C & C Investments, LP v. Martha L. Hummel

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
April 14, 2022
2022COA42
No. 20CA1879, C & C Inv. v. Hummel — Real Property —
Common Interest Communities — Homeowners Associations —
Dues — Foreclosure Sales — Right to Cure; Civil Procedure —
Process — Service by Publication; Constitutional Law — Due
Process
A division of the court of appeals considers whether a
homeowners association, before proceeding with a foreclosure sale,
is constitutionally required to do more than serve notice by mailing
and publication. Applying the reasoning of Jones v. Flowers, 547
U.S. 220 (2006), the division concludes that due process requires
homeowners associations to make a good faith, rather than highly
technical, effort to effectuate actual notice to a homeowner before
foreclosing on their property. When, as in this case, a homeowners
association does not take reasonably calculated steps to serve an
owner with actual notice before proceeding with a foreclosure, the
trial court does not have jurisdiction, and any resulting judgment,
sheriff’s sale, and confirmation deed are void ab initio.
Consistent with Colorado’s foreclosure statutes and Oakwood
Holdings, LLC v. Mortgage Investments Enterprises LLC, 2018 CO
12, the division vacates the trial court’s order granting a
post-foreclosure right to cure but affirms the court’s order vacating
the default judgment, sheriff’s sale, and confirmation deed for lack
of jurisdiction.
COLORADO COURT OF APPEALS 2022COA42
Court of Appeals No. 20CA1879
Larimer County District Court No. 17CV30536
Honorable Daniel M. McDonald, Judge
C & C Investments, LP,
Appellant,
v.
Martha L. Hummel,
Defendant-Appellee.
ORDERS AFFIRMED IN PART AND VACATED IN PART
Division I
Opinion by JUDGE SCHUTZ
Dailey and Fox, JJ., concur
Announced April 14, 2022
Hatch Ray Olsen Conant, LLC, Christopher J. Conant, Denver, Colorado, for
Appellant
Law Office of Ingrid J. DeFranco, Ingrid J. DeFranco, Brighton, Colorado, for
Defendant-Appellee
¶1 More than 2.6 million Colorado residents live in communities
governed by covenants that are administered by a homeowners
association. Colo. Div. of Real Est., HOA Info. & Res. Ctr., 2021
Annual Report 8, https://perma.cc/CQN4-J846. This case
presents two important issues related to the foreclosure on a
residence for purposes of collecting outstanding homeowners
association dues. First, we address whether a trial court may
exercise its equitable powers to grant a property owner a post-
foreclosure right to cure. Following established precedent
interpreting our current statutes, we answer “no” to that question
and vacate the trial court’s order. Next, we address whether a
homeowners association, before proceeding with a foreclosure, is
constitutionally required to do more than serve notice on the
homeowner by mail and newspaper publication. Based upon the
facts presented, we answer that question “yes” and therefore affirm
this order, albeit for different reasons than those provided by the
trial court.
I. Factual Background
¶2 The pertinent facts of this case are unique and undisputed. In
1999, Martha L. Hummel purchased a home in Loveland, Colorado.
1
The home was subject to declarations and covenants that imposed
monthly homeowners association dues. Amended Windsong
Homeowners Association, a Colorado nonprofit corporation (HOA),
administered the covenants.
¶3 Hummel’s relationship with the HOA was uneventful for the
first fifteen years of her occupancy. She timely paid her mortgage
and association dues through automatic withdrawals from her
checking account. In 2011, Hummel’s sister, the only person with
whom she socially interacted, relocated from Wyoming to Georgia.
Hummel’s mental health progressively deteriorated. Suffering from
severe depression, she shut herself in her home for the next eight
years.
¶4 Hummel never left her home during this period. She did not
shower or change clothing during the entire time she was cloistered;
she did not answer the door unless to accept delivery of the pizzas
she had ordered; she stacked every pizza box around the home and
never took trash or refuse to the curb for collection; and she did not
retrieve her mail, so the post office eventually discontinued service
to her home.
2
¶5 During this period, Hummel paid all her bills via
autopayments from her checking account or credit card, including
her mortgage, property taxes, and HOA dues. She screened her few
phone calls through an answering machine. Periodically,
authorities were contacted to check on her welfare, and she
returned at least one phone call to adult protective services,
reassuring them that she needed no assistance.
