Dahar v. Jackson (In Re Jackson)

United States Court of Appeals
For the First Circuit

No. 05-2702

IN RE: STANLEY W. JACKSON

Debtor.

VICTOR DAHAR,

Trustee, Appellee,

v.

SUSAN W. JACKSON,
Individually and as Trustee of
SWJ Trust I and SWJ Trust II,

Defendant, Appellant,

STANLEY W. JACKSON, JR.; STANLEY W. JACKSON,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Joseph A. DiClerico, Jr., U.S. District Judge]

Before
Selya, Lynch, and Lipez, Circuit Judges.

Mary Ann Dempsey, with whom Thomas J. Pappas and Wiggin &
Nourie, P.A. were on brief, for appellant.
Richard Thorner, with whom Stephen L. Boyd and Wadleigh, Starr
& Peters, P.L.L.C. were on brief, for appellee.

August 18, 2006
 LIPEZ, Circuit Judge. Defendant Susan W. Jackson

appeals from the bankruptcy court's judgment setting aside certain

property transfers made to her from Stanley W. Jackson, debtor and

husband of the defendant, as constructively fraudulent pursuant to

the New Hampshire Uniform Fraudulent Transfer Act, N.H. Rev. Stat.

Ann. § 545-A:4. Victor Dahar, Chapter 7 trustee, commenced these

adversary proceedings against the debtor, the defendant, and their

son, Stanley W. Jackson, Jr., in 2002. The bankruptcy court

granted summary judgment for Dahar on his claim against the son,

voiding a transfer to him of $ 25,000.00. After a four-day trial

on the trustee's claims against the debtor and the defendant, the

bankruptcy court concluded that certain transfers of property by

the debtor to the defendant were constructively fraudulent, and

entered a judgment of $ 260,130.67 in favor of Dahar. The

defendant appealed to the district court, which affirmed the

decision of the bankruptcy court. We also affirm.

I.

We summarize the facts as follows. At the time of the

trial in 2004, the debtor had been in the business of buying and

selling real estate for approximately 30 years. On or about August

22, 1990, he executed a term note in the amount of $ 800,000. The

note was subsequently assigned to Citizens Bank. The debtor made

a payment on the note but then did not make further payments

because, he contended, the bank had not fulfilled its

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responsibilities in connection with the note. Over the next few

years, the debtor and the bank fought over the amount owed on the

note but no collection proceedings were commenced by Citizens Bank.

On June 3, 1999, the debtor transferred numerous parcels

of real property ("subject parcels") to the defendant for no

consideration.1 Testifying that they made the transfer for estate

planning purposes, the debtor and the defendant explained that

their estate planning attorney had advised them to equalize their

estates and create two trusts, SWJ Trust I and SWJ Trust II, to

hold their assets and to obtain the maximum benefit of the federal

estate tax marital deduction. In the eighteen months following the

transfer, the defendant sold almost all of the subject parcels.

The proceeds were used to pay the debtor's business and living

expenses. The debtor made no payments to his largest creditor,

Citizens Bank, during this time period.

On December 16, 1999, Al Ho, LLC acquired Citizens Bank's

note and demanded that the debtor satisfy the balance due. No

payments were made and Al Ho foreclosed on the mortgaged properties

securing the debtor's obligation. The foreclosure sale covered

only some of the balance owed, leaving a deficiency of $877,129.14,

which Al Ho demanded from the debtor on May 25, 2000. After state

court proceedings on the validity of the note, the debtor and Al Ho

1
These parcels, all income-generating properties, represented a
substantial portion of all of the property owned by the debtor at
the time.

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stipulated to an order of judgment in the amount of $931,818.56.

The stipulated order barred the debtor from transferring any

property or assets from May 29, 2001, until July 13, 2001. A few

days before the stipulated order was signed, the debtor transferred

to the defendant, for consideration, two mortgage receivables. He

transferred his remaining mortgage receivables to the defendant,

for consideration, on July 13, 2001. The debtor then filed his

bankruptcy petition on October 15, 2001.

