John A. GUIDO v. TOWNSHIP OF SANDY and DuBois Dutch, LLC
880 A.2d 1220
Supreme Court of Pennsylvania
Argued March 2, 2004. Decided Aug. 23, 2005.
880 A.2d 1220
Justice BAER
Appeal of DuBois Dutch, LLC.
Appeal of DuBois Dutch, LLC.
Supreme Court of Pennsylvania.
Argued March 2, 2004.
Decided Aug. 23, 2005.
Before: CAPPY, C.J., CASTILLE, NIGRO, NEWMAN, SAYLOR, EAKIN and BAER, JJ.
OPINION
Justice BAER.
In this dispute concerning real property, we granted allocatur limited to determining whether a leasehold interest in a parcel of land coupled with an option to purchase such land creates a property interest in the lessee-optionee sufficient to support a legally recognized subdivision of the property either at the time the lease and option were simultaneously executed or when the purchase option was exercised. The Commonwealth Court held that governmental recognition of a subdivision was not proper at either time becausе the petitioning party failed to satisfy the requirements of the municipality‘s relevant ordinances. We affirm.
BACKGROUND
Appellee John Guido (Guido) purchased the Property at issue situate in Sandy Township, Pennsylvania, in 1986. At purchase, the 3.379-acre lot was informally separated into two parcels by virtue of a 1982 lease (hereinafter, 1982 Lease) between Guido‘s predecessor in title and Appellant Dubois Dutch, LLC‘s predecessor lessee.1 Dubois Dutch owns and operates a Dutch Pantry Restaurant on a 2.605-acre area of the lot; Guido retains occupancy of the smaller portion of the parcel, aрproximately 0.772 acres in area, on which he built and maintains a convenience store and gas station.2
In November 1998, Dubois Dutch attempted to exercise the Option. Exercise of the Option would have left Guido with a lot 33,259 square feet in area, 11,741 square feet fewer than the required minimum lot size set forth in the 1996 Zoning Ordinance.3 Guido refused to convey the Restaurant Parcel to Dubois Dutch, due to his concern that his residue lot, the Gas Station Parcel, would be non-conforming pursuant to the 1996 Zoning Ordinance and thus rendered commercially useless. On November 28, 1998, Dubois Dutch sought formal subdivision approval from the Sandy Township Planning Commission (hereinafter, Planning Commission).4 Guido objected and the
On February 12, 1999, Dubois Dutch commenced a legal action against Guido in the Clearfield County Court of Common Pleas, seeking specific performance of the Option. As a defense to specific performance, Guido asserted that he could not perform his contractual duty because subdivision of the property would violate the 1996 Zoning Ordinance. Additionally, Guido countersued for ejectment, seeking possession of the Restaurant Parcel frеe of any claim by Dubois Dutch. Dubois Dutch filed preliminary objections to the ejectment action, raising the pendency of its prior action for specific performance, pursuant to Pa.R.C.P. 1028(a)(6).5 On May 17, 1999, following a hearing, in an apparent effort to effectuate an amicable resolution of the parties’ dispute, the trial court directed Dubois Dutch to apply, once again, to the Planning Commission seeking approval of a formal subdivision of the Property. The trial court also issued an order staying all litigation pending a decision by the Planning Commission on the subdivision approval request it directed Dubois Dutch to submit.6
Pursuant to the court‘s direction, Dubois Dutch reapplied to the Planning Commission.7 In due course, Dubois Dutch raised two principal arguments: first, that the 1982 Lease and
On August 3, 1999, Guido filed an аppeal from the Planning Commission‘s decision with the Clearfield County Court of Common Pleas. On June 13, 2000, the trial court held a de novo hearing. The court found that the creation of the 1982 Lease and Option and Dubois Dutch‘s attempt to execute the Option constituted a Subdivision of the property under the MPC as of June 1982. The trial court noted that equitable title of property subject to a lease coupled with a purchase option passes, upon exercise of a purchase option, not as of the date of exercise, but rather as of the date of option creation. Thus, it concluded that the 1965 Subdivision Ordinance governed.10 Trial Ct. Op. at 8-9.