¶6 In 2014, the HOA hired a new management company.
Hummel was not aware of this change and was also unaware that
the automatic withdrawal authorization she had previously put in
place was no longer viable. Because Hummel had not authorized
payments to the new management company, her HOA dues were no
longer being paid and her HOA account soon fell into arrears. She
did not receive the letters the HOA sent her advising of the
deficiencies and demanding payment.
¶7 During this time, Hummel continued to pay her other
outstanding bills. She had nearly paid off her mortgage. Although
no formal appraisal was presented to the trial court, an HOA
representative testified that homes in her neighborhood were valued
between $250,000 and $300,000.
3
II. The Lawsuit
¶8 On May 18, 2017, the HOA’s governing board voted
unanimously to commence a foreclosure action based upon
Hummel’s years of unpaid HOA dues totaling approximately $7,000.
On June 28, 2017, the HOA filed suit against Hummel and her
mortgage lender, First National Bank of Arizona, for judicial
foreclosure and mailed the complaint and summons to Hummel.
The papers were returned “undeliverable.” In September of 2017,
the HOA filed a motion for extension of time to serve Hummel. The
motion was accompanied by an affidavit from a process server
indicating that he had unsuccessfully attempted to personally serve
Hummel in July of 2017 on four separate occasions. The court
granted the requested extension. Despite the extension, the HOA
made no additional efforts to personally serve Hummel.
A. The HOA’s Efforts to Serve Hummel by Publication
¶9 On November 14, 2017, the HOA filed a motion requesting
permission to serve Hummel and her lender by publication. The
motion referred to prior efforts to effectuate personal service on
Hummel stating, “[a] search has been made of the public records of
Larimer County, Colorado and its surrounding counties, and of the
4
telephone and other available directories, and various inquiries
have been made to obtain information concerning the whereabouts
of Defendant Hummel . . . to no avail.” The motion provided no
further description or documentation of the HOA’s efforts to
personally contact Hummel. On December 3, 2017, the trial court
granted the HOA’s motion for service by publication. Accordingly,
notice of the foreclosure was published in the Loveland Reporter
Herald. Because Hummel did not receive the newspaper and did
not have the ability to access it online, she did not receive actual
notice of the foreclosure suit.
B. The HOA’s Motion for Foreclosure by Default
¶ 10 In May of 2018, the HOA filed a motion for default judgment
and a decree of foreclosure. The trial court held a hearing to
address the motion on September 27, 2018, which counsel for the
HOA and an HOA representative, but not Hummel, attended. At the
hearing, the court found that neither Hummel nor her mortgage
lender had been personally served. In explaining the lack of
personal service, counsel for the HOA informed the court,
It sounds like she’s somewhat eccentric.
They’ve tried to do wellness checks through
the sheriff’s office. And each time she will call
5
just prior to the sheriff’s arrival, say everything
is okay. But she seems to be somewhat of a
recluse. She orders pizza to be delivered daily.
And so that is going to be at least some of the
reasons why personal service couldn’t be
affected [sic]. But I would obviously have to
make sure that other avenues of due process
were, were met in order to proceed with a
decree of foreclosure here.
(Emphasis added.)
¶ 11 The trial court expressed deep concern about granting the
remedy of foreclosure without providing additional notice to
Hummel:
Well, and also what I would require before I
would even ever consider ordering a sale; is if
you can’t get personal service and I know
you’ve tried publication . . . I would also
[require] you to look back into serving the
mortgagee . . . which apparently is First
National Bank of Arizona. And then also post,
at the very least, posting on the property itself,
on the front door, notice of what’s going on here
and that there is a default judgment that’s
being entered and there’s a lien and there’s a
request[] to foreclose on the house.
(Emphasis added.)
¶ 12 Thus, the trial court required that the HOA post notice “on the
front door” of the property before it would authorize the foreclosure
by default. The HOA’s counsel then reiterated the court’s order: “So
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just so I’m clear on my marching orders, you want to confirm that
we’ve had proper posting, and if not, post it to the property,
re-examine what had been done to serve the mortgagor [sic].” The
court confirmed counsel’s understanding.