On September 26, 2002, Dahar initiated an adversary

proceeding against the Jacksons, alleging that the debtor's

transfers of the subject parcels and certain mortgage receivables

to the defendant were fraudulent. Although rejecting a claim of

actual fraud, the bankruptcy court concluded that the transfers of

the subject parcels were constructively fraudulent under New

Hampshire law.2 The bankruptcy court found that the value of the

subject parcels fraudulently transferred was $ 585,500.00 but

awarded Dahar a judgment of $ 260,130.67, which reflected an

equitable deduction of the "amount of proceeds utilized to pay

business debts of Mr. Jackson and the ordinary and necessary living

expenses of his family or $ 365,369.33." The district court

affirmed on appeal.

2
The bankruptcy court rejected the trustee's other claim that the
debtor's transfer of the mortgage receivables violated 11 U.S.C. §
548.

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 II.

Dahar brought his complaint under section 544(b) of the

Bankruptcy Code, which "allows the avoidance of 'any transfer of an

interest of the debtor in property or any obligation incurred by

the debtor that is voidable under applicable law.' Applicable law

includes various state fraudulent conveyance statutes, many based

on the Uniform Fraudulent Transfer Act [("UFTA")]." See FCC v.

Nextwave Personal Commc'ns, Inc. (In re Nextwave Personal Commc'ns,

Inc.), 200 F.3d 43, 49 (2d Cir. 1999) (quoting 11 U.S.C. § 544(b)).

The applicable law in this case, the New Hampshire UFTA, provides

in pertinent part:

A transfer made or obligation incurred by a
debtor is fraudulent as to a creditor, whether
the creditor's claim arose before or after the
transfer was made or the obligation was
incurred, if the debtor made the transfer or
incurred the obligation:
(a) With actual intent to hinder, delay, or
defraud any creditor of the debtor; or
(b) Without receiving a reasonably equivalent
value in exchange for the transfer or
obligation, and the debtor:
(1) Was engaged or was about to engage
in a business or a transaction for
which the remaining assets of the
debtor were unreasonably small in
relation to the business or
transaction; or
(2) Intended to incur, or believed or
reasonably should have believed that
he would incur, debts beyond his
ability to pay as they became due.

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N.H. Rev. Stat. Ann. § 545-A:4(I). The bankruptcy court found that

the transfer here met the elements of § 545-A:4(I)(b)(1).

Specifically, the bankruptcy court found that the debtor did not

receive "reasonably equivalent value in exchange" for the subject

parcels, and that the debtor was engaged "in a business . . . for

which the remaining assets of the debtor were unreasonably small in

relation to the business." N.H. Rev. Stat. Ann. § 545-

A:4(I)(b)(1).3

The defendant does not contest the bankruptcy court's

first finding -– that the debtor did not receive reasonably

equivalent value in exchange for the subject parcels he transferred

to the defendant. However, the defendant raises several arguments

challenging the bankruptcy court's second finding that the debtor

3
This provision in the UFTA was adopted, with one change, from a
provision in the Uniform Fraudulent Conveyance Act ("UFCA"), the
UFTA's predecessor. See Peter A. Alces and Luther M. Dorr, Jr., A
Critical Analysis of the New Uniform Fraudulent Transfer Act, 1985
U. Ill. L. Rev. 527, 543 (1985) (noting that the drafters of the
UFTA incorporated the UFCA's version of this provision, but revised
it to refer to unreasonably small "assets" instead of "capital").
This provision permits creditors to prove a fraudulent transfer
without proving the debtor's "actual intent" to defraud. See id.
at 530-35. The drafters of the UFCA, responding to the difficulty
creditors were facing under the "actual intent" standard, included
several provisions outlining how creditors could prove constructive
fraud. See id. at 532. The drafters adopted these provisions from
the evolving case law, in which courts began to shift their
fraudulent transfer inquiry from the debtor's intent to whether
there had been an "unjust diminution of the estate of the debtor
that otherwise would be available to the creditor." Id. This
provision, like others in the UFTA, reflects these concerns and the
UFTA's overall purpose "to protect the debtor's estate from being
depleted to the prejudice of the debtor's unsecured creditors."
UFTA § 3, cmt. 2.

