Court Opinion

ID: 4642692
Source: CourtListenerOpinion
Date Created: 2020-12-14 19:00:18.063857+00
Date Added: 2024-06-11T08:00:34.793178
License: Public Domain

Case: 20-60310     Document: 00515671792         Page: 1     Date Filed: 12/14/2020

              United States Court of Appeals
                   for the Fifth Circuit                         United States Court of Appeals
                                                                          Fifth Circuit

                                                                        FILED
                                                                December 14, 2020
                                  No. 20-60310
                                                                   Lyle W. Cayce
                                                                        Clerk

   Cascade Capital Group, L.L.C.,

                                                           Plaintiff—Appellant,

                                       versus

   Livingston Holdings, L.L.C.; Chestnut Developers,
   L.L.C.; David Landrum; Michael L. Sharpe, also known
   as Mike Sharpe,

                                                         Defendants—Appellees.

                  Appeal from the United States District Court
                    for the Southern District of Mississippi
                            USDC No. 3:17-CV-952

   Before Jolly, Stewart, and Oldham, Circuit Judges.
   Per Curiam:*
          Plaintiff-Appellant Cascade Capital Group, L.L.C. (“Cascade”)
   brought suit against Defendants-Appellees Livingston Holdings, L.L.C.,
   Chestnut Developers, L.L.C., David Landrum, and Michael Sharpe

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-60310      Document: 00515671792          Page: 2   Date Filed: 12/14/2020

                                    No. 20-60310

   (“Borrowers”) due to their default on a Promissory Note and subsequent
   Forbearance Agreement. Following a bench trial, the district court
   determined that Borrowers breached the parties’ enforceable contract, but
   that Cascade had also breached its fiduciary duty to Livingston, Chestnut,
   and Sharpe (“Livingston/Chestnut/Sharpe”). Cascade filed a motion to
   alter or amend the judgment, which the district court denied. Cascade
   appeals the district court’s final judgment. We AFFIRM.
                       I. Facts & Procedural History
          In 2008, Borrowers began a project to re-develop the “Old Town” of
   Livingston, Mississippi. In 2011, Borrowers secured a loan from BankPlus to
   fund part of the project. Chestnut, who had acquired the land, provided
   BankPlus with a promissory note in the amount of $978,287.17, secured by a
   Deed of Trust. Livingston later sought help recapitalizing the project. In July
   2012, it engaged the consulting services of Cascade, whose sole member is
   Mark Calvert.
          When Borrowers faced default on their BankPlus loan, Calvert offered
   them a new loan, with a principal and interest total of $951,147, despite the
   conflict of interest posed by Calvert serving as both a lender and a financial
   advisor. Borrowers executed the Promissory Note, which was set to mature
   in March 2016. In April 2016, Borrowers executed a Forbearance Agreement.
   The Agreement required a $750,000 payment in December 2016, and
   purported to release Calvert and Cascade from any claims Borrowers may
   have against them. The Agreement was amended in July of 2016 to extend
   deadlines for other payments. Borrowers failed to make the December
   payment, placing them in default. Cascade filed a lawsuit in December 2017,
   seeking appointment of a receiver to take possession of Borrowers’ property,
   and a joint and several judgment for the principal and interest due, as well as
   attorney’s fees and collection costs.

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          All Borrowers except for Landrum filed counterclaims against
   Cascade. In February 2019, the court granted Cascade judgment on the
   pleadings as to Landrum. The same day, the court granted in part and denied
   in part Cascade’s motion for summary judgment. The court determined that
   Borrowers had breached their contract, but that there was a genuine issue of
   fact as to whether Cascade had breached its fiduciary duty. The court, in so
   concluding, rejected four arguments made by Cascade: (1) that the
   counterclaims were time-barred, (2) that Borrowers had waived their ability
   to make these claims by signing the exculpation clause, (3) that Borrowers
   waived their claims when signing the Forbearance Agreement, and (4) that
   Borrowers were estopped from repudiating the contracts, as they had
   benefited from them.
          In its final judgment, the court determined that Cascade owed a
   fiduciary duty to Livingston/Chestnut/Sharpe and had breached it. The
   court stated that the most “egregious” breach was when Calvert took
   unsecured debt (including his unpaid professional fees) and collateralized it.
   This further encumbered the land that previously only secured the BankPlus
   loan, to Calvert’s benefit and his clients’ detriment. The court voided the
   collateralization in order to put the parties in the position they would have
   occupied but for the breach, and found Livingston/Chestnut/Sharpe jointly
   and severally liable for $424,329.55, which was the original payoff balance on
   the BankPlus note. The court further determined that the land now only
   secured that sum.
          Cascade now appeals, arguing that Livingston/Chestnut/Sharpe’s
   claims were time-barred and, in the alternative, that they had waived said
   claims.

