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Farley v. Roosevelt Memorial Hospital





APPEAL from the Circuit Court of Cook County; the Hon. JOSEPH M. WOSIK, Judge, presiding.


This appeal requires us to decide whether the circuit court improvidently entered a preliminary injunction preventing the sale of real estate which was the subject matter of an option to purchase that the defendant Roosevelt Memorial Hospital (the Hospital) had granted to the plaintiff Philip Farley. After the time to exercise the option had expired, the Hospital contracted with defendant Hudland Corporation to sell it the property, and this sale was enjoined by the preliminary injunction which the circuit court entered, and which was designed to preserve the status quo until the issue of a permanent injunction was resolved.

In determining whether the preliminary injunction was properly issued, two questions raised by the defendants must be addressed: first, was the option to purchase the property correctly exercised, thereby creating a contract between the plaintiff and the Hospital? Second, even if the option was exercised, is specific performance of the contract possible when the holder of the legal title to the real estate was not a party to the option or contract? The Hospital argues that because both questions must be answered in the negative, the plaintiff does not have a reasonable likelihood of success on the merits, that is of showing he had a valid contract for purchase of the real estate. Thus, the Hospital contends that the preliminary injunction was erroneously entered. See McCormick v. Empire Accounts Service, Inc. (1977), 49 Ill. App.3d 415, 417, 364 N.E.2d 420.

The option agreement executed by the Hospital as optionor and the plaintiff as optionee provided in its first paragraph:

"In consideration of the sum of $10,000.00, paid by the Optionee to the Optionor, receipt of which is hereby acknowledged, the Optionor hereby grants to the Optionee the exclusive option to purchase the real property described in Exhibit 1 hereto on the terms and conditions contained in said Real Estate Sale Contract."

An unexecuted real estate sale contract between the plaintiff and the Hospital was attached to the option agreement as Exhibit 1.

The option agreement then stated in two separate paragraphs that it was to be exercised by 10 a.m. on April 26, 1978, by written notice signed by the plaintiff and sent to the Hospital via registered mail prior to the expiration date. Another paragraph provided that the purchase price was $700,000 and that the option consideration ($10,000) was to be credited against the cash payment to be made on closing. The next paragraph stated that if the plaintiff did not exercise the option "as herein provided," the Hospital should retain the $10,000.

Following these provisions, a separate paragraph of the option agreement provided:

"If this option is exercised as herein provided, the optionor [the Hospital] and the optionee [the plaintiff] will immediately sign the Real Estate Sale Contract attached hereto as Exhibit 1."

The following evidence was introduced by the plaintiff on the hearing on his motion: On March 28, 1978, the plaintiff submitted the option agreement and a form of real estate sale contract to the Hospital's representative and invited the Hospital's attorney to make any changes he desired in the form of contract. Three days later the Hospital returned the option agreement to the plaintiff signed and unchanged together with a different form of real estate sale contract which was acceptable to the plaintiff and which was referred to in the option agreement as Exhibit 1. At the time the Hospital revised the form of contract, both it and its attorney knew that two land trusts held legal title to the property and that the beneficial interests had been assigned for collateral purposes, but this information was not incorporated in the form of contract returned to the plaintiff or communicated to him.

Subsequent to executing the option agreement, the plaintiff and the defendant, Dr. Samuel Matlin, one of the Hospital's chief executive officers, had several conversations regarding the option. At one of their meetings Dr. Matlin informed the plaintiff that another person had offered the Hospital $125,000 more than the option price. Dr. Matlin offered to split the profit with the plaintiff if he would give up his option rights, but the plaintiff declined.

The plaintiff and his attorney testified that on April 24, 1978, the plaintiff prepared to notify the Hospital of his exercise of the option. Because the attorney who represented him in preparing the option agreement was not available, the plaintiff consulted the attorney's associate. The attorney he consulted drafted a notice dated April 24, 1978, and reading as follows:

"Roosevelt Memorial Hospital 426 West Wisconsin Street Chicago, Illinois 60614 VIA REGISTERED MAIL Attn: Charles ...

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