11 Cal. App. 5th 1150
Cal. Ct. App.2017Background
- Jesus and Sofia Aguayo ran a long‑running scheme (beginning 1988) taking possession of distressed residential properties, using false documents ("wild" quitclaim deeds, false PCORs), mail diversion, fraud on vulnerable owners (including elderly), evictions, and rent skimming; they rented many properties and collected substantial rents.
- Criminal prosecutions produced numerous convictions (31 convictions across two trials, including felonies); the State brought a separate civil enforcement action under California's Unfair Competition Law (UCL, Bus. & Prof. Code § 17200 et seq.) alleging thousands of UCL violations related to 43 properties at issue.
- After a 22‑day bench trial the trial court found appellants’ conduct unlawful, unfair, and fraudulent under the UCL; it awarded restitution ($2,636,854.50), civil penalties ($1,338,000), removed appellants’ recorded and legal claims to the 43 properties, and entered a permanent injunction barring specified adverse‑possession and related practices.
- Appellants appealed, raising six main challenges: Noerr‑Pennington immunity for their petitioning/litigation‑related acts; legal effect of wild deeds; asserted adverse‑possession title to seven properties; entitlement to keep rents; excessiveness of penalties; and overbreadth/impermissible punishment in the injunction.
- The Court of Appeal affirmed in all respects, holding (inter alia) that the scheme was not protected petitioning under Noerr‑Pennington, the wild deeds were unlawful falsifications, adverse possession does not shield unlawful conduct from UCL remedies, restitution for rents and receiver collections was proper, penalties were within discretion, and the injunction was appropriate and tailored to prevent recurrence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether appellants' litigation and pre‑litigation acts are immune under Noerr‑Pennington | Noerr‑Pennington does not protect sham or objectively baseless petitioning; appellants’ acts were shams and independent unlawful conduct not protected | Appellants claim all conduct was incidental to adverse possession/quiet title litigation and thus immunized | Court: Noerr‑Pennington inapplicable — many acts (fraud, trespass, false filings, rent skimming, mail theft) were not petitioning or were sham and not primarily aimed at government petitioning |
| Whether "wild" quitclaim deeds conveyed a lawful interest | These deeds were fraudulent instruments used to cloud title and were unlawful | Appellants contend occupancy conferred an interest under Civil Code §1006 and a quitclaim can transfer occupancy interest | Court: Wild deeds conveyed fictional interests, were unlawful (consistent with Denman), and could be remedied and set aside |
| Whether adverse possession barred UCL relief for seven claimed properties | State: adverse possession does not immunize unlawful/fraudulent conduct used to acquire properties and does not preclude restitution or title removal | Appellants: five‑year statutory bar matured title into absolute fee for seven properties | Court: Adverse possession does not shield appellants who acquired possession through unlawful acts occurring before prescriptive period expired; UCL remedies still available |
| Whether restitution (rents and receiver collections) was improper because appellants were entitled to rents | Restitution restores money/property acquired by unfair competition; victims had vested interest in rents; receivership collections belong to victims | Appellants rely on Lapcheske to claim rights to rents as adverse possessors and assert improvements offset rents | Court: Rejected Lapcheske as a defense here; rent collection constituted unlawful rent skimming/trespass so restitution of rents (including receiver collections and specific awards) was within §17203 discretion |
| Whether civil penalties ($750 x violations; total within statutory range) were excessive | State: penalties reflect number, persistence, willfulness, seriousness, and targeting of vulnerable victims | Appellants: many counts were lawful adverse‑possession activity, no individualized harm shown, penalties will impoverish them | Court: Penalties within broad §17206 discretion; trial court properly considered equities, credibility, and facts — no abuse of discretion |
| Whether injunction improperly restricts lawful activity or punishes appellants | State: injunction tailored to prevent recurrence of specific wrongful tactics that formed the scheme | Appellants: injunction bars constitutionally/statutorily authorized conduct (adverse possession, quiet title litigation, bidding at tax sales) and is punitive | Court: Injunction was proper and narrowly tailored to bar the precise unlawful practices used in the scheme; not unconstitutionally overbroad or punitive given risk of recidivism |
Key Cases Cited
- Cel‑Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163 (statutory scope of UCL and distinct prongs of unlawful, unfair, fraudulent)
- BE&K Construction Co. v. NLRB, 536 U.S. 516 (sham exception two‑part test for Noerr‑Pennington)
- Allied Tube & Conduit Corp. v. Indian Head, 486 U.S. 492 (context matters; Noerr‑Pennington does not protect underlying unlawful conduct)
- Manhattan Beach v. Superior Court, 13 Cal.4th 232 (discussion of deed interpretation; does not support transferring occupancy interest by quitclaim)
- Lapcheske, 73 Cal.App.4th 571 (adverse possessor may have limited rent rights but does not immunize unlawful enterprise)
- Denman, 218 Cal.App.4th 800 (recording false quitclaim deeds to oneself while having no title is unlawful and clouds title)
- Beaumont Investment Ltd. v. People ex rel. Kennedy, 111 Cal.App.4th 102 (UCL remedies and appellate review of restitution/penalty discretion)
- Cortez v. Purolator Air Filtration Prods. Co., 23 Cal.4th 163 (equitable considerations in fashioning UCL relief)