C. A Default Foreclosure Judgment Entered Against Hummel
¶ 13 Shortly after this hearing, new counsel entered an appearance
for the HOA. On October 18, 2018, this attorney filed an amended
motion for default asserting, “[a]ll named Defendants were duly and
properly served. True and correct copies of the Affidavits of Service
and Proof of Publications are on file with the Court and are
incorporated herein by reference.” The amended motion also cited
legal authority permitting a homeowners association to collect its
assessment lien through the remedy of foreclosure. The amended
motion did not address, however, the court’s prior order that the
notice must also be posted on the property before any foreclosure
would be permitted.
¶ 14 On February 28, 2019, without further hearing, the court
granted the HOA’s motion for default judgment and decree of
foreclosure. In granting the motion, the court noted, “though
Plaintiff is not required to post a copy of the summons and
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complaint on Defendant’s property, Plaintiff did not use this method
of publication. However, the court finds that all named Defendants
were duly and properly served.” The court did not mention its prior
order requiring that the notice be posted on the property before
foreclosure would be permitted. Nor did the court vacate its prior
order or state that the posting requirement had been fulfilled. The
court completed the order with this notation,
under C.R.S. 38-38-103, entering a decree of
foreclosure does not allow for immediate sale
of the Property, and Defendant Hummel will
have an opportunity to cure the default prior
to the sale. Both named Defendants will be
provided with significant opportunity to pay
the outstanding balance and avoid the sale of
the Property.
¶ 15 A sheriff’s sale of Hummel’s home was conducted on June 25,
2019. Contrary to the trial court’s assumption when it granted the
foreclosure by default, the record contains no evidence suggesting
Hummel received actual notice, whether by mail or posting, before
the sheriff’s sale. At the sale, C & C Investments, LP (C & C),
purchased Hummel’s home for $19,360.10.
8
D. Hummel’s Motion to Set Aside the Default Judgment
¶ 16 On August 15, 2019, C & C posted a notice to quit on
Hummel’s front door. Hummel saw the notice, immediately
contacted an attorney, and on August 29, 2019, filed an affidavit
with the court asserting she had never been properly served and a
motion to set aside the default judgment on the grounds of fraud
under C.R.C.P. 60(b)(2).
¶ 17 The court set an evidentiary hearing to address the motion to
set aside the default judgment. Because of COVID-19 protocols, the
hearing was delayed for several months. During that period, the
presiding judge for the case changed because of the district’s
rotating docket policy. Eventually, the hearing was scheduled and
held before a new judge on July 6, 2020. By that time, C & C had
been permitted to intervene in the proceedings but had not filed any
claims for relief. Leading up to the hearing, the court entered an
order advising the parties:
The Court finds that the sole issue currently
before it is whether the default should be set
aside. The issue of the Sheriff’s sale and title
to the property is a separate issue that has
been raised but not in a way that would allow
the matter to proceed to hearing on July 6,
9
2020 unless both parties agree to have that
issue heard as well.
¶ 18 Consistent with this directive, at the commencement of the
hearing, the court clearly stated it would only address whether
there were grounds to vacate the default judgment in favor of
Hummel and would not address any claim to set aside the sheriff’s
sale until a later date.
¶ 19 Also, at the start of the hearing, the court acknowledged that it
had been informed that the HOA and Hummel had reached an
agreement resolving the HOA’s claims that, once consummated,
would result in the dismissal of the claims against Hummel. As
part of this resolution, the HOA agreed not to oppose Hummel’s
request to vacate the default judgment. Thus, the HOA did not
actively participate in the hearing. Nonetheless, the court permitted
C & C to participate.
¶ 20 After addressing these preliminary matters, the court
proceeded to hear the parties’ evidence.
E. The Trial Court’s Findings and Conclusions
¶ 21 At the completion of the evidence and after closing arguments,
the court entered findings of fact and conclusions of law. The court
10
began by ruling that even though the motion to set aside the default
judgment was expressly filed under C.R.C.P. 60(b)(2), Hummel had
adequately preserved her right to challenge the judgment under all
subparts of Rule 60(b).
¶ 22 Referencing the prior court order directing the HOA to post
notice on Hummel’s property, the court noted, “I think the court
was very clear that she wanted service by posting on the door. And
then later found that it wasn’t necessary, based on the fact that
there was a posting on the door.”1 The court found Hummel’s
testimony “very compelling.” The court credited her statement that
during this period she was suffering from debilitating mental illness
and that she had never received notice of the lawsuit or the
subsequent foreclosure proceedings until the summer of 2019,
when the eviction notice was posted on the door.
