Shifrin v. Forest City Ent., Inc.

SUPREME COURT CASES

Laws-info.com » Cases » Ohio » Supreme Court » 1992 » Shifrin v. Forest City Ent., Inc.

State: Ohio

Court: Supreme Court

Docket No: 1991-1344

Case Date: 09/09/1992

Plaintiff: Shifrin

Defendant: Forest City Ent., Inc.

Preview: OPINIONS OF THE SUPREME COURT OF OHIO

The full texts of the opinions of the Supreme Court of
Ohio are being transmitted electronically beginning May 27,
1992, pursuant to a pilot project implemented by Chief Justice
Thomas J. Moyer.

Please call any errors to the attention of the Reporter's
Office of the Supreme Court of Ohio. Attention: Walter S.
Kobalka, Reporter, or Justine Michael, Administrative
Assistant. Tel.: (614) 466-4961; in Ohio 1-800-826-9010.
Your comments on this pilot project are also welcome.

NOTE: Corrections may be made by the Supreme Court to the
full texts of the opinions after they have been released
electronically to the public. The reader is therefore advised
to check the bound volumes of Ohio St.3d published by West
Publishing Company for the final versions of these opinions.
The advance sheets to Ohio St.3d will also contain the volume
and page numbers where the opinions will be found in the bound
volumes of the Ohio Official Reports.

Shifrin et al., Appellants, v. Forest City Enterprises,
Inc. et al., Appellees.

[Cite as Shifrin v. Forest City Ent., Inc. (1992),
Ohio St.3d .]
Contracts -- Extrinsic evidence considered in an effort to give

effect to the parties' intentions, when.
Only when the language of a contract is unclear or ambiguous, or

when the circumstances surrounding the agreement invest

the language of the contract with a special meaning will

extrinsic evidence be considered in an effort to give

effect to the parties' intentions.

(No. 91-1344 -- Submitted June 3, 1992 -- Decided
September 9, 1992.)

Appeal from the Court of Appeals for Cuyahoga County, No.
58068.

On June 1, 1965, plaintiff-appellant,1 Jack Shifrin,
entered into an agreement with defendants-appellees, Forest
City Enterprises, Inc. and F.C.E. Management Company
(collectively, "Forest City"), creating a general partnership
known as "Court Mall Properties Company" for the purposes of
constructing, developing and managing the Eastland Shopping
Mall in Flint, Michigan. Under the terms of the partnership
agreement, Shifrin and Forest City each retained a fifty
percent ownership interest in Court Mall Properties Company and
shared equally in all profits and losses arising out of the
operation of the mall.

In 1976, persistent disputes prompted the partners to
enter into a management agreement providing specific guidelines
for the joint management of the mall. Management disputes
remained unresolved, however, and in 1984 the parties entered
into an auction agreement providing for the purchase of the
partnership by the partner who submitted the highest bid. The
bidding took place on August 31, 1984 and Forest City prevailed
with a bid of $8.7 million. As the prevailing party, Forest
City had the right to choose a date for closing the
transaction, no earlier than November 1, 1984 and no later than
May 31, 1985. Forest City chose May 30, 1985.

In compliance with the auction agreement, Shifrin executed
a document entitled "Assignment of Partnership Interest,"

transferring Shifrin's one-half interest in Court Mall
Properties Company to Forest City. The parties also executed
cognovit notes in the amount of $400,000 as liquidated damages
if either party failed to complete the transaction on the
prescribed date. The assignment was irrevocably deposited in
escrow, to be delivered to Forest City at closing.

The partnership was to continue during the interim period
between the auction and the closing; however, under the terms
of the auction agreement, the prevailing party was required to
open a new management account to handle the financial affairs
of the partnership during the interim period. In September and
December 1984, cash disbursements totaling approximately
$99,000 were made to Shifrin from that management account.

Early in 1985, a disagreement arose over Shifrin's
entitlement to interim payments from the operation of Eastland
Mall. Relying on the language of the partnership agreement,
Shifrin sought a distributive share of the net profits derived
from the operation of the mall during the interim period;
Forest City argued that under the management agreement Shifrin
was entitled only to a distributive share of the net cash
flow. Despite the disagreement, the closing took place as
scheduled on May 30, 1985.

