Noonan v. Rauh

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 96-1845
IN RE DAVID C. RAUH,

Debtor,

DAVID J. NOONAN, TRUSTEE,

Plaintiff, Appellant,

v.

KUEI FONG RAUH,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nathaniel M. Gorton, U.S. District Judge]

Before

Boudin, Circuit Judge,

Cyr, Senior Circuit Judge,

and Lynch, Circuit Judge.

Claudia J. Reed, with whom David J. Noonan and Cohen,
Rosenthal P.C. were on brief for appellant.
Joseph I. Schindler, with whom Jonathan S. Schindler and
Klieman, Lyons, Schindler, Gross & Pabian were on brief for
appellee.

July 18, 1997

CYR, Senior Circuit Judge. Appellant David J. Noonan,

trustee in bankruptcy of David C. Rauh ("Debtor"), challenges

various
bankruptcy court rulings later affirmed by the district

court declining to set aside certain prepetition transfers to

Kuei Fong Rauh, the Debtor's wife, and disallowing the Trustee's

postjudgment
motion to amend the complaint, findings, and judgment

relating to three fraudulent-conveyance claims belatedly asserted

against Mrs. Rauh. We affirm the judgment, as amended to reflect

an additional voidable transfer to Mrs. Rauh.

I

BACKGROUND

In 1976, the Debtor, Gary Stahelski, and a third

individual no longer involved in the case, founded a partnership,

Environmental
Water Systems ("E.W.S."), which was to engage in the

plumbing and heating business. Six years later, the same

individuals formed a corporation, E.W.S. Realty, Inc. ("Realty"),

which developed real property for sale or lease. The principal

lenders
for
the
various
real estate development projects undertaken

by Realty were Commerce Bank & Trust Co. ("Commerce Bank") and

Country Bank for Savings ("Country Savings"). The loans obtained

to finance the Realty projects were secured by mortgages on the

various
properties
under
development and were guaranteed by Realty,

as well as by the Debtor and Stahelski in their individual

capacities. During 1988, the Debtor, Stahelski, and Vincent and

Ernest Osterman engaged in a real estate development project in

their individual capacities. Around the same time, these four

2

individuals
formed
Pioneer Valley Partners No. 1, Inc. ("Pioneer"),

a
corporation
which
was
to develop a shopping mall known as Pioneer

Plaza. The Pioneer Plaza project financing came from the real

estate sellers and Commerce Bank. The loans were secured by

mortgages on the Pioneer Plaza real estate and guaranteed by the

various corporations, the Debtor, Stahelski, and the Ostermans.

For
a
time,
E.W.S.
and
Realty were reasonably successful,

especially during 1986, 1987 and 1988. As the Massachusetts real

estate market slumped in 1989, however, the Debtor's financial

position
deteriorated,
due to difficulties in obtaining lessees for

space
in
the
Pioneer
Mall, a slowdown in the construction business,

and the heavy indebtedness incurred with E.W.S. and/or Realty for

services performed in connection with the Pioneer Plaza project.

E.W.S.
and
Realty in turn became deeply indebted to third parties.

By May 1989, the Debtor realized that he and Stahelski would be

unable
to
meet
the
$200,000 mortgage payment due the sellers of the

Pioneer Plaza real estate in June and an additional payment due

Country Savings around the same time.

Between June 1 and September 2, 1989, Mrs. Rauh

unilaterally withdrew $127,758 from various joint accounts

maintained
in the names of both spouses and deposited the proceeds

in
accounts
she
either
held jointly with her daughter or in her own

name as trustee for her son. The bankruptcy court found that

these
transfers
were
made by Mrs. Rauh with actual intent to remove

the monies in the joint spousal accounts from the reach of the

Debtor's creditors.

3

On June 28, 1989, the Debtor suddenly absconded wit

$9,000 withdrawn from an unspecified joint spousal account. Mrs.

auh
sought
an
explanatio
h
R n from Stahelski, who described the dismal

financial
picture
confronting him and the Debtor and suggested that

the Debtor might have left with another woman. The Debtor

resurfaced approximately two weeks later, however, and Stahelski

terminated
the Debtor's employment with Realty shortly thereafter.

