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Shabbat Parashat Korach 5777

P'ninat Mishpat: Time of Payment of an Iska Loan part II

(based on ruling 75109 of the Eretz Hemdah-Gazit Rabbinical Courts)

Case: [A highly condensed description follows] The plaintiff (=pl) lent/invested large sums of money to the defendant (=def), a real estate developer, over the course of a few years, and was to receive approximately a 25% annual return. He used various heter iska forms to permit this (in his view). The largest sum was used to buy rights to property in a multi-million shekel project. Before the project was built, pl sold his rights back to def for 1.66 mil. shekels, which was not given but became a new loan/investment. A central document summarizing the loan/investments stated that they should be paid in the near future, without mentioning dates, and required monthly interest payments of 20,000 shekels. The big project was stopped by a court order after only a percentage of the homes were built and sold. Def slowed down and then stopped making the monthly payments. Def claims that he is unable and not required to return the loan/investment until the project is resumed. Pl demands immediate payment and claims that def has fictitiously hid all his assets.     


Ruling: [After seeing that def owes all the money according to the heter iska forms, we must decide when payment is due.]

The document that summarized the loans states that def will return the money “as soon as he can, around half a year.” This and other linguistic indications show that there is no clear commitment as to when to pay.

Despite this fact, def must return all the loans immediately for two reasons. One is that def stopped following his contractual obligation – to make a monthly interest payment of 20,000 shekels. Under such circumstances, it is not logical that pl should have to wait indefinitely (it is now 4 years).

The second factor is that def has made several efforts to hide assets. At the time of the loans, def was a major partner in the big project, and his part in it served as a strong guarantee for the payment of the large loans. Subsequently def created a company which owned his rights in the project. Later, he gave away his rights in the project to the wife of a partner, thus removing liens. Def had promised to pay back some of pl’s loans from sales of apartments in the project, but gave nothing from these revenues, which were apparently hidden or reinvested. Some of def’s property has been put in his children’s name, and the expensive car he drives is listed as his brother-in-law’s. Therefore, the loan cannot be left open-ended because of the lack of a date when there is reason for concern that the chance to find payment will slip away.

Therefore, the money is due now. Def claims that if pl will take aggressive steps to collect the money, it will cause def to go bankrupt, and pl will never receive full payment. It is not for beit din to decide what is wise for pl to do. It is pl’s right to take steps to try to prevent the loss of huge amounts of his money, including large sums he borrowed from banks to provide for these investments. Until payment is made, they will continue to accrue interest.
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