Court Opinion

ID: 4704703
Source: CourtListenerOpinion
Date Created: 2021-07-19 21:21:09.85341+00
Date Added: 2024-06-11T08:05:31.520215
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

 LENNAR MULTIFAMILY BUILDERS,
 LLC f/k/a LMC CONSTRUCTION, LLC,                  DIVISION ONE

                        Respondent,                No. 81879-1-I

                   v.                              OPINION PUBLISHED IN PART

 SAXUM STONE, LLC,

                        Appellant.

       DWYER, J. — Saxum Stone, LLC appeals from the superior court’s order

releasing its construction lien and awarding attorney fees to Lennar Multifamily

Builders, LLC. The order was entered pursuant to a proceeding initiated by

Lennar to release Saxum’s lien as being frivolous. Saxum asserts that the

superior court erred by (1) failing to enter findings of fact demonstrating that the

lien was frivolous, (2) releasing the lien as being frivolous, and (3) awarding

attorney fees to Lennar. Because Saxum’s lien was not frivolous, we reverse the

superior court’s orders releasing the lien and awarding attorney fees and costs to

Lennar. Additionally, we hold that Saxum is entitled to an award of attorney fees
No. 81879-1-I/2

and costs for defending this action both in the superior court and on appeal

pursuant to RCW 60.04.081(4).1

                                              I

       Lennar Multifamily Builders, LLC was the general contractor for the

construction of Totem Lake Apartments, a construction project located in

Kirkland, Washington. On February 7, 2019, Lennar subcontracted with Wall to

Wall Tile & Stone, LLC to build and install quartz countertops for the project. The

total amount that Lennar agreed to pay Wall to Wall under the subcontract was

$480,494.

       On July 16, 2019, Wall to Wall filed for chapter 11 bankruptcy protection in

the United States Bankruptcy Court for the District of Oregon. The record is not

clear as to whether Wall to Wall commenced work on the Totem Lake

Apartments project prior to filing for bankruptcy protection. According to a

declaration filed by one of Lennar’s members, Wall to Wall “began its work on the

Project on or about February 7, 2019.” However, according to a declaration filed

by one of Saxum Stone, LLC’s members, Wall to Wall “started to perform labor

on the Project on December 3, 2019 by fabricating, transferring, and installing

quartz countertops on units on the 6th floor of the Project.”

       It is clear, however, that after Wall to Wall commenced the bankruptcy

proceeding, Wall to Wall performed work on the Totem Lake Apartments project

pursuant to the existing subcontract. It did so as a debtor in possession. Wall to

       1  In the unpublished portion of the opinion, we address an argument advanced by Lennar
that was not adequately briefed on appeal. In that section, we also provide guidance to the
superior court should this issue arise on remand.

                                              2
No. 81879-1-I/3

Wall continued to fabricate and install the quartz countertops until March 24,

2020, at which point Wall to Wall ceased to engage in any further work on the

project.

       On April 6, 2020, Wall to Wall’s chapter 11 bankruptcy proceeding was

converted to a chapter 7 proceeding. At that point, according to a declaration

filed by one of Lennar’s members, Lennar had paid Wall to Wall for all of the

quartz material that was needed to complete the subcontract, even though Wall

to Wall had not finished installing the countertops. The remaining uninstalled

quartz material was stored in Wall to Wall’s warehouse in Kent.

       As of March 24, 2020, according to a declaration filed by one of Saxum’s

members, Wall to Wall held an outstanding account receivable for Lennar in the

amount of $73,102.83. This account receivable regarded labor performed and

materials supplied under the subcontract. Lennar does not dispute the existence

of this account receivable.

       On May 1, 2020, Saxum entered into an agreement with the trustee of

Wall to Wall’s bankruptcy estate to purchase substantially all of the estate’s

assets for a price of $4,364,519. That same day, Lennar received notice from

the trustee of the trustee’s intent to sell substantially all of the assets possessed

by Wall to Wall’s bankruptcy estate to Saxum.

       The agreement entered into by the trustee and Saxum, entitled

“Agreement for Sale and Purchase of Business Assets” (asset purchase

agreement), stated, in part:

       Seller hereby sells to Buyer and Buyer hereby purchases from
       Seller all of the Assets of the Estate useful in the Business,

                                          3
No. 81879-1-I/4

        including, but not limited to accounts receivable, equipment,
        inventory, supplies, the real property leases listed in Schedule 1.2,
        software, licenses, Intellectual Property, books and records, tools,
        vehicles listed on Schedule 1.1, all claims, if any, against Buyer, its
        members, agents, attorneys, officers, and directors (“Buyer
        Claims”).

(First emphasis added.)

        The agreement also excluded certain specified assets:

        [T]he purchased assets do not include: a) cash; b) vehicle leases
        with Enterprise Fleet Management, Inc. (“Enterprise”); c) claims
        and causes of action, if any, against present or former insiders or
        otherwise listed in paragraphs 4 and 8 of the Conversion
        Declaration filed on April 20, 2020 as Lead Case Docket No. 356
        (the “Conversion Declaration”)[2] (other than claims against Buyer
        and Buyer’s members) or arising under or pursuant to [various
        sections] of the Bankruptcy Code, other than the Buyer Claims; d)
        Benefit Plans of the Seller; e) any vehicles not listed on Schedule
        1.1 and any other items listed in paragraphs 3(i)-(j) of the
        Conversion Declaration; and f) claims pursuant to any insurance
        policy insuring the Debtors’ for general liability or for acts of officers
        and owners of Debtors, other than the Buyer Claim (the “Assets”),
        free and clear of all mortgages, pledges, liens, security interests,
        options, claims (including but not limited to any claim for successor
        liability), charges, other encumbrances, interests, or restrictions of
        any kind (collectively, “Liens”).

