Citation. 162 Ill. 2d 47, 642 N.E.2d 128, 1994 Ill. 204 Ill. Dec. 666
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Brief Fact Summary.
The Defendants, Anderson, Zografos and the estate of Jacula (Defendants), with no notice of the Plaintiff, Daniels’s (Plaintiff), rights to land, contracted to buy a lot. After Defendant made payments, he was informed of Plaintiff’s right of first refusal and Plaintiff sued for specific performance of his option to purchase the land.
Synopsis of Rule of Law.
The pro tanto rule protects buyers to the extent of payment made prior to notice, but no further.
In 1977, the Plaintiff contracted to buy two lots from Jacula, with a right of first refusal for an additional adjacent lot. When Plaintiff received his deed, it did not mention the right of first refusal. In 1985, Zografos, with no knowledge of Plaintiff’s right of first refusal, contracted with Jacula to buy the adjacent lot to Plaintiff’s property. After paying 2/3 of the purchase price, Plaintiff’s wife informed Defendant that Plaintiff possessed a right of first refusal to the land. Plaintiff sued for specific performance of his option of first refusal. The trial court found for the Plaintiff ruling that the Defendant had actual notice of the option when he took title. The appellate court affirmed and the Defendant appealed.
When does a buyer become a bona fide purchaser?
Affirmed, Plaintiff will reimburse Defendant for the full purchase price and property taxes paid on the property and Defendant will convey the lot in question to Plaintiff.
A buyer, who prior to the payment of any consideration receives notice of an outstanding interest, pays the consideration at his or her peril and is not protected as a bona fide purchaser.
The pro tanto rule protects buyers to the extent of payment made prior to receiving notice, but no further.
The court determined that the Defendant had no notice of Plaintiff’s right of first refusal when he contracted to buy the land in question. However, he was made aware of that right prior to recording the deed. The court then discussed the various methods jurisdictions have employed to deal with purchasers that have not obtained bona fide purchaser standing, but still deserved to have some rights protected.