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Pursuant to FED. R. CIV. P. 9(b) and 12(b)(6), Counter-Defendant, Cascade Capital Group,
LLC, moves to dismiss the Counter-Plaintiffs’ claims for failure to plead fraud with particularity and
therefore failure to state a claim upon which relief may be granted and in support thereof would show
1.
LEGAL AUTHORITY
A claim that a fraud allegation is insufficiently particular under Rule 9(b) is properly raised
by a Rule 12(b)(6) motion for dismissal for failure to state a claim. United States ex rel. Grubbs v.
Kanneganti, 565 F.3d 180, 186 n. 8 (5th Cir. 2009). In this case, Counter-Plaintiffs purport to allege
a cause of action based upon allegations of fraud. Rule 9(b) applies and requires that the predicate
acts be pled with particularity. See Williams v. WMX Technologies, Inc., 112 F.3d 175, 177 (5th Cir.
1997). Rule 9(b) requires that “[i]n all averments of fraud or mistake, the circumstances constituting
Case 3:17-cv-00952-LG-FKB Document 18 Filed 01/29/18 Page 2 of 7
fraud or mistake shall be stated with particularity.” FED. R. CIV. P. 9(b). Rule 12(b)(6) provides
that a claim may be dismissed for failure to state a claim upon which relief can be granted. FED. R.
CIV. P. 12(b)(6). Certain types of claims must meet a heightened pleading standard to avoid
dismissal under Rule 12(b)(6). FED. R. CIV. P. 9. Rule 9(b) elevates the federal rules’ liberal
pleading standards to require plaintiffs to plead the circumstances constituting fraud claims with
2.
The Fifth Circuit requires claimants alleging fraud to “specify the statements contended to
be fraudulent, identify the speaker, state when and where the statements were made, and explain why
the statements were fraudulent.” Dorsey, 540 F.3d at 339. In other words, Rule 9(b) requires the
Plaintiff to allege with specificity the “time, place, and contents of the false representations, as well
as the identity of the person making the representation and what the person obtained thereby.”
Williams, 112 F.3d at 177, (quoting Tuchman v. OSC Communications Corp., 14 F.3d 1061, 1068
(5th Cir. 1994)). The Fifth Circuit refers to this Rule 9(b) standard as the “who, what, when, where,
and how” requirement, and this requirement must be met “before access to the discovery process is
granted.” Id. at 178–79. “At a minimum, Rule 9(b) requires allegations of the particulars of time,
place, and contents of the false representations, as well as the identity of the person making the
misrepresentation and what he obtained thereby.” Benchmark Elec., Inc. v. J.M. Huber Corp., 343
F.3d 719, 724 (5th Cir. 2003) (quoting Tel-Phonic Servs., Inc. v. TBS Int’l, Inc., 975 F.2d 1134, 1139
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3.
APPLICATION OF LAW
Livingston Holdings, LLC and Chestnut Developers, LLC have filed a Counter-Claim
alleging fraud. [Doc. #16]. Likewise, Michael L. Sharpe has filed a Counter-Claim alleging fraud.
[Doc. # 15]. Since the claims pertaining to fraud and fraudulent inducement are identical in both
pleadings, Cascade addresses the deficiency of both pleadings herein. Cascade submits that all
Counter-Plaintiffs have alleged the exact same allegations with regard to fraud and all have failed
to plead their allegations of fraud with the requisite particularity, as discussed below.
4.
FRAUD AS A DEFENSE
The Answer of Livingston Holdings, LLC (“Livingston”) and Chestnut Developers, LLC
(“Chestnut”) contends that the Promissory Note and the Forbearance Agreement relied on by
Cascade were procured by fraudulent misrepresentation and fraud in the inducement. [Doc. #16 at
¶¶8-9]. Likewise, the Answer of Michael L. Sharpe contends that the Promissory Note and the
fraud in the inducement. [Doc. #15 at ¶¶8-9]. Even as a defense, the Defendants have failed to plead
5.
FRAUD AS A COUNTERCLAIM
In pursuit of the fraud claim in their counterclaim, listed as Count II, Livingston and
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41. The actions of Cascade constitute fraud. They are a “breach of duty, trust
or confidence [which] include all acts, omissions or concealments by which another
is injured, or an undue or unconscientious advantage is taken.” Cumbest v. State, 456
So. 2d 209, 217 (Miss. 1984).
43. At all times, Cascade’s dealings with Livingston and Chestnut were with
knowledge of the financial commitment and obligation of Livingston and Chestnut
to the Livingston project and they are entitled to damages against Cascade. Sharpe
was an intended beneficiary of any such contracts.
44. In equity, the conflict of interest, self- dealing, duress and coercion of
Cascade is so egregious that the court should exercise its equitable power to void any
contract, understanding or agreement entered into between Sharpe, Livingston,
Chestnut and Cascade and award those parties full recovery of any and all monies
paid to Cascade by those parties as additional damages.
6.
proper notice of the “who, what, when, where and how” of their predicate allegations of fraud.
Furthermore, Counter-Plaintiffs have failed to plead any facts showing they relied on any purportedly
7.
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8.
proper notice of the “who, what, when, where and how” of their predicate allegations of fraudulent
inducement. The fraud claim must “identify specific statements” made by the party who allegedly
made the representations. Williams, 112 F.3d at 179. “To avoid a dismissal for failure to state a
claim, ‘a plaintiff must plead specific facts not mere conclusory allegations.’” Dorsey, 540 F.3d at
338 (quoting Tuchman, 14 F.3d at 1067). Simple allegations that counter-defendants possessed
fraudulent intent will not satisfy Rule 9(b). The claimant must still allege specific facts that support
an inference of fraud. Tuchman, 14 F.3d at 1068 (5th Cir. 1994) (citing cases). The claimant may
sufficiently allege intent by pointing out circumstances or facts that reasonably indicate intent or
motive to commit fraud. Id. When a corporation is alleged to have made false representations, the
court must look to the “state of mind of the individual corporate official or officials who make or
issue the statement[.]” Southland Sec. Corp., 365 F.3d at 366. It follows that “[a] corporation can
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be held to have a particular state of mind only when that state of mind is possessed by a single
individual.” Id. at 367 (quoting First Equity Corp. v. Standard & Poor’s Corp., 690 F.Supp. 256, 260
9.
