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Minshall v. Johnston

Court of Appeals of Colorado, Seventh Division

March 22, 2018

Richard G. Minshall and Vicky L. Minshall, Plaintiffs-Appellees,
v.
David K. Johnston, Defendant-Appellant.

          Court of Appeals No. 17CA0407 City and County of Denver District Court No. 15CV34174 Honorable Catherine Lemon, Judge Honorable Edward D. Bronfin, Judge

          Gleason Wells, P.C., Todd A. Wells, Denver, Colorado, for Plaintiffs-Appellees

          Semmens Law, P.C., Damon M. Semmens, Denver, Colorado, for Defendant- Appellant

          OPINION

          BERGER JUDGE.

         ¶ 1 The district court entered a default judgment against defendant, David K. Johnston, when he failed to respond to a complaint filed by plaintiffs, Richard G. Minshall and Vicky L. Minshall. Johnston was not personally served with process; instead, the court permitted substituted service under C.R.C.P. 4(f) on the registered agent of Aries Staffing LLC (Aries), a corporation of which Johnston was a co-owner and shareholder.

         ¶ 2 Some six months after he claimed that he learned about the entry of the default judgment, Johnston moved pro se to set it aside. He vaguely asserted in the district court, and explicitly argues here, that the judgment was void because the Minshalls did not properly serve him with process. The district court denied the motion and Johnston appeals.

         ¶ 3 We agree with most of the district court's analysis. However, the record is insufficient to determine whether service on Aries' corporate agent for service of process, Incorp Services Inc. (Incorp), was "reasonably calculated to give actual notice" of the case to Johnston. See C.R.C.P. 4(f). Because that is an essential condition of valid substituted service under Rule 4(f), we must vacate the district court's order denying Johnston's motion to set aside the judgment and remand for the court to determine whether service on Incorp was "reasonably calculated to give actual notice" to Johnston. We reject all of Johnston's other contentions.

         I. Relevant Facts and Procedural History

         ¶ 4 The Minshalls alleged in their complaint that they made two loans to Aries, neither of which was repaid. Johnston was not an obligor on either loan.

         ¶ 5 Johnston was a co-founder and shareholder of Aries. The Minshalls pleaded that Aries was Johnston's alter ego and that Johnston was liable for Aries' debts, including the two loans. See In re Phillips, 139 P.3d 639, 644 (Colo. 2006) ("Individual liability is appropriate when the corporation is merely the alter ego of the shareholder . . . ."). In addition to the alter ego claim, the Minshalls pleaded claims of breach of contract and unjust enrichment against Aries, and claims of promissory estoppel, deceit based on fraud or false representation, and negligent misrepresentation against both Aries and Johnston.

         ¶ 6 The Minshalls served Aries through its corporate agent for service of process, Incorp. Aries defaulted, and the district court entered a default judgment against Aries, which Aries did not appeal.

          ¶ 7 The Minshalls had great difficulty, however, attempting to serve Johnston personally under C.R.C.P. 4(e). Because the Minshalls were unsuccessful in personally serving Johnston, they moved to serve him by mail, purportedly under Rule 4(f). The district court correctly denied that motion because

Rule 4(f) does not allow for service on a party by mail. Rather Plaintiffs' motion must identify a separate, appropriate person on whom process will be hand delivered. Because Plaintiffs' Motion does not identify such a person, substitute service under rule 4(f) is not proper.

         ¶ 8 The Minshalls then filed an amended motion under Rule 4(f), this time procedurally complying with that rule by designating a "person, " Incorp, as the "appropriate person on whom process will be hand delivered." The court granted the amended motion and the Minshalls served Johnston though Incorp as authorized by the court's order. (Incorp had already been served when service was obtained on Aries, so it was served a second time.)

         ¶ 9 When Johnston failed to answer the complaint, the court entered a default judgment against him. Months later, he moved pro se (without identifying any particular rule in support of his motion) to set aside the judgment, claiming he only learned of the complaint when the Minshalls recorded a judgment lien on his property in Georgia.

II. While The Minshalls Complied With Some of Rule 4(f)'s Requirements, The Record Is Insufficient To Determine If All of The Requirements Were Satisfied

         ¶ 10 Johnston raises the same argument on appeal (now through counsel) that we liberally construe his motion to set aside the default judgment to have raised before the district court that the judgment entered against him is void for lack of jurisdiction under C.R.C.P. 60(b)(3). See C.J.C. 2.6 cmt. 2; People ...


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