Tyrone Allen approached two men hunched over thick tomes of real estate law at the Colorado Supreme Court library in downtown Denver. Facing foreclosure on his home, he intended to make only enough small talk to snare a book he desperately needed.
Cousins James Bailey and Allen Russell also were fighting foreclosure on a building they jointly owned. Allen struck up a conversation with the men. They quickly found they shared the same lender and a suspicion that the same judge had improperly denied them a court hearing that might have helped delay the public sale of their properties.
Affording a lawyer’s help was out of the question.
“The more we talked, the more I thought, ‘Praise God, I am not alone,”‘ Allen recalled.
Their shared commiseration in April 2004 fueled tireless research over the past 13 months that has raised questions about due process, the accuracy of some Denver court records and the validity of some foreclosure rulings.
The men, acting as their own attorneys, filed a joint complaint against Denver District Court Magistrate Diane Dupree in September. The case, which claims violation of civil rights, is pending in U.S. District Court.
The lawsuit may not get very far because the men are legal amateurs, experts say. But the case has at least spotlighted systemic problems that might entitle others to challenge the circumstances under which their properties were taken in foreclosure proceedings.
Debtors facing foreclosure may request a so-called Rule 120 hearing. In some cases, requested hearings weren’t held. Yet, a Denver district court database indicated that they were.
Denver District Court acknowledges that there was a database problem, but claims it has been fixed.
“It wasn’t that anyone was denied rights or opportunities,” Jeff Bayless, Denver District Court’s chief judge, said Friday. “But it was a failure to have something recorded in a proper way.”
The state attorney general’s office is defending Dupree. The AG’s office, in a December response to the lawsuit, acknowledges the database was flawed and has been corrected.
“We’ve got the attorney general clearly acknowledging a very, very big problem that is much more serious than a technological glitch,” said Denver lawyer John Head, who represents borrowers but is not involved in the case.
It is unknown how many foreclosure cases, or other types of hearings, may be affected. Three other Denver residents interviewed by The Denver Post claim difficulty in getting a foreclosure hearing.
Allen, Bailey and Russell are making a federal case of it.
“These guys haven’t made all the right moves, but I have to give them credit because they’re asking many of the right questions,” said Stephen Hess, a Colorado Springs lawyer who is an expert in the state’s foreclosure law and is not representing the men.
An intricate process
Lenders sent more than 12,100 households in the metro region into foreclosure in 2004. That’s the highest number recorded since 1988, during an economic bust.
The recent spiraling rate stems from aggressive lenders, overextended borrowers, lagging income growth and flat home prices, experts say.
About one-fourth of last year’s metro foreclosure filings were in Denver County, where Allen, Bailey and Russell live.
“The market used to be strong enough for people to sell (their property) in enough time and for enough money to pay their debts and maybe make a little something to help them start over,” said Denver County Deputy Public Trustee Anita Dubas. “Today, those people are the rare exception.”
The foreclosure process is intricate.
The official notice informing a borrower that his or her property has been sent into foreclosure typically arrives in the mail – uncertified – between three and five months after a payment is missed. The notice, laden with legalese, is from the lender’s attorney. The complaint against a borrower is filed at a county courthouse, but is not supplied with the notice.
The notice states that borrowers who properly respond to the court are entitled to the Rule 120 hearing. This hearing is critical because a judge decides whether the lender has the right to sell the foreclosed property at public auction.
Knowing they’re in default, the majority of borrowers don’t put up much of a fight when the notice arrives in the mail. Fewer than 10 percent even ask for a Rule 120 hearing in Denver District Court, said Jose Vasquez, a lawyer with Colorado Legal Services.
A lawyer who primarily has represented lenders for 25 years said judges “typically bend over backwards” to give debtors their day in court.
“We have to prepare for a full-blown hearing, and then the guys (debtors) don’t show up, or they show up and say all sorts of things that are outside the scope of that hearing. They’re just trying to buy time,” said Charles “Chuck” Bewley of Denver law firm Berenbaum, Weinshienk & Eason P.C.
But some debtors who properly requested Rule 120 hearings claim they didn’t get them. Tyrone Allen, James Bailey and Allen Russell are among them. And they’re fighting the system.
Bungalow refinanced
Tyrone Allen’s path to foreclosure – and personal bankruptcy – began in 2002 when he refinanced the mortgage on the pristine bungalow he has filled with African art in Denver’s pricey Park Hill neighborhood.
He used $15,500 from the refinancing to keep afloat his company, which matches moving companies with jobs.
“I had to make payroll,” said Allen, 43. “Sure, I was taking a risk, but I like working and living boldly.”
People in Denver’s Five Points and Curtis Park neighborhoods will attest to that. They know the Denver native as a local high school basketball coach. They remember the eight years he paid for 200 people to attend a lavish Christmas Eve breakfast and dinner at a YMCA.
But he has also run into business trouble. At least three times he has been associated with companies that filed for bankruptcy. His trucking brokerage, which operates under names that include America on the Move, is currently under investigation by the Federal Motor Carrier Safety Administration, which is probing consumer complaints.
The Denver/Boulder Better Business Bureau reports 54 consumer complaints against Allen’s brokerage in the past three years.
“That has to be weighed against the amount of shipping I do in a year,” said Allen, noting his company handles 650 to 700 shipments a year.
Even with $15,500 he gained from the 2002 home refinancing, Allen fell three months behind on house payments of $3,200 a month in 2003. Allen said he owed his lender $352,000.
When he tried to make up the missed payments, he said, his lender pointed to the loan’s fine print. Allen had missed an important detail: In addition to late fees, the contract stated he also owed “default interest” on each missed payment. The lender wanted $45,000 in default interest alone.