At about the same time, the E.W.S. partnership was dissolved.

The Debtor sued Stahelski to recover the value of his

interests in E.W.S. and Realty. Mrs. Rauh joined the action,

claiming
damages
for
emotional distress caused by her dealings with

Stahelski following the Debtor's disappearance. The suit was

settled on July 23, 1991 (the "Stahelski Settlement"), with the

Debtor receiving vehicles and equipment of little value in return

for
relinquishing all interests in E.W.S. and Realty to Stahelski;

Mrs. Rauh received $15,000 in cash and a $40,000 promissory note

payable
to
Realty.1 She continued to receive all payments made on

the $40,000 note until well after the Debtor filed a voluntary

chapter 7 petition on March 24, 1992.

In due course, the Trustee commenced an adversary

proceeding to set aside several transfers to Mrs. Rauh,

individually and as next friend of the Rauh children. As the

challenged transfers all occurred more than one year before

bankruptcy, see Bankruptcy Code S 548, the Trustee invoked

1Meanwhile, the Debtor had deeded his tenancy-by-the-
entireties
interest
in
the marital home to Mrs. Rauh on January 28,
1991, for nominal consideration.

4

Bankruptcy Code S 544(b) and chapter 109A of the Massachusetts

General Laws ("ch. 109A") the Massachusetts Uniform Fraudulent

Conveyance Act ("UFCA") as grounds for avoiding them.2

At
trial,
the Trustee managed to persuade the bankruptcy

court
to
set
aside
only
the transfer of the Debtor's joint interest

in
the
marital
home
and
the transfer of the $40,000 promissory note

to Mrs. Rauh in connection with the Stahelski Settlement.

Thereafter,
the
Trustee
moved to amend the complaint, findings, and

judgment to conform with the evidence. See Fed. R. Bankr. P.

7015(b), 7052(b), 9023(a); Fed. R. Civ. P. 15(b), 52(b), 59(a).

The proposed amended complaint alleged additional fraudulent

transfers.

Nearly a year after trial, the bankruptcy court denied

the
postjudgment
motion
on the mistaken ground that the Trustee had

failed
to
file a motion to amend the complaint to conform with the

evidence. See infra Section II.B.

In addition to the ruling at trial refusing to set

aside Mrs. Rauh's withdrawals from the joint accounts the

Trustee
now
challenges the bankruptcy court's postjudgment rulings

refusing
to
set
aside:

the $15,000 cash payment Mrs. Rauh received

in the Stahelski Settlement; a $6,565.31 deposit, on March 27,

1992, to Mrs. Rauh's own bank account, comprised of three checks

dated two weeks prior to the Debtor's chapter 7 petition, payable

to the Debtor and endorsed over to Mrs. Rauh; and $3,786.76 in

2The Uniform Fraudulent Transfer Act ("UFTA") did not take
effect in Massachusetts until well after these transactions. See
Mass. Gen. Laws ch. 109A (1997), amended by St. 1996, ch. 157
(approved July 8, 1996) (replacing UFCA provisions with UFTA).

5

deposits to Mrs. Rauh's own bank account, between September 17,

1991 and February 12, 1992, consisting of several checks from the

Debtor's customers made payable to Mrs. Rauh.

II

DISCUSSION

A. The Joint-Account Withdrawals

The
threshold
matter
for
our consideration is whether the

Trustee adequately preserved the claims asserted on appeal. A

thorough review of the entire record discloses that the theory

advanced by the trustee on appeal in support of his claims to the

various amounts withdrawn from the joint accounts is altogether

different
than
that
litigated below. Accordingly, we conclude that

these claims were abandoned below.

