IN THE UNITED STATES BANKRUPTCY COURT FOR ... - Active Cases

IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF TEXAS

SHERMAN DIVISION § In re § Chapter 11 § CFO MANAGEMENT HOLDINGS, LLC,1 § Case No. 19-40426 § Debtor. § Date/Time of Hearing: § Sept. 8, 2020, 2:30 p.m. CT § § Nature of Proceeding: § Motion to Sell Crescent Parc § [Docket No. 525] § Motion to Approve Mediation § Fee Payment [Docket No. 535]

WITNESS AND EXHIBIT LIST

David Wallace, Chapter 11 Trustee (the “Trustee”) for the above-captioned bankruptcy

case of CRO Management Holdings, LLC, files this Witness and Exhibit List for the hearing

scheduled for September 8, 2020 at 2:30 p.m. prevailing central time (or as such hearing may be

continued or rescheduled) before the Honorable Brenda T. Rhoades, United States Bankruptcy

Judge for the Eastern District of Texas, via telephone by dialing 1-888-675-2535 (use access

number 4225607 and security number 3633), on the following motions:

Chapter 11 Trustee’s Motion to Sell the Crescent Parc Commercial Property Free and Clear of Liens, Claims, and Encumbrances Under 11 U.S.C. § 363 [Docket No. 525]; and

Chapter 11 Trustee’s Motion for Approval of Payment of Mediation Fee to Edwin Paul Keiffer [Docket No. 535].

1 The following entities’ bankruptcy cases and estates have been substantively consolidated with that of Debtor CFO Management Holdings, LLC (EIN# XX-XXX6987) for all purposes (see Docket No. 248): Carter Family Office, LLC (Case No. 19-40432); Christian Custom Homes, LLC (Case No. 19-40431); Double Droptine Ranch, LLC (Case No 19-40429); Frisco Wade Crossing Development Partners, LLC (Case No. 19-40427); Kingswood Development Partners, LLC (Case No. 19-40434); McKinney Executive Suites at Crescent Parc Development Partners, LLC (Case No. 19-40428); North-Forty Development LLC (Case No. 19-40430); and West Main Station Development, LLC (Case No. 19-40433). The following mailing address can be used for the consolidated Debtor with respect to these cases: c/o David Wallace, Chapter 11 Trustee, 4131 North Central Expressway, Suite 775, Dallas, Texas 75204.

Case 19-40426 Doc 542 Filed 09/04/20 Entered 09/04/20 17:29:18 Desc MainDocument Page 1 of 3

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Docket #0542 Date Filed: 09/04/2020

CHAPTER 11 TRUSTEE’S WITNESS AND EXHIBIT LIST 2

EXHIBIT LIST

EXHIBIT DESCRIPTION OF EXHIBIT OFFERED OBJECTION ADMITTED

1 Purchase and Sale Agreement with CP380, LLC [Docket No. 525-1]

2 Amended Complaint in Adv. Case No. 19-04096 [Docket No. 27]

3 Amended Complaint in Adv. Case No. 20-04054 [Docket No. 28]

4 Declaration of David Wallace in Support of Docket Nos. 525 and 535 [Docket No. 541]

The Trustee reserves the right to offer any exhibits designated by any other party and to

offer exhibits necessary and appropriate as rebuttal evidence. The Trustee requests that the Court

take judicial notice of the full docket, pleadings, and other documents filed with the Court.

WITNESS LIST

1. David Wallace;

2. Anyone designated by any other party;

3. Any witness necessary to authenticate a document; and

4. Rebuttal and impeachment witnesses, as necessary.

The Trustee reserves the right to supplement this Witness and Exhibit List, as needed.

Dated: September 4, 2020 By: /s/ Jessica Lewis Judith W. Ross, State Bar No. 21010670 Jessica L. Voyce Lewis, State Bar No. 24060956 Ross & Smith, PC 700 N. Pearl Street, Suite 1610 Dallas, Texas 75201 Telephone: 214-377-7879 Facsimile: 214-377-9409 Email: [email protected] [email protected] COUNSEL TO CHAPTER 11 TRUSTEE DAVID WALLACE


CHAPTER 11 TRUSTEE’S WITNESS AND EXHIBIT LIST 3

CERTIFICATE OF SERVICE

I certify that on September 4, 2020, I served or caused to be served a copy of the foregoing document electronically on the Electronic Case Filing System for the United States Bankruptcy Court for the Eastern District of Texas. /s/ Jessica Lewis Jessica Lewis


IN RE CFO / CP380, LLC (disposition)PURCHASE AND SALE AGREEMENT

AND JOINT ESCROW INSTRUCTIONS

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PURCHASE AND SALE AGREEMENTAND

JOINT ESCROW INSTRUCTIONS(Crescent Parc, McKinney, Texas [disposition])

entered into by and between

David Wallace, as Chapter 11 Trustee in In re CFO Management Holdings, LLC before the United States Bankruptcy Court for the Eastern District of Texas – Sherman Division, Case No. 19-40426

(Seller)

and

CP380, LLC(Purchaser)

regarding that certain improved real propertycommonly known as

Crescent Parc,located in McKinney, Texas

1

Case 19-40426 Doc 542-1 Filed 09/04/20 Entered 09/04/20 17:29:18 Desc Exhibit 1 - Purchase and Sale Agreement Page 1 of 34

TABLE OF CONTENTSPage



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Section 1. Sale of Property .................................................................................................................. 4Section 2. Deposit ................................................................................................................................ 4Section 3. Title and Survey Matters..................................................................................................... 5Section 4. Purchaser’s Due Diligence.................................................................................................. 5

(a) Inspection Period ................................................................................................... 5(b) Physical Condition of the Property. ....................................................................... 6(c) Confidentiality. ...................................................................................................... 7

Section 5. DISCLAIMER OF WARRANTIES; “AS-IS, WHERE-IS, WITH ALL FAULTS” CONVEYANCE; INSPECTION...................................................................... 7(a) “As-Is, Where-Is, With All Faults” Conveyance................................................... 7(b) No Reliance ........................................................................................................... 8(c) No Seller Representations...................................................................................... 8(d) Additional Disclaimers .......................................................................................... 9(e) Purchaser’s Inspection Opportunity; Property Agreements................................... 9(f) Release................................................................................................................... 9(g) Advice from Legal Counsel................................................................................... 9

Section 6. Purchaser’s Representations, Warranties and Covenants. .................................................. 9(a) Purchaser Representations and Warranties.......................................................... 10(b) Purchaser Covenants............................................................................................ 11

Section 7. Default. ............................................................................................................................. 11(a) Default by Purchaser............................................................................................ 11(b) Default by Seller .................................................................................................. 12

Section 8. Prorations.......................................................................................................................... 12Section 9. Closing Costs .................................................................................................................... 12

(a) Seller’s Costs ....................................................................................................... 12(b) Purchaser’s Costs................................................................................................. 12(c) Legal Costs .......................................................................................................... 12

Section 10. Closing.............................................................................................................................. 12Section 11. Brokers.............................................................................................................................. 13Section 12. Assignability ..................................................................................................................... 13Section 13. Notices .............................................................................................................................. 13Section 14. Condemnation and Casualty ............................................................................................. 14Section 15. Escrow Agent.................................................................................................................... 15Section 16. Miscellaneous. .................................................................................................................. 16Section 17. Sale Order ......................................................................................................................... 16Section 18. Bankruptcy Court Approval.............................................................................................. 17

EXHIBITS

Exhibit “A” - Legal Description of the LandExhibit “B” - DeedExhibit “C” - Bill of Sale and AssignmentExhibit “D” - FIRPTA Certificate




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PURCHASE AND SALE AGREEMENTAND

JOINT ESCROW INSTRUCTIONS(Crescent Parc, McKinney, Texas [disposition])

THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS is entered into by and between Purchaser and Seller. Escrow Agent also executes this Agreement for the sole purpose of acknowledging and agreeing to comply with Sections 2 and 15 herein.

RECITALS

A. On April 24, 2019, Seller was appointed Chapter 11 Trustee of, among other assets, the Property.

B. Purchaser has submitted an offer to purchase the Property from Seller and, subject to obtaining the final approval of the Bankruptcy Court and the other terms and conditions set forth herein, Seller is willing to sell the Property to Purchaser as expressly set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser, intending to be legally bound, do hereby agree as follows:

DEFINITIONS

As used herein, the following terms have the following meanings:

“Agreement” means this Purchase and Sale Agreement and Joint Escrow Instructions.

“Bankruptcy Code” means Title 11 of the United States Code, Sections 101 et seq.

“Bankruptcy Court” means the United States Bankruptcy Court for the Eastern District of Texas presiding over the bankruptcy case of In re CFO Management Holdings, LLC, Case No. 19-40426.

“Bill of Sale and Assignment” means a bill of sale and assignment without representation or warranty of Seller’s interest in the Personal Property, the form of which is attached hereto as Exhibit “C”and incorporated herein by reference.

“Brokers” means collectively, Seller’s Broker and Purchaser’s Broker.

“Closing” means the consummation of the transaction contemplated by this Agreement.

“Closing Date” means the date of Closing as described in this Agreement.

“Closing Deadline” means 10:00 a.m. (Dallas, Texas time) on the date that is fifteen (15) days following the expiration of the Inspection Period.

“Commission” means a brokerage commission to be paid by Seller to Seller’s Broker.

“Deed” means a special warranty deed in recordable form, duly executed and acknowledged by Seller, conveying fee simple title to the Real Property to Purchaser, subject to the Permitted Exceptions, the form of which is attached hereto as Exhibit “B” and incorporated herein by reference.




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“Demand Notice” means a written notice sent by Escrow Agent to Purchaser and Seller advising that Purchaser or Seller, as the case may be, has demanded the Deposit.

“Deposit” means the Initial Deposit and the Second Deposit (once made), that may be held by Escrow Agent from time to time hereunder, and any interest earned on the Deposit or any portion thereof.

“Due Diligence Information” means copies of all of the following items related to the Property, but only to the extent same are in Seller’s actual physical possession: (i) the Property Agreements; (ii) title policies and/or commitments; (iii) environmental reports; (iv) engineering reports; (v) warranties or guaranties on any of the Personal Property; (vi) drawings or plans and specifications; and (vii) any surveys.

“Effective Date” means the date of receipt by the escrow Agent of a fully executed Agreement.

“Environmental Laws” means all federal, state and/or local laws, rules, regulations, orders and other directives concerning hazardous substances, pollution, hygiene or the protection of the environment.

“Escrow Agent” means Benchmark Title Services, LLC, as agent for the Title Company.

“FIRPTA Certificate” means a certificate sufficient to comply with the non-foreign affidavit exemption to the withholding requirement of Section 1445 of the Internal Revenue Code, the form of which is attached hereto as Exhibit “D” and incorporated herein by reference.

“Improvements” means all or any portion, as the context may require, of the buildings and other improvements located on the Land.

“Independent Consideration” means the sum of $100.00.

“Inspection Period” means the period of time beginning on the Effective Date and ending thirty-seven (37) days thereafter at 5:00 pm (Dallas, Texas time).

“Initial Deposit” means $100,000.00, and any interest earned thereon.

“Intangible Property” means all or any portion, as the context may require, of the following items, if any, to the extent they are in Seller’s actual physical possession: (i) licenses, permits, specifications or similar documents relating to the Real Property; and (ii) all other items of intangible personal property owned or held by Seller that relate in any way to the construction, ownership, use, leasing, maintenance, service or operation of the Real Property, but specifically excluding the Property Agreements.

“Land” means all or any portion, as the context may require, of that certain real property located in Collin County, Texas, and being more particularly described on Exhibit “A” attached hereto and incorporated herein by reference (provided that such description shall be automatically updated to reflect the description set forth in the initial Title Commitment to be provided by Seller as set forth herein if the description in such Title Commitment contains minor differences from that set forth on Exhibit “A”).

“Lists” means collectively the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to the Order and/or any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders.

“OFAC” means the Office of Foreign Assets Control, U.S. Department of the Treasury.

“Order” means Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001).




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“Orders” means collectively the Order and any other rules, regulations, legislation or orders related to the Order.

“Owner’s Policy” means an owner’s policy of title insurance in the amount of the Purchase Price, to be issued by the Title Company to Purchaser.

“Permitted Exceptions” means (i) any standard printed exceptions contained on the Title Commitment; (ii) any unrecorded exceptions (including the Property Agreemens) and exceptions of record; (iii) all applicable zoning ordinances, other land use laws and regulations; (iv) taxes for the current tax year which are a lien not yet payable; (v) matters deemed Permitted Exceptions pursuant to Section 3; (vi) any matters that would be shown by a complete and accurate survey of the Real Property; and (vii) matters affecting the Real Property created by or with the written consent of Purchaser and Seller, provided that, in no event shall deeds of trust, mechanics’ liens, attachments, judgments, liens to secure the payment of income taxes of Seller to the extent caused or consented to by Seller, or created by Seller’s inaction, and which can be removed by the payment of a sum, as well as delinquent property tax and assessment liens against the Real Property be “Permitted Exceptions.”

“Personal Property” means (i) all or any portion, as the context may require, of any furniture, fixtures, equipment, appliances keys, access devices and other items of personal property owned by Seller, used in direct connection with the operation of the Real Property and which (for tangible personal property) are located on or in the Real Property as of the Effective Date and (ii) the Intangible Property.

“Property” means all of the real property and personal property listed in Section 1.

“Property Agreements” means all contracts to purchase contemplated unit(s) located or to be located on the Land, leases encumbering the Land, and construction contracts, maintenance, service, and utility contracts to which Seller, as the Trustee in the bankruptcy case of In re CFO Management Holdings, LLC, Case No. 19-40426 (or the applicable debtor in such case, as applicable), is a party, if any.

“Purchase Price” means Seventeen Million Four Hundred Seventy Five Thousand and 00/100 Dollars ($17,475,000).

“Purchaser” means CP380, LLC, a Texas limited liability company.

“Purchaser’s Broker” means Hank Schlachter.

“Purchaser’s Representatives” means Purchaser and Purchaser’s directors, officers, employees, agents, affiliates or other representatives (including without limitation, attorneys, accountants, engineers, experts, consultants, contractors, financial advisors, and any other person or entity performing services for Purchaser in connection with this Agreement), and their respective successors and assigns.

“Real Property” means the Land and the Improvements.

“Released Portion of the Initial Deposit” means $15,000.00.

“Sale Hearing” means a hearing before the Bankruptcy Court at which the Seller’s motion to sell the Property is considered.




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“Sale Order” means an order of the Bankruptcy Court in form and substance reasonably satisfactory to Seller approving, inter alia, the sale of the Property to Purchaser free and clear of any encumbrances (other than the Permitted Exceptions).

“Second Deposit” means $150,000.00, and any interest earned thereon.

“Substantial Portion” has the meaning set forth in Section 14 hereof.

“Seller” means David Wallace, as Chapter 11 Trustee in In re CFO Management Holdings, LLC before the United States Bankruptcy Court for the Eastern District of Texas – Sherman Division, Case No. 19-40426.

“Seller’s Broker” means Edge Realty Partners.

“Termination Notice” means written notice given by Purchaser to Seller prior to the end of the Inspection Period stating that Purchaser has elected to terminate this Agreement.

“Title Commitment” means a title insurance commitment with respect to the Real Property issued by the Title Company.

“Title Company” means the title company that agrees to issue the Owner’s Policy pursuant to the Title Commitment.

“Title Defects” means any matters in the Title Commitment to which Purchaser timely objects.

“Title Objection Notice” means Purchaser’s written notice to Seller describing the Title Defects.

AGREEMENT

Section 1. Sale of Property. For the Purchase Price and subject to the terms and conditions hereof, Seller agrees to sell, convey, assign, transfer and deliver to Purchaser, and Purchaser agrees to purchase, acquire and take from Seller, the following described Property:

(a) the Real Property, together all of Seller’s interest, if any, in all rights, privileges, easements, hereditaments and appurtenances, if any, benefiting the Real Property;

(b) all of Seller’s interest, if any, in the Personal Property, to the extent assignable without the payment of any fees or the consent of any third party;

Section 2. Deposit. Within three (3) days of the Effective Date, Purchaser agrees to deposit with Escrow Agent the Initial Deposit. Escrow Agent will pay directly to Seller the Released Portion of the Initial Deposit, and the balance it shall invest in an interest-bearing account following receipt of an executed W-2 from Purchaser. Within one (1) day after the expiration of the Inspection Period, Purchaser shall deposit the Second Deposit with Escrow Agent, which Escrow Agent will accept and invest in the same interest-bearing account as the applicable proceeds of the Initial Deposit. The Deposit (including the Released Portion of the Initial Deposit) shall be applicable to the Purchase Price as set forth herein, and shall be non-refundable in all respects after the expiration of the Inspection Period, except as otherwise set forth herein. The Released Portion of the Initial Deposit shall be non-refundable to Purchaser when made, unless the final approval of the Bankruptcy Court is not granted as described in Section 18 hereof, or, if




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granted, Seller otherwise is unable or unwilling to convey title to the Property to Purchaser pursuant to the terms hereof, in which case Seller shall repay the Released Portion of the Initial Deposit to Purchaser.

Section 3. Title and Survey Matters.

(a) Seller, at Seller’s expense, shall provide Purchaser with the Title Commitmentwithin ten (10) days from the Effective Date.

(b) Purchaser shall review the Title Commitment and, on or before ten (10) days following the receipt by Purchaser of the Title Commitment, deliver to Seller the Title Objection Notice. In the event Purchaser timely and properly objects to any Title Defect, Seller shall have the right (but without any obligation to do so) to attempt to cure such Title Defect within five (5) days thereafter. In the event that Seller does not cure any of the Title Defect within said five (5) day period or has not within said five (5) days agreed in writing to cure such Title Defect on or before Closing, then Purchaser may, at Purchaser’s option, either:

(i) elect to accept title to the Property subject to the Title Defect without any adjustment to the Purchase Price, in which event the Title Defect and any other additional Title Defects shall be deemed Permitted Exceptions; or

(ii) terminate this Agreement by providing written notice of termination to Seller not later than five (5) days thereafter, in which event this Agreement shall be deemed terminated, the Initial Deposit and the Released Portion of the Initial Deposit shall be returned to Purchaser, less the Independent Consideration, and both parties shall thereafter be released from all further obligations hereunder except as expressly stated otherwise herein.

In the event Purchaser fails to timely and properly terminate this Agreement as set forth in option (ii) above, then Purchaser shall be deemed to have selected option (i) above. Purchaser may, at Purchaser’s sole cost and expense, obtain any and all endorsements to the Owner’s Policy which Purchaser desires to obtain in connection with this transaction.

Section 4. Purchaser’s Due Diligence

(a) Inspection Period. Within three (3) days following the Effective Date, Seller shall make available or deliver the Due Diligence Information within Seller’s actual possession to Purchaser,without representation or warranty of any kind, for Purchaser’s review. Seller and Purchaser hereby acknowledge that Purchaser has not yet had an opportunity to complete its due diligence review of the Property and to fully review and evaluate this transaction. If, on or before 5:00 p.m. (Dallas, Texas time) on the final day of the Inspection Period, Purchaser determines, in its sole and absolute discretion, that Purchaser does not desire to purchase the Property, then Purchaser shall have the right to give the Termination Notice to Seller. In the event that Seller receives the Termination Notice on or before 5:00 p.m. (Dallas, Texas time) on the final day of the Inspection Period, then this Agreement shall be deemed terminated, Seller shall instruct Escrow Agent to return the Initial Deposit, less the Independent Consideration and the Released Portion of the Initial Deposit, to Purchaser and Seller and Purchaser shall be released from all further obligations to each other under this Agreement except as expressly stated otherwise herein. In the event that Seller does not receive the Termination Notice on or before 5:00 p.m. (Dallas, Texas time) on the final day of the Inspection Period, the contingency set forth in this Section 4(a)shall be deemed satisfied and/or waived by Purchaser and, except as otherwise specifically set forth in this Agreement, Purchaser shall have no right to terminate this Agreement.




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(b) Physical Condition of the Property.