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was engaged in a business for which his remaining assets were

unreasonably small in relation to the business. The defendant also

argues that the bankruptcy court applied the wrong standard of

proof for establishing constructive fraud under N.H. Rev. Stat.

Ann. § 545-A:4(I)(b)(1). In addition, the defendant argues that

the bankruptcy court erred in limiting the equitable adjustment it

applied to the judgment.

We address these arguments in turn, beginning with the

burden issue. We review the bankruptcy court's conclusions of law

de novo and its factual findings for clear error. See Davis v. Cox

(In re Cox), 356 F.3d 76, 82 (1st Cir. 2004). Although the

district court has reviewed the bankruptcy court's decision in this

case, we "exhibit no particular deference to the conclusions of

. . . the district court." Brandt v. Repco Printers &

Lithographics, Inc. (In re HealthCo Int'l), 132 F.3d 104, 107 (1st

Cir. 1997).

A. Standard of proof for establishing constructive fraud pursuant
to N.H. Rev. Stat. Ann. § 545-A:4(I)(b)(1)

N.H. Rev. Stat. Ann. § 545-A:4(I)(b)(1) is silent on the

issue of the standard of proof to be applied to constructive fraud

claims, and the New Hampshire Supreme Court has not yet addressed

this issue. "In the absence of controlling state law, a federal

court should choose the rule that it believes the state's highest

court is likely to adopt in the future." Amherst Sportswear Co. v.

-7-
McManus, 876 F.2d 1045, 1048 (1st Cir. 1989). The bankruptcy court

held that the plaintiff had the burden of establishing constructive

fraud by a preponderance of the evidence. The defendant argues

that the clear and convincing evidence standard, not the

preponderance of the evidence standard, should apply to

constructive fraud claims.

In the context of claims involving "actual intent to

hinder, delay, or defraud" creditors, the New Hampshire Supreme

Court held that the "plaintiff has the burden of proving by clear,

convincing and direct evidence the existence of a fraudulent

intent." Chagnon Lumber Co. v. DeMulder, 427 A.2d 48, 51 (N.H.

1981). As the bankruptcy court aptly noted, however, this is not

a case involving "actual intent to hinder, delay, or defraud" a

creditor. This is a case involving constructive fraud.

Constructive fraud is generally defined as an "unintentional

deception or misrepresentation that causes injury to another."

Black's Law Dictionary 686 (8th ed. 2004) (emphasis added). Under

the constructive fraud provision in the New Hampshire UFTA, the

court is required to assess objective factors, not actual intent.

See N.H. Rev. Stat. Ann. § 545-A:4(I)(b)(1) (stating that a

transfer is fraudulent if the debtor did not receive "a reasonably

equivalent value in exchange for the transfer" and the debtor

"[w]as engaged or was about to engage in a business or a

transaction for which the remaining assets of the debtor were

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unreasonably small in relation to the business or transaction"

(emphasis added)). This distinction is important because the

stigma that attaches to a finding of intentionally fraudulent

conduct does not attach to a finding of constructive fraud. The

elements of constructive fraud aim at assessing the injury to the

creditor, not the intent of the debtor.

While there is no case law interpreting the standard of

proof under the New Hampshire UFTA's constructive fraud provision,

we note that bankruptcy courts have applied the preponderance of

the evidence standard to a similar constructive fraud provision in

the Bankruptcy Code, 11 U.S.C. § 548(a)(2).4 See Glinka v. Bank of

Vt. (In re Kelton Motors, Inc.), 130 B.R. 170, 179 (Bankr. D. Vt.

1991); Armstrong v. Ketterling (In re Anchorage Marina, Inc.), 93

B.R. 686, 691 (Bankr. D.N.D. 1988); Zimmerman v. Saviello (In re

Metro Shippers, Inc.), 78 B.R. 747, 751 (Bankr. D. Pa. 1987);

Talbot v. Warner (In re Warner), 65 B.R. 512, 519 (Bankr. S.D. Ohio

1986). As one court explained, the preponderance of the evidence

standard is appropriate for demonstrating constructive fraud under

11 U.S.C. § 548(a)(2) because

(1) the judicially created presumption [of
fraud] under § 548(a)(2) no longer requires a
moving party to prove actual intent to defraud
creditors; (2) the purpose of enacting

4
11 U.S.C. § 548(a)(2) mirrors the requirements of N.H. Rev.
Stat. Ann. § 545-A:4(I)(b)(1), but refers to unreasonably small
"capital" instead of "assets."

