Anderson v. Alaska Housing Finance Corp., 041720 AKSC, S-17077

• Opinion Judge: WINFREE, Justice.
• Party Name: DAVIN J. ANDERSON, Appellant, v. ALASKA HOUSING FINANCE CORPORATION, Appellee.
• Attorney: James J. Davis, Jr., Alaska Legal Services Corporation, Anchorage, for Appellant. Laura Fox and Stefan Saldanha, Assistant Attorneys General, Anchorage, and Jahna Lindemuth, Attorney General, Juneau, for Appellee.
• Judge Panel: Before: Bolger, Chief Justice, Winfree, Stowers, Maassen, and Carney, Justices. STOWERS, Justice, dissenting.
• Case Date: April 17, 2020
• Court: Alaska Supreme Court

DAVIN J. ANDERSON, Appellant,

v.

ALASKA HOUSING FINANCE CORPORATION, Appellee.

No. S-17077

Supreme Court of Alaska

April 17, 2020

Appeal from the Superior Court No. 3AN-17-05945 CI of the State of Alaska, Third Judicial District, Anchorage, Frank A. Pfiffner, Judge.

James J. Davis, Jr., Alaska Legal Services Corporation, Anchorage, for Appellant.

Laura Fox and Stefan Saldanha, Assistant Attorneys General, Anchorage, and Jahna Lindemuth, Attorney General, Juneau, for Appellee.

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

OPINION

WINFREE, Justice.

I. INTRODUCTION

Alaska Housing Finance Corporation (AHFC), a public corporation, held a promissory note and deed of trust executed in connection with a borrower's purchase of his home. AHFC non-judicially foreclosed on the deed of trust without first providing the borrower an opportunity to present to a decision-maker his argument why under AHFC's policies and procedures he was entitled to loan assistance to prevent the foreclosure. The borrower brought suit, alleging, among other things, that he was denied procedural due process protections before AHFC took his property by foreclosure. The superior court rejected his due process argument and granted AHFC summary judgment on all issues. The sole issue on appeal is the due process question. We conclude that AHFC is a "state actor," that the foreclosure effected a deprivation of the borrower's property, and that the borrower was not afforded a constitutionally required pre-deprivation opportunity to be heard. We therefore reverse the superior court's summary judgment decision on the due process question and remand for further proceedings.

II. FACTS AND PROCEEDINGS

A. AHFC's History And Lending Activities

AHFC is "a public corporation organized within the Alaska Department of Revenue."¹ Although AHFC has "a legal existence independent of and separate from the [S]tate, "² in practice it is state-controlled and enjoys benefits associated with being a state entity. AHFC's board of directors is comprised of seven members; all are state agency commissioners or otherwise appointed by the governor.³ AHFC is represented by the Attorney General in legal matters⁴ and enjoys the State's sovereign immunity from lawsuits.⁵

The legislature created AHFC to address the shortage of residential housing available to low- and middle-income Alaskans and to promote the development of the State's "remote, underdeveloped, or blighted areas."⁶ AHFC "is empowered to act on behalf of the [S]tate and its people in serving [AHFC's] public purpose."⁷ Part of AHFC's public purpose is encouraging private lending to low- and middle-income borrowers by purchasing mortgage loans on the secondary market.⁸

AHFC contracts with lenders to service its loan portfolio. AHFC requires its servicers to "establish a system for servicing delinquent loans that follows the accepted standards of prudent lending." AHFC s servicing guide provides that a servicer may be required to repurchase a loan if it fails to adequately service the loan. AHFC's servicing guide also calls for compliance with "requirements of the insurer or guarantor" to assure mortgage insurance proceeds. AHFC must approve all loan modifications and mortgage foreclosures.

B. Anderson Purchases A Residence Financed By A Promissory Note Secured By A Deed Of Trust

In September 2006 Davin Anderson borrowed $90, 950 from Wells Fargo Bank, N.A. to purchase a residential property. Anderson executed a 30-year promissory note at a 5.75% annual interest rate. The note was secured by a deed of trust covering the property.⁹ A rider to the deed of trust contemplated that Wells Fargo might assign the note and deed of trust to AHFC.