(i) Subject to the terms of this Section, Purchaser and the Purchaser’s Representatives shall have access to the Property at reasonable times during Seller’s normal business hours upon reasonable prior notice on or before the end of the Inspection Period in order to:

(1) inspect the physical condition of the Property;

(2) conduct a Phase I environmental site assessment (noninvasive); and

(3) conduct any other reasonable examinations with respect to the Property as Purchaser or the Purchaser’s Representatives may deem reasonably necessary. Seller shall designate a representative to coordinate access to the Property for Purchaser and the Purchaser’s Representatives and shall provide Purchaser with contact information for such designated representative. Purchaser shall coordinate all access to the Property with Seller’s designated representative. Purchaser shall make any request for access to the Property a reasonable period of time prior to the date access is desired. Purchaser and the Purchaser’s Representatives shall not have the right to access the Property at any time that Seller, in its sole and absolute discretion, determines would be unreasonably disruptive. Purchaser and the Purchaser’s Representatives shall not conduct any test, examination or inspection that would be unreasonably disruptive to Seller’s operations at the Property or would increase Seller’s liability with respect to the Property. In the event that any test, examination or inspection discloses a condition that could reasonably be considered dangerous or capable of causing injury to a person or property, Purchaser shall immediately notify Seller of the existence of such condition, shall provide such information as Seller may request in connection therewith, and shall take commercially reasonable steps to minimize the adverse effect that the test, examination or inspection may have on such condition. Purchaser and the Purchaser’s Representatives shall enter the Property at their own risk. Seller shall not be liable in any way for any damages or losses suffered by such parties. Purchaser shall be solely responsible for all costs and expenses in connection with Purchaser’s testing, examination and inspection of the Property. Purchaser shall comply with all laws, including without limitation, Environmental Laws, applicable to Purchaser’s testing, examination and inspection of the Property. Purchaser shall immediately remove or bond to Seller’s satisfaction any lien or other encumbrance which attaches to the Property in connection with Purchaser’s testing, examination and inspection of the Property. Upon completion of any test, examination or inspection, Purchaser shall restore any damage to the Property caused by such test, examination or inspection. Purchaser shall provide Seller with copies of all final reports generated as a result of Purchaser’s testing, examination and inspection of the Property. Purchaser hereby indemnifies, defends and holds Seller and itsrespective partners, members, managers, directors, officers, shareholders, employees, agents, advisors and affiliates, and their respective successors and assigns, harmless from all losses, liabilities, costs and expenses (including without limitation, reasonable attorneys’ fees and court costs through all trial and appellate levels), damages, liens or alleged liens (including without limitation, mechanic’s liens and materialmen’s liens or claims of liens), claims, actions and causes of action arising or resulting from or relating to: (i) Purchaser’s or Purchaser’s Representatives’ access to the Property; (ii) Purchaser’s or Purchaser’s Representatives’ performance of tests, examinations or inspections of the Property, whether pursuant to this Section or otherwise; and (iii) failure to pay any costs and expenses in connection with Purchaser’s due diligence and/or otherwise in connection with Purchaser’s or Purchaser’s Representatives’ testing, examination and inspection




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of the Property, including without limitation, Purchaser’s failure to remove or bond any lien placed on the Property as a result of Purchaser’s testing, examination and inspection of the Property.

(ii) Purchaser may engage only qualified, fully licensed contractors, subcontractors or consultants to perform any testing, examination and inspection of the Property. No contractual, legal or other relationship shall be created between Seller and any such contractor, subcontractor or consultant as a result of Purchaser’s engagement of such contractor, subcontractor or consultant. This Agreement shall not create any obligation on the part of Seller to pay any sum to any contractor, subcontractor or consultant or to see that payment is made by Purchaser to any contractor, subcontractor or consultant.

(iii) Purchaser and any Purchaser’s Representative desiring access to the Property must have: (1) broad form commercial general liability insurance (occurrence insurance) with combined limits of not less than $1,000,000.00; (2) business automobile liability insurance (occurrence insurance) for any owned, hired and non-owned vehicles with combined limits of not less than $1,000,000.00; and (3) worker’s compensation insurance in compliance with applicable laws. Any Purchaser’s Representative desiring access to the Property in order to perform an invasive environmental test must also have: (x) professional liability or errors and omissions insurance with combined limits of not less than $1,000,000.00; and (y) pollution liability insurance with combined limits of not less than $1,000,000.00, both with retroactive policy dates prior to or the same as the Effective Date. All insurance policies providing such coverage must name Seller as an additional insured. Except where prohibited by law, all insurance policies must contain provisions waiving the applicable insurance companies’ rights of recovery and subrogation against Seller. No cancellation or modification of any such insurance coverage may be effective against Seller unless the insurance company provides a notice of cancellation or modification to Seller at least thirty (30) days prior to the effective date of the cancellation or modification. No person or entity desiring access to the Property shall have the right to access the Property until such person or entity delivers to Seller certificates of insurance evidencing the required coverage. Notwithstanding anything to the contrary contained in this Agreement, the insurance requirements set forth herein are not intended to, and shall not be deemed to, limit Purchaser’s liability for any of its obligations under this Agreement.

(c) Confidentiality.

(i) All Property-related information obtained by Purchaser or Purchaser’s Representatives shall be treated by Purchaser as strictly confidential information. Purchaser shall instruct all of the Purchaser’s Representatives as to the strict confidentiality of such information and shall require that all such parties keep such information strictly confidential. Purchaser shall not, except with the express prior written consent of Seller, directly or indirectly: (1) disclose or permit the disclosure of any information to any person or entity except the Purchaser’s Representatives; or (2) use any such information for any purpose other than evaluating the contemplated purchase of the Property.

Section 5. DISCLAIMER OF WARRANTIES; “AS-IS, WHERE-IS, WITH ALL FAULTS” CONVEYANCE; INSPECTION.

(a) “As-Is, Where-Is, With All Faults” Conveyance. PURCHASER REPRESENTS, WARRANTS AND ACKNOWLEDGES TO SELLER AND AGREES WITH SELLER THAT SAVE AND EXCEPT (I) THE LIMITED WARRANTIES CONTAINED WITHIN THE DEED; AND (II) THE WARRANTY REGARDING BROKERS’ COMMISSIONS SET FORTH HEREIN, PURCHASER IS




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PURCHASING THE PROPERTY IN AN “AS-IS, WHERE-IS” CONDITION “WITH ALL FAULTS”AND SPECIFICALLY AND EXPRESSLY WITHOUT ANY WARRANTIES, REPRESENTATIONS OR GUARANTIES, EITHER EXPRESS OR IMPLIED, OF ANY KIND, NATURE OR TYPE WHATSOEVER, FROM OR ON BEHALF OF SELLER. PURCHASER ACKNOWLEDGES THAT SELLER HAS INFORMED PURCHASER THAT SELLER HAS LITTLE OR NO DIRECT OR ACTUAL KNOWLEDGE CONCERNING THE PHYSICAL OR ECONOMIC CHARACTERISTICS OF THE PROPERTY. PURCHASER ACKNOWLEDGES THAT IT HAS NOT RELIED, AND IS NOT RELYING, UPON ANY INFORMATION, DOCUMENT, SALES BROCHURES OR OTHER LITERATURE, MAPS OR SKETCHES, PROJECTION, PROFORMA, STATEMENT, REPRESENTATION, GUARANTEE OR WARRANTY (WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, OR MATERIAL OR IMMATERIAL) THAT MAY HAVE BEEN GIVEN OR MADE BY, OR ON BEHALF OF, SELLER.

(b) No Reliance. Purchaser hereby acknowledges that it is not entitled to, and should not, rely on Seller or its agents as to (i) the quality, nature, adequacy or physical condition of the Property, including, but not limited to, the structural elements, foundation, roof, appurtenances, access, landscaping, parking facilities or the electrical, mechanical, HVAC, plumbing, sewage or utility systems, facilities or appliances at the Property, if any; (ii) the quality, existence, nature, adequacy or physical condition of soils, sub-surface support or ground water at the Property; (iii) the existence, quality, nature, adequacy or physical condition of any utilities serving the Property; (iv) the existence, quality, nature or adequacy of an ability to access utilities, including, but not limited to, electricity, natural gas, water and sewer; (v) the existence, quality, nature, adequacy, physical condition or ability to access any rights-of-way or roads of any kind; (vi) the development potential of the Property, its habitability, merchantability, fitness, suitability or adequacy for any particular purpose; (vii) the zoning classification, use or other legal status of the Property; (viii) the existence, applicability, quality or nature of any setback requirements; (ix) the Property’s or its operations’ compliance with any applicable codes, laws, regulations, statutes, ordinances, covenants, conditions or restrictions of any governmental or quasi-governmental entity or of any other person or entity; (x) the quality of any labor or materials relating in any way to the Property; or (xi) the condition of title to the Property or the nature, status or extent of any right, encumbrance, license, reservation, covenant, condition, restriction or any other matter affecting title to the Property. Purchaser acknowledges that Seller is making no representations, warranties or covenants with respect to any of the Property Agreements in this Agreement, including, without limitation, the existence or status of any Property Agreements, whether any Property Agreements are in effect, and whether any default exists under such Property Agreements (by Seller, the counterparty to such Property Agreements or otherwise). Nothing set forth in this Agreement shall be interpreted to be an agreement by or obligation of Seller to pay any monetary sums, cure any default or otherwise take any action with respect to the Property Agreements. For the avoidance of doubt, the Property Agreements are not included in the sale from Seller to Purchaser contemplated herein and shall not be assigned at Closing.

(c) No Seller Representations. PURCHASER ACKNOWLEDGES TO AND AGREES WITH SELLER THAT WITH RESPECT TO THE PROPERTY, SAVE AND EXCEPT (I) THE LIMITED WARRANTIES CONTAINED WITHIN THE DEED; AND (II) THE WARRANTY REGARDING BROKERS’ COMMISSIONS SET FORTH HEREIN, SELLER HAS NOT MADE, DOES NOT MAKE AND WILL NOT MAKE ANY WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING, BUT IN NO WAY LIMITED TO, ANY WARRANTY OF CONDITION, MERCHANTABILITY, HABITABILITY OR FITNESS FOR A PARTICULAR USE, OR WITH RESPECT TO THE VALUE, PROFITABILITY OR MARKETABILITY OF THE PROPERTY.




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(d) Additional Disclaimers. PURCHASER WARRANTS THAT IT IS KNOWLEDGEABLE IN REAL ESTATE MATTERS. PURCHASER ACKNOWLEDGES THAT, SAVE AND EXCEPT (I) THE LIMITED WARRANTIES CONTAINED WITHIN THE DEED; AND (II) THE WARRANTY REGARDING BROKERS’ COMMISSIONS SET FORTH IN THIS AGREEMENT, SELLER HAS NOT MADE, DOES NOT MAKE AND WILL NOT MAKE ANY REPRESENTATION OR WARRANTY WITH REGARD TO COMPLIANCE WITH ANY ENVIRONMENTAL OR OCCUPATIONAL PROTECTION, POLLUTION, SUBDIVISION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS, INCLUDING, BUT NOT LIMITED TO, THOSE PERTAINING TO THE HANDLING, GENERATING, TREATING, STORING OR DISPOSING OF ANY HAZARDOUS WASTE, MATERIAL OR SUBSTANCE.

(e) Purchaser’s Inspection Opportunity; Property Agreements. As set forth in this Agreement, Purchaser acknowledges that Purchaser will be given an adequate opportunity to make such legal, factual and other inquiries and investigations as Purchaser deems necessary, desirable or appropriate with respect to the Property. Such inquiries and investigations of Purchaser will be deemed to include, but will not be limited to, the physical components of all portions of the Property; the condition of the Property, including the existence of any hazardous waste, material or substance; the existence of any wood destroying organisms on the Property; such state of facts as an accurate survey would show; zoning ordinances, resolutions and regulations of the city, county and state where the Property is located; and the value and marketability of the Property. Furthermore, Purchaser acknowledges that Seller and/or prior owners of the Property may be in default under one or more of the Property Agreements, and that Seller shall not be obligated to cure any such default(s), if any, or take any action(s) whatsoever with respect to the Property Agreements. If Purchaser elects not to inspect the Property or to terminate this Agreement within the Inspection Period, Purchaser acknowledges that such election will be made in Purchaser’s sole and absolute discretion, in reliance solely upon the tests, analyses, inspections and investigations that Purchaser makes, or had the right to make and opted not, or otherwise failed, to make, and not in reliance upon any alleged representation made by or on behalf of Seller.

(f) Release. Without in any way limiting the generality of the preceding Sections 5(a)through 5(e), Purchaser, on behalf of itself, its successors and assigns, specifically acknowledges and agrees that upon Closing this transaction it forever waives, releases and discharges any claim it has, might have had or may have against Seller or any officer, director, employee, agent, contractor, servicer or affiliate of Seller, with respect to the following: the condition of the Property, either patent or latent; Seller’s or Purchaser’s ability or inability to obtain or maintain building permits, either temporary or final certificates of occupancy, other licenses for the use or operation of the Property and/or certificates of compliance for the Property; the actual or potential income or profits to be derived from the Property; the real estate taxes or assessments now or hereafter payable thereon; the compliance with any environmental or occupational protection, pollution, subdivision or land use laws, rules, regulations or requirements or liability for violations thereof; any matter whatsoever in connection with the Property Agreements (including, without limitation, any default(s) under such Property Agreements, if any, prior to or after Closing); and any other state of facts which exists with respect to the Property.

(g) Advice from Legal Counsel. Purchaser hereby specifically acknowledges that Purchaser has carefully reviewed the preceding Sections 5(a) through 5(f) and discussed their import with legal counsel (or had the opportunity, but opted not, to do so), that Purchaser is fully aware of their consequences and that they are a material part of this Agreement. The provisions of this Section 5 will survive the termination of this Agreement or Closing.

Section 6. Purchaser’s Representations, Warranties and Covenants.




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(a) Purchaser Representations and Warranties. Purchaser represents and warrants to Seller as follows, which representations and warranties shall be true and correct as of both the Effective Date and the Closing Date:

(i) Purchaser is a Texas limited liability company that is in good standing under the laws of the State of Texas and the laws of the State of its formation (if Purchaser was not formed in Texas).

(ii) Purchaser has all necessary power and authority to enter into this Agreement and to perform all of Purchaser’s obligations hereunder.

(iii) This Agreement has been duly and validly executed and delivered by Purchaser and this Agreement constitutes the valid and legally binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and except that the availability of legal and equitable remedies is subject to the discretion of the court before which any proceeding may be brought).

(iv) The execution, delivery, performance or compliance with this Agreement by Purchaser and the transfer of Seller’s right, title and interest in the Property to Purchaser pursuant to this Agreement shall not: (1) violate or conflict with Purchaser’s governing documents; or (2) result in a breach or violation of, or constitute a default under, any mortgage, indenture, contract or agreement, lease, instrument, judgment, decree, order or award binding on Purchaser or to which Purchaser is a party.

(v) There are no judgments, bankruptcy or other insolvency proceedings or pending litigation against Purchaser.

(vi) Purchaser has sufficient funds to pay the Purchase Price plus adjustments as required herein, as well as all of its closing costs and expenses.

(vii) Purchaser represents and warrants to Seller that Purchaser is in compliance with the requirements of the Order and other similar requirements contained in the rules and regulations of OFAC and in any enabling legislation or other Executive Orders or regulations in respect thereof. Further, Purchaser covenants and agrees to make its policies, procedures and practices regarding compliance with the Orders, if any, available to Seller for its review and inspection during normal business hours and upon reasonable prior notice. Purchaser represents and warrants that neither Purchaser nor any beneficial owner of Purchaser is (i) named on any one or more of the Lists; (ii) a person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders; or (iii) owned or controlled by, or acts for or on behalf of, any person or entity on the Lists or any other person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders. Purchaser hereby covenants and agrees that if Purchaser obtains knowledge that Purchaser or any of its beneficial owners becomes listed on the Lists or is indicted, arraigned or custodially detained on charges involving money laundering or predicate crimes to money laundering, Purchaser will immediately notify Seller in writing, and in such event Seller will have the right to terminate this Agreementimmediately upon delivery of written notice thereof to Purchaser. To enable Seller to assess Purchaser’s compliance with this Section, Purchaser will deliver to Seller from time to time such reasonable and customary information regarding itself and/or any one or more of its beneficial owners.




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(b) Purchaser Covenants. Purchaser covenants to Seller as follows:

(i) Purchaser shall use commercially reasonable efforts to promptly conduct such tests, examinations and inspections as are necessary for Purchaser to determine if it desires to purchase the Property.

(ii) If Purchaser intends to obtain financing in order to purchase the Property, Purchaser shall use commercially reasonable efforts to promptly apply for and diligently pursue such financing; provided, however, that in no event shall Purchaser’s inability to obtain such financing be a condition to Purchaser’s obligations hereunder.

(iii) Purchaser covenants and agrees to make its policies, procedures and practices regarding compliance with the Orders, if any, available to Seller for its review and inspection during normal business hours and upon reasonable prior notice. Purchaser represents and warrants that neither Purchaser nor any beneficial owner of Purchaser is (i) named on any one or more of the Lists; (ii) a person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders; or (iii) owned or controlled by, or acts for or on behalf of, any person or entity on the Lists or any other person or entity who has been determined by competent authority to be subject to the prohibitions contained in the Orders. Purchaser hereby covenants and agrees that if Purchaser obtains knowledge that Purchaser or any of its beneficial owners becomes listed on the Lists or is indicted, arraigned or custodially detained on charges involving money laundering or predicate crimes to money laundering, Purchaser will immediately notify Seller in writing, and in such event Seller will have the right to terminate this Agreementimmediately upon delivery of written notice thereof to Purchaser. To enable Seller to assess Purchaser’s compliance with this Section, Purchaser will deliver to Seller from time to time such reasonable and customary information regarding itself and/or any one or more of its beneficial owners.

Section 7. Default.

(a) Default by Purchaser. Purchaser shall be in default of this Agreement if Purchaser fails to perform any obligation under this Agreement, or if there is a breach of any representation, warranty or covenant of Purchaser contained in this Agreement, and such failure or breach is not cured by Purchaser within five (5) days after the date Seller provides Purchaser with written notice of such failure or breach. In the event of Purchaser’s default that is not timely cured, Escrow Agent shall deliver the Deposit (that has not already been delivered) to Seller as agreed upon liquidated damages for such breach. Upon Seller’s receipt of the Deposit, the parties shall be relieved of all further obligations hereunder; provided, however, that Purchaser shall not be released from and shall remain additionally liable for any liability that expressly survives the closing or earlier termination of this Agreement. PURCHASER AND SELLER HEREBY ACKNOWLEDGE AND AGREE THAT SELLER’S DAMAGES IN THE EVENT OF PURCHASER’S DEFAULT WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE, THAT THE AMOUNT OF THE DEPOSIT IS THE PARTIES’ BEST AND MOST ACCURATE ESTIMATE OF THE DAMAGES SELLER WOULD SUFFER IN THE EVENT OF PURCHASER’S DEFAULT, AND THAT THE AMOUNT OF THE DEPOSIT IS REASONABLE UNDER THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS AGREEMENT. Notwithstanding anything contained in this Agreement to the contrary, Purchaser shall not be entitled to notice and the opportunity to cure Purchaser’s failure to close the transaction contemplated by this Agreement on the Closing Date.




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(b) Default by Seller. Seller shall be in default of this Agreement if Seller fails to perform any obligation under this Agreement and such failure or breach is not cured by Seller within five (5) days after the date Purchaser provides Seller with written notice of such failure or breach. In the event of Seller’s default that is not timely cured, Purchaser may either (i) elect in writing to terminate this Agreement, whereupon Escrow Agent shall return the Deposit and the Released Portion of the Initial Deposit to Purchaser, or (ii) subject to receipt of the Sale Order in all respects, elect to pursue specific performance for the conveyance of the Property.

(c) The remedies set forth above are the sole and exclusive remedies of Seller and Purchaser with respect to any default herein that is not timely cured.

Section 8. Prorations. Real estate taxes, assessments and all other expense items and income items (if any) relating the Property shall be prorated as of the Closing Date. All items subject to proration pertaining to the period prior to the Closing Date shall be credited or charged to Seller. All items subject to proration pertaining to the period on and after the Closing Date shall be credited or charged to Purchaser. All prorations which can be liquidated accurately or reasonably estimated as of the Closing Date shall be made as of the Closing Date. All other prorations shall be made in good faith, subject to a right to reprorate when actual amounts can be determined. In the event that any tax bill for the current fiscal tax year (as of the Closing Date) is not available before the Closing Date, then any such taxes shall be prorated based on the prior year’s tax statement. All prorations shall be final at Closing.

Section 9. Closing Costs. At Closing, Seller and Purchaser shall pay the following costs:

(a) Seller’s Costs. Seller shall pay (i) one-half (1/2) of the escrow fees charged by Escrow Agent; (ii) the based premium of the Owner’s Policy (but not for any extended coverage, loan policy or endorsements thereto) and (iii) the Commission due to the Seller’s Broker, which Seller’s Broker shall then pay the 0.5% commission due to Purchaser’s Broker out of the Commission paid to Seller’s Broker.

(b) Purchaser’s Costs. Purchaser shall pay all other closing costs.

(c) Legal Costs. Each party shall be responsible for payment of its own legal fees, except as provided in Section 16(d).