        The parties agree that, pursuant to the asset purchase agreement, Saxum

was not assigned the subcontract concerning the Totem Lake Apartments

project.3

        On May 14, 2020, the bankruptcy court entered an order approving the

asset purchase agreement. This order stated that “[o]nly one response was filed

– a limited objection by Baffco Enterprises, LLC.” This order also provided that

        2 The referenced Conversion Declaration is not in the record on appeal.
        3 In its opening brief, Saxum states that “[t]his case does not involve an assignment or
assumption of future contractual performance.” Br. of Appellant at 17. Likewise, in its response
brief, Lennar states that the asset purchase agreement “did not assign the . . . Subcontract to
Saxum.” Br. of Resp’t at 4.

                                                4
No. 81879-1-I/5

“[t]he Trustee may sell the assets free and clear of all liens, claims, and

encumbrances . . . because, in each case, one or more of the standards set forth

in 11 U.S.C. § 363(f)(1)-(5) has been established.” Additionally, the order stated

that “[t]he terms and conditions of the [asset purchase agreement] are approved.”

       That same day, the trustee executed a bill of sale, which assigned the

assets referenced in the asset purchase agreement to Saxum.

       On June 12, 2020, an attorney representing Saxum sent an attorney

representing Lennar a letter demanding payment of the outstanding account

receivable. On June 15, Lennar’s attorney responded by informing Saxum’s

attorney that Lennar would not pay any amount due on the account receivable.

       On June 22, 2020, Saxum recorded a lien on the Totem Lake Apartments

property in the amount of $73,149.90. Consistent with the language for claim of

lien forms recommended by RCW 60.04.091(2), the claim of lien filed declared:

“If the claimant is the assignee of this claim state so here: Claimant is the

assignee of Wall to Wall Tile & Stone.”

       On July 28, 2020, Lennar filed a motion in the King County Superior Court

pursuant to RCW 60.04.081, a statute providing a mechanism for a party to

challenge a frivolous construction lien. In the motion, Lennar asserted that

Saxum’s lien was frivolous and requested that the trial court release the lien and

award attorney fees and costs to Lennar. Lennar claimed that Saxum’s lien was

frivolous because (1) Saxum did not perform any lienable work on the Totem

Lake Apartments project, (2) Saxum was not assigned the subcontract, and (3)

                                          5
No. 81879-1-I/6

Wall to Wall did not record a lien. Also in this motion, Lennar requested that the

superior court order Saxum to show cause.

        On August 5, 2020, a commissioner of the King County Superior Court

granted the motion to show cause. On August 20, the superior court held a show

cause hearing. During the hearing on Lennar’s motion to release Saxum’s lien,

the superior court opined that Saxum was not assigned the lien because (1)

Saxum was not assigned the subcontract, and (2) Wall to Wall did not record the

lien:

                [SAXUM’S COUNSEL]: . . . And it’s -- the key point for this
        Materialmen’s Lien statute is that it’s the debt and the cause of
        action that was clearly assigned; there’s a Bill of Sale from the
        Chapter 7 trustee.
                Wall To Wall, it’s undisputable that they fall under the
        statute. There’s no --
                THE COURT: Oh, they definitely fall under it. I mean they
        did the work. They would fall under it.
                The question is, because you didn’t buy the sub -- because
        you didn’t get the subcontract, I mean the question is, and they
        didn’t file a lien, whether you fall under it.

        On August 21, 2020, the superior court entered an order releasing the lien

and awarding attorney fees and costs to Lennar. The order did not contain

written findings of fact demonstrating that Saxum’s claim of lien was frivolous.

        Saxum appeals.

                                         II

        As an initial matter, Saxum contends that the superior court erred by not

entering findings of fact demonstrating that Saxum’s lien was frivolous. We

disagree.

                                         6
No. 81879-1-I/7

      RCW 60.04.0814 “creates a summary proceeding in which a property

owner may quickly obtain the release of a lien that is frivolous and made without

reasonable cause.” W.R.P. Lake Union Ltd. P’ship v. Exterior Servs., Inc., 85

Wn. App. 744, 749, 934 P.2d 722 (1997). This “statutory procedure is . . . in the

nature of a trial by affidavit.” W.R.P. Lake Union Ltd. P’ship, 85 Wn. App. at 750.

      We have previously noted that motions filed pursuant to RCW 60.04.081

initiate a “special proceeding.” Andries v. Covey, 128 Wn. App. 546, 550, 113

P.3d 483 (2005). In such a special proceeding, strict compliance with the CR 52

mandate concerning the entry and content of findings of fact is not required. CR

81(a). Indeed, we have previously explained that RCW 60.04.081 “contains no

      4 RCW 60.04.081 provides:
      (1) Any owner of real property subject to a recorded claim of lien under this
      chapter, or contractor, subcontractor, lender, or lien claimant who believes the
      claim of lien to be frivolous and made without reasonable cause, or clearly
      excessive may apply by motion to the superior court for the county where the
      property, or some part thereof is located, for an order directing the lien claimant
      to appear before the court at a time no earlier than six nor later than fifteen days
      following the date of service of the application and order on the lien claimant, and
      show cause, if any he or she has, why the relief requested should not be granted.
      The motion shall state the grounds upon which relief is asked, and shall be
      supported by the affidavit of the applicant or his or her attorney setting forth a
      concise statement of the facts upon which the motion is based.
                (2) The order shall clearly state that if the lien claimant fails to appear at
      the time and place noted the lien shall be released, with prejudice, and that the
      lien claimant shall be ordered to pay the costs requested by the applicant
      including reasonable attorneys’ fees.
                (3) If no action to foreclose the lien claim has been filed, the clerk of the
      court shall assign a cause number to the application and obtain from the
      applicant a filing fee pursuant to RCW 36.18.016. If an action has been filed to
      foreclose the lien claim, the application shall be made a part of that action.
                (4) If, following a hearing on the matter, the court determines that the lien
      is frivolous and made without reasonable cause, or clearly excessive, the court
      shall issue an order releasing the lien if frivolous and made without reasonable
      cause, or reducing the lien if clearly excessive, and awarding costs and
      reasonable attorneys’ fees to the applicant to be paid by the lien claimant. If the
      court determines that the lien is not frivolous and was made with reasonable
      cause, and is not clearly excessive, the court shall issue an order so stating and
      awarding costs and reasonable attorneys’ fees to the lien claimant to be paid by
      the applicant.
                (5) Proceedings under this section shall not affect other rights and
      remedies available to the parties under this chapter or otherwise.