On October 3, 1985, Forest City determined that as of May
31, 1985, a cash balance of $152,712.67 was available for
distribution to the general partners, and tendered one-half of
that amount to Shifrin. Shifrin refused the sum, arguing that
Forest City had erroneously calculated the amount due Shifrin.

The parties being unable to resolve the dispute over the
method of calculating the payments due Shifrin during the
interim period, Shifrin filed this action against Forest City
on March 10, 1988, seeking an accounting and a distribution of
Shifrin's share of the net profits accrued during the interim
period. The Cuyahoga County Common Pleas Court rendered
judgment in favor of Forest City, finding that Shifrin had
released all claims against the partnership upon the transfer
of Shifrin's partnership interest to Forest City at closing.
Shifrin appealed to the Cuyahoga County Court of Appeals, which
affirmed the decision of the trial court.

The case is before this court pursuant to an allowance of
a motion to certify the record.

McDonald, Hopkins, Burke & Haber Co., L.P.A., Robert S.
Stone and Kenneth J. Walsh, for appellants.

Kahn, Kleinman, Yanowitz & Arnson Co., L.P.A., Thomas L.
Dettelbach and Adrienne Lalak Deckman, for appellees.

Bryant, J. Shifrin's primary contention, contained in
the first and second propositions of law, is that the court of
appeals' determination that the releases extinguished Shifrin's
claims is contrary to the intent of the parties. Specifically,
Shifrin points to the testimony of Forest City's president,
Albert Ratner, that Shifrin was entitled not only to the agreed
purchase price of $8.7 million, but also to a distributive
share from the operation of the mall during the interim period,
the amount of which could not be ascertained until after
closing. Shifrin further notes Forest City's post-closing
tender to Shifrin of $76,356.34, based on Forest City's

determination of Shifrin's distributive share. Shifrin then
argues that Ratner's testimony and the tendered money reveal
the parties' intention to except from the releases claims
relating to payment of Shifrin's distributive share during the
interim period. For the reasons which follow, we find that
under the unambiguous terms of the releases between the
parties, Shifrin released all claims asserted herein, and we
affirm the judgment of the court of appeals.

Generally, courts presume that the intent of the parties
to a contract resides in the language they chose to employ in
the agreement. Kelly v. Med. Life Ins. Co. (1987), 31 Ohio
St.3d 130, 31 OBR 289, 509 N.E.2d 411, paragraph one of the
syllabus; Aultman Hosp. Assn. v. Community Mut. Ins. Co.
(1989), 46 Ohio St.3d 51, 544 N.E.2d 920, syllabus. Only when
the language of a contract is unclear or ambiguous, or when the
circumstances surrounding the agreement invest the language of
the contract with a special meaning will extrinsic evidence be
considered in an effort to give effect to the parties'
intentions. Kelly, supra, at 132, 31 OBR at 291, 509 N.E.2d at

413. When the terms in a contract are unambiguous, courts will
not in effect create a new contract by finding an intent not
expressed in the clear language employed by the parties.
Alexander v. Buckeye Pipe Line Co. (1978), 53 Ohio St.2d 241,
246, 7 O.O.3d 403, 406, 374 N.E.2d 146, 150.

Accordingly, the threshold issue controlling our
determination of the contractual intent of the parties herein
is whether the releases in the auction agreement and assignment
instrument are ambiguous. In Alexander, supra, paragraph two
of the syllabus, we set forth a test for determining whether
contract terms are ambiguous: "Common words appearing in a
written instrument will be given their ordinary meaning unless
manifest absurdity results, or unless some other meaning is
clearly evidenced from the face or overall contents of the
instrument." See, also, Aultman Hosp., supra, 46 Ohio St.3d at
54, 544 N.E.2d at 923. If no ambiguity appears on the face of
the instrument, parol evidence cannot be considered in an
effort to demonstrate such an ambiguity. See Stony's Trucking
Co. v. Pub. Util. Comm. (1972), 32 Ohio St.3d 139, 142, 61
O.O.2d 388, 389, 290 N.E.2d 565, 567.

