United States District Court, D. Colorado
PAGOSA LAKES PROPERTY OWNERS ASSOCIATION, a Colorado nonprofit corporation, Plaintiff,
JENNIFER M. LEE, RURAL HOUSING SERVICE OR SUCCESSOR AGENCY, UNITED STATES, DEPARTMENT OF AGRICULTURE, NCO PORTFOLIO MANAGEMENT, and BETTY A. DILLER, as Archuleta County Public Trustee, Defendants.
ORDER ON MOTION FOR RELIEF FROM STATE COURT'S
BROOKE JACKSON, UNITED STATES DISTRICT JUDGE
16, 2013, Pagosa Lakes Property Owners Association
(“Pagosa”) filed a complaint for judicial
foreclosure in the Archuleta County District Court, Colorado,
against defendant Jennifer M. Lee. See generally ECF
No. 3. Ms. Lee owned real property located at 22 Jubilee
Court, Pagosa Springs, CO 81147. Id. The Rural
Housing Service, U.S. Department of Agriculture
(“Housing Service”) had an interest in this
property consisting of a deed of trust recorded on June 9,
1997. Id. at 3-4. In this foreclosure action, Pagosa
also sued the Housing Service. Id. However, Pagosa
and the Housing Service agree that Pagosa Lakes mistakenly
did not serve the Housing Service as required under 28 U.S.C.
§ 2410(b). ECF No. 12 at 3, ECF No. 15 at 2.
U.S.C. § 2410 requires that for a state court to have
subject matter jurisdiction in a foreclosure action over the
United States, the plaintiff must serve a copy of the
complaint on the United States Attorney for the district in
which the action is brought (here, the District of Colorado)
or upon an assistant United States attorney or clerical
employee designated by the United States Attorney. 28 U.S.C.
§ 2410(b). Instead of serving the Housing Service in
either designated manner, Pagosa delivered a copy of the
complaint and summons at the headquarters of the U.S.
Department of Justice in Washington, D.C. ECF No. 12 at 3.
Housing Service, unaware of the state-court action, did not
respond. Id. Pagosa moved for an entry of default
against the Housing Service, which the state-court clerk
granted. ECF No. 11-1 at 73, 85. Pagosa then moved for a
decree of judicial foreclosure, and on May 30, 2014 the state
court granted that motion. Id. at 18-20, 24-27. This
decree of foreclosure granted default judgment in
rem against the Housing Service, adjudicated
Pagosa's lien as the prior and superior lien on the
property and extinguished the lien of the Housing Service.
Id. at 19-20. The decree also ordered the sale of
the real property, and on March 18, 2015 the Archuleta County
Sheriff sold the property for $10, 490, free and clear of any
interest of the Housing Service. ECF No. 12-2.
Housing Service learned about the state-court action on
August 2017, when it had tried to initiate its own
foreclosure proceedings on the property. ECF No. 12 at 3. The
Housing Service removed Pagosa's foreclosure action
pursuant to 28 U.S.C. §§ 1444 and 2410(a), which
permit removal of any foreclosure action against the United
States to the district court where the action is pending. ECF
Housing Service then filed a motion to set aside the state
court's default judgment in rem and its decree
of foreclosure. ECF No. 12. Pagosa filed a response, ECF No.
15, and the Housing Service filed a reply, ECF No. 16. I
requested that the parties file supplemental briefs
addressing the possible application of the
Rooker-Feldman Doctrine. ECF No. 18. See Rooker
v. Fid. Tr. Co., 263 U.S. 413 (1923); D.C. Court of
Appeals v. Feldman, 460 U.S. 462 (1983). The Housing
Service filed a brief arguing that the
Rooker-Feldman doctrine is inapplicable here, ECF
No. 19, and Pagosa did not file a brief before the April 25,
STANDARD OF REVIEW AND ANALYSIS
Civ. P. 60(b)(4) provides for relief from a final judgement,
order, or proceeding where the judgement is void. The Housing
Service argues that the state-court default judgment and
decree of foreclosure are void because the state court never
acquired personal jurisdiction or subject-matter jurisdiction
over the Housing Service given Pagosa's mistake with
service. The Housing Service requests that I set aside the
state court's default judgment in rem and the
state court's decree for judicial foreclosure which
extinguishes the Housing Service's Security Interest
recorded on June 6, 1997. ECF No. 12 at 6. Pagosa does not
dispute the relief sought by the Housing Service to the
extent that I declare the judgment and decree entered in the
state court's foreclosure action void only as to the
Housing Service, leaving the remainder of the judgment and
decree in effect. ECF No. 15 at 3.
does state in the last paragraph of its response that
“to the extent that Colorado law is not preempted by
federal statute, Colorado Revised Statute has a mechanism for
addressing omitted parties due to lack of service of process
in C.R.S. §38-38-506. Under Colorado law, omitted
parties are limited to redemption rights if the omitted party
would have been entitled to redeem pursuant to C.R.S.
§38-38-302.” ECF No. 15 at 3. Pagosa makes no
further argument about whether I should determine that
Colorado law is not preempted by federal statute and why. The
Housing Service argues that Pagosa's failure to make a
real argument about preemption waives the issue, and that in
any event, the argument lacks merit. I agree with the Housing
Service that U.S.C. § 2410 conflicts with Colo. Rev.
Stat. § 38-38-506 in offering greater protection to
liens of the United States. Here, federal law would preempt
the Colorado law to which Pagosa refers.
agree with the Housing Service that the
Rooker-Feldman doctrine is inapplicable here. ECF
No. 15. Because Pagosa did not file briefing on this point,
I'll assume it does not contest this either.
Rooker-Feldman is a jurisdictional bar where a party
who had an opportunity to litigate the claim in state court
loses and files a new lawsuit in federal court, seeking to
overturn the state-court judgment. D.C. Court of Appeals
v. Feldman, 460 U.S. 462 (1983). Here, however, the
Housing Service did not have an opportunity to litigate the
jurisdictional issue in state court. It is now exercising its
rights pursuant to 28 U.S.C. § 1444 to remove the action
and raise a federal defense that the state court lacked
subject-matter jurisdiction over the Housing Service due to
the plaintiff's improper service. The Tenth Circuit has
held that 28 U.S.C. § 1444 “gives the United
States a substantive right to remove, independent of any
other jurisdictional limitations.” Leathers v.
Leathers, 856 F.3d 729, 750 n.10 (10th Cir. 2017).
Therefore, the Rooker-Feldman doctrine does not pose
a bar to this Court's jurisdiction.
reasons stated herein, the Court grants ECF No. 12,
defendant's motion for relief from state court's
default judgment. I order that (1) the state court's
default judgment in rem entered on June 30, 2014 is
void as against the Rural Housing Service and (2) the State
court's decree for judicial foreclosure entered on June
30, 2014 extinguishing the security interest of the Housing