                                                 7
No. 81879-1-I/8

requirement for entry of findings of fact and conclusions of law.” W.R.P. Lake

Union Ltd. P’ship, 85 Wn. App. at 750. However, “[a]t a minimum, the trial court’s

reasoning for entering the order should be clearly set out in the order itself.”

W.R.P. Lake Union Ltd. P’ship, 85 Wn. App. at 750.

       Nevertheless, Saxum contends that our opinion in S.D. Deacon Corp. of

Washington v. Gaston Bros. Excavating, Inc., 150 Wn. App. 87, 206 P.3d 689

(2009), required the superior court to enter findings of fact demonstrating that

Saxum’s lien was frivolous in order to release the lien. Not so. In that case, the

parties disputed facts that were material to the superior court’s determination of

whether a construction lien was frivolous. S.D. Deacon Corp., 150 Wn. App. at

95. Because there was a material factual dispute as to the validity of the lien, we

explained that “the court must make specific findings establishing that the lien is

so meritless as to justify depriving the claimant of the opportunity to present live

testimony and cross-examine witnesses.” S.D. Deacon Corp., 150 Wn. App. at

96.

       Here, however, the material facts were not in dispute. Moreover, the

superior court’s reasoning for releasing the lien is apparent from the record and

the order. During the hearing on Lennar’s motion to release Saxum’s lien, the

following exchange occurred between Saxum’s counsel and the superior court:

              [SAXUM’S COUNSEL]: . . . And it’s -- the key point for this
       Materialmen’s Lien statute is that it’s the debt and the cause of
       action that was clearly assigned; there’s a Bill of Sale from the
       Chapter 7 trustee.
              Wall To Wall, it’s undisputable that they fall under the
       statute. There’s no --
              THE COURT: Oh, they definitely fall under it. I mean they
       did the work. They would fall under it.

                                          8
No. 81879-1-I/9

                 The question is, because you didn’t buy the sub -- because
         you didn’t get the subcontract, I mean the question is, and they
         didn’t file a lien, whether you fall under it.

         The day after the hearing, the superior court entered its order granting

Lennar’s motion. This order was entitled, “ORDER TO RELEASE FRIVOLOUS

LIEN AND FOR AWARD OF ATTORNEY FEES PURSUANT TO RCW

60.04.081.” Based on this record, the superior court’s reasoning for releasing

Saxum’s lien is apparent.

         Accordingly, Saxum’s assignment of error fails.

                                          III

         Saxum next contends that the superior court erred by releasing Saxum’s

lien as being frivolous. Because the lien was assigned to Saxum pursuant to the

asset purchase agreement, which was approved by a bankruptcy court order, we

agree.

                                           A

         We review a superior court’s interpretation of chapter 60.04 RCW de

novo. Intermountain Elec., Inc. v. G-A-T Bros. Constr., Inc., 115 Wn. App. 384,

390, 62 P.3d 548 (2003). “Mechanics’ and materialmen’s liens are creatures of

statute, in derogation of common law, and therefore must be strictly construed to

determine whether a lien attaches.” Estate of Haselwood v. Bremerton Ice

Arena, Inc., 166 Wn.2d 489, 498, 210 P.3d 308 (2009). “But if it is determined a

party’s lien is covered by chapter 60.04 RCW, the statute is to be liberally

construed to provide security for all parties intended to be protected by its

provisions.” Estate of Haselwood, 166 Wn.2d at 498 (citing RCW 60.04.900).

                                           9
No. 81879-1-I/10

       A court’s fundamental objective when determining the meaning of a

statute “is to ascertain and carry out the Legislature’s intent.” Dep’t of Ecology

v. Campbell & Gwinn, LLC, 146 Wn.2d 1, 9, 43 P.3d 4 (2002). “Where a

‘statute’s meaning is plain on its face, then the court must give effect to that plain

meaning as an expression of legislative intent.’” Inland Empire Dry Wall Supply

Co. v. W. Sur. Co., 189 Wn.2d 840, 843, 408 P.3d 691 (2018) (quoting Campbell

& Gwinn, LLC, 146 Wn.2d at 9-10). A statute’s plain meaning “is discerned from

all that the Legislature has said in the statute and related statutes which disclose

legislative intent about the provision in question.” Campbell & Gwinn, LLC, 146

Wn.2d at 11.

       “To be frivolous, a lien must be improperly filed beyond legitimate dispute.”

Pac. Indus., Inc. v. Singh, 120 Wn. App. 1, 5, 86 P.3d 778 (2003) (citing W.R.P.

Lake Union Ltd. P’ship, 85 Wn. App. at 752). A lien “is frivolous ‘only if it

presents no debatable issues and is so devoid of merit that it had no possibility of

succeeding.’” Pac. Indus., Inc., 120 Wn. App. at 6 (quoting Intermountain Elec.,

Inc., 115 Wn. App at 394). “Every frivolous lien is invalid, but not every invalid

lien is frivolous.” Pac. Indus., Inc., 120 Wn. App. at 6.

