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DISTRICT COURT, SAGUACHE COUNTY, COLORADO

Court ), Saguache, CO 81149


Plaintiff:
BRUCE C. McDONALD
v.
Defendants:
ONE WEST BANK and FEDERAL HOME LOAN
MORTGAGE CORPORATION
COURT USE ONLY
Case Number: 2010CV6
Division:3 Courtroom:
ORDER REGARDING ONE WEST BANK F.S.BS AND FEDERAL HOME LOAN
MORTGAGE CORPORATIONS MOTION FOR RELIEF FROM FINAL JUDGMENT
THIS MATTER comes before the Court on One West Bank F.S.B.s and Federal Home
Loan Mortgage Corporations Motion for Relief from Final Judgment, filed March 18, 2011, and
orally argued on July 28, 2011. The Plaintiff, Bruce C. McDonald, is represented by Erich
Schwiesow of Lester, Sigmond, Rooney & Schwiesow. Defendants, One West Bank
F.S.B.(OneWest) and Federal Home Loan Mortgage Corporation (Freddie Mac), are
represented by Victoria E. Edwards of Akerman Senterfitt LLP. The Court having reviewed the
motion, responses, replies, matters of record, and otherwise being informed makes the following
Order.
PROCEDURAL BACKGROUND
Plaintiff, Bruce McDonald, filed a complaint in this case on March 2, 2010, and amended
the complaint on September 16, 2010. The amended complaint requested this Court to find that
Defendant OneWest did not have standing in case no. 2009CV42 and therefore the C.R.C.P.
Rule 120 Order Authorizing Sale is void; that Defendant OneWest could not and did not convey
good title to Defendant Freddie Mac; that Freddie Mac had notice of this action through the
EFILED Document
CO Saguache County District Court 12th JD
Filing Date: Oct 3 2011 10:46AM MDT
Filing ID: 40144354
Review Clerk: Brandie Taylor

2010CV6 D55 Page 2 of 10
Notice of Lis Pendens filed on March 3, 2010; and, that Plaintiff remains the owner of the
property subject to foreclosure and the foreclosure sale that purported to divest him of title is
void.
Defendant One West Bank was served on October 1, 2010, and Defendant Freddie Mac
was served on September 17, 2010. Neither party filed a responsive pleading to the amended
complaint within the time required by the Colorado Rules of Civil Procedure nor did they appear
in the case.
Plaintiff submitted a Motion for Entry of Default on October 29, 2010, and filed a
Motion for Entry of Default Judgment on November 1, 2010. The basis of Plaintiffs Motion was
that neither of the Defendants appeared within the required legal time. On November 19, 2010,
the Court entered a default judgment in favor of Plaintiff, quieting the disputed property in the
Plaintiff. The Court also entered default against Defendants on November 26, 2010.
On March, 16, 2011, counsel for the Defendants entered her appearance. And on March
18, 2011, the Defendants filed a motion for relief from judgment.
SUMMARY OF ARGUMENTS
Defendants argue that the default judgment should be vacated. Defendants complain of
the following: (1) Plaintiff alleged he attempted to serve Defendants out-of-state counsel but
failed to disclose that he knew Defendants were represented by local counsel in Colorado in a
federal case; (2) Plaintiff should have in good-faith attempted service on Defendants local
counsel in Colorado before attempting service on their legal representatives in California and
West Virginia; (3) Plaintiff should have warned local counsel that he was seeking a default
judgment; (4) Plaintiff represented to the Court that he made all efforts to serve Defendants; (5)
2010CV6 D55 Page 3 of 10
Plaintiff knew how to serve Defendants in Colorado; (6) Plaintiff engaged in improper litigation
tactics.
Defendants also argue that the default judgment violated Defendants due process rights
and is void as a matter of law. The Defendants point to previous litigation whereby, based on this
Courts ruling in a Rule 120 case, the Defendants had a Public Trustee foreclosure on the
disputed property. Essentially, Defendants argue res judicata.
In response, Plaintiff argues that the allegations of bad-faith and misrepresentations are
unfounded, that Colorado law does not require him to warn Defendants of applying for default
judgment when Defendants have not appeared in the case, and that the orders issued by this
Court in a previous Rule 120 action have no preclusive effect on this quiet title action.
