P'ninat Mishpat: To Whom Do the Payments Go? – part I | Beit Din Eretz Hemda - Gazit | Beit Midrash

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Case: The plaintiff (=pl) and the defendant (=def), individually owned real estate development businesses, jointly organized a group to win a tender for dozens of apartments. Pl was to be the management company (=mc) for the building stage for 9% of apartments’ cost and in charge of the legal work; def was in charge of marketing. Pl and def had originally agreed to divide the profits from the initial investments, 75-25% in favor of def. After winning the tender, many of the group members (=ob) wanted to sell their rights. Def found a large, united group of new buyers (=nb) to take their places, but nb demanded to use a management company of their choice (=mc2). Pl wrote up a contract requiring nb to pay 32,000 NIS and ob to pay 24,000 NIS, to an account under pl’s control. In practice, some of nb paid def and most paid pl; none of ob paid anything. Pl is demanding that ob pay him as stated, and for def to pay him 25% of the money he received. Pl argues that def relinquished rights to payment, as finds expression in the new contract, out of fear that the project would collapse. Also, pl claims that 140,000 NIS he gave def was a loan, and so he wants it back. Def demands 75% of what pl collected. Def claims that the 140,000 NIS was given as a first payment for his part. Def also gave pl a receipt for 400,000 NIS that pl promised to give and did not.

Ruling: [We will start with the minority opinion.]
In general, the written contract takes precedence over the albeit more reasonable claims of def that the funds pl received should be split. The advantage of the written contract is a basic principle (see Shulchan Aruch, Choshen Mishpat 68:2; ibid. 45:3), and it states that the money is to be given to pl. This is strengthened by the agreement between pl and mc2 that gives pl rights of compensation for relinquishing the right to be the mc.
On the other hand, despite the signatures of ob on an obligation to pay pl 24,000 NIS, we will not honor that ostensible obligation. First, it makes no sense that people who were by agreement and by plan being replaced on the project at such an early stage would have to pay a significant amount toward future management fees. All of the many ob who came testified in a manner that convincingly demonstrated their shock that they were being sued for 24,000 NIS. (The fact that def agreed to pay in their place if they were obligated increases their credibility.) Def explained that there was a need for false documentation that equated between ob and nb, in order that the tender not be rescinded, and this is logical considering the legal steps taken city-wide.
Although we do not know the exact background for the partial payments and receipts between pl and def, the fact that pl received receipts and used them to receive serious tax reductions is the equivalent of a kinyan to obligate pl to def for the amounts of the receipts. Therefore, pl must complete the 400,000 NIS payment. On the other hand, this does not exempt def from giving 25% of the funds he collected to pl based on the previous agreement, which def admits is functional.