Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-00083/USCOURTS-azd-2_10-cv-00083-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

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 Appellant’s request for oral argument is denied because the parties have had an

adequate opportunity to discuss the law and evidence, and oral argument will not aid the

Court’s decision. See Lake at Las Vegas Investors Grp., Inc. v. Pac. Malibu Dev., 933 F.2d

724, 729 (9th Cir. 1991).

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

In Re

Jake’s Granite Supplies, L.L.C.,

Debtor. _________________________________

Jake’s Granite Supplies, L.L.C., an

Arizona Limited Liability Company, 

Appellant, 

vs.

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. 

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No. CV-10-00083-PHX-GMS

BK No. 2:05-bk-10601-RJH

Adv. No. 2:07-ap-00145-RJH

ORDER

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.

Case 2:10-cv-00083-GMS Document 26 Filed 12/13/10 Page 1 of 11
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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

Case 2:10-cv-00083-GMS Document 26 Filed 12/13/10 Page 2 of 11
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 11 U.S.C.A. §108(a) states, “[i]f applicable nonbankruptcy law, an order entered in

a nonbankruptcy proceeding, or an agreement fixes a period within which the debtor may

commence an action, and such period has not expired before the date of the filing of the

petition, the trustee may commence such action only before the later of – 

(1) the end of such period, including any suspension of such period occurring on or

after the commencement of the case; or 

(2) two years after the order for relief.” 

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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

Case 2:10-cv-00083-GMS Document 26 Filed 12/13/10 Page 3 of 11
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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. Analysis 

A. 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

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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; Whitemore 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

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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 adverse claim is being asserted. Conwell v. Allen, 21 Ariz. App. 383, 385, 519 P.2d 872,

875 (Ct. App. 1974). Appellants contend that the Beavers’ possession was not open and

notorious because the fencing around the disputed parcels was difficult to get to because of

dense trees, bushes, and the fact that the area was landlocked. (Doc. 16). While recognizing

the difficulty of accessing the fence, the Bankruptcy Court reasoned that the open and

notorious element is satisfied because “anyone who gets to the boundary of the adversely

possessed property would see the fence.” (Doc. 17, Ex. B). 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.” Rorebeck v.

Criste, 1 Ariz. App. 1, 5, 398 P.2d 678, 682 (Ct. App. 1965) (citing Norgard v. Busher, 220

Or. 297, 349 P.2d 490 (1960)). 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 Appellants that the Beavers were treating the property in a suitable manner and, notably,

as their own. Cf. id. (holding that occupancy was open and notorious where “fence was an

apparent separation of property for all the world to see” and “grazing of the cattle, irrigation,

and leasing of the property was notice to the world and particularly to the defendants that the

plaintiff and her predecessors were treating this property as their property...”). This Court has

found no binding authority suggesting that the open and notorious element of adverse

possession cannot be satisfied where the title owner can not easily access adverse claimant’s

fencing due to natural obstruction. Therefore, the Bankruptcy Court did not clearly err in its

factual determination on the open and notorious element. 

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In their appeal of the Bankruptcy Court’s Second Amended Final Judgment the parties

do not contest the element of actual possession. To constitute actual possession, “neither

actual occupancy nor cultivation nor residence is necessary.” Platt, 730 F. Supp. at 322. In

fact, what acts may or may not constitute actual possession are “necessarily varied and . . .

depend upon the circumstances of the case.” Higginbotham, 102 Ariz. at 38, 424 P.2d at 166.

The Beavers’ actual possession of the disputed parcels was evidenced through the

uncontroverted fact that they cleared the land of dense brush and fenced it for livestock

grazing. 

Moreover, to prove hostility, the adverse claimant must claim exclusive right to the

land and “den[y] (by word or act) the owner’s title.” Rorebeck, 1 Ariz. App. at 3–4, 398 P.2d

at 680–81. The possession must be hostile, not only as against the true owner, but as against

the world. Gunther & Shirley Co. v. Presbytery of L.A., 85 Ariz. 56, 331 P.2d 257 (1958).

