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Case 3:17-cv-00952-LG-FKB Document 18 Filed 01/29/18 Page 1 of 7

IN THE UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION

CASCADE CAPITAL GROUP, LLC PLAINTIFF

VS. CIVIL ACTION NO. 3:17-cv-00952-LG-RHW

LIVINGSTON HOLDINGS, LLC;


CHESTNUT DEVELOPERS, LLC;
DAVID LANDRUM; and,
MICHAEL L. SHARPE a/k/a MIKE SHARPE DEFENDANTS

CASCADE CAPITAL GROUP’S MOTION TO DISMISS COUNTER-CLAIMS FOR


FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED
UNDER RULE 12(B)(6); OR, IN THE ALTERNATIVE, FAILURE TO
PLEAD FRAUD WITH THE PARTICULARITY REQUIRED BY RULE 9(B)

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

unto the Court:

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

particularity. FED.R.CIV.P. 9(b).

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

(5th Cir. 1992) (internal quotation marks omitted)).

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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

Forbearance Agreement relied on by Cascade were procured by fraudulent misrepresentation and

fraud in the inducement. [Doc. #15 at ¶¶8-9]. Even as a defense, the Defendants have failed to plead

fraud with the requisite particularity.

5.

FRAUD AS A COUNTERCLAIM

In pursuit of the fraud claim in their counterclaim, listed as Count II, Livingston and

Chestnut, as well as Sharpe, allege:

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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).

42. Cascade repeatedly made misrepresentations to Sharpe, Livingston and


Chestnut, 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 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 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.

[Doc. #16 at ¶¶41-44] and [Doc. #15, ¶¶41-44].

6.

The counterclaim for fraud contains no averments sufficient to place Counter-Defendant on

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

fraudulent statements or omissions.

7.

FRAUDULENT INDUCEMENT AS A COUNTERCLAIM

In pursuit of Count IV of their counter- claim, claiming fraudulent inducement, Livingston

and Chestnut, as well as Sharpe, further allege:

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52. The actions of Calvert and Cascade in making representations to


Livingston, 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
result of the fraudulent inducement of Cascade and Calvert.

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 and all monies paid to Cascade by those
parties as additional damages.

[Doc. #16, ¶¶52-53] and [Doc. #15, ¶¶52-43].

8.

Again, the counterclaim contains no averments sufficient to place Counter-Defendant on

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

(S.D.N.Y. 1988), aff’d, 869 F.2d 175 (2d Cir. 1989)).

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),

Counter-Defendant further moves to dismiss Counter-Plaintiffs’ fraud action pursuant to Federal

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,

both at law and in equity, to which it may show itself entitled.

Respectfully submitted,

CASCADE CAPITAL GROUP, LLC

BY: WILLIFORD, McALLISTER & JACOBUS, LLP


303 Highland Park Cove, Suite A
Ridgeland, Mississippi 39157
(601) 991-2000

BY: /s/ Patrick F. McAllister


PATRICK F. McALLISTER, MSB #2177
TIFFANY PIAZZA GROVE, MSB #101455

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Case 3:17-cv-00952-LG-FKB Document 18 Filed 01/29/18 Page 7 of 7

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:

Harris H. Barnes III, Esq.


Barnes Law Firm, PA
5 River Bend Place, Suite A
Flowood, MS 39232-7618
tbarnes@barnes-lawfirm.com
Attorney for David Landrum

John G. Corlew, Esq.


Corlew Munford & Smith, PLLC
4450 Old Canton Road, Suite 111 (39211)
P.O. Box 16807
Jackson, MS 39236-6807
jcorlew@cmslawyers.com
Attorney for Michael L. Sharpe a/k/a Mike Sharpe

Steven H. Smith, Esq.


Steven H. Smith, PLLC
4316 Old Canton Road, Suite 200
Jackson, MS 39211
ssmith@shsattorneys.com
Attorney for Livingston Holdings, LLC
and Chestnut Developers, LLC

DATED: this the 29th day of January, 2018.