RELIEF SOUGHT
Because Counter-Plaintiffs did not plead fraud with particularity as required by Rule 9(b),
Counter-Defendant requests the Court to dismiss Counter-Plaintiffs’ fraud claim pursuant to Rule
9(b). Moreover, because a motion to dismiss under Rule 9(b) is in essence a motion to dismiss under
Rule 12(b)(6), see U.S. v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 901 (5th Cir. 1997),
Rule 12(b)(6).
WHEREFORE, Counter-Defendant, Cascade Capital Group, LLC, respectfully prays that this
Court grant Counter-Defendant’s Motion to Dismiss, and dismiss this COUNT II of the
Counterclaim in its entirety, with prejudice. Counter-Defendant requests all other and further relief,
Respectfully submitted,
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CERTIFICATE OF SERVICE
I, Patrick F. McAllister, do hereby certify that I have this day electronically filed the above
and foregoing Pleading with the Clerk of this Court using the ECF filing system, which sent
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ANSWER
COMES NOW Defendant, David Landrum, by and through counsel, and files this his
Answer and Defenses to the Amended Complaint lodged against him by Plaintiff, Cascade
Capital Group, LLC, and would show unto the Court the following, to-wit:
I. ANSWER
Parties
Complaint.
Complaint.
Complaint.
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Complaint.
Complaint.
Complaint.
Complaint.
Factual Allegations
Complaint.
Complaint.
Complaint.
Complaint.
Complaint.
Complaint.
2
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Complaint.
Complaint.
Defendant, David Landrum now files this his Answer to the Amended Complaint.
DAVID LANDRUM
OF COUNSEL:
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CERTIFICATE OF SERVICE
I hereby certify that on this day I electronically filed the foregoing pleading or other such
paper with the Clerk of the Court using the ECF system which sent notification of such filing to
the following:
Patrick F. McAllister
pmcallister@wmjlaw.com
John G. Corlew
jcorlew@cmslawyers.com
Steven H. Smith
ssmith@shsattorneys.com
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Livingston and Chestnut demand Trial by Jury on all Claims in the Amended
Complaint; in the Counterclaim; and in the Third Party Complaint
COMES NOW the Defendants Livingston Holdings, LLC (“Livingston”) and Chestnut
Developers, LLC (“Chestnut”) and file this their Answer to the Amended Complaint of Cascade
Capital Group, LLC (“Cascade”) and file their Counter-Claim against Cascade; and file their
Third-Party Complaint against Mark Calvert (“Calvert”) and would show unto the Court as
follows:
FIRST ANSWER
SECOND ANSWER
The Amended Complaint fails to state a cause of action upon which relief may be granted.
THIRD DEFENSE
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company organized under the laws of the state of Delaware. Livingston and Chestnut lack
knowledge or information sufficient to form a belief about where Cascade is domiciled or has its
organized under the laws of the state of Mississippi and that its sole members are Jill B. Landrum
and B&S MS Holdings, LLC (“B&S”), a limited liability company organized under the laws of
the state of Mississippi whose sole members are Michael C. Bollenbacher and Marna Sharpe.
Livingston and Chestnut would deny the remaining allegations contained in paragraph 2 of
limited liability company organized under the laws of the state of Mississippi. Chestnut denies that
its sole members are David Landrum and Sharpe. Chestnut would deny the remaining allegations
4. Livingston and Chestnut admit that David Landrum is an adult resident citizen of
Madison County, Mississippi but lacks knowledge or information sufficient to form a belief about
the truth of the remaining allegations in paragraph 4, and therefore deny same.
6. Livingston and Chestnut admit that the amount in controversy exceeds $75,000.00.
Livingston and Chestnut lack sufficient information to form a belief about the truth of the
7. Livingston and Chestnut admit that a substantial portion of the activity that is
subject to this action occurred in the Jackson Division of the Southern District of Mississippi.
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Livingston and Chestnut lack knowledge or information sufficient to form a belief about the truth
8. Livingston and Chestnut admit that two documents are attached to the Amended
Complaint as Exhibits “A” which are titled “Promissory Note.” Since the provisions of these
documents speak for themselves, Livingston and Chestnut deny all characterization of the
documents set forth in paragraph 8. The Promissory Note(s) were illegally procured and are void.
Chestnut is not a party to either of the Promissory Notes, did not execute either of the Promissory
notes and the notes are unenforceable as to Chestnut. Neither of the Promissory Notes attached to
Cascade’s Amended Complaint as Exhibit “A” thereto, are binding or enforceable against
Livingston. Livingston did not execute either Promissory Note. No person authorized to act behalf
of Livingston executed either of the Promissory Notes which constitute Exhibit “A” to Cascade’s
Amended Complaint. The notes were procured by fraudulent misrepresentation, fraud in the
inducement, duress through the self-dealing and egregious conflict of interest on the part of
Cascade and Calvert, and in breach of the fiduciary duty of Cascade and Calvert to Livingston and
in violation of duties of good faith and fair dealing which Cascade and Calvert owed to Livingston.
On their face the Note(s) reflect several alleged sources of indebtedness. The Notes reflect
that Cascade parlayed its purchase of a Note owed by Livingston to BankPlus in the amount of
$421,957.94 into a $951,147.00 “total loan amount.” There are allegations of a 2% loan fee with
for cash advances to Livingston by an unidentified source and to Livingston by CCG Fund II which
has not been made a party to this action, but is a necessary party to this action. An allegation of
professional fees rendered in the amount of $171,488.00 and that additional professional fees
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“shall be added to the amount due hereunder on a monthly basis” also appear on the face of the
notes. The Note(s) are alleged to include “collateral” in paragraph 6, but there is no Exhibit “A,”
as alleged to identify what that collateral may be. Nor is there any procedure available under
Mississippi law whereby a “notice of lien” may be filed in order to secure consulting fees. If
Cascade in fact filed such a notice of lien it created an illegal cloud on the title to the property and
its owner is entitled to damages for defamation of title, costs and attorney fees.
