ASSOCIATED PRESS and STAFF REPORTS
Traverse City Record-Eagle
---- — TRAVERSE CITY — A new law prevents a bank from trying to collect more than $2 million from the former Cherryland Center’s owner who is also the brother of the chairman of the Michigan Republican Party, a state appeals court said in a decision released Wednesday.
David Schostak, of developer Schostak Bros., oversaw the development of the Cherryland Center in Garfield Township, but the poor economy caused store closings and the family-owned development company defaulted on an $8.7 million loan. The default prompted Wells Fargo to repossess the shopping center. The bank then took the unusual move of pursuing David Schostak for $2.1 million to cover the balance of the loan based on his personal guarantee in the loan contract.
Schostak is the brother of Republican leader Bobby Schostak.
The Michigan Legislature, with wide bipartisan support, subsequently approved a bill that ensured developers would not bear personal liability in commercial loans under certain conditions.
Wells Fargo had argued that the law illegally interfered with a valid contract and was the product of political interference from the Republican-controlled Legislature. The appeals court acknowledged that David Schostak would benefit but said lawmakers seemed motivated “to avert a broader economic problem” that could also affect other developers.
“We have found no evidence that the (law) was intended solely for his benefit,” the court said in a 3-0 opinion.
Lawrence McLaughlin, a longtime Schostak Bros. attorney who helped write the law, said it has a “very broad impact” and wasn’t specifically intended to benefit Schostak.