OPINION OF THE COURT
The issue here is whether warrants to purchase shares of stock of defendant corporation must be adjusted in light of a reverse stock split authorized by defendant corporation after plaintiffs received warrants. We answer that question in the negative.
Shortly after September 30, 1993, in partial repayment of a loan, defendant authorized the issuance of warrants enabling plaintiff Rebot Corporation to purchase up to 1,198,904 shares of defendant's common stock for 10 cents per share until September 30, 1998. Defendant also issued warrants to plaintiff Marvin Reiss, in recognition of his services to defendant as a director of the corporation, entitling him to purchase 500,000 shares of common stock at 10 cents per share until August 31, 1998. Although a warrant issued earlier, on September 1, 1993, to Robert S. Trump was accompanied by a warrant agreement providing for a reverse stock split, no other agreement accompanied the authorization of the plaintiffs' warrants. Thus, the warrants given to Rebot and Reiss, unlike the warrants given to Trump, did not incorporate the warrant agreement provisions requiring adjustment in the event of a reverse stock split.
In 1996, defendant's shareholders approved a one-for-five reverse split of its common stock, and, as a consequence, each
Supreme Court denied injunctive relief and dismissed the action. A divided Appellate Division modified by declaring judgment in defendant's favor. Relying on Cofman v Acton Corp. (958 F.2d 494 [1st Cir 1992]), the Appellate Division held that an essential term of the contract was missing and, according to its determination of the intent of the parties, supplied a term providing for adjustment of the number of shares stated in the warrants. The Appellate Division also found that plaintiffs' claim for reformation of the expiration date to dates in late 2000 was without merit. We now modify to reinstate the first cause of action for declaratory relief.
Duly executed stock warrants are contracts entitling the holder to purchase a specified number of shares of stock for a specific price during a designated time period. Here, the warrants are enforceable according to their terms. They have all the material provisions necessary to make them enforceable contracts, including number of shares, price, and expiration date, and were drafted by sophisticated and counseled business persons. As this Court stated in W.W.W. Assocs. v Giancontieri, "when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms" (77 N.Y.2d 157, 162 ; see also, Breed v Insurance Co., 46 N.Y.2d 351, 355 ).
Haines v City of New York (41 N.Y.2d 769 ) is instructive. Haines involved an agreement between the City, the Town of Hunter and the Village of Tannersville under which the City assumed "all costs of construction and subsequent operation, maintenance and repair" of a sewage system and agreed to extend the sewer lines to accommodate the growth of the respective communities (id., at 770). From time to time, the City fulfilled its obligations under the contract. Fifty years after the contract agreement, the system reached
The agreement was silent as to the City's obligations in the event that the municipalities' usage exceeded the capacity of the plant which the City agreed to build. The municipalities, which had intervened in the plaintiff's action against the City, requested that the Court imply a term to the agreement to address this uncovered contingency by requiring the City to expand the sewage plant or construct new facilities to accommodate the new property development. The Court, however, declined to imply such a term where the contingency was clearly foreseeable by the municipalities, holding that "the contract does not obligate the [C]ity to provide sewage disposal services for properties in areas of the municipalities not presently served or even to new properties in areas which are presently served where to do so could reasonably be expected to significantly increase the demand on present plant facilities" (id., at 773). At the very least, Haines stands for the proposition that this Court will not imply a term where the circumstances surrounding the formation of the contract indicate that the parties, when the contract was made, must have foreseen the contingency at issue and the agreement can be enforced according to its terms (see also, Rowe v Great Atl. & Pac. Tea Co., 46 N.Y.2d 62, 72 ).