attached as Exhibit “B” to the Amended Complaint. Since the provisions of that document speak
for themselves, Livingston and Chestnut deny each and every characterization of that document
by Cascade and any inference which may be drawn because only select portions of the Agreement
are quoted or referred to in the Amended Complaint. The Forbearance Agreement was also
illegally procured and is void. Since the alleged obligations in paragraph 8 are void, there is/was
no consideration for the Forbearance Agreement. The Agreement was procured by fraudulent
misrepresentation, fraud in the inducement, duress through the self-dealing and egregious conflict
of interest on the part of Cascade and Calvert and in breach of the fiduciary duty of Cascade and
Calvert to Livingston and Chestnut and in violation of the duty of good faith and fair dealing which
Cascade and Calvert owed to Livingston and Chestnut. The Agreement attached to Cascade’s
Amended Complaint as Exhibit “B” is not binding or enforceable against Livingston or Chestnut.
Livingston and Chestnut did not execute the Agreement because no person and/or entity authorized
takes advantage of parties in an inferior bargaining position. Every provision of the Agreement as
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a matter of law must be construed against Cascade and Calvert. The Agreement is fraught with
ambiguity and misrepresentations. The Agreement refers to Cascade as “Lender” but the
Promissory Note(s) referenced in the recitals, as set forth in paragraph 8 above, alleges funds from
a variety of different sources. The Agreement identifies “THE MEMBERS” as “Borrowers” but
never identifies any Members to which it refers. Nor were Livingston, Sharpe, or Landrum ever
“Borrowers.” The recitals of the Agreement (paragraph C) allege that “Lender” purchased the
BankPlus Note “for the benefit of the Chestnut, Livingston, Sharpe, and Landrum.” Cascade in
fact purchased the BankPlus Note to enable it to exercise duress over those parties to illegally,
inequitably and outrageously inflate the purchase price of the $424,329.55 balance of the BankPlus
Note, into at fraudulent obligation to Cascade in the alleged amount of $978,287.17. The alleged
details of how that occurred were purportedly included on an Exhibit “B” (see paragraph I of
Agreement) which is not attached to the Agreement. The so-called Forbearance Agreement refers
to defined terms such as Loan Agreement, Loan Document, and Related Documents. There is no
such Loan Agreement, no such Loan Documents and no such Related Documents. The
of obligations and duties, none of which are for Cascade to perform. The Forbearance Agreement
includes a waiver of jury provision (subparagraph 11(h)). The provision is void because the
there is no waiver of jury with respect to claims against Calvert. Livingston and Chestnut will
10. Livingston and Chestnut admit that Exhibit “C” is a First Amendment to
Forbearance Agreement (“First Amendment”). Since that Agreement speaks for itself, Livingston
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and Chestnut deny any and all characterizations of that document by Cascade and any inference
which might be drawn from its selection of particular provisions without reference to others.
Livingston and Chestnut also incorporate their responses to paragraphs 8 and 9 of Cascade’s
11. Livingston and Chestnut deny default of any type and in any amount. Livingston
and Chestnut deny and refute the legality of an assignment of Tax Increment Financing Bonds and
the eligibility of Cascade to benefit from same. Livingston and Chestnut would deny any and all
remaining allegations set forth and contained in paragraph 11 of Cascade’s Amended Complaint.
12. Livingston and Chestnut deny the allegations of paragraph 12. Cascade is not
entitled to seek any equitable relief, such as appointment of a receiver, because Cascade does not
come into Court with clean hands. Cascade is also not entitled to seek any relief against Livingston
and Chestnut because the Note(s) and Agreement are void and/or unenforceable against them for
the reasons set forth hereinabove and to be shown upon a hearing hereon.
13. Livingston and Chestnut deny any indebtedness to Cascade and allege that no party
in good conscious and equity should be allowed by blatant conflict of interest, self-dealing, duress,
and/or breach of fiduciary relationship, to parlay the purchase of a bank note and deed of trust for
$421,957.00 (as stated in the Amended Complaint), in the short time frame alleged by Cascade.
16. Livingston and Chestnut deny that Cascade is entitled to any of the relief which it
alleges in paragraphs A, B, and C, contained on page 6 of its Amended Complaint and which
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COUNTER-CLAIM
And now, having fully answered the allegations of the Amended Complaint, Livingston
and Chestnut would file this, their Counter-Claim against Cascade and show unto the Court as
follows:
17. Cascade and Calvert are alter egos of one another and the Court should pierce the
corporate veil between them. There has been a frustration of expectations regarding the party to
whom Livingston and Chestnut looked for performance; there has been a disregard of corporate
formalities and improper use of the corporate form to avoid legal responsibility; and as set forth
herein both Cascade and Calvert have demonstrated fraud and misfeasance in the manner in which
they have conducted business with Livingston and Chestnut and it would subvert the ends of justice
if the corporate veil is not pierced. Any action of Calvert binds Cascade and any action of Cascade
18. Calvert and Cascade promote themselves as experts and consultants in the
accordance with the rules and regulations of the Association of Certified Turnaround Professionals
(ACTP). As a CTP, Calvert holds himself out to be an expert in helping financially and
organizationally troubled businesses become financially healthy and prosperous and to grow their
business. As a member of the ACTP, Calvert is bound by a code of professional responsibility that
creates a fiduciary duty between an ACTP member and the ACTP member's clients. Likewise, at
common law, a professional who commits to provide services to a member of the public in
exchange for compensation, has a fiduciary duty to the parties whom he purports to represent.
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Calvert represents that he is the sole member of Cascade and its Managing Director. Cascade has
Mississippi set out to re-develop the old Town of Livingston in Madison County, Mississippi
located at the intersection of Highway 22 and Highway 463 (the "Livingston Project"). Plans were
drawn for a multi-use community. Property was acquired by Chestnut, and BankPlus, a Mississippi
banking corporation, provided funding for a portion of the Livingston Project (the "BankPlus
Loan"). Chestnut provided to BankPlus a promissory note in the principal amount of Four Hundred
Twenty-One Thousand Dollars ($421,000.00) (the "BankPlus Note") and a Deed of Trust, dated
December 15, 2011, granted by Chestnut to BankPlus as lender and beneficiary (the "BankPlus
Deed of Trust"). The BankPlus Deed of Trust has heretofore been recorded among the land records
in the office of Chancery Clerk of Madison County, Mississippi in Book 2753 at Page 270.
