GRAFFEO, J.
In this case, we conclude that the option contract at issue is valid and enforceable and that the optionor may not introduce parol evidence to import a separate obligation as consideration for the agreement. We therefore affirm the order of the Appellate Division.
Leonard Grunstein and Murray Forman manage and indirectly own plaintiff SVCare Holdings LLC (SVCare), which operates nursing homes through a subsidiary. Rubin Schron, a real
In 2004, Grunstein and Forman sought Schron's participation in the acquisition of Mariner Health Care, Inc., a publicly held company engaged in the nursing home business.
The transaction closed in December 2004 and involved two written agreements relevant to this appeal, both of which were amended in June 2006.
The second pertinent contract related to the Mariner transaction was a loan agreement under which another of Schron's entities — Cammeby's Funding III LLC (Cam III) — agreed to lend $100 million to SVCare for the purpose of capitalizing its subsidiary, Sava. The loan agreement and the option contract were executed on the same date in December 2004 and amended on the same day in June 2006 as part of a refinancing of the Mariner transaction. At some point after the refinancing, the relationship between the parties deteriorated.
In anticipation that Cam Equity would exercise the option, Grunstein, Forman and their related companies (including SVCare) commenced this action in March 2010 under the caption Mich II Holdings LLC v Schron.
Despite the pending litigation, Cam Equity gave written notice to SVCare of its intent to exercise the option in June 2010. When SVCare refused to honor the option, Schron and his affiliated entities (including Cam Equity) brought a separate lawsuit — Schron v Troutman Sanders LLP — seeking specific performance of the option agreement.
Cam Equity later moved in limine in the Schron suit for the exclusion of any parol evidence by SVCare intended to show that the $100 million loan was the "other good and valuable consideration" referenced in the option agreement. In the Mich II action, Cam Equity also filed a motion to dismiss SVCare's fifteenth cause of action that asserted similar claims.
Supreme Court consolidated and granted both motions in favor of Cam Equity, concluding that the option and loan were entirely separate agreements; that the option was supported by
In the meantime, following a 10-day bench trial in the Schron action, Supreme Court issued a decision in September 2012 determining that Cam III had, in fact, fully funded the $100 million loan to SVCare pursuant to the loan agreement (36 Misc.3d 1238[A], 2012 NY Slip Op 51730[U] [2012]). SVCare has taken an appeal to the Appellate Division.
On this appeal, SVCare no longer presses its argument raised below that the option and loan agreement — involving separate subject matters, different parties and without any cross-references — are inextricably intertwined and must be read together. Instead, SVCare maintains that the courts below erred in precluding it from introducing extrinsic evidence regarding the meaning of the phrase "other good and valuable consideration" in the option contract. SVCare asserts that the language is ambiguous and that it should be permitted to adduce parol evidence showing (1) the parties intended the "other consideration" to mean the $100 million loan obligation between Cam III and SVCare and (2) the loan was never funded. Cam Equity responds that the "mutual covenants" set forth in the option agreement suffice for consideration and objects to SVCare's attempt to change the terms of the option by imposing an additional
Option contracts, like any other agreement, are subject to basic contract interpretation principles. Under New York law, written agreements are construed in accordance with the parties' intent and "[t]he best evidence of what parties to a written agreement intend is what they say in their writing" (Greenfield v Philles Records, 98 N.Y.2d 562, 569 [2002] [internal quotation marks and citation omitted]). As such, "a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms" (id.).
Parol evidence — evidence outside the four corners of the document — is admissible only if a court finds an ambiguity in the contract. As a general rule, extrinsic evidence is inadmissible to alter or add a provision to a written agreement. This rule gives "stability to commercial transactions by safeguarding against fraudulent claims, perjury, death of witnesses ... infirmity of memory ... [and] the fear that the jury will improperly evaluate the extrinsic evidence" (W.W.W. Assoc. v Giancontieri, 77 N.Y.2d 157, 162 [1990] [internal quotation marks and citation omitted]). Furthermore, where a contract contains a merger clause, a court is obliged "to require full application of the parol evidence rule in order to bar the introduction of extrinsic evidence to vary or contradict the terms of the writing" (Matter of Primex Intl. Corp. v Wal-Mart Stores, 89 N.Y.2d 594, 599 [1997]).
Applying these precepts, we agree with the courts below that the option agreement unambiguously provided that the mutually beneficial covenants constituted the consideration and that the importation of another obligation, such as the separate loan obligation, would impermissibly alter the writing in violation of the parol evidence rule.
Moreover, had these sophisticated business entities, represented by counsel,
In sum, we conclude that the option is a valid, stand-alone contract and that Cam Equity is free to exercise the option by paying the agreed-upon amount of $100 million.
Accordingly, the order of the Appellate Division, insofar as appealed from, should be affirmed, with costs.
Order, insofar as appealed from, affirmed, with costs.
This provision has been applied to option contracts (see Levey v Saphier, 83 Misc.2d 146, 150 [Sup Ct, Nassau County 1975] [10-year stock option agreement would be enforceable under the statute even if unsupported by consideration]; see also Capalongo v Desch, 81 A.D.2d 689, 690 [3d Dept 1981], affd for reasons stated below 57 N.Y.2d 972 [1982] ["The proper interpretation of this statute is that lack of consideration does not affect revocability, provided the writing contains reference either to a specific period of time, or simply states that it is irrevocable"]).