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 § 548(a)(2) was to remove the difficulty of
proving fraud and to give effect to the policy
of the Bankruptcy Code; and, (3) an action
brought under § 548(a)(2) is civil in nature:
i.e., it involves no penalty or any other
policy consideration that requires a
heightened standard of proof.

In re Kelton Motors, Inc., 130 B.R. at 179.

Under similar reasoning, the Supreme Court, in

interpreting a different fraud provision in the Bankruptcy Code,

has held that a preponderance of the evidence standard applies.

See Grogan v. Garner, 498 U.S. 279 (1991) (assessing standard of

proof under 11 U.S.C. § 523(a), which provides a fraud exception to

discharge). The Court noted that, "[b]ecause the preponderance-of-

the-evidence standard results in a roughly equal allocation of the

risk of error between litigants, we presume that this standard is

applicable in civil actions between private litigants unless

'particularly important individual interests or rights are at

stake.'" Id. at 286 (quoting Herman & MacLean v. Huddleston, 459

U.S. 375, 389-90 (1983)). Applying that reasoning to the

Bankruptcy Code provision, the Court observed that

it [is] unlikely that Congress, in fashioning
the standard of proof that governs the
applicability of these provisions, would have
favored the interest in giving perpetrators of
fraud a fresh start over the interest in
protecting victims of fraud. Requiring the
creditor to establish by a preponderance of
the evidence that his claim is not
dischargeable reflects a fair balance between
these conflicting interests.

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Id. at 287.

This same reasoning holds true for the New Hampshire

UFTA's constructive fraud provision. In New Hampshire civil cases,

the plaintiff generally has the burden of proving his or her case

by a preponderance of the evidence. See Hancock v. R.A. Earnhardt

Textile Mach. Div., 653 A.2d 558, 559 (N.H. 1995). A case

involving constructive fraud under N.H. Rev. Stat. Ann. § 545-

A:4(I)(b)(1) requires only an inquiry into objective factors. No

penalty results from a finding of constructive fraud; rather, the

debtor is required only to pay a judgment "equal to the value of

the asset at the time of the transfer." N.H. Rev. Stat. Ann.

§ 545-A:8(III). The stigma attached to actual intent cases is not

present here. Thus, there is no justification for a heightened

burden of proof in constructive fraud cases under this provision in

New Hampshire law.5 We therefore agree with the bankruptcy court's

reasoning that the New Hampshire Supreme Court would apply the

preponderance of the evidence standard to constructive fraud cases.

5
To the extent that some courts have held that a plaintiff must
prove constructive fraud by clear and convincing evidence, these
courts seem to have relied on cases that adopted the heightened
standard applicable to actual intent cases without addressing the
differences between the inquiries in constructive fraud and actual
intent cases, see, e.g., Territorial Savings & Loan Ass'n v. Baird,
781 P.2d 452, 458 (Utah App. Ct. 1989), or were interpreting state
law that holds that any case involving fraud requires a heightened
standard of proof, see Nastro v. D'Onogrio, 263 F. Supp. 2d 446 (D.
Conn. 2003) (citing Gaudio v. Gaudio, 580 A.2d 1212, 1223-24 (Conn.
App. Ct. 1990)). The cases also fail to contend with the Supreme
Court's reasoning in Grogan. We therefore decline to apply the
rule of those cases here.

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Cf. Word Invs., Inc. v. Bruinsma (In re TML, Inc.), 291 B.R. 400,

436-37 (Bankr. W.D. Mich. 2003) (applying a similar analysis in

determining that, under the constructive fraud provision in the

Michigan UFCA, the Michigan Supreme Court would apply the

preponderance of the evidence standard).

