Ohio and Michigan are the only states to address this subject legislatively. In the absence of legislative direction, the courts applying the laws of other jurisdictions must determine to what extent they view the decision in Cherryland as effective guidance. Given how closely the enactment of the NMLA and Legacy Trust Act followed the Cherryland decision, not many courts have given consideration to the effect of the decision. In 2012, a Georgia court was asked to interpret an SPE covenant which also required the Borrower to “be solvent and pay its liabilities from its assets…as the same shall become due.” and to “maintain adequate capital for the normal obligations reasonably foreseeable in a business with its size and character.”15 The Georgia court, citing Cherryland favorably, enforced the full liability provisions of the loan documents and did not read any meaning into the phrases “from its assets” or “obligations reasonably foreseeable”. To date, the Guarantor in Mitchell’s Park has not been similarly rescued by the Georgia legislature. Conclusion Given the prevalence of reliance on New York law in loan documents, the view of the New York courts on Cherryland will be particularly telling. In Rincon, the Federal District court applying New York law did not rely upon, or even cite, Cherryland in its decision. The Rincon court relied heavily upon the particular facts of that case so it is difficult to draw any broad conclusions from that decision. The decision is also so recent that it is still subject to appeal and bears further monitoring. The fact driven nature of the Rincon decision underscores the need for careful review, negotiation and drafting in the loan documents to accurately and precisely manifest the parties’ intent. However, Rincon does suggest, as the Michigan and Ohio legislatures before it, that the New York court too is distancing itself from the Cherryland line of analysis. This result should temper enthusiasm and anxiety among those who believed that Cherryland would lead to sweeping changes in the interpretation and enforcement of non-recourse guarantees in New York. CRE Finance World Winter 2015 28 1 Michael Pollack is Of Counsel in Ballard Spahr’s New York office at 425 Park Avenue, New York , New York 10022 (tel. 212-223-0200; email: pollackmv@ballardspahr.com) 2 Andrew E. Walsh is Of Counsel in Ballard Spahr’s Washington , D.C. office at 1909 K Street, NW, Washington, D.C. 20006 (tel. 202-661- 2200; email: walsha@ballardspahr.com) 3 10 Civ. 4638 DAB, 2014 WL 1357323 (S.D.N.Y., April 7, 2014) 4 In Gramercy Advisors, LLC v. Ripley, 13 Civ. 9070 VEC, 2014 WL 4188099 (S.D.N.Y, Aug. 25, 2014), the court recited the language from Rincon for the principle that in attempting to determine whether or not an ambiguity exists between competing contractual provisions, the courts ‘need not determine which is the more likely interpretation,’ but instead ‘merely decide whether each is sufficiently reasonable to render the clause ambiguous.’ Gramercy, at p. 9, quoting Rincon at p. 10 5 295 Mich.App. 99, 812 N.W.2d 799 (Mich.Ct.App., 2011) 6 295 Mich. App. at 125 7 Rincon at p. 8 8 Rincon at p. 11 9 Rincon at p. 13 10 Rincon at p. 15 11 Rincon at p. 11 12 M.C.L.A. § 445.1593. 13 Wells Fargo Bank, N.A. v. Cherryland Mall (on Remand), 300 Mich.App. 361, 835 N.W.2d 593 (Mich.Ct.App., 2012) 14 Ohio Revised Code § 1319.07-09 15 See Wells Fargo Bank, N.A. v. Mitchell’s Park, LLC, 1:10 Civ. 3820 TWT, 2012 WL 4899888 (N.D. Ga., Oct. 11, 2012). Is Cherryland Still Relevant? “Rincon should temper enthusiasm and anxiety among those who believed that Cherryland would lead to sweeping changes in the interpretation and enforcement of non-recourse guarantees in New York.”
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