Applied here, the Beavers’ possession was hostile because it was exclusive by virtue of

complete enclosure through fencing. Thus, the fencing was notice to the world and

particularly to Appellants that the Beavers were treating the property as their own. See, e.g.,

Rorebeck, 1 Ariz. App. at 4, 398 P.2d at 681 (finding that existence of fence was a visible

indication of a possession hostile to the defendants and to the world). 

Appellants argue that Beavers’ silence on three separate occasions functions as an

implicit acknowledgment of Jake’s superior ownership and hence undermines the hostility

requirement. However, this proposition is not convincingly supported. Appellants rely on

Combs v. DuBois, in which the adverse claimant verbally acknowledged that the disputed

property was not theirs by indicating that they would treat the property “like it was my own.”

135 Ariz. 465, 467, 662 P.2d 140,142 (Ct. App. 1982). The present case is clearly

distinguishable from Combs because there was no verbal acknowledgment by the Beavers of

Jake’s superior ownership rights. Equally lacking was any sort of act by the Beavers that

would indicate such an acknowledgment. Therefore, Appellant’s contention that the Beavers’

silence equates to acknowledgment of Jake’s superior ownership must fail. 

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Adverse possession is normally based on a ten-year statute of limitations period by

which the party that holds title to the subject property must commence action to recover land

from the person in possession. A.R.S. §12-526(A). However, where the ten-year limitations

period has not expired before the petition date in a bankruptcy proceeding, the statute of

limitations is extended to the later of either 1) the end of the ten-year period, or 2) two years

from the bankruptcy petition. Bankruptcy Code 11 U.S.C. §108(a). Applied here, the

Bankruptcy Court correctly concluded that because the adverse possession period for all of

the parcels, with the exception of the Quackenbush Pasture, began no later than April 1995,

the ten-year statute of limitations period had expired by April 2005, before Jake’s petition date

of June 13, 2005. As for the Quackenbush Pasture, the court correctly concluded that the facts

did not support adverse possession because Jake’s objected to the Beavers’ claim with respect

to this particular parcel within the 12-year extended statute of limitations period afforded

under §108(a). 

As part of their argument regarding Appellee’s failure to prove the elements of adverse

possession, Appellants also claim that the Beavers failed to prove by clear and positive

evidence the boundaries and area of the disputed property. However, in demonstrating the

boundaries and area, the Beavers relied on an aerial photo which was stipulated to by

Appellants. The Bankruptcy Court recognized that the aerial photo was “prone to inaccuracy”

because of its one inch to 100 feet scale, but accepted it as the means for determining the

precise acreage of the parcels. (Doc. 17, Ex. B). Appellants have not met their burden of

proving that the Bankruptcy Court’s reliance on the aerial photo to determine the precise

acreage was clearly erroneous and have not preserved any objections to the photo being

admitted into evidence.

Accordingly, the Bankruptcy Court’s determination that the Beavers’ possession of the

disputed parcels met the elements of adverse possession was not clearly erroneous. 

B. Mr. Beaver’s testimony regarding boundaries and acreage of property

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The Court reviews a bankruptcy court’s evidentiary rulings for abuse of discretion.

Latman, 366 F.3d at 786. Abuse of discretion is demonstrated if a decision is “based on an

erroneous conclusion of law or when the record contains no evidence on which [the trial

court] rationally could have based that decision.” In re Windmill Farms, Inc., 841 F.2d 1467,

1472 (9th Cir. 1988) (quoting In re Hill, 775 F.2d 1037, 1040 (9th Cir. 1985)). 

Appellants contend that the Bankruptcy Court erred in admitting Mr. Beaver’s

testimony regarding the acreage and boundary lines because it was both hearsay and

incompetent. Specifically, they argue that “Mr. Beaver’s understanding of the location of his

property boundaries and corners is based upon hearsay staking and surveys performed by

persons who did not testify at trial.” (Doc. 16). The bankruptcy judge admitted into evidence,

over Jake’s hearsay objections, photos of the survey stakes and land survey on which Mr.

Beaver relied in his testimony. 