Under paragraph 5(a) of the auction agreement, effective
on consummation of the agreement,2 the parties released each
other from "all claims of every kind" with respect to the
partnership from its inception, with the single exception of
claims relating to a partnership utility account not relevant
to the dispute herein.3 Similarly, the language of the
assignment instrument releases the partnership from "further
claims against the partnership" without exception, effective
upon Shifrin's transfer of the partnership interest to Forest
City.4

Giving the terms of the releases their ordinary meaning,
the releases indicate unambiguously the intent of the parties
to release all of Shifrin's claims against the partnership at
issue herein, including those arising during the interim
period, effective upon transfer of Shifrin's partnership
interest to Forest City. See Whitt v. Hutchison (1975), 43
Ohio St.2d 53, 60, 72 O.O.2d 30, 34, 330 N.E.2d 678, 683.
While the evidence Shifrin cites shows that Forest City

intended under the contract to pay Shifrin's distributive share
during the interim period, an intent not inconsistent with the
language of the releases, the releases contain no exceptions
preserving Shifrin's right to enforce such payments after the
closing.

Shifrin attempts to circumvent the lack of a facial
ambiguity in the releases by asserting that the parties would
not have agreed that Forest City was obligated to pay Shifrin's
distributive share during the interim period without providing
Shifrin the means legally to enforce such payments, and that a
"latent ambiguity" thus exists in the parties' agreements that
justifies the use of parol evidence to show the intent of the
parties, even if the terms of the releases are unambiguous.

While the record reveals that Forest City intended to
contract for distributive payments during the interim period,
the record does not similarly support Shifrin's contention that
Forest City mistakenly, much less fraudulently, failed to
include provisions in the agreements for enforcing that right.
Shifrin having failed to demonstrate fraud, mutual mistake or
the existence of an ambiguity on the face of the contract that
would allow that court to vary the clear terms of the contract,
parol evidence cannot be used to demonstrate a "latent
ambiguity" in the contract between Shifrin and Forest City.
Charles A. Burton, Inc. v. Durkee (1952), 158 Ohio St. 313, 49

O.O. 174, 109 N.E.2d 265, paragraph two of the syllabus;
Cassilly v. Cassilly (1897), 57 Ohio St. 582, 49 N.E. 795.
Accordingly, Shifrin's first and second propositions of
law are overruled.

Shifrin's third proposition of law asserts that the trial
court incorrectly applied the legal doctrines of anticipatory
release and accord and satisfaction, and that those legal
doctrines have no application herein. Shifrin did not raise
this argument in the court of appeals and, thus, has waived
it. State v. Williams (1977), 51 Ohio St.2d 112, 5 O.O.3d 98,
364 N.E.2d 1364, paragraph two of the syllabus. Nevertheless,
even if we were to agree that the trial court erred by applying
these legal doctrines to the facts of this case, our
disposition of appellant's first two propositions of law
renders harmless any error in the trial court's treatment of
those issues.

The judgment of the court of appeals is affirmed.

Judgment affirmed.

Sweeney, Acting C.J., Douglas, Wright, H. Brown and
Resnick, JJ., concur.

Holmes, J., dissents.

Peggy Bryant, J., of the Tenth Appellate District, sitting
for Moyer, C.J.
FOOTNOTES:

1 At all times relevant hereto, plaintiffs-appellants,
Jack, David and Lisa Shifrin, collectively owned Jack Shifrin's
interest in the partnership, and are referred to collectively
as "Shifrin."

2 While the term "consummation" may be less than clear,
thus raising a potential ambiguity regarding the date the
release contained in the auction agreement became effective,
the parties stipulated that the consummation date was the date
of closing.

3 The release in the auction agreement states:

"5. (a) Effective on consummation of this agreement, each
party releases and discharges the other from all claims of
every kind with respect to the partnership from its inception
and the Property, with the exception stated in (b) below
[relating to utility charges during a time period not in
dispute herein]. * * *"

4 The release in the assignment instrument provides that:

"* * * effective on and after the date of the transfer of
such interest, the Shifrin Partners shall have no further
claims against the Partnership or liability under any claims,
legal or equitable, proceedings, suits, judgments, decrees,
liabilities, obligations and/or taxes, which accrue on or after
the effective date hereof * * *."

Wright, J., concurring. I join the majority's opinion in
this matter, but I do so reluctantly because the result seems
most unjust. I remain bewildered that Shifrin and Forest City
entered into releases that were wholly at odds with their
conduct predating the releases. As the majority aptly notes,
however, the language of both the auction agreement and the
assignment instrument clearly and unambiguously released the
partnership from claims against it, without exception, upon
Shifrin's transfer of his partnership interest to Forest City.
Shifrin cannot now complain that the plain language of the
releases is contrary to his intentions. There simply is no
room in our jurisprudence for a doctrine that seeks to rescue
the inattentive from the operation of well-accepted notions of
contract interpretation.

