barrett Business Services, Inc., the company never fulfilled its obligation.

The WCAB affirmed the ruling of a workers’ compensation judge, who held in February of last year that the burden of seeking recovery of the funds from other responsible parties must fall on the employer, who is better positioned to do so. That ruling came following a December 2010 trial, at which Rivas, a laborer who worked for Barrett when he suffered a back injury in 2005, and his attorney, Carl Feldman, testified as to the circumstances involving the settlement check.

According to the testimony, Rivas and his wife moved in with his nephew, who lives on Evans Street in San Bernardino, sometime before April 2007, but no change of address was filed with the WCAB. In April 2007, Feldman filed Rivas’ new San Bernardino address, on Walnut Street, with the board in April 2007, serving the new address on Barrett but not on its lawyer or adjuster.

Another Address Changed

In June 2008, Feldman filed yet another notice of address change, indicating that Rivas had moved to Tyler, Texas. That notice was not served on Barrett, but on its attorney and adjuster of record, although—apparently unbeknownst to Feldman—Barrett had terminated its relationship with the adjuster and moved its claims unit in-house.

No notice of the change in adjuster was filed in Rivas’ WCAB file.

By the fall of 2008, Feldman and Barrett’s counsel had negotiated a settlement for $20,000, less $3,000 in attorney fees. The “compromise and release” listed the Evans Street address, to which the $17,000 check was sent.

That check was cashed at a check cashing business in Rancho Cucamonga, using the endorsement “Rafal Rivas.” The endorser used a permanent address residence card from Mexico with a date of birth different from that of Rivas, who testified that he had no such card and is from El Salvador.

Check Already Cashed

Barrett was notified in December 2008 that the check was not received by its former employee. It tried to stop the check, but learned that it had already been cashed.

Rivas testified that the fraudulent endorsement did not appear to be that of anyone he knew.

After the WCJ ruled in the worker’s favor, Barrett unsuccessfully sought reconsideration by the WCAB, but the Court of Appeal granted review and heard the case on its merits.

Justice Patti Kitching, writing for the panel, said Barrett must bear responsibility for the check because Rivas, as a payee who had not received the check, had enforceable rights only against the payor, not against third parties.

The jurist cited a comment to California Uniform Commercial Code Sec. 3420, providing in part:

“If the check falls into the hands of a thief who obtains payment after forging the signature of the payee as an indorsement, the obligation owed to the payee continues to exist after the thief receives payment. Since the payee’s right to enforce the underlying obligation is unaffected by the fraud of the thief, there is no reason to give any additional remedy to the payee.” 

Argument Rejected

Kitching rejected Barrett’s argument that the C&R directed it to discharge its obligation to Rivas in a particular manner, so that its mailing of the check to the address in that document fulfilled the obligation under Civil Code Sec. 1476. The justice noted that it was Barrett who drafted the document, and that Barrett’s ignorance of Rivas’ Texas address was chargeable to the company’s failure to serve notice that it was now adjusting its own claims, so Barrett could not argue that Rivas directed it to send the check to the Evans Street address.

Filomena Meyer of Hinshaw & Culbertson in West Los Angeles represented Barrett in the Court of Appeal; Feldman represented Rivas, along with Glendale lawyer Susan M. Garrett.

The case is Barrett Business Services, Inc. v. Workers’ Compensation Appeals Board, B233168.


Copyright 2012, Metropolitan News Company