Section 10. Closing. So long as Seller has received the Sale Order, the Closing shall be held at 10:00 AM (Central Time) on a mutually agreed Closing Date (which shall not be later than the Closing Deadline unless such deadline is extended in order to obtain the Sale Order as provided in this Agreement)in an escrow closing coordinate by the Escrow Agent. At Closing, the following shall occur:

(a) Seller shall have obtained a file-stamped copy of the Sale Order and will provide same to the Title Company.

(b) Seller shall execute and deliver to Escrow Agent the following documents with respect to the Property:

(i) the Deed;

(ii) the Bill of Sale and Assignment;

(iii) a FIRPTA Certificate; and




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(iv) such copies of documents which effectuate the sale of the Property by Seller to Purchaser and all closing documents reasonably required by Escrow Agent or the Title Company consistent with this Agreement.

(c) Purchaser shall deliver the Purchase Price (subject to prorations and adjustments, including without limitation, if applicable, a credit for the Deposit) and any other necessary Closing funds by wire transfer of immediately available funds to an account designated by Escrow Agent.

(d) Seller shall execute and deliver to Escrow Agent a closing statement (which shall be prepared by Escrow Agent) describing all funds due to Seller in connection with the sale of the Property to Purchaser, all Closing costs to be paid by Seller, all prorations to be made in accordance with Section 9, and any other matters reasonably requested by Escrow Agent or Purchaser. Escrow Agent shall countersign the closing statement to indicate that it is acting as the closing agent for the transaction. Purchaser shall execute and deliver to Escrow Agent a counterpart signature to the closing statement (which shall be prepared by Escrow Agent) describing all funds due from Purchaser in connection with the sale of the Property to Purchaser, all Closing costs to be paid by Purchaser, all prorations to be made in accordance with Section 9, and any other matters reasonably requested by Escrow Agent or Seller. Escrow Agent shall countersign the closing statement to indicate that it is acting as the closing agent for the transaction.

(e) Purchaser and Seller shall execute and deliver to Escrow Agent all documents reasonably necessary to consummate the Closing. Upon Escrow Agent’s receipt of all necessary Closing documents and funds, and Escrow Agent’s confirmation that it is ready to close in accordance with the terms of this Agreement and with the terms of any additional Closing instructions provided by Seller and/or Purchaser, Seller and Purchaser shall instruct Escrow Agent to close the transaction. Escrow Agent shall then close the transaction, shall distribute documents to the appropriate parties and shall deliver the net Closing proceeds (the Purchase Price minus any Closing costs Seller agreed to pay) to Seller by wire transfer of immediately available funds to an account designated by Seller.

Section 11. Brokers. Seller represents and warrants to Purchaser, and Purchaser represents and warrants to Seller, that, other than the Brokers, there are no real estate brokers, salesman or finders involved in this transaction who would be entitled to a commission with respect to this transaction. Only if the transaction discussed herein closes, Seller agrees that it shall pay the Commission to the Seller’s Broker pursuant to the terms of a separate agreement between Seller and Seller’s Broker, and Seller’s Broker shall then pay the commission due to Purchaser’s Broker out of the Commission received. Seller makes no representations or warranties, express or implied, with respect to any brokerage fees due in connection with the Property Agreements. The provisions of this Section 11 shall survive the Closing and any termination of this Agreement.

Section 12. Assignability. Purchaser may not assign its rights under this Agreement without the prior written consent of Seller, which consent Seller may be withheld, conditioned and/or delayed in Seller’s sole and absolute discretion. The interest of Seller herein may be assigned at the discretion of the Bankruptcy Court (to a liquidation trust or otherwise).

Section 13. Notices. Any notices required or permitted to be given under this Agreement shall be in writing and shall be deemed given if (a) on the day of delivery, if delivered by hand, (b) on the day deposited with a recognized overnight courier (e.g. FedEx), or (c) on the day of deposit if mailed by certified or registered U.S. Mail, postage prepaid, return receipt requested:




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If to Seller: David Wallace, as Chapter 11 Trustee in In re CFO Management Holdings, LLC before the United States Bankruptcy Court for the Eastern District of Texas – Sherman Division, Case No. 19-404264131 North Central Expressway, Suite 775Dallas, Texas 75204(214) 766-7516 (telephone)

with a copy to: Thompson & Knight LLP1722 Routh Street, Suite 1500Dallas, Texas 75201Attn: Mark Weibel, Esq. and S. Samuel Young, Esq.(214) 969-1111 (telephone)

If to Purchaser at: CP380, LLC15400 Knoll Trail Dr., Suite 230, Dallas, Texas 75248

With a copy to: Abernathy, Roeder, Boyd & Hullett, P.C.1700 Redbud Blvd. / Suite 300 / McKinney, TX. 75069ATTN: Robert RoederMain 214.544.4000

If to Escrow Agent: Benchmark Title Services, LLC2007 Randall StreetDallas, Texas 75201Attn: Ben Gibbons(214) 485-8678 (telephone)

Notices shall be deemed given (even if rejected by the addressee) when sent in accordance with the requirements of this Section 13.

Section 14. Condemnation and Casualty.

(a) If, prior to Closing, the Real Property or any Substantial Portion thereof is taken by eminent domain, Seller shall promptly notify Purchaser and Purchaser shall, at Purchaser’s option, either: (i) cancel this Agreement by delivery of written notice to Seller, whereupon Escrow Agent shall return the Deposit and the Released Portion of the Initial Deposit, less the Independent Consideration, to Purchaser, and Seller and Purchaser shall be relieved of all further obligations under this Agreement save and except expressly stated otherwise herein; or (ii) proceed with the Closing and Purchaser shall beentitled to (and Seller shall assign to Purchaser without recourse or warranty) all of Seller’s interest in all condemnation awards applicable to the Property, subject to the terms of this Agreement. Purchaser shall notify Seller of its election within ten (10) days of receipt of notice from Seller of such condemnation. In the event that Purchaser fails to timely notify Seller of its election, Purchaser shall be deemed to have elected to proceed with the Closing. For any taking of the Real Property that does not constitute a “Substantial Portion” of the Real Property, the parties will proceed in accordance with clause (ii) of this Section 14(a).

(b) If all or any Substantial Portion of the Real Property is damaged or destroyed by fire or other casualty after the Effective Date and before the Closing Date, Purchaser may, at its option, either (i) within five (5) days after receipt of written notice from Seller of such damage, terminate this




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Agreement by written notice to Seller and receive a refund of the Deposit and the Released Portion of the Initial Deposit, whereupon this Agreement will be null and void and neither party will have any further claim against the other, except for those obligations which survive the termination of this Agreement, or (ii) proceed to close the transaction contemplated herein pursuant to the terms hereof without reduction of the Purchase Price, in which event Seller will deliver to Purchaser at Closing any net insurance proceeds actually received by Seller attributable to the Property from such casualty and will assign to Purchaser any right Seller may have to receive insurance proceeds attributable to the Property from such casualty, subject to the terms of this Agreement. For the purposes of this subsection, a “Substantial Portion” of the Real Property means equal to or greater than ten percent (10%) of the gross number of square feet contained in the Improvements or the Land. For any damage or destruction of the Real Property that does not constitute a “Substantial Portion” of the Real Property, the parties will proceed in accordance with clause (ii) of this Section 14(b). Notwithstanding the terms of this Section or anything else to the contrary in this Agreement, if all or any portion of the Real Property is damaged or destroyed by fire or other casualty after the Effective Date and before consummation of Closing and the amount of insurance proceeds payable in connection with such fire or other casualty exceeds the Purchase Price, then Seller, at its sole option and in its sole and absolute discretion, may terminate this Agreement by written notice delivered to Purchaser at any time before consummation of Closing, whereupon the Deposit and the Released Portion of this Initial Depositwill be refunded to Purchaser, and, except for any obligations that survive the earlier of termination of this Agreement or Closing, neither party will have any further rights or obligations pursuant to this Agreement.

Section 15. Escrow Agent. Escrow Agent shall have only the duties specifically set forth in this Agreement. Escrow Agent is acting as stakeholder only with respect to the Deposit. Seller and Purchaser agree that such duties are purely ministerial in nature and do not disqualify Escrow Agent from acting in any other capacity with respect to this transaction. Provided that Escrow Agent acts in good faith to performs its duties hereunder, (a) Escrow Agent shall incur no liability for failure to perform such duties except in the case of willful misconduct or negligence and (b) Seller and Purchaser each release Escrow Agent from any claims for failure to perform such duties except in the case of willful misconduct or negligence. Notwithstanding the foregoing, nothing contained in this Agreement shall limit the liability of Escrow Agent as the title agent/insurer (if applicable) under the terms of the Owner’s Policy, such liability to be determined in accordance with the terms of such policy. Except as otherwise set forth herein, Escrow Agent shall disburse the Deposit at Closing as set forth herein. In the event that either party alleges that there is a default or other event entitling that party to the Deposit, and demands that the Deposit be paid to that party, then Escrow Agent shall send a Demand Notice to both parties. Seller and Purchaser shall have ten (10) days to review the Demand Notice. If neither party objects to the Demand Notice within ten (10) days after receipt of the Demand Notice, then Escrow Agent shall disburse the Deposit according to the demanding party’s instructions. If either party objects to the Demand Notice within ten (10) days after receipt of the Demand Notice, then Escrow Agent shall hold the Deposit until it receives written disbursement instructions signed by both Seller and Purchaser, or, if no such instructions are given, Escrow Agent shall hold the Deposit until final determination of the rights of Seller and Purchaser in appropriate legal proceedings. If Escrow Agent does not receive such instructions within thirty (30) days after the date of the Demand Notice, and if appropriate legal proceedings to determine how to disburse the Deposit are not begun within thirty (30) days after the date of the Demand Notice and diligently continued, Escrow Agent may bring an appropriate action to interplead the Deposit. Any such interpleader action must be brought in the Bankruptcy Court or in a federal or state court of competent jurisdiction in Dallas County, Texas. The party finally determined not to be entitled to the Deposit shall reimburse Escrow Agent for all costs and expenses incurred by Escrow Agent in connection with the interpleader action, including without limitation, reasonable attorneys’ fees and disbursements. Upon disbursing the Deposit in accordance with this Section 15, Escrow Agent shall have no further liability for the Deposit unless such delivery constituted willful misconduct or negligence. Escrow Agent is hereby authorized and instructed to invest the Deposit in an interest bearing “money market” escrow account at a state or federal bank or savings and loan whose




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accounts are generally insured by the F.D.I.C. If Escrow Agent is counsel to either Purchaser or Seller, Escrow Agent shall not be disqualified from representing itself or its client in connection with this Agreement solely because Escrow Agent is acting as the escrow agent for this transaction. The provisions of this Section 15 shall survive Closing and any termination of this Agreement.

Section 16. Miscellaneous.

(a) This Agreement shall be construed and governed in accordance with the internal laws of the State of Texas, without regard to any conflicts of laws principles.

(b) The venue for any litigation related to this Agreement shall be in the Bankruptcy Court or in any federal or state court having jurisdiction in Dallas County, Texas.

(c) In the event any provision of this Agreement is determined by appropriate legal proceedings to be illegal or otherwise invalid, such provision shall be given its nearest legal meaning or reinterpreted as the applicable authority determines, and the remainder of this Agreement shall be construed to be in full force and effect.

(d) In the event of any litigation between Seller and Purchaser related to this Agreement, the non-prevailing party shall reimburse the prevailing party for the prevailing party’s reasonable attorneys’ fees and court costs through all trial and appellate levels. Any payment obligation of Seller to Purchaser under this Section 19(d) shall be subject to Bankruptcy Court approval.

(e) This Agreement constitutes the entire agreement between Seller and Purchaser for the sale and purchase of the Property, and supersedes any other agreement or understanding of Seller and Purchaser with respect to the matters herein contained.

(f) This Agreement may not be changed, altered or modified except by a written document executed by both Seller and Purchaser.

(g) Time is of the essence with respect to Purchaser’s performance of its obligations under this Agreement, including Purchaser’s obligation to Close prior to the Closing Deadline.

(h) In the event that any date on which either party’s performance hereunder is to occur falls on a Saturday, Sunday, Texas state or national holiday, then the time for such performance shall be extended until the next following business day and, specifically, in all cases the Closing Date shall be extended as necessary until all required approvals are obtained or provided by the Bankruptcy Court(subject to Purchaser’s right to terminate this Agreement as provided in Section 17 below).

(i) Purchaser shall not record this Agreement or a memorandum of any of its terms, and the provisions of this Section 16(i) shall survive Closing and any termination of this Agreement.

(j) This Agreement and any subsequent amendments hereto may be executed in any number of counterparts, each of which, when executed, shall be deemed to be an original, and all of which shall be deemed to be one and the same instrument. Electronic transmission signatures (.pdf) shall be deemed original signatures for all purposes herein.

Section 17. Sale Order. Notwithstanding anything to the contrary set forth in this Agreement, this Agreement is subject to the Bankruptcy Court entering the Sale Order. If the Bankruptcy Court declines, or otherwise fails to enter a Sale Order, then this Agreement shall be deemed null and void ab




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nitio, and the Deposit, together with the Released Portion of the Initial Deposit, shall be promptly delivered to Purchaser and neither Seller nor Purchaser thereafter shall have any further right or obligation under this Agreement, except as expressly stated otherwise herein. If a Sale Order is not obtained prior to the Closing Deadline and Seller is actively attempting to obtain a Sale Order or otherwise obtain a decision from the Bankruptcy Court with respect to the sale of the Property, then Seller shall have the unilateral right to extend the Closing Deadline for such time as is reasonably necessary to obtain the Sale Order or otherwise obtain a decision from the Bankruptcy Court with respect to the sale of the Property, provided that Purchaser shall have the right to terminate this Agreement and receive a refund of the Deposit and the return of the Released Portion of the Initial Deposit if such Closing Deadline is extended more than thirty (30) days beyond the Closing Deadline. For the avoidance of doubt, the timing, process and ultimate determination of the approval of the Bankruptcy Court shall be in the sole and absolute discretion of Seller in all respects.

Section 18. Bankruptcy Court Approval. Subject to the receipt of a higher and/or better offer for purchase of the Property at or before the final Sale Hearing, Seller shall use its reasonable efforts to gain approval by the Bankruptcy Court of the purchase and sale of the Property to the extent required by Section 363 and all other applicable provisions of the Bankruptcy Code. Seller shall have ultimate discretion on whether to present this Agreement for approval at the Sale Hearing.

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IN WITNESS WHEREOF, Seller and Purchaser execute this Agreement to be enforceable on theEffective Date-

SELLER:

DAVID WALLACE, AS CHAPTER 11 TRUSTEE ININ RE CFO MANAGEMENT HOLDINGS, LLCBEFORE TTM UMTED STATES BANKRTIPTCYCOURT FOR TTIE EASTERN DISTRICT OF TEXAS- SHERMAN DIVISION" CASE NO. 19-40426 NCASENO. 1940426

",,Dll),!r(Printed Name: David Wallace

PTIRCHASER:

CP380, LLC, a Texas limited liability company

PrintedName:Title:

Escrow Agent joins in the execution of this Agreement for the sole and limited purpose ofacknowledging and agreeing to the comply with the obligations in Section 2 and Section 15 herein.

ESCRO}Y AGENT:

BENCHMARK TITLE SERVICES, LLC,a Texas limited liability company

PrintedName:Title:

IN RE CFO / CP380, LLC (disposition)PURCTTASE AND SAI,E A@JEIVENTAND Jotlrl ESCRovr' INSTRUCTIoNS

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518704.000076 23720004.7

EXHIBIT “A”

to that certainPurchase and Sale Agreement and Joint Escrow Instructions

Legal Description of the Land

BEING All Units in CRESCENT PARC, A CONDOMINIUM, a Condominium regime in the City of McKinney, Collin County, Texas according to the Declaration filed for record on August 01, 2018, and recorded under Clerk's File No. 20180801000965310, Official Public Records, Collin County, Texas, together with an undivided interest in the general and limited common elements appurtenant to said Units, all as described in said Declaration.


In Re CFO / [Insert Name of Purchaser](disposition)PURCHASE AND SALE AGREEMENT


518704.000076 23720004.7

EXHIBIT “B”

to that certainPurchase and Sale Agreement

andJoint Escrow Instructions

Deed

[see attached]


In Re CFO / [INSERT NAME OF PURCHASER] (disposition)PURCHASE AND SALE AGREEMENT


518704.000076 23720004.7

AFTER RECORDING RETURN TO:

Thompson & Knight LLP1722 Routh Street, Suite 1500Dallas, Texas 75201Attn: Mark Weibel, Esq.

NOTICE OF CONFIDENTIALITY RIGHTS:

IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THEFOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

SPECIAL WARRANTY DEED(In Re CFO / [Insert Name of Purchaser])

______________, 20__ (the “Effective Date”)

STATE OF TEXAS §§

COUNTY OF _______________ §

[ ] (“Grantor”), for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration in hand paid by [__________________], a [__________________] (“Grantee”), the receipt and sufficiency of which are hereby acknowledged and confessed, has GRANTED, BARGAINED, SOLD and CONVEYED, and by these presents does GRANT, BARGAIN, SELL and CONVEY unto Grantee all that certain lot, tract or parcel of land, lying and beingsituated in [__________________] County, Texas, more particularly described on Exhibit “A” attached hereto and incorporated herein by reference, together with all improvements thereon (the “Property”).

This deed and conveyance are made and accepted subject to those matters set forth on Exhibit “B”attached hereto and incorporated herein by reference, to the extent that the same are valid and subsisting and affect the Property.

TO HAVE AND TO HOLD the Property, together with, all and singular, the rights and appurtenances thereto in anywise belonging, unto Grantee, its successors, legal representatives and assigns forever; and Grantor does hereby bind Grantor, and Grantor’s successors and legal representatives, to WARRANT and FOREVER DEFEND, all and singular, the Property unto Grantee, its successors, legal representatives and assigns, against every person whomsoever lawfully claiming or to claim the same, or any part thereof, by, through or under Grantor, but not further or otherwise.

GRANTEE, BY ITS ACCEPTANCE HEREOF, ACKNOWLEDGES AND AGREES THAT GRANTEE CONDUCTED ITS OWN INDEPENDENT INVESTIGATION AND INSPECTION OF ALL ASPECTS OF THE PROPERTY. GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT IT HAS RELIED ON SUCH INDEPENDENT INVESTIGATION AND INSPECTION AND, EXCEPT FOR THE SPECIAL WARRANTY OF TITLE CONTAINED HEREIN, HAS NOT RELIED ON ANY INFORMATION PROVIDED BY GRANTOR, GRANTOR’S AGENTS OR GRANTOR’S BROKER IN DETERMINING WHETHER TO PURCHASE THE PROPERTY. GRANTEE FURTHER




518704.000076 23720004.7

ACKNOWLEDGES AND AGREES THAT ANY INFORMATION PROVIDED BY GRANTOR TO GRANTEE WITH RESPECT TO THE PROPERTY HAS BEEN OBTAINED FROM A VARIETY OF SOURCES AND THAT GRANTOR HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION.

GRANTEE FURTHER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE SPECIAL WARRANTY OF TITLE CONTAINED HEREIN, GRANTOR HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY DISCLAIMS ANY AND ALL REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH RESPECT TO THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, (A) THE NATURE, QUALITY OR CONDITION OF THE PROPERTY; (B) THE INCOME TO BE DERIVED FROM THE PROPERTY; (C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH GRANTEE MAY CONDUCT THEREON; (D) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, INCLUDING, BUT NOT LIMITED TO, ANY STATE OR FEDERAL ENVIRONMENTAL LAW, RULE OR REGULATION; (E) THE HABITABILITY, MERCHANTABILITY OR FITNESS OF THE PROPERTY FOR A PARTICULAR PURPOSE; OR (F) ANY OTHER MATTER WITH RESPECT TO THE PHYSICAL OR OTHER CONDITION OF THE PROPERTY. GRANTEE HEREBY WAIVES ANY SUCH REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES (BUT NOT INCLUDING THE SPECIAL WARRANTY OF TITLE CONTAINED HEREIN).

GRANTOR IS CONVEYING THE PROPERTY TO GRANTEE “AS IS, WHERE IS, WITH ALL FAULTS” AND SPECIFICALLY AND EXPRESSLY WITHOUT ANY WARRANTIES, REPRESENTATIONS OR GUARANTIES, EITHER EXPRESS OR IMPLIED, OF ANY KIND, NATURE OR TYPE WHATSOEVER FROM OR ON BEHALF OF GRANTOR.

[Signature Page Follows]




518704.000076 23720004.7

IN WITNESS WHEREOF, Grantor has executed this Special Warranty Deed to be effective as of the Effective Date.