The Trustee argued before the bankruptcy court that

Massachusetts law establishes a rebuttable presumption that the

spouse whose funds are deposited in a joint spousal account

("contributing spouse") is presumed to have intended that each

spouse
own
a
one-half
interest in the deposited funds. See Gibbons

v. Gibbons, 4 N.E.2d 1019, 1020 (Mass. 1936). Thus, the Trustee

contended
throughout the proceedings below that the Debtor was the

contributing spouse; that he owned one-half the monies in these

joint accounts; that Mrs. Rauh, the party challenging the

aforementioned presumption, had not carried her burden, see

Blanchette v. Blanchette, 287 N.E.2d 459, 463 (Mass. 1972), of

establishing that the contributing spouse intended to retain

6

ownership of all monies deposited;3 and, therefore, that either

Mrs.
Rauh
had converted the Debtor's one-half share, or the Debtor

had
conveyed
his
one-half share to Mrs. Rauh in fraud of creditors.

Accordingly, the Trustee claimed, the Debtor's "transfers" were

voidable under Bankruptcy Code S 544(b) and ch. 109A.

The bankruptcy court instead ruled that a joint spousal

account creates a very different presumption; namely, that the

contributing spouse intended to give the noncontributing spouse a

beneficial interest in all monies deposited to their account,

subject only to the contributing spouse's coequal, unilateral

right, at any time, to withdraw all monies on deposit, see Noonan

v. Rauh (In re Rauh), 164 B.R. 419, 423 (Bankr. D. Mass. 1994)

(citing, e.g., Blanchette, 287 N.E.2d at 463). The bankruptcy

court also held that the party challenging the presumption (viz.,

the Trustee) may rebut it only by adducing evidence that the

contributing spouse intended to convey no present beneficial

interest to the noncontributing spouse. See id. (citing, e.g.,

Ross v. Ross, 314 N.E.2d 888, 893 (Mass. App. Ct. 1974), cert.

denied, 420 U.S. 947 (1975)). The bankruptcy court further noted

that the Trustee had neither alleged nor established that the

Debtor
intended
to
convey no beneficial interest in these monies to

3Mrs. Rauh contended at trial that the funds in these joint
accounts
derived from assets owned by her alone; she was therefore
the contributing spouse; and she had intended that all the funds
remain her property. The Trustee, on the other hand, introduced
evidence
that
the
funds
in these accounts derived from the earnings
and
investments
of
the
Debtor or represented proceeds from jointly-
held
assets.
The bankruptcy court found, however, that the Debtor
was the sole contributing spouse.

7

Mrs. Rauh. See id.

The bankruptcy court reasoned as follows: (1) either

spouse has the unilateral legal right to withdraw all monies in

their
joint
spousal account, thereby divesting the other spouse of

any beneficial interest, see id. at 424 (citing Heffernan v.

Wollaston
Credit
Union,
567 N.E.2d 933, 937 (Mass. App. Ct. 1991));

thus, in 1989 Mrs. Rauh simply withdrew her own 100% beneficial

interest in the funds; (2) consequently, any "transfer" of the

Debtor's beneficial interest in the deposited monies to Mrs. Rauh

had occurred not at the time of the withdrawals by Mrs. Rauh in

1989,
but
much
earlier
(v
iz., not later than the dates on which the

Debtor made the respective deposits to their accounts); (3) since

the
withdrawals by Mrs. Rauh in 1989 consisted entirely of her own

funds, no "transfer" of property of the Debtor could have taken

place;
and
(4) a fortiori, no conversion or conveyance, fraudulent

or otherwise, occurred at that time. See id.

The position adopted by the Trustee on appeal bears no

resemblance to his litigation stance below, as the Trustee now

contends that he did rebut the legal presumption posited by the

bankruptcy
court.
4

The
Trustee relies for support upon Mrs. Rauh's

4
The
Trustee
also
points out that the expert witness presented
by Mrs. Rauh testified that all monies in these joint spousal
accounts
were
assets
of
the Debtor. However, this expert testimony
was offered to prove that the Debtor was not "insolvent," as of
1988,
for
purposes of ch. 109A, S 4. There has been no attempt by
the Trustee to explain how this expert testimony bears upon the
Debtor's donative intent in establishing the joint accounts. See
United States v. Zannino, 895 F.2d 1, 17 (1st Cir.) ("issues
adverted to in a perfunctory manner, unaccompanied by some effort
at
developed
argumentation, are deemed waived"), cert. denied, 494
U.S. 1082 (1990).

