Judgment Enforcement, LLC v. King

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 19, 2020
2020COA43
No. 18CA2281, Namaste Judgment Enforcement, LLC v. King —
Civil Procedure — Process — Substituted Service
A division of the court of appeals interprets C.R.C.P. 4(f) —
“Substituted Service” — and holds that first-class mailing of the
summons and complaint to a substituted person does not
constitute sufficient “delivery” under Rule 4(f)(1) to effect valid
service under Rule 4(f)(2) or to confer personal jurisdiction to the
court. Accordingly, the district court’s order denying the motion to
vacate the default judgment is reversed, the judgment is vacated,
and the case is remanded for further proceedings.
COLORADO COURT OF APPEALS 2020COA43
Court of Appeals No. 18CA2281
Jefferson County District Court No. 10CV1510
Honorable Christopher C. Zenisek, Judge
Namaste Judgment Enforcement, LLC, as Assignee of Todd Oltmans and
Colleen McClary,
Appellee,
v.
Michael Keith King; Crown Investment Group, LLC, a Colorado limited liability
company; and Crown Development Group, LLC, a Colorado limited liability
company,
Defendants-Appellants.
ORDER VACATED AND CASE
REMANDED WITH DIRECTIONS
Division VI
Opinion by JUDGE FREYRE
Richman and Grove, JJ., concur
Announced March 19, 2020
Van Remortel LLC, Fred Van Remortel, Denver, Colorado, for Plaintiff-Appellee
Michael Best & Friedrich LLP, Patrick J. Bernal, Broomfield, Colorado, for
Defendants-Appellants
¶1 Defendants, Michael Keith King (Mr.King); Crown Investment
Group, LLC, (Crown Investment); and Crown Development Group
(Crown Development) — collectively, defendants — appeal the
district court’s order denying defendants’ motion to set aside a
default judgment. Mr. King was allegedly the sole owner of both
entities. The district court entered a default judgment against
defendants in 2010 when they failed to respond to a complaint filed
by plaintiffs, Todd Oltmans and Colleen McClary (investors).
Because Mr. King had left the country, investors were unable to
personally serve the defendants under C.R.C.P. 4(e), so investors
moved for substituted service under C.R.C.P. 4(f). The court
granted investors’ motion.
¶2 Mr. King returned to the United States in 2017 and learned of
the default judgment when Namaste Judgment Enforcement, LLC
(Namaste) — a collection agency to which investors had assigned
their judgment — served a writ of garnishment on his bank in 2018.
Once Mr. King discovered the default judgment, defendants moved
to set aside the default judgment under C.R.C.P. 60(b)(3) as void for
lack of proper service. After a hearing, the district court denied
defendants’ motion.
1
¶3 In this appeal, we must interpret C.R.C.P. 4(f) — “Substituted
Service” — to determine whether first-class mail of the summons
and complaint to Mr. King’s mother and brother-in-law constituted
sufficient “delivery of process” under Rule 4(f)(1) to effect valid
service under Rule 4(f)(2). We conclude that it did not. Accordingly,
we reverse the district court’s order denying the motion, vacate the
default judgment, and remand for further proceedings to allow
defendants to respond to the complaint.
I. Factual and Procedural Background
¶4 We draw the following factual history from investors’
complaint, subsequent motions filed by investors, and the
transcript of the hearing on defendants’ motion to vacate the default
judgment.
¶5 In 2007, Mr. King approached investors offering a “very
secure” investment opportunity with Crown Investment. On July
16, 2007, Mr. King, in his capacity as “Managing Member” of Crown
Investment, executed a promissory note whereby Crown Investment
promised to repay investors their $35,000 investment in the
company plus ten percent interest by August 17, 2007.
2
Unbeknownst to investors, Mr. King transferred investors’ $35,000
to Crown Development and not Crown Investment.
¶6 Just before the note was due, Mr. King asked investors to
extend the payment deadline in exchange for additional interest.
Investors refused. Mr. King then promised to pay them within a
matter of days but failed to do so, citing numerous reasons. About
eight months after payment was due, investors received a check
from Mr. King drawn on a Crown Investment bank account in the
amount of $68,075. The check was returned for insufficient funds.