21. Development and property sales commenced, but difficult economic times caused
the Livingston Project to move very slowly. Sensing the development being stagnant and
financially distressed, Landrum and Livingston explored options to move the development forward
who represented that they were Certified Turnaround Professionals and could assist in
straightening out their business issues, dealing with financing troubles, locating new lenders and
equity, and moving the Livingston Project forward. Cascade and Calvert specifically represented
to Chestnut /Livingston that they had contacts within the financial industry and could secure a
lender on favorable terms to replace BankPlus and other debt encumbering the Livingston Project
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and could locate additional equity for the Livingston Project. No written engagement contract is
available for attachment to this Counterclaim but based on the first Cascade/Calvert billing it is
believed that this engagement commenced by at least July 2012. From July 2012 through April
2017 (the "Consultant Period"), Calvert made numerous trips from Seattle, Washington to
Mississippi to meet with and provide consulting services to Chestnut and Livingston for which
Calvert/Cascade charged Livingston a fee based on hourly rates between $225.00 and $450.00 per
hour. During the Consultant Period Calvert/Cascade invoiced Livingston fees and expenses in
23. Landrum and Sharpe have known each other and have been friends for many years
prior to the Livingston Project. Because of this longstanding friendship, Sharpe agreed to provide
financial assistance to Landrum for the Livingston Project through loans and capital contributions
and he agreed to guarantee the BankPlus Loan. Based on the representation and advice of Calvert
and Cascade with respect to the Livingston Project, Sharpe continued to invest substantial sums
24. Sharpe is not a real estate development professional, and thus he relied heavily on
Cascade and Calvert's represented expertise in moving forward with the Livingston Project and
with respect to the financial obligations incurred after Cascade and Calvert were engaged as
consultants.
25. Beginning in 2014, Calvert and Cascade took on the dual roles of both CTP
fiduciary advisor and lender. On or about December 31, 2014, Calvert and Cascade coerced
Landrum and Sharpe to enter into a promissory note payable to Cascade by Livingston, and
Landrum and Sharpe individually, for $60,000 of monetary advances and $95,144.11 of what
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Cascade/Calvert represented were fees for past due CTP services. Calvert/Cascade also coerced
Livingston, and Landrum and Sharpe individually, to obligate themselves to pay a rate of interest
of 12% per annum which increased to 20% per annum if the note was not paid on the maturity date
set by Calvert/Cascade. Further Calvert/Cascade coerced Livingston to secure the note with a lien
from Chestnut against all of the property in the Livingston Project. The advances made by
Project called “the Cottages at Livingston.” For the reasons set forth herein the Note is not
26. By moving from the singular role as a consultant and CTP to the dual roles of
consultant and lender Calvert/Cascade created a gross conflict of interest in violation of their
fiduciary duties of providing good faith, objective consultation as required by the ACTP Code of
Ethics. By becoming a secured lender to the Livingston Project, Calvert and Cascade commenced
a behavior of self-dealing for their own benefit to the financial detriment of Livingston and
Chestnut. Such actions of Calvert and Cascade were intentional, in bad faith, and intended to enrich
themselves at the expense of Livingston and Chestnut and were so malignant so as to rise to the
27. Calvert and Cascade failed in their representations to Livingston and Chestnut by
making no effort to and not securing a replacement lender for BankPlus nor any other equity
participants for the Livingston Project. In early 2014, with BankPlus threatening foreclosure on a
material portion of the Livingston Project, Calvert and Cascade made further representations to
Livingston, Chestnut and Sharpe that they could take the pressure off the Livingston Project by
Calvert and Cascade purchasing the BankPlus Note which would provide time for Chestnut,
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Livingston and Sharpe to turn the Livingston Project around, and that with the continued
consultation and advice of Calvert and Cascade as turnaround experts, such turnaround would be
achieved. Accordingly, on or about April 16, 2014, Calvert purchased the BankPlus Note and
Chestnut's indebtedness from BankPlus, as evidenced by the Assignment of Note, Deed of Trust
and Related Instruments dated April 16, 2014, which is recorded among the land records in the
office of Chancery Clerk of Madison County, Mississippi in Book 3074 at Page 245. Upon
information and belief, Calvert obtained a loan from The Peoples Bank, Biloxi, Mississippi, a
Mississippi banking corporation, which he used to purchase the BankPlus Note. As a part of
Calvert's loan transaction with Peoples Bank, Calvert executed an Assignment of Note, Deed of
Trust and Related Instruments dated April 17, 2014, and assigned all of his right, title and interest,
in and to the BankPlus Note and the BankPlus Deed of Trust to Peoples Bank by instrument
recorded in the office of the Chancery of Clerk Madison County, Mississippi, Book 3074, Page
247.
28. At this point in time Calvert advised Livingston, Chestnut and Sharpe that Calvert
had a conflict of interest but nevertheless coerced them into executing a note payable to Cascade
in the principal amount of Nine Hundred Fifty-One Thousand One Hundred Forty-Seven and
12/100 Dollars ($951,147.12) (the "Calvert/Cascade Note") and advised them that it is merely "a
modification" of the existing BankPlus Loan that Calvert possessed and owned. A true and correct
copy of said Calvert/Cascade Note is attached hereto as Exhibit "A" and incorporated herein by
reference for all purposes. For the reasons set forth in paragraph 8 of this Answer to the Amended
Complaint, the Note is not enforceable. Livingston and Chestnut received no consideration for the
Note. To secure the Calvert/Cascade Note, Calvert and Cascade coerced Chestnut into executing
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a Deed of Trust, Security Agreement and Assignment of Rents in favor of Cascade Capital Group,
LLC which encumbers substantially all of the land comprising the Livingston Project and much
more land than the BankPlus Deed of Trust. Said Deed of Trust was recorded among the land
records in the office of Chancery Clerk of Madison County, Mississippi in Book 3064 at Page 292
(the "Calvert/Cascade Deed of Trust"). For the reasons set forth in this paragraph and paragraphs
8 and 9 of this Answer to the Amended Complaint, the Deed of Trust is void and unenforceable.
