Rosenberg v. Smidt

In 1973, Alvin and Janice Smidt (plaintiffs) purchased property in Alaska from Rodney Spendlove and William Johnson. The property was encumbered by a deed of trust executed by Spendlove and Johnson. The Smidts executed a second deed of trust in favor of Spendlove and Johnson for $6,200, the balance of the purchase price. Alaska Title Guaranty Company (Alaska Title) was named as trustee on both deeds of trust. In 1980, Spendlove and Johnson defaulted on the note secured by the first deed of trust, and Alaska Title began nonjudicial foreclosure proceedings. As required by statute, Alaska Title mailed notice of default to the Smidts, as assignees of Spendlove and Johnson, at the Smidts’ last known address, i.e., the address on the deed of trust executed seven years earlier. However, the mail was returned as unclaimed. Alaska Title also published notice of the deed of trust sale in a newspaper. Despite Alaska Title’s efforts, the Smidts never received actual notice of the sale. Fred and Rita Rosenberg (defendants) purchased the property at public foreclosure under a deed of foreclosure stating that notice had been given in compliance with the law. The Smidts continued making payments to Spendlove and Johnson under the deed of trust until 1981, when the Smidts learned of the sale to the Rosenbergs. The Smidts sued to set aside the sale. The trial court granted partial summary judgment to the Smidts, divesting the Rosenbergs of title to the property. The court also ruled that Alaska Title, as trustee, had a duty to take reasonable steps to discover the current address of record interest holders, like the Smidts, before selling the property. The Rosenbergs appealed.