¶7 On March 30, 2010, investors filed a complaint in district
court seeking to recover the promised funds. Although Crown
Investment was the only signatory on the note, investors also
brought claims against Crown Development and Mr. King under
piercing the corporate veil and alter ego theories. Near the end of
April 2010, Mr. King moved from Parker, Colorado, to Costa Rica,
and remained out of the country for approximately seven years
3
before returning to the United States and settling in Ashland,
Oregon, in October 2017.1
¶8 After filing the complaint, investors unsuccessfully attempted
to serve defendants. They began by attempting service at the
addresses on file at the Colorado Secretary of State’s office for
Crown Investment and Crown Development, and at Mr. King’s
personal residence in Parker, Colorado. The process server found
the businesses’ addresses vacant and the personal residence
surrounded by a fence and gated driveway that prevented access to
the home.
¶9 Investors retained a second process server, who conducted
surveillance of Mr. King’s residence. According to the second
process server, he spoke with Mr. King’s tenant who lived at that
address. The tenant claimed that many other process servers were
trying to serve Mr. King and that Mr. King was on an extended
1 In the district court, Mr. King testified that he and his family
traveled internationally for several years before returning to the
United States. They lived in Costa Rica for a year and a half and
then moved to Belize for seven months. After Belize, they moved to
Bali, Indonesia, and remained there for four years before moving to
British Columbia, Canada, for a year. The Kings returned to the
United States in October 2017.
4
vacation. Concluding that Mr. King was avoiding service of process,
the process server then performed skip traces that showed that Mr.
King had continued using the personal address in Parker to secure
credit.
¶ 10 On July 22, 2010, investors filed a “Motion for Substituted
Service on All Defendants” pursuant to C.R.C.P. 4(f). They
requested authorization to send the summonses and complaint “as
substituted service under Rule 4(f) by U.S. Mail” to: (1) Mr. King’s
personal address in Parker; (2) Mr. King’s mother in Illinois; (3) Mr.
King’s second known address; (4) Mr. King’s last known work
address; (5) to Mr. King’s brother-in-law in Colorado. Presumably,
investors sought to substitute Mr. King’s mother and brother-in-law
for Mr. King and the other two defendants; however, the motion did
not explain why service on those substituted persons was
reasonably calculated to give actual notice to Mr. King. The court
granted the motion on July 28, 2010, and according to investors’
counsel, the only mail that was returned as undeliverable was the
one sent to Mr. King’s personal address in Parker. Counsel
provided no tracking or mail delivery confirmation documenting the
receipt of the other mailings.
5
¶ 11 Neither Mr. King nor his businesses filed an answer or other
responsive pleading by the August 20, 2010 deadline.
Consequently, on September 1, 2010, investors filed a “Motion for
Default Judgment Against All Defendants.” On September 14,
2010, the district court granted the motion and entered judgment in
the amount of $113,384.27, plus interest at the statutory rate of
8% “until this judgment is paid in full, along with costs of collection
to include attorney fees.” The note did not contain any fee-shifting
language. In April 2017, investors assigned the judgment to
Namaste.
¶ 12 In 2018, Namaste located Mr. King. Namaste obtained a “Writ
of Garnishment with Notice of Exemption and Pending Levy” in the
amount of $200,133.01 to seize funds from Mr. King’s Chase bank
account. It served the writ on Mr. King in May 2018.
¶ 13 On August 31, 2018, defendants moved to set aside the
default judgment under C.R.C.P. 60(b)(3) and asserted that the
judgment was void. Citing a violation of the right to due process,
defendants claimed that investors had not exercised due diligence
in determining that Mr. King could not be personally served and
had failed to personally serve him. After a hearing, the district
6
court found that investors had exercised due diligence in
attempting personal service of process, and that they had “sent the
documents to five different addresses including [those of] two close
family members.” The court denied defendants’ motion.
II. Motion to Set Aside Default Judgment
¶ 14 Defendants contend that the court erred by finding sufficient
service of process and by denying their motion to set aside the
judgment. They argue that service was invalid because investors’
counsel failed to personally serve the substituted persons in
accordance with Rule 4(f)(1). We agree and hold that first-class
mailing to a substituted person is insufficient delivery of process to
satisfy due process and effect valid service.