29. Livingston, Chestnut and Sharpe not only were under extreme duress, but they felt
that they had no choice but to sign the Calvert/Cascade Note because the new Calvert/Cascade
Note was recommended by Calvert and because they were still relying on Calvert's professional
CTP advice. In the process, Calvert gained control of the Livingston Project and its financing and
future development and secured the exorbitant and otherwise unsecured Calvert/Cascade fees
being charged to the Project. All the while Calvert/Cascade were engaged in an admitted conflict
of interest. Realizing this conflict, Calvert later presented Livingston and Sharpe with a document
Multiple Clients" which they refused to sign, a true and correct copy of which is attached hereto
30. In the Spring of 2016, Chestnut (which is a wholly owned subsidiary of Livingston
and which controls the Livingston Project) located without the assistance of Calvert/Cascade
financing and purchasers for what is known as the "Building I Parcel" and the "Cottages Parcel"
within the Livingston Project. It was at this time that Calvert/Cascade insisted and attempted to
coerce Livingston and Sharpe to execute the waiver of conflict of interest which they refused to
do. Calvert then reverted to a strategy whereby Calvert/Cascade refused to agree to release any of
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the parcels that were under an agreement of sale and development or to even negotiate with
Livingston and Chestnut regarding a partial release unless Livingston, Chestnut and Sharpe
executed a Forbearance Agreement. With no choice and no other financing or equity options
available, Livingston and Sharpe executed the Forbearance Agreement, under duress, to move the
Livingston Project forward and to prevent Calvert from foreclosing on the Calvert/Cascade Deed
of Trust and Note that he and Cascade now held (the "Forbearance Agreement"). The exhibits
referenced in the Forbearance Agreement were never attached. For the reasons set forth in
paragraphs 8 and 9 of their Answer to the Amended Complaint, the Forbearance Agreement is
31. Notwithstanding their fiduciary duties owing to Livingston, Chestnut and Sharpe,
Calvert/Cascade have now placed Livingston, Chestnut and Sharpe in an untenable position, and
now exercise complete financial control over Livingston, Chestnut and Sharpe and the entire
Livingston Project, all to the detriment of Livingston, Chestnut and Sharpe, all in gross breach of
Calvert's CTP fiduciary responsibilities, all in breach of contractual fiduciary responsibilities, and
all in malicious and gross tortious interference with the business of Livingston, Chestnut and
Sharpe, and all the while continuing to charge $350-425.00 per hour in consulting fees and 18%
32. On July 6, 2016, the First Amendment to the Forbearance Agreement was executed
by certain parties because Calvert/Cascade once more refused to release parcels of the Livingston
Project that were under agreement of sale and development unless the amendment was executed.
The First Amendment is void and not enforceable for the same reasons that the Forbearance
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33. The Calvert/Cascade note contains a 12% interest rate with interest increasing to
18% in the event the note is not paid in full on a date certain in April 2016. At such point and
continuing to the present time, it is in Calvert's and Cascade's financial interest for the unpaid
balance of the Calvert/Cascade Note to remain outstanding and to continue to accrue interest.
34. In the Summer of 2017, Livingston entered into an agreement with a purchaser of
property encumbered by the original BankPlus Note that Peoples Bank now holds. This property
sale would retire the entire remaining amount of the original BankPlus Loan, but with
Calvert/Cascade's 12% and 18% interest rates, the total amount of debt claimed by
Calvert/Cascade claimed had tripled to approximately One Million Three Thousand Dollars
($1,300,000). Calvert refused to allow the payment of the remaining balance of the BankPlus Loan
and the release of the BankPlus Deed of Trust on terms that would permit the Livingston Project
to move forward. The prospective buyer withdrew from the agreement to purchase, thereby further
COUNTERCLAIM COUNTS
35. Livingston and Chestnut adopt all of the allegations set forth in paragraphs 17
through 34 of their Counterclaim, including paragraphs 8 and 9 of the Answer to the Amended
Complaint.
COUNT I
BREACH OF FIDUCIARY DUTY
36. Cascade in all of its dealings hereinabove described had a fiduciary relationship
with Livingston and Chestnut. Cascade was in a position of superior bargaining position,
domination and control with respect to those parties who were in a position of dependence and
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trust with respect to Cascade and justifiably reposed trust in Cascade. Instead of honoring that
trust, Cascade engaged in egregious acts of conflict of interest, self-dealing, duress and coercion
with respect to Livingston and Chestnut and breached its fiduciary duties to those parties.
37. As a direct and proximate result of the breach of fiduciary duty, Livingston and
Chestnut have suffered damages for which Cascade is liable under law.
38. At all times, Cascade’s dealings with Livingston and Chestnut were with
knowledge of the financial commitment and obligations of Livingston and Chestnut to the
39. In equity, the conflict of interest, self-dealing and duress of Cascade is so egregious
that the court should exercise its equitable power to void any contract, understanding or agreement
between Sharpe, Livingston, Chestnut and Cascade and award those parties full recovery of any
COUNT II
FRAUD
40. Livingston and Chestnut adopt the allegations of paragraphs 17 through 34 of his
41. The actions of Cascade constitute fraud. They are a “breach of duty, trust or
confidence [which] include all acts, omissions or concealments by which another is injured, or an
undue or unconscientious advantage is taken.” Cumbest v. State, 456 So. 2d 209, 217 (Miss. 1984).
and with intent to deceive those parties. The misrepresentations were material. Sharpe, Livingston
and Chestnut reasonably relied upon those misrepresentations and Cascade is liable in law for all
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damages suffered by Livingston and Chestnut as a direct and proximate result of that reliance.
43. At all times, Cascade’s dealings with Livingston and Chestnut were with
knowledge of the financial commitment and obligation of Livingston and Chestnut to the
Livingston project and they are entitled to damages against Cascade. Sharpe was an intended
44. In equity, the conflict of interest, self-dealing, duress and coercion of Cascade is so
egregious that the court should exercise its equitable power to void any contract, understanding or
agreement entered into between Sharpe, Livingston, Chestnut and Cascade and award those parties
full recovery of any and all monies paid to Cascade by those parties as additional damages.