                                          B

       It is well established in Washington that “[a] lien, like a mortgage, is a

chose in action.” Mueller v. Rupp, 52 Wn. App. 445, 450, 761 P.2d 62 (1988)

(citing In re Estate of Adler, 116 Wash. 484, 489, 199 P. 762 (1921);

Congregational Church Bldg. Soc’y v. Scandinavian Free Church of Tacoma, 24

Wash. 433, 436-37, 64 P. 750 (1901)). “A chose in action is personal property.”

                                          10
No. 81879-1-I/11

Mueller, 52 Wn. App. at 450-51 (citing In re Estate of Plasterer, 49 Wn.2d 339,

341, 301 P.2d 539 (1956); Ennis v. Ring, 49 Wn.2d 284, 289, 300 P.2d 773

(1956)).

        The relevant statute provides that, subject to certain notice requirements,

        any person furnishing labor, professional services, materials, or
        equipment for the improvement of real property shall have a lien
        upon the improvement for the contract price of labor, professional
        services, materials, or equipment furnished at the instance of the
        owner, or the agent or construction agent of the owner.

RCW 60.04.021.

        Under this statute, a construction lien5 “arises and attaches upon the

performing of labor or furnishing of materials.” A.A.R. Testing Lab., Inc. v. New

Hope Baptist Church, 112 Wn. App. 442, 448, 50 P.3d 650 (2002) (citing RCW

60.04.021). This interpretation of RCW 60.04.021 is consistent with the statutory

language of RCW 60.04.061, which addresses the priority of liens:

        The claim of lien created by this chapter upon any lot or parcel of land
        shall be prior to any lien, mortgage, deed of trust, or other encumbrance
        which attached to the land after or was unrecorded at the time of
        commencement of labor or professional services or first delivery of
        materials or equipment by the lien claimant.

(Emphasis added.)

        Construction liens “are a class of ‘off-the-record’ interests that may be

senior to interests actually recorded prior to the recording of the . . . lien but after

        5 “In 1991, Washington’s comprehensive mechanics’ and materialmen’s lien statute was
repealed and replaced with a revised and recodified law.” Diversified Wood Recycling, Inc.
v. Johnson, 161 Wn. App. 891, 902 n.14, 251 P.3d 908 (2011) (citing LAWS OF 1991, ch. 281; ch.
60.04 RCW). “‘The title “mechanics’ and materialmen’s lien” is still used in the RCW, but the liens
are called by the more inclusive title, “construction liens,” in this subchapter.’” Diversified Wood
Recycling, Inc., 161 Wn. App. at 902 n.14 (quoting 27 MARJORIE DICK RAMBAUER, W ASHINGTON
PRACTICE: CREDITORS’ REMEDIES—DEBTORS’ RELIEF § 4.51, at 347 (1998)).

                                                11
No. 81879-1-I/12

commencement of work on the project.” A.A.R. Testing Lab., Inc., 112 Wn. App.

at 448. “During the period of time between commencement of work and actual

recording of the claim of lien, a [construction] lien has an ‘off-record’ priority.”

A.A.R. Testing Lab., Inc., 112 Wn. App. at 448-49. Construction liens attach to

the “lot, tract, or parcel of land which is improved.” RCW 60.04.051.

       Notably, under chapter 60.04 RCW, construction liens are assignable.

RCW 60.04.121 provides: “Any lien or right of lien created by this chapter and the

right of action to recover therefor, shall be assignable so as to vest in the

assignee all rights and remedies of the assignor.” The statutory scheme of

chapter 60.04 RCW demonstrates that a construction lien is assignable

regardless of whether that lien has been recorded. Indeed, the language that is

recommended, by statute, to be used on forms for recording construction liens,

provides, in pertinent part: “IF THE CLAIMANT IS THE ASSIGNEE OF THIS

CLAIM SO STATE HERE.” RCW 60.04.091(2).

                                           C

       Wall to Wall’s bankruptcy estate possessed a construction lien right on the

land on which the Totem Lakes Apartments project was situated. On July 16,

2019, Wall to Wall filed for chapter 11 bankruptcy. Although the record is not

clear as to whether Wall to Wall had commenced work prior to commencing the

bankruptcy proceeding, Wall to Wall continued to fabricate and install quartz

countertops on the Totem Lake Apartments project through March 2020.

       Once Wall to Wall provided and installed quartz material on the Totem

Lake Apartments project, a construction lien arose and attached to the land on

                                           12
No. 81879-1-I/13

which the Totem Lake Apartments project was located.6 See RCW 60.04.021;

A.A.R. Testing Lab., Inc., 112 Wn. App. at 448.

        The construction lien that arose and attached when Wall to Wall

commenced lienable work on the Totem Lake Apartments project was assigned

to Saxum pursuant to the bill of sale and asset purchase agreement, which was

approved by a bankruptcy court order. The asset purchase agreement stated, in

part:

        Seller hereby sells to Buyer and Buyer hereby purchases from
        Seller all of the Assets of the Estate useful in the Business,
        including, but not limited to accounts receivable, equipment,
        inventory, supplies, the real property leases listed in Schedule 1.2,
        software, licenses, Intellectual Property, books and records, tools,
        vehicles listed on Schedule 1.1, all claims, if any, against Buyer, its
        members, agents, attorneys, officers, and directors (“Buyer
        Claims”).

(First emphasis added.)