Holmes, J., dissenting. This matter involves a dispute
about money between two very sophisticated businessmen, Jack
Shifrin and Albert Ratner, who, having formed a partnership a
number of years previously for purposes of operating a shopping
center, grew apart philosophically and decided upon a plan of
buying out of the business through an auction agreement.
Ratner, with his business entity, Forest City, was the
successful bidder and Shifrin assigned his partnership interest
to Forest City in escrow for delivery upon the consummation of
the transaction on the eventual closing date, which was to be
no later than May 31, 1985. The parties were to remain
partners between the bidding date of August 31, 1984 and the
closing date, which latter date as selected by Forest City was
May 30, 1985. Further, the partners were to share in
partnership profits during this interim period.

In the case at bar, the contractual intent of the parties
regarding the entitlement to and distribution of partnership
profits (or losses) for the interim period between the auction
and the closing was clearly manifested in the parties' actual
conduct, both before and after the closing date of the auction
transaction. The trial testimony of both parties and their
behavior in the interim period (from the August 31, 1984
bidding to the May 30, 1985 closing) clearly show that it was
the intention of both parties that Shifrin receive his share of
the partnership income for the interim period. In fact, Forest
City paid and Shifrin accepted income for a portion of the
interim period. And, in fact, Forest City unilaterally
conducted and generated a post-closing "Corporate Internal
Audit" dated October 3, 1985, which reflected additional income

of $152,712.67 available for distribution to the partners,
$76,356.34 of which was offered to Shifrin along with a copy of
the audit document. But Shifrin claimed that the computation
was erroneous, refused to accept the distribution calculated by
Forest City, and then perfected his claim in the lawsuit.
Forest City opposed the computation claim, but never claimed in
the courtroom that the release language of the parties' auction
agreement barred Shifrin's claim.

The essence of the dispute between the parties which was
tried in the court below centered on the method of calculation
of the amount which Shifrin would receive, i.e., whether it
would be calculated based on (a) accrued net profits or (b)
cash flow, and not on whether Shifrin was entitled to claim a
partnership distributive share (or was releasing his
partnership share in consideration of his own sale of his
interests). The lawsuit asked the court to determine the
method-of-computation issue, which the parties willingly
litigated. The court was not asked to determine whether
Shifrin was barred by release from further payment of the full
consideration for the sale of his partnership interests.

It is highly improbable that Shifrin, a sophisticated
businessman, would execute this business-transfer instrument,
believing that he was to remain a partner during the interim
period of operation before the consummation of the transaction
and the distribution of profits and the accounting therefor,
and not intend that such partnership profits be divided
properly and accordingly paid to him, or that he have
appropriate recourse for their collection.

Judge Nahra, in his dissenting opinion in the court of
appeals below, captured the import of the issues involved here,
and applied the proper law to such issues. He stated as
follows:

"The transaction we are concerned with involved a
substantial interest in real estate, but its structure was
quite simple. One partner was buying out the other partner.
Until the sale closed, they were to remain partners and share
in the profits or losses as partners. All parties testified to
this understanding. The only argument was over how the profits
or losses were to be computed. The defendants unequivocally
admitted they owed the plaintiffs money. Also, it was
undisputed that the amount owed could not be determined until
sometime after the sale was consummated when all rents and
overages had been collected and all expenses for that period
had been paid. The majority's holding in effect is that the
defendants released claims that did not even exist either when
they executed the release or when they accepted the purchase
price. Contracts are to be interpreted to carry out the intent
of the parties. Yoder v. Electric Co. (1974), 39 Ohio App.2d
113, 316 N.E.2d 472, paragraph two of the syllabus; Sloan v.
Standard Oil Co. (1964), 177 Ohio St. 149, 203 N.E.2d 237.
There is no doubt that the intention of the parties was as
stated above. * * *"

I agree with Judge Nahra, and would accordingly reverse the judgment of the court of appeals and remand this matter to the trial court to determine the proper amount of the partnership profits due Shifrin.

Download 1992-ohio-28.pdf