Chapter 3 - § 3.1 • PARTIES

• Jurisdiction: Colorado

§ 3.1 • PARTIES

§ 3.1.1—Parties With Record Interest And Parties In Possession — Rule 105(b) And C.R.S. § 38-35-114

Rule 105(b) limits necessary parties to those with a record interest and parties in possession. Anyone who claims an interest in the property through another person, but whose interest does not appear in the records will be bound by the outcome of the lawsuit as long as the person under whom the claim is made is named as a party. C.R.S. § 38-35-114 is to the same effect. Thus, any person or entity whose name appears in documents affecting title to the subject property should be named as a party in the complaint. Scrutiny of the record documents is necessary to find not only the names of all parties claiming an interest, but also any derivations of the names; for example, "William Smith" versus "Bill Smith," the inclusion of a suffix such as "Jr." or "III," or inclusion or deletion of middle initials or middle names. If multiple permutations of similar names appear, the best practice is to name them all, e.g., name both "William Smith" and "Bill Smith." Also, when it is necessary to name multiple defendants, listing them in alphabetical order can help organize the defendant group and make it easier to keep track of them. Unless the list of defendants runs multiple pages, it is a good habit to continue to list them all instead of using "et al." Most of the time, it will not matter whether all defendants are listed or whether the "et al." abbreviation is used. However, serious consequences can occur from use of "et al." in critical documents such as the quiet title decree or the notice of appeal. In those documents, all defendants must be listed; otherwise the decree could be ineffective, or an appellate court could rule that fewer than all the defendants have actually appealed.

The names of entities can be particularly tricky. In 2000, the Colorado General Assembly passed a statute now codified at C.R.S. § 7-90-601 addressing entity names. Subsection (2) requires that entity names be distinguishable in the secretary of state's records from other domestic entities. This was a change from the prior requirement that entity names not be "deceptively similar." Then, on July 1, 2004, the secretary of state's office changed its policy, making registration of nearly identical entity names possible. For example, merely using the words "the" or "a" in the beginning of a name can make entity names distinguishable. Similarly, abbreviations such as "Corp.," "Co.," or "LLC" can render names distinguishable. As a result, "XYZ, Corp.," "XYZ, Corporation," and "XYZ, Inc." can all be registered in Colorado as separate entities. The implication for the quiet title practitioner is that extreme care must be taken in examining the record and naming entities exactly as their names appear and using every permutation shown in the record. Similarly, care must also be taken in serving the proper entity with the quiet title lawsuit.

A quiet title plaintiff must also determine whether any parties are in possession of the subject property. If so, the plaintiff must investigate the identity of such parties and name them as defendants.

In addition to properly identifying and naming the defendants in a quiet title action, it should be obvious that properly naming the plaintiff is critical as well. Reisbeck, LLC v. Levis¹ is a case where that did not happen. There, the plaintiff was named "Reisbeck, LLC" when the actual name of the plaintiff/property owner was "Reisbeck Subdivision, LLC." The case went all the way to a default judgment, which stated that "Reisbeck, LLC" was the owner of an 85 percent interest in the subject property. After the judgment entered, plaintiffs counsel realized the error and moved to correct the judgment under C.R.C.P. 60(a). Despite the fact the motion was uncontested, the district court denied the motion. On appeal, the court of appeals reversed, holding that Rule 60(a) could properly be used in a case like this to correct a mistake made by a party.

§ 3.1.2—Public Trustee, County Treasurer

If the subject property is encumbered by a deed of trust that the plaintiff would like to extinguish, the plaintiff should name the public trustee of the county in which the property is located as a party. This will almost always result in the public trustee filing a disclaimer under Rule 105(c). If the plaintiff intends to set aside a tax sale or a treasurer's deed, the plaintiff should also name the county treasurer.

