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Hooks v. Alaska USA Federal Credit Union

Supreme Court of Alaska

March 2, 2018


         Appeal from the Superior Court of the State of Alaska, Third Judicial District, Superior Court No. 3 AN-16-05 824 CI Anchorage, Dani Crosby, Judge.

          Rand Joseph Hooks, pro se, Anchorage, Appellant. Richard Ullstrom, RCO Legal-Alaska, Inc., Anchorage, for Appellee

          Alaska USA Federal Credit Union. Mario L. Bird, Ross, Miner & Bird, PC, Anchorage, for Appellee Dennis Albert.

          Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and Carney, Justices.


          BOLGER, Justice.


         A borrower defaulted on a loan, leading to a non-judicial foreclosure of a deed of trust on his property. He filed suit against the property's new owner and the credit union that initiated the foreclosure, arguing the foreclosure and the transactions preceding it were fraudulent and invalid. The superior court granted summary judgment for the defendants. We affirm the superior court's conclusion that the borrower failed to demonstrate an issue of material fact concerning the loan origination and the foreclosure. We also reject the borrower's claims that the superior court judge was biased and that the borrower's right to due process was violated.


         In December 2002 Rand Joseph Hooks Jr. obtained a loan from Homestate Mortgage Company LLC (Homestate) to refinance an existing loan secured by his property. Hooks signed a promissory note evidencing an obligation to repay the loan and a deed of trust giving Homestate a security interest in the property. The day the loan closed, Homestate sold the promissory note and the beneficial interest in the deed of trust to Alaska USA Federal Credit Union (Alaska USA). A Homestate agent signed and transferred the note and also signed a document assigning the beneficial interest to Alaska USA.

         In 2015 the loan went into default. Alaska USA referred the defaulted loan and the deed of trust for foreclosure, and through the statutory nonjudicial deed of trust foreclosure process, the property was sold to Dennis Albert. Hooks remained in the property despite the sale, and he filed a pro se complaint against Albert and Alaska USA. Hooks alleged that Alaska USA had committed fraud, that it did not possess the document needed to initiate a foreclosure, and that banks and credit unions are legally prohibited from owning property. Hooks also claimed that he, not Albert, owned the property.

         Alaska USA and Albert filed motions for summary judgment in July 2016. After Hooks failed to respond to the motions in a timely manner, the superior court issued a "Notice Regarding Motion for Summary Judgment" that described the requirements for opposing summary judgment and extended the deadline for responding to the motions. However, Hooks did not file an opposition before the new deadline. When Hooks failed to appear at the August 22 trial call, the court took the trial off the calendar and instead held oral argument on the summary judgment motions on the date originally set for trial. At the court's request, Alaska USA sent Hooks a letter explaining the change.

         The oral argument took place on August 25, and all parties were present. Before presenting his arguments, Hooks told the court he had not received the defendants' summary judgment motions or the court's notice explaining how to oppose summary judgment; he also said he had not known about the trial call. Hooks explained he had not opened the court's emails because he had not recognized the email address the court had used to send them.

         At the oral argument, Hooks contested the legality of the loan origination and the foreclosure on several grounds. He argued that the promissory note he signed during the loan origination process was itself an asset equal in value to the loan he received, that any debt was paid in full when he transferred this asset to the lender, and that he had never received a loan at all. Hooks argued the lender had fraudulently concealed this information, causing him to mistakenly make payments for a number of years. He also argued that there were technical defects in the deed of trust and that Alaska USA had failed to adequately validate the debt upon request.

         After oral argument the superior court verified that Hooks had copies of the summary judgment motions and the notice describing how to oppose a motion. The court gave him 15 days to file a written opposition. Hooks filed an opposition on September 2 and a second opposition on September 23. In his oppositions Hooks presented several of the same arguments he had made during oral argument. He also asserted that the loan constituted ultra vires activity and that Alaska USA did not possess the note when the foreclosure was initiated. Alaska USA's and Albert's replies argued that the loan origination and foreclosure were valid and that Hooks's factual assertions were not based on personal knowledge as required under Alaska Civil Rule 56(e).

         On September 30 the court entered an order granting the defendants' motions for summary judgment.[1] The court concluded that there was no issue of material fact regarding the existence of a loan and a lien on the property, that Alaska USA was entitled to enforce the promissory note through foreclosure, and that Hooks's arguments that the loan was ultra vires and had been paid off by the promissory note were groundless. The court also held Albert was a bona fide purchaser entitled to possess the property and recover a money judgment from Hooks to compensate for lost rent, and it ordered Hooks to vacate the property. Hooks now appeals arguing that: (1) summary judgment was inappropriate; (2) the superior court was biased; and (3) the superior court violated his due process rights.


         A. Summary Judgment

         During the superior court proceedings, Hooks argued the foreclosure sale was void because the underlying debt was settled, unenforceable, or nonexistent; the deed of trust was deficient; and Alaska USA lacked the authority to foreclose. "We review grants of summary judgment de novo"[2] and will affirm when "the evidence in the record presents no genuine issue of material fact and the moving party is entitled to judgment as a matter of law."[3]

         Hooks attacks the debt on three closely related grounds. First, he argues that the debt was satisfied in full when he transferred the promissory note to Homestate. He claims his signature imbued the note with a value equal to the value of the loan itself, so after Homestate took possession of the note no further payments were required. Second, he argues Homestate loaned him "credit" rather than "money, " as evidenced by the fact he did not personally receive the amount loaned. Hooks claims that the National Bank Act does not authorize Homestate to lend credit[4] and that the loan was therefore ultra vires.[5] Lastly, he argues he never received a loan at all, meaning the promissory note is void for lack of consideration.

         Hooks's claims appear to be premised on two "interrelated and overlapping" legal theories, which other courts have characterized as the "vapor money" theory and the "unlawful money" theory.[6] In McLaughlin v. CitiMortgage, Inc., a federal district court analyzed both theories in detail:

The essence of the "vapor money" theory is that promissory notes (and similar instruments) are the equivalent of "money" that citizens literally "create" with their signatures. . . . Bolstering this argument (at least for its adherents) is the fact that once received, banks typically deposit promissory notes into their own accounts and list them as assets....
At this point in the argument, plaintiffs relying on the vapor money theory typically introduce an additional wrinkle: whereas they gave the banks valuable "money" (in the form of a promissory note), the banks gave them something that is essentially worthless: "mere" credit.... As allegedly established by the "unlawful money" theory, issuing credit violates the Constitution[] ....
This "fact" has at least two clear benefits to the []borrower .... First, it means that the bank-lender gave essentially no consideration, and risked nothing, in making the purported loan, rendering the transaction void (or at least voidable) under general principles of contract law.
... [S]econd[, ]... the []borrower actually comes out ahead in the transaction - after all, she is the only one who gave anything of value, and it would constitute unjust enrichment for the bank to "keep" the ...

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