BY: /s/Patrick F. McAllister


PATRICK F. McALLISTER, MSB #2177

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Case 3:17-cv-00952-LG-FKB Document 17 Filed 01/19/18 Page 1 of 4

IN THE UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION

CASCADE CAPITAL GROUP, LLC PLAINTIFF

VS. CIVIL ACTION NO. 3:17-cv-00952-LG-RHW

LIVINGSTON HOLDINGS, LLC;


CHESTNUT DEVELOPERS, LLC;
DAVID LANDRUM; AND
MICHAEL L. SHARPE a/k/a MIKE SHARPE DEFENDANTS

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

In answering the allegations of the Complaint, paragraph by paragraph, Defendant asserts

the following, to-wit:

Parties

1. Defendant admits the allegations contained in Paragraph 1 of the Amended

Complaint.

2. Defendant admits the allegations contained in Paragraph 2 of the Amended

Complaint.

3. Defendant admits the allegations contained in Paragraph 3 of the Amended

Complaint.

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Case 3:17-cv-00952-LG-FKB Document 17 Filed 01/19/18 Page 2 of 4

4. Defendant admits the allegations contained in Paragraph 4 of the Amended

Complaint.

5. Defendant admits the allegations contained in Paragraph 5 of the Amended

Complaint.

Venue and Jurisdiction

6. Defendant admits the allegations contained in Paragraph 6 of the Amended

Complaint.

7. Defendant admits the allegations contained in Paragraph 7 of the Amended

Complaint.

Factual Allegations

8. Defendant admits the allegations contained in Paragraph 8 of the Amended

Complaint.

9. Defendant admits the allegations contained in Paragraph 9 of the Amended

Complaint.

10. Defendant admits the allegations contained in Paragraph 10 of the Amended

Complaint.

11. Defendant admits the allegations contained in Paragraph 11 of the Amended

Complaint.

12. Defendant admits the allegations contained in Paragraph 12 of the Amended

Complaint.

13. Defendant admits the allegations contained in Paragraph 13 of the Amended

Complaint.

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14. Defendant admits the allegations contained in Paragraph 14 of the Amended

Complaint.

15. Defendant admits the allegations contained in Paragraph 15 of the Amended

Complaint.

Defendant, David Landrum now files this his Answer to the Amended Complaint.

Respectfully submitted this the 19th day of January, 2018.

DAVID LANDRUM

By: /s/ Harris H. Barnes, III


Harris H. Barnes, III (MSB #2018)

OF COUNSEL:

Harris H. Barnes, III (MSB #2018)


tbarnes@barnes-lawfirm.com
James Williams Janoush (MSB #103966)
will@barnes-lawfirm.com
BARNES LAW FIRM, P.A.
5 River Bend Place, Suite A
Flowood, Mississippi 39232
Telephone: (601) 981-6336
Facsimile: (601) 981-7075

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Case 3:17-cv-00952-LG-FKB Document 17 Filed 01/19/18 Page 4 of 4

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

This the 19th day of January, 2018.

s/ Harris H. Barnes, III


Harris H. Barnes, III (MSB #2018)

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IN THE UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION

CASCADE CAPITAL GROUP, LLC PLAINTIFF

VS. CIVIL ACTION NO. 3:17-CV-00952-LG-RHW

LIVINGSTON HOLDINGS, LLC;


CHESTNUT DEVELOPERS, LLC;
DAVID LANDRUM; and MICHAEL
L. SHARPE a/k/a MIKE SHARPE DEFENDANTS

ANSWER OF LIVINGSTON HOLDINGS, LLC AND CHESTNUT DEVELOPERS, LLC


TO AMENDED COMPLAINT;
COUNTER-CLAIM; AND THIRD-PARTY COMPLAINT

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

The Amended Complaint fails to join necessary and indispensable parties.

SECOND ANSWER

The Amended Complaint fails to state a cause of action upon which relief may be granted.

THIRD DEFENSE

Answering the allegations of the Amended Complaint paragraph by paragraph:

1. Livingston and Chestnut admit that Cascade is a Delaware limited liability

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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

principal place of business, and whether Calvert is Cascade’s sole member.

2. Livingston and Chestnut admit that Livingston Holdings, LLC (“Livingston”) is

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

Cascade’s Amended Complaint.

3. Livingston and Chestnut admit that Chestnut Developers, LLC (“Chestnut”) is a

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

contained in paragraph 3 of Cascade’s Amended Complaint.

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.

5. Livingston and Chestnut admit the allegations of paragraph 5.

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

remaining allegations of paragraph 6 and would therefore deny same.

