In re Supplies

• Court: U.S. District Court — District of Arizona
• Writing for the Court: ORDER
• Citation: In re Supplies, 442 B.R. 694 (D. Ariz. 2010)
• Decision Date: 13 December 2010
• Docket Number: Adversary No. 2:07–ap–00145–RJH.,Bankruptcy No. 2:05–bk–10601–RJH.,No. CV–10–00083–PHX–GMS.,CV–10–00083–PHX–GMS.
• Parties: In re JAKE'S GRANITE SUPPLIES, L.L.C., Debtor.Jake's Granite Supplies, L.L.C., an Arizona Limited Liability Company, Appellant,v.John and Vicki H. Beaver dba Buckeye Ranch, L.L.C., husband and wife; Buckeye Ranch, L.L.C., an Arizona limited liability company, Appellees.

442 B.R. 694

In re JAKE'S GRANITE SUPPLIES, L.L.C., Debtor.Jake's Granite Supplies, L.L.C., an Arizona Limited Liability Company, Appellant,

v.John and Vicki H. Beaver dba Buckeye Ranch, L.L.C., husband and wife; Buckeye Ranch, L.L.C., an Arizona limited liability company, Appellees.

No. CV–10–00083–PHX–GMS.

Bankruptcy No. 2:05–bk–10601–RJH.

Adversary No. 2:07–ap–00145–RJH.

United States District Court, D. Arizona.

Dec. 13, 2010.

Michael R. Scheurich, Robert C. Brown, William L. Novotny, Mariscal Weeks McIntyre & Friedlander PA, Phoenix, AZ, for Appellant.John Beaver, Phoenix, AZ, pro se.Vicki H. Beaver, Phoenix, AZ, pro se.Buckeye Ranch LLC, Phoenix, AZ, pro se.

ORDER

G. MURRAY SNOW, District Judge.

Currently pending before the Court is Debtor's Appeal from the Arizona Bankruptcy Court's Second Amended Final Judgment entered on January 25, 2010. (Doc. 17, Ex. C). After reviewing the pleadings and record excerpts submitted for purposes of this appeal, and having determined that oral argument is unnecessary,¹ the Court affirms the judgment for the following reasons.

BACKGROUND

Appellant, Jake's Granite Supplies (“Jake's”), is an Arizona limited liability company. Jake's filed a voluntary petition under Chapter 11 of the Bankruptcy Code on June 13, 2005 (the “petition date”). (Doc. 17, Ex. D). As of the petition date, Jake's was the title owner of certain real property associated with its sand and gravel mining operation. The property included the following parcels: Quackenbush (~120 acres), Stone (~40 acres), and Dycus (~40 acres). ( Id.). Jake's acquired title to the parcels by three separate deeds, all of which were recorded on October 12, 2004. In connection with its acquisition of the parcels, Jake's also obtained an “ALTA/ASCM Land Title Survey” (the “Survey”), in July 2004. ( Id.). The Survey provided that, “[t]he 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.” (Doc. 17, Ex. D).

The Beavers, husband and wife, owned approximately 460 acres of flood damaged land known as “Buckeye Ranch,” which was located adjacent to the disputed parcels. (Doc. 17, Ex. D). The Beavers are claimants in Jake's Chapter 11 case and assert that they adversely possessed portions of Jake's property. (Doc. 17, Ex. A). 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.

Several months after Jake's petition date, the Bankruptcy Court approved the sale of substantially all of Jake's assets associated with its sand and gravel mining operation, including the disputed parcels, to Cemex Construction Materials, L.P. (Doc. 17, Ex. D). The transaction closed on November 27, 2005. In the course of the Cemex Transaction, Jake's became aware of the Beavers' adverse possession claim to portions of the parcels. As a result, the Bankruptcy Court conditioned its approval of the Cemex Transaction on the proceeds of the sale being escrowed pending further order, and further directed that whatever interest the Beavers had in the disputed parcels attach to the proceeds of the Cemex Transaction. On March 20, 2006, 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.

At issue before the Bankruptcy Court was how to determine the statutory period for adverse possession when a bankruptcy case is filed prior to the end of the ten-year statutory period. The court found this issue moot in the present case because, with the exception of the Quackenbush Pasture, which was fenced in September 1995, the rest of the parcels were all fenced prior to April 1995, more than ten years before Jake's petition date of June 13, 2005. The court did note, however, that the outcome would be the same if they had calculated a twelve-year period backward from April 2007 because of the two-year extension granted to actions commenced by the debtor under § 108(a) of the Bankruptcy Code.²

Accordingly, 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., pursuant to the Court's Order entered November 23, 2005.” (Doc. 17, Ex. C). Specifically, the adversely possessed property included 4.02 acres of Dycus Field, 4.11 acres of Dycus Pasture, .80 acres of Stone Parcel, and 1.10 acres of Quackenbush Field. ( Id.). The court did not find Quackenbush Pasture to be adversely possessed because the requisite statutory period was not satisfied with respect to that parcel.