FINDINGS OF FACT
The Plaintiff and the Defendants have submitted requests for judicial notice. Both
requests are granted and the Court makes the following findings of fact based on judicial notice
of the relevant documents:
1. On or around May 27, 2003, Plaintiff obtained a loan for $198,000.00 from IndyMac
Bank, F.S.B. (Pls Ex. 1 A.) The loan was secured by property located at 4434 Rarity
Court, Crestone, Colorado. (Pls Ex. 1 B.) Defendant OneWest became servicer of the
loan (Pls Ex. 1. E.; Ex. 2), and in 2009, the Plaintiff defaulted on the loan, with a
remaining balance of $200,912.31. (Pls Ex. 1. D.)
2. Defendant OneWest filed a Rule 120 Motion for Order Authorizing Sale on
September 11, 2009, in case number 2009CV42. On February 4, 2010, this Court
found, inter alia, that there was a reasonable probability that a default existed as
alleged in the motion and granted an order authorizing sale of the disputed property.
3. On March 3, 2010, Plaintiff filed a complaint in this case, 2010CV6, seeking to void
the order authorizing sale, and on March 8, 2010, Plaintiff filed a notice of lis
pendens. Plaintiff filed an Amended Complaint on September 10, 2010, adding
Federal Home Loan Mortgage Corporation (Freddie Mac) as a defendant.
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4. On June 29, 2010, Freddie Mac filed a complaint alleging forcible entry and detainer
against Mr. McDonald in case number 2010CV30.
5. On July 22, 2010, Plaintiff also filed a lawsuit in the United States District Court for
the District of Colorado against present Defendant and other unknown defendants.
(Pls Ex. 1. Fed. Compl.) On December 27, 2010, the case was dismissed for failure
to state a claim (Pls Ex. 5).
6. On September 17, 2010, this Court held a hearing in case number 2010CV30 to
determine whether the 2010CV30 action would be stayed until the issue of ownership
was resolved in this case, 2010CV6. Freddie Mac was represented by Castle
Meinhold & Stawiarski, LLC, and Mr. McDonald was represented by current counsel
Erich Schwiesow.
7. The Court heard arguments from both parties on whether the 2010CV30 should be
stayed. Mr. Shwiesow did not represent that his client would pursue either a federal
action or a state action. The Court finds that Mr. Shwiesow represented that his client
would pursue and litigate this case, 2010CV6. At that point, it was clear that Freddie
Macs counsel knew of the 2010CV6 litigation.
8. On September 17, 2010, Plaintiff served the Amended Complaint on Freddie Mac.
9. On September 27, 2010, Plaintiff served the Amended Complaint on OneWest.
10. On November 19, 2010, this Court entered default Judgment in favor of Plaintiff and
against Defendants and on November 26, 2010, this Court entered default in favor of
Plaintiff and against Defendants. Notice of Default was served on Freddie Mac and
OneWest on December 7, 2010, and December 15, 2010, respectively.
11. Defendants did not appear in case no. 2010CV6 until March 18, 2011three months
after Defendants were served with Notice of Defaultwhen Defendants filed a joint
motion for relief from final judgment.
12. On July 28, 2011, this Court heard arguments on Defendants Motion for Relief from
Final Judgment. At the hearing, defense counsel expressly refused to argue excusable
neglect and pressed arguments based on fraud and bad faith. Defense counsel thus
waived their argument for relief of judgment based on excusable neglect.
13. The Defendants have proffered no evidence on why they failed to timely respond to
the complaint.
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CONCLUSIONS OF LAW
Defendants ask the Court to vacate the judgment. Pursuant to C.R.C.P. Rule 60, the court
may relieve a party from a final judgment or order for, inter alia, mistake, excusable neglect,
misrepresentation, misconduct of an adverse party, judgment is void, and fraud. To set aside a
judgment under C.R.C.P. 60(b), the movant bears the burden of establishing by clear and
convincing evidence that the motion should be granted. Goodman Associates, LLC v. WP
Mountain Properties, LLC, 222 P.3d 310, 315 (Colo. 2010) (citing Borer v. Lewis, 91 P.3d 375,
380-81 (Colo. 2004)).
1. Excusable Neglect
Defendants assert, [they] did not bring their motion under the excusable neglect
standard of C.R.C.P. 60(b)(1).