GRANTOR:

[_______________________]

By:Printed Name: David Wallace

STATE OF TEXAS

COUNTY OF DALLAS

BEFORE ME, the undersigned authority on this day personally appeared David Wallace, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged and swore to me that he executed the same for the purposes and the consideration therein expressed and in the capacity therein stated.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ___ day of ___________, 2020.

____________________________________________Notary Public for the State of Texas

My Commission Expires:(Printed name of notary)

Address of Grantee:____________________________________________________________________Attention: ________________




518704.000076 23720004.7

EXHIBIT “A”

toSpecial Warranty Deed

Legal Description

[see attached]




518704.000076 23720004.7

EXHIBIT “B”

toSpecial Warranty Deed

Permitted Exceptions

1. Any standard printed exceptions contained on the standard title commitment covering the Property;

2. Any exceptions of record;

3. Any matters that would be shown by a complete and accurate survey of the Property;

4. All applicable zoning ordinances, other land use laws and regulations;

5. Taxes for the current tax year which are a lien not yet payable; and

6. Matters affecting the Property created by or with the written consent of Grantor and Grantee.




518704.000076 23720004.7

EXHIBIT “C”



Bill of Sale and Assignment

[see attached]




518704.000076 23720004.7

BILL OF SALE AND ASSIGNMENT(In Re CFO / [Insert Name of Purchaser])


_____________________________________________ (“Seller”), for good and valuable consideration paid by __________________, a ____________ limited liability company (“Purchaser”), hereby has granted, bargained, sold, transferred, assigned and delivered, and by these presents, does grant, bargain, sell, transfer, assign and deliver unto Purchaser, its successors and assigns, in “AS-IS, WHERE-IS, WITH ALL FAULTS” condition, without recourse, representation or warranty of any kind whatsoever, express or implied, except as expressly set forth herein, all of Seller’s right, title and interest, if any, in the Personal Property, to the extent assignable without the consent of any third party.

Capitalized terms used but not defined herein shall have the meanings given such terms in that certain Purchase and Sale Agreement and Joint Escrow Instructions, dated as of the Effective Date, entered into by and between Seller and Purchaser (or any predecessor of Purchaser).

Recordation of the Deed constitutes a conclusive presumption that Purchaser accepts and agrees to all matters set forth herein.

Signature Page Follows




518704.000076 23720004.7

IN WITNESS WHEREOF, Seller has hereunto executed this Bill of Sale and Assignment to be effective as of the Effective Date.

SELLER:

[______________________]

By: _________________________________________Printed Name: David Wallace




518704.000076 23720004.7

EXHIBIT “D”



FIRPTA Certificate

[see attached]




518704.000076 23720004.7

FIRPTA CERTIFICATE(In Re CFO / [Insert Name of Purchaser])


Section 1445 of the Internal Revenue Code of 1986, as amended (the “Code”), provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person. To inform the transferee that withholding of tax is not required upon the disposition of a U.S. real property interest by ___________________________________________ (“Transferor”) (as the sole member of _____________________________________________, as seller), the undersigned hereby certifies the following on behalf of Transferor:

1. Transferor is not a foreign corporation, foreign partnership, foreign trust or foreign estate(as those terms are defined in the Code and treasury regulations promulgated pursuant thereto);

2. Transferor is not a disregarded entity as defined in Sec. 1.1445-2(b)(2)(iii) of the Code;

3. Transferor’s U.S. employer identification number is ________; and

4. Transferor’s office address is __________________________________.

Transferor understands that this certification may be disclosed to the Internal Revenue Service by the transferee and that any false statement contained herein could be punished by fine, imprisonment or both.

Under penalty of perjury, the undersigned, in the undersigned’s capacity stated below and not in the undersigned’s individual capacity, declares that the undersigned has examined this certification and to the best of the undersigned’s knowledge and belief, this certification is true, correct and complete, and the undersigned further declares that the undersigned has authority to sign this certification on behalf of Transferor.

IN WITNESS WHEREOF, Transferor has executed this FIRPTA Certificate to be effective as of the Effective Date.

TRANSFEROR:

[_______________________]

By:Printed Name: David Wallace


PLAINTIFFS’ FIRST AMENDED CLASS ACTION COMPLAINT Page 1


SHERMAN DIVISION

IN RE: § §

CFO MANAGEMENT HOLDINGS, LLC,1 § CASE NO: 19-40426§

DEBTOR. § CHAPTER 11§

DAVID and KAREN WRIGHT § ADVERSARY NO. 19-04096on behalf of themselves and all §others similarly-situated, §

§ PLAINTIFFS, §

§ v. §

§ DAVID WALLACE, AS CHAPTER 11 § TRUSTEE FOR CFO MANAGEMENT § HOLDINGS, LLC §

§ DEFENDANT. §

PLAINTIFFS’ FIRST AMENDED CLASS ACTION COMPLAINT

TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE:

David and Karen Wright (“Plaintiffs” or “the Wrights”), on behalf of themselves and all

others similarly-situated (the “Plaintiff Class” or “Investors”), file this adversary proceeding

against David Wallace as Chapter 11 Trustee for CFO Management Holdings, Inc. (“Debtor”),

seeking relief for themselves and all other investors in the Debtor and Debtor-controlled entities.

1 The following entities’ bankruptcy cases and estates have been substantively consolidated with that of Debtor CFO Management Holdings, LLC (EIN# XX-XXX6987) for all purposes (see Docket No. 248): Carter Family Office, LLC (Case No. 19-40432); Christian Custom Homes, LLC (Case No. 19-40431); Double Droptine Ranch, LLC (Case No 19-40429); Frisco Wade Crossing Development Partners, LLC (Case No. 19-40427); Kingswood DevelopmentPartners, LLC (Case No. 19-40434); McKinney Executive Suites at Crescent Parc Development Partners, LLC (CaseNo. 19-40428); North-Forty Development LLC (Case No. 19-40430); and West Main Station Development, LLC(Case No. 19-40433).


2

Case 19-40426 Doc 542-2 Filed 09/04/20 Entered 09/04/20 17:29:18 Desc Exhibit 2 - Class Action Complaint Page 1 of 23


I. Introduction

1. Plaintiffs file this case on behalf of themselves and all other similarly-situated

persons who were conned out of vast sums of money by CFO Management Holdings, LLC, its

predecessors, principals, agents, and affiliated entities. There is no question that the underlying

facts as set forth below constitute egregious and unconscionable fraud and breach of fiduciary

duty. Indeed, some principals in the massive securities scam have been convicted and sentenced

for securities fraud and other crimes. Other participants, including the controlling party of the

Debtor, Phillip Carter and his wife, have been indicted and await trial.

II. Jurisdiction and Venue

2. Jurisdiction of this action arises under 28 U.S.C. § 1334 and §§157(b) and (c).

Venue is proper in this district pursuant to 28 U.S.C. § 1391 because a substantial portion of the

events giving rise to Plaintiffs’ claims occurred in this district. Debtor filed for bankruptcy

protection in this district, Defendant Lenders participated in Debtor’s Chapter 11 bankruptcy in

this district, and Defendant Lenders transacted business in this district.

3. Pursuant to Fed. R. Bankr. P. 7008(a), Plaintiffs state that to the extent the Court

determines that any portion of this complaint is non-core, Plaintiffs consent to the entry of final

orders or judgment in this adversary proceeding by the bankruptcy judge if it is determined that

the bankruptcy judge, absent consent of the parties, cannot enter final orders or judgment

consistent with Article III of the United States Constitution. Further, to the extent that any court

determines that the Bankruptcy Court does not have the authority to enter a final judgment on any

cause of action set forth herein, Plaintiffs request that the Bankruptcy Court issue a report and




recommendation for a judgment to the United States District Court for the Eastern District of Texas

on any such cause of action.

III. Parties

4. Plaintiffs are individuals residing in Fannin County, Texas. They are husband and

wife. Prior to their long-awaited retirement, they were the owners and operators of a sole

proprietorship known as Red River Rustic.

5. David Wallace is the Chapter 11 Trustee for CFO Management Holdings, Inc., a

Texas limited liability company.2 David Wallace is represented by Judith Ross of Ross & Smith,

PC at Plaza of the Americas, 700 N. Pearl Street, Suite 1610, North Tower, Dallas, TX 75201.

Counsel has agreed to accept service.

IV. Factual Allegations

A. The Scam

6. The Wrights are two of approximately three hundred proposed class members who

invested more than $40 million in a massive consumer fraud scheme conceived and perpetrated by

Phillip Carter (“Carter”) and his minions.

7. All all times relevant herein, Phillip Carter — directly and through various entities

which he controlled, managed and/or owned — owned, managed and/or controlled the operations

of the Debtor.

8. Collectively, the Investors were typically senior citizens of limited means. Many

of them invested their life’s savings from their Individual Retirement Accounts. Often, they

learned of the investment “opportunities” by listening to local radio stations. Only a small fraction

2 The substantively consolidated bankruptcy estates of the Debtor may be referred to as the “Estate.”




of them every saw a penny of return on their investment.

9. The Wrights and the Plaintiff Class invested money through alleged brokers at

Texas First Financial (“TFF”) and a predecessor entity. The TFF principal was Bob Guess

(“Guess”), a well-known radio personality with financial advice programs. At all times relevant

herein Guess acted as the agent of Carter and the Debtor.

10. TFF also employed other salespeople including Richard Tilford. Guess, Tilford,

and other TFF representatives all were controlled by Carter and the Debtor and acted on behalf of

the Debtor as to the North Forty investment described below.

11. Guess and representatives of TFF offered various investment opportunities to the

Wrights and the Plaintiff Class. One such investment opportunity was North Forty Development,

LLC. (“North Forty”), allegedly a “sure thing” development of commercial properties in Frisco

and surrounding areas.

12. Beginning on or before July 14, 2015, Carter, individually and/or through Guess

and his agents, told Plaintiffs and the Plaintiff Class that their investments were being used to

develop certain commercial office projects in and around Frisco, Texas. Carter and his minions

told Plaintiffs and the Plaintiff Class that their investments were secured by hard assets, “sure

things,” and guaranteed to earn a return of 9-10% of the principal amount invested.

13. Carter appeared with Guess at various promotional events. Investors were given

promissory notes, some signed by Guess and others signed by Carter (the “Notes”). The Notes

were substantively identical, uniformly fraudulent, and presented to the Investors by parties not

licensed to sell securities.

14. Between July 14, 2015 and April 20, 2017, Carter and Guess signed up victims on

an almost weekly basis.




15. On or about February 25, 2016, the Wrights invested $700,000.00 secured by a

Note with North Forty Development, LLC3 as Maker. Other class members signed notes with

additional companies or fictional entities established and controlled by Carter and the Debtor

including, but not limited to, “Texas Cash Cow” or “North Forty Development Capital Account.”

Collectively, the Notes in North Forty Development, LLC, North Forty Development Capital

Account, and Texas Cash Cow are referred to as the “Contracts.” The Contracts are identical on

all substantive points.

16. The entire funding of the North Forty developments was part theft and part Ponzi

scheme. Although Investor money did go to the development of actual, identifiable assets, the

investments were high risk, not guaranteed, no liens were ever recorded for the benefit of Plaintiffs,

and the payments made to some early investors came from money taken from later investors.

17. At no time relevant herein was Carter, Guess, or any representative of TFF or North

Forty licensed to sell securities in the State of Texas, an essential fact never disclosed to the

Wrights or the Plaintiff Class.

18. Debtor used portions of the money it solicited from the Wrights and the Plaintiff

Class to purchase land and develop various real estate properties in and around

Frisco. Unbeknownst to the Plaintiff Class, Phillip Carter also diverted more than $2 million of

investor funds to other, undisclosed purposes including retiring a $1.2 million personal tax lien,

operating his exotic game ranch and funding his extravagant lifestyle.

19. The assets of the Estate now being liquidated and sold were built and/or improved

by funds solicited from Investors. In short, the seed money for the scam and whatever real property

was developed came from the Plaintiffs and the Plaintiff Class investors. These projects include:

3 The actual check came from Red River Rustic, the Wrights’ sole proprietorship, and the funds consisted of the proceeds from the sale of their business.




▪ Frisco Wade Crossing - a substantially completed retail development located at 5855 Preston Rd, Frisco, Texas 75034 in the name of Subsidiary Debtor Frisco Wade Crossing Development Partners, LLC; ▪ Crescent Parc - a partially constructed office development located at 1400 Coit Rd., McKinney Texas 75071 in the name of Subsidiary Debtor McKinney Executive Suites at Crescent Parc Development Partners, LLC; ▪ Starling House - a luxury 8,036 square foot home built in 2018 and located at 4009 Starling Dr., Frisco, Texas 75034 in the name of Subsidiary Debtor Christian Custom Homes, LLC; ▪ Ranch - a hunting ranch located on Duncan Road in Ringling, Oklahoma in the name of Subsidiary Debtor Double Droptine Ranch LLC; ▪ Raw Land - approximately 9.4 acres of commercial raw land located at the southwest corner of Main and Majestic Gardens Dr. in Frisco, Texas in the name of Subsidiary Debtor West Main Station Development, LLC; and ▪ Single-Family Residences - four partially constructed single-family residence properties located at 1781 and 1786 Courtland Drive and 1756 and 1784 Hidalgo Lane, respectively, in Frisco, Texas in the name of Subsidiary Debtor Kingswood Development Partners, LLC.

20. Although Guess, Phillip Carter and other agents of the Debtor told Investors their

loans were secured by real property, no such liens existed and none were ever recorded.

21. Despite its lofty promises, Debtor now seeks to classify the Wrights and the

Plaintiff Class as mere “unsecured creditors.”

22. The Debtor obtained funds from the Wrights and the members of the Plaintiff Class

through fraudulent means.

23. Specifically, on or about February 15, 2016, the Wrights met personally with Guess

to receive his recommendation and advice on a potential investment of their life’s savings.

24. During this meeting, Guess acted as the agent of the Debtor and a financial adviser

to the Wrights.




25. Guess held himself out to the Wrights as a financial expert with specialized

information and knowledge regarding investments in general and the operations of the Debtor in

particular.

26. As an investment advisor, Guess and the entities on whose behalf he acted owed

the Wrights fiduciary duties of loyalty, utmost good faith, candor, integrity, and fair & honest

dealing.

27. Guess advised the Wrights to invest in Debtor’s operations and to execute a

promissory note which purported to guarantee a 9% return on their money and to secure their

investment “by appropriate deeds of trust.

28. On Guess’s advice and recommendation, the Wrights delivered $700,000.00 to

Debtor and executed the promissory note.

29. In so doing, the Wrights relied upon Guess’s purported skill and expertise in

making the decision to invest in Debtor’s operations and to execute the promissory note.

30. The Wrights further relied on Guess’s express representations that their investment

was (1) fully secured by hard assets, (2) a “sure thing” completely free of risk and (3) guaranteed

to earn 9%.

31. In fact, these representations were patently false. The Wrights had no ability to

foreclose on hard assets, the investments were highly speculative, and there was no guarantee of

any return on principal or interest.

32. At the time he made these representations, Guess knew them to be false, he intended

that the Wrights rely on them and Wrights did so to their detriment and ever-lasting regret.

33. Further, at no time did Guess disclose to the Wrights that neither he, his associates

nor anyone else associated with TFF, the Debtor or any of the actual or fictitious entities involved




in this charade, held any license authorizing them to sell or offer to sell securities in the State of

Texas. In addition, Guess never disclosed that a portion of the money collected from Investors

would be used to pay a personal tax lien and other personal expenses of Phillip Carter.4

34. Likewise, Guess and Carer did not disclose to the Plaintiff Class that Carter

intended to use portions of investor funds $2 million of investor funds to other, undisclosed

purposes to retire a $1.2 million personal tax lien, operate his exotic game ranch and fund his

extravagant lifestyle.

35. Guess and the Debtor breached their fiduciary duties to the Wrights through the

misrepresentations detailed above and by failing to disclose that no hard assets secured their

investment, the investment was highly speculative, and not guaranteed to generate any return, and

the parties recommending the investments were not licensed to do so.

36. Likewise, beginning on or before July 14, 2015 and continuing through at least

April 20, 2017, Guess, Carter and others acting on Debtor’s behalf represented to other members

of the Plaintiff Class that their investments were (1) secured by hard assets, (2) a “sure thing” free

of any risk and (3) guaranteed to earn 9-10% interest depending solely on the length of the

investment.

37. Guess, Carter and others acting on Debtor’s behalf made these false representations

in person during individual and group meetings as well as through brochures and promotional

materials, print advertisements, and phone calls.

38. In fact, these representations were patently false. The members of the Plaintiff Class

had no ability to foreclose on hard assets, their investments were highly speculative, and there was

no guarantee of any return on principal or interest regardless of the length of the investment.

4 Of course, the fact that some Investor funds were used for items other than the real estate projects does not mean that other Investor funds were not directly traceable to land, developments, and the proceeds from the sale of those items.




39. At the time they made these representations, Guess, Carter and other agents of

Debtor knew them to be false, they intended that the member of the Plaintiff Class rely on them

and members of the Plaintiff Class did so to their detriment and ever-lasting regret.

40. At no time did Guess or Carter disclose to any member of the Plaintiff Class that

neither they, their associates nor anyone else associated with TFF, the Debtor or any of the actual

or fictitious entities involved in this charade held any license authorizing them to sell or offer to

sell securities in the State of Texas. Further, they never disclosed that a portion of money collected

from Investors would be used to pay a personal tax lien and other expenses of Phillip Carter.

41. Likewise, Guess did not disclose to the Wrights that Carter intended to use portions

of investor funds $2 million of investor funds to other, undisclosed purposes to retire a $1.2 million

personal tax lien, operate his exotic game ranch and fund his extravagant lifestyle.

42. As in Guess’s meeting with the Wrights, Guess and Carter acted as the agent of the

Debtor and as financial advisers during their meetings with the members of the Plaintiff Class.

43. Guess and Carter and others under Carter’s control held themselves out to the class

members as financial experts with specialized information and knowledge regarding investments

in general and the operations of the Debtor in particular.

44. As investment advisors, Guess, Carter and the entities on whose behalf they acted,

owed the members of the Plaintiff Class a fiduciary duty of loyalty, utmost good faith, candor,

integrity and fair & honest dealing.

45. Nonetheless, Guess and Carter advised the members of the Plaintiff Class to invest

in Debtor’s operations and to execute promissory notes which purported to guarantee a return of

9-10% on the amount invested and to secure the investment with real property.




46. On Guess’s and Carter’s advice and recommendation, the members of the Plaintiff

Class delivered approximately $40,000,000.00 to Debtor and executed the promissory notes.

47. The members of the Plaintiff Class relied upon Guess’s and Carter’s purported skill

and expertise in making the decision to invest in Debtor’s operations and to execute the promissory

notes.

48. Guess, Carter and the Debtor breached their fiduciary duties to the Plaintiff Class

through the misrepresentations detailed above and by failing to disclose that no hard assets secured

their investment, the investment was highly speculative and not guaranteed to generate any return,

and the parties recommending the investments were not licensed to do so.

49. On or about August 15, 2016, the Texas State Securities Board issued an

Emergency Cease and Desist Order against TFF, Guess, and others.

50. On or about January 17, 2017, Carter and some of the Debtors filed a state court

interpleader action in Collin County ostensibly to interplead money into the state court for court

supervised payments to investors, Cause No. 219-00305-2017, Texas Cash Cow, et al v. Texas

First National Bank, et al, 219th District Court, Collin County, Texas (the “Interpleader”).

51. In this action, Carter and cohorts announced to the world that they had obtained

money under false pretenses and needed to give it back to the Investors. (Of course, Carter

proclaimed in that proceeding that he was unaware of Guess’ activities.)

52. Guess plead guilty to securities fraud and other crimes and was sentenced to twelve

years in prison.




V. Class Allegations

A. Class Definition

53. Pursuant to Fed. R. Bank. P. 7023 and 7023(b)(2)-(3) and any other applicable

rules, Plaintiffs bring this class action on behalf of themselves and all others similarly situated.5

54. Plaintiffs propose the following class definition for this case:

Every individual or entity other than CPIF Lending, LLC, SMS Financial Strategic Investments, LLC, and Legend Bank, N.A. who/which invested in or loaned money to the Debtors and/or related entities (including fictional entities) prior to the filing of this bankruptcy and who have not been fully repaid. This class does not include those parties who provided materials or services.

B. Class Prerequisites

55. Members of the class can be identified through the Debtor’s records and the records

of others.

56. The proposed class is so numerous that individual joinder of all members would be

impracticable.

57. The subject of this case involves approximately 300 class members. While the

identities of many of the class members are unknown to Plaintiffs at this time, such information

can be readily ascertained through appropriate investigation and discovery. The disposition of the

claims of the class members in a single action will provide substantial benefit to all parties and to

the Court.