That the warrants do not address the contingency of a reverse stock split does not, of itself, create an ambiguity. "An omission or mistake in a contract does not constitute an ambiguity [and] * * * the question of whether an ambiguity exists must be ascertained from the face of an agreement without regard to extrinsic evidence" (Schmidt v Magnetic Head Corp., 97 A.D.2d 151, 157 ). "[E]xtrinsic and parol evidence is not admissible to create an ambiguity in a written agreement which is complete and clear and unambiguous on its face" (W.W.W. Assocs., supra, at 163, quoting Intercontinental Planning v Daystrom, Inc., 24 N.Y.2d 372, 379 ). Even where a contingency has been omitted, we will not necessarily imply a term since "`courts may not by construction add or excise terms, nor distort the meaning of those used and thereby "make a new contract for the parties under the guise of interpreting the writing"'" (Schmidt, supra, 97 AD2d, at 157, quoting Morlee Sales Corp. v Manufacturers Trust Co., 9 N.Y.2d 16, 19, ).
Further, Cofman v Acton Corp. (supra), the decision relied upon by the Appellate Division majority, is inapposite here. In Cofman, as part of a settlement agreement, a corporation allowed 12 partnerships (Partnerships) to make a one-time demand on the corporation for payment of a sum equal to the price of a share of common stock minus $7 multiplied by 7,500. This provision was a "sweetener," added to the settlement of $120,000, in case the price of a share of stock increased. Later, the corporation executed a reverse stock split, decreasing the number of shares and increasing the price of a share of common stock by a multiple of five. Partnerships sued the corporation for enforcement of the agreement, seeking to use the price of the stock after the reverse split to calculate the settlement. Partnerships argued that the plain language required that the warrants be valued as of the time of their exercise and the defendant corporation assumed the risk of a reverse stock split by not negotiating a different provision. The corporation also relied on the plain language of the warrants, contending that it was entitled to the value of the stock existing when the agreement was signed. The Massachusetts District Court found for the corporation.
Applying Massachusetts law, the First Circuit affirmed the District Court, concluding that Partnerships would not have agreed to a forward stock split because it could have eviscerated the value of the stock. The First Circuit held that the parties had not given any thought to dilution and that an essential term of the contract was missing. Just as Partnerships should not suffer by dilution of the value of the stock, so Acton should not suffer by reverse dilution.
It may be that Reiss would be entitled to a remedy if Financial performed a forward stock split, on the theory that he "did not intend to acquire nothing" (Cofman, supra, 958 F2d, at 497). We should not assume that one party intended to be placed at the mercy of the other (Wood v Duff-Gordon, 222 N.Y. 88, 91 ). It does not follow, however, that Financial should be given a comparable remedy to save it from the consequences of its own agreements and its own decision to perform a reverse stock split.
There remains a remedial problem, which we cannot ignore, although it is not well framed for our review. Plaintiffs' complaint contained two causes of action. The first sought a declaration that they were entitled to exercise the warrants in accordance with their terms, while the second sought to reform the expiration date of the warrants to a date in late 2000— allegedly five years after the warrants were delivered to plaintiffs. Plaintiffs also sought, by order to show cause, an order staying cancellation of the warrants on their stated expiration dates. Supreme Court refused to sign this order and ultimately dismissed both causes of action of the complaint, and the Appellate Division affirmed the dismissal.
Before this Court, plaintiffs have not advocated reinstating the reformation cause of action, which, if granted now, would leave them with nothing more than expired warrants. Rather, they have argued that their attempt to exercise the warrants, together with their motion for an order to show cause, preserved their right to exercise all of the warrants upon the successful conclusion of the litigation. At oral argument plaintiffs suggested, further, that this Court might direct
We cannot direct Supreme Court to grant plaintiffs summary judgment, as they did not seek it (see, Merritt Hill Vineyards v Windy Hgts. Vineyard, 61 N.Y.2d 106, 110-111 ) and may not be entitled to it. If Supreme Court determines that plaintiffs are entitled to the declaration they seek on the reinstated cause of action, the Court should also resolve the remaining remedial issues, including the effect of plaintiffs' tender.
Accordingly, the order of the Appellate Division should be modified, with costs to plaintiffs, by remitting the case to Supreme Court for further proceedings in accordance with this opinion and, as so modified, affirmed. The certified question should be answered in the negative.
Order modified, etc.