B. Whether the debtor was engaged in a business for which his
remaining assets were unreasonably small in relation to the
business

Under the New Hampshire UFTA, Dahar had to demonstrate

that the debtor "[w]as engaged or was about to engage in a business

or a transaction for which the remaining assets of the debtor were

unreasonably small in relation to the business or transaction."

N.H. Rev. Stat. Ann. § 545-A:4(I)(b)(1). This requirement in

fraudulent transfer law generally calls for a court to "examine the

ability of the debtor to generate enough cash from operations and

sales of assets to pay its debts and remain financially stable"

after a transfer. Pioneer Home Builders, Inc. v. Int'l Bank of

Commerce (In re Pioneer Home Builders, Inc.), 147 B.R. 889, 894

(Bankr. W.D. Tex. 1992) (quoting Yoder v. T.E.L. Leasing, Inc. (In

re Suburban Motor Freight, Inc.), 124 B.R. 984, 999 (Bankr. S.D.

Ohio 1990)) (internal quotation marks omitted); see also Vadnais

Lumber Supply, Inc. v. Byrne (In re Vadnais Lumber Supply, Inc.),

100 B.R. 127, 137 (Bankr. D. Mass. 1989) (holding that, under the

parallel "unreasonably small capital" provision in 11 U.S.C. § 548,

courts must assess "the ability of the debtor to generate enough

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cash from operations or asset sales to pay its debts and still

sustain itself" after a transfer). This requirement in fraudulent

transfer law does not require a finding of post-transfer

insolvency; it instead "encompasses difficulties which are short of

insolvency in any sense but are likely to lead to insolvency at

some time in the future." In re Vadnais Lumber Supply, Inc., 100

B.R. at 137; see also Moody v. Sec. Pac. Business Credit, 971 F.2d

1056, 1070 (3d Cir. 1992) ("[U]nreasonably small capital denotes a

financial condition short of equitable insolvency.").

The defendant argues that the bankruptcy court committed

several errors in its approach and its findings under this

provision of the New Hampshire UFTA. We consider and reject the

defendant's arguments.

1. Whether the bankruptcy court failed to consider
personal assets in evaluating the debtor's "remaining assets"

The defendant argues that the bankruptcy court erred by

interpreting the term "remaining assets" in N.H. Rev. Stat. Ann.

§ 545-A:4(I)(b)(1) to exclude personal assets and thus failed to

consider the debtor's personal assets when determining the extent

of his "remaining assets" after the transfer. The applicable

definition of "asset" under New Hampshire law does not distinguish

between personal and business assets. See N.H. Rev. Stat. Ann.

§ 545-A:1. If the bankruptcy court had considered the debtor's

personal assets, the defendant argues, it would have concluded that

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the debtor's business and personal assets were enough to cover the

debtor's debts and keep him financially stable.

The defendant's argument reflects a misunderstanding of

the bankruptcy court's analysis. The bankruptcy court did not

interpret the statute to exclude personal assets. While the

bankruptcy court did not calculate the precise value of the

debtor's personal assets, it did consider the impact of the

debtor's personal assets on the "remaining assets" inquiry.

Specifically, the court acknowledged that "the Debtor had

significant equity in his residence, as well as other assets," but

observed that "all of the property transferred to the Defendant as

part of the estate-planning transfers were business assets" and it

was from these business assets that the debtor intended "to derive

income, pay his business debts, and support his family." Indeed,

the bankruptcy court found that there was no evidence "as to how

the Debtor could pay his business debts and support himself and his

family without continuing to engage in the business of selling his

real estate inventory." The defendant herself asserted in her

trial brief to the bankruptcy court that "the uncontroverted

evidence [is] that during this period Stanley Jackson generated no

new income, the Jacksons needed to sell property to pay expenses,

including living expenses, and that the properties were accumulated

[by the Jacksons] to do so."

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 Thus, there was no error in the bankruptcy court's

analysis of the "remaining assets." Even considering the debtor's

personal assets (which, the trustee argues, were not easily

liquidated), the debtor could not "generate enough cash . . . to

pay [his] debts and remain financially stable" after the transfer.