COUNT III
45. Livingston and Chestnut adopt the allegations of paragraphs 17 through 34 of their
46. All contracts under Mississippi law contain an implied covenant of good faith and
fair dealing. A breach of good faith is bad faith characterized by conduct which violates standards
the duty of good faith and fair dealing. Cascade conducted itself in bad faith by conduct which
violates standards of decency, fairness and reasonableness. Its egregious conflict of interest, self-
dealing, duress and coercion was bad faith and violated all standards of decency and fairness and
reasonableness. Livingston and Chestnut are entitled to recover all damages proximately caused
47. In equity, the conflict of interest, self-dealing, duress and coercion of Cascade is so
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egregious that the court should exercise its equitable power to void any contract, understanding or
agreement entered into between Sharpe, Livingston, Chestnut and Cascade and award those parties
full recovery of any and all monies paid to Cascade by those parties as additional damages.
COUNT IV
48. Livingston and Chestnut adopt the allegations of paragraphs 17 through 34 of their
49. In Cascade’s actions with respect to purchase of the Bank Plus note, and Cascade’s
actions with respect to the refusal to allow consummation of the proposed sale of the “Building I”
Parcel and the “Cottages of Livingston” Parcel, Cascade acted in a manner which constituted
tortious interference with contract and business relations. Cascade and Calvert’s acts were
intentional and willful; Cascade and Calvert’s actions were calculated to cause damages to Sharpe,
Livingston and Chestnut in their lawful business; Cascade and Calvert’s actions were done with
the unlawful purpose of causing damages and loss, without right or justifiable cause on their part,
such acts constituting malice; and actual damage and loss occurred to Livingston and Chestnut as
50. In equity, the conflict of interest, self-dealing, duress and coercion of Cascade is so
egregious that the court should exercise its equitable power to void any contract, understanding or
agreement effecting Sharpe, Livingston and Chestnut and award those parties full recovery of any
COUNT V
FRAUDULENT INDUCEMENT
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51. Livingston and Chestnut adopt the allegations of paragraph 17 through 34 of their
Chestnut and Sharpe with respect to services to be performed as a turnaround expert, including
expediting sales of property and finding appropriate refinancing and/or equity investment, were
untrue and false. Calvert and Cascade by those untruths and false statements and representations
induced Livingston, Chestnut and Sharpe to do business with them and to execute documents
intended for the benefit of Cascade and Calvert, to the detriment of Livingston, Chestnut and
Sharpe. Livingston and Chestnut are entitled to all damages incurred as a direct and proximate
53. In equity, the conflict of interest, self-dealing, duress and coercion of Cascade is so
egregious that the court should exercise its equitable power to void any contract, understanding or
agreement effecting Sharpe, Livingston and Chestnut and award those parties full recovery of any
COUNT VI
PUNITIVE DAMAGES
54. Livingston and Chestnut adopt all of the allegations in paragraphs 17 through 34
of their Counterclaim including paragraphs 8 and 9 of their response to the Amended Complaint.
55. The conduct of Cascade is willful, wanton, constitutes gross negligence and
indifference to Livingston and Chestnut, is motivated solely by Cascade’s avarice and greed, is
intentional in order to satisfy Cascade’s avarice and greed, constitutes actual fraud and to the extent
to which its conduct constitutes breach of contract, the conduct is such as to amount to an
independent tort. Breach of fiduciary duty is one of the “extreme or special additional
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circumstances when punitive damages may be awarded.” United States v. Arundel Corp., 814 F.
56. This conduct entitles Livingston and Chestnut to recover punitive damages against
Cascade.
compensatory damages from Cascade; punitive damages; attorney fees; prejudgment and post
judgment interest; equitable relief in holding void and of no effect each and every note, deed of
trust, forbearance or other agreement to which Livingston, Chestnut or Sharpe is a party; and
Livingston and Chestnut pray for such further, other, general and equitable relief as the Court
deems proper.
And now, having answered the allegations of the Amended Complaint, and stated their
Counterclaim against Cascade, Livingston and Chestnut file this Third Party Complaint against
57. Third Party Defendant Mark Calvert (“Calvert”) is an adult resident of the State of
Washington doing business in the State of Mississippi. The torts, breaches of contract and all
causes of action alleged herein arise from Calvert’s activities in the State of Mississippi. He may
be served with process at 1501 Fourth Avenue, Suite 2840, Seattle, Washington 98101.
58. Cascade and Calvert have disregarded corporate formalities in the manner in which
they have conducted business; their actions reflect fraud with respect to Livingston and Chestnut
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Calvert were not held accountable for his fraudulent misrepresentations and/or otherwise unlawful
conduct. Livingston and Chestnut are entitled to pierce any corporate veil of Cascade and recover
damages against Calvert for all damages proximately caused by Cascade and Calvert to Livingston
and Chestnut as alleged hereinabove. At all times Cascade and Calvert were alter egos one for the
other so that any liability against Cascade is also the liability of Calvert, and any liability of Calvert
59. Livingston and Chestnut adopt the allegations set forth in paragraphs 17
Amended Complaint.
COUNT I
BREACH OF FIDUCIARY DUTY
relationship with Sharpe, Livingston and Chestnut. Calvert was in a position of superior
bargaining position, domination and control with respect to those parties who were in a
position of dependence and trust with respect to Calvert and justifiably reposed trust in
Calvert. Instead of honoring that trust, Calvert engaged in egregious acts of conflict of
interest, self-dealing and duress with respect to Sharpe, Livingston and Chestnut and
61. As a direct and proximate result of the breach of fiduciary duty, Livingston
and Chestnut have suffered damages for which Calvert is liable under law.
62. At all times, Calvert’s dealings with Livingston and Chestnut were with
knowledge of the financial commitment and obligation that Livingston and Chestnut had
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and made to the Livingston Project and Livingston and Chestnut are entitled to damages
against Calvert.
egregious that the court should exercise its equitable power to void any contract,
understanding or agreement between Sharpe, Livingston and Chestnut and award those
parties full recovery of any and all monies paid to Calvert by those parties as additional
damages.