        In other words, the assets that were encompassed by the asset purchase

agreement were not limited to those assets that were specifically listed in the

writing. Although the asset purchase agreement excluded certain assets, the

construction lien in dispute was not listed as an excluded asset. Accordingly, the

        6   11 U.S.C. § 541 explains what assets are part of the bankruptcy estate after a party
files for bankruptcy:
          (a) The commencement of a case under section 301, 302, or 303 of this title
          creates an estate. Such estate is comprised of all the following property,
          wherever located and by whomever held:
              (1) Except as provided in subsections (b) and (c)(2) of this section, all legal or
              equitable interests of the debtor in property as of the commencement of the
              case.
              ....
              (7) Any interest in property that the estate acquires after the commencement
              of the case.
          The exceptions provided in 11 U.S.C. § 541(b) and (c)(2) do not apply to the construction
lien in dispute. Accordingly, regardless of whether Wall to Wall commenced work on the Totem
Lake Apartments project prior to filing for bankruptcy, the bankruptcy estate clearly possessed the
construction lien at the time the sale was approved by the bankruptcy court.

                                               13
No. 81879-1-I/14

construction lien was assigned to Saxum pursuant to the asset purchase

agreement, as approved by the bankruptcy court.

       Lennar asserts that Saxum was not assigned the construction lien. This is

so, according to Lennar, because “the cause of action did not exist at any time

during the pendency of the [Wall to Wall] bankruptcy or at the time of the

bankruptcy sale.”7 We disagree. As previously explained, a construction lien

“arises and attaches upon the performing of labor or furnishing of materials.”

A.A.R. Testing Lab., Inc., 112 Wn. App. at 448. As such, the cause of action

arose when Wall to Wall fabricated and installed the quartz material in the Totem

Lake Apartments project.

       Lennar also contends that Saxum does not fall within the class of persons

contemplated by chapter 60.04 RCW as entitled to claim a construction lien.

According to Lennar, “RCW 60.04.021 is explicit regarding those who come

under the statute’s terms and quantifies this group as ‘any person furnishing

labor, professional services, materials, or equipment for the improvement of real

property.’”8 But this argument is off the mark. To be clear, RCW 60.04.121

provides: “Any lien or right of lien created by this chapter and the right of action to

recover therefor, shall be assignable so as to vest in the assignee all rights and

remedies of the assignor.” (Emphasis added.) Therefore, Saxum—as assignee

of the construction lien possessed by Wall to Wall’s bankruptcy estate—is

entitled to enforce the construction lien.

       7   Br. of Resp’t at 23.
       8   Br. of Resp’t at 9-10.

                                             14
No. 81879-1-I/15

        Lennar next asserts that chapter 60.04 RCW requires that only the entity

who performed lienable work can record a construction lien even if the right of

lien is assigned. We disagree. In Lennar’s view of the law, that entity must

record the lien prior to assignment and, if it does not, the assignee engages in a

frivolous frolic by attempting enforcement. The basis for Lennar’s assertion lies

in RCW 60.04.091, which states:

        Every person claiming a lien under RCW 60.04.021 shall file for
        recording . . . a notice of claim of lien not later than ninety days
        after the person has ceased to furnish labor, professional services,
        materials, or equipment or the last date on which employee benefit
        contributions were due.

        Lennar claims that this language requires that only the entity who

performed lienable work can record the lien—to the exclusion of assignees. The

folly of this contention, however, is made plain by a provision of the

recommended claim of lien form in this same section. This form states: “IF THE

CLAIMANT IS THE ASSIGNEE OF THIS CLAIM SO STATE HERE.” RCW

60.04.091(2).

        Lennar asserts that the quoted language in RCW 60.04.091(2) must be

interpreted to apply only to notice of claim forms that are filed to amend an

already-filed notice of claim of lien.9 To the contrary, RCW 60.04.121 provides:

“Any lien or right of lien created by this chapter and the right of action to recover

therefor, shall be assignable so as to vest in the assignee all rights and remedies

of the assignor.” (Emphasis added.) This broad and inclusive language clearly

         9 RCW 60.04.091(2) authorizes parties to amend a notice of claim of lien under certain

circumstances: “Where an action to foreclose the lien has been commenced such notice of claim
of lien may be amended as pleadings may be by order of the court insofar as the interests of third
parties are not adversely affected by such amendment.”

                                               15
No. 81879-1-I/16

authorizes the assignment of a construction lien regardless of whether that lien

has already been recorded. Additionally, because an assignee is vested with all

of the rights of the assignor, an assignee is plainly entitled to file a notice of claim

of lien under RCW 60.04.091.

       Finally, Lennar avers that RCW 60.04.191 prevented the construction lien

that was possessed by Wall to Wall’s bankruptcy estate from being assigned to

Saxum by means of the asset purchase agreement. The cited statute provides:

               Nothing in this chapter shall be construed to impair or affect
       the right of any person to whom any debt may be due for the
       furnishing of labor, professional services, material, or equipment to
       maintain a personal action to recover the debt against any person
       liable therefor.

RCW 60.04.191.

       According to Lennar, “it is impossible to reconcile that [Wall to Wall]’s

rights could be transferred free and clear through bankruptcy when RCW 60.04

itself prevents [Wall to Wall]’s rights from being impaired.”10 But again, RCW

60.04.121 expressly authorizes the assignment of construction liens. And, in any

event, Wall to Wall forfeited any right that it may have otherwise had in the lien to

the bankruptcy estate when it filed for bankruptcy. See 11 U.S.C. § 541. We

decline to hold that RCW 60.04.191 prevented the construction lien from being

assigned to Saxum pursuant to the bill of sale, asset purchase agreement, and

bankruptcy court order.

       In sum, chapter 60.04 RCW authorizes the assignment of a construction

lien regardless of whether that lien has already been recorded. Saxum was

       10   Br. of Resp’t at 18.

                                          16
No. 81879-1-I/17

assigned the construction lien pursuant to the bill of sale and asset purchase

agreement, which was approved by the bankruptcy court.

