Wells Fargo Bank v. Cherryland Mall Ltd. Partnership
300 Mich. App. 361
| Mich. Ct. App. | 2013Background
- Remand from Supreme Court to reconsider prior Wells Fargo decision in light of NMLA 2012 PA 67 (MCL 445.1591 et seq.).
- CMBS loan secured by Cherryland Mall Limited Partnership; Schostak signed guaranty.
- Nonrecourse loan structure with separateness covenants and carveouts; post-closing solvency covenants implicated.
- Foreclosure by advertisement occurred; lender bid $6 million, leaving $2.1 million deficiency; guarantor potentially liable.
- Original opinion held insolvency violated single-purpose-entity status, triggering full recourse; NMLA nullifies such post-closing solvency covenants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Contract Clause impairment by NMLA | Schostak waived rights; NMLA invalidates guaranty | NMLA valid, constitutional defenses preserved | Contract Clause challenges rejected; NMLA constitutional. |
| Guaranty validity under NMLA | Guaranty remains enforceable despite NMLA | NMLA renders post-closing solvency covenants invalid against guarantors | Guaranty provisions invalid and unenforceable under NMLA. |
| Substantive due process | Legislation lacks legitimate public purpose; arbitrary | Legislation rationally addresses broad economic problem | No substantive due process violation; rational basis supported. |
| Separation of powers | Legislation improperly interferes with judicial interpretation | Legislation clarifies law; does not dictate outcome of case | No separation-of-powers violation; retroactive effect permissible. |
| Remedies and attorney fees allocation | Stipulation fixed costs; count IV misallocated | Stipulation ambiguous; applicable to entire action | Remanded to determine costs/fees for count IV. |
Key Cases Cited
- Wells Fargo Bank, NA v Cherryland Mall Ltd Partnership, 295 Mich App 99; 812 NW2d 799 (2011) (2011) (prior decision on single-purpose entity and recourse)
- Energy Reserves Group, Inc v Kansas Power & Light Co, 459 U.S. 400 (1983) (Contract Clause substantial impairment framework)
- Keystone Bituminous Coal Ass’n v DeBenedictis, 480 U.S. 470 (1987) (three-step Contract Clause inquiry; public purpose standard)
- Detroit Mayor v Arms Technology, Inc, 258 Mich App 48; 669 NW2d 845 (2003) (2003) (administrative retroactivity and separation-of-powers discussion)
- Blue Cross & Blue Shield of Mich v Governor, 422 Mich 1; 367 NW2d 1 (1985) (1985) (contract impairment and public-policy considerations)