holding that if the terms of a contract are ambiguous, “then extrinsic evidence may be resorted to in an effort to determine the intention of the parties”
How later courts described this case
- holding that if the terms of a contract are ambiguous, “then extrinsic evidence may be resorted to in an effort to determine the intention of the parties”
- stating that “[w]hen 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”
- explaining that extrinsic evidence will “be considered in an effort to give effect to the parties’ intentions” only if “the language of a contract is unclear or ambiguous”
- holding that if no ambiguity appears on the face of the instrument, parol evidence cannot be considered in an effort to demonstrate such an ambiguity
Written by the judges who cited it.
The opinion
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 *641 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, ie., 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 *642 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 , 68 O.O.2d 288 , 316 N.E.2d 477 , paragraph two of the syllabus; Sloan v. Standard Oil Co. (1964), 177 Ohio St. 149 , 29 O.O.2d 355 , 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.