        Accordingly, the trial court erred by releasing Saxum’s lien.11

                                               IV

        Saxum asserts that, because its lien was not frivolous, the superior court

erred by awarding attorney fees and costs to Lennar. We agree.

        In a summary frivolous lien proceeding, the prevailing party is statutorily

entitled to an award of attorney fees:

        If, following a hearing on the matter, the court determines that the
        lien is frivolous and made without reasonable cause, or clearly
        excessive, the court shall issue an order releasing the lien if
        frivolous and made without reasonable cause, or reducing the lien if
        clearly excessive, and awarding costs and reasonable attorneys’
        fees to the applicant to be paid by the lien claimant. If the court
        determines that the lien is not frivolous and was made with
        reasonable cause, and is not clearly excessive, the court shall
        issue an order so stating and awarding costs and reasonable
        attorneys’ fees to the lien claimant to be paid by the applicant.

RCW 60.04.081(4) (emphasis added); accord W.R.P. Lake Union Ltd. P’ship, 85

Wn. App. at 753 (“Attorney fees are mandatory for the prevailing party under

RCW 60.04.081(4).”).

        Additionally, we have interpreted RCW 60.04.081(4) to encompass

attorney fees incurred by the prevailing party on appeal. See, e.g., W.R.P. Lake

Union Ltd. P’ship, 85 Wn. App. at 753; Intermountain Elec., Inc., 115 Wn. App. at

395-96.

        11 Saxum also asserts that it was assigned the construction lien merely by purchasing the

account receivable from the bankruptcy trustee. According to Saxum, “it is the assignment of the
debt alone that confers Saxum’s rights as a lien claimant under RCW 60.04.” Br. of Appellant at
17. Because Saxum was assigned the construction lien under the plain terms of the asset
purchase agreement, we need not address this argument.

                                               17
No. 81879-1-I/18

       Because Saxum’s lien is not frivolous, the award of attorney fees to

Lennar is reversed. On remand, Saxum is entitled to an award of attorney fees

and costs for defending this action in both the superior court and on appeal.

       The remainder of this opinion has no precedential value. Therefore, it will

be filed for public record in accordance with the rules governing unpublished

opinions. See RCW 2.06.040.

                                         V

       We next address an argument that Lennar raised, but did not adequately

brief, on appeal. Additionally, we will attempt to provide guidance to the superior

court in the event that Lennar, on remand, advances the defenses of setoff or

recoupment against Saxum’s lien.

                                         A

       Lennar claims that, in order for Saxum to have been assigned Wall to

Wall’s lien, it must have also been assigned the subcontract that was executed

between Wall to Wall and Lennar. Lennar asserts that “[t]his is embodied in

statute in RCW 60.04.121, which notes, a lien or right of lien ‘shall be assignable

so as to vest in the assignee all rights and remedies of the assignor, subject to all

defenses thereto that might be made.’”12 According to Lennar, “[w]ithout the

assignment of the underlying contract, [Lennar] is precluded from raising all

defenses this assignment statute contemplates.”13 This argument was not

contained within the statement of the issues in Lennar’s brief as is required by

       12   Br. of Resp’t at 19.
       13   Br. of Resp’t at 19.

                                         18
No. 81879-1-I/19

RAP 10.3(b).14 Instead, the issue was raised in a perfunctory manner within a

section of the brief devoted to a different claim of error.

        Contrary to Lennar’s apparent belief, RCW 60.04.121 does not guarantee

a party against whom a construction lien is filed the right to assert any defense

whatsoever against the lien. Instead, the statute permits a party to advance

defenses that it is entitled to advance. Indeed, the statute provides that an

assigned construction lien is “subject to all defenses thereto that might be made.”

RCW 60.04.121 (emphasis added). To the extent that the bankruptcy court order

approving the asset purchase agreement extinguished any defenses or claims

that Lennar may have otherwise been able to advance, Lennar is not entitled to

advance such defenses or claims against Saxum’s lien.

                                                B

        The bankruptcy court order approving the asset purchase agreement

provided that the assets encompassed by the agreement were sold free and

clear of all claims. The basis for this was the bankruptcy court’s ruling: “The

Trustee may sell the assets free and clear of all liens, claims, and encumbrances

. . . because, in each case, one or more of the standards set forth in 11 U.S.C. §

363(f)(1)-(5) has been established.”

        14The statement of the issues in Lennar’s brief are:
        1. Whether the trial court was required to make findings of fact to determine
             Saxum’s lien was frivolous as a matter of law based on an undisputed
             record?
        2. Whether Saxum did not fall under the class of people contemplated by RCW
             60.04 to bring a claim of lien, rendering the claim of lien frivolous?
        3. Whether Saxum had no valid right of lien when no lien was filed by Wall to
             Wall Tile & Stone, LLC, upon conclusion of its work on the Project, rendering
             the claim of lien frivolous?
Br. of Resp’t at 2.

                                                19
No. 81879-1-I/20

       The cited authority provides:

       The trustee may sell property under subsection (b) or (c) of this
       section free and clear of any interest in such property of an entity
       other than the estate, only if—
              (1) applicable nonbankruptcy law permits sale of such
       property free and clear of such interest;
              (2) such entity consents;
              (3) such interest is a lien and the price at which such
       property is to be sold is greater than the aggregate value of all liens
       on such property;
              (4) such interest is in bona fide dispute; or
              (5) such entity could be compelled, in a legal or equitable
       proceeding, to accept a money satisfaction of such interest.

