New York Court of Appeals: Schron v. Troutman Saunders, LLP
The matter before the Court was the result of a number of consolidated cases, but the parties immediately on appeal were SVCare Holdings, LLC and Cammeby’s Equity Holdings, LLC (“Cam Equity”). The issue centered on two written agreements entered into as part of a plan by Schron, a real estate investor who controlled Cam Equity, Grunstein (Schron’s attorney), Forman (Schron’s investment banker), and managers and owners of SVCare. As part of a plan to acquire a publicly-held nursing home company, the parties drafted two agreements. The first gave Cam Equity an option to acquire 99.99% of SVCare. The second provided that another of Schron’s entities (“Cam III”) would lend SVCare $100 million for capitalization of its subsidiary. The agreements were later amended while refinancing the nursing home company transaction.
After a period of litigation, the only claim now relevant before the Court was whether Cam Equity’s option was enforceable, where SVCare argued that it was contingent upon the $100 million loan. SVCare also claimed that the $100 million loan was never paid and sought to introduce parol evidence to prove both of its claims. Related to the previous litigation, Schron and Cam Equity sought specific performance of the option agreement. In that litigation, Cam Equity moved to exclude the parol evidence by SVCare that might be offered to prove that the “other good and valuable consideration” (from the option agreement) was intended to reference the $100 million loan agreement. Schron v. Troutman Saunders, LLC, 20 N.Y.3d 430, 433 (2013).
Upon SVCare’s motion to introduce parol evidence, Cam Equity argued that the other “mutual covenants” referenced by the option agreement were sufficient consideration for the option and objected to the attempt to insert the $100 million loan as part of the original agreement. The Court held that Cam Equity’s interpretation of the option agreement comported with the precedential understanding of contract law for several reasons: (1) a writing that is clear, unambiguous and complete on its face must be enforced; (2) the simple inclusion of “other good and valuable consideration” did not create any ambiguity in the agreement; and (3) the business entities here were sophisticated enough to have included language relating to the $100 million loan had they intended it to be part of their agreement. Schron, 20 N.Y.3d at 433. The Court affirmed the appellate division and held that Cam Equity was free to exercise its option.
20 N.Y.3d 430 (2013)