COUNT II
FRAUD
Complaint.
65. The actions of Calvert constitute fraud. They are a “breach of duty, trust or
Chestnut, and with intent to deceive those parties. The misrepresentations were material.
Sharpe, Livingston and Chestnut reasonably relied upon those misrepresentations and
Calvert is liable in law for all damages suffered by Livingston and Chestnut as a direct and
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67. At all times, Calvert’s dealings with Livingston and Chestnut were with
the Livingston project and Livingston and Chestnut are entitled to damages against Calvert,
not only in their own right, but also as a third party beneficiary to any contract between
egregious that the court should exercise its equitable power to void any contract,
understanding or agreement between Sharpe, Livingston and Chestnut and award those
parties full recovery of any and all monies paid to Calvert by those parties as additional
damages.
COUNT III
BREACH OF DUTY OF GOOD FAITH AND FAIR DEALING
Complaint.
70. All contracts under Mississippi law contain an implied covenant of good faith
and fair dealing. A breach of good faith is bad faith characterized by conduct which
hereinabove described breached the duty of good faith and fair dealing. Calvert conducted
himself in bad faith by conduct which violates standards of decency, fairness and
reasonableness. It is egregious conflict of interest, self-dealing and duress was bad faith
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and violated all standards of decency and fairness and reasonableness. Livingston and
Chestnut are entitled to recover all damages proximately caused by Calvert’s breach of the
71. In equity, the conflict of interest, self-dealing, duress and coercion of Calvert
is so egregious that the court should exercise its equitable power to void any contract,
understanding or agreement between Sharpe, Livingston and Chestnut and award those
parties full recovery of any and all monies paid to Calvert by those parties as additional
damages.
COUNT IV
TORTIOUS INTERFERENCE WITH CONTRACT AND BUSINESS RELATIONS
Complaint.
73. In Calvert’s actions with respect to purchase of the Bank Plus note, and
Calvert’s actions with respect to the refusal to allow release of property from the Deed of
Trust; and Calvert’s actions with respect to refusal to allow the sale of the Livingston
Project, Calvert acted in a manner which constituted tortious interference with contract and
business relations. Calvert’s acts were intentional and willful; Calvert’s actions were
calculated to cause damages to Sharpe, Livingston and Chestnut in their lawful business;
Calvert’s actions were done with the unlawful purpose of causing damages and loss,
without right or justifiable cause on their part, such acts constituting malice; and actual
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damage and loss occurred to Livingston and Chestnut as a direct and proximate result
thereof.
74. In equity, the conflict of interest, self-dealing, duress and coercion of Calvert
is so egregious that the court should exercise its equitable power to void any contract,
understanding or agreement affecting Sharpe, Livingston and Chestnut and award those
parties full recovery of any and all monies paid to Calvert by those parties as additional
damages.
COUNT V
FRAUDULENT INDUCEMENT
Complaint.
expediting sales of property and finding appropriate refinancing and/or equity investment,
were untrue and false. Calvert by those untruths and false statements and representations
induced Livingston, Chestnut and Sharpe to do business with them and to execute
documents intended for the benefit of Calvert, to the detriment of Livingston, Chestnut and
Sharpe. Livingston and Chestnut is entitled to all damages incurred as a direct and
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egregious that the court should exercise its equitable power to void any contract,
understanding or agreement affecting Sharpe, Livingston and Chestnut and award those
parties full recovery of any and all monies paid to Calvert by those parties as additional
damages.
COUNT VI
PUNITIVE DAMAGES
Amended Complaint.
79. The conduct of Calvert is willful, wanton, constitutes gross negligence and
indifference to Livingston and Chestnut, is motivated solely by Calvert’s avarice and greed,
is intentional in order to satisfy Calvert’s avarice and greed, constitutes actual fraud and to
the extent to which its conduct constitutes breach of contract, the conduct is such as to
amount to an independent tort. Breach of fiduciary duty is one of the “extreme or special
80. This conduct entitles Livingston and Chestnut to recover punitive damages
against Calvert.
compensatory damages from Calvert; punitive damages; attorney fees; prejudgment and
post judgment interest; equitable relief in holding void and of no effect each and every
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Sharpe is a party; and Livingston and Chestnut pray for such further, other, general and
Respectfully submitted,
OF COUNSEL:
Steven H. Smith (MSB # 7610)
Steven H. Smith, PLLC
4316 Old Canton Road, Suite 200
Jackson, MS 39211
Telephone: 601-987-4800
Facsimile: 601-987-6600
ssmith@shsattorneys.com
CERTIFICATE OF SERVICE
I, Steve H. Smith, hereby certify that have this day caused a true and correct copy of the
foregoing to be filed through the Court’s ECF system, which has sent notice to all counsel of
record.
AMENDED COMPLAINT
COMES NOW, Cascade Capital Group, LLC, (“Cascade”) and hereby files its Amended
Complaint against the Defendants and would show unto the Court the following:
PARTIES
1. Cascade Capital Group, LLC is a Delaware limited liability company, domiciled in Bonney
Lake, WA, with its principal place of business located at 19015 111th Street, Suite E, Bonney Lake,
WA, 98391-8078. The sole member of Cascade Capital Group, LLC is Mark Calvert, a resident and
company which may be served through Marna Sharpe, its registered agent for service of process, at
116 Livingston Church Road, Suite B, Flora, MS 39071 or her places of residence, 920 Granite
Drive, No. 405, Pasadena, CA 91101 or 6730 Huasna Townsite Road, Arroyo Grande, CA 93420.
The sole members of Livingston are Jill B. Landrum, a resident and citizen of Mississippi and B&S
MS Holdings, LLC, a Mississippi domiciled limited liability company. The sole members of B&S
MS Holdings, LLC, are Michael C. Bollenbacher, a resident and citizen of California and Michael
which may be served through David Landrum, its registered agent for service of process, at 116
Livingston Church Road, Suite B, Flora, MS 39071. The sole members of Chestnut are David
Landrum, a resident and citizen of Mississippi and Michael L. Sharpe, a resident and citizen of
California.
