Was There a Sale to Renege on? – part III

Beit Din Eretz Hemda - Gazit

Adar 5783

Case: The plaintiff (=pl), a real estate investor, negotiated with the defendant (=def) about apartments to be built in a building under Tama 38 (strengthening and expansion of buildings). They agreed (on some level) that pl would buy three apartments for 3 million NIS. The two then signed a handwritten document titled "Summary of Loan + Purchase Agreement of Apartments." Later, they agreed that pl would buy a fourth apartment for 600,000 NIS. Under the guidance of a lawyer (=lyr), who discussed the legal challenges, they reached an agreement of principles. Later pl signed an agreement to lend 1.5 million NIS each to a company that def owns and to a company which def owns in partnership with another person (=prtn). Lyr testified that the reason the payment was presented as a loan, with interest and guarantees, rather than a purchase, was due to tax issues. Eventually it was supposed to have led to purchase contracts and erasure of the interest. The sides progressed close to a final agreement and payment. However, after some disagreements, and a couple of months later, def returned the "loan money" with an additional sum for interest, as written in the original agreement. Pl claims that the money given in relation to the loan agreement was purchase money. Pl brought several proofs from documents that indicate that there was really a sale, not a loan, and that their agreement is no less than a zichron devarim (memorandum of understanding). Pl wants to go through with the purchase of the four apartments. If that cannot be done, he demands a fine of 10% as written in the agreement of principles. Def argues that there were only advanced negotiations about the purchase, and the loan was just one stage in the process. He raised different indications (including that the agreement of principles is unsigned) that the sale had not been finalized. Def also claims that prtn approved only the loan agreement. Prtn did not agree for beit din to adjudicate.

Ruling: [Last time we saw that the "loan" was payment for a purchase, but there is no innate mechanism for either sale or obligation to sell that overcomes problems such as davar shelo ba la’olam =dshlbl.]
To enforce a sale or obligation to sell based on dina d’malchuta/common practice, one must deal with the law that real estate agreements need a written component, which is lacking here.
When money is given on the sale of a movable object but there is no valid kinyan, one who backs out is sanctioned with a mi shepara. The Pitchei Teshuva (Choshen Mishpat 204:2) says that most agree that this applies even to real estate (where money is a kinyan) where there is an impediment to efficacy. However, the Beit Yosef (CM 204) says this is the case only when the sale works based on Torah law, which is not the case here since the apartments are a dshlbl.
There is a machloket whether mechusar amana, a lower level of sanction for one who reneges (Bava Metzia 49a), applies to a dshlbl; Mishpat Shalom (209:3) says that most agree it does. The machloket whether it applies if one backed out due to a change in the item’s price (see Rama, CM 204:1, Shach ad loc.) should not make a difference, because here the price change was expected and factored in. This is only bolstered by the fact that quasi-kinyan actions were taken (mechusar amana is usually based on oral commitment alone).