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

of the remaining allegations of paragraph 7 and would therefore deny same.

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

no identification of Payee, an appraisal fee with no identification of Payee, an alleged indebtedness

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.

9. Livingston and Chestnut admit that a “Forbearance Agreement” (“Agreement”) is

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

to act for or on behalf of Livingston and Chestnut executed the Agreement.

The Agreement is a classic contract of adhesion where a party in a superior bargaining

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

“Forbearance Agreement” includes representations and warranties (paragraph 5) and a multitude

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

Forbearance Agreement is void, and/or unenforceable as to Livingston and Chestnut. Furthermore,

there is no waiver of jury with respect to claims against Calvert. Livingston and Chestnut will

demand trial by jury in their Third-Party Complaint against Calvert.

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

Amended Complaint in relation to the First Amendment.

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.

14. Livingston and Chestnut deny the allegations of paragraph 14.

15. Livingston and Chestnut deny the allegations of paragraph 15.

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

conclude its Amended Complaint.

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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

binds Calvert. They are jointly and severally liable.

18. Calvert and Cascade promote themselves as experts and consultants in the

turnaround and restructuring of distressed businesses throughout the United States.

19. Calvert markets himself as a Certified Turnaround Professional (CTP) in

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

the same fiduciary duties as Calvert.

20. In approximately 2008, David Landrum, an adult resident of Madison County,

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

and to recapitalize with more equity and new loans.

22. On or about 2012, Chestnut/Livingston were introduced to Cascade and Calvert

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

excess of Three Hundred Thousand Dollars ($300,000.00).

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

into the Livingston Project.

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

Calvert/Cascade were to be devoted to the development of a certain portion of the Livingston

Project called “the Cottages at Livingston.” For the reasons set forth herein the Note is not

enforceable. The lien is a nullity.

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

level of bad faith conduct.

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

that is entitled "Acknowledgement and Waiver of Conflict of Interest in Joint Representation of

Multiple Clients" which they refused to sign, a true and correct copy of which is attached hereto

as Exhibit "B" and incorporated herein by reference for all purposes.

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

void and/or not enforceable against Livingston and Chestnut.

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%

per annum interest to do these things.

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

Agreement is void and unenforceable.

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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

exacerbating damages to Sharpe and Livingston.

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

Livingston Project and they are entitled to damages against Cascade.

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

and all monies paid to Cascade by those parties as additional damages.

COUNT II

FRAUD

40. Livingston and Chestnut adopt the allegations of paragraphs 17 through 34 of his

Counterclaim, including paragraphs 8 and 9 of his Answer to the Amended Complaint.

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).

42. Cascade repeatedly made misrepresentations to Sharpe, Livingston and Chestnut,

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

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.

COUNT III

BREACH OF DUTY OF GOOD FAITH AND FAIR DEALING

45. Livingston and Chestnut adopt the allegations of paragraphs 17 through 34 of their

Counterclaim, including paragraphs 8 and 9 of their Answer to the Amended Complaint.

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

of decency, fairness or reasonableness. The actions of Cascade as hereinabove described breached

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

by Cascade’s breach of the duties of good faith and fair dealing.

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

TORTIOUS INTERFERENCE WITH CONTRACT AND


BUSINESS RELATION

48. Livingston and Chestnut adopt the allegations of paragraphs 17 through 34 of their

Counterclaim, including paragraphs 8 and 9 of their Answer to the Amended Complaint.

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

a direct and proximate result thereof.

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

and all monies paid to Cascade by those parties as additional damages.

COUNT V
FRAUDULENT INDUCEMENT

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51. Livingston and Chestnut adopt the allegations of paragraph 17 through 34 of their

Counterclaim, including paragraphs 8 and 9 of their Answer to the Amended Complaint.

52. The actions of Calvert and Cascade in making representations to Livingston,

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

result of the fraudulent inducement of Cascade and Calvert.

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

and all monies paid to Cascade by those parties as additional damages.

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.

2d 193, 199 (5th Cir. 1987).

56. This conduct entitles Livingston and Chestnut to recover punitive damages against

Cascade.

WHEREFORE, PREMISES CONSIDERED, Livingston and Chestnut demand

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.

