Pub. 12 2022-2023 Issue 6

Lender Beware When Serving by Mail in Colorado

The Colorado Court of Appeals recently reversed a judgment for possession and a judicial foreclosure judgment entered in favor of a mechanic’s lien holder against a homeowner because the summons and complaint were not mailed to the homeowner’s last known address. Home Improvement, Inc. v. Villar, 2022 COA 129 (Colo. App. 2022). In Villar, the plaintiff contractor was unable to personally serve the summons and complaint on the homeowner. Accordingly, the plaintiff requested, and the Court granted, an order allowing service by publication, which also required service by certified mail to the last known address for the defendant. The summons was published in a local newspaper but the certified mailing of the summons and complaint to the homeowner’s street address came back as undeliverable. Although not required, the plaintiff also caused the summons and complaint to be posted on the door of the residence. After the homeowner failed to respond to the summons and complaint, the Court entered default judgment and the Sheriff’s Department completed a judicial foreclosure sale of the property to a third-party purchaser. The homeowner contested the judgment for possession in the eviction case and moved to set aside the default judgment in the mechanic’s lien case. The trial court entered a judgment for possession and denied the motion to set aside. The Court of Appeals reversed and held that C.R.C.P. 4(g)(2) requires mailing to a party’s “last known address.” In Villar, the homeowner provided the contractor with a post office box for the mailing of insurance proceeds which is the address the plaintiff should have used, especially since communications to the homeowner were returned as undeliverable.

The Court of Appeals ruled the trial court lacked in rem jurisdiction due to ineffective service of process. After reviewing the definition of the word “address” in Merriam-Webster Dictionary and Black’s Law Dictionary, the Court defined “address” as “the place at which a party generally recognizes that a party can be communicated with” while the phrase “last known address” is the most recent such place.

The Court didn’t stop there. The trial court observed that the property address was provided at the outset of the contract and was never updated by the homeowner, and it was reasonable for the contractor to infer the homeowner’s address was his domicile and residence. Nonetheless, the Court said the trial court’s reasoning ignored a “significant change of circumstance” when the trial court became aware the notice of intent to file a mechanic’s lien was returned as “not deliverable as addressed.” Since the plaintiff knew about the post office box address, then the property address ceased to be a “known” address and the post office box became the last known address. Actual knowledge of the lien by the homeowner was not a substitute for proper service. The case was remanded for further proceedings. It is unclear what will happen in the case as the attorney for the contractor withdrew his representation and the contractor is prohibited from proceeding without an attorney. C.R.S. § 13-1-127.

While this case pertains to a judicial foreclosure, Colorado’s non-judicial foreclosure statutes include similar language. For example, C.R.S. § 38-38-102.5 requires the notice prior to a residential foreclosure to be mailed to the property address as well as the “last address shown in the holder’s records.” Similarly, C.R.C.P. 120(a)(1)(B) requires the motion to include the name and “last known address” as shown in the real property records and records of the moving party of, among others, the grantor of the deed of trust, those personally liable for the debt and those with an interest that may otherwise be affected by the foreclosure. The notice of motion must be mailed to those persons listed in the motion.

Banks and servicers should take care in updating the addresses of the borrowers, grantors and any potential successors-in-interest. If mail comes back as undeliverable, a creditor should include the original mailing address and add any additional addresses located by the creditor. Attorneys should take care when seeking to serve by publication and mail. C.R.C.P. 4(g) requires a showing of due diligence before a court allows service by publication and mailing to the last known address. Finally, it is recommended to have the borrower and guarantors confirm the mailing address when agreeing to modify a loan or to forbear from enforcing loan documents. Taking such measures will help prevent a borrower from challenging a default judgment and possibly unwinding the sale of foreclosed property.