8

trial
testimony
that
the
Rauhs always paid their household expenses

from their joint accounts (i.e. the accounts were mere

"convenience"
accounts),
and argues that her testimony conclusively

rebutted
any
presumption
that the Debtor intended to give Mrs. Rauh

a beneficial interest in the deposited funds.

Thus,
the
Trustee utterly abandons the interpretation of

Massachusetts law which formed the bulwark on which he based his

claims before the bankruptcy court: that (1) the creation of a

joint spousal account by the Debtor triggered a legal presumption

that the Debtor intended to give Mrs. Rauh only a 50% interest in

the deposited funds; and (2) that Mrs. Rauh not the Trustee

bore the burden of rebutting that presumption. Indeed, on appeal

the
Trustee
implicitly acknowledges the validity of the bankruptcy

court's divergent interpretation of Massachusetts law (viz., the

presumption that all deposited funds were intended as a gift to

Mrs. Rauh), simply arguing instead that he did rebut the

presumption,
as
identified by the bankruptcy court, by establishing

that the Rauhs used their joint spousal accounts to defray

household expenses. As the Trustee has not challenged the

bankruptcy court's delineation of the underlying presumption on

appeal, we can only conclude that he has abandoned the original

and
much
broader

legal theory relied on below. Consequently, we

express no opinion on the validity vel non of the bankruptcy

court's ruling.5 See Baybank-Middlesex v. Ralar Distribs., Inc.

5
Nor
do
we
consider
a quite different argument never raised by
the
Trustee

that even if Mrs. Rauh had a right to withdraw 100%
of these funds, a voidable transfer of a property interest of the

9

(In re Ralar Distribs., Inc.), 69 F.3d 1200, 1204 n.5 (1st Cir

1995) (noting that theories neither briefed nor argued on appeal

are deemed waived); Executive Leasing Corp. v. Banco Popular de

Puerto Rico, 48 F.3d 66, 68 (1st Cir.) (On appeal, "[w]e will not

rely
upon
arguments and allegations that are developed only in the

[trial] court pleadings."), cert. denied, 116 S. Ct. 171 (1995);

Taglienti
.
Nelson v. (In re Nelson), 994 F.2d 42, 45 n.6 (1st Cir.

1993); see also Carducci v. Regan, 714 F.2d 171, 177 (D.C. Cir.

1983) (judicial system assumes assistance of counsel in framing

arguments and citing authority).

Nor need we decide the only claim actually presented by

the Trustee on appeal; viz., that Mrs. Rauh's "household expense"

or "convenience account" testimony conclusively rebutted any

presumption that the Debtor intended to donate all monies in the

joint spousal accounts to her.6 As the bankruptcy court itself

correctly
noted, the Trustee never contended below that the Debtor

had created these accounts with intent to pass no present

beneficial interest to Mrs. Rauh.

A
party
may
not
raise
new arguments for the first time on

Debtor (i.e. his putative coequal, unilateral right to withdraw
100%
of
these
funds,
or
his ownership interest in 50% of the funds)
nonetheless occurred at the time Mrs. Rauh exercised her legal
right to withdraw the funds.

6
For
one thing, Mrs. Rauh's trial testimony was not as clear,
in
context,
as the Trustee suggests. When asked from what account
the Rauhs' household expenses were paid, she responded: "We only
have [sic] one checking account at that time. So it [sic] paid
from
the
checking account." The record reveals, however, that the
Rauhs
had
many joint accounts in 1989. Consequently, it cannot be
ascertained from the record which was the checking account.

10

appeal. See, e.g., Juniper Dev. Group v. Kahn (In re Hemingway

Transp., Inc.), 993 F.2d 915, 935 (1st Cir.), cert. denied, 510

U.S. 914 (1993).7 The Trustee's waiver cannot be excused simply

because the raw facts he now considers determinative of his

newfound legal theory may have been before the bankruptcy court.