Appellant’s have failed to meet their burden of proving that the bankruptcy judge’s

admission of Mr. Beaver’s testimony and reliance on the survey and photo evidence rises to

an abuse of discretion. Appellants stipulated to the admission of the aerial photo into

evidence, and have not preserved any grounds on which to object to its admission to this

Court. The Bankruptcy Court’s final judgment indicates that while the judge agreed that the

aerial photo relied on to determine the exact acreage of the disputed parcels was “prone to

inaccuracy,” “it doesn’t fall so low to the level of mere speculation,” and it was the only

available evidence. (Doc. 17, Ex. B). Appellants have not put forth viable arguments for

reversing the bankruptcy judge’s determination. 

Further, Appellant’s competency argument also fails. During trial, the bankruptcy

judge had an opportunity to examine the demeanor and assess the competency of Mr. Beaver.

As a result, the judge, in referring to Mr. Beaver’s testimony states, “I think he did a pretty

good job, so I’ll accept the acreage.” (Doc. 17, Ex. B). The bankruptcy judge did not abuse

his discretion in determining that Mr. Beaver was qualified to testify as to what he believes

the boundaries of his property to be. See, e.g., Brown v. Dorfman, 251 Or. 522, 446 P.2d 672

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(1968) (holding that a landowner need not be instructed by a registered surveyor before he can

testify to the location of a boundary on his land). Thus, this Court does not find the

Bankruptcy Court abused its discretion in admitting Mr. Beaver’s testimony. 

C. Valuation of the land 

In their joint pre-trial statement the parties stipulated to the valuation date of the

disputed parcels as November 27, 2005, the sale date of the parcels to Cemex. In its judgment,

the Bankruptcy Court emphasized the difficulty of determining the value of the adversely

possessed property on this date without the benefit of appraisal testimony. The court then

considered several pieces of admitted evidence in estimating the value of the property. 

First, the court considered and rejected the July 2006 sale by the Beavers to United

Metro at $60,000 per acre because roughly half of that property was irrigated farm land

located at a higher elevation than the disputed land, which is located in a floodway. The court

also considered and rejected Jake’s 2004 purchase of the property at $6,500 per acre for

Dycus, $7,500 per acre for Stone, and $13,333 per acre for Quackenbush because the land was

not exactly comparable and it was a year earlier than the stipulated valuation date. Finally, the

court considered Mr. Beaver’s own estimation of the value of the property at $50,000 per acre.

The court ultimately valued the parcels at $30,000 per acre, which is “the upper end of what

Jake’s offered to purchase [the] property and significantly below the $60,000 and the $50,000

that Mr. Beaver contends for.” (Doc. 17, Ex. B). 

While Appellant contends that no plausible evidence supports the court’s valuation of

the disputed property at $30,000 per acre, the record suggests that the Bankruptcy Court’s

factual determination of the property value was based on available, albeit imperfect,

indicators. Accordingly, this Court is not left with a “definite and firm conviction” that the

Bankruptcy Court made a mistake in determining the value of the adversely possessed

property. See Latman, 366 F.3d at 781. When the record is examined in the light most

favorable to the prevailing party, it is apparent that it contains nothing that mandates a finding

that the Bankruptcy Court’s conclusion was clearly erroneous. 

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 In a companion order, the Court vacates and remands for further proceedings that

part of the Bankruptcy Court’s Second Amended Final Judgment (Doc. 17, Ex. C), awarding

Defendants SNS Civil Design Consultants, Inc. dba SNS Civil Design Group, Kimball R.

Siegfried and Eileen Siegfried attorneys’ fees and costs.

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CONCLUSION

For the reasons explained above, the Bankruptcy Court’s decision below is affirmed

with respect to the Beaver judgment. Accordingly,

IT IS HEREBY ORDERED that those aspects of the January 25, 2010 Second

Amended Final Judgement of the Bankruptcy Court (Doc. 17, Ex. C) that find that the

Beavers adversely possessed 10.03 acres of the real property formerly owned by Jake’s and

that enter judgement against Jake’s in the amount of $300,900.00 with interest thereon at the

rate of seven percent (7%) per year, are AFFIRMED.

3

DATED this 13th day of December, 2010.

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