v. Johnston

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
March 22, 2018
2018COA44
No. 17CA0407, Minshall v. Johnston — Civil Procedure —
Process — Substituted Service
This case emphasizes that district courts entering C.R.C.P. 4(f)
orders must exercise meaningful discretion in determining whether
the person to whom process is delivered is properly designated for
substituted service under Rule 4(f). Thus, a division of the court of
appeals vacates the district court’s order denying David K.
Johnston’s motion to set aside the judgment and remands for the
district court to determine whether service on a registered agent of
a corporation founded by Johnston was “reasonably calculated to
give actual notice” to Johnston, as required by Rule 4(f).
COLORADO COURT OF APPEALS 2018COA44
Court of Appeals No. 17CA0407
City and County of Denver District Court No. 15CV34174
Honorable Catherine Lemon, Judge
Honorable Edward D. Bronfin, Judge
Richard G. Minshall and Vicky L. Minshall,
Plaintiffs-Appellees,
v.
David K. Johnston,
Defendant-Appellant.
ORDER VACATED AND CASE
REMANDED WITH DIRECTIONS
Division VII
Opinion by JUDGE BERGER
Bernard and Vogt*, JJ., concur
Announced March 22, 2018
Gleason Wells, P.C., Todd A. Wells, Denver, Colorado, for Plaintiffs-Appellees
Semmens Law, P.C., Damon M. Semmens, Denver, Colorado, for Defendant-
Appellant
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2017.
¶1 The district court entered a default judgment against defendant,
David K. Johnston, when he failed to respond to a complaint filed
by plaintiffs, Richard G. Minshall and Vicky L. Minshall. Johnston
was not personally served with process; instead, the court
permitted substituted service under C.R.C.P. 4(f) on the registered
agent of Aries Staffing LLC (Aries), a corporation of which Johnston
was a co-owner and shareholder.
¶2 Some six months after he claimed that he learned about the
entry of the default judgment, Johnston moved pro se to set it
aside. He vaguely asserted in the district court, and explicitly
argues here, that the judgment was void because the Minshalls did
not properly serve him with process. The district court denied the
motion and Johnston appeals.
¶3 We agree with most of the district court’s analysis. However, the
record is insufficient to determine whether service on Aries’
corporate agent for service of process, Incorp Services Inc. (Incorp),
was “reasonably calculated to give actual notice” of the case to
Johnston. See C.R.C.P. 4(f). Because that is an essential condition
of valid substituted service under Rule 4(f), we must vacate the
district court’s order denying Johnston’s motion to set aside the
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judgment and remand for the court to determine whether service on
Incorp was “reasonably calculated to give actual notice” to
Johnston. We reject all of Johnston’s other contentions.
I. Relevant Facts and Procedural History
¶4 The Minshalls alleged in their complaint that they made two
loans to Aries, neither of which was repaid. Johnston was not an
obligor on either loan.
¶5 Johnston was a co-founder and shareholder of Aries. The
Minshalls pleaded that Aries was Johnston’s alter ego and that
Johnston was liable for Aries’ debts, including the two loans. See In
re Phillips, 139 P.3d 639, 644 (Colo. 2006) (“Individual liability is
appropriate when the corporation is merely the alter ego of the
shareholder . . . .”). In addition to the alter ego claim, the Minshalls
pleaded claims of breach of contract and unjust enrichment against
Aries, and claims of promissory estoppel, deceit based on fraud or
false representation, and negligent misrepresentation against both
Aries and Johnston.
¶6 The Minshalls served Aries through its corporate agent for service
of process, Incorp. Aries defaulted, and the district court entered a
default judgment against Aries, which Aries did not appeal.
2
¶7 The Minshalls had great difficulty, however, attempting to serve
Johnston personally under C.R.C.P. 4(e). Because the Minshalls
were unsuccessful in personally serving Johnston, they moved to
serve him by mail, purportedly under Rule 4(f). The district court
correctly denied that motion because
Rule 4(f) does not allow for service on a party
by mail. Rather Plaintiffs’ motion must
identify a separate, appropriate person on
whom process will be hand delivered. Because
Plaintiffs’ Motion does not identify such a
person, substitute service under rule 4(f) is not
proper.