A three-judge panel of the Commonwealth Court reversed the trial court by a vote of two to one.11 See Guido v. Township of Sandy, 809 A.2d 1036 (Pa.Cmwlth.2002). The majority found that a leasehold interest coupled with an option to purchase does not create a Subdivision of the property and, therefore, Dubois Dutch could not effectively “lock-in” the Gas Station Parcel as a pre-existing non-conforming lot by exercising its option to purchase a portion of thе property after the 1996 Zoning Ordinance took effect. The Commonwealth Court held:
There is simply no legal authority, or reason, to hold that the potential right to exercise an option to purchase, created by a lease in 1982, which Dubois Dutch did not seek to exercise until 1999, created a subdivision in 1982 under an ordinance which was no longer in existence when the option was exercised. In this case, Dubois Dutch‘s right to pursue subdivision approval was no different in 1982 than it was in 1998, when it finally initiated its first request before the Township Supervisors. Although that right might not have arisen until Dubois Dutch elected to exercise its option, its decision tо exercise its right, or to forego its right, was the
Guido, 809 A.2d at 1041-42 (emphasis in original). The majority further rejected the trial court‘s conclusion that the Gas Station Property could satisfy the 1997 Subdivision Ordinance‘s requirement that the lots meet the “minimum requirements” of the 1996 Zoning Ordinance. It found that the “minimum requirements” could not be satisfied by way of exceptions to the 1996 Zoning Ordinance—e.g., by designation as a pre-existing non-conforming lot—and hеld that the only remedy available to Dubois Dutch was the modification provisions of the 1997 Subdivision Ordinance. The modification provision, modeled on MPC section 512, allows the municipality to modify any of its requirements if the literal enforcement of the provision would exact undue hardship due to the particular conditions pertaining to the land. See
Dubois Dutch filed a petition for reargument, which the Commonwealth Court denied. On January 2, 2003, Dubois Dutch timely filed a petition for allowance of appeal to this Court. By Order dated August 27, 2003, our Court granted the appeal limited to the following issue: Whether a leasehold interest with an option to purchase creates a property interest in the lessee sufficient to support a Subdivision under the terms of the MPC.
The parties do not materially dispute the facts stated above. Thus, the issue under consideration presents a question of law and our review is plenary. Naylor v. Township of Hellam, 565 Pa. 397, 773 A.2d 770, 773 (2001).
I.
The parties agree that the 1982 Lease and Option, at inception, reflected their mutual intention to grant Dubois Dutch an option to purchase the Restaurant Parcel. This does not answer, in itself, Guido‘s argument that he should not be compelled to specifically perform his obligation thereunder by conveying that parcel to Dubois Dutch. Nevertheless, because the 1982 Lease and Option lie at the heart of this dispute, we must consider preliminarily its legal effect vis-à-vis the parties.
At the outset, we note that Dubois Dutch‘s status as optionee in the Restaurant Parcel conferred upon it a “substantial interest in the land” that, upon exercise of the Option, made it owner ab initio of the Restaurant Parcel. In Detwiler v. Capone we discussed the rights conferred by a lease containing a purchase option.
An option to purchase is analogous to a contract for the sale of land; it is in nature an encumbrance on the land pledged. In such case, the [optionor] is a trustee of the legal title for the benefit of the purchaser [qua optionee].... Equity regards the person bound to convey as having done what he should have done, i.e. made the conveyance, and treats him as trustee for the optionee. Where an option is exercised the title of the optionee relates back to the date of the option and his interest is regarded as real estate of that time....
357 Pa. 495, 55 A.2d 380, 383 (1947) (internal quotation marks and citations omitted); see In re Powell, 385 Pa. 467, 123 A.2d 650, 654 (1956) (“An option to purchase land is a substantial interest in the land; and, when the option is exercised, the optionee‘s ownership reverts to the granting of the option
It was held in [Kerr v. Day, 14 Pa. 112 (1850)], that an option to purchase is a substantial interest in land, which may be conveyed to a vendee; and the English chancery cases were reviewed by Bell, J., with the result that, ‘when the lessee made his option to purchase, he was to be considered as the owner ab initio. Indеed, the determination can only be supported by attributing to the lessee an equitable estate in the land, under his covenant for an optional purchase, which passed to his alienee, vesting him with the right to call for a specific execution on declaring his election.’ And in [Frick‘s Appeal, 101 Pa. 485 (1882)], where the land was sold upon a prior judgment before payment or conveyance, it was held that the surplus was the property of the optional vendee.
Id. at 114. Accordingly, Dubois Dutch‘s equitable title reverted, upon exercise of the Option, back to the date of formation of the 1982 Lease and Option conferring title upоn Dubois Dutch effective June 16, 1982.
Guido does not materially contest this assertion; instead, he aims to minimize its importance. He argues first that the “relation back principle” relied upon by Dubois Dutch applies only as between contracting parties, and does not affect the enforcement of zoning ordinances. The authorities he relies upon, however, merely illustrate the primacy of zoning author-
II.
Thus, we arrive at the vexing matter that lies at the heart of this case: whether and when the Property was divided-in-fact or Subdivided as a matter of law. Dubois Dutch‘s argument requires that the division-in-fact of the Property into the two smaller parcels legally coincided with the execution of the 1982 Lease and Option. In support of its argument, Dubois Dutch directs our attention to the MPC section 107, which defines “subdivision” as follows:
the division or redivision of a lot, tract or parcel of land by any means into two or more lots, tracts, parcels or other divisions of land including changes in existing lot lines for the purpose, whether immediate or future, of lease, partition by the court for distribution to heirs or devisees, transfer of ownership or building or lot development....