1
Defendants assert that Defendants counsel assumed that Plaintiff would pursue either a
federal action or a state action, but not both, and former counsels failure to notify Defendants of
Rather, they brought the Motion under C.R.C.P. 60(b)(2) for
misconduct of an adverse party. (Def.s Reply, p. 5.) Defendants reinforced their position not to
argue excusable neglect at the hearing by explicitly stating they were not pursuing relief under
the excusable neglect standard. Nevertheless, the Court notes that Defendants have seemingly
argue for relief pursuant to excusable neglect despite their clear and explicit intentions not to do
so. The Court finds and holds that the Defendants have waived their excusable neglect argument
and will not consider it as a basis for relief from judgment. The Court further finds that even if
the Defendants did not waive its excusable neglect argument, there is no excusable neglect.
1
Defendants filings confuse notions of notice in service of process with notice for default judgment. In later filings
the confusion continues and is exacerbated by Defendants raising new arguments not included in their original
motions.
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the possibility of the state court action establish a basis for the Court to find excusable neglect.
As to the latter argument, there is no misrepresentation since Plaintiffs counsel informed
Defendant Freddie Mac that he intended to pursue 2010CV6 at the hearing in 2010CV30. This
Court has found that Plaintiffs counsel clearly expressed his intention to pursue 2010CV6 and
did not represent that he would stay 2010CV6, if the federal action was pursued by separate
counsel on behalf of Plaintiff. The whole reason for the hearing was Plaintiffs request to stay
litigation in 2010CV30 (a forcible entry and detainer action) while ownership was litigated in
this case, 2010CV6.
The Defendants have failed to proffer evidence of excusable neglect for failing to appear
and defend in a timely manner. Defendants argue that Defendant Freddie Macs previous counsel
assumed that this case, 2010CV6, would not be litigated by Plaintiff and failed to inform Freddie
Mac about the existence of this case. Defendants did not proffer evidence tending to establish
either of those propositions. Nor did the Defendants establish why they failed to litigate after
they were served with processwhich occurred after Freddie Macs previous counsel learned of
this case. In summary, the arguments pressed by Defendants are directed towards some formal or
informal notice of the action directly to an attorney rather than shedding light on Defendants
failure to file a responsive pleading after proper service.
The Court further finds that though the Defendants may have had a meritorious claim,
and some equity may favor the Defendants, the failure to provide evidence of excusable neglect
requires that this Court will not set aside default judgment based on excusable neglect grounds.
Such argument was waived and, in the alternative, Defendants did not meet their burden in
establishing excusable neglect.
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2. 60(b)(2) Misrepresentation or Other Misconduct of an Adverse Party
In the Motion for Relief from Judgment, Defendants argue that Plaintiff had a duty to
serve process on Defendants counsel and not on Defendants out-of-state registered agents, that
Plaintiff should have informed the Court that he did not serve Defendants counsel, and failing to
notify Defendants of the state action violated Defendants due process. To support their position,
Defendants cite C.R.C.P. Rule 4, C.R.S. 13-1-125, Mason-Jares Ltd., v. Peterson, 939 P.2d
522 (Colo. App. 1997), and Matter of Bonfils Estate, 543 P.2d 701, 705 (Colo. 1975).
Service of process on corporations is clearly defined by C.R.C.P. 4 and section 13-1-125
C.R.S. (2010). Proper service on a corporation, pursuant to C.R.C.P. 4(e)(4), requires serving
the registered agent for service as set forth in the most recently filed documents in the records
of the secretary of this state or any other jurisdiction. Section 13-1-125 provides that service
must be made to the registered agent within the State of Colorado if one exists. Here, neither
Defendant maintains an agent for service of process in the State of Colorado. Therefore, serving
process on the Defendants out-of-state registered agents is authorized and proper to apprise the
Defendants to appear and defend in this Court
The holdings in Mason-Jares and Matter of Bonfils simply do not apply to this case.
Mason-Jares held a judgment was void because service of publication did not satisfy due
process where plaintiff discovered defendants location during publication process. In re C.L.S.,
252 P.3d 556, (Colo. App. 2011) (citing Mason-Jares, 939 P.2d at 524, for the proposition that a
judgment entered in violation of due process is void). The crux of Mason-Jares is that the spirit
of the law requires actual notice must be given, when possible, to an actual party whose rights
are affected by litigation. See id. The need for service by publication ceases to exist if actual
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notice is possible through personal service. See Bray v. Germain INV. CO., 98 P.2d 993 (Colo.
1940). Here, personal service was achieved, and therefore, actual notice was achieved and the
due process concerns found in Mason-Jaresactual notice v. constructive noticedo not exist.
This Court can find no basis in the law to extend the holding of Mason-Jares so as to require
personal service on opposing partys counsel, simply because the parties are involved in
litigation elsewhere. Nor does Mason-Jares stand for the proposition that parties must be notified
of an application for default judgment when the same parties and attorneys are engaged in other
litigation.