¶8 The Minshalls then filed an amended motion under Rule 4(f), this
time procedurally complying with that rule by designating a
“person,” Incorp, as the “appropriate person on whom process will
be hand delivered.” The court granted the amended motion and the
Minshalls served Johnston though Incorp as authorized by the
court’s order. (Incorp had already been served when service was
obtained on Aries, so it was served a second time.)
¶9 When Johnston failed to answer the complaint, the court entered
a default judgment against him. Months later, he moved pro se
(without identifying any particular rule in support of his motion) to
set aside the judgment, claiming he only learned of the complaint
3
when the Minshalls recorded a judgment lien on his property in
Georgia.
II. While The Minshalls Complied With Some of Rule 4(f)’s
Requirements, The Record Is Insufficient To Determine If All of
The Requirements Were Satisfied
¶ 10 Johnston raises the same argument on appeal (now through
counsel) that we liberally construe his motion to set aside the
default judgment to have raised before the district court that the
judgment entered against him is void for lack of jurisdiction under
C.R.C.P. 60(b)(3). See C.J.C. 2.6 cmt. 2; People v. Bergerud, 223
P.3d 686, 696-97 (Colo. 2010) (we must construe pro se arguments
liberally).
A. Applicable Law and Standard of Review
¶ 11 C.R.C.P. 55(c) provides that “[f]or good cause shown the court
may set aside an entry of default and, if a judgment by default has
been entered, may likewise set it aside in accordance with Rule
60(b).” Rule 60(b)(3) requires a court to set aside a void judgment
when a proper application is made. First Nat’l Bank of Telluride v.
Fleisher, 2 P.3d 706, 714 (Colo. 2000).
¶ 12 A judgment is either void or it is not. Accordingly, we review de
novo the district court’s ruling on a Rule 60(b)(3) motion. Goodman
4
Assocs., LLC v. WP Mountain Props., LLC, 222 P.3d 310, 314 (Colo.
2010). The burden to establish that a judgment is void is on the
party claiming the judgment is void, and that movant must
demonstrate the invalidity of the judgment by clear and convincing
evidence. Id. at 315.
¶ 13 Rule 4 prescribes the means by which a defendant must be
served with process. If service does not conform to Rule 4’s
requirements, the court does not obtain personal jurisdiction over
the defendant and any resulting judgment is void. Goodman
Assocs., 222 P.3d at 315.
¶ 14 Rule 4(f) recognizes that sometimes it will be difficult, if not
impossible, to obtain personal service on a defendant. Thus, the
rule prescribes an alternative method to effectuate service. Rule 4(f)
provides as follows:
In the event that a party attempting service of
process by personal service under section (e) is
unable to accomplish service, and service by
publication or mail is not otherwise permitted
under section (g), the party may file a motion,
supported by an affidavit of the person
attempting service, for an order for substituted
service. The motion shall state (1) the efforts
made to obtain personal service and the
reason that personal service could not be
obtained, (2) the identity of the person to
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whom the party wishes to deliver the process,
and (3) the address, or last known address of
the workplace and residence, if known, of the
party upon whom service is to be effected. If
the court is satisfied that due diligence has
been used to attempt personal service under
section (e), that further attempts to obtain
service under section (e) would be to no avail,
and that the person to whom delivery of the
process is appropriate under the circumstances
and reasonably calculated to give actual notice
to the party upon whom service is to be
effective, it shall:
(1) authorize delivery to be made to the person
deemed appropriate for service, and
(2) order the process to be mailed to the
address(es) of the party to be served by
substituted service, as set forth in the motion,
on or before the date of delivery. Service shall
be complete on the date of delivery to the
person deemed appropriate for service.
(Emphasis added.)
B. Analysis
1. The Due Diligence Requirement of Rule 4(f) Was Satisfied
¶ 15 In his motion to set aside the default judgment, Johnston stated
that “due to the fact that the Minshalls were fully aware of
[Johnston’s] location and non-affiliation with Aries Staffing LLC, the
service of process was improper.” We liberally construe this as
preserving the argument, which Johnston raises on appeal, that the
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Minshalls did not exercise due diligence in attempting to serve
Johnston personally, a necessary condition precedent to serving
him by substituted service under Rule 4(f).