4. David Landrum (“Landrum”) is an adult resident citizen of Madison County, Mississippi and
may be served with process at his place of residence, 120 Noah’s Mill Road, Madison, MS 39110,
or his place of business, 601 Crescent Blvd., Suite 401, Ridgeland, MS 39157.
5. Michael L. Sharpe (“Sharpe”) is an adult resident citizen of Pasadena, California and may
be served with process at his places of residence, 920 Granite Drive, No. 405, Pasadena, CA 91101
or
6730 Huasna Townsite Road, Arroyo Grande, CA 93420, or his principal place of business, 9045
6. This Court has jurisdiction over this matter pursuant to the provisions of 28 U.S.C.
§1332(a)(1) and (2) because complete diversity of citizenship exists between the parties and the
amount in controversy exceeds the sum or value of $75,000.00, exclusive of court costs and interest.
7. Venue is proper in this Court pursuant to 28 U.S.C. §1391(a)(1) and (2) since complete
diversity of citizenship exists between the parties and since a substantial portion of the activity that
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FACTUAL ALLEGATIONS
8. On or about April 18, 2014 Livingston, Landrum and Sharpe executed a Promissory Note in
favor of Cascade in the original principal amount of $951,147.12, bearing interest at the rate of 12%
per annum and a default interest rate of 18% per annum, with a maturity date of April 18, 2016.1
9. On or about April 26, 2016, the parties and Chestnut entered into a Forbearance Agreement
A. The Livingston, Chestnut, Landrum and Sharpe2 parties confirmed and acknowledged
an outstanding debt to Cascade in the amount of $1,030,370.00 as of March 31, 2016,
(Recitals, ¶ I.), and further “acknowledge[d] and agree[d] that they owe [Cascade]
the full amount of the Indebtedness as of the date hereof, reaffirms all of its
Indebtedness . . . hereby forever waive and relinquish any and all claims, offsets or
defenses that it may now or hereafter have with respect to the payment of the
Indebtedness . . .” (Section 2.(a)).
B. The Forbearance Agreement further provides that “Borrowers acknowledge and agree
that they are in default (and therefore Events of Default) exist effective March 31,
2016, the due date for all amounts owed [Cascade]. Borrowers agree that they have
no ability to cure the Existing Defaults.” (Section 2.(b)).
C. Cascade agreed to forbear action on the Indebtedness until March 18, 2018,
conditioned, inter alia, upon the following:
1
A true and correct copy of said Note is attached hereto as Exhibits “A” and is incorporated
herein by reference.
2
Livingston, Chestnut, Landrum and Sharpe are collectively referred to as “Borrowers” in the
Forbearance Agreement and herein.
3
A true and correct copy of the Forbearance Agreement is attached hereto as Exhibit “B” and
is incorporated herein by reference.
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10. On July 6, 2016 Cascade and the Borrowers entered into a First Amendment to Forbearance
Agreement, prepared by counsel for the Borrowers, which provides, in part, as follows:
B. Each of the Borrowers again represented and warranted to Cascade that they had no
“offsets or defenses with respect to its respective obligations under the Forbearance
Agreement, and that except as amended or modified herein, all other terms,
covenants and provisions of the Forbearance Agreement remain in full force and
effect in accordance with its terms and are hereby ratified and confirmed.”4
4
A true and correct copy of the First Amendment to Forbearance Agreement is attached
hereto as Exhibit “C” and is incorporated herein by reference.
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11. The Borrowers defaulted under the terms of the Forbearance Agreement and the First
Amendment to Forbearance Agreement by failing to make the December 31, 2016 payment of
$750,000.00 and by failing to assign the proceeds of tax incremental financing bonds, payable to the
12. As provided by the Forbearance Agreement, the failure to make the payments or comply with
any of the terms of the Forbearance Agreement constituted an Event of Termination, authorizing the
immediate appointment of a receiver and further authorizing Cascade to take immediate action
13. As of November 30, 2017, the total amount due on the Indebtedness was $1,362,055.00,
including accrued interest, late charges and other costs of collection incurred by Cascade as
authorized by the Promissory Note and Forbearance Agreement. Interest continues to accrue on the
Note at the per diem rate of $671.00 from and after November 30, 2017 at the interest rate of 18%
14. As provided by the Promissory Note and Forbearance Agreement, Cascade is further entitled
to collect all expenses, including, but not limited to, all legal fees and expenses incurred in the
15. By virtue of the Borrowers default, Cascade is entitled to the immediate appointment of a
receiver to take possession and control of the collateral and a joint and several Judgment against
Livingston Holdings, LLC, Chestnut Developers, LLC, David Landrum and Michael L. Sharpe for
all amounts due on the Indebtedness, including pre- and post-judgment interest, all collection costs,
all attorney’s fees and expenses incurred by Cascade in this action and all costs of this action.
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collateral, including the authority to: collect and hold all rents, income, profits and accounts
receivable for application to the Indebtedness; to assign the Borrowers’ interest in all tax incremental
the terms of the Forbearance Agreement; and, sell the collateral pledged by the Borrowers to Cascade
free and clear of liens and redemption, with all costs of the receivership, including attorney’s fees
Developers, LLC, David Landrum and Michael L. Sharpe in the amount of $1,362,055.00, for the
amount due on the Note as of November 30, 2017, plus pre- and post-judgment interest at the
contract rate of interest from and after November 30, 2017, all attorneys’ fees and expenses and all
costs of collection.
C. Cascade further prays that all costs of this action be assessed to the Defendants,
Livingston Holdings, LLC, Chestnut Developers, LLC, David Landrum and Michael L. Sharpe, and
for such other and further general relief as it may be entitled to in law or equity.
Respectfully submitted,
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CERTIFICATE OF SERVICE
I, Patrick F. McAllister, do hereby certify that I have this day electronically filed the above
and foregoing Pleading with the Clerk of this Court using the ECF filing system, which sent
notification of such filing to the following:
Michael L. Sharpe
920 Granite Drive, No. 405
Pasadena, CA 91101
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