Rule 120: Relocation of the Meaningful Hearing
| Publication year | 1991 |
| Pages | 495 |
| Citation | Vol. 20 No. 3 Pg. 495 |
1991, March, Pg. 495. Rule 120: Relocation of the Meaningful Hearing
Recently, the Colorado Court of Appeals announced its decision in Zartman v. Shapiro and Meinhold.(fn1) This case is the latest in a line of opinions dealing with the scope and nature of the Colorado Rules of Civil Procedure ("C.R.C.P.") Rule 120 proceeding, which precedes a foreclosure by the public trustee.(fn2) Zartman is of particular interest because it does more than reaffirm that Rule 120 proceedings must comport with principles of due process. It also establishes that the venue provisions of the Fair Debt Collection Practices Act(fn3) ("FDCPA") will govern the commencement of Rule 120 proceedings by attorneys who are acting as collectors of consumer debt.
This article reviews the scope and nature of the Rule 120 hearing. It also alerts attorneys to the presence of Zartman and to certain proposed amendments to Rule 120 which, if adopted, will be consistent with that decision. The reader is cautioned that Zartman may not yet have come to rest because petitions for certiorari were pending before the Colorado Supreme Court when this article went to press.(fn4) However, the decision to foreclose to collect a consumer debt should be considered carefully before commencing any such foreclosure.
The scope of the Rule 120 hearing has often been the subject of litigation. For many years, it was generally believed that a Rule 120 hearing merely provided a forum for the summary determination of a debtor's military status for purposes of the Soldiers' and Sailors' Civil Relief Act of 1940.(fn5) The decision in Princeville Corporation v. Brooks(fn6) changed this perception.
In Princeville, the Colorado Supreme Court acknowledged that such a determination of military status was the original purpose of Rule 120. However, the court went on to note that times had changed and that there was a growing awareness of the requirements of due process. The court declared that Rule 120 "is broad enough to comport with the modern trend to restrict ex parte taking of property without a hearing." The court then determined that the district court had acted correctly during the Rule 120 hearing when it considered other facts unrelated to military status.(fn7)
After the decision in Princeville, Rule 120 was amended to conform with the Colorado Supreme Court's view that due process considerations had to be taken into account in the Rule 120 hearing. In Valley Development At Vail, Inc. v. Warder,(fn8) a case decided after Princeville, the Supreme Court reaffirmed the Princeville protections. It also applied to the hearing procedures the due process safeguards provided in the amended rule. In doing so, the court commented:
In Princeville we were concerned more broadly with the constitutional requirements of due process. . .. Subsequently, C.R.C.P. 120 was repealed and readopted ... to provide . . . due process safeguards to one who challenges
In 1983, the Supreme Court again was called on to resolve the question of the scope of the Rule 120 hearing. The resulting opinion in Moreland v. Marwich, Ltd.(fn10) includes an informative historical analysis of the rule and further illuminates the proper scope of such a hearing.
In Moreland, the Supreme Court criticized the actions of a district court which, at a Rule 120 hearing, had determined the existence of default solely by reference to the language of the original loan documents and without regard to proffered evidence of an alleged oral modification.(fn11) The Supreme Court held that the district court's restricted view of the Rule 120 hearing was "inconsistent with [the Rule's] purpose to test whether, considering all relevant evidence, there is a reasonable probability that a default exists."(fn12)
Section (d) of Rule 120 provides, in pertinent part, as follows:
The scope of inquiry at [a Rule 120 hearing] shall not extend beyond the existence of a default or other circumstances authorizing, under the terms of the instrument described in the motion, exercise of a power of sale contained therein, and such other issues required by the Soldiers' and Sailors' Civil Relief Act of 1940, as amended. The court shall determine whether there is a reasonable probability that such default or other circumstance has occurred, and whether an order authorizing sale is otherwise proper under said . . . Act, . . . and shall summarily grant or deny the motion in accordance with such determination.(fn13)
It should be clear, from decisions such as Princeville, Valley Development and Moreland, that the language of Rule 120 incorporates due process safeguards for debtors. It also should be clear that these safeguards are to be provided in a meaningful manner during a hearing at which the debtor may contest the claims made by the foreclosing mortgagee. Nevertheless, even after Moreland,...
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