## Facts

- A landlord and a corporate tenant executed a written commercial lease, and an individual signed a separate written personal guaranty of the tenant’s obligations.
- The defendants admitted executing both the lease and the guaranty.
- The landlord sued to recover unpaid rent under the lease and to enforce the guaranty.
- The defendants asserted the lease and guaranty were not intended to be enforceable and were created as a sham to induce the landlord’s construction lender to advance additional funds.
- The individual guarantor was also one of the landlord corporation’s three directors, supporting defendants’ claim the transaction was not at arm’s length.
- The landlord moved for summary judgment based on the written instruments; the trial court denied the motion, and the landlord appealed.

## Issues

1. Whether parol evidence is admissible to prove that an executed, integrated lease and guaranty were never intended to be binding and therefore constituted no contract.
2. Whether defendants’ sham-transaction evidence raised triable issues of fact and credibility that precluded summary judgment for rent and on the guaranty.

## Decision

- The Appellate Division affirmed the order denying the landlord’s motion for summary judgment.
- The court held that parol evidence may be admitted to show that a writing that appears to be a contract is, in fact, no contract at all.
- The court concluded that the defendants’ evidence of a collusive, lender-deception purpose and the parties’ relationship created credibility and fact disputes for trial, not resolution on summary judgment.

## Legal Principles

- The parol evidence rule generally bars extrinsic evidence that contradicts, varies, adds to, or subtracts from the terms of an integrated written agreement.
- The rule presupposes a valid contract; it does not bar proof offered to show the parties never formed a binding agreement.
- Parol evidence is admissible to show that a writing purporting to be a contract was a sham and therefore no contract.
- When admissible extrinsic evidence creates genuine disputes as to intent to be bound, summary judgment is inappropriate because credibility determinations are for the factfinder.

## Conclusion

The court allowed defendants to rely on parol evidence to argue that the signed lease and guaranty were a nonbinding sham, and it affirmed denial of summary judgment because the alleged lack of intent to contract presented triable issues of fact and credibility.


Val-Ford Realty Corp. v. J.Z.’s Toy World, Inc., 231 A.D.2d 434, 647 N.Y.S.2d 488 (N.Y. App. Div. 1st Dep’t 1996)