A. Standard of Review and Relevant Law
¶ 15 We review de novo a district court’s decision to grant relief
from a judgment under C.R.C.P. 60(b)(3) on the basis that it is void,
specifically when, as here, a party alleges lack of personal
jurisdiction due to improper service of process. Goodman Assocs.,
LLC v. WP Mountain Props., LLC, 222 P.3d 310, 314 (Colo. 2010).
¶ 16 We apply statutory construction principles when interpreting
procedural rules, beginning with the commonly understood and
7
accepted meanings of their words, otherwise known as their plain
language. Curry v. Zag Built LLC, 2018 COA 66, ¶ 23. If the rule is
“clear and unambiguous on its face, then we need not look beyond
the plain language.” Vigil v. Franklin, 103 P.3d 322, 327 (Colo.
2004). We will also endeavor to “give effect to every word and
render none superfluous.” Lombard v. Colo. Outdoor Educ. Ctr., Inc.,
187 P.3d 565, 571 (Colo. 2008).
¶ 17 C.R.C.P. 55(c) permits a court, for good cause shown, to “set
aside an entry of default and, if a judgment by default has been
entered, [the court] may likewise set it aside in accordance with
Rule 60(b).” As relevant here, Rule 60(b) provides that “the court
may relieve a party. . . from a final judgment, order, or proceeding
for the following reasons . . . (3) the judgment is void.” C.R.C.P.
60(b)(3). A default judgment is void if it “entered when the trial
court lack[ed] personal jurisdiction over a defendant because of
invalid service of process.” Rainsberger v. Klein, 5 P.3d 351, 353
(Colo. App. 1999) (citing Weaver Constr. Co. v. Dist. Court, 190 Colo.
227, 545 P.2d 1042 (1976)). “Where a judgment is set aside on
jurisdictional grounds, it is vacated and of no force and effect.”
Weaver, 190 Colo. at 232, 545 P.2d at 1045.
8
¶ 18 It is well settled that a judgment entered against a defendant
without valid service of process violates due process of law and is
void. Id. When a party has attempted, but is unable to, accomplish
personal service under Rule 4(e), such party may move for
substituted service under Rule 4(f). Willhite v. Rodriguez-Cera, 2012
CO 29, ¶¶ 20-22. 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
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
9
(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
¶ 19 In their motion for substituted service, investors explained
their process servers’ efforts to personally serve Mr. King. In
paragraph 10, they proposed “to send the summonses and
complaints for the three Defendants as substituted service under
Rule 4(f) by U.S. Mail as follows . . . .” As pertinent here, they listed
Mr. King’s mother and her Illinois mailing address, as well as Mr.
King’s brother-in-law and his Colorado address. By granting the
motion, we presume the court authorized delivery of process to each
of these individuals as an appropriate substituted person under
Rule 4(f).
¶ 20 At the hearing on the motion to vacate the default judgment,
investors’ counsel stated that the only mail returned as
undeliverable was the one sent to the Parker residence.
Nevertheless, counsel admitted that none of the documents was
10
sent by certified mail or another tracking method that could confirm
receipt by the substituted person. Indeed, Mr. King’s mother
provided an affidavit stating that she did not recall ever receiving
these documents. Moreover, Mr. King provided an affidavit stating
that he had no knowledge of whether his brother-in-law had
received service because he and his brother-in-law had not been on
speaking terms since the summer of 2010.
¶ 21 The plain language of Rule 4 recognizes that it may “be
difficult, if not impossible, to obtain personal service on a
defendant” under Rule 4(e) and thus prescribes an alternate
method to effectuate service under Rule 4(f). Minshall v. Johnston,
2018 COA 44, ¶ 14. However, our supreme court has made clear
that “the completion and validity of service” under the rule “is
linked to the delivery of process to the substituted person and not
to the mailing of process to the defendant.” Willhite, ¶ 24.
