Shifrin v. Forest City Enterprises, Inc.

• Citation: 597 N.E.2d 499,64 Ohio St.3d 635
• Decision Date: 09 September 1992
• Docket Number: No. 91-1344,91-1344
• Parties: SHIFRIN et al., Appellants, v. FOREST CITY ENTERPRISES, INC. et al., Appellees.
• Court: United States State Supreme Court of Ohio

Page 635

64 Ohio St.3d 635

597 N.E.2d 499

SHIFRIN et al., Appellants, v. FOREST CITY ENTERPRISES, INC. et al., Appellees.

No. 91-1344.

Supreme Court of Ohio.

Submitted June 3, 1992.

Decided Sept. 9, 1992.

SYLLABUS BY THE COURT

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.

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, Cleveland, for appellants.

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

PEGGY L. BRYANT, Judge.

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.2d 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...