See Un ited States v. Slade, 980 F.2d 27, 31 (1st Cir. 1992)

(irrelevant that party is debuting only "new arguments" and not

"new facts" on appeal). Nor was the newfound theory properly

preserved below merely by the Trustee's generalized argumentation

as
to
the
ownership
of
the Rauhs' joint accounts. See id. at 30-31

(noting
that
appellant
must have articulated the specific arguments

below);
McCoy

v.
Massachu
setts Inst. of Tech., 950 F.2d 13, 22 (1st

Cir. 1991) ("Overburdened trial judges cannot be expected to be

mind
readers.

If
claims
are merely insinuated rather than actually

articulated in the trial court, we will ordinarily refuse to deem

them
preserved for appellate review."), cert. denied, 504 U.S. 910

(1992).

As
the bankruptcy court was never afforded an opportunity

to consider the theory and authorities now advanced by the

Trustee,8 nor to make any predicate factual findings, we decline

the invitation to do so on appeal. See In re Mark Bell Furniture

7We consider arguments raised for the first time on appeal
only
in
exceptional circumstances threatening a "clear miscarriage
of justice." See Playboy Enter., Inc. v. Public Serv. Comm'n of
Puerto
Rico,
906
F.2d
25, 40 (1st Cir.), cert. denied, 498 U.S. 959
(1990). We discern no such exceptional circumstances in the
present case.

8Even in the Trustee's postjudgment motion to amend the
findings and judgment, there is no mention of the perceived
relevance of Mrs. Rauh's testimony regarding the Rauhs' household
expenditures.

11

Warehouse, Inc.

little

531 (1st Cir. 1993)).

After the bankruptcy court entered final judgment in

Febr
v. e
d 7, 9 (1st Cir. 1993) ("'If lawyers could
ursue
on
appeal issues not properly raised below, there would be
incentive to get it right the first time and no end of
retrials.'") (quoting Poliquin v. Garden Way, Inc., 989 F.2d 527,
9
B. Amendments to Complaint

uary 1994, see p. 5, the Trustee moved to amend the

complaint to conform to the evidence at trial, and to amend the

judgment, to set aside, inter alia, a $15,000 cash transfer Mrs.

Rauh received in the Stahelski Settlement, and transfers to Mrs.

Rauh of several checks from the Debtor's customers.10

Rule
7015(b)
of
the
Federal Rules of Bankruptcy Procedure

Fed. R. Civ. P. 15(b) to adversary proceedings) state
D.M. Reid Assocs. (In re Mark Bell Furnitur
Warehouse,
Inc.
),
992
F.2
p
(applying s

We
supra e
au the Trustee cites on appeal do not appear to support
newfound theory. Levy v.
9 note in passing, however, without deciding, that th
thorities
the See Levy, 35 N.E.2d 659, 661-62
(Mass. 1941); Zak v. Zak, 25 N.E.2d 169, 170-71 (Mass. 1940);
Rosman

v.
Ros
man, 19 N.E.2d 41, 42 (Mass. 1939); Cram v. Cram, 160
N.E. 337, 339-40 (Mass. 1928); Moore v. Mansfield, 142 N.E. 792,
793-94 (Mass. 1924); Hutchinson v. Hutchinson, 383 N.E.2d 82, 87
(Mass. App. Ct. 1978). In each instance, the contributing spouse
either averred or testified that he never intended to donate any
beneficial interest in the account to the other spouse. The
Trustee alludes to no comparable averment or testimony in the
present
record. Moreover, we have found no Massachusetts decision
holding that mere evidence that household expenses were paid from
joint
accounts was necessarily relevant to, let alone conclusively
rebutted, a presumption of donative intent. Finally, the Trustee
adduced no competent evidence that the Rauhs used all their joint
accounts to pay household expenses. See supra note 6.

10 We review the bankruptcy court's denial of the motion to
amend the complaint only for abuse of discretion. See Lynch v.
Dukakis, 719 F.2d 504, 509 (1st Cir. 1983).

12

that

When issues not raised by the pleadings are
tried by express or implied consent of the
parties,
they shall be treated in all respects
as if they had been raised in the pleadings.
Such amendment of the pleadings as may be
necessary to cause them to conform to the
evidence
and
to raise these issues may be made
upon motion of any party at any time, even
after judgment; but failure so to amend does
not affect the result of the trial of these
issues. . . .