¶ 22 Relying on Minshall, Mr. King contends that “delivery” on the
substituted person under Rule 4(f)(1) requires hand delivery and
cannot be accomplished by first-class mailing. See Minshall, ¶ 7
(“Rule 4(f) does not allow for service on a party by mail. Rather
Plaintiffs’ motion must identify a separate, appropriate person on
11
whom process will be hand delivered.” (Emphasis added.)) Because
we must read the rule as a whole and must construe all of its
provisions consistently, we agree and hold that first-class mailing to
the substituted person under Rule 4(f)(1) does not effect valid
service of process under Rule 4(f)(2). See People v. Dist. Court, 713
P.2d 918, 921 (Colo. 1986) (recalling that courts interpret statutes
“so as to give consistent, harmonious, and sensible effect to all its
parts”); Int’l Satellite Commc'ns, Inc. v. Kelly Servs., Inc., 749 P.2d
468, 470 (Colo. App. 1987) (noting “[r]ules of civil procedure are to
be construed as a whole, and a reviewing court must adopt a
construction consistent with the purpose of the rules”); see also
Curry, ¶ 23 (applying statutory construction principles to
procedural rules).
¶ 23 First, Rule 4(e) describes how personal service is
accomplished, and no one disputes that personal service requires
“delivering a copy . . . to the person” or to that person’s agent (hand
delivery). See Rule 4(e)(1).
¶ 24 Next, the Rule recognizes that personal service cannot always
be accomplished. Accordingly Rule 4(f) provides for service on a
substituted person. But it does so by authorizing “delivery to be
12
made to the person deemed appropriate for service.” Rule 4(f)(1).
Reading the rule as a whole, the only distinction between Rule 4(e)
and 4(f) is the identity of the person served, not the method of
service. Indeed, if the supreme court had believed first-class
mailing to a substituted person was sufficient, it would have said so
as it did with respect to service on the defendant under Rule 4(f)(2).
See City of Colorado Springs v. Securcare Self Storage, Inc., 10 P.3d
1244, 1249 (Colo. 2000) (noting “the principle that courts presume
that the legislative body meant what it clearly said”).
¶ 25 We find further support for our interpretation in Rule 4(g),
which is the only provision that authorizes service by mail. It states
“Except as otherwise provided by law, service by mail or publication
shall be allowed only in actions affecting specific property or status
or other proceedings in rem.”
¶ 26 And when a court finds service by mail appropriate, it “shall
order the party to send by registered or certified mail a copy of the
process addressed to such person at such addresses, requesting a
return receipt signed by the addressee only.” Rule 4(g)(1). Because
“shall” is mandatory language, first-class mailing is never permitted
under Rule 4 — only registered or certified mail is permitted,
13
neither of which occurred here. See DiMarco v. Dep't of Revenue,
Motor Vehicle Div., 857 P.2d 1349, 1352 (Colo. App. 1993) (“[u]nless
the context indicates otherwise, the word ‘shall’ generally indicates
that the General Assembly intended the provision to be mandatory”)
(citations omitted).
¶ 27 Therefore, and consistent with Minshall, we hold that first-
class mailing to a substituted person under Rule 4(f)(1) does not
effect valid service of process under Rule 4(f)(2) and that hand
delivery to the substituted person is required. Accordingly, the
default judgment is void as a matter of law. See Weaver, 190 Colo.
at 232, 545 P.2d at 1045.2
¶ 28 Because we conclude that the judgment is void, we need not
address Namaste’s argument that defendants cannot obtain relief
from the judgment under Rule 60(b) unless they show that they
have a meritorious defense. Id. (“[W]here a judgment is set aside on
grounds other than those challenging the jurisdiction of the court,
the judgment is opened and the moving party, after a showing of
2 We do not consider whether service on a corporate entity may be
effected through substituted service on a relative of the entity’s sole
owner because neither party raises that issue on appeal.
14
good cause and a meritorious defense, will be permitted to file an
answer to the original complaint and participate in a trial on the
merits. Where a judgment is set aside on jurisdictional grounds, it
is vacated and of no force and effect.”); Mason-Jares, Ltd. v.
Peterson, 939 P.2d 522, 524 (Colo. App. 1997) (once a party
establishes that a judgment is void, it is unnecessary to establish a
meritorious defense); see also Shannon v. Norman Block, Inc., 256
A.2d 214, 219 (R.I. 1969) (it is “well settled that there is no
necessity to make any showing of a meritorious defense where a
litigant moves to vacate a void judgment”). Nor must we address
the defendants’ remaining contentions regarding due diligence and
due process.
III. Conclusion
¶ 29 The order is reversed, the default judgment is vacated, and the
case is remanded for further proceedings to allow Mr. King and the
other defendants to respond to the complaint.
JUDGE RICHMAN and JUDGE GROVE concur.
15