C & C Invs., LP v. Hummel

• Decision Date: 14 April 2022
• Docket Number: Court of Appeals No. 20CA1879
• Parties: C & C INVESTMENTS, LP, Appellant, v. Martha L. HUMMEL, Defendant-Appellee.
• Court: Colorado Court of Appeals

514 P.3d 328

2022 COA 42

C & C INVESTMENTS, LP, Appellant,

v.Martha L. HUMMEL, Defendant-Appellee.

Court of Appeals No. 20CA1879

Colorado Court of Appeals, Division I.

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

Opinion by JUDGE SCHUTZ

¶ 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. 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.

¶ 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.

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 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 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 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 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.

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....