¶ 23 The court also heard testimony from the HOA’s process server,
who had filed an affidavit indicating he attempted service upon
Hummel on four occasions over a sixteen-day period in July of
1Despite the statement, there is no evidence in the record to
support the conclusion that the notice was ever posted on the
property. Indeed, the parties agree it was not.
11
2017. The court found this testimony “not very compelling” due to
the process server’s inability to correctly describe Hummel’s home,
cite the time of day he attempted service, or recall if he stayed
longer than sixty seconds at Hummel’s door.
¶ 24 Based upon these findings, the court concluded Hummel had
demonstrated excusable neglect for her failure to timely file an
answer, that she had a viable defense on the merits, and that there
were “extraordinary circumstances” justifying setting aside the
default judgment under Rule 60(b)(1) and (5).
¶ 25 In addition to finding excusable neglect and extraordinary
circumstances, the court stated, “I do not believe there is good
cause to set aside under 60(b)(2), or (3) or (4).” But, in making this
statement, the court made no reference as to whether it had
personal jurisdiction over Hummel. After its ruling, the court
reiterated it was not addressing the status of the sheriff’s sale
because “that’s a separate issue that requires a different amount of
evidence, different standards, [and] different information before the
court.” It ordered additional briefing by both parties on the issue of
whether the court should nullify the sheriff’s sale and resulting
deed and scheduled a hearing date to resolve that issue.
12
¶ 26 On September 11, 2020, after receiving the requested briefs,
the court sua sponte entered an order granting Hummel fifteen days
to file a notice of intent to cure the foreclosure sale.2 Upon payment
of the cure amount, Hummel was ordered to file a status update
with the court, after which the court would declare the sheriff’s sale
and confirmation deed void and quiet title in Hummel. Hummel
subsequently tendered the cure funds, and the court, in turn,
issued an order to quiet title in her favor and voided the sheriff’s
deed. That same day, the court denied C & C’s motion to
reconsider the cure order, which asserted the court had no
discretion to afford Hummel a post-sale right to cure under current
Colorado law.
2 The trial court labeled the remedy it was affording Hummel as a
right to cure. As discussed in more detail below, historically an
owner had both a statutory right to cure prior to a foreclosure sale
and a post-foreclosure right to redeem. In 2008, however, the
General Assembly “eliminated a homeowner’s formal statutory
redemption rights after the foreclosure sale and . . . combined the
pre-and post-sale cure periods into one before-sale cure and payoff
period.” Oakwood Holdings, LLC v. Mortg. Invs. Enters. LLC, 2018
CO 12, ¶ 8. Even though the trial court’s remedy was to be
exercised after the foreclosure sale, for the sake of consistency, we
will refer to it as a “cure” right rather than a right of redemption.
13
¶ 27 C & C now appeals the trial court’s order affording Hummel a
post-sale cure opportunity and providing that, upon such cure, the
sheriff’s sale and resulting confirmation deed would be vacated.
III. Was the Trial Court’s Order Authorizing the Post-Sale Cure
Proper?
¶ 28 C & C argues that the trial court erred by affording Hummel a
post-foreclosure cure opportunity. We agree.
A. Standard of Review
¶ 29 A trial court abuses its discretion when it misconstrues the
law. People v. Salas, 2017 COA 63, ¶ 30. An appellate court
reviews a trial court’s application of the law de novo yet defers to
the court’s factual findings, which it will not disturb if they have
record support. People v. Fuerst, 2013 CO 28, ¶ 10.
B. Analysis of the Post-Sale Cure Right Granted by the Trial
Court
¶ 30 Colorado’s foreclosure statutes apply to foreclosures processed
by a public trustee or by a sheriff and govern all processes by which
a sheriff’s sale occurs. § 38-38-701(1), C.R.S. 2021. C & C argues,
and we agree, that the trial court was required to comply with
section 38-38-104, C.R.S. 2021, when determining whether to allow
Hummel to cure. Section 38-38-104 expressly permits an owner to
14
cure, but to exercise that right, an owner must provide notice of
intent to cure at least fifteen days prior to the sale, § 38-38-104(1),
and the cure sums must be paid by noon on the day before the
scheduled sale date, § 38-38-104(2)(b). It is true that Colorado’s
foreclosure statutes previously permitted an owner both a pre-sale
right to cure and a post-sale right to redeem. § 38-38-302, C.R.S.