The court further held that the property had a value of $30,000.00 per acre as of November 23, 2005, for a total value of $300,900.00. Accordingly, the Bankruptcy Court ordered judgment in favor of the Beavers in the amount of $300,900.00, with interest at the rate of seven percent (7%) per year accruing from November 23, 2005, until paid in full. Jake's appeals from the Bankruptcy Court's final judgment both with respect to the adverse possession finding and the valuation of the disputed parcels.

DISCUSSION

I. Legal Standard

Under 29 U.S.C. § 158(a)(1), the Court has jurisdiction over appeals from “final judgments, orders, and decrees” of bankruptcy judges. The Court reviews a bankruptcy court's conclusions of law de novo, and its findings of fact under the clearly erroneous standard. Greene v. Savage, 583 F.3d 614, 618 (9th Cir.2009); Fed. R. Bankr. P. 8013 (“Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.”). The clearly erroneous standard requires the Court to accept a bankruptcy court's findings of fact “unless these findings leave the definite and firm conviction that a mistake has been committed by the bankruptcy judge.” See Latman v. Burdette, 366 F.3d 774, 781 (9th Cir.2004) (citing In re Banks, 263 F.3d 862, 869 (9th Cir.2001)). The Court must review the evidence on record in the light most favorable to the prevailing party. Lozier v. Auto Owners Ins. Co., 951 F.2d 251, 253 (9th Cir.1991).

II. AnalysisA. Adverse Possession Finding

Applying the clearly erroneous standard of review, 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. A.R.S. §§ 12–521, 12–526 (2010); see also Spaulding v. Pouliot, 218 Ariz. 196, 201, 181 P.3d 243, 248 (Ct.App.2008); Berryhill v. Moore, 180 Ariz. 77, 82, 881 P.2d 1182, 1187 (Ct.App.1994); Lewis v. Pleasant Country, 173 Ariz. 186, 189, 840 P.2d 1051, 1054 (Ct.App.1992). The question of whether a claimant has established the elements of adverse possession is “one of fact which must be determined from the circumstances of each case.” Kay v. Biggs, 13 Ariz.App. 172, 175, 475 P.2d 1, 4 (Ct.App.1970). Based on the Bankruptcy Court's factual determinations, the Beavers satisfied the enumerated elements of adverse possession.

First, the Bankruptcy Court found that the Beavers' complete enclosure of the parcels by fencing established the requisite exclusivity. As a general rule, enclosure coupled with the claimant's mere general use of property within the enclosure is sufficient to prove adverse possession without requiring proof of other specific acts that would “fly the flag” over the disputed land, but only if the enclosure is complete. See, e.g., Berryhill, 180 Ariz. at 84, 881 P.2d at 1189; Whittemore v. Amator, 148 Ariz. 173, 175, 713 P.2d 1231, 1233 (1986). The Bankruptcy Court found that the parcels, used here primarily for grazing and farming, were “completely enclosed.” (Doc. 17, Ex. B). Therefore, the court did not commit clear error by concluding that the Beavers' use of the parcels was exclusive.

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. “A claim of right is nothing more than the intention of the party in possession to appropriate and use the land as his own to the exclusion of others irrespective of any semblance or shadow of actual title or right.” Higginbotham v. Kuehn, 102 Ariz. 37, 38, 424 P.2d 165, 166 (1967); see also Chandler v. Jackson, 148 Ariz. 307, 312, 714 P.2d 477, 482 (Ct.App.1986); Berryhill, 180 Ariz. at 83, 881 P.2d at 1188 (finding that the intention of the adverse claimant, and not the mistake, is the test by which the character of the possession is determined). Therefore, the bankruptcy judge did not clearly err in concluding that the Beavers possessed the land under a claim of right.

The open and notorious element of adverse possession requires that the acts of ownership must be of the character so as to indicate to the community in which the land is situated that it is in the exclusive possession and enjoyment of the claimant. U.S. on Behalf of Zuni Tribe of N.M. v. Platt, 730 F.Supp. 318 (D.Ariz.1990) (citing 2 C.J.S. Adverse Possession § 50 at 714 (1972)). There must be physical facts which openly evince and give notice of an intent to hold the land in hostile dominion and indicate to a prudent owner that an...