58. Common questions of law and fact exist as to all members of the class. Plaintiffs’

claims are typical of the claims of other class members. The common legal and factual questions

include, but are not limited to, the following:

5 Plaintiffs have filed a class proof of claim and will be requesting that the Court apply Rule 7023 to that claim.




a) Did the Debtor commit fraud vis-à-vis the members of the Plaintiff Class? b) Did the Debtor commit breach of a fiduciary relationship vis-à-vis the

members of the Plaintiff Class? c) Was the Debtor unjustly enriched by its misconduct? d) Can the investments of the Plaintiff Class be traced to identifiable assets? e) Should the Court impose a constructive trust over any such assets or the

proceeds of any sale of those assets for the benefit of the Plaintiff Class? 59. These common issues predominate over those affecting only individual members

of the class and a class action is the superior means of resolving this dispute pursuant to Rule

23(b)(2) and (3), Fed. R. Civ. P., as made applicable to this proceeding by Fed. R. Bankr. P. 7023.

60. There are no facts or circumstances so unique to any individual putative class

member that would cause that individual to want to control this litigation. The facts of each case

do not vary greatly from one putative class member to another.

61. Plaintiffs’ claims are typical of the claims of the members of the class. Plaintiffs

share the aforementioned facts and legal claims or questions with class members, and Plaintiffs

and all class members have been similarly affected by Defendants’ actions.

62. Plaintiffs will fairly and adequately represent and protect the interests of the class.

Plaintiffs have retained counsel with substantial experience in handling bankruptcy matters as well

as complex class action litigation, including class actions by consumer debtors against non-debtor

entities, and consumer class actions filed against companies in Chapter 11 bankruptcy proceedings.

63. Plaintiffs and Plaintiffs’ counsel are committed to the vigorous protection of this

class action.




64. Plaintiffs and Plaintiffs’ counsel will fairly and adequately protect the interests of

the members of the class. Neither Plaintiffs nor Plaintiffs’ counsel have any interests which might

cause them not to vigorously pursue this action.

65. A class action is superior to other available methods for the fair and efficient

adjudication of the present controversy for at least the following reasons:

a) Individual joinder of all class members is impracticable; b) Absent a class, Plaintiffs and class members will continue to suffer harm as

result of Defendants’ unlawful conduct; c) The class necessarily consists of persons in unfavorable economic

circumstances who are not able to pay to maintain individual actions against the Defendants;

d) Even if the individual class members had the resources to pursue individual

litigation, it would be unduly burdensome for the court to maintain individual litigation; and

e) Adjudication of individual class members’ claims against Defendants would, as

a practical matter, be dispositive of the interests of other class members who are not parties to the adjudication and may substantially impair or impede the ability of other class members to protect their interests.

66. Because Defendants’ wrongful conduct is widespread and uniform, this case should

be certified for class action treatment pursuant to Fed. R. Bankr. P. 7023(a) and 7023(b)(2)-(3).

67. In addition, the case is suitable for certification under Rule 7023(b)(2) in

that Debtor acted and refused to act on grounds generally applicable to the class as a whole such

that declaratory and/or injunctive relief would be appropriate.

VI. Causes of Action

FIRST CLAIM FOR RELIEF: ACTUAL FRAUD

68. The allegations contained in the foregoing paragraphs are re-alleged and

incorporated herein by reference.




69. The conduct above constitutes actual fraud in that the Debtor took investor funds

through fraudulent means. Specifically, as to the Wrights, on or about February 15, 2016, Guess

represented to the Wrights that (1) their investment was secured by hard assets, (2) their investment

was a “sure thing,” and (3) their investment was guaranteed to earn 9-10% interest (depending on

the length of investment they made). These representations were false as the Wrights had no ability

to foreclose on hard assets, the investments were highly speculative, and there was no guaranteed

of any return on principal or interest. Guess knew these representations to be false, he intended

that the Wrights rely on these representations, the Wrights did rely on these representations, and

suffered damages as a result.

70. As a remedy, Plaintiffs and the Plaintiff Class seek a constructive trust. The Debtor

committed fraud vis-à-vis the Plaintiffs and the Plaintiff Class. The Debtor was unjustly enriched.

The investments of the Plaintiffs and the Plaintiff Class can be traced to the listed assets of the

Estate, including:

▪ Frisco Wade Crossing - a substantially completed retail development located at 5855 Preston Rd, Frisco, Texas 75034 in the name of Subsidiary Debtor Frisco Wade Crossing Development Partners, LLC;

▪ Crescent Parc - a partially constructed office development located at 1400 Coit Rd., McKinney Texas 75071 in the name of Subsidiary Debtor McKinney Executive Suites at Crescent Parc Development Partners, LLC;

▪ Starling House - a luxury 8,036 square foot home built in 2018 and located at 4009 Starling Dr., Frisco, Texas 75034 in the name of Subsidiary Debtor Christian Custom Homes, LLC;

▪ Ranch - a hunting ranch located on Duncan Road in Ringling, Oklahoma in the name of Subsidiary Debtor Double Droptine Ranch LLC; ▪ Raw Land - approximately 9.4 acres of commercial raw land located at the southwest corner of Main and Majestic Gardens Dr. in Frisco, Texas in the name of Subsidiary Debtor West Main Station Development, LLC; and




▪ Single-Family Residences - four partially constructed single-family residence properties located at 1781 and 1786 Courtland Drive and 1756 and 1784 Hidalgo Lane, respectively, in Frisco, Texas in the name of Subsidiary Debtor Kingswood Development Partners, LLC.

71. For these reasons, Plaintiffs and the Plaintiff Class assert that these assets and the

proceeds from any sale of these assets of the Debtor are owned by the Plaintiffs and Plaintiff Class

under a constructive trust and are not part of the Estate.

SECOND CLAIM FOR RELIEF: FRAUDULENT INDUCEMENT



73. The conduct above also constitutes fraudulent inducement in that the Debtor

fraudulently induced the Wrights and the Plaintiff Class to enter into the Contracts. The Wrights

and the Plaintiff Class relied to their detriment upon the misrepresentations set forth above.

Specifically, as to the Wrights, on or about February 15, 2016, Guess represented to the Wrights

that (1) their investment was secured by hard assets, (2) their investment was a “sure thing,” and

(3) their investment was guaranteed to earn 9-10% interest (depending on the length of investment

they made). These representations were false as the Wrights had no ability to foreclose on hard

assets, the investments were highly speculative, and there was no guaranteed of any return on

principal or interest. Guess knew these representations to be false, he intended that the Wrights

rely on these representations and they did and suffered damages as a result.




Estate, including:







▪ Ranch - a hunting ranch located on Duncan Road in Ringling, Oklahoma in the name of Subsidiary Debtor Double Droptine Ranch LLC; ▪ Raw Land - approximately 9.4 acres of commercial raw land located at the southwest corner of Main and Majestic Gardens Dr. in Frisco, Texas in the name of Subsidiary Debtor West Main Station Development, LLC; and ▪ Single-Family Residences - four partially constructed single-family residence properties located at 1781 and 1786 Courtland Drive and 1756 and 1784 Hidalgo Lane, respectively, in Frisco, Texas in the name of Subsidiary Debtor Kingswood Development Partners, LLC.




THIRD CLAIM FOR RELIEF: FRAUD BY NONDISCLOSURE



77. The nondisclosures set forth above also constitute fraud by nondisclosure.

Specifically, (1) the Debtor failed to disclose facts to the Plaintiffs and the Plaintiff Class, (2) the

Debtor had a duty to disclose those facts, (3) the facts were material, (4) the Debtor knew the

Plaintiffs and the Plaintiff Class were ignorant of the facts and they did not have an equal

opportunity to discover the facts, (5) the Debtor was deliberately silent when it had a duty to speak,




(6) by failing to disclose the facts, the Debtor intended to induce the Plaintiffs and the Plaintiff

Class to take some action or refrain from acting, (7) the Plaintiffs and the Plaintiff Class relied on

the Debtor’s nondisclosure, and (8) the Plaintiffs and the Plaintiff Class were injured as a result of

acting without that knowledge.




Estate, including:




▪ Ranch - a hunting ranch located on Duncan Road in Ringling, Oklahoma in the name of Subsidiary Debtor Double Droptine Ranch LLC; ▪ Raw Land - approximately 9.4 acres of commercial raw land located at the southwest corner of Main and Majestic Gardens Dr. in Frisco, Texas in the name of Subsidiary Debtor West Main Station Development, LLC; and ▪ Single-Family Residences - four partially constructed single-family residence properties located at 1781 and 1786 Courtland Drive and 1756 and 1784 Hidalgo Lane, respectively, in Frisco, Texas in the name of Subsidiary Debtor Kingswood Development Partners, LLC.







FOURTH CLAIM FOR RELIEF: BREACH OF FIDUCIARY



81. Moreover, Guess, Carter, and other representatives of the Debtor, acted as financial

advisors to Plaintiffs and the Plaintiff Class in these transactions creating a fiduciary relationship.

The Wrights and the Plaintiff Class looked to Guess, Carter and others acting on Debtor’s behalf

as financial experts with specialized information and knowledge regarding the investments. The

Debtor owed duties of candor, duties to refrain from self-dealing, duties of fair and honest dealing,

and duties of full disclosure,

82. Debtor breached its fiduciary duties by misrepresenting that the investments were

secured, that the investments were “sure things”, that the investments were guaranteed to earn

principal and interest returns of 9-10% interest, and by failing to disclose that the parties

recommending the investments were not licensed to do so, and that the investments were going to

be used for payment of a personal tax lien for Carter or other purposes other than just the advertised

commercial projects. Again, the Wrights and the Plaintiff Class have been injured as a result of

these breaches of fiduciary duty.

83. As a remedy, the Wrights and the Plaintiff Class seek a constructive trust. The

Debtor committed breach of fiduciary duty vis-à-vis the Plaintiffs and the Plaintiff Class. The

Debtor was unjustly enriched. The investments of the Plaintiffs and the Plaintiff Class can be traced

to the listed assets of the Estate, including:





▪ Crescent Parc - a partially constructed office development located at 1400 Coit Rd., McKinney Texas 75071 in the name of Subsidiary Debtor McKinney Executive Suites at Crescent Parc Development Partners, LLC; ▪ Starling House - a luxury 8,036 square foot home built in 2018 and located at 4009 Starling Dr., Frisco, Texas 75034 in the name of Subsidiary Debtor Christian Custom Homes, LLC; ▪ Ranch - a hunting ranch located on Duncan Road in Ringling, Oklahoma in the name of Subsidiary Debtor Double Droptine Ranch LLC; ▪ Raw Land - approximately 9.4 acres of commercial raw land located at the southwest corner of Main and Majestic Gardens Dr. in Frisco, Texas in the name of Subsidiary Debtor West Main Station Development, LLC; and ▪ Single-Family Residences - four partially constructed single-family residence properties located at 1781 and 1786 Courtland Drive and 1756 and 1784 Hidalgo Lane, respectively, in Frisco, Texas in the name of Subsidiary Debtor Kingswood Development Partners, LLC.

84. For these reasons, Plaintiffs assert that these assets of the Debtor and the proceeds

from any sale of these assets are owned by the Plaintiffs and Plaintiff Class under a constructive

trust and are not part of the Estate.

FIFTH CLAIM FOR RELIEF: BREACH OF CONTRACT



86. The Debtor entered into a Contract with the Wrights to pay them the return of their

$700,000.00 investment plus 9% per annum interest with such principal and interest due by

February 25, 2017.

87. The Debtor entered into Contracts with the Plaintiff Class to repay the amount of

the class member’s investment along with interest rate tied to the term of the investment, either 12

months or 24 months.




88. The Debtor is in breach of the Contract with the Wrights and the Contracts with the

Plaintiff Class by failing to make payment as they came due under the Contracts. The Wrights and

the Plaintiff Class seek their actual damages as well as reasonable and necessary attorneys’ fees.

VII. Request for Constructive Trust


incorporated herein by this reference.

90. Texas law has long-recognized the right of the Court to impose a constructive trust

in order to prevent unjust enrichment of a wrongdoer.

91. Property held in constructive trust prior to the filing of bankruptcy is not property

of the bankruptcy estate and may be recovered by the trust’s beneficiaries from the bankruptcy

trustee or debtor.

92. In this case, Debtor, through its principals, agents and affiliated entities under its

ownership, management and/or control breached its fiduciary duties to the Wrights and the

Plaintiff Class and committed fraud upon them.

93. Debtors invested the funds fraudulently obtained from the Wrights and the Plaintiff

Class into identifiable properties and projects to which the funds can be readily traced.

94. In the absence of a constructive trust, the Debtor will be unjustly enriched at the

expense of the Wrights and the Plaintiff Class.

95. As a result, the Wrights move this Court to find that the following properties and

the proceeds from any sale of these properties are held in constructive trust for the benefit of the

Plaintiff Class and are not property of the bankruptcy Estate:





▪ Crescent Parc - a partially constructed office development located at 1400 Coit Rd., McKinney Texas 75071 in the name of Subsidiary Debtor McKinney Executive Suites at Crescent Parc Development Partners, LLC; ▪ Starling House - a luxury 8,036 square foot home built in 2018 and located at 4009 Starling Dr., Frisco, Texas 75034 in the name of Subsidiary Debtor Christian Custom Homes, LLC; ▪ Ranch - a hunting ranch located on Duncan Road in Ringling, Oklahoma in the name of Subsidiary Debtor Double Droptine Ranch LLC; ▪ Raw Land - approximately 9.4 acres of commercial raw land located at the southwest corner of Main and Majestic Gardens Dr. in Frisco, Texas in the name of Subsidiary Debtor West Main Station Development, LLC; and ▪ Single-Family Residences - four partially constructed single-family residence properties located at 1781 and 1786 Courtland Drive and 1756 and 1784 Hidalgo Lane, respectively, in Frisco, Texas in the name of Subsidiary Debtor Kingswood Development Partners, LLC.

VIII.

Damages

FIRST CLAIM FOR RELIEF: ACTUAL DAMAGES



97. Plaintiffs and the other class members have sustained actual damages in the form

of the loss of the principal amount invested together with the promised investment returns.

SECOND CLAIM FOR RELIEF: ATTORNEY’S FEES



99. Plaintiffs and the other class members have been forced to retain legal counsel and

have incurred reasonable and necessary attorneys’ fees which, pursuant to Contract and/or in

equity and good conscience should be borne by Debtor and the Lender Defendants.




WHEREFORE, having set forth their claims for relief against Debtor and the Lender

Defendants, Plaintiffs respectfully pray of the Court as follows:

a. Certify the Plaintiff Class as defined herein and appoint the Wrights and their Counsel to represent the interests of the Plaintiff Class;

b. Find that the Debtor committed fraud and/or breach of fiduciary duty vis-à-vis the

Plaintiff Class; c. Find that the Debtor was unjustly enriched; d. Find that the investments of the Plaintiff Class can be traced to identifiable assets

held by Debtor; e. Find that the assets of the Debtor purchased, constructed, and/or improved with

Investor funds, or the proceeds from the sale thereof, are owned by the Plaintiff Class under a constructive trust and did not become part of Debtor’s Estate;

f. Award Plaintiffs and the Plaintiff Class their reasonable and necessary attorneys’

fees and expenses incurred in this case and g. Provide Plaintiffs and class members such other and further relief as the Court may

deem just and proper.

This 17th day of March, 2020.

Respectfully submitted, /s/ David B. Miller David B. Miller Texas Bar No. 00788057 [email protected] SCHNEIDER MILLER REYNOLDS, P.C. 300 N. Coit Road, Suite 1125 Richardson, Texas 75080 (972) 479-1112 (972) 479-1113 (fax) Karen L. Kellett Texas Bar No. 11199520 [email protected] Theodore O. Bartholow III Texas State Bar No. 24062602 [email protected] KELLETT & BARTHOLOW PLLC



mailto:[email protected]




11300 N. Central Expressway, Suite 301 Dallas, TX 75243 (214) 696-9000 (214) 696-9001 (fax) James A. Holmes State Bar No. 00784290 [email protected] THE LAW OFFICE OF JAMES HOLMES, P.C. 212 South Marshall Henderson, Texas 75654 (903) 657-2800 (903) 657-2855 (fax) ATTORNEYS FOR DAVID AND KAREN WRIGHT ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY-SITUATED





(SHERMAN DIVISION)

IN RE: § § CASE NO. 19-40426

CFO MANAGEMENT § HOLDINGS LLC,1 §

§ CHAPTER 11 Debtor. §

§ §

DAVID WALLACE, CHAPTER 11 § TRUSTEE FOR THE BANKRUPTCY § ESTATE OF CFO MANAGEMENT § HOLDINGS, LLC, §

§ Plaintiff, §

§ v. § ADVERSARY NO. 20-04054

§ CPIF Lending, LLC, a Washington § Limited Liability Company §

§ Defendant. §

§

AMENDED COMPLAINT AND OBJECTION TO CLAIM

COMES NOW, David Wallace, Chapter 11 Trustee for the Bankruptcy Estate of

CFO Management Holdings, LLC, and files this, his Amended Complaint and Objection to

Claim and, for such, would respectfully show the Court as follows:

1 The following entities’ bankruptcy cases and estates have been substantively consolidated with that of Debtor CFO Management Holdings, LLC (EIN# XX-XXX6987) for all purposes (see Docket No. 248): Carter Family Office, LLC (Case No. 19-40432); Christian Custom Homes, LLC (Case No. 19-40431); Double Droptine Ranch, LLC (Case No 19-40429); Frisco Wade Crossing Development Partners, LLC (Case No. 19-40427); Kingswood Development Partners, LLC (Case No. 19-40434); McKinney Executive Suites at Crescent Parc Development Partners, LLC (Case No. 19-40428); North-Forty Development LLC (Case No. 19-40430); and West Main Station Development, LLC (Case No. 19-40433). The following mailing address can be used for the consolidated Debtor with respect to these cases: c/o David Wallace, Chapter 11 Trustee, 4131 North Central Expressway, Suite 775, Dallas, Texas 75204.


3

Case 19-40426 Doc 542-3 Filed 09/04/20 Entered 09/04/20 17:29:18 Desc Exhibit 3 - CPIF Complaint Page 1 of 35

Amended Complaint and Objection to Claim 2

I. JURISDICTION AND VENUE

1. This Court has jurisdiction over this proceeding in accordance with

28 U.S.C. § 1334(b). This Court can hear and determine this matter in accordance with

28 U.S.C. § 157 and the standing order of reference of bankruptcy cases and proceedings

in this District. Venue is proper in this district under 28 U.S.C. §§ 1408 and 1409. This is a

core proceeding under 28 U.S.C. §157(b)(2)(A), (B), (C), (F), (H), (K) and (O). The bases

for the relief sought are found in §§ 502, 503, 506, 510, 544, 547, 548, 550, and 551 of the

United States Bankruptcy Code, 11 U.S.C. §§ 101, et seq. (the “Bankruptcy Code”) and

Rules 3007, 3012, and 7001 of the Federal Rules of Bankruptcy Procedure (the

“Bankruptcy Rules”).

2. Plaintiff consents to the entry of final orders by the Bankruptcy Court for all

matters over which this Court has jurisdiction in this proceeding.

II. PARTIES AND KEY PLAYERS

3. CFO Management Holdings, LLC (“CFO Management” or the “Debtor”) and

its subsidiaries (as listed in Footnote 1 in this Complaint, the “Subsidiary Debtors,” and

together with the Debtor, the “Debtors”) each filed voluntary petitions under Chapter 11

of the Bankruptcy Code on February 17, 2019 (“Petition Date”).

4. On April 10, 2019, the United States Trustee for the bankruptcy cases filed a

notice of the appointment of David Wallace as Chapter 11 Trustee for the Debtors’ estates

(the “Trustee”). See Docket No. 143.2 On April 24, 2019, the Court entered its order

2 All docket references refer to entries in the docket of the above-captioned main bankruptcy case, Case No. 19-40426.




granting the United States Trustee’s application to approve the appointment of David

Wallace as Chapter 11 Trustee. See Docket No. 153.

5. On August 15, 2019 the Court entered an order substantively consolidating the

Debtor and Subsidiary Debtors and their estates for all purposes under the name and case

of the Debtor, CFO Management Holdings, LLC. See Docket No. 248.

