DIRT DEVELOPMENT for March 8, 2010
Daniel B. Bogart
Donley and Marjorie Bollinger Chair in Real Estate Law
Chapman University School of Law, Orange, California

Adverse Possession; Element of Hostility; Possession by Tenant:   Tenant did not demonstrate that he disavowed his permissive tenancy relationship and therefore failed to carry the burden of proving his adverse possession.

Hutchinson v. Taft, 222 P. 3d 1250 (Wyo. 2010)

Taft and Hutchinson were neighbours.  Taft purchased her property in 1931, 30 years prior to the Hutchinsons’ purchase of their property.  The land was rural and used for grazing and farming. Hutchinsons’ property largely surrounded Taft’s land. Almost immediately after buying their land,  Hutchinsons’ entered into a lease to use Taft’s land for grazing and farming.  The rental was a mere $50 per year.

Taft died in 1967 without a will.  Her two heirs therefore took her property as tenants in common.  The Hutchinsons continued to pay the rent of $50 per year “until the early 1970s.” The opinion is not more specific than this.  The Hutchinsons ceased making rental payments sometime between 1970 and 1975.  

Most importantly, however, Hutchinsons continued to use the Taft property for farming and grazing, whether they paid or not. 

In 1989, Taft’s heirs entered into oil and gas leases covering the disputed property.  Hutchinsons did not object, or bring a quiet title action at this point, even though it was clear that the property they claimed to own by adverse possession was generating oil revenue.

Vera Hutchinson became the sole owner of the Hutchinson property in 1992, when her husband (likely as an estate planning tool) conveyed all of his interest to her.  Vera in turn conveyed the Hutchinson property to the Vera Hutchinson Revocable Trust.

In 1996, Taft’s heirs died and the court says that their interests were “distributed” to their respective spouses.  Perhaps there was a will, but the language implies that the heirs died without wills, following in ancestor’s tradition.  (The opinion does not really make this clear, and it is possible that there was a will.) (This development will refer to the Taft’s spouses simply as the Tafts.)

The Hutchinsons continued to farm and graze the Taft property, without paying the $50 rental specified in the original lease.

Things came to a head when the Tafts listed their property for sale in July, 2003. Hutchinsons filed a complaint to quiet title in the Taft property claiming to have obtained title via adverse possession.  Essentially, Hutchinsons claimed that they had established all the elements of adverse possession beginning in the 1970s, when they first ceased paying rent under the lease.

Tafts brought a motion at the beginning of trial arguing that Hutchinsons failed to establish facts necessary to show that their use of the property was adverse, and the court agreed.  This ended the trial.  On appeal, the Wyoming Supreme Court reviewed the trial court’s order de novo, and accorded the plaintiffs’ statement of facts “all favourable and reasonable inferences.” Nevertheless, the Wyoming Supreme Court affirmed the trial court’s order. 

The burden of showing that the elements of adverse possession have been met rests squarely on the alleged adverse possessor. The Hutchinsons argued that they met this burden (and should have withstood any motion to dismiss) by demonstrating that they failed to pay rent beginning in the 1970s, and that their use was “actual, open, notorious, exclusive, continuous, hostile, and under a claim of right or title.”  Indeed, they argued that they had enclosed the Taft property with a fence and that this “evidence alone was sufficient under Wyoming law to establish adverse possession.”

According to the court, Tafts responded that “Hutchinsons did not prove their use of the property was adverse, rather, the evidence showed that [the Hutchinsons’] use continued to be permissive even after they stopped paying rent.”  Tafts backed up this view of Hutchinsons’ behaviour, pointing out that Hutchinsons had never paid taxes on the Taft property, failed to make “substantial improvements,” executed a disclaimer in 1964 acknowledging their tenancy, and failed to take protective steps to secure ownership of the property in 1989 when Tafts leased oil and gas rights on the property.  Indeed, Tafts actually sold a portion of the property in 2003 to the State of Wyoming, and Tafts argued that, if nothing else, this should have forced Hutchinsons to assert their alleged adverse possessory rights at that time.  As to the fence, the opinion suggested that the most the Hutchinsons had done was maintain a structure they found already on the property; Hutchinsons did not erect the fe

The question of whether a tenant may assert adverse possession claims to leased property comes up from time to time, although often (as in this case) in the context of income producing rural or farm land.  This is not to say, however, that the tenant under a commercial ground lease might not, under the right circumstances, attempt the same manoeuvre.