11 U.S.C. § 363(f).

       In an opinion not cited to us by either party, a federal circuit court

observed that, in the context of 11 U.S.C. § 363(f), “[c]ourts faced with the task of

defining the scope of the term ‘any interest’ have been unable to provide a

precise definition.” Folger Adam Sec., Inc. v. DeMatteis/MacGregor JV, 209 F.3d

252, 258 (3d Cir. 2000) (citing 3 COLLIER ON BANKRUPTCY ¶ 363.06[1]).

Nevertheless, the circuit court sought to give meaning to the term.

       The bankruptcy court order at issue therein was one approving the sale of

assets. It provided:

       “The sale of the Acquired Assets and the assignment of the
       Assigned Contracts to Purchaser is made free and clear of all liens,
       mortgages, security interests, encumbrances, liabilities, claims,
       or any other interests, other than the Assumed Liabilities, whether
       arising before or after the Petition Date.”

Folger Adam Sec., Inc., 209 F.3d at 257. In addition, the notice of auction that

preceded the sale “indicated that the sale was to be ‘free and clear’ of all claims

and other ‘interests’ that could be asserted against the Debtors.” Folger Adam

Sec., Inc., 209 F.3d at 255.

                                          20
No. 81879-1-I/21

        The circuit court opined that “the phrase ‘any other interests’” in the

bankruptcy court’s order “would not include [the defenses of] setoff and

recoupment[15] since those interests are not similar to those enumerated in the

Notice of Auction.” Folger Adam Sec., Inc., 209 F.3d at 260. Although the notice

of auction in that case provided that the sale was to be free and clear of all

claims, the circuit court reasoned that the Bankruptcy Code’s definition of claim

“requires an enforceable obligation of the debtor to pay the claimant.” Folger

Adam Sec., Inc., 209 F.3d at 260. Conversely, “a defense seeks to diminish a

claim or to defeat recovery rather than to share in it.” Folger Adam Sec., Inc.,

209 F.3d at 260 (citing BLACK’S LAW DICTIONARY 419 (6th ed. 1990)).

        However, and significantly, the circuit court suggests that a creditor may

advance the defenses of recoupment and setoff only with regard to debts that

arose prior to the commencement of the bankruptcy case.16

        15   “Recoupment and set-off rights are usually determined by state law.” In re Lawrence
United Corp., 221 B.R. 661, 669 (Bankr. N.D.N.Y. 1998). In Washington, the defense of
recoupment is “‘the keeping back or stopping something which is otherwise due, because the
other party to the contract has violated some duty devolving upon him in the same transaction.’”
J.A. Campbell Co. v. Holsum Baking Co., 15 Wn.2d 239, 253, 130 P.2d 333 (1942) (quoting
Nelson Co. v. Goodrich, 159 Wash. 189, 194, 292 P. 406 (1930)). Additionally, “when setoff is
asserted against an assignee [of a contract], it diminishes or defeats the assignee’s claim,
although the assignee has no liability in excess of the amount sued on.” Nancy’s Prod., Inc.
v. Fred Meyer, Inc., 61 Wn. App. 645, 650-61, 811 P.2d 250 (1991). Although Saxum was not
assigned the subcontract executed between Lennar and Wall to Wall, RCW 60.04.121 states that
an assigned construction lien is “subject to all defenses thereto that might be made.” A breach of
contract may form the basis of such a defense. See 33 DAVID K. DEWOLF & MATTHEW C.
ALBRECHT, W ASHINGTON PRACTICE: CONSTRUCTION LAW MANUAL § 14.38, at 315 (2d ed. 2018)
(listing breach of contract as a viable defense in a construction lien foreclosure proceeding); Pilch
v. Hendrix, 22 Wn. App. 531, 533, 591 P.2d 824 (1979) (holding that a breach of contract
counterclaim brought in a mechanics’ lien foreclosure proceeding was supported by substantial
evidence).
          16 With regard to the defense of recoupment, the Third Circuit stated that “we agree with

the Bankruptcy Court in In re Lawrence United Corp. and hold that a right of recoupment is a
defense and not an interest and therefore is not extinguished by a § 363(f) sale.” Folger Adam
Sec., Inc., 209 F.3d at 261. In the cited case, In re Lawrence United Corp., 221 B.R. at 671, the
bankruptcy court found that the creditor therein “does not have a right of recoupment against the
commissions earned postpetition.” The bankruptcy court determined that “[s]uch a result would

                                                 21
No. 81879-1-I/22

        Similarly, in Marley v. United States, 381 F.2d 738, 743 (Ct. Cl. 1967),17

the Court of Claims held that a bankruptcy sale of certain causes of action

against the United States “free and clear of liens” did not mean that the causes of

action “were sold free and clear of the Government’s already asserted right to

setoff.” (Emphasis added.) In that case, the government had asserted a right to

setoff in a contract dispute with the debtor in the Court of Claims prior to the

commencement of the bankruptcy proceeding. Marley, 381 F.2d at 741.

        We note that there is a dearth of published authority in the Ninth Circuit

regarding the issue of whether a defense is an “interest” within the context of 11

U.S.C. § 363(f). See, e.g., In re Fraser’s Boiler Serv., Inc., No. 3:18-CV-05637-

RBL, 2019 WL 1099713 (W.D. Wash. 2019) (unpublished)18 (“[A]n ‘interest in

such property’ includes ‘obligations that may flow from ownership of property’ or

‘obligations that are connected to, or arise from, the property being sold.’”

