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Daniels v. Anderson,
Supreme Court of IL (1994)
Author: Bram
Parties:
Buyer (Daniels)
v. Seller (Zografos)
Cause of
action/remedy sought:
The following is an
equitable action for specific performance.
Procedural
History:
Trial court held for
PL. The appellate court affirmed, as does this court.
Facts:
Adjoining landowner
contended that he was a bona fide purchase of the contiguous parcel, the trial
court's award of the contiguous parcel to the landowner should not have included
the easement that the adjoining landowner received from the prior owner, and
that the landowner had no easement rights under the 1977 contract. The adjoining
landowner contended he was a bona fide purchaser. The adjoined landowner had not
raised this defense until his appeal.
Issue(s):
Under IL property
law, was Zografos a BFP who took notice of the option and therefore should be
protected from having to convey to Daniels. Under the same law, at what stage
does one become a BFP?
Holding:
No. DF had notice of
the first refusal clause before he took title of the property, and thus should
estopped from asserting any rights as a BFP over PL, and specific performance
should be granted.
Court's
Rationale/Reasoning:
As to the notice,
DF/appellee tried to invoke the doctrine of equitable conversion in this court
and the lower court, as he did not raise the argument at trial and has thus
waived any such contention (collateral estoppel). Absent consideration of the
equitable conversion doctrine, the court turned to when Zografos became a BFP.
DF contends that during this executory period, the buyer can rely solely on the
public records and ignore even actual notice of an outstanding, unrecorded
interest. Not so.
However, the courts are
split as to whether or not a BFP is still a BFP upon receiving notice prior to
paying the full price. Some say partial consideration is not enough, but many
courts have relaxed this harsh rule. Instead they apply a pro tanto rule, which
protects the buyer to the extent that they have paid prior to notice. This
court recognizes this rule. There are 3 methods to apply this rule:
(1) most common method is to
award the land to the holder of the outstanding interest and award the buyer the
payments he or she has made
(2) award the buyer a
fractional interest in the land proportional to the amount paid prior to notice
(3) allow the buyer to
complete the purchase, but to pay the remaining installments to the holder of
the outstanding interest
Since the court went with
the first option and forced Daniels to pay DF, the trial court did not abuse its
discretion.
Rule:
A BFP takes takes
title to real property w/o notice of the interests of others. Any notice prior
to the payment of any consideration pays at their own risk with respect to the
holder of the outstanding interest. That buyer is not a BFP.
Did court
avoid issues?:
No.
Dicta:
No.
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