Ruffolo v. Jordan (IL)

Summary: Remedy for tenant's nonpayment of rent after tenant exercised option to purchase was not termination of option agreement. Tenant had continuing obligation to pay rent until all terms of the purchase was agreed upon.


Go to full opinion.


Ruffolo v. Jordan, 2015 IL App (1st) 140969, reh'g denied (2015).


Facts: On August 11, 1999, plaintiff Kimberly Ruffolo agreed to purchase a veterinary practice, Mt. Plaines Animal Hospital, from defendant Donald Dreessen. Part of the purchase agreement was a lease for the clinic. Another part of the agreement gave Ruffolo an option to purchase the property. The option gave her the right of first refusal during the first six years, and the right to purchase the property outright after six years. The option agreement stated that the purchase must be completed within six months of the option being exercised.

In July of 2005, a month before the option for an outright purchase became viable, Ruffolo’s attorney sent a letter to Dreessen’s attorney that expressed Ruffolo’s intent to purchase the property. The parties began negotiating once the option vested, and were unable to resolve the details of the sale, but most importantly the parties could not agree on price.

The option agreement stated that an appraiser would be selected by the parties, and if they are unable to agree upon an appraiser, each party chooses an appraiser and the two appraisers would choose a third appraiser. Ruffolo’s first appraiser was rejected, but she agreed to Dreessen’s appraiser as long as she was not bound by the appraisal. Dreessen’s chosen appraiser, Mr. Bulthuis ran into delays. The six month purchase period expired, but the parties continued to negotiate a sale.

While the negotiations were ongoing, Ruffolo continued to pay rent until ceasing rent payments on March 1, 2007. The parties could not mutually agree on an appraiser, so they each selected an appraiser, and those two appraisers selected Greg Schmitt of RJ Schmitt to be the third-party appraiser. In October 2007, Schmitt appraised the property at $525,000, between Ruffolo's suggested value of $340,000 and Dreessen's suggested value of $750,000.

While still negotiating other terms of the sale, Dreessen filed a forcible entry and detainer suit based on the unpaid rent. That suit was dismissed. The sale never closed and Ruffolo filed suit to compel the sale.

The trial court granted Ruffolo’s motion for summary judgement, finding that the option was valid and properly exercised, and there was an enforceable agreement for a sale of the property for $525,000. The trial court held that Dreessen was not entitled to any unpaid rent and that the cessation of rent payments did not terminate the option. The trial court found that the delay in selecting the appraiser and effectuating the sale were attributable to Dreessen, while Ruffolo remained ready, willing, and able to perform during the option period.


Holding: Affirmed in part, reversed in part; remanded. The appellate court held that  Ruffolo was entitled to purchase the property for $525,000; but was required to pay all rent through October 2007. On remand the trial court should determine the amount of rent due and the award of attorney fees.

First, the court agreed that Ruffolo had a valid option that was properly exercised. Dreessen waived the argument that the option was not valid by continuing the negotiation process long after the six month closing period. But similarly, Ruffolo cannot rely on the expiration of the option in support of her arguments because she continued to pay rent as if the lease was valid and never repudiated her obligations under the lease. The court stated neither party treated the six month period as determinative until litigation began and now neither can rely on it.

Second, the court rejected Dreessen’s argument that he only agreed to the third-party appraisal for settlement purposes and that he never agreed to be bound by that appraisal. The court found that the parties were bound by the third-party appraisal, and Dreessen’s intention not to be bound by Schmitt’s appraisal was inconsistent with his rights and obligations under the option agreement. The option did not terminate when Ruffolo stopped paying rent, and Dreessen could not claim he was no longer bound by the option agreement once rent payments stopped. The court found the only material hold up in the purchase and sale was the price, and the Ruffolo was entitled to purchase the property.

Third, the court rejected Ruffolo’s argument that after the six month option period, she was the equitable owner of the property and not required to pay rent. Generally when an option is exercised, the former relationship of lessor and lessee terminates and the parties are in a vendor vendee relationship.  Wendy & William Spatz Charitable Foundation v. 2263 North Lincoln Corp., 2013 IL App (1st) 122076, ¶ 28, 376 Ill.Dec. 199, 998 N.E.2d 909. But here, when Ruffolo exercised her option, it created a binding agreement to perform in the future, once the price was determined. A contract for the sale of land cannot be enforced according to an option unless and until all essential contract terms, including sale price, are certain. Kane v. McDermott, 191 Ill.App.3d 212, 217, 138 Ill.Dec. 541, 547 N.E.2d 708 (1989).

Here, the lease did not terminate until the rights and obligations under the purchase agreement were fully determined. The parties were concurrently in a landlord-tenant and vendor-vendee relationship, with the lease governed by the rental relationship and the option contract governing the purchasing relationship. See Industrial Steel Construction, Inc. v. Mooncotch, 264 Ill.App.3d 507, 512, 202 Ill.Dec. 124, 637 N.E.2d 663 (1994). Thus, Ruffolo was not justified to discontinue rent payments. It wasn’t until there was the third-party appraisal, fixing her rights and obligations under the option agreement, that Ruffolo became the equitable owner and terminated her rent obligations.

Opinion Year: 
By: ATG Underwriting Department | Posted on: Tue, 10/04/2016 - 11:39am