§ 3.1.3—Homeowners' Associations

If the subject property is located in an area covered by a homeowners' association, the plaintiff should consider whether this will affect the parties to be named. For example, if the quiet title action includes a claim for an easement crossing a record easement in which members of the local HOA may have an interest, the association or even all the individual property owners within the association may be necessary parties. The question will probably turn on whether the subject property is a "common element" of the common interest community. C.R.S. § 38-33.3-105(2) states that each unit in a condominium or planned community with common elements has an ownership interest in the common elements for assessment and taxation purposes.

Another scenario that could require naming all owners is litigation over restrictive covenants. If the association is of a significant size, identifying, naming, and serving hundreds or possibly thousands of parties could make the proposed quiet title action economically impossible. At least one case approved class action status as a way to deal with this problem.² On the other hand, the association is the representative of the homeowners.³

§ 3.1.4—Service On Legal Entities

Title to real property is often held by legal entities rather than individuals. Many real property owners elect to hold their real property in the name of legal entities to avail themselves of certain tax benefits or as a method of limiting their personal liability. Sometimes real property is also held by a trust for estate planning purposes. If a legal entity holds an interest in real property, the initiating party of a quiet title action must properly name and serve the legal entity as part of the action.⁴

Under Colorado law, legal entities that are registered with the Colorado Secretary of State must designate someone to accept service of process on behalf of the entity. This individual is referred to as the registered agent of the entity. Many foreign entities or large companies use an agency to provide this service. The control persons (or the founders) of a legal entity in Colorado are required to designate an initial registered agent of an entity in the controlling documents of the entity that are filed with the Colorado Secretary of State (i.e., the articles of incorporation in the case of a corporation or the articles of organization in the case of a limited liability company).⁵ The registered agent of a Colorado entity can be changed from time to time by submitting a new filing with the Colorado Secretary of State.⁶

The Business Center section of the Colorado Secretary of State's website contains an electronic copy of the controlling documents for Colorado entities that are required to register.⁷ Before naming a Colorado entity in a quiet title lawsuit, the practitioner should check the records of the Colorado Secretary of State to determine if the entity is in good standing, suspended, or dissolved.

The following discusses the most common types of legal entities used to hold title to real property followed by a description of how to serve each of those entities.

Corporations

Domestic Corporations in Good Standing
Process is served upon a corporation

by delivering a copy thereof to the registered agent for service as set forth in the most recently filed document in the records of the secretary of state of this state . . . or [an officer of the corporation].⁸

The articles of incorporation of a corporation will state the name and address of the corporation's registered agent.⁹ If the corporation does not have a registered agent, then service on the corporation can be accomplished by registered or certified mail to the corporation's principal offices or as otherwise provided under the Colorado Rules of Civil Procedure.¹⁰ Many corporations have filed a complete copy of their articles of incorporation online with the Colorado Secretary of State that may indicate the name of the initial directors of the corporation.

Under Colorado law, a corporate entity has the power to sell, convey, mortgage, pledge, and otherwise dispose of its property.¹¹ The officers, directors, or agents of a corporation who are granted the authority to dispose of such property on behalf of the corporation will be identified in the corporation's articles of incorporation, bylaws, or, if none, under the provisions of the Colorado Business Corporations Act or other provisions of Colorado law.¹²

Domestic Nonprofit Corporations

In general, any civil action permitted under Colorado law may be brought against any nonprofit corporation and such assets may be subject to levy and execution.¹³ The Colorado Rules of Civil Procedure do not distinguish between a "for profit" corporation and a nonprofit corporation for purposes of service of process.¹⁴ Therefore, process is served upon a nonprofit corporation just as it is on a for profit corporation.¹⁵

The Colorado Corporations and Associations Act, providing for registered agents and service of process, applies to nonprofit corporations.¹⁶ In general, the Colorado Corporations and Associations Act provides that service on a nonprofit corporation can be accomplished by delivery to the corporation's registered agent.¹⁷ The articles of incorporation of a nonprofit corporation will state the name and address of the corporation's registered agent.¹⁸ Many nonprofit corporations have filed a complete copy of their articles of incorporation online with the...