“I knew then that I had made a big mistake,” Allen said. “But I also had questions about what was happening. It didn’t look, feel or smell right.”
Allen sent his lender checks to cover missed payments and late fees, but Allen contested the default interest. He said his lender sent the checks back because they were only partial payments. The stalemate plunged Allen into a court system that he claims treated him and others unfairly.
His Rule 120 notice arrived in the mail in February 2004. Denver District Court acknowledged that Allen appropriately filed a written response to request his hearing and paid the required $70 filing fee.
When he showed up for his hearing on Feb. 26, 2004, he said a court clerk told him he would have to return another day. Dupree, the Denver District Court magistrate assigned to his case, had a full day of hearings and was trying to leave for vacation, Allen said he was told. Allen claims the clerk also told him he would be notified of the hearing’s new date.
A week later, Allen said, he was still waiting for that notification. He said he called Dupree’s office once a week in the course of a month and was told no new hearing date had been set.
On April 21, 2004, a Wednesday, he said he placed his last call to the clerk and was told that the judge had authorized the auction of his home.
Dupree declined to comment for this story. However, the Colorado attorney general’s office has acknowledged in court filings that Allen did not get the Rule 120 hearing he requested.
A quick filing to buy time
When told by the clerk that his home would be sold, Allen acted quickly. Filing for personal bankruptcy would stop the foreclosure process and buy time.
From his home, he ran to his car and drove to the U.S. Customs Building in downtown Denver. He ran through the halls and to the office that accepts bankruptcy filings. It was closed, but a clerk pitied him and accepted his hurriedly completed paperwork.
The next week, Allen befriended Bailey, 49, and Russell, 54, at the Colorado Supreme Court library.
The men discovered they shared the same lender: Financial Capital Companies, based in Greenwood Village. They also found they had asked for Rule 120 hearings they didn’t get from Dupree.
Bailey and Russell jointly owned a building at East 28th Avenue and Downing Street in the Five Points neighborhood. On the ground floor, Russell had run Spin Records & Tapes for nearly two decades. The cousins lived in apartments upstairs.
Bailey, an ex-convict who said he served time for running a food-stamp scam, is a boisterous, self-described “jailhouse lawyer.” Acting as their own attorneys, Bailey and Russell filed claims in state and federal court objecting to Financial Capital’s lending practices, and helped Allen do the same.
Russell and Bailey’s federal claims, which included alleged Truth in Lending violations, came before U.S. District Court Judge Marcia Krieger in June.
The judge waded through legal briefs riddled with spelling and grammar errors and presided over Russell’s spirited and unpolished courtroom banter for several hours over two days.
“I encourage you to hire an attorney,” she told him before ruling that he’d have to take his claims against Financial Capital to state court. “As you’ve discovered today, trying to conduct an evidentiary hearing is a little bit like trying to do brain surgery on yourself. It’s a hard thing, and it’s a dangerous thing.”
In March, Krieger ruled on Allen’s claims. She decided he had raised Truth in Lending claims against Financial Capital worthy of a federal trial. Financial Capital quickly moved to settle with Allen. The settlement gives Allen the opportunity to buy back his property below the appraised market value, a transaction still in negotiation.
“That just goes to show you that if Judge Dupree had given me that (Rule 120) hearing, I would have had a lot of interesting things to say,” Allen said recently. “And maybe I wouldn’t have had to go through even half of what I have.”
Michael Schuyler, an attorney for Financial Capital, said, “The issue between Mr. Allen and (Financial Capital) has been settled. There is no litigation pending between the two parties.”
Separately, Russell, Bailey and Allen – again, acting as their own attorneys – filed a complaint in federal court in September. They claim Dupree violated their rights to due process by not giving them a Rule 120 hearing.
The Colorado attorney general’s office, in its December response to the lawsuit, acknowledges that the hearings were not held: “In plaintiffs’ cases, in- chambers reviews of the entire files were conducted prior to the entry of any decision. However, the Register of Action shows the in-chambers reviews as ‘Hearing Held.”‘
The federal lawsuit was assigned to Krieger. Whether it goes to trial is expected to be decided later this year. Krieger did not return calls for comment.
Even if the men prevail, they may not win back their properties. Allen is still negotiating with Financial Capital. Bailey and Russell were evicted from their building Monday.
“I’m not sure it really is too late for us,” Allen said. “But even if it is, maybe others will somehow benefit from what we’ve managed to do.”
The Post has talked with three other debtors who claim they requested, but did not receive, Rule 120 hearings. Laura Golston was scheduled to appear before Dupree. Esther Watson and Beverly Grant-Cobb were to appear in separate hearings before Magistrate Elizabeth Leith. Leith did not return a call for comment.Legal experts say the pending federal case raises three chief issues:
Due process. Colorado law entitles borrowers to a Rule 120 hearing before their property can be sold in foreclosure.
Validity. Colorado courts have not addressed whether the improper denial of a Rule 120 hearing voids foreclosure, said Vasquez, the lawyer with Colorado Legal Services.
The accuracy of Denver court records. Only after Allen, Bailey and Russell filed suit against Dupree did Denver District Court officials work to correct the database to more accurately reflect whether a hearing had in fact been held.
“This problem has since been resolved so that ‘hearing held’ will no longer show in such instances,” Assistant Colorado Attorney General Melody Mirbaba wrote in the December brief responding to the men’s federal lawsuit.
Head, the Denver lawyer, isn’t sure it is resolved.
“We have to be able to depend on an accurate court record, but how do we know records regarding (Rule) 120 hearings are accurate now?” he asked.
“Unfortunately, we also have three guys (Allen, Bailey and Russell) who don’t know what they’re doing, trying to push this issue through the courts.”
Staff writer Christine Tatum can be reached at 303-820-1015 or ctatum@denverpost.com.
