Fremont Indemnity Co. v. Du Alba

Opinion

WALLIN, J. In 1978, Robert Corbett intentionally blinded himself at his place of employment in order to collect a worker’s compensation award. He subsequently filed the fraudulent claim with Fremont Indemnity Company, his employer’s insurance carrier, and was awarded $185,000. Shortly thereafter, while serving time in prison on an unrelated criminal charge, Corbett confessed to the entire scheme.

Meanwhile, Corbett’s wife Sonia, a French citizen, took the insurance award and left the state. She first went to Oregon, where she purchased a home for $80,000. Around this time, Fremont learned of Corbett’s confession and Sonia’s departure to Oregon. Fremont filed a lawsuit in Oregon against Sonia to recover the insurance proceeds and to impose a constructive trust on any assets acquired with those funds. Upon learning of the lawsuit, Sonia quickly sold the property at a loss to a third party who later sold it to the Potters, plaintiffs below. Sonia took the proceeds from the sale of the Oregon property and purchased another residence in Fountain Valley.

[476]The Potters found out about Fremont’s lawsuit and discovered Fremont was claiming an interest in the Oregon property they had purchased from Sonia. They filed a lawsuit in Orange County against both Sonia and Fremont seeking declaratory relief, a constructive trust and indemnity. The Potters wanted Fremont to satisfy its judgment first with the Fountain Valley property if Fremont prevailed in the Oregon lawsuit. If, however, Fremont were to obtain title to or an interest in their Oregon property, then the Potters wanted a constructive trust or equitable lien imposed in their favor on the Fountain Valley property, then owned by Sonia.

On October 7, 1982, the day the Potters filed their lawsuit, they also filed a lis pendens against the Fountain Valley property, which was recorded the following morning. Three days later, on October 11, Sonia sold the Fountain Valley property to the Du Albas. She took the proceeds from that sale and apparently returned to France.

After the Du Albas purchased the property, Fremont answered the Potters’s complaint and filed a cross-complaint against Sonia and the Du Albas. The cross-complaint alleged fraud by Sonia and sought a constructive trust and/ or equitable lien against the Fountain Valley property.1 Thereafter, the Du Albas filed a motion for summary judgment on the basis the Potters’s lis pendens was insufficient to provide the Du Albas with constructive notice of Fremont’s claims to the property. The court granted the Du Albas’s motion for summary judgment.