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                              II. Standard of Review
          In considering a final judgment from trial without a jury under Federal
   Rule of Civil Procedure 52, we review the district court’s findings of fact for
   clear error, and we review conclusions of law de novo. Chandler v. City of
   Dallas, 958 F.2d 85, 89 (5th Cir. 1992) (per curiam).
                                    III. Discussion
          (A) Statute of Limitations
          Cascade argues that any breach of fiduciary duty occurred with the
   execution     of    the   Promissory      Note      in   2014,   and   therefore
   Livingston/Chestnut/Sharpe’s counterclaims fall outside of Mississippi’s
   three-year statute of limitations. Miss. Code Ann. § 15–1–49. Cascade
   argues that the district court thus improperly applied equitable tolling, citing
   numerous cases for the proposition that equitable tolling is unavailable in
   circumstances like these. We disagree.
          The district court did not apply equitable tolling in this case, instead
   determining that Cascade’s wrongdoing continued beyond the execution of
   the Note in 2014, and that therefore the counterclaim was filed within the
   statute of limitations. Under Stevens v. Lake, “continuing or repeated injuries
   can give rise to liability even if they persist beyond the limitations period for
   the initial injury.” 615 So. 2d 1177, 1183 (Miss. 1993) (citing Hendrix v. City of
   Yazoo City, 911 F.2d 1102, 1103 (5th Cir. 1990)). Stevens is clear that while
   the principle does not apply “where harm reverberates from a single, one-
   time act,” it is applicable “in situations where the defendant commits
   repeated acts of wrongful conduct.” Id. The court stated that they did not
   find the date of the Note’s execution to be the date of the last instance of
   tortious conduct, stating that “Calvert repeatedly breached his fiduciary duty
   . . . the formation of the Note was just the first noted instance.”

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           Cascade contends that because there is a common causal origin of the
   breach (the execution of the Note), every wrongful action since reverberated
   from that origin. Cascade characterizes Calvert’s subsequent actions
   following the Note’s execution as a continuing harm, not repeated acts of
   wrongful conduct. This is inaccurate. The district court noted repeated,
   discrete acts in which Calvert breached his fiduciary duty, including an
   example in 2017 where Calvert instructed a bank to refuse to release the
   property unless Calvert was paid in full, causing Livingston’s negotiations
   with a prospective buyer to fall through. Actions like this cannot be described
   as merely a reverberating harm from an initial act of wrongdoing, but instead
   reflect “repeated acts of wrongful conduct.” Stevens, 615 So. 2d at 1183. 1
           The      district     court     did       not   err     in    concluding        that
   Livingston/Chestnut/Sharpe’s counterclaims were not time-barred.
           (B) Waiver or Forfeiture
           Cascade argues that Livingston/Chestnut/Sharpe’s execution of the
   Forbearance Agreement and subsequent Amendment waived their
   counterclaims. In support of this proposition, it cites to Holland v. Peoples
   Bank & Trust Co., 3 So. 3d 94 (Miss. 2008). Holland held that a plaintiff’s
   renewal of a defaulted note constituted waiver of all claims against the bank,

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             Cascade also argues that the district court improperly applied the “continuous
   representation rule.” It cites to a case where the court rejected a rule that the statute of
   limitations begins to run on the last day of representation by a lawyer, rather than when the
   malpractice occurred. Channel v. Loyacono, 954 So. 2d 415, 420–21 (Miss. 2007). This case
   is wholly inapplicable, because in that case there was no evidence showing the lawyers
   committed any negligent or fraudulent acts after the malpractice in question. Id. at 420.
   The district court did not determine that the statute of limitations began running on the
   last day of representation by Cascade, but rather stated that there were ongoing, repeated
   acts of breach that occurred within the three years before Livingston/Chestnut/Sharpe
   brought counterclaims.