1990. But the General Assembly eliminated an owner’s post-sale
right to redeem in 2008. Compare Ch. 275, sec. 2, § 38-38-302,
1990 Colo. Sess. Laws 1664-65, with Ch. 305, sec. 21, § 38-38-302,
2006 Colo. Sess. Laws 1467. Thus, when the trial court entered its
order, an owner had no statutory right to cure after the foreclosure
sale.
¶ 31 The trial court was aware of the statutory requirement that a
cure must be exercised prior to sale. The court’s order stated that
Hummel could exercise the right to cure it was creating
“notwithstanding any subsections, such as subsections 38-38-
104(1), (2)(a)(1) or (b), which require cure to be made prior to sale.”
Thus, the trial court was purporting to authorize a remedy that the
General Assembly had previously eliminated.
15
¶ 32 We appreciate that the trial court was laboring under the belief
that it could fashion an equitable remedy to address the
circumstances of this case. But regardless of how it perceived its
equitable powers and the equities of this situation, the trial court
was not at liberty to create a remedy that did not statutorily exist.
The exercise of such equitable powers was expressly rejected by the
supreme court in Oakwood Holdings, LLC v. Mortgage Investments
Enterprises LLC, 2018 CO 12, ¶ 3 (“Although a debtor-owner is
sometimes entitled to cure, the statute is clear that he or she must
do so before the foreclosure sale is complete . . . .”). Like the right
to cure, the court also stated that the right to redeem is not derived
from principles of equity but depends entirely upon the provisions
of the statute creating that right:
[T]he right to redeem from an execution sale is
a creature of statute. The right of redemption
has long been recognized as a substantive
right to be exercised in strict compliance with
statutory terms. It is not a right derived from
principles of equity, but depends entirely upon
the provisions of the statute creating the right.
Id. at ¶ 14 (quoting Johnson v. Smith, 675 P.2d 307, 310 (Colo.
1984)). Strict compliance with these statutory rights is required to
protect persons with a stake in the process from prejudice. Janicek
16
v. Obsideo, LLC, 271 P.3d 1133, 1139 (Colo. App. 2011). Thus, the
supreme court held, these rights may not be expanded by judicial
interpretation. Oakwood Holdings, ¶ 14.
¶ 33 The trial court’s order granting Hummel a post-sale right to
cure is contrary to these established principles. Accordingly, we
vacate that portion of the order.
IV. Whether the Decree of Foreclosure Should be Vacated and the
Sheriff’s Deed Set Aside
¶ 34 C & C also takes issue with the trial court’s order that, upon
Hummel tendering the cure amount, the court would “declare the
sheriff’s sale and confirmation deed void, and quiet title in Ms.
Hummel.” Consistent with this order, Hummel timely paid the
amounts due to C & C under the court’s order. The cure proceeds
were released to C & C to repay the amounts it bid at the
foreclosure sale plus subsequently incurred holding costs, and the
trial court voided the sheriff’s sale and confirmation deed. C & C
contends the court erred by entering these orders.
A. Standard of Review
¶ 35 Whether the trial court properly ordered a foreclosure by
default presents a mixed question of fact and law. We review the
17
trial court’s factual findings for clear error and its legal conclusions
de novo. People v. Miller, 75 P.3d 1108, 1111-12 (Colo. 2002).
B. Consequences of Setting Aside a Default Judgment
¶ 36 When a default judgment is set aside, the original judgment
may either be reopened or vacated. See, e.g., Weaver Constr. Co. v.
Dist. Ct., 190 Colo. 227, 231, 545 P.2d 1042, 1045 (1976). Because
the default judgment was not set aside at the July 2020 hearing, C
& C argues the sheriff’s sale and resulting deed remain valid.
