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Shabbat Parashat Tzav 5777

P'ninat Mishpat: Returning Money of an Iska Loan part II

(based on ruling 76003 of the Eretz Hemdah-Gazit Rabbinical Courts)

Case: The plaintiff (=pl), his uncle the defendant (=def), and other family members decided to jointly, with different roles and shares, purchase and develop a plot of land that cost 2.9 million shekels. Pl and another uncle founded a company to develop the property and made the first payment of 1.9 million shekels. At a later stage, def gave pl 1 million shekels, with the following conditions. The money was to accrue a 7% annual return (while no heter iska was written, the parties apparently agreed to follow the terms of the Chochmat Adam’s heter iska). Def would receive one of the apartments to be built, which would ensure the money due him. Subsequently, a municipal planning issue arose, which caused a serious delay in the project and made the money def gave unneeded at that time. Pl wants to return the money and exempt himself from the 7% return. Def refuses to receive the payment, demanding that their deal continue.

 

Ruling: [Last time we saw that pl may return the investment to def. Several smaller questions must be addressed in the aftermath of that conclusion.]

The 1,000,000 shekel investment was under pl’s control for five months before he requested to return it. Even though the main purpose of their desire for the money was not realized, it was still in pl’s control at a time that there were likely profits from the project (e.g., increased value of the property). Therefore, it is still appropriate to pay the “compromise money,” which comes to 29,166 shekels for that period.

The above applies only until the time that pl wanted to return the money, even before def received it. The Taz (Yoreh Deah 177) says that if the time of an iska investment has passed but the money stays in the “borrower’s” hands for longer, he has to continue paying the envisioned returns beyond that. The Pitchei Teshuva (177:2) cites the Levushei Srad who says that while it would not be ribbit to pay, the borrower does not have a monetary obligation to pay and suggests that the iska agreement should state what will happen if the investment goes longer than envisioned. It is likely that the Taz would agree in a case like ours in which there were not clearly visible profits during the interim.

There were two reasons for def to receive rights to one of the apartments: 1. To ensure payment; 2. As an investment privilege. Although the first one does not apply, the second one does, and therefore it is still def’s right to acquire an apartment if he pays for it in one form or another.

Although the sides had agreed on a compromise – that the investment would continue at a lower rate of return – this was done when pl was unaware of the mechanism of a heter iska and that it was possible for him to return the money. Since the compromise was agreed upon by mistake, it is not binding (see Rambam, Sanhedrin 6:5). If the sides will agree to continue the investment at this time, pl will not be able to force def to accept a reduction in the rate of return.
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