Fed.
R.
Bankr. P. 7015(b). Under Rule 7015(b), motions to amend a

complaint to conform to the evidence admitted at trial are

liberally allowed. See, e.g., Brandon v. Holt, 469 U.S. 464, 471

& n.19 (1985) (permitting amendment to pleadings pursuant to

Federal Rule of Civil Procedure 15(b) even after Supreme Court

mandated remand).

A post-trial motion to conform the judgment to the

evidence
should not be allowed, however, unless the opposing party

expressly or impliedly agreed to try the matter in question. See

Luria Bros. & Co. v. Alliance Assurance Co., 780 F.2d 1082, 1089

(2d Cir. 1986). Even so, amendment should not be allowed if the

opposing
party demonstrates "unfair prejudice." See DCPB, Inc. v.

City of Lebanon, 957 F.2d 913, 917 (1st Cir. 1992); Lynch v.

Dukakis, 719 F.2d 504, 509 (1st Cir. 1983); Scully Signal Co. v.

Electronics Corp. of Amer., 570 F.2d 355, 362 (1st Cir. 1977)

("Although Rule 15(b) by its terms requires amendment of the

pleadings whenever an issue has been tried by express or implied

consent, courts have refused to grant such motions if amendment

would prejudice one of the parties, such as by requiring the

13

presentation
of additional evidence."), cert. denied, 436 U.S. 945

(1978);
see

a
lso Morgan and Culpepper, Inc. v. Occupational Safety

& Health Review Comm'n, 676 F.2d 1065, 1066 (5th Cir. 1982). The

term "unfair prejudice" refers to whether a party "had a fair

opportunity to defend and whether he could offer any additional

evidence if the case were to be retried on a different theory."

See

Browning
Debenture
Holders' Comm. v. DASA Corp., 560 F.2d 1078,

1086 (2d Cir. 1977) (quoting 3 James Wm. Moore et al., Moore's

Federal Practice q 15.13[2], at 993 (2d ed. 1966)).

1. The Stahelski Settlement Transfer

The stated basis for denying the Trustee's motion to

amend the judgment to conform with the evidence introduced at

trial,
in
relation
to
certain cash transfers from Stahelski to Mrs.

Rauh, was the mistaken understanding by the bankruptcy judge that

the Trustee had never filed such a motion and that any amendment

therefore would have been unfair because Mrs. Rauh had not had an

opportunity to present a defense. The bankruptcy court docket

sheet
reveals, however, that the Trustee did file such a motion on

April 19, 1994, and that Mrs. Rauh later filed a reply. As the

denial
therefore
constituted an "abuse of discretion," the judgment

must be amended provided the motion was meritorious. See Webb v.

Hiykel, 713 F.2d 405, 407-08 (8th Cir. 1983) (appellate court

reverses trial court and orders judgment where plaintiff was

entitled to relief on unpled theory and defendants would not

experience undue prejudice).

At trial, without objection, the Trustee introduced

14

competent evidence of the $15,000 cash payment Mrs. Rauh received

from Stahelski. See Conjugal Partnership of Jones v. Conjugal

Partnership of Pineda, 22 F.3d 391, 400-01 (1st Cir. 1994) ("One

sign
of
implied consent is that issues not raised by the pleadings

are presented and argued without proper objection by opposing

counsel. . . . Under Rule 15(b), lack of consent is manifested by

an objection on the ground that the evidence is not within the

issues
raised by the pleadings.") (citation and internal quotation

marks omitted). Mrs. Rauh contends on appeal, however, that she

did
not
object at trial because the Trustee introduced the $15,000

cash
payment
only to prove that her receipt of the promissory note

had
been
fraudulent. See DCPB, Inc., 957 F.2d at 917 ("Consent to

the
trial
of
an issue may be implied if, during the trial, a party

acquiesces in the introduction of evidence which is relevant only

to that issue.") (emphasis added); Luria Bros. & Co., 780 F.2d at

1089
("That
such
evidence, relevant to both pled and unpled issues,

was
introduced
without
objection does not imply consent to trial of

the unpled issues, absent some obvious attempt to raise them.");

Ellis v. Arkansas Louisiana Gas Co., 609 F.2d 436, 440 (10th Cir.