According to the court, “A permissive user may change his possession into adverse title with a clear, positive, and continuous disclaimer and disavowal of the tile of the true owner brought home to the latter’s knowledge.” This requires that the tenant give notice of its hostile intent.  In prior Wyoming cases (which not surprisingly regularly involve the adverse possession of pasture and grazing land) the court held that building of a home within disputed property, as well as a fence, constituted the requisite notice that the possessor had shifted from a permissive state of mind to adverse. (Citing Davis v. Chadwick, 55 P. 3d 1267 (Wyo. 2002).

But as the court noted, “none of these [Wyoming] cases involved the situation we are presented with here, where the initial use was permissive pursuant to a rental agreement and the claimant asserts it became hostile upon cessation of rental payments.” 

Looking to other jurisdictions, the court determined that mere failure to make rent payments fails to establish a “distinct and positive assertion” of ownership. (Quoting Glover v. Glover, 92 P.3d 387 (Alaska 2004).  The Glover court stated: “When a claimant started out occupying land permissively, it is essential that his new, hostile interest in the property be made clear to the true owner …. [I]f a tenant merely acts as he always did, the owner will not be on notice of his new, hostile claim.”

Applying this standard to the Hutchinson fact pattern, the court stated that Hutchinsons’ mere failure to pay rent did not put the Tafts, as landlord, on notice of the change in Hutchinsons’ desire to take fee to the property. Instead, the court explained that Hutchinsons should have announced their change in status and taken affirmative steps to repudiate Taft’s title. Instead, at each of several opportunities – execution of a document acknowledging Taft’s title, sale of a portion of the grazing land to Wyoming, and the lease of oil and gas rights – the Hutchinsons did nothing.

The Wyoming court was mindful that some jurisdictions might not be so strict with the tenant.  For example, a Texas court held that “evidence showing a tenant’s long continued possession of the land and the true owner’s non-assertion of ownership” would satisfy the requirements of adverse possession. (Citing Tex-Wis Co. v. Johnson, 534 S.W.2d 895 (Tex. 1976)). However, the Wyoming Supreme Court stated that even under this more generous standard, Hutchinsons would have lost.  “The Texas court defined “non-assertion of ownership” as the absence of any overt act of ownership on the part of a true owner that is inconsistent with adverse possessor’s claim.  The Taft’s actions in entering into oil and gas leases on the property and selling a portion of the property to the State constituted overt acts of ownership inconsistent with the Hutchinsons’ adverse possession claim.”

Reporter’s Comment 1: It is always an uphill battle persuading a court that possession that begins consensually has been transmuted into a non permissive behaviour leading to adverse possession.  This is particularly true with respect to lease agreements.  Where a tenant holds over at the end of a term of years, the non permissive nature of the occupancy is clear, and once landlord makes its election to treat the tenant as a trespasser, the period for adverse possession begins to run.  In this case, however, there was little in the way of a clear demarcation between permissive and adverse behaviour.  The case appears rightly decided.

Reporter’s Comment 2: In this case, Taft could easily have declared Hutchinsons in default and terminated the lease, but possibly because of the parties’ lack of sophistication, Taft failed to do so. Indeed, perhaps Taft was just being neighbourly, and given the small amount of the annual rental, saw no reason to force the issue by banning an activity by the Hutchinsons that she found to be non objectionable over so many years.

Reporter’s Comment 3: The lease agreement might have been written to state that failure to pay rent constituted a default.  Or it might have been written to terminate at a date certain.  Presumably, neither was true of this document.  The case opinion does not tell us one way or the other.

Editor’s Comment: With respect to the Reporters’ third suggestion, the Editor submits that neither of the facts suggested would have mattered.  The usual rule is that a holdover tenant at the end of a lease becomes a tenant at sufferance - still a tenant - until the landlord takes action to change that status. Thus, the Hutchinson’s still owe the periodic $50 rent for the time measured by the statute of limitations, and the current owners - the Tafts, can evict them.  To the editor, this is a simple case - even without the sale of property to Wyoming and the oil and gas lease, there is no reason for the court to intervene to help the Hutchinson’s steal land. 

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