¶ 16 It is undisputed that the Minshalls complied with the procedural
requirements of Rule 4(f) by filing an affidavit from the process
server detailing his numerous unsuccessful attempts to serve
Johnston. From this affidavit and the information in, or attached
to, the Minshalls’ motion for substituted service, the district court
found that the Minshalls had hired an investigator to identify
Johnston’s address and that another investigator had attempted to
serve Johnston four times at that address to no avail.
¶ 17 The Minshalls also investigated the address where Johnston’s
vehicle was registered and determined that he no longer lived there.
The Minshalls attempted to serve Johnston at Aries, his last known
“usual workplace,” but Aries’ offices were vacant. And the
Minshalls tried to contact Johnston through their son (who had
previously worked with Johnston) and through Johnston’s realtor.
¶ 18 Due diligence does not require that the plaintiffs actually succeed
in serving the defendant or that the plaintiffs exhaust every possible
option in attempting to do so. Willhite v. Rodriguez-Cera, 2012 CO
7
 29, ¶ 35. Instead, “‘[d]ue diligence’ is commonly understood as
‘[t]he diligence reasonably expected from, and ordinarily exercised
by, a person who seeks to satisfy a legal requirement or to
discharge an obligation.’” Owens v. Tergeson, 2015 COA 164, ¶ 44
(quoting Black’s Law Dictionary 553 (10th ed. 2014)).
¶ 19 This record overwhelmingly supports the district court’s finding
that the Minshalls exercised the diligence required by Rule 4(f).1
2. Johnston’s Argument that Incorp Is Not a “Person” Within The
Meaning of Rule 4(f) Is Not Properly Before Us
¶ 20 Johnston next argues that Incorp, the “person” on whom
substituted service was authorized by the court’s Rule 4(f) order,
was not a “person” and thus did not meet Rule 4(f)’s “person”
requirement.
¶ 21 Johnston did not make this argument in the district court and
while, as noted above, we (and the district court) must interpret pro
se pleadings and motions liberally, liberal construction does not
1 It is unnecessary for us to determine in this case the precise
standard of review applicable to a trial court’s determinations
underlying an order authorizing substitute service under C.R.C.P.
4(f) because we would reach the same conclusions irrespective of
which standard of review we apply: de novo, abuse of discretion, or
clear error.
8
include inventing arguments not made by the pro se party.
Because we do not address arguments made for the first time on
appeal, we do not further address this “person” argument. Estate of
Stevenson v. Hollywood Bar & Cafe, Inc., 832 P.2d 718, 721 n.5
(Colo. 1992); Silverview at Overlook, LLC v. Overlook at Mt. Crested
Butte Ltd. Liab. Co., 97 P.3d 252, 257 (Colo. App. 2004).
3. The Record Is Insufficient To Determine Whether The Person
On Whom Substituted Service Was Made Complied With
Rule 4(f)
¶ 22 Finally, in his motion to set aside the default judgment, Johnston
argued that it was improper for the Minshalls to serve Incorp when
they “were aware that [Johnston] [had] ended his affiliation with
Aries.” We liberally construe this as preserving the argument that
Johnston expressly makes on appeal: that substituted service on
Incorp (Aries’ registered agent) was not “reasonably calculated to
give actual notice” to Johnston of the suit.
¶ 23 In their amended (and lengthy) motion for substituted service,
the Minshalls addressed only cursorily the critical requirement of
Rule 4(f) that service on the designated person must be “reasonably
calculated to give actual notice” of suit to the named defendant.
The Minshalls’ only statement directed to that essential condition
9
was that “because Defendant Johnston is a co-owner of Aries,
service on Aries’ registered agent is appropriate under the
circumstances and is reasonably calculated to give Defendant
Johnston actual notice.”2
¶ 24 Under Colorado law, a corporation and its natural person
shareholders are distinct legal persons. Phillips, 139 P.3d at 643.
The Minshalls do not cite, and we have not found, any legal
authority supporting the proposition that service on the registered
agent of a corporation is sufficient, by itself, to effectuate valid
service on a “co-owner” of a corporation.