The deed of trust described the note holder's remedies if Anderson defaulted on payment. The deed of trust permitted the note holder to accelerate the debt and to exercise a power of sale to non-judicially foreclose on the property.¹⁰ The deed of trust required that prior to acceleration the note holder give Anderson notice specifying: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date [of the notice], by which the default must be cured; and (d) that failure to cure the default on or before the date specified... may result in acceleration of the sums secured by [the deed of trust] and sale of the [p]roperty.¹¹

The deed of trust required that prior to the trustee exercising power of sale it "execute a written notice of the occurrence of an event of default and of the election to cause the [p]roperty to be sold and... record such notice in [the] Recording District in which... the [p]roperty is located."¹² The trustee also was required to mail or personally deliver notice to anyone holding an interest in the property.¹³ Following the required notice period, the trustee was allowed to "sell the [p]roperty at public auction to the highest bidder at the time and place and under the terms designated in the notice of sale."¹⁴ The deed of trust provided that Anderson could halt the foreclosure process and reinstate the note if he made all past-due payments and cured any other defaults under the agreement.¹⁵

Shortly after the secured loan was originated, Wells Fargo sold and assigned both the note and deed of trust to AHFC. AHFC retained Wells Fargo to service the loan.

C. Anderson Defaults And Seeks A Modification

Anderson later began having financial difficulties. He declared bankruptcy in 2010 and discharged his personal obligation on the note. In 2013 Anderson fell behind on his payments and Wells Fargo placed the loan in "loss mitigation status." Anderson and Wells Fargo corresponded several times in 2014 about possible loan modification options. Wells Fargo notified Anderson in December that AHFC had rejected a proposed modification.

Anderson then tried to communicate directly with AHFC. Anderson wrote AHFC in January 2015 asking for help refinancing or modifying his loan to make it affordable. AHFC forwarded the letter to Wells Fargo. In March Anderson emailed AHFC a proposed payment schedule. Wells Fargo requested updated financial information to determine if Anderson qualified for a repayment plan. Anderson did not respond for several months, and AHFC instructed Wells Fargo to proceed with foreclosure. The foreclosure sale was scheduled for September.

In August Anderson called Wells Fargo to determine how he could stop the foreclosure sale. Wells Fargo told him he would need to pay $14, 195, which included all past-due payments and foreclosure-related expenses.¹⁶ Anderson submitted the payment and his loan was reinstated.

Anderson soon defaulted again; his last payment was in December 2015. He sent AHFC a letter in March 2016 seeking an interest rate reduction. AHFC forwarded the letter to Wells Fargo. Wells Fargo mailed Anderson a "[l]oss [m]itigation package" and followed up with several phone calls. By May Anderson had not responded, and Wells Fargo recommended that AHFC again begin the foreclosure process. AHFC approved foreclosure.

D. AHFC Directs Foreclosure Pursuant To The Power Of Sale

The second non-judicial foreclosure process under Anderson's deed of trust began in June 2016; a foreclosure sale was scheduled for September. The trustee recorded a notice of default describing the property, the amount owed, and how the loan could be reinstated. The notice was posted in three public buildings near the property; published online and in a newspaper; posted at a conspicuous place on Anderson's property; and mailed to him.¹⁷ The notice mailed to Anderson also included disclosures implicated by the federal Fair Debt Collection Practices Act, ¹⁸ including the following: Unless within 30 days after receipt of this notice you dispute the debt or any portion of it, we will assume the debt to be valid. . . . If you notify us in writing within 30 days after receipt of this notice that you dispute the debt or any part of it, we will obtain verification of the debt and mail it to you.

The foreclosure sale was postponed several times;^[19] it ultimately took place in August 2017. AHFC was the highest bidder at the sale and the trustee conveyed the property to it shortly thereafter.²⁰

E. Anderson Unsuccessfully Sues; Anderson Appeals

In April 2017, a few months before the foreclosure sale, Anderson sued AHFC and Wells Fargo to enjoin the sale and recover damages related to Wells Fargo's alleged misrepresentations. Wells Fargo later settled with Anderson, leaving Anderson's claim that AHFC had failed to afford him due process because it had not provided him a pre-foreclosure opportunity to be heard. Anderson apparently did not seek a temporary injunction, and his suit thus did not halt the foreclosure sale. Following the sale AHFC brought a counterclaim to recover possession of the property and damages.²¹

Anderson sought summary judgment on his due process claim. AHFC opposed that motion and sought summary judgment on all other issues, arguing that Anderson received sufficient due process and that his other claims were barred by statute or AHFC's sovereign immunity. The superior court heard oral argument on the cross-motions. The court then denied Anderson's motion and granted AHFC's, without providing specific reasoning, but stating that Anderson should appeal to the supreme court for a ruling on his due process claim.

After the summary judgment ruling, the parties engaged with the superior court for entry of final judgment. As part of the final judgment, Anderson was ordered to pay AHFC damages for his post-foreclosure possession of his residence. The parties then stipulated to a stay of execution and to Anderson's continued possession of the...