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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Original Source: https://www.courts.wa.gov/opinions/pdf/D2%2059088-3-II%20Published%20Opinion.pdf ↗

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Property Sale.” CP at 589. The Receiver cited to bankruptcy cases and argued that “[i]n the

bankruptcy context, courts have held that funds held in escrow, and funds traceable to escrow

deposits which have not been earned, are not property of the estate.” CP at 590. Further, the

Receiver argued that because the PSA Phase 2 closing never occurred, ECM never gained title to

the Phase 2 deposit, and therefore, the “$450,000 cannot be considered Receivership Estate

Property, [and] it should be returned to LGI prior to any other distributions.” CP at 590.

CLS objected to the Receiver’s recommendation that LGI receive $450,000 ahead of CLS’s

claim. CLS argued that bankruptcy principles were not applicable and even if the Phase 2 deposit

was traceable to an escrow account, LGI ultimately had an unsecured claim.

The superior court granted the Receiver’s request to return the $450,000 to LGI prior to

any other distributions. In its written order (May 11, 2023 Order), the superior court found:

1. The Phase 2 earnest money deposit in the amount of $450,000
traceable to LGI (the “LGI Earnest Money Deposit”) is not property of the
Receivership Estate as a result of the Receiver’s rejection of the ECM/LGI
Purchase and Sale Agreement for Phase 2, and acceptance of a new purchase and
sale agreement with D.R. Horton, previously approved by this court. Pursuant to
RCW 7.60.130, the Receiver’s rejection of the LGI Purchase and Sale Agreement
is treated as a breach of that contract, occurring immediately prior to the Receiver’s
appointment, and terminated any right of the Receiver to retain the LGI Earnest
Money Deposit.