6. Each of the substantively consolidated Subsidiary Debtors were at one time

wholly owned and controlled by Phillip Carter or by entities that Carter controlled,

managed, or owned. The Subsidiary Debtors’ businesses focused on real-estate

development, including developing and selling residential and commercial real estate in

Collin and Denton Counties in North Texas and owning and managing a wild-game ranch

in Southern Oklahoma. On or about January 18, 2019, CFO Management was created to

hold and manage the underlying assets of the Subsidiary Debtors. Such real-estate assets

included the following as of the Petition Date:

• Frisco Wade Crossing - a substantially completed retail development located at 5855 Preston Rd, Frisco, Texas 75034 in the name of Subsidiary Debtor Frisco Wade Crossing Development Partners, LLC

• Crescent Parc - a partially constructed office development located at 1400 Coit Rd., McKinney Texas 75071 in the name of Subsidiary Debtor McKinney Executive Suites at Crescent Parc Development Partners, LLC;

• Starling House - a luxury 8,036 square foot home built in 2018 and located at 4009 Starling Dr., Frisco, Texas 75034 in the name of Subsidiary Debtor Christian Custom Homes, LLC;

• Ranch - a hunting ranch located on Duncan Road in Ringling, Oklahoma in the name of Subsidiary Debtor Double Droptine Ranch LLC;

• Raw Land - approximately 9.4 acres of commercial raw land located at the southwest corner of Main and Majestic Gardens Dr. in Frisco, Texas in the name of Subsidiary Debtor West Main Station Development, LLC; and




• Single-Family Residences - four partially constructed single-family-residence properties located at 1781 and 1786 Courtland Drive and 1756 and 1784 Hidalgo Lane, respectively, in Frisco, Texas in the name of Subsidiary Debtor Kingswood Development Partners, LLC.

7. Defendant CPIF Lending, LLC (“CPIF”) is a Washington limited liability

company and a creditor and party in interest in the Debtor’s substantively consolidated

bankruptcy case. Alex Washburn, Columbia Pacific Income Fund II, LP and Columbia

Pacific Advisors, LLC (“Columbia Pacific”) are the listed governors of CPIF.

8. Bob Guess was a radio personality who managed or controlled Texas First

Financial (“TFF”), Texas Cash Cow, LLC (a Delaware limited liability company), and

North Forty Development, LLC (a Delaware limited liability company).3 He was also a

salesperson for TFF and one of Carter’s co-conspirators in a scheme in which investors

were defrauded. He is currently a guest of the Texas State Department of Criminal Justice.

9. James Frinzi was the pre-petition Chief of Staff to Philip Carter at Subsidiary

Debtor Carter Family Office, LLC (“CFO”).4

10. Kelly Carney was the pre-petition President of Commercial Operations for

CFO.

11. Rob Shields is a Senior Underwriter at Columbia Pacific.

12. Brad Shain is or was the pre-petition Fund Manager at CPIF and is the manager

of real-estate-lending strategy at Columbia Pacific.

13. Will Nelson works in loan production and asset strategy at Columbia Pacific.

3 Though similar in name, this entity is separate from Subsidiary Debtor North-Forty Development LLC, a Texas limited liability company. 4 CFO apparently managed the operations and development of the various Subsidiary Debtor real estate projects.




14. Kevin Quinn is an Asset and Underwriting Manager at Columbia Pacific.

III. BACKGROUND

15. As President of the Subsidiary Debtors, Philip Carter participated in a massive

years-long multi-million-dollar consumer-fraud scheme. He was aided and abetted in this

scheme by brokers and lenders—including CPIF—who were all too eager to enrich

themselves at the expense of the scheme’s victims, typically senior citizens of limited

means whose investments represented in some cases their life savings.

16. Starting in or before July 2015 and continuing through at least February 2017,

Carter raised over $40 million from over 270 investors in several states, most residing

within North Texas through the solicitation of real-estate investments by way of

materially misleading statements and omissions. Carter then misappropriated some such

investor funds to pay off personal tax liens, fund his lifestyle, and make Ponzi payments

to investors.

17. The scheme worked like this: Carter, soliciting funds with or through alleged

“brokers” Texas First Financial (“TFF”) (led by radio personality and self-proclaimed

financial guru Bob Guess), received funds from vulnerable individuals, often people in or

approaching retirement, to whom they sold short-term, high-yield promissory notes

issued by a number of shell companies that were misleadingly named to confuse

investors. Investors were told they were investing in Carter’s real-estate-development

companies and that their investments were backed by hard assets from legitimate real-

estate-development projects, including in North-Forty Development LLC (“North-Forty”),

a supposed “sure thing” developer of commercial properties in Frisco and surrounding




areas. Investors were given promissory notes purportedly entitling them to a return of

between nine and twelve percent.

18. Many of the statements made in soliciting investors were materially false and

misleading. Promissory notes given to investors were not secured and were in the name

of shell companies with names nearly identical to the names of Carter’s actual real-estate

companies, but with no underlying assets. In fact, even North-Forty did not hold title to

any of the real-estate developments or, upon information and belief, controlling interest

in the entities that held such titles. Although the investments in North-Forty and related

entities were touted to prospective investors as “low risk,” it was not revealed to investors

that they actually relied on the success of each link of a long chain of real-estate-

development projects for repayment.

19. Although Carter did, in fact, develop some real-estate projects, he also, upon

information and belief, misappropriated investor funds to pay off an over $1.3 million

personal IRS tax lien, make Ponzi payments to other investors, and operate his

Oklahoma Ranch.

20. On May 17, 2016, the United States Attorney’s Office served Phillip Carter with

a letter informing him that he was the subject of a federal investigation.

21. On or about August 15, 2016, the Texas State Securities Board issued an

Emergency Cease and Desist Order against TFF, Guess, and another Guess-related entity.

The Cease and Desist Order noted, among other things, that “[a]t least $875,000.00, and

perhaps as much as $1.4 million, of investor funds placed with North-Forty and companies




associated with it, were expended for the benefit of the company’s principal [Carter] to

cover a $1,391,064.88 federal tax lien that was outstanding as of April 2016.”

22. On or about January 20, 2017, Carter and some of the Debtors filed a state-court

interpleader action in Collin County ostensibly to interplead money into the state court

for court-supervised payments to investors, Cause No. 219-00305-2017, Texas Cash Cow

Investments, Inc., et al. v. Texas First Financial, LLC, et al., 219th District Court, Collin

County, Texas (the “Interpleader Action”). In this action, Carter and his co-plaintiffs

stated that they were in possession of funds to which TFF had a contractual claim but

acknowledged that such funds were actually the likely property of investors.

23. One part of Carter and Guess’s scheme involved two commercial construction

projects in North Texas. In October 2015, Subsidiary Debtor McKinney Executive Suites at

Crescent Parc Development Partners, LLC (“MES”) and Subsidiary Debtor Frisco Wade

Crossing Development Partners, LLC, (“FWC”) were formed. On December 14, 2015, MES

entered into a construction agreement with Crossland Construction (“Crossland”) to

build Crescent Parc, and on February 22, 2016 FWC entered into a construction

agreement with Crossland to build Frisco Wade Crossing.

24. Things did not go well with Crossland (partly related to the MES and FWC

projects, but also related to problems that led to litigation in connection with another

project known as Prosper Business Park owned by another Carter-controlled entity), and

on March 2, 2017 Crossland filed suit against MES and FWC in Collin County District

Court for breach of contract and foreclosure of a mechanic’s and materialmen’s lien.




25. Undaunted, on May 25, 2017 FWC entered into a construction agreement with

a different construction company, EMJ Construction (“EMJ”), to continue construction on

Frisco Wade Crossing, and MES entered into a construction agreement with EMJ to

continue construction on Crescent Parc.

26. On August 29, 2017, the United States filed an Application for a Warrant to

Seize Property Subject to Forfeiture in the District Court for the Eastern District of Texas

seeking to gain control of the funds deposited in the state-court registry as part of the

Interpleader Action and stating that such funds were actually from new investors in

continuation of the Ponzi scheme. As a result, the court released the funds into the

control of the U.S. Secret Service.

27. Between approximately August 2017 and July 2018, millions of dollars of

construction costs were incurred by EMJ on behalf of MES and FWC in connection with

the construction of Crescent Parc and Frisco Wade Crossing. To fund this construction

and other Subsidiary Debtor activity, on July 31, 2018 MES, FWC, and other Subsidiary

Debtors entered into loan agreements with TBG Funding, LLC (“TBG”) in the collective

amount of $15.6 million ($8.6 million and $7 million, respectively), and on August 2, 2018

TBG filed a deed of trust against FWC and MES properties in the amount of $8.6 million.

28. CFO executives, including at least Carter, Kelly Carney, and James Frinzi, were

discontent with the degree of financial oversight that TBG had imposed as a condition for

lending the Subsidiary Debtors money. So, just two days after the United States had filed

the warrant application and a mere one month after MES and FWC had entered into the

loan agreements with TBG, on August 31, 2018, individuals from CPIF participated in an




introductory call with CFO representatives. CPIF participants on the call included Will

Nelson and Rob Shields.

29. CPIF and its agents, Shields and Nelson, knew or should have known about the

state and federal investigations into Carter and the litigation that Subsidiary Debtor

entities had been embroiled in with the government, prior lenders, their previous

construction contract partners, and cheated investors. Nevertheless, on September 5, 2018

CPIF accepted from North Forty Development a $50,000 refundable deposit and began

discussing the start of due diligence on a potential new loan in which Subsidiary Debtors

MES and FWC would act as borrowers.

30. Just eight days later, on September 13, 2018, CPIF sent a commitment letter for

a $32 million loan that included a 3.5% origination fee to CPIF (which CPIF charged

against the entire $32 million loan amount despite never fully funding the loan); a

3% “brokerage fee” to Eastern Union Funding; a 9.75% fixed interest rate; and a 12-month

maturity. Although these fees were well above market rates, MES and FWC did not even

try to negotiate better terms, and CPIF was only too happy to take advantage of MES’s

and FWC’s weak position.

31. On September 14, 2018, Rob Shields at CPIF sent an email to Philip Carter, Kelly

Carney, and James Frinzi at CFO (and included Will Nelson at CPIF and Mordechai Beren

at Eastern Union Funding) saying that CPIF was “running full steam ahead to close before

month end.” Carter then looped in outside legal counsel to MES and FWC, Kimberly

Davison at Griffith Davison.




32. On September 18, 2018. James Frinzi sent a one-page summary to Rob Shields

at CPIF regarding the TFF investigation in response to Shields’s inquiry regarding

“preliminary findings” from a background check, in which Frinzi described how Guess

was perpetrating a fraud on innocent investors that involved businesses like the Carter

entities: “The way the transaction worked was TFF would hold investment meetings,

promoted on the radio, for retail investors. For example, he would rent a conference room

at a hotel, and have Carter or someone like Carter, come and pitch the business for

investment. Guess represented to the businesses that the retail investors were investing in

a TFF debt fund, which would turn around and lend money to the business. Guess

represented to the investors that the money was being invested directly to each

organization as debt. What really happened was the investors would invest in an imposter

organization, created by Bob Guess. That imposter company would then transfer the

money to TFF. From there, TFF would lend the money to each of the actual companies,

more or less as a corporate bond deal. The actual companies would then make the bond

payments, and Guess would then use that cashflow to pay returns to the retail investors.”

33. Regardless of whether Carter’s level of involvement in the scheme matched

Frinzi’s description, CPIF knew or should have known that Carter and his companies,

including MES and FWC, were in the middle of a criminal investigation as they were

seeking to borrow millions of dollars from CPIF and offering security in assets in which

defrauded individuals may have invested.

34. During this truncated “due diligence” period, Kelly Carney emailed CPIF,

explaining how the proceeds of the proposed $32 million loan FWC and MES were




seeking could be used to help Carter and the Subsidiary Debtors either perpetuate or dig

their way out of the scheme. For example, on September 21, 2018 Carney emailed Will

Nelson at CPIF: “And based on your pay back requirements then we will know what we

have available each month for the TFF investors (there is no set amount, we just try and

give people their money back as best and expeditious as we can).”

35. And on September 25, 2018 Carney emailed Will Nelson and Rob Shields at

CPIF outlining a repayment plan in which CPIF could be paid back quickly, while existing

creditor–investors would be hindered and delayed in receiving payment: “. . . in theory

you 32M could be paid back in Jan, and sales could fund the remainder of the projects and

it still leaves a surplus to address the investor payout over the life of the projects.

However, its construction, there are delays, sales don’t always close when expected . . . I

don’t think we can ever build as fast as Carter wants to go…which requires capital vs

phase approach. I am showing this spreadsheet as this is what Carter understands and

looks at so w/e model loan structure needs to be on a monthly cash basis, showing how

we could use your money to expedite CP and WM and finish much earlier, how we pay

you back while keeping a surplus for the investor payout. Given the profits involved the

sooner we finish the sooner Columbia and the investors are paid and we can use your

money on the next projects.” [spelling and grammar as in original].

36. Later that same day, Rob Shields at CPIF responded favorably to Carney’s

proposal, copying Will Nelson: “ . . . we are in the money deploying business and would

like to provide as large of loan as possible, but we understand our debt is expensive and

you want to control your costs.” Carney replied to Shields and Nelson, casually informing




them that he would like to pay back investors who had lost their life savings and had

health problems, but only if doing so made sound business sense: “ . . . the investor

proceeds are the thorn persay. Having heard their stories of lost life savings, health

problems, if no surgery they are going to die, etc……you want to pay them back as soon as

can or as many as can but it has to be business sound.” [spelling and grammar as in

original].

37. Despite all of this information, CPIF forged ahead with the rush to close the

transaction. On September 27, 2018 the parties exchanged signature packets, and the firm

of Griffith Davison provided CPIF with a draft of an opinion letter in which Kimberly

Davison had deleted a number of representations CPIF was asking them to make. Late in

the evening of September 27, 2018, Rob Shields at CPIF emailed Davison, copying Kelly

Carney, and insisted that Griffith Davison change its opinion letter to include express

representations regarding (1) the validity and perfection of the security interests being

granted to CPIF under the loan agreements; (2) a representation that the interest rates

being charged by CPIF were not usurious; and (3) that the firm was “not aware of any

action, suit or proceeding, or investigation at law, or in equity, or before or by any court,

public board or body, government agency or arbitrator, pending or threatened against,

Borrower or Guarantor [i.e., Philip Carter], which challenges the validity or enforceability

of or the transactions contemplated by the Transaction Documents, or the ability of

Borrower or Guarantor to perform their respective obligations under any of such

documents, or which seeks to enjoin the execution, delivery, or consummation of the

transactions contemplated by such Transaction Documents.” Griffith Davison had




stricken that representation from its opinion letter because it knew, as CPIF knew, that it

was false. Yet Shields requested it be put back into the letter.

38. CPIF was so insistent on Griffith Davison including these misleading

representations in its opinion letter that CPIF’s lawyer sent an email to Kimberly Davison

again directing her to change the opinion letter. The email included a veiled threat: “If

you need to bring in a different TX firm to provide the required opinions if you’re firm

isn’t comfortable giving that’s fine, but we need to have these in order to close.”

39. To their credit, Griffith Davison resisted—at least at first—the pressure from

CPIF and its lawyers to include false representations in the opinion letter. Kimberly

Davison responded to CPIF and its lawyer’s demands late in the evening of September 27,

2018: “After receiving your comments, I discussed the requested opinions internally.

While I can appreciate that other firms may be willing to provide the requested opinions,

I believe your request far exceeds the typical opinions provided for transactions of this

nature in Texas.”

40. CPIF was not pleased with Griffin Davison’s response, and continued to

pressure the firm to change the opinion letter before the now-delayed closing. On

September 28, 2018 Griffith Davison finally relented and provided an updated opinion

letter (the “Opinion Letter”) referencing Bob Guess-related claims. Included in the final

opinion letter was this representation: “Lender has performed its due diligence in

connection with the transaction contemplated by the Transaction Documents in a

reasonably prudent manner and has received, reviewed and duly considered all

information available or obtained in connection with such due diligence or otherwise.




Said due diligence included but was not limited to the following: (1) the search of public

records, (2) the performing of background checks on the principals of Borrower and the

Guarantors, (3) the visual inspection of the real property described in the Deed of Trust,

(4) the examination of all documents and information related to the Real Property and

Personal Property including those provided by Borrower, and (5) all other information

obtained or possessed by Lender or any agent or attorney for Lender.”

41. On September 28, 2018, CPIF closed on the $32 million loan transaction with

Debtors FWC and MES (the “CPIF Loan”). Out of that $32 million, nearly $15 million was

sent to TBG to pay off loans that FWC and MES (and other Debtor entities) had only

recently obtained; another $960,000 went to Eastern Union Funding as a brokerage fee;

$1.12 million went to CPIF as an origination fee; and another approximately $50,000 went

to various other third parties. The high costs associated with the CPIF Loan—so soon

after FWC, MES, and other Debtors had secured financing from TBG—left FWC, MES,

and other Debtors in a worse financial condition than before the transaction.

42. In connection with the CPIF Loan, CPIF executed certain loan and security

documents with Carter, Debtors MES and FWC, and related entities that purported to

give CPIF a first lien—ahead of the already-defrauded investors—on the very buildings

and properties that Carter bought or developed in part with funds loaned by the investors

(as identified, described, and defined in section 1.1. of the Opinion Letter and, together

with the CPIF Loan and any disbursements made in accordance therewith, the “CPIF

Transfer”). Under the terms of the CPIF Loan, FWC and MES were each jointly and




severally liable for the debts and obligations of the other. As a result, FWC and MES each

were rendered balance-sheet insolvent by engaging in the CPIF Transfer.

43. Upon information and belief, CPIF neither sought nor obtained an opinion on

the FWC’s or MES’s solvency before closing on the CPIF Loan and engaging in the CPIF

Transfer.

44. At the time of the CPIF Transfer, Debtors FWC and MES were insolvent or

rendered insolvent as a result of the CPIF Tranfer.

45. At the time of the CPIF Transfer, CPIF knew or should have known that

Debtors FWC and MES were insolvent.

46. At the time of the CPIF Transfer, Philip Carter, James Frinzi, and Kelly Carney

were fiduciaries of Debtors FWC and MES.

47. At the time of the CPIF Transfer, Philip Carter, James Frinzi, and Kelly Carney

owed fiduciary duties to Debtors FWC and MES, and because Debtors FWC and MES

were insolvent, those fiduciary duties extended to FWC’s and MES’s creditors.

48. As a result of the CPIF Transfer, creditors of FWC and MES were hindered,

delayed, or defrauded, and suffered harm. As recognized in the substantive consolidation

of the Debtors’ bankruptcy cases, such creditors included the defrauded investors.

49. At the time of the CPIF Transfer, Philip Carter was the subject of state and

federal criminal investigations.

50. At the time of the CPIF Transfer, CPIF, Rob Shields, Brad Shain, and Will

Nelson knew or should have known that Philip Carter was the subject of state and federal

criminal investigations.




51. In the weeks that followed the closing of the CPIF Loan and consummation of

the CPIF Transfer, individuals at CPIF communicated with individuals at CFO regarding

who should and should not receive payments out of the proceeds of the CPIF Loan.

Included among the recipients of payments that CPIF knowingly approved and released

were Philip Carter’s criminal-defense attorney and creditors of entities that were not

signatories to the CPIF Loan (in other words, loan proceeds were distributed for the

benefit not of MES and FWC, but for the benefit of Carter or other non-Borrower Debtor

entities). CFO and CPIF also discussed the importance (to CPIF) of not paying investors

without ensuring that CPIF was paid first.

52. For example, with respect to a planned closing in mid-October 2018 on the sale

of Frisco Wade Crossing Retail Building No. 2, Unit 100, CPIF insisted that all sales

proceeds be paid to CPIF despite Kelly Carney’s request that at least some investors be

paid some of what they were owed out of some of the sale proceeds. CPIF’s insistence that

it take control of all of the proceeds from the closing of this sale transaction hindered or

delayed the payment of the Debtors’ investor–creditors.

53. After that transaction closed, CPIF and CFO continued to discuss who would

get paid out of property sale proceeds, and how such payments would be determined,

with CPIF claiming that it was entitled to take possession of 100% of the sale proceeds

(while not applying these funds to the amounts owed under the loan) and control who

got paid and when. On October 19, 2018, Kelly Carney emailed the following to Rob

Shields at CPIF: “Ok so I am clear. We talked about a pay off schedule that was going to

be put off until after closing and then ‘worked out’. But you are stating there is a payoff




schedule in the loan document? Especially given Mr. Carter was only sent the signature

pages and not the full loan document to review…that would be a major problem.

Regardless, I went thru all 100 pages of the loan document and I don’t find any mention of

Columbia keeping 100% of sales proceeds nor anything concerning disbursement that a

lawyer would need to change. So before I go to Mr. Carter with this can you; 1. Point me

to the page in the loan documents that shows a pay back schedule and 2. Explain why it

would be in there when all discussions would be that payback would be discussed/agreed

after closing.” [spelling and grammar as in original].

54. On November 2, 2018, CPIF funded a draw request by the Borrowers on the

CPIF Loan in the aggregate amount of $1,536,662.16. None of this amount went to pay

investors.

