Scott v. Turner
345 F. App'x 761 (2009)
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Rule of Law:
A property title is unmarketable if it exposes the holder to a reasonable probability of litigation. A land use violation, such as reliance on an expired municipal variance for property access, creates such exposure and renders the title unmarketable.
Facts:
- In 1993, landowners Bradley and Mary Yohe obtained a variance from Freedom Township for a 16-foot wide gravel right-of-way, which did not meet the township's ordinance requirements.
- The variance was explicitly conditioned on two terms: it was limited to the Yohes' period of ownership, and it would become 'void' if the land was subdivided into more than three residential lots.
- Later in 1993, the Yohes sold a portion of their land, 'Lot 2', to Peter and Anne Scott, who built a residence on it serviced by the gravel right-of-way.
- Subsequently, the Yohes' remaining land was further subdivided, resulting in a total of four residential lots on the tract of land originally described in the variance.
- In October 2006, the Scotts entered into an agreement to sell their property to Stephen and Nancy Hoke Turner, which required the Scotts to convey 'good and marketable' title.
- Upon discovering the variance and its expired conditions, the Turners refused to complete the purchase, believing the title was not marketable.
Procedural Posture:
- Peter and Anne Scott sued Stephen and Nancy Hoke Turner in the Adams County Court of Common Pleas (state trial court) for breach of contract.
- The Turners removed the case to the United States District Court for the Middle District of Pennsylvania (federal trial court).
- The Turners filed a counterclaim seeking the return of their $50,000 deposit.
- Both parties moved for summary judgment.
- The District Court granted summary judgment in favor of the Turners, holding that the Scotts had breached the agreement by failing to provide marketable title.
- The Scotts, as appellants, filed an appeal of the District Court's judgment to the United States Court of Appeals for the Third Circuit.
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Issue:
Does a property title become unmarketable under Pennsylvania law when a variance permitting access via a non-conforming roadway has expired, thereby exposing the owner to potential litigation from the township?
Opinions:
Majority - Smith, Circuit Judge.
Yes, a property title becomes unmarketable when an access variance expires, exposing the owner to potential litigation. Under Pennsylvania law, marketable title must be free from encumbrances and not expose the holder to litigation. The variance permitting the Scotts' non-conforming right-of-way explicitly stated it would become void if the land was subdivided into more than three residential lots. Since the land now contains four lots, the variance has expired by its own terms. Because the right-of-way no longer conforms to the township ordinance and the variance is void, the township is empowered to sue the property owner to force them to upgrade the road. This risk of litigation renders the title unmarketable, meaning the Scotts, not the Turners, breached the agreement by failing to provide marketable title.
Analysis:
This decision reinforces the principle that marketability of title extends beyond clear ownership to include compliance with land use regulations. It solidifies that a title defect creating a reasonable probability of litigation, specifically from a municipality enforcing its ordinances, is sufficient to render title unmarketable. The ruling protects buyers from being compelled to accept a property that carries an inherent and foreseeable legal dispute, thereby upholding the 'prudent purchaser' standard in real estate transactions.