1979)
("Implied
consent
may not be inferred merely because evidence

relevant
to
a properly pleaded issue incidentally tends to prove a

fact not within the pleadings."), cert. denied, 445 U.S. 964

(1980). We disagree.

At trial, the Trustee maintained that the Stahelski

Settlement proceeds received by Mrs. Rauh constituted fraudulent

conveyances under ch. 109A because (1) the Debtor, with intent to

15

keep assets from his creditors, diverted to Mrs. Rauh the bulk of

the
consideration
he
otherwise would have received in settlement of

his claims against Stahelski; and (2) none of the settlement

proceeds
received by Mrs. Rauh were attributable to the settlement

of her own tort claim for infliction of emotional distress. See

supra p. 4. Accordingly, the only conceivable purpose of the

Trustee's
evidentiary proffer relating to the $15,000 cash payment

was to establish the amount of the Stahelski Settlement transfer

which was voidable. The evidence offered by the Trustee was not

even remotely probative of whether the Debtor had conveyed the

$40,000 promissory note with fraudulent intent, nor whether the

transfer
of
the promissory note constituted consideration for Mrs.

Rauh's relinquishment of her tort claim.

Furthermore, Mrs. Rauh has not demonstrated that any

"unfair prejudice" would result from the postjudgment relief

requested
by
the Trustee. See DCPB, Inc., 957 F.2d at 917; Scully

Signal Co., 570 F.2d at 362. At trial, the bankruptcy court

expressly rejected her contention that the Stahelski-Settlement

payments
were
in
satisfaction of her emotional distress claim. The

court found instead that the Debtor thereby fraudulently

transferred his interests in E.W.S. and Realty indirectly to Mrs.

Rauh, see supra p. 4, a finding Mrs. Rauh does not challenge on

appeal.

Nor
has Mrs. Rauh suggested that her contention in regard

to the Trustee's $15,000 fraudulent-transfer claim differed

significantly from her defense to the surrender of the $40,000

promissory
note, see supra p. 4, which took place in the identical

16

circumstances
. See Modern Elec., Inc. v. Ideal Elec. Sec. Co., 81

F.3d
240,
247
(D.C.
Cir.
1996) (complaint amended to include unjust

enrichment claim, after parties had tried similar quantum meruit

claim);
Morgan
and
Culpepper, Inc., 676 F.2d at 1068 ("Federal Rule

of Civil Procedure 15(b) contemplates amendments in cases where

relevant issues have been litigated."); Cunningham v. Quaker Oats

Co.
,
107
F.R.D.
66,
70-71 (W.D.N.Y. 1985) (new plaintiff allowed to

be
named
in
complaint, where defense to original plaintiff's claim

was primarily legal in nature, the defense had already been tried

and it applied to both the original and new plaintiff).

As
Mrs.
Rauh
implicitly consented to try the fraudulent-

conveyance
claim
relating to the $15,000 cash transfer she received

in
the
Stahelski Settlement, and she has not shown that any unfair

prejudice would result from the postjudgment relief requested by

the Trustee, the motion to conform the complaint and the judgment

with the evidence should have been allowed.

2. Checks from Debtor's Customers

The
bankruptcy
court
likewise denied the Trustee's motion

to
amend
the
judgment to set aside alleged fraudulent transfers of

several checks from the Debtor's business customers made payable

directly, or endorsed over, to Mrs. Rauh. See 11 U.S.C. S

548(a)(2) (transfers by insolvent within one year of bankruptcy

petition); id. S 549 (postpetition transfers). Although the

bankruptcy court once again acted on the mistaken belief that the

Trustee had filed no postjudgment motion to amend the complaint,

see supra Section II.B, we may affirm its ruling on any ground

17

supported by the record. See Max Sugarman Funeral Home, Inc. v.

A.D.B.
Investors
,
926
F.2d 1248, 1253 n.9 (1st Cir. 1991). As Mrs.

Rauh did not agree to try this issue, we decline to disturb the

bankruptcy court ruling.

