Key Decisions

March 2013 – Equity Requires Clean Hands

(filed under: Key Decisions Archive | March 22, 2013)

Equity Requires Clean Hands

Aguayo v. Amaro
(Cal. Ct. of App., 4th Dist.), filed January 13, 2013 

KEY FACTS

Sofia and her husband Jesus Duran Aguayo are in the “business” of acquiring properties by adverse possession.

Herman Infante and Isabel Infante acquired a property by grant deed in 1946.  The property served as the family home for Herman and Isabel and their two children, Alfred Infante and Richard Infante.  Richard’s biological daughter, Michelle Amaro, was raised on the property until she was adopted by a different family when she nine years old.  Herman died in 1969.  Isabel died in 1993.  After their parents died, Alfred and Richard continued to reside at the property.

On January 2, 1999, Jesus placed a sign on the property stating “No Trespassing.”  The sign also indicated that Sofia was the “owner” of the property.  Jesus and Sofia claimed to have changed the locks to the front door of the house, placed a fence around the property and made electrical, plumbing and drywall repairs.

On April 27, 2000, Jesus and Sofia recorded a quitclaim deed that purported to transfer the property from “Jesus Duran” to Jesus Aguayo and Sofia Aguayo.  There was no “Jesus Duran” and there was no prior conveyance of the property to a “Jesus Duran.”  The quitclaim deed stated that tax statements should be mailed to Sofia at her own address.  She paid both back taxes on the property and all other property taxes as they accrued.

In 2004, Sofia filed a verified complaint to quiet title to the property.  The complaint sought a judgment that the property belonged to Sofia under the doctrine of adverse possession.  Michelle Amaro, as special administrator of the Estate of Isabel Infante, filed a cross-complaint against Sofia and Jesus for quiet title.

The trial court found that Sofia took possession of the property by claim of right and color of title.  It also further found that although Sofia met the “technical requirements” of adverse possession, her quiet title action “must fail as she proceeded with unclean hands in asserting her adverse interest in this property.”  The court based its ruling on the fact that Sofia recorded the quitclaim deed so the property tax bills would be sent to her and not the legal owner.  Based on this, it quieted title to Amaro.

HOLDING & REASONING

The Court of Appeal affirmed.  It found that the trial court had not abused its discretion in applying the defense of unclean hands and that there was substantial evidence in support of its finding that Sofia had unclean hands.

The doctrine of unclean hands is a defense to an equitable action, including an action to quiet title.  It rests on the maxim that he who comes into equity must come with clean hands.

Not all wrongful conduct constitutes unclean hands.  Only if the misconduct is directly related to the cause at issue can a defendant invoke the doctrine.

The elements of adverse possession are:  “(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.”

Adverse possession under color of title is based on a written instrument, judgment, or decree that purports to convey real property but is for some reason defective.  The good faith of the occupant, in relying on a defective instrument, is a crucial element to establishing adverse possession based upon color of title.  Adverse possession under a claim of right is not founded on a written instrument, judgment or decree.  A claim of right can be founded on either a deliberate trespass, or a mistake if the claimant intends to claim the area occupied as his or her land.

The wrongful act of trespass cannot be the basis for an unclean hands defense to adverse possession by claim of right.  This is because such a defense is inconsistent with the possibility of adverse possession by claim of right.

Nonetheless, unclean hands was available to Amaro because the basis for her unclean hands defense was not Sofia’s trespass on the property.  Rather, it was Sofia’s deceitful act of recording a wild deed for the purpose of diverting tax bills to her address.

ANALYSIS

By its very nature, adverse possession involves an adverse possessor acting hostile toward an existing owner.  This decision draws a line by deciding that filing a false deed to divert tax bills goes too far.