Fremont Indemnity Co. v. Du Alba

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…