The record discloses that Mrs. Rauh was never on fair

notice of these claims. The checks in question were material to

count VI of the complaint as amended prior to trial, see DCPB,

Inc.
,
957
F.2d at 917; Luria Bros. & Co., 780 F.2d at 1089; Ellis,

609 F.2d at 440, wherein the Trustee alleged that funds presently

in
Mrs.
Rauh's various bank and mutual fund accounts were property

of
the
chapter
7
estate,
either because Ms. Rauh had converted them

from the Debtor, or the Debtor had fraudulently conveyed them to

her.

See

sup
ra pp. 5-6. Count VI focused on transfers from joint

accounts
to
accounts held in Mrs. Rauh's name alone (e.g. "between

November,
1988 and November, 1989, the Defendant and/or the Debtor

transferred funds . . . at various times from jointly owned bank

accounts to other bank accounts."). See supra Section II.A. In

her answer Mrs. Rauh asserted that "these accounts contain[ed]

monies
which
were earned or derived solely by her efforts and were

not monies earned or derived from any effort of the debtor."

The dispute at trial likewise concerned whether the

monies in the joint accounts had derived solely from Mrs. Rauh's

own efforts, or from the Debtor's. See supra note 3. Mrs. Rauh

testified that she was the sole source of these monies. The

Trustee, in turn, used the Debtor-customer checks made payable to

Mrs. Rauh to impeach her credibility by way of demonstrating that

18

the Debtor not Mrs. Rauh was the source of those particular

deposits to their joint accounts.

T

c ence, nor the Trustee's examination of the

fairly signaled an intention to establish that th
hus,
neither
the
Trustee's introduction of these Debtor-
ustomer
checks
into
evid
witnesses, e

Debtor had transferred these specific checks to Mrs. Rauh with

fraudulent
intent,
within the meaning of 11 U.S.C. SS 548(a)(2) and

549. Rather, it was not until after trial that the Trustee

mentioned
these
specific
transfers to Mrs. Rauh's accounts from the

Debtor's business customers. As the Trustee thus failed to alert

Mrs.
Rauh
to
his intention, her failure to object at trial did not

connote implicit consent to try the unpled issue. See Modern

Elec., Inc., 81 F.3d at 247; United States v. 890 Noyac Road, 945

F.2d 1252, 1257 (2d Cir. 1991); Luria Bros. & Co., 780 F.2d at

1089.

Although the Trustee's unpled claims may well have

prevailed
at
trial, we cannot assume that Mrs. Rauh would not have

been able to establish her present contention that the checks

were
not
property of the chapter 7 estate had she been afforded

fair
notice
and
opportunity to resist the unpled claims at trial.11

See 890 Noyac Road, 945 F.2d at 1259 (although opposing party

already may have presented all the evidence she had, "[g]iven the

11
For
example, at trial Mrs. Rauh testified that she had used
personal funds to defray various business expenses because the
Debtor's checking account had been attached. Further, she
represented that she had overpaid some of the Debtor's suppliers
and
that
their
checks
accordingly represented reimbursements of her
overpayments.

19

confused context in which this proof was presented, however, we

decline to speculate about how [the defendant] might have dealt

with
the
issue . . . had it been squarely presented."); Morgan and

Culpepper, Inc., 676 F.2d at 1068 ("We deem improper the

Commission's prejudgment of possible defenses which a company may

assert. . . . Where amendment of pleadings is permitted on the

basis of the second half of Fed. R. Civ. P. 15(b), the Commission

may
not
deny
the
petitioner the opportunity to present new defenses

by stating the ex parte conclusion that all possible defenses are

meritless.").

As
Mrs.
Rauh was not afforded fair notice that these

newly
minted
Debtor-customer check claims were being interjected by

the
Trustee
at trial, the Trustee was not entitled to amend either

the complaint or the judgment.

III

CONCLUSION

Accordingly, the judgment is amended to set aside the

$15,000 cash payment received by Mrs. Rauh in the Stahelski

Settlement. In all other respects, the judgment is affirmed. No

costs.

SO ORDERED.

20