Facts
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Bradley and Mary Yohe owned a tract of land in Freedom Township, Pennsylvania.
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The local zoning/land-development rules required a private access road of a certain width, but the Yohes wanted to build a narrower gravel right-of-way.
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In 1993, the Yohes obtained a township variance allowing a 16-foot-wide gravel right-of-way that did not meet the ordinance’s width requirement.
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The variance included express limits:
- it applied only while the Yohes owned the entire parcel shown on the land development plan;
- it did “not extend to subsequent owners”; and
- it became void if the land was subdivided to create more than three residential building lots, after which the road would need to comply with the ordinance.
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The Yohes subdivided the tract and sold one subdivided parcel, Lot 2, to Peter and Anne Scott.
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Lot 2’s access depended on the gravel right-of-way running through the Yohes’ retained land (Lot 1).
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After the sale to the Scotts, the retained Yohe land was further subdivided, resulting in four residential lots on the original tract.
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In 2006, Stephen and Nancy Hoke Turner entered into an agreement to buy the Scotts’ property (Lot 2) for about $1.25 million, and they paid a deposit into escrow.
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The sales contract required the Scotts to convey “good and marketable” title.
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During investigation of the property, the Turners learned of the 1993 variance and its nontransferability and termination conditions, and they concluded the right-of-way was nonconforming without reliable legal protection.
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The Turners refused to close, asserting that the Scotts could not deliver marketable title because the township could require the road to be widened or could take enforcement action.
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The Scotts sued for breach of contract, and the Turners counterclaimed for return of their deposit.
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The federal district court granted summary judgment to the Turners and ordered the deposit returned; the Scotts appealed to the Third Circuit.
Issues
- Did the Scotts fail to provide “good and marketable” title under Pennsylvania law where access to the property depended on a nonconforming right-of-way and the variance permitting it had terminated by its own terms?
- If the title was unmarketable, were the Turners excused from closing and entitled to recover their deposit?
Decision
- The Third Circuit affirmed the grant of summary judgment for the Turners.
- The court agreed that, based on the variance’s written conditions and the later subdivision creating more than three residential lots, the variance had terminated and did not protect subsequent owners.
- Because the access road remained nonconforming without a valid variance, the buyer faced a real possibility of township enforcement or litigation to compel compliance with the road-width ordinance.
- That risk made the title unmarketable under Pennsylvania law and the contract’s “good and marketable” title requirement.
- The Turners were therefore justified in refusing to close and were entitled to the return of their deposit.
Legal Principles
- Marketable title under Pennsylvania law is title a reasonable purchaser, informed of the facts and legal consequences, would accept; it must be free from reasonable doubt.
- Title is not marketable if it exposes the purchaser to a substantial risk of litigation or governmental enforcement action affecting the property’s use or requiring immediate corrective work.
- A zoning variance governed by express written conditions ends according to those terms; a purchaser may treat the loss of that protection as a defect affecting marketability when noncompliance remains.
- Informal municipal statements or meeting minutes suggesting a willingness to overlook a defect do not necessarily remove the legal risk that enforcement could occur later.
Conclusion
Because the only access to the Scotts’ property depended on a right-of-way that did not comply with the township ordinance and the recorded variance authorizing that noncompliance had ended under its stated conditions, the Turners faced a substantial risk of enforcement or dispute. The Third Circuit held that this risk rendered the title unmarketable, excused the Turners from closing, and entitled them to return of their deposit.