June 16, 2019

Colorado Court of Appeals: Corporation Incorporated in Another State May Be Considered “Citizen” of This State for C.R.C.P. 102 Purposes

The Colorado Court of Appeals issued its decision in Old Republic National Title Insurance Co. v. Kornegay on August 16, 2012.

Prejudgment Attachment.

Roger Kornegay appealed three trial court orders sustaining a prejudgment attachment obtained by Old Republic National Title Insurance Company (Old Republic) in connection with its pending civil action against him. The orders were affirmed.

Old Republic paid its insured $250,000 following the insured’s purchase of property from Kornegay that Kornegay did not own. Old Republic then sued Kornegay, alleging that its losses were the result of a fraud scheme he had perpetrated. Old Republic also filed an ex parte motion for a prejudgment writ of attachment pursuant to CRCP 102.

Old Republic’s investigator, Pollock, submitted a supporting affidavit and, on that basis, Old Republic alleged there was “a real threat that [Kornegay] or individuals he is close to will further transfer or hide his assets,” thereby rendering execution unavailable in the event of a judgment against him. The trial court granted the motion and issued the writ without requiring Old Republic to post a bond.

Old Republic served the writ, along with a writ of continuing garnishment in aid of attachment, on four banks, several Colorado county treasurers, and the clerk and recorder of El Paso County, where Kornegay owned real property. Kornegay, who was incarcerated in Nebraska, was served with copies.

Through counsel, Kornegay moved to dismiss and discharge the attachment and quash the garnishment. He also filed a traverse, a counterclaim for wrongful attachment, and a notice of a claimed homestead exemption. In three orders entered the same day, the trial court denied Kornegay’s motions and dismissed his counterclaim. Kornegay appealed.

Kornegay did not challenge the sufficiency of the Pollock affidavit to establish the grounds for attachment under CRCP 102. Rather, he argued that the attachment was wrongful because (1) Old Republic is not a Colorado resident and thus cannot avail itself of the remedy of prejudgment attachment; (2) the procedural requirements of CRCP 102 (d), (h), (i), and (n) were not met; (3) the trial court should not have sustained the attachment without addressing his homestead exemption claim; and (4) the trial court erred in dismissing his counterclaim for wrongful attachment. The Court of Appeals found no grounds for reversal.

Old Republic is registered to conduct business in Colorado and has three offices in the state, but its principal place of business is in Minnesota. Colorado courts have not addressed whether a foreign corporation authorized to conduct business in Colorado and having offices here may be considered a “resident of this state” for purposes of CRCP 102. The Court looked to cases from other jurisdictions for edification.

A corporation generally is considered to be domiciled in, and a citizen of, its place of incorporation, but it may for some purposes be considered a resident of more than one state. The Court found that Old Republic is a “resident of this state” for purposes of CRCP 102. It has a presence (three offices) and “no present intention of definite and early removal.” It therefore may avail itself of the remedy of prejudgment attachment.

As to Kornegay’s arguments regarding the other sections of CRCP 102, the Court held that use of a private process server to serve the writ on a defendant incarcerated in another state complied with the rule and that it wasn’t necessary for the sheriff to serve the writ. As to CRCP 102(h), the tax liens were security interests in real property, and serving writs of garnishment in aid of attachment on the treasurers of the counties where the property was located satisfied the requirements of the rule.

The failure to post a bond was not error because Old Republic offered to post a bond in a nominal amount if required to do so, and the trial court waived bond. Kornegay argued this was not waivable; Old Republic replied that the court effectively set the bond at zero. The Court found this an appropriate exercise of the court’s discretion, given the resources of Old Republic to satisfy any damages or costs Kornegay might incur if the attachment was wrongful.

Kornegay argued that CRCP 102(n) was not complied with because no hearing was held on his traverse. The Court found that Kornegay did not file an effective traverse, so no hearing was required. The traverse was ineffective because it was not supported by an affidavit.

The Court also found that Kornegay’s claimed homestead exemption was properly rejected because neither Kornegay nor his wife resided at the subject property. Accordingly, the orders were affirmed.

Summary and full case available here.

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