THIRD PARTY COMPLAINT

Trial by Jury Demanded

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

Mark Calvert and would show unto the Court as follows:

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

and it would constitute a frustration of Livingston’s and Chestnut’s contractual expectations if

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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

is also the liability of Cascade.

59. Livingston and Chestnut adopt the allegations set forth in paragraphs 17

through 34 of their Counterclaim, including paragraphs 8 and 9 of their Answer to the

Amended Complaint.

COUNT I
BREACH OF FIDUCIARY DUTY

60. Calvert in all of his dealings hereinabove described had a fiduciary

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

breached his fiduciary duties to those parties.

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.

63. In equity, the conflict of interest, self-dealing and duress 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 II
FRAUD

64. Livingston and Chestnut adopt the allegations of paragraphs 17 through 34

of their Counterclaim, including paragraphs 8 and 9 of their Answer to the Amended

Complaint.

65. The actions of Calvert constitute fraud. They are a “breach of duty, trust or

confidence [which] includes 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).

66. Calvert repeatedly made misrepresentations to Sharpe, Livingston and

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

proximate result of that reliance.

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67. At all times, Calvert’s dealings with Livingston and Chestnut were with

knowledge of the financial obligations commitment made by Livingston and Chestnut to

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

Calvert and Livingston/Chestnut.

68. In equity, the conflict of interest, self-dealing and duress 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 III
BREACH OF DUTY OF GOOD FAITH AND FAIR DEALING

69. Livingston and Chestnut adopt the allegations of paragraphs 17 through 34

of their Counterclaim, including paragraphs 8 and 9 of their Answer to the Amended

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

violates standards of decency, fairness or reasonableness. The actions of Calvert as

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

duties of good faith and fair dealing.

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

72. Livingston and Chestnut adopt the allegations of paragraphs 17 through 34

of their Counterclaim, including paragraphs 8 and 9 of their Answer to the Amended

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

75. Livingston and Chestnut adopt the allegations of paragraph 17 through 34 of

their Counterclaim, including paragraphs 8 and 9 of their Answer to the Amended

Complaint.

76. The actions of Calvert in making representations to Livingston, 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 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

proximate result of the fraudulent inducement of Calvert.

77. In equity, the conflict of interest, self-dealing and duress of Calvert is so

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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

78. 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.

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

additional circumstances when punitive damages may be awarded.” United States v.

Arundel Corp., 814 F. 2d 193, 199 (5th Cir. 1987).

80. This conduct entitles Livingston and Chestnut to recover punitive damages

against Calvert.

WHEREFORE, PREMISES CONSIDERED, Livingston and Chestnut demand

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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note, deed of trust, forbearance or other agreement to which Livingston, Covenant or

Sharpe is a party; and Livingston and Chestnut pray for such further, other, general and

equitable relief as the Court deems proper.

This the 19th day of January, 2018.

Respectfully submitted,

LIVINGSTON HOLDINGS, LLC


CHESTNUT DEVELOPERS, LLC

By and through their attorney:

/s/ Steve H. Smith


STEVEN H. SMITH (MSB # 7610)

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.

DATED: January 19, 2018

/s/ Steve H. Smith


STEVE H. SMITH
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IN THE UNITED STATES DISTRICT COURT


FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION

CASCADE CAPITAL GROUP, LLC PLAINTIFF

VS. CIVIL ACTION NO. 3:17-cv-00952-LG-RHW

LIVINGSTON HOLDINGS, LLC;


CHESTNUT DEVELOPERS, LLC;
DAVID LANDRUM; and,
MICHAEL L. SHARPE a/k/a MIKE SHARPE DEFENDANTS

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

citizen of Washington State.

2. Livingston Holdings, LLC (“Livingston”) is a Mississippi domiciled limited liability

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

L. Sharpe, a resident and citizen of California.


Case 3:17-cv-00952-LG-FKB Document 6 Filed 12/11/17 Page 2 of 7

3. Chestnut Developers, LLC (“Chestnut”) is a Mississippi domiciled limited liability company

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

Haven Ave, Suite 107, Rancho Cucamonga, CA 91730-5427.

VENUE AND JURISDICTION

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

is subject to this action occurred in this judicial district.

