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Jake's Granite Supplies, L.L.C. v. Beaver - 442 B.R. 694

Rule:

Under Arizona law, a party claiming title, or in this case compensation, for real property by adverse possession must show that his or her possession was exclusive, actual, open and notorious, hostile, under a claim of right, and continuous for the statutory period of ten years.

Facts:

Jake's Granite Supplies (Jake's), is an Arizona limited liability company, which filed a voluntary petition under Chapter 11 of the Bankruptcy Code on June 13, 2005. As of the petition date, Jake's was the title owner of certain real property that included the following parcels: Quackenbush (~120 acres), Stone (~40 acres), and Dycus (~40 acres). Jake's acquired title to the parcels by three separate deeds. Jake’s also obtained “ALTA/ASCM Land Title Survey" which provided that, “the premises surveyed have no known discrepancies, boundary line conflicts, encroachments, overlapping of improvements, easements or right-of-ways except as shown, and has access to or from a dedicated roadway.

The Beavers owned approximately 460 acres of flood-damaged land known as "Buckeye Ranch," which was located adjacent to the disputed parcels. The Beavers are claimants in Jake's Chapter 11 case and assert that they adversely possessed portions of Jake's property. The disputed parcels are located within a river floodway, and the Beavers contend that they used the property primarily for grazing and farming during the adverse possession period.

The Bankruptcy Court approved the sale of substantially all of Jake's assets to Cemex Construction Materials, L.P. Jake's objected to the Beavers' claims, asserting that the Beavers had failed to meet the legal requirements to obtain title by adverse possession, to specifically quantify the real property to which their claim relates, and to properly value the real property implicated by the claim. The Court found the issue moot except only for Quackenbush Pasture, which was fenced in September 1995. The rest of the parcels were all fenced prior to April 1995, more than 10 years before Jake's petition date of June 13, 2005. The Bankruptcy Court found that, "for the requisite statutory period, the Beavers adversely possessed 10.03 acres of the real property formerly owned by Jake's and ordered sold free and clear of all liens to Cemex Construction Materials, L.P. The Bankruptcy Court ordered judgment in favor of the Beavers. Jake's appealed.

Issue:

Did the Beavers adversely possess the subject property?

Answer:

Yes.

Conclusion:

The Bankruptcy Court did not err in determining that the Beavers' adversely possessed the subject property. Under Arizona law, a party claiming title, or in this case compensation, for real property by adverse possession must show that his or her possession was exclusive, actual, open and notorious, hostile, under a claim of right, and continuous for the statutory period of ten years. First, the Bankruptcy Court found that the Beavers' complete enclosure of the parcels by fencing established the requisite exclusivity. Second, the Bankruptcy Court found that the Beavers' adverse possession of the property commenced under a claim of right because there was sufficient evidence of the Beavers' intent to exercise possession and dominion of the property, whether by mistake or not. Arizona law is clear that an adverse claimant need not take any particular type of occupancy to demonstrate possession and need only show that he "occupied or used the land as would an ordinary owner of the same type of land taking into account the uses for which the land was suitable. Applied here, the fence erected by the Beavers was coupled with the grazing of cattle and irrigation of the property, all of which together served as notice to Jake's that the Beavers were treating the property in a suitable manner and, notably, as their own. The court ultimately valued the parcels at $30,000 per acre, which was the upper end of what Jake's offered to purchase the property, but significantly below the $50-60 thousand that the Beavers claimed.

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