In re Pioneer Home Builders, Inc., 147 B.R. at 894 (quoting In re

Suburban Motor Freight, Inc., 124 B.R. at 999) (internal quotation

marks omitted).6 As we discuss in more detail below, this finding

is supported by the defendant's own assertions at trial and the

fact that, after the transfer, payment of the debtor's debts and

his family's personal expenses came from the defendant's sale of

the properties transferred.

6
In his brief, the trustee suggests that most of the property
held personally by the debtor was encumbered, exempt, or jointly
held and not subject to creditors' claims, and thus not "assets"
within the meaning of New Hampshire fraudulent transfer law. See
N.H. Rev. Stat. Ann. § 545-A:1 (defining "asset" as "property of a
debtor, but the term does not include: (a) Property to the extent
it is encumbered by a valid lien; (b) Property to the extent it is
generally exempt under nonbankruptcy law; or (c) An interest in
property held in tenancy by the entireties to the extent it is not
subject to process by a creditor holding a claim against only one
tenant"). The bankruptcy court did not make any findings on this
specific issue, and instead recognized that the property held by
the debtor did not generate enough income to help him remain
financially stable. Because that finding is not clearly erroneous,
we do not delve into the issue of whether the debtor's personal
assets could be considered "assets" under New Hampshire fraudulent
transfer law.

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 2. Whether the bankruptcy court erred in finding the
debtor's remaining assets "unreasonably small" in relation to the
business

The defendant argues that the bankruptcy court erred in

finding that the debtor's remaining assets were "unreasonably

small" in relation to his business. This argument is premised

primarily upon the defendant's argument that the court had failed

to account for the debtor's personal assets in calculating his

remaining assets. We have already rejected that argument. The

bankruptcy court considered all of the debtor's remaining assets

and did not clearly err in determining that they were "unreasonably

small" in relation to his business.

This conclusion is borne out by the evidence of how the

debtor attempted to pay his business debts and living expenses

after the transfer of the majority of his income-generating

properties to the defendant. The bankruptcy court found that,

after the transfer, the debtor had negative equity in his remaining

business assets. The defendant began selling the subject parcels

and used the majority of those proceeds to pay the debtor's

business debts and their joint living expenses, which, prior to the

transfer, had been paid by the debtor's business income.7 The sale

7
The defendant argues that the bankruptcy court erred in
considering, as part of its "unreasonably small" assets analysis,
whether the debtor had sufficient assets to support his family's
living expenses. The defendant argues that the amount of assets
should be measured only "in relation to the business or
transaction," not the debtor's family obligations.

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of the majority of the subject parcels to pay debts and living

expenses defeated the estate planning purpose of the transfer (to

equalize the estates of the debtor and the defendant by shifting

assets to the defendant) and indicates that the debtor was unable

to generate enough cash from his own remaining assets to "remain

financially stable." In re Pioneer Home Builders, Inc., 147 B.R.

at 894. The defendant herself asserted that she needed to sell the

properties in order to pay the debtor's debts and expenses. In

light of these facts, the defendant has not established that the

bankruptcy court clearly erred in finding that the debtor's assets

were "unreasonably small" in relation to his business under N.H.

Rev. Stat. Ann. 545-A:4(I)(b)(1), despite his retention of certain

personal assets.

Assuming for argument's sake that this argument has been
preserved, it leads the defendant nowhere. The bankruptcy court
found that the debtor had to rely on the defendant's sale of the
subject parcels to meet his business debts as well as his living
expenses. Taking living expenses out of the equation does not
change the fact that the debtor had to rely on the proceeds of the
post-transfer sales to pay his business debts. Moreover, the
defendant fails to explain why consideration of this issue was
inappropriate in the context of this case. The fact that the
debtor had to use the proceeds of the post-transfer sales to pay
his living expenses in addition to his business debts only further
demonstrates his lack of financial stability following the
transfers. We see no error here.