55. Four days later, on November 6, 2018, the house of cards Carter had built (with

CPIF’s assistance) collapsed. Based on claims presented by the Texas State Securities

Board, Carter was indicted by the Grand Jury of Collin County, Texas on multiple counts

of securities fraud. Subsequently, the U.S. Securities and Exchange Commission also filed

a complaint against Carter alleging that he and two other individuals raised

approximately $45 million from more than 270 noteholders across the United States but

that the “notes” were actually backed by unrelated, but closely named, entities that had

no assets. The SEC also alleged that Carter misappropriated investor funds, using the

funds to finance his own expenses, operate an Oklahoma ranch, and to pay certain

investors to perpetuate the alleged fraudulent scheme.




56. On the day Carter was indicted, Rob Shields at CPIF Lending emailed CFO’s

Kelly Carney regarding information needed for a discussed 80/20% sales-proceeds sharing

agreement: “In regards to the 80/20 sales proceeds allocation. That is in your attorneys

court, as we need to know the following before we can finalize the amendment:

1. Identity of the investors to whom amounts are owed, together with the amounts owed and the identity of the project in which the investors invested;

2. Identity of any pending lawsuits filed by any investor(s) against Phillip Carter and/or his entities where fraud, misrepresentation, breach of fiduciary duty, breach of contract, securities violations, and/or similar claims are asserted (please provide all case caption information);

3. Identify any pending civil or criminal actions asserted against Phillip Carter or the borrower where a governmental unit is the plaintiff.”

57. Six days after Carter was indicted, on November 12, 2018, CPIF sent a letter

explaining CPIF’s decision to hold on reserve the $2,889,842.82 in sales proceeds from two

mid-October sales of portions of Frisco Wade Crossing (the above-referenced sale of

Building No. 2, Unit 100 and another sale of Building No. 4) and commenting on

negotiations concerning allowing the Debtors to receive a partial distribution from the

proceeds of future sales.

58. On November 14, 2018, CPIF sent a notice of default to CFO in which CPIF

identified the six state-level indictments against Phillip Carter and the federal

investigation. CPIF also notified CFO that the default interest rate would now be applied

to the outstanding balance on the CPIF Loan—including on amounts in reserve accounts

over which CPIF had custody and control. Astonishingly, in the notice of default CPIF

cited the representation (to the effect that the Debtors knew of no suits threatened




against any Borrower or Guarantor) that CPIF knew was false but had insisted the

Borrowers include in the Opinion Letter in order to close the CPIF Loan. See Complaint,

supra, ¶ 37.

59. On November 20, 2018, CPIF sent a letter stating that it would authorize a draw

submitted on November 16, which requested payment of $1,019,918.21. None of the

amount requested, which CPIF authorized, went to pay investors.

60. On November 30, 2018, CPIF funded yet another draw request by Borrowers in

the aggregate amount of $136,089.82. None of the amount requested and funded went to

pay investors. On December 5, 2018 CPIF paid itself a preferential payment in the amount

of $268,666.67 in Debtors’ funds from an “Interest Reserve” account. On January 7, 2019

CPIF paid itself a preferential payment in the amount of $268,666.67 in Debtors’ funds

from an “Interest Reserve” account.

61. On February 11 and 12, 2019, Kevin Quinn at CPIF sent an email to CFO

regarding loan payoff amounts, asserting that $660,000 in alleged default interest (on top

of $95,333 in regular interest) had accrued since November 14, 2018.

62. On February 13, 2019, just four days before the Petition Date, CPIF sent CFO a

notice of acceleration, stating that CPIF had applied $8,137,252.69 in Debtors’ funds on

deposit to antecedent debts owed to Debtors’ creditors. Such applied funds included the

$2,889,842.82 in sales proceeds held on reserve by CPIF since the mid-October Frisco

Wade Crossing property sales.

63. Postpetition, on November 8, 2019 CPIF filed an objection to the Trustee’s

motion for an order approving the sale of certain portions of Frisco Wade Crossing




[See Docket No. 315], which the Court later overruled after notice and hearing

[See Docket No. 325].

IV. CAUSES OF ACTION

A. Cause of Action One: Fraudulent Transfer Under 11 U.S.C. § 548(a)(1)(A) (Actual Fraud) and 11 U.S.C. §§ 550 & 551

64. The Trustee reincorporates the allegations contained in paragraphs 1 through

63 of the Complaint.

65. The CPIF Transfer was made or incurred by MES and FWC within two years of

the Petition Date and was made or incurred with actual intent to hinder, delay, or

defraud entities to which the MES and FWC were or became indebted after the date that

such CPIF Transfer was made or such obligation was incurred.

66. By reason of the foregoing, the Trustee sues to avoid the CPIF Transfer made to

Defendant CPIF under 11 U.S.C. § 548, to recover the CPIF Transfer or the value thereof

from Defendant CPIF under 11 U.S.C. § 550, and to preserve such avoided transfer and any

liens associated therewith for the benefit of the Debtor’s bankruptcy estate under

11 U.S.C. § 551.

B. Cause of Action Two: Fraudulent Transfer Under 11 U.S.C. § 548(a)(1)(B) (Constructive Fraud) and 11 U.S.C. §§ 550 & 551

67. The Trustee reincorporates the allegations contained in paragraphs 1 through

66 of the Complaint.

68. The CPIF Transfer was made or incurred by MES and FWC within two years of

the Petition Date.




69. MES and FWC received less than a reasonably equivalent value in exchange for

such CPIF Transfer or obligations.

70. MES and FWC were insolvent on the date of the CPIF Transfer or became

insolvent as a result of the CPIF Transfer.

71. As a result of the CPIF Transfer, creditors of the Debtors, including creditors of

Debtors MEC and FWS, were harmed.

72. By reason of the foregoing, the Trustee sues to avoid the CPIF Transfer made to

Defendant CPIF under 11 U.S.C. § 548, to recover the CPIF Transfer or the value thereof

from Defendant CPIF under 11 U.S.C. § 550, and to preserve such avoided transfer and any

liens associated therewith for the benefit of the Debtor’s bankruptcy estate under

11 U.S.C. § 551.

C. Cause of Action Three: Fraudulent Transfer Under 11 U.S.C. § 544 and Texas Business and Commerce Code 24.005(a)(1) (Actual Fraud)

73. Plaintiff reincorporates the allegations contained in paragraphs 1 through 72 of

the Complaint.

74. Under 11 U.S.C. § 544(b)(1) the Trustee may avoid any transfer of an interest of

the debtor in property or any obligation incurred by the debtor that is avoidable under

applicable law by a creditor holding an unsecured claim that is allowable under

11 U.S.C. § 502.

75. Under Texas Business and Commerce Code 24.005(a)(1), made applicable by

11 U.S.C. § 544(b)(1), the CPIF Transfer that was made by Debtors MES and FWC was

fraudulent as to a creditor, whether the creditor’s claim arose before or within a

reasonable time after the CPIF Transfer was made or the obligation was incurred, as




Debtors MES and FWC made the CPIF Transfer with actual intent to hinder, delay, or

defraud creditors of the Debtors, including creditors of Debtors MEC and FWS.



77. By reason of the foregoing, the Trustee sues to avoid the CPIF Transfer and to

recover the CPIF Transfer or the value thereof from Defendant CPIF under

11 U.S.C. §§ 544 and 550, and for his attorneys’ fees and costs.

D. Cause of Action Four: Fraudulent Transfer Under 11 U.S.C. § 544 and Texas Business and Commerce Code 24.005(a)(2) (Constructive Fraud)


the Complaint.




11 U.S.C. § 502.

80. Under Texas Business and Commerce Code 24.005(a)(2), made applicable by

11 U.S.C. § 544(b)(1), the CPIF Transfer that was made by Debtors MES and FWC was

fraudulent as to a creditor, whether the creditor’s claim arose before or within a

reasonable time after the CPIF Transfer was made or the obligation was incurred, as the

Debtors made the CPIF Transfer without receiving a reasonably equivalent value in

exchange for the CPIF Transfer, and Debtors MES and FWC: (A) were engaged or were

about to engage in a business or a transaction for which the remaining assets of Debtors

MES and FWC were unreasonably small in relation to the business or transaction; or (B)




intended to incur, or believed or reasonably should have believed that Debtors MES and

FWC would incur, debts beyond MES’s and FWC’s ability to pay as they became due.




recover the CPIF Transfer or the value thereof from Defendant CPIF under


E. Cause of Action Five: Fraudulent Transfer Under 11 U.S.C. § 544 and Texas Business and Commerce Code 24.006(a) (Present Creditors)


the Complaint.




11 U.S.C. § 502.

85. Under Texas Business and Commerce Code 24.006(a) made applicable by 11

U.S.C. § 544(b)(1), the CPIF Transfer was fraudulent as to creditors whose claims arose

before the CPIF Transfer because Debtors MES and FWC made the CPIF Transfer without

receiving a reasonably equivalent value in exchange for the CPIF Transfer and Debtors

MES and FWC were insolvent at that time or the Debtor became insolvent as a result of

the CPIF Transfer.







recover the CPIF Transfer or the value thereof from the Defendant CPIF under


F. Cause of Action Six: Fraudulent Transfer Under 11 U.S.C. § 544 and Texas Business and Commerce Code 24.006(b) (Present Creditors)

88. Plaintiff withdraws this cause of action.

89. [Withdrawn]

90. [Withdrawn]

91. [Withdrawn]

92. [Withdrawn]

G. Cause of Action Seven: Knowing Participation in a Breach of Fiduciary Duty


the Complaint.

94. On the date of the CPIF Transfer and during all relevant periods of negotiation

of the terms of the CPIF Loan and CPIF Transfer, Debtors MES and FWC were insolvent.

95. As a result of that insolvency, on the date of the CPIF Transfer and during all

relevant periods of negotiation of the terms of the CPIF Loan and CPIF Transfer, Debtors

MES’s and FWC’s officers, directors, managers, and principals, including without

limitation Philip Carter, Kelly Carney, and James Frinzi, had a fiduciary relationship with

MES and FWC and with MES’s and FWC’s creditors, including the duty of good faith, the

duty to always act in the best interest of MES’s and FWC’s creditors, and the duty to avoid

self-dealing and self-enrichment at the expense of MES’s and FWC’s creditors.




96. As described in this Complaint, one or more of MES’s or FWC’s officers,

directors, managers, or principals, including without limitation Philip Carter, Kelly

Carney, and James Frinzi breached their fiduciary duties by, among other things,

orchestrating, authorizing, and carrying out the CPIF Transfer.

97. CPIF knew of the existence of the fiduciary duties owed by MES’s and FWC’s

officers, directors, managers, or principals, and knowingly and intentionally provided

substantial assistance to Debtors MES’s and FWC’s officers, directors, managers, and

principals, including without limitation Philip Carter, Kelly Carney, and James Frinzi by,

among other things, orchestrating, authorizing, and carrying out the CPIF Transfer in

breach of those fiduciary duties.

98. CPIF’s assistance was a substantial factor in causing one or more of MES’s or

FWC’s officers, directors, managers, or principals, including without limitation Philip

Carter, Kelly Carney, and James Frinzi to breach their fiduciary duties.

99. These breaches of fiduciary duties proximately caused damages to Debtors

MES and FWC and their creditors in an amount to be proven at trial. Such damages were

the reasonable and foreseeable outcome of CPIF’s conduct. CPIF is liable for actual and

consequential damages resulting from its conduct in aiding and abetting the breaches of

fiduciary duties.






H. Cause of Action Eight: Conspiracy to Commit Fraudulent Transfer


the Complaint.

102. CPIF joined and conspired with one or more of Debtors MES’s or FWC’s

officers, directors, managers, or principals, including without limitation Philip Carter,

Kelly Carney, and James Frinzi to perpetrate, facilitate, and aid or abet the CPIF Transfer,

the breaches of fiduciary duties, and other wrongful acts that harmed the Debtors’

creditors, including creditors of Debtors MEC and FWS, described in this Complaint.

103. CPIF had a meeting of the minds with one or more of MES’s or FWC’s officers,

directors, managers, or principals, including without limitation Philip Carter, Kelly

Carney, and James Frinzi regarding this course of action.

104. As described in this Complaint, CPIF and one or more of Debtors MES’s or

FWC’s officers, directors, managers, or principals, including without limitation Philip

Carter, Kelly Carney, and James Frinzi undertook substantial wrongful overt acts in

furtherance of this course of action.

105. As a result of these wrongful acts, CFO and its creditors, including creditors of

Debtors MEC and FWS, suffered damages in an amount to be determined at trial.

I. Cause of Action Nine: Avoidance and Recovery of Preferential Payments Under 11 U.S.C. § 547 and 550


the Complaint.

107. CPIF, as a creditor of Debtors MES and FWC, received the benefit of transfers

of interests in such Debtors’ property on account of an antecedent debt (the CPIF Loan)




while such Debtors were insolvent, which transfers were made between November 19,

2018 and the Petition Date (the “Preference Period”), and as a result of such transfers,

CPIF was able to receive more than it would receive if such Debtors’ cases were under

Chapter 7 of the Bankruptcy Code, the transfers had not been made, and CPIF had

received payment of such antecedent debts to the extent provided under the Bankruptcy

Code.

108. Specifically, and without limitation, CPIF received transfers of interests in

Debtors MES’s or FWC’s property on account of antecedent debts on at least the

following occasions and in the following amounts:

• December 5, 2018 in the amount of $268,666.67 (Debtors’ funds in “Interest Reserve” that CPIF paid to itself);

• January 7, 2019 in the amount of $268,666.67 (Debtors’ funds in “Interest Reserve” that CPIF paid to itself); and

• February 13, 2019 in the amount of $8,137,252.69 (Debtors’ funds “on reserve” that CPIF paid to itself) (each a “Preferential Transfer”)

109. Accordingly, the Trustee may avoid the Preferential Transfers under

11 U.S.C. § 547(b) and recover the value of the Preferential Transfers under

11 U.S.C. § 550(a).

J. Cause of Action Ten: Improper Setoff Under 11 U.S.C. § 553


the Complaint.

111. The Preferential Transfers constituted setoffs under 11 U.S.C. § 553.




112. To the extent the Trustee’s objection to the CPIF Claim (see below) is sustained

and the CPIF Claim is disallowed, the setoff of the Preferential Transfers was not allowed

under § 553(a) of the Bankruptcy Code.

113. The Trustee seeks recovery of the improper setoffs in the amount of

$8,674,586.03 under § 553(b)(1).

V. OBJECTION TO CLAIM

114. The Trustee objects to proof of claim number 457 filed by CPIF on October 16,

2019 in the amount of $24,788,078.18, plus certain postpetition fees, expenses, and interest

(the “CPIF Claim”), and respectfully asks the Court to sustain this objection and disallow

the CPIF Claim.

115. The CPIF Claim arises from the CPIF Loan and the CPIF Transfer which, as

described in paragraphs 1 through 100 above, consisted of a $32 million loan to Debtors

FWC and MES that carried exorbitant fees and costs for which CPIF received a security

interest in assets those Debtors had obtained during a fraudulent scheme facilitated by

prepetition principals, managers, and agents of the Debtors.

116. Although CPIF only ever made payments to the Debtors or to other parties on

the behalf of the Debtors in an approximate total of $25.7 million, which included over

$2 million in broker and origination fees (the latter of which went to CPIF), CPIF uses the

$32 million stated loan amount to calculate well over a million dollars of interest

obligations (primarily at a default interest rate) it includes in the CPIF Claim. As a result

and after the much-delayed application of over $2.8 million in proceeds from the mid-

October 2018 sales of portions of Frisco Wade Crossing just before the bankruptcy filing,




CPIF now asserts a claim of $24,788,078.18 as of the Petition Date. Upon information and

belief, CPIF intends to assert an additional approximately $2 million in postpetition

interest it asserts has been accruing at a rate of 18%, or $12,375.47 per day, since the

Petition Date, as well as certain postpetition fees and expenses.

117. As described in the Complaint, the CPIF Transfer was a fraudulent transfer

under applicable bankruptcy and state law. Accordingly, the security interest granted by

Debtors MES and FWC in connection with the CPIF Transfer should be avoided. As a

result of the avoidance of the security interest, to the extent CPIF has a claim against the

Debtor’s bankruptcy estate, such claim is not secured, so CPIF is not entitled to any

postpetition interest.

118. To the extent the security interest that might provide CPIF with the right to

postpetition interest is not avoided, and the Court determines that CPIF is entitled to an

allowed secured claim on which it is over-secured, the Court has discretion to allow

postpetition interest at a rate other than the default interest rate CPIF is asserting.

Provided the Court makes factual findings regarding the equities the Court considers in

applying a different rate, the Court can, and should, disallow CPIF’s assertion of default

interest. For the reasons described throughout the Complaint and summarized below on

equitable subordination, CPIF’s conduct justifies reducing—or denying entirely—

postpetition interest on its claim.

119. Additionally, to the extent that the Court determines CPIF is entitled to an

allowed secured claim on all or a portion of its claim, the Court should surcharge CPIF’s

collateral under Bankruptcy Code § 506(c) for the work the Trustee has performed in the




case relating to Frisco Wade Crossing, which was for the benefit of CPIF to the extent

CPIF had a valid perfected security interest in the collateral whose value the Trustee’s

work preserved.

120. If the Court finds in favor of the Trustee on any of the Chapter 5 causes of

action asserted in the Complaint and orders recovery of the Debtor’s property or the

value thereof, the Court should disallow the CPIF Claim in its entirety under Bankruptcy

Code § 502(d), unless CPIF actually turns over such property or the value thereof to the

Trustee, in which event CPIF’s claim should be limited to the amount recovered by the

Trustee from CPIF for the Debtor’s bankruptcy estate, in accordance with Bankruptcy

Code § 502(h), and—for the reasons discussed below—be equitably subordinated to

investor claims.

121. Additionally or alternatively, to the extent the Court allows any portion of the

CPIF Claim, either as a secured or unsecured claim, the Trustee respectfully asks the

Court to equitably subordinate such claim under Bankruptcy Code § 510(c), which

provides as follows:

Notwithstanding subsections (a) and (b) of this section, after notice and hearing the court may--

Under principles of equitable subordination, subordinate for purposes of distribution, all or part of an allowed claim to all or part of another allowed claim or all or part of an allowed interest to another allowed interest; or

Order that any lien securing such a subordinated claim be transferred to the estate.

11 U.S.C. § 510(c).




122. To the extent the Court allows any portion of the CPIF Claim, that claim should

be equitably subordinated because CPIF engaged in inequitable conduct through its

involvement in, and facilitation of, a scheme to defraud investors. These acts caused

significant and irreparable harm to numerous creditors.

123. CPIF’s inequitable conduct was willful, knowing, and deliberate. It included,

without limitation, the following:

• Obtaining a security interest in assets that Debtors had acquired during a fraudulent scheme perpetrated by pre-petition principals, managers, and agents of the Debtors;

• Conspiring with the Debtors’ pre-petition officers, directors, managers, or principals to effectuate the fraudulent CPIF Transfer and aiding abetting them in their breach of fiduciary duties;

• Charging exorbitant fees and interest on the CPIF Loan;

• Engaging in self-dealing to the detriment of MES’s and FWC’s creditors, including defrauded investors;

• Pressuring the pre-petition MES’s and FWC’s outside legal counsel to make representations in an opinion letter that the firm repeatedly expressed their unwillingness to make;

• Ignoring numerous “red flags” about MES’s and FWC’s financial condition, stability, business relationships, and business practices, including the fact that MES’s and FWC’s principal Philip Carter was under criminal investigation by both state and federal authorities and his business associate had been indicted; MES and FWC had been sued by Crossland; and MES and FWC had recently obtained a loan from another lender but were unhappy with the degree of review and oversight that lender was requiring; etc.;

• Deciding not to seek or obtain a solvency opinion despite MES’s and FWC’s obvious signs of financial distress;

• Failing to conduct adequate due diligence and rushing to close the transaction on an accelerated schedule;

• Exercising dominion and control over sales proceeds, keeping them on reserve instead of applying such proceeds to the CPIF Loan balance, so CPIF could




charge default interest on a higher balance for months before applying the proceeds just a few days before the Debtors filed bankruptcy;

• Soon following the declaration of a default on November 12, 2018, refusing any draw requests but also refusing to accelerate the loan and apply the funds on reserve to the loan balance, instead charging default interest for months before finally accelerating the loan and applying the reserves just before bankruptcy;

• After Philip Carter was indicted, making preferential payments to itself by transferring the Debtors’ funds on reserve in the amounts of $268,666.67 each on December 5, 2018 and January 7, 2019, and in the amount of $8,137,252.69 just days before the Debtors filed bankruptcy, despite knowing that these funds were needed to pay defrauded investors;

• In calculating interest on the CPIF Claim, applying a usurious interest rate above the maximum amount allowed under Texas law through the use of a 360-day year for interest calculation;

• In applying a 3.5% “origination fee” on the CPIF Loan, applying the fee to the $32 million loan amount despite never fully funding the loan; and

• In releasing funds, paying third parties not directly involved in the construction for which the loan was ostensibly obtained, such as Carter’s defense attorney and other personal creditors of Carter.

