Judgment Enforcement, LLC v. King

2020 COA 43, 465 P.3d 78

• Court: Colorado Court of Appeals
• Decided: March 19, 2020
• Docket: 18CA2281, Namaste
• Status: Published

Opinion

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.