(quoting Folger Adam Sec., Inc., 209 F.3d at 258)). Accordingly, on this record

and briefing, it is unclear whether, or to what extent, the Third Circuit’s reasoning

in Folger Adam Sec., Inc., 209 F.3d 252, is applicable to the order entered by the

United States Bankruptcy Court for the District of Oregon with regard to Saxum’s

construction lien.

enable [the creditor] to receive better treatment than other general, unsecured creditors, a result
inconsistent with one of the [Bankruptcy] Code’s canons: equal treatment for similarly-situated
creditors.” In re Lawrence United Corp., 221 B.R. at 671.
         Additionally, the Third Circuit explained that, with regard to the defense of setoff, a
creditor “must prove that it actually took a setoff, the amounts and against which contracts, before
the bankruptcy filing. This does not mean it actually must have received funds, but that its
accounts receivable were reduced or offset.” Folger Adam Sec., Inc., 209 F.3d at 263.
         17 This case was also not cited to us by either party.
         18 This case was also not cited to us by either party.

                                                22
No. 81879-1-I/23

                                               C

       Given the inadequacy of the record and briefing on appeal, we decline to

decide whether Lennar is entitled to assert the defenses of setoff and

recoupment against Saxum’s lien. However, on remand, the superior court

should be aware of several things.

       First, the bankruptcy court order approving the asset purchase agreement

provides: “This Court shall retain jurisdiction to resolve any controversy or claim

arising out of or related to the implementation of this Order or the transactions

contemplated thereby.” Thus, the bankruptcy court retains jurisdiction to

determine whether the defenses of setoff and recoupment are “claims” within the

meaning of its order. Therefore, the question of whether Lennar is entitled to

assert the defenses of setoff and recoupment—either in this proceeding or in a

judicial foreclosure proceeding initiated pursuant to RCW 60.04.17119—appears

to be reserved to the bankruptcy court (not the superior court) by virtue of the

wording in the order itself.

       Second, even if the bankruptcy court’s ruling—namely, that the trustee

was authorized to sell all of the assets encompassed by the asset purchase

agreement free and clear of all claims—was erroneous, Lennar is not entitled to

dispute the validity of that ruling in state court. Indeed, when a “factual finding

       19RCW 60.04.171 provides, in part:
       The lien provided by this chapter, for which claims of lien have been recorded, may be
       foreclosed and enforced by a civil action in the court having jurisdiction in the manner
       prescribed for the judicial foreclosure of a mortgage. The court shall have the power to
       order the sale of the property. In any action brought to foreclose a lien, the owner shall
       be joined as a party. The interest in the real property of any person who, prior to the
       commencement of the action, has a recorded interest in the property, or any part thereof,
       shall not be foreclosed or affected unless they are joined as a party.

                                              23
No. 81879-1-I/24

[under 11 U.S.C. § 363(f)] is made but is erroneous, or the interested party

simply does not like the outcome of the sale, his only remedy is to collaterally

attack the order to sell free and clear.” In re DeCelis, 349 B.R. 465, 470 (Bankr.

E.D. Va. 2006) (emphasis added). “[T]he order approving a bankruptcy sale is a

judicial order and can be attacked collaterally only within the tight limits that Fed.

R. Civ. P. 60(b)[20] imposes on collateral attacks on civil judgments.”

FutureSource LLC v. Reuters Ltd., 312 F.3d 281, 286 (7th Cir. 2002).

Accordingly, should Lennar dispute whether the construction lien was assigned

to Saxum free and clear of all claims, Lennar must turn to the bankruptcy court

for resolution of the question.

        Third, in Lennar’s reply in support of its motion to release Saxum’s lien,21

Lennar stated that it “is not asking for setoff or recoupment damages.” Because

Lennar both affirmatively disclaimed the defenses of setoff and recoupment in

the superior court and failed to adequately brief on appeal whether it was entitled

to advance such defenses, the superior court may be called upon to determine

whether Lennar has forfeited any defense of setoff or recoupment. This

        20 Federal Rule of Bankruptcy Procedure 9024 states that “Rule 60 F. R. Civ. P. applies
in cases under the Code.” Federal Rule of Civil Procedure 60(b) provides, in part:
        (b) Grounds for Relief from a Final Judgment, Order, or Proceeding. On motion
        and just terms, the court may relieve a party or its legal representative from a
        final judgment, order, or proceeding for the following reasons:
                 (1) mistake, inadvertence, surprise, or excusable neglect;
                 (2) newly discovered evidence that, with reasonable diligence, could not
        have been discovered in time to move for a new trial under Rule 59(b);
                 (3) fraud (whether previously called intrinsic or extrinsic),
        misrepresentation, or misconduct by an opposing party;
                 (4) the judgment is void;
                 (5) the judgment has been satisfied, released, or discharged; it is based
        on an earlier judgment that has been reversed or vacated; or applying it
        prospectively is no longer equitable; or
                 (6) any other reason that justifies relief.
        21 A pleading filed in the superior court.

                                               24
No. 81879-1-I/25

determination will influence any further review we may conduct, given that “‘[i]t is

. . . the rule that questions determined on appeal, or which might have been

determined had they been presented, will not again be considered on a

subsequent appeal if there is no substantial change in the evidence at a second

determination of the cause.’” Folsom v. County of Spokane, 111 Wn.2d 256,

263, 759 P.2d 1196 (1988) (emphasis added) (quoting Adamson v. Traylor, 66

Wn.2d 338, 339, 402 P.2d 499 (1965)); see also RAP 2.5(c). We do not, at this

time, make any determination on the question.

       Fourth, in the event that Lennar is determined to be entitled to assert the

defenses of setoff or recoupment, Lennar must then establish that the right in

question arose before Wall to Wall filed for bankruptcy. See Folger Adam Sec.,

Inc., 209 F.3d at 261, 263; In re Lawrence United Corp., 221 B.R. 661, 669, 671

(Bankr. N.D.N.Y. 1998). This is a factual question that we cannot determine on

the present record.

       Reversed and remanded.

WE CONCUR:

                                         25