Our analysis leads us to conclude that, when Dubois Dutch attempted to exercise the Option in 1998, Pennsylvania law related the transaction back to 1982 and recognized it as a conveyance, as of 1982, of the Restaurant Parcel. Thus, logic dictates that the property must have been divided-in-fact as of the effective date of that sale. We reject, however, Dubois Dutch‘s argument that MPC section 107‘s reference to “lease” compеls the conclusion that the property was divided-in-fact at the time of execution of the lease. This contention, which echoes the trial court‘s ruling,14 defies the plain language of the above definition. A careful reading reveals that division-in-fact may occur by any means, including changes in existing lot lines, and that such changes may occur for the immediate or future purpose of lease, or building or lot development. In contending that MPC section 107 contemplates the instantiation of property division by way of lease, Dubois Dutch and the trial court mistake ends for means and broaden the definition beyond its terms. Wе agree with the Commonwealth Court that “the potential right to exercise an option to purchase, created by a lease in 1982, which Dubois Dutch did not seek to exercise until 1999,” cannot in itself have divided-in-fact the property as of 1982. Guido, 809 A.2d at 1041-42 (emphasis in original). To hold otherwise would lead to the absurd result that the Property would have been divided-in-fact by virtue of an inchoate interest in property the holder might opt not to exercise, leaving the owner with a division of his property he did not desire at the hands of someone with no interest in effecting such a division. However, just as the exercise of the Option passed equitable title to the optionee effective as of the date of the inception of the Option, so must
Nevertheless, division-in-fact does not amount to a governmentally recognized Subdivision; indeed, an interested governmental body may view a particular division-in-fact as illegal.15 Thus, notwithstanding our recognition of the applicability of the “relation back” doctrine to equitable ownership, we cannot conclude that the Property was legally Subdivided through some sоphistry arising from the actions of the parties or operation of law absent active governmental contemplation and ratification.
III.
Having established that the law views Dubois Dutch‘s exercise of the Option as effectuating transfer of the Restaurant Parcel to Dubois Dutch as of the date of the 1982 Lease and Option, and that we must of necessity recognize that such conveyance resulted in the division-in-fact of the Property into the Restaurant Parcel and the Gas Station Parcel, we now must consider the impact of these determinations on the paramount question of how government should view the two lots resulting from these transactions. In addressing this issue, we must first examine why the legislature requires formal Subdivision approval.
The MPC provides that “[w]here a subdivision and land development ordinance has been enacted by a municipality under the authority of this article, no subdivision or land development of any lot ... shall be made ... except in accordance with the provisions of such ordinance.”
In the case sub judice, while we recognize that Dubois Dutch could not have sought Subdivision approval until it exercised the Option, as discussed supra, we agree with the Commonwealth Court that Dubois Dutch‘s “decision to exercise its right, or to forego its right, was the sole impediment to its right to official subdivision.” Guido, 809 A.2d at 1042. Had Dubois Dutch exercised the Option prior to the adoption of the new lot size requirements in the 1996 Zoning Ordinance and obtained formal approval under the 1965 Subdivision Ordinance, the two properties would have been conforming lots under the 1964 Zoning Ordinance, and would therefore have fit the 1996 Zoning Ordinance‘s definition of a pre-existing non-conforming lot. By choosing not to exercise the Option and seek Subdivision approval until 1998, Dubois Dutch assumed the risk that the ordinances might change such that one or both of the individual parcels would not comply with “the minimum requirements of the Sandy Township Zoning Ordinance,” which would prevent approval under the Subdivision Ordinance.16
The governing body or the planning agency ... may grant a modification of the requirements of one or more provisions if the literal enforcement will exact undue hardship because of peculiar conditions pertaining to the land in question, provided that such modification will not be contrary to the public interest and that the purpose and intent of the ordinance is observed.
Therefore, we affirm the Commonwealth Court‘s determination that while the 1982 Lease and Option in themselves did not divide-in-fact the property as a matter of logical necessity, division-in-fact necessarily occurred when Dubois Dutch exercised the Option and the law recognized the conveyance as relating back to 1982. We also hold that division-in-fact in no
Justice SAYLOR files a concurring opinion in which Chief Justice CAPPY and Justice NIGRO join.
Justice SAYLOR concurring.
I join the majority opinion, except for portions of its discussion concerning the principle of relation back as appliеd in the circumstances of this case.
While the majority ultimately reaches the conclusion that relation back does not apply relative to the attempt to effect (retroactively) a de facto, legal subdivision, see Majority Opinion, at 1229, I respectfully differ with certain of its efforts to reconcile the relation-back principle with this conclusion. In particular, my thinking does not align with the majority‘s indications that optioned property segments must be viewed as retrospectively divided in fact upon the exercise of an option. See, e.g., id. at 1226-27, 1229. To me, it is preferable merely to recognize from the outset that, while an optionee‘s equitable title may in fact be deemed to relate back to the date of the execution of the option for certain purposes,1
I also reiterate the majority‘s observation that application of general princiрles of law and equity to further address the parties’ respective interests arising out of the option agreement in the circumstances as they have unfolded is beyond the limited scope of this appeal.
Chief Justice CAPPY and Justice NIGRO join this concurring opinion.