124. Equitably subordinating any allowed claims of CPIF to the claims of the

defrauded investors is fair based on the totality of the circumstances in this case.

125. Equitably subordinating any allowed claims of CPIF to the claims of the

defrauded investors is consistent with Bankruptcy Code.

126. Accordingly, to the extent any of CPIF’s claims are not otherwise disallowed by

this Court, the Trustee is entitled to entry of an order equitably subordinating all such

allowed claims of CPIF to the claims of the defrauded investors against the Debtor.

VI. PRAYER

WHEREFORE, PREMISES CONSIDERED, David Wallace, Trustee, respectfully

prays that this Court:




a) Enter judgment in the Trustee’s favor on all cause of action asserted in this

Complaint;

b) avoid the CPIF Transfer described in this Complaint in accordance with

§§ 544 or 548, as applicable, including but not limited to any security

interests granted by any of the Debtors to CPIF in connection with the CPIF

Loan;

c) order the Defendant to turn over to the Trustee the value of such CPIF

Transfer under § 550 of the Bankruptcy Code;

d) order the Defendant to turn over to the Trustee the value of the Preferential

Transfers under § 550 of the Bankruptcy Code;

e) order the Defendant to turn over to the Trustee the $8,674,586.03 in

improper setoffs under § 553 of the Bankruptcy Code;

f) direct that the CPIF Transfer and any liens associated therewith are

preserved for the benefit of the estate under § 551 of the Bankruptcy Code;

g) find and conclude that Plaintiff aided and abetted a breach of fiduciary

duty, and award damages in an amount to be determined at trial;

h) find and conclude that Defendant conspired to commit a fraudulent

transfer, and award damages in an amount to be determined at trial;

i) sustain the Trustee’s objection to CPIF’s proof of claim and, to the extent

the Court finds that CPIF has a claim against the estate in any amount,

equitably subordinate the allowed amount of such claim to the allowed

claims of the defrauded investors;




j) to the extent the Court determines that CPIF has an allowed secured claim

in any amount, deny CPIF’s request for postpetition interest entirely or, to

the extent the Court determines that CPIF is entitled to postpetition

interest, deny CPIF’s request for interest at the default rate and reduce the

rate of interest to a lower rate based on equitable considerations;

k) to the extent the Court finds that CPIF has an allowed secured claim in any

amount, under 11 U.S.C. § 506(c) permit the Trustee to recover from the

property securing CPIF’s allowed claim the reasonable, necessary costs and

expenses of preserving, or disposing of, such property to the extent of any

benefit to CPIF, in an amount to be determined at trial;

l) disallow CPIF’s claim for both pre-petition or postpetition attorneys’ fees

and costs;

m) award the Trustee attorneys’ fees, costs, and prejudgment and post-

judgment interest to the fullest extent permitted by law;

n) grant such other relief to the Trustee as the Court may deem just and

equitable.




Dated: August 20, 2020 By: /s/ Judith W. Ross Judith W. Ross, State Bar No. 21010670 Frances A. Smith, State Bar No. 24033084 Eric Soderlund, State Bar No. 24037525 Jessica L. Voyce Lewis, State Bar No. 24060956 Ross & Smith, PC 700 N. Pearl Street, Suite 1610 Dallas, Texas 75201 Telephone: 214-377-7879 Facsimile: 214-377-9409 Email: [email protected] [email protected] [email protected] [email protected]

COUNSEL TO CHAPTER 11 TRUSTEE DAVID WALLACE



DECLARATION OF DAVID WALLACE 1


SHERMAN DIVISION

§ In re § Chapter 11

§CFO MANAGEMENT HOLDINGS, LLC,1 § Case No. 19-40426

§ Debtor. §

§

DECLARATION OF DAVID WALLACE IN SUPPORT OF: (A) MOTION TO SELL THE CRESCENT PARC COMMERCIAL PROPERTY FREE AND CLEAR

OF LIENS, CLAIMS, AND ENCUMBRANCES UNDER 11 U.S.C. § 363; AND (B) CHAPTER 11 TRUSTEE’S MOTION FOR APPROVAL OF PAYMENT OF

MEDIATION FEE TO EDWIN PAUL KEIFFER

1. I, David Wallace, Chapter 11 Trustee (the “Trustee”) for the above-captioned

bankruptcy case of CRO Management Holdings, LLC (the “Debtor”), submit this declaration in

support of the Chapter 11 Trustee’s Motion to Sell the Crescent Parc Commercial Property Free

and Clear of Liens, Claims, and Encumbrances Under 11 U.S.C. § 363 [Docket No. 525] (the “Sale

Motion”) and the Chapter 11 Trustee’s Motion for Approval of Payment of Mediation Fee to Edwin

Paul Keiffer (the “Mediation Fee Motion”) [Docket No. 535].2 I am General Counsel for Trigild

Incorporated, where I, among other things, serve as counsel for the company with respect to the

management, acquisition, and disposition of assets. I am familiar with the matters set forth herein,

and unless otherwise noted, I have personal knowledge of the matters set forth herein. If called

1 The following entities’ bankruptcy cases and estates have been substantively consolidated with that of Debtor CFO Management Holdings, LLC (EIN# XX-XXX6987) for all purposes (see Docket No. 248): Carter Family Office, LLC (Case No. 19-40432); Christian Custom Homes, LLC (Case No. 19-40431); Double Droptine Ranch, LLC (Case No 19-40429); Frisco Wade Crossing Development Partners, LLC (Case No. 19-40427); Kingswood Development Partners, LLC (Case No. 19-40434); McKinney Executive Suites at Crescent Parc Development Partners, LLC (Case No. 19-40428); North-Forty Development LLC (Case No. 19-40430); and West Main Station Development, LLC (Case No. 19-40433). The following mailing address can be used for the consolidated Debtor with respect to these cases: c/o David Wallace, Chapter 11 Trustee, 4131 North Central Expressway, Suite 775, Dallas, Texas 75204. 2 Any capitalized terms not defined herein shall have the meanings ascribed to them in the Sale Motion or the Mediation Fee Motion, as applicable.


4

Case 19-40426 Doc 542-4 Filed 09/04/20 Entered 09/04/20 17:29:18 Desc Exhibit 4 - Declaration in Support Page 1 of 10

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Docket #0541 Date Filed: 09/04/2020


upon to testify in support of the Sale Motion and the Mediation Fee Motion, I would testify as

follows:

I. TESTIMONY IN SUPPORT OF SALE MOTION

1. The property at issue in the Sale Motion is a partially constructed office

development located at 1400 Coit Rd., McKinney Texas 75071 (as more precisely described in the

property description attached to Exhibit A to the Contract (as defined below), “Crescent Parc”).

Before substantive consolidation of the assets and liabilities of the Debtor and Subsidiary Debtors,

Crescent Parc was under the name of Subsidiary Debtor McKinney Executive Suites at Crescent

Parc Development Partners, LLC (“MES”). Prior to bankruptcy, MES was in the process of

constructing an office suite complex on Crescent Parc property, with the real property and related

construction divided into two phases: Phase 1 and Phase 2. A majority of the construction

completed prior to the bankruptcy filing and before construction was suspended due to the

financial issues and other events that led to the bankruptcy filing was on Phase 1 of the property.

Construction on Phase 1 is approximately 70-80% complete, but construction on Phase 2 of the

property had barely started (e.g. slabs had not yet been poured) at the time construction was

suspended.

2. While the Court’s Order Granting Chapter 11 Trustee’s Motion for an Order

Authorizing the Retention of Real Estate Brokers [Docket No. 197] (the “Broker Order”)

contemplated a marketing of the property for sales of the individual office suites, which is an

option that I considered and pursued initially, I have since identified a buyer who is interested in

purchasing Crescent Parc in its entirety. In evaluating the option of a full-property sale, I have

analyzed and compared the two scenarios, taking into account the costs associated with completing

construction on Crescent Parc, the post-petition financing that would be required to do so, as well

as the related costs and obligations, the length of time needed to complete construction, appraisal




information, comparisons with the full-property marketing process, and the inherent uncertainties

of the real-estate market, which have only been increased by the COVID-19 pandemic. As a result

and based on my experience, I believe that a sale of Crescent Parc property in its entirety (versus

as individual office suite units following completion of construction) on the same or more

favorable terms as those provided in the Sale Motion is in the best interests of the Debtor’s estate.

3. In accordance with the Broker Order, I retained Edge Realty Partners (“Edge”) to

market Crescent Parc for sale. Edge has taken numerous steps to ensure the thorough marketing

of such properties, including the following:

Broadcasted an offering memorandum to over 4,000 qualified investors on May 6th, with a secondary campaign launched on May 15th, 20th, and 27th to a broader audience of 31,100 investors and brokers;

Received 107 executed Confidentiality Agreements;

Gave open-house tours to approximately 25 buyers over 2-day period; and

Conducted three rounds of bidding, each narrowing contenders by price and offer/buyer attributes.

4. With these marketing efforts, I believe that a sale of Crescent Parc to the below-

referenced buyer or another buyer under more favorable terms, as identified at or before a hearing

on this Motion, would be at market value and beneficial to the Debtor’s estate.

A. Terms of Proposed Sale

5. I have received 17 separate and independent offers to purchase Crescent Parc and

has been in negotiations with a potential buyer, CP380, LLC (“CP380”), for the sale of Crescent

Parc. Following these negotiations, I entered into a contract for the sale of Crescent Parc to CP380

(the “Contract”) subject to the approval of this Court and under the following summarized terms,

as more thoroughly described in the Contract:




Sale price of $17,475,000;

37-day inspection period, running as of the August 4, 2020 effective date of the Contract;

$100,000 in initial earnest money, with a second, $150,000 deposit following the inspection period;

$15,00 non-refundable deposit to protect the estate, and

Closing deadline of September 25, 2020.

A copy of the Contract is attached as Exhibit A to the Sale Motion and Exhibit 1 on the Witness

and Exhibit list to be filed in connection with the hearing on the Sale Motion.

6. As of the signing of this Declaration, I intend to proceed with a sale of Crescent

Parc to CP380 under the terms of the Contract, as an offeror who has provided the highest and best

offer to date at terms that the Trustee believes to be acceptable and beneficial to the Debtor’s estate.

Ultimately, though, I believe that it is prudent to proceed with a sale of Crescent Parc to any

Potential Buyer under terms substantially similar to the above terms and the other terms provided

in the Contract. Based on my experience in the real-estate market, an evaluation of appraisal and

other interested purchaser information, and an analyses of the costs, liabilities, and related

uncertainties associated with borrowing funds to finish construction of Crescent Parc and sell the

office suites on an individual basis, I believe that the above terms and process will result in a sale

of Crescent Parc at market value.

7. I estimate that the costs of a sale of Crescent Parc, including commissions, fees,

title policy, costs of document preparation and recordation, and other closing costs would total

approximately 5% of the purchase price or roughly $875,000. In a sale to CP380, there would be

a 3% commission paid to brokers, with Edge receiving a commission of 3% of the sales price and

then paying Hank Schlachter, the buyer’s broker for CP380 a portion of that equal to 0.5% of the

sales price.




8. Selling Crescent Parc under terms favorable to the Debtor’s estate under the current

market conditions is beneficial to the estate by furthering the ultimate goal of liquidating the

Debtor’s estate for the benefit of creditors, eliminating costs related to maintaining (including

avoiding waste and damage that can occur with a partially constructed development) and

completing construction on Crescent Parc, and avoiding some of the uncertainties that are inherent

to the real estate market. I believe that selling Crescent Parc under the terms described herein

would maximize the value of this asset for the Debtor’s estate and is in the best interests of the

Debtor’s estate and creditors. Therefore, I believe that the sale of Crescent Parc as described herein

has sound business justification.

9. There are two main types of secured claims that have been asserted against Crescent

Parc: any claims asserted by the Debtor’s primary lender, CPIF Lending, LLC (“CPIF Lending”)

and claims based on materialmen and mechanic’s liens relating to construction. The CPIF Lending

claim relates to a deed of trust and related financing agreements entered into by Subsidiary Debtors

MES and Frisco Wade Crossing Development Partners, LLC (“FWC”) on or around

September 27, 2018. On account of that transaction, CPIF Lending claims an interest in both the

commercial real estate development owned by FWC, which has since been sold during the course

of this Bankruptcy Case, and in Crescent Parc. CPIF Lending has filed a claim in this Bankruptcy

Case (Claim No. 457 on the official claims registry in this Bankruptcy Case), in which CPIF

Lending claims to be owed $24,788,078.18 in principal and interest (including default interest) as

of the Petition Date, as well as postpetition legal fees and expenses. In subsequent filings, CPIF

Lending has claimed that, with postpetition interest, attorneys’ fees, and any other amounts it is

claiming entitlement to, that claim now exceeds $30 million. Due to the circumstances

surrounding the CPIF Lending transaction, I have both objected to CPIF Lending’s claim and




commenced an adversary proceeding claiming, among other things, that CPIF’s claim should be

equitably subordinated and the transfers giving rise to CPIF’s claim should be avoided as

fraudulent (see Adv. Case No. 20-04054). A copy of the Amended Complaint in that adversary is

attached as Exhibit 3 to the Witness and Exhibit List to be filed in connection with the hearing on

the Sale Motion.

10. Second, certain other entities, including EMJ, have asserted mechanics’ and

materialmen’s liens against Crescent Parc relating to work purportedly performed on Crescent Parc

(such claimants, collectively, the “M&M Lien Claimants”). Such M&M Lien Claimants, the

amount they claimed to be owed, and other lien information was provided in Exhibit B to the Sale

Motion.3 I, along with the Committee, am currently evaluating the validity of the liens asserted

by the M&M Lien Claimants. At this point, it is my understanding that several of the liens are

invalid and warrant removal. Further, in the event that CPIF Lending or the Class-Action Plaintiffs

(defined below) are determined to be owed an amount equal to or greater than the proceeds of the

sale of Crescent Parc, then there is the possibility that some or all of the M&M Lien Claimants

would not be entitled to payment out of such sale proceeds.

11. There is an additional subordinated, purportedly secured claim asserted against

Crescent Parc. PC Legacy Two Trust, a Phillip Carter-related entity,4 filed a deed of trust in

August 2017 with respect to Crescent Parc. This lien was partially released in August 2018 and

was subordinated to the position of CPIF Lending through a September 27, 2018 Subordination

and Standstill Agreement between those parties. I have believe that, given the events leading to

3 Please note that while Exhibit B to the Sale Motion referenced that Royal Painting, Inc. has filed a lien affidavit asserting a lien on Crescent Parc in the amount of $33,257.16, that amount listed was incorrect. The number asserted on the lien affidavit filed by Royal Painting, Inc. is actually $127,809.90. While I make no representation about the validity of this claim or lien or the other items listed on Exhibit B to the Sale Motion, I wanted to make this correction for clarity. 4 Based on the 2017 deed of trust, it appears that Phillip Carter is the trustee of this trust.




the filing of the Bankruptcy Case and the appointment of the Trustee, there are reasons to challenge

the validity of the PC Legacy Two Trust lien and right to payment. Further, any amounts paid on

account of a secured claim would need to be done according to priority, making payment on

account of this subordinated claim unlikely on a secured basis.

12. In addition to the claim and lien-related issues referenced above with respect to the

purported secured claims on Crescent Parc, certain creditors (the “Class-Action Plaintiffs”) of the

Debtor have asserted a priority secured interest in Crescent Parc, claiming that other secured claims

are subordinated to such creditors’ interests under various grounds, including the doctrine of

constructive trust. These claims were asserted in a complaint filed against the Debtor and CPIF

Lending, among others, on December 6, 2019. A copy of the most recent complaint in that

adversary is attached as Exhibit 2 to the Witness and Exhibit List to be filed in connection with

the hearing on the Sale Motion.

13. Due to the above uncertainties about the status and extent of the claims asserted by

CPIF Lending, the M&M Lien Claimants, and the Class-Action Plaintiffs, I have proposed that all

sales proceeds (after payment of closing costs and applicable taxes) be held in escrow pending

resolution of any lien-related disputes and determination of claim priority by order of the Court

(either through approval of a settlement agreement, the Trustee’s plan of liquidation, or other

determination of such dispute and/or priority) and entry of a Court order directing release of such

escrowed funds, with all valid liens passing to the proceeds in the order of priority.

14. It is my understanding that there are no outstanding ad valorem tax obligations for

years prior to 2018. Any outstanding 2018 and 2019 ad valorem taxes are to be paid at closing,

and any liens securing year 2020 ad valorem property taxes will remain attached to the real estate

until paid. By this Motion, I am not intending to sell Crescent Parc free of easements and similar




property-related encumbrances to the extent that such encumbrances are valid and recorded in the

records of Collin County, Texas as of the filing of this Motion and designated as permitted

encumbrances in the course of finalizing the sale of Crescent Parc (such surviving easements and

similar encumbrances, the “Permitted Encumbrances”).

15. To the extent that there are insufficient proceeds to pay the total of liens against

Crescent Parc, any Interest holder whose claim cannot be paid out of the proceeds will be under-

secured and, therefore, hold instead either (i) an unsecured claim against the Debtor that would

have to be addressed through the claims process or (ii) no claim against the Debtor due to the fact

that their unsecured claim is against another entity. This latter is applicable in the case of

subcontractors who, as to any unsecured portion of their claim, are not in contractual privity with

the Debtor and have recourse only against the general contractor. Finally, any amounts owed with

respect to property taxes pertaining to Crescent Parc will be paid at closing of the sale.

16. It is my understanding that all parties (or types of parties) asserting an Interest in

Crescent Parc, other than the Debtor’s estate and certain easements and similar encumbrances, are

those referenced above. With respect to the claims of CPIF Lending, the M&M Lien Claimants,

and the PC Legacy Two Trust, a bona fide dispute exists as to the validity, amount, and/or secured

status of such claimants’ claims (satisfying § 363(f)(4)), and to the extent that a dispute any such

party cannot be resolved prior to closing, that party’s interest shall remain protected through its

liens being transferred to escrowed proceeds in order of priority. Further, it is my understanding

that CPIF Lending has explicitly consented to the sale and that others, by not objecting to the sale

after having received appropriate notice, have also consented, thereby satisfying § 363(f)(2).

II. TESTIMONY IN SUPPORT OF MEDIATION FEE MOTION

17. At the commencement of this chapter 11 case, before my appointment as Trustee,

the Debtor hired SierraConstellation Partners, LLC (“Sierra”),and in particular, Mr. Lawrence




Perkins, as financial advisors. Specifically, Mr. Perkins, a principal of Sierra, was acting as the

CRO of the Debtor during this period. Upon my appointment, Sierra and Mr. Perkins were no

longer involved in the case, but they have informally sought payment of their postpetition

administrative claims.

18. I believe that the estate may have claims against Sierra and Mr. Perkins related to

their activities in this case.

19. After informally trying to resolve the disputes between the parties, I, consistent with

my goal of minimizing litigation in this case, and Sierra (as well as the Official Committee of

Unsecured Creditors) have agreed to a voluntary mediation of the disputes between one another.

That mediation has been scheduled on September 17, 2020, starting at 9:00 a.m. before Edwin

Paul Keiffer, a partner with the law firm of Rochelle McCullough. Mr. Keiffer, who is highly

qualified to mediate this dispute, has asked for a fee of $2,750 from the bankruptcy estate. Sierra

will also pay $2,750 to Mr. Keiffer for his services in mediating this matter. Mr. Keiffer has asked

that his firm be paid prior to the commencement of the mediation, which would require payment

by no later than September 16, 2020.

20. I believe that payment of a mediator is a payment that is outside the ordinary course

of business, and thus requires court approval. But I believe making such payment and pursing

mediation is in the best interest of the Debtor’s estate to reduce the possibility of incurring the

costs that could result from possible prolonged litigation should the parties not have opportunity

to settle differences in the mediation context.

[Remainder of the Page Intentionally Left Blank]



Pursuant to 28 U.S.C. § 1746, I, David Wallace, declare under penalty of perjury that the

foregoing is true and accurate to the best of my knowledge and belief.

Dated: September 4, 2020

DECLARATION OF DA YID WALLA CE

David Wallace 4131 North Central Expressway, Suite 775 Dallas, TX 75204 Telephone: 214-766-7516 Email: [email protected]

CHAPTERllTRUSTEE

10