As for Matter of Bonfils, that case distinguished the different effects extrinsic fraud and
intrinsic fraud have upon judgments. Here, there is no basis to assert a fraud claim, especially
where Rule 4 authorizes, and C.R.S. 13-1-125 does not restrict, service of process on
Defendants out-of-state registered agents. In order for a fraud to exist, among other things, there
must be a misrepresentation. Because this court finds no notice requirement exists, there can be
no misrepresentation. There is no misrepresentation in not doing that which is not required.
Misrepresentation occurs when a party fails to disclose what the party has a duty to disclose.
None of the authorities cited in Defendants Motion give rise nor imply such a duty. Therefore,
there was no misrepresentation to the Court since Plaintiff had no duty, nor reason, to inform the
Court that Defendants counsel was not served.
The Defendants remaining contention is the alleged duty of the Plaintiff to warn the
Defendants of an application for default judgment.
2
2
This argument was first raised in oral arguments and again in OneWest Bank FSBs and Federal Home Loan
Mortgage Corporations Supplemental Brief in Support of Motion for Relief from Final Judgment, filed August 9,
2011.
By rule, notice of an application for default
judgment is only required if the party against whom judgment by default is sought has appeared
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in the action. Goodman Associates, LLC v. WP Mountain Properties LLC, 222 P.3d 310, 323
(Colo. 2010) (citing C.R.C.P. 55(b)). Defendants made no appearance in this action, so notice
was not required.
Nevertheless, Defendants cite California case law for the proposition that Plaintiff had an
ethical duty to warn Defendants before applying for default judgment. Though the Court finds
the California case law somewhat persuasive, C.R.C.P. Rule 55(b) is clear. Pursuant to this rule,
[i]f the party against whom judgment by default is sought has appeared in the action, the party
(or, if appearing by representative, the partys representative) shall be served with written notice
of the application for judgment at least three days prior to the hearing on such application.
C.R.C.P. Rule 55(b). Clearly, under Colorado law, notice is only given to those parties who have
appeared in the case and not pursuant to rules of professional conduct.
3. Res Judicata
Defendants further argue that the issue of whether defendants had authority to
foreclose was already decided in the Rule 120 action, and that Order serves as res judicata in this
quiet title action, where plaintiff has improperly attempted to relitigate the issue of title.
(Defendants Supplemental Brief, p. 4.) The Court agrees with Plaintiff that res judicata does not
apply to a C.R.C.P.Rule 120 proceeding. The plain language of this rule states in part, Neither
the granting nor the denial of a motion under this Rule shall constitute an appealable order or
judgment. The granting of any such motion shall be without prejudice to the right of any person
aggrieved to seek injunctive or other relief in any court of competent jurisdiction, and the denial
of any such motion shall be without prejudice to any right or remedy of the moving party.
C.R.C.P. Rule 120(d).
2010CV6 D55 Page 10 of 10
Defendants cite Golden Cycle Corporation v. Cresson Consolidated Gold Mining and
Milling Company, 497 P.2d 714 (Colo. App. 1972), to support their proposition that a Rule 120
provides res judicata as to matters pled and determined. Golden Cycle applied res judicata to a
default judgment in a foreclosure proceeding. It is unclear from the opinion whether the
foreclosure proceeding was held pursuant to Rule 120 or Rule 105. Nevertheless, a judgment
issued therein rather than merely an order authorizing sale as is the case in a Rule 120
proceeding, which leads this Court to believe that Golden Cycle applied res judicata to a judicial
foreclosure proceeding and not to a Rule 120 proceeding. (See C.R.C.P. 120(e) (If no response
has been filed within the time permitted by section (c)the court shall dispense with the hearing
and forthwith enter an order authorizing sale). Thus, the Court finds that the Order Authorizing
Sale in case number 2009CV42 is not res judicata as the issues presented in this case.
FOR THE REASONS STATED ABOVE, IT IS THEREFORE ORDERED that One
West Bank F.S.B.s and Federal Home Loan Mortgage Corporations Motion for Relief From
Final Judgment be and is hereby DENIED.
DONE AND SIGNED THIS 3
rd
DAY OF October, 2011.
BY THE COURT
MARTIN A. GONZALES
DISTRICT JUDGE
Martin A. Gonzales
ORIGINAL
SIGNATURE
2011.10.03 10:23:37
-06'00'