¶ 37 Weaver counsels that when a default judgment “is opened the
defendant is allowed to answer to the merits of the claim, but the
original judgment and judgment lien remain in effect as security
pending the resolution of the trial on the merits.” Id. at 232, 545
P.2d at 1045. But Weaver also teaches,
if a judgment results in plaintiff’s favor after
the original judgment is opened for a trial on
the merits, his judgment lien will remain in full
force and effect as if the original default
judgment had not been opened. If a judgment
results in favor of the defendant . . . then the
original default judgment is vacated — the
judgment and judgment lien are dissolved as
though they never existed. Therefore,
generally, the court must refrain from vacating
a default judgment until after the opened
judgment results in a new judgment on the
merits.
18
Id. In contrast to an opened judgment, when a default judgment is
set aside on jurisdictional grounds, the underlying judgment and
any subsequent foreclosure sale are void and treated as if they
never existed. Id.
C. Did the Trial Court Have Jurisdiction to Enter the Foreclosure
Decree?
¶ 38 Contending the trial court only opened the underlying
judgment, C & C argues the court lacked jurisdiction to vacate the
judgment and resulting sheriff’s deed. We disagree but for reasons
different than those articulated by the trial court. See, e.g., Roque
v. Allstate Ins. Co., 2012 COA 10, ¶ 7 (“We can affirm for any reason
supported by the record, even reasons not decided by the trial
court.”). Recall that Hummel has consistently argued since her
entry into this case that she did not receive adequate notice of these
proceedings. This argument challenges the trial court’s jurisdiction
to enter the foreclosure order in the first instance. But the trial
court did not fully resolve this essential question. Because
jurisdiction is a necessary prerequisite to the enforceability of any
order, we must address and resolve that question.
19
¶ 39 C & C concedes, and we agree, that if the trial court lacked
jurisdiction, the judgment and resulting sheriff’s deed must be set
aside. See, e.g., Davidson Chevrolet, Inc. v. City & Cnty. of Denver,
138 Colo. 171, 173-76, 330 P.2d 1116, 1118-19 (1958). We
conclude the trial court failed to expressly rule on the question of
whether it had sufficient jurisdiction. Nonetheless, we conclude
that the trial court made adequate factual findings to allow us to
resolve this question as a matter of law.
1. An Association’s Duties When Enforcing Covenants
¶ 40 The Colorado Common Interest Ownership Act (CCIOA) creates
a comprehensive framework for the creation and operation of
common interest communities. Rancho Escondido Prop. Owners
Ass’n v. Redstone Mgmt. Co., 169 P.3d 270, 273 (Colo. App. 2007).
Assessment liens created under its provisions “may be foreclosed
[by an association] in like manner as a mortgage on real estate.” Id.(quoting § 38-33.3-316(11)(a), C.R.S. 2021). Although an
association is not the government, it serves “quasi-governmental
functions” when enforcing covenants and must abide by the due
process requirements of the United States and Colorado
Constitutions. See Colo. Homes, Ltd. v. Loerch-Wilson, 43 P.3d 718,
20
722 (Colo. App. 2001) (recognizing fiduciary obligations owed to
homeowners based upon “the power held by homeowner
associations, the quasi-governmental functions they serve, and the
impact on value and enjoyment that can result from the failure to
enforce covenants”).
2. General Service Requirements for Actions Involving Real
Estate
¶ 41 As C & C correctly notes, the HOA was proceeding in rem —
that is, against Hummel’s property, rather than against her
personally — when pursuing its foreclosure remedy. And, as C & C
also notes, C.R.C.P. 4(g) contemplates mailing and publication as a
means of effectuating “other service” when jurisdiction over
property is sought:
Except as otherwise provided by law, service
by mail or publication shall be allowed only in
actions affecting specific property . . . . The
court, if satisfied that due diligence has been
used to obtain personal service or that efforts
to obtain the same would have been to no
avail, shall:
(1) Order the party to send by registered or
certified mail a copy of the process addressed
to such person at such address, requesting a
return receipt signed by the addressee
only . . . , or
21
(2) Order publication of the process in a
newspaper published in the county in which
the action is pending. Such publication shall
be made once each week for five successive
weeks. Within 14 days after the order the
party shall mail a copy of the process to each
person whose address or last known address
has been stated in the motion and file proof
thereof. . . .
In this case, the trial court’s initial written order permitted “other
service” by publication in the newspaper. C & C argues that since
the HOA published notice in the newspaper in accordance with the
order, it fulfilled the requirements of Rule 4(g), and therefore we
must conclude the trial court had sufficient jurisdiction to enter a
default judgment of foreclosure. We disagree.
