Wash. Court of Appeals published opinion — D2 59088-3-II Published Opinion.pdf

Citation: Wash. Court of Appeals published opinion — D2 59088-3-II Published Opinion.pdf
Jurisdiction: Washington (state)
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No. 59088-3-II

assumed when it agreed to release the entire deposit amount.16 Thus, LGI is functionally an

unsecured creditor and must be treated as such.

c. Superior court erred in allowing LGI’s claim to be paid ahead of CLS’s
claim

Because LGI is an unsecured creditor, the receivership statute provides that LGI falls below

CLS in terms of distribution priorities. RCW 7.60.230. LGI argues in the alternative that the

Receiver’s obligation to return the Phase 2 deposit “constitutes an administrative expense of the

Receivership that takes priority over CLS’s secured claim under RCW 7.60.230(1)(b).” Br. of

Resp’t at 31. LGI cites to bankruptcy principles to support its contention that a depositor’s earnest

money, and the obligation to return earnest money based on a breach of contract, is an

administrative expense. We disagree.

Expenses incurred during the administration of a receivership estate “have priority over the

secured claim of any creditor obtaining or consenting to the appointment of the receiver.” RCW

7.60.230(1)(b). RCW 7.60.130(2) provides in part:

Any obligation or liability incurred by a general receiver on account of the
receiver’s assumption of an executory contract . . . shall be treated as an expense of
the receivership. A general receiver’s rejection of an executory contract . . . shall
be treated as a breach of the contract . . . occurring immediately prior to the
receiver’s appointment.

(Emphasis added.)

Here, under the plain language of Washington’s receivership statute, only obligations

arising from a receiver’s assumption of an executory contract constitute an “expense.” There is