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   including claims for breach of fiduciary duty. Id. at 103. However, the
   fiduciary duty in Holland was allegedly created by an escrow agreement that
   was part of the plaintiff and defendant’s ongoing creditor/debtor
   relationship, and it is therefore distinguishable. Id. at 97. As the district court
   correctly points out, “[t]his fiduciary relationship derives from the separate
   consulting services agreement, which was not ‘remedied’ or otherwise
   contractually by the Agreement[.]”We agree that there is no basis for holding
   that execution of a Forbearance Agreement can waive claims for breach of
   fiduciary duty unrelated to the debtor/creditor relationship.
          Cascade also argues that the Forbearance Agreement’s exculpatory
   clause waives counterclaims for breach of fiduciary duty. The clause provides
   that Borrowers:
          release, acquit and forever discharge [Cascade], its predecessors in
          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 of 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.
          Cascade argues that the district court incorrectly determined that
   Livingston/Chestnut/Sharpe’s signing of this indemnification agreement
   did not waive their counterclaims for breach of fiduciary duty. It notes that in
   Smith Barney, Inc. v. Henry, the Mississippi Supreme Court determined that
   the phrase “[a]ny controversy arising out of or relating to” referenced a
   claimed breach of fiduciary duty. 775 So. 2d 722, 726 (Miss. 2001). Cascade
   also relies on Russell v. Performance Toyota, Inc., 826 So. 2d 719, 723 (Miss.

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   2002) (concluding that arbitration clause language referring to “any
   controversy or claim arising out of or relating to the vehicle which is the
   subject of the contract” included claims for breach of fiduciary duty in those
   circumstances). We agree with the district court that this exculpatory clause
   failed to waive Livingston/Chestnut/Sharpe’s counterclaims.
          Both cases cited by Cascade are inapplicable, as they discuss the
   applicability of arbitration agreements, not the viability of exculpation
   clauses. This is a meaningful distinction, because “[t]he law does not look
   with favor on contracts intended to exculpate a party from the liability of his
   or her own negligence . . . .” Turnbough v. Ladner, 754 So. 2d 467, 469 (Miss.
   1999). While they are sometimes enforceable, “such agreements are subject
   to close judicial scrutiny and are not upheld unless the intention of the parties
   is expressed in clear and unmistakable language.” Id. Further, “[t]he
   wording of an exculpatory agreement should express as clearly and precisely
   as possible the extent to which a party intends to be absolved from liability.”
Id. (emphasis in original).
          Here, the exculpatory clause fails because it does not clearly explain
   the extent to which Cascade intends to be absolved from liability. The clause
   and the Forbearance Agreement generally do not acknowledge the consulting
   relationship between Cascade and Borrowers. Its disclaimer of liability for
   “breaches of duty” did not specify breaches of fiduciary duty, which may
   have alerted Borrowers that the clause was intended to cover potential claims
   Borrowers may have with respect to other aspects of their relationship with
   Cascade. Borrowers could reasonably have read this clause as only applying
   to claims relating to lending, as the Forbearance Agreement related only to
   Borrowers’ creditor/debtor relationship with Cascade. It lacks the requisite
   specificity expected from a successful disclaimer of liability, and therefore is
   not an effective waiver of Livingston/Chestnut/Sharpe’s counterclaims.

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          Finally, Cascade argues that Borrowers forfeited their counterclaim
   by failing to exercise their rights at the earliest practicable opportunity.
   However, Cascade did not make this argument in lower court briefing.
   Cascade argued to the district court a theory of “quasi-estoppel,” where one
   is prohibited from gaining a benefit under a contract and then avoiding the
   contract’s obligations. This new argument is distinct because while
   Cascade’s quasi-estoppel argument concerns obligations of a contract, this
   new theory involves rights against a fiduciary. Our court will generally not
   consider issues raised for the first time on appeal. See Martco Ltd. P’ship v.
   Wellons, Inc., 588 F.3d 864, 877 (5th Cir. 2009).
          The district court did not err in its determination that
   Livingston/Chestnut/Sharpe’s counterclaims were not waived or forfeited.
                                  IV. Conclusion
          For the foregoing reasons, we AFFIRM the district court’s final
   judgment.

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