¶ 42 C & C’s error is predicated upon an assumption that
compliance with Rule 4(g) is, under all circumstances, sufficient to
confer adequate jurisdiction to allow a foreclosure to proceed. Yet
in addition to compliance with Rule 4(g), an association must also
meet the mandates of due process before foreclosing on an
individual’s property.
¶ 43 Before turning to the specific case law upon which we base
our conclusion, we amplify the trial court’s intuitive statement that
it would require, “at the very least, posting on the property itself, on
22
the front door” before it would authorize foreclosure by default.
Similarly, at the same hearing, counsel for the HOA conceded he
“would obviously have to make sure that other avenues of due
process were . . . met in order to proceed with a decree of
foreclosure here.” These statements were grounded in counsel’s
and the court’s appreciation that due process may well require
something more than mailing or publication in a newspaper before
a foreclosure could move forward by default. They were right. See,
e.g., Owens v. Tergeson, 2015 COA 164, ¶ 40 (“Compliance with
[the rules of procedure regarding service by publication], however, is
not the end of the matter.” (citing Mullane v. Cent. Hanover Bank &
Tr. Co., 339 U.S. 306, 315 (1950))). Unfortunately, the trial court
lost sight of these principles and entered the foreclosure order by
default without ensuring that the requirements of due process had
been satisfied.3 That omission does not relieve us of the obligation
3 We appreciate trial courts are always in a difficult position when
acting upon motions for default judgment because the party who
will be adversely affected by the ruling is not before the court and
assisting to ensure its rights are protected. Because of these
vulnerabilities, the trial court has an obligation to be extra vigilant
to ensure basic due process principles have been satisfied before
entering a default judgment.
23
to ensure that the entry of the judgment was consistent with due
process.
3. Due Process Requirements when Foreclosing an Association’s
Lien
¶ 44 Despite the ancient and often unhelpful distinction between
actions in rem and in personam, see Mullane, 339 U.S. at 312-13(discussing the origins of the terms in rem, quasi in rem, and in
personam, and their limited value when assessing the degree of
diligent inquiry and notice required to fulfill the constitutional
mandates of due process), or the requirements of a particular
statute or rule of procedure that addresses service in foreclosure
actions, the United States Supreme Court has long held that when
foreclosing a lien against an individual’s home, due process requires
“notice [that is] reasonably calculated, under all the circumstances,
to apprise interested parties of the pendency of the action and
afford them an opportunity to present their objections.” Id. at 314.
Moreover, this is not a generalized “check the box” exercise, but
rather “[t]he means employed must be such as one desirous of
actually informing the absentee might reasonably adopt to
accomplish it.” Id. at 315.
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¶ 45 The Court’s decision in Jones v. Flowers is particularly
instructive. 547 U.S. 220 (2006). The State of Arkansas held a tax
lien against Flowers’ residence, which he no longer occupied. Id. at
223. After years of nonpayment of taxes, the state commenced a
tax sale and notified Flowers by certified mail, which met the notice
requirements of the applicable state statute. Id. at 223-24. The
letter was returned unclaimed. Id. at 224. The state also published
notice of the sale in a local newspaper. Id. The sale proceeded
without Flowers receiving actual notice, and a third party
purchased the home. Id. The purchaser then posted an eviction
notice on the property, and the tenant brought the sale to the
attention of Flowers, who promptly moved to set aside the sale
based upon Mullane and its progeny. Id. at 224-25.
¶ 46 Writing for the majority, Chief Justice Roberts conveyed the
Court’s holding: “[W]hen mailed notice of a tax sale is returned
unclaimed, the State must take additional reasonable steps to
attempt to provide notice to the property owner before selling his
property, if it is practicable to do so.” Id. at 225.
