REDWOOD CITY -- Seton Medical Center in Daly City lost the body of a full-term stillborn baby, which was later discovered at a Santa Cruz commercial laundry, about to be dropped into a washing machine, according to a lawsuit.

Estefani Belen Arriaza's body was discovered by laundry workers who found the tiny corpse on a conveyor belt, says the suit filed Friday in San Mateo County Superior Court by the girl's parents.

A spokeswoman for the Daughters of Charity Health System, which operates Seton, declined to comment.

"We have no comment on this due to pending litigation," said spokeswoman Patricia Smith, who also would not say if procedures have changed since the alleged incident.

Rina Arriaza, 32, was 36 weeks pregnant on Oct. 29, 2012, at a doctor's appointment when she learned her fetus had no heartbeat, the suit says. Doctors induced labor at Seton, and Estefani was stillborn that same day, resulting in "every expectant parent's worst nightmare," according to the suit.

Rina and her husband, Julio Arriaza, 35, both of Daly City, cried over their child, took some pictures of her and named her before a nurse took her away for unspecified reasons. But two days later, after being discharged from the hospital, the Arriazas got a call from a hospital social worker saying Seton's director wanted to meet with the family.

James Schuessler, who was then the director of Seton, told the Arriazas that corpses are generally covered with a sheet and taken to a morgue, but housekeeping staff had taken their daughter's sheet-wrapped body and put it with dirty linen, the suit says. No further explanation was offered.

Estefani's body and the laundry were then transported to a cleaning facility in Santa Cruz. Workers there found the body, contacted Santa Cruz police, who then informed Seton, the suit says.

Schuessler, who was replaced by Joanne Allen in April, "apologized and took all responsibility," and assured the Arriazas the hospital took unspecified action prevent a similar error from happening again, the suit says. The hospital also paid $2,5000 to cover the cost of the funeral.

The Arriazas attorney said the family is still dealing with grief over their loss and the horror of almost losing their child's body.

"I mean can you imagine anything worse?" asked San Francisco-based lawyer Rafael Crespo, who added it's too early to say how much money his clients are seeking from the hospital.

Contact Joshua Melvin at 650-348-4335. Follow him at Twitter.com/melvinreport.