¶ 25 Giving effect to the legal separateness of a corporation and its
shareholders under Colorado law, we conclude that the fact that a
person is a shareholder of a corporation does not, without more,
render the corporation’s registered agent a proper person for
substitute service under Rule 4(f).3
2 In a different section of the Minshalls’ motion for substituted
service, they alleged that they attempted to serve one of “Johnston’s
partners/co-founders at Aries’ principal office” at least suggesting
that Johnston was a co-founder of Aries.
3 The fact that Johnston may also have been a “co-founder” of Aries
may have some relevance in determining whether service on Incorp
10
¶ 26 But we do not exclude the possibility that the nature of the
relationship between the registered agent, the corporation, and the
shareholder-defendant could justify substituted service on the
corporation’s registered agent.
¶ 27 For example, if the defendant were an active participant in the
affairs of the corporation, service on the corporation’s registered
agent might be “reasonably calculated to give actual notice” to the
defendant. Or, if the defendant has some separate relationship
with the registered agent, by contract, familial tie, or otherwise, the
registered agent may well be an appropriate person for substitute
service. See Willhite, ¶¶ 4-6 (discussing, but not ruling on, trial
court’s decision to grant substitute service on the Colorado-based
sister of a Mexican resident under Rule 4(f)). These examples are by
no means exclusive.
was “reasonably calculated to give actual notice” to Johnston under
Rule 4(f). But this information, either considered by itself or
coupled with the allegation that Johnston is a “co-owner,” is
insufficient to meet the Minshalls’ burden under Rule 4(f). For
example, if Johnston had been a founder of the corporation, but
had left the corporation years earlier, the fact that he was a
co-founder would appear to have little relevance to the “reasonably
calculated” inquiry.
11
¶ 28 The ultimate determination of whether service on the proposed
designated person is “reasonably calculated” to give notice to the
named defendant is a question the trial court must resolve before
authorizing service under Rule 4(f). But we emphasize that the trial
court’s duties in this respect are very limited. It is solely the
burden of the party seeking substitute service to allege sufficient
facts to support a determination that service on the proposed
designated person is “reasonably calculated to give actual notice” of
suit to the defendant.
¶ 29 The court is not required to investigate the alleged facts. It may
(indeed, it must because this is an ex parte proceeding) assume the
truth of the facts alleged by the moving party.
¶ 30 Viewed in this light, the record here is insufficient for us to
determine whether service on Incorp was “reasonably calculated to
give actual notice” to Johnston as required by Rule 4(f). Other than
showing that Aries engaged Incorp to act as its agent for service of
process, the record is devoid of any indication of a separate
relationship between Incorp and Johnston or other facts which
would support the required finding under Rule 4(f).
12
¶ 31 Accordingly, we remand this case to the district court to
determine whether service on Incorp under Rule 4(f) was
“reasonably calculated to give actual notice” to Johnston. The
question is not whether Incorp notified Johnston of the service or
suit; according to Johnston, that did not occur. Instead, the
question is whether, when the district court authorized substituted
service on Incorp, that service was “reasonably calculated to give
actual notice” to Johnston as required by Rule 4(f).4 In making this
determination on remand, the court, in its discretion, may hold a
hearing or require the Minshalls to provide additional information
in writing.
¶ 32 If the court finds that Incorp was not a person properly
designated for substituted service under Rule 4(f), the court must
4 We recognize that, in entering the default judgment against
Johnston, the district court also found that a copy of the process
was mailed to Johnston’s last known address, as required by Rule
4(f). The court’s findings rejecting Johnston’s arguments regarding
the sufficiency of the mailing are well supported by the record. But
mailing of process alone, as the court recognized when it properly
denied the original motion for substituted service, is not sufficient
to give the court jurisdiction over a defendant. C.R.C.P. 4(f). Only
when it is coupled with compliance with the other requirements of
Rule 4(f) is service by mail sufficient. Id.
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vacate the judgment against Johnston and allow Johnston to
defend against the allegations of the complaint. If, however, the
court finds that Incorp was a person properly designated for
substituted service under Rule 4(f), then the court’s order denying
Johnston’s motion to set aside the judgment will stand affirmed,
subject only to Johnston’s right to appeal the determinations made
on remand.
III. Conclusion
¶ 33 The order denying Johnston’s motion to set aside the default
judgment is vacated and the case is remanded for the further
proceedings directed above.
JUDGE BERNARD and JUDGE VOGT concur.
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