Extent of Partnership – part I | Beit Din Eretz Hemda - Gazit | Beit Midrash

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Case: In 2007, a land developer (=def1) planned a project – he would buy a property with a two-story building and greatly expand the building. The plaintiff (=pl) put up 900,000 NIS and received a 10% stake in profits from the project. There is a long agreement between the sides (=agr) and, later, a letter of understanding. Def2 and def3 are close relatives of def1, and there is another investor (=adinv). After the purchase of the property, the Tabu (Land Registry) listed four owners of 25% of the property each – pl, def2, def3, and adinv. After a later sale, officially by these four to another six people (who bought apartments), pl’s stake, per Tabu, stands at 13.5%. Pl received one of the apartments and demands additional money as per his 10% stake, including rent on the apartments that def1 handles. Pl claims that his 10% ownership enables him to receive both an apartment, like the others, and also general rights. Def claim that pl did not receive 10% ownership of the property but, as an investor, 10% of the profits, from which the value of the apartment he received should be subtracted. Def demand of pl that he sign a request for a building permit for the second stage of the building’s expansion.

Ruling: While it is true that the funds that pl put up were 10% of the purchase and building’s expected budget, logically, pl should not receive an equal part per investment to def1’s part, as the latter was the developer, whose idea the project was and who put in massive amounts of work and expertise into the project. Pl could have even gotten all his investment back, in which case it would take a strong proof to convince one that he had been given profits plus ownership.
Still there is a need to analyze agr’s language, which is the most influential factor. The term partnership is found in agr’s title but not in the rest of the long document, which makes it more likely that it is an investment agreement. Beit din made several inferences from the language, all of which appear to support def1’s version of the agreement. One of def1’s stronger inferences is the fact that the apartment pl received was priced and it was discussed how it impacted the remainder of pl’s rights. If pl were a partner in the property, an apartment in the building would be a natural right, which would not have to be bought. In general, when there is a doubt how to interpret a contract, the one who needs it to give him rights, which, in this case, is pl, begins with the weaker position (see Bava Batra 150b). This just strengthens the indications that def1 is correct that the contract views pl as no more than an investor. The language of the letter of understanding also fits better with def1’s claims.
Furthermore, in a hearing before another beit din on an internal conflict between residents of the building, in explaining the financial dynamics in the building, pl stated that the roof belonged to def1. If pl were a 10% partner in the building as a whole, he should have said that he was also a partner in the roof. Statements made before a beit din, even in a different context, can be used as an admission if that is what comes out of the content of the statement.
We continue next time.