¶ 47 In rejecting the state’s argument that the mailing and
subsequent publication were sufficient to meet the requirements of
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due process, Chief Justice Roberts noted, “we have required the
government to consider unique information about an intended
recipient regardless of whether a statutory scheme is reasonably
calculated to provide notice in the ordinary case.” Id. at 230. The
Court held that the state’s knowledge that the normal procedures
were ineffective triggered its obligation to take additional steps to
effectuate notice. Id. While recognizing that the type of additional
steps will vary from case to case, the Court stated, “posting notice
on real property is ‘a singularly appropriate and effective way of
ensuring that a person . . . is actually apprised of proceedings
against him.’” Id. at 236 (quoting Greene v. Lindsey, 456 U.S. 444,
452-53 (1982)); see also Long v. Pippin, 914 P.2d 529, 532 (Colo.
App. 1996) (posting on door coupled with certified mailing were
sufficient to provide homeowner notice of tax sale).
¶ 48 The holdings and rationale of Mullane and Flowers are
particularly instructive in the homeowners association setting.
Homeowners associations have extraordinary powers and authority
under CCIOA. They may record a lien against an individual’s home
to recover delinquent assessments and enforce such liens by
foreclosure. They are permitted to charge and recover late fees,
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interest, and attorney fees related to the nonpayment and
enforcement mechanisms. Typically, the lien and foreclosure rights
are directed toward an individual’s home. And unlike many larger
agencies, an association is typically governed by volunteers who live
in the same neighborhood as the property that is the subject of the
foreclosure action. Such familiarity can also provide insight into
the intangible circumstances of the homeowner who is the subject
of the foreclosure action. Given these dynamics, it is not
unreasonable to require a homeowners association to make a good
faith, rather than a highly technical, effort to effectuate actual
notice to a fellow neighbor before foreclosing on their property.
¶ 49 Applying these principles to the undisputed facts presented on
appeal, it is manifest that the HOA did not take reasonable steps
calculated to provide Hummel with actual notice of the lawsuit or
the resulting sheriff’s sale. Recall that the trial court did not find
credible the testimony from the process server that he attempted
personal service upon Hummel. Even if the court had deemed that
testimony credible, it reflects an attempt at personal service that
spanned only sixteen days in a case that was pending for years.
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¶ 50 In addition, recall that in September of 2018, the HOA’s
counsel acknowledged he knew that Hummel was a “recluse” who
did not answer her door except to take pizza deliveries, and that she
was occasionally the subject of welfare checks by adult social
services. Indeed, after reciting these facts, the HOA’s counsel
acknowledged to the court, “I would obviously have to make sure
that other avenues of due process were . . . met in order to proceed
with a decree of foreclosure here.” It was these same concerns that
prompted the original trial judge to require “at the very least,
posting on the property itself, on the front door, notice of what’s
going on here and that there is a default judgment that’s being
entered and there’s a lien and there’s a request[] to foreclose on the
house.” Yet despite these acknowledgments by both counsel and
the trial court, the HOA never posted notice on the property.
¶ 51 Given these undisputed facts, we conclude the HOA failed to
achieve service that meets the strictures of due process. To the
extent that any of the trial court’s orders could be interpreted
otherwise, we conclude any such orders are inconsistent with
Hummel’s right to due process. Accordingly, we conclude the trial
court did not have adequate jurisdiction, and the default judgment
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and resulting sheriff’s sale and confirmation deed were void ab
initio and were properly vacated by the trial court.
¶ 52 Finally, we note that C & C has been made whole by actions
taken in response to the trial court’s prior orders. It obtained the
return of the money it paid at the foreclosure sale, and it recovered
all holding costs it incurred between the time it took title and when
the sheriff’s deed was vacated. While we recognize C & C will not
realize the windfall profit it would have received had the
confirmation deed been validated, both principles of law and equity
mandate this result.
V. C & C’s Request for Attorney Fees
¶ 53 Considering our resolution of the appeal, coupled with the fact
that C & C was not bringing an action to enforce the HOA
covenants, rules, or regulations, we conclude C & C is not entitled
to an award of attorney fees on appeal. See § 38-33.3-123(1)(c),
C.R.S. 2021 (“In any civil action to enforce or defend the provisions
of this article or of the declaration, bylaws, articles, or rules and
regulations, the court shall award reasonable attorney fees, costs,
and costs of collection to the prevailing party.”).
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VI. Conclusion
¶ 54 For the reasons stated, we vacate the trial court’s order
granting a post-foreclosure cure remedy but affirm the order of the
court vacating the default judgment, the sheriff’s sale, and the
confirmation deed.
JUDGE DAILEY and JUDGE FOX concur.
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