Adverse Possession Business Defeated by Unclean Hands

Posted on: February 23, 2013

On January 31, 2013, in the case of Aguayo v. Amaro, 13 Cal. Daily Op. Serv. 1792, 2013 WL 557189, the Second District Court of Appeals affirmed the trial court’s decision to apply the equitable defense of “unclean hands” to defeat a lawsuit for quiet title by adverse possession.

The Court cited the elements of adverse possession, as follows: (1) Possession must be by actual occupation under such circumstances as to constitute reasonable notice to the owner. (2) It must be hostile to the owner’s title. (3) The holder must claim the property as his own, under either color of title, or claim of right. (4) Possession must be continuous and uninterrupted for five years. (5) The holder must pay all the taxes levied and assessed upon the property during the period.

Plaintiff Aguayo claimed to be in the “business of adverse possession” and used a sophisticated plan to satisfy all five elements of adverse possession, including recording of a fraudulent quitclaim deed – a “wild deed” – that instructed the tax assessor to mail the tax statements to Aguayo’s post office box. This act was intended to interfere with the true property owner’s payment of property taxes, by assuring that the tax bills would never reach the true owner and thus the owner would not be reminded to pay the tax bills. For five years, Aguayo claimed right to possession under the fraudulent wild deed, paid the tax bills and then after five years filed suit for quiet title by adverse possession.

After a bench trial, the court applied the equitable doctrine of “unclean hands” to prevent Aguayo from asserting one of the essential elements of adverse possession – payment of all property taxes during the 5 year period. The trial court reasoned, and the Appellate Court affirmed, that the act of recording a fraudulent quitclaim deed for the purpose of interfering with the true owner’s payment of property taxes, is inequitable. Since an action for quiet title is equitable in nature, the court sits as chancellor in equity, and in that context, the law requires that whoever comes to court seeking equity, must do equity – the party cannot have unclean hands.

In a related but separate criminal action, Aguayo was indicted on 22 counts of criminal behavior related to her “Adverse Possession business”, including filing a false document – the quitclaim deed – a violation of Penal Code Section 115(a).

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