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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

which provided, in part, as follows:

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. payment of $114,632.00 on or before June 30, 2016 (Section 2.(e)(iii));


2. an increase in the interest rate of the Indebtedness to 18% per annum,
effective June 1, 2016 (Section 2.(e)(iv));
3. payment of $750,000.00 on or before December 31, 2016 (Section 2.(e)(v));
4. payment of balance of the Indebtedness in full on or before March 18, 2018
(Section 2.(e)(vi)); and, 3
5. the assignment of proceeds from tax incremental financing bonds payable by
Madison County, Mississippi (Section 2.(g)).

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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Case 3:17-cv-00952-LG-FKB Document 6 Filed 12/11/17 Page 4 of 7

D. Stipulation to Appointment of Receiver. Upon expiration of the terms of this


Forbearance Agreement, or upon Borrowers’ default of this Agreement, Borrowers
stipulate to the appointment of a receiver to take possession and control of the
Collateral and to exercise the powers and duties to sell the Collateral free and clear
of liens and redemption. Such receiver shall be entitled to collect and hold all rents,
income, profits and accounts receivable upon the Collateral. Borrowers shall be
responsible for all costs of receivership, including attorney’s fees and costs, if any.
(Section 4.(e)).

E. The Borrowers, as consideration for the forbearance granted in the Forbearance


Agreement, further agreed to “release, acquit and forever discharge [Cascade], its
predecessors interest, and all [Cascade’s] past and present officers, directors,
attorneys, affiliates, employees and agents, of and from any and all claims, demands,
liabilities, indebtedness, breaches of contract, breaches of duty or any relationship,
acts, omissions, misfeasance, malfeasance, causes of action, defenses, offsets, debts,
sums of money, accounts, compensation, contracts, controversies, promises,
damages, costs, losses, and expenses, of every type, kind, nature, description or
character, whether known or unknown, suspected or unsuspected, liquidated or
unliquidated, each as though fully set forth herein at length (each, a “Released
Claim” and collectively, the “Released Claims”), that Borrowers now have or may
acquire as of the date they have executed and delivered this Agreement to
[Cascade].” (Section 8).

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:

A. Section 2(e)(iii) of the Forbearance Agreement was amended to provide for a


payment of $38,402.00 on or before July 15, 2016 and a payment of $76,230.00 on
or before September 15, 2016; and,

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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Case 3:17-cv-00952-LG-FKB Document 6 Filed 12/11/17 Page 5 of 7

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

Borrowers from Madison County, Mississippi, to Cascade.

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

against the Borrowers for the collection of the Indebtedness.

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%

per annum as provided by the Forbearance Agreement.

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

collection of the Indebtedness.

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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Case 3:17-cv-00952-LG-FKB Document 6 Filed 12/11/17 Page 6 of 7

WHEREFORE, PREMISES CONSIDERED, Cascade prays for the following relief:

A. The immediate appointment of receiver to take possession and control of the

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

financing bonds payable to Borrowers by Madison County, Mississippi to Cascade as provided by

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

and costs, assessed to the Borrowers.

B. A joint and several Judgment against Livingston Holdings, LLC, Chestnut

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,

CASCADE CAPITAL GROUP, LLC

BY: WILLIFORD, McALLISTER & JACOBUS, LLP


303 Highland Park Cove, Suite A
Ridgeland, Mississippi 39157
(601) 991-2000

BY: /s/ Patrick F. McAllister


PATRICK F. McALLISTER, MSB #2177
TIFFANY PIAZZA GROVE, MSB #101455

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Case 3:17-cv-00952-LG-FKB Document 6 Filed 12/11/17 Page 7 of 7

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:

Harris H. Barnes III, Esq.


Barnes Law Firm, PA
5 River Bend Place, Suite A
Flowood, MS 39232-7618
tbarnes@barnes-lawfirm.com
Attorney for David Landrum

and by U.S. Mail, postage pre-paid to the following:

Livingston Holdings, LLC


Attn: Marna Sharpe, registered agent for Livingston Holdings, LLC
116 Livingston Church Road, Suite B
Flora, MS 39071

Chestnut Developers, LLC (“Chestnut”)


Attn: David Landrum, registered agent for Chestnut Developers, LLC
116 Livingston Church Road, Suite B
Flora, MS 39071

Michael L. Sharpe
920 Granite Drive, No. 405
Pasadena, CA 91101

DATED: this the 11th day of December, 2017.

BY: /s/Patrick F. McAllister


PATRICK F. McALLISTER, MSB #2177

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