Effect of Bankruptcy on Adverse Possession
very murky area of adverse possession law got murkier with a recent decision
from the Superior Court of Pennsylvania.
2010, the Superior Court adopted the rule that a bankruptcy filing by the
record owner of property interrupted the continuity of possession claimed by
the adverse possessor. Because the property is deemed to be in custodia legis during the pendency of
the bankruptcy proceeding (pursuant to the Bankruptcy Code), the time from the
filing of the petition until the order of closure is omitted from calculation
of the adverse possession period, Showalter v. Pantaleo, 9 A. 3d 233 (2010) appeal denied, 20 A.3d 489 (Pa.
The recent case, however, extends this
concept even further. In Bezjak v. Diamond, 2016 PA Super 57 (March 3, 2016), the court found the rule applicable when
the adverse claimant was the party
who had been in bankruptcy. In Bezjak,
Pontorero Coal Co. had taken physical possession of the disputed land in 1977, filed
bankruptcy in 1983, and continued in physical possession until 2002, when Bezjak
purchased it from the bankruptcy trustee. After excluding the time from 1983
until 2002, during which the property was part of the bankruptcy estate, Bezjak
could not show the requisite twenty-one years of continuous possession needed for
Pontorero Coal to have established title under Pennsylvania law.
The earliest case law concerning bankruptcy of the record owner rationalizes
the doctrine on the ground that the bankruptcy court could have adjudicated the
adverse claim in the debtor’s (and therefore, the estate’s) favor, had the
claim been presented. In a Bezjak fact pattern, the custodial possession
by the bankruptcy court could be characterized as continuing the possession of
the debtor in order to maximize the value of the estate. The adverse possession
claim was apparently not set up in the Pontorero Coal petition because the
debtor believed the disputed parcel was within the record description of its
adjoining parcel. Query: would a different result obtain had the case been
brought as an adversary proceeding in a re-opened bankruptcy?