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 3. Whether the bankruptcy court erred in finding that
the debtor was "engaged or was about to engage in a business" when
he transferred the properties

The defendant argues that the bankruptcy court clearly

erred in finding that the debtor was still engaged in the real

estate business at the time of the transfers. The defendant

asserts that the debtor had retired from the real estate business

due to his failing health, particularly following a hip surgery

that lead to numerous medical complications. The bankruptcy court

considered this argument, but noted that the debtor had been

engaged in his real estate business for thirty years, and that,

despite his health problems, he continued to sell properties in the

months immediately preceding the transfers of the subject parcels

in June 1999. The bankruptcy court noted that this same practice

of selling properties continued after the transfers, albeit under

the defendant's name. Indeed, the defendant testified at trial

that she and the debtor had accumulated the properties over the

years in order to sell them, and that was how they earned their

living. In light of those facts, the bankruptcy court did not

clearly err in finding that the debtor had no intentions of

retiring or otherwise ceasing his business activities immediately

following the transfers.8

8
Having so concluded, we also reject the defendant's argument that
the bankruptcy court should have assessed the debtor's remaining
assets only in relation to the financial needs associated with
selling the subject parcels after the transfers. The "business" in

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C. Equitable adjustment

Under New Hampshire law, the judgment for a fraudulent

transfer "must be for an amount equal to the value of the asset at

the time of the transfer, subject to adjustments as the equities

may require." N.H. Rev. Stat. Ann. 545-A:8(III) (emphasis added).

The bankruptcy court calculated the value of the subject parcels to

be $ 585,000.00. The bankruptcy court then adjusted that amount by

$ 325,369.33, crediting the defendant "for the expenditures she

made, that the Debtor could have made without objection [if he had

not transferred the properties], during the [one-year period that]

the business was winding down." The bankruptcy court explained:

In this case, the Defendant used some of the
proceeds from the sale of Subject Parcels to
pay the Debtor's business expenses and the
family expenses the Debtor had been solely
responsible for covering for the prior two
decades. This use of the proceeds for those
specific purposes was the basis for the
Court's finding that the transfer was
constructively fraudulent. Furthermore, the
Plaintiff has not challenged the
reasonableness or necessity of these payments.
Therefore, in the absence of any finding of
actual fraud, it would be a windfall to the
estate to allow the Plaintiff full recovery of

question is the debtor's real estate business as a whole, and the
bankruptcy court had to assess the debtor's ability, after the
transfer, to cover the debts and expenses of that business (not
just the debts and expenses that may or may not have been
associated with the defendant's sale of the subject parcels) with
his remaining assets. The evidence demonstrates that the debtor
was not able to cover those debts and expenses and relied instead
upon the income generated from the defendant's sale of the
properties transferred to her.

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 all the proceeds from the sale of the Subject
Parcels without making an equitable adjustment
to account for the proceeds the Defendant used
to pay the Debtor's bills and cover the family
expenses. Accordingly, the Court determines
that it is equitable under the facts of this
case to credit the Defendant for the
expenditures she made that the Debtor could
have legitimately made if the constructively
fraudulent transfers had not occurred.

Neither party challenges the bankruptcy court's decision to adjust

the judgment in this case. However, the defendant challenges the

one-year limitation on the adjustment, arguing that she continued

to pay for expenditures on the debtor's behalf after that period

and thus is deserving of a larger adjustment.9 We review the

bankruptcy court's limitation on the equitable adjustment for abuse

of discretion and its underlying factual findings for clear error.

See United States v. Verduchi, 434 F.3d 17, 25 (1st Cir. 2006)

(stating that equitable determinations made in the context of

9
The defendant also argues that she should have received an
additional $30,000.00 as an equitable credit for the sale of a lot
that the debtor had transferred to her. The defendant sold the
property, receiving $ 3,540.50 in net proceeds and an $80,000.00
mortgage receivable. She then transferred the mortgage receivable
to the debtor for no consideration, and then bought it back from
him for $30,000.00. The bankruptcy court rejected her request for
a $30,000.00 credit, finding that she misunderstood the purpose of
the equitable adjustment it had applied. The court found that
equity in this case required only that the defendant be credited
for expenditures that she made, which the debtor could have made
without objection if he had kept the properties, during the time
the business was winding down. The court found no reason to credit
the defendant for her decision to shuffle money and property to and
from the debtor in relation to the transaction in question. We see
no reason to overturn that finding.

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fraudulent transfer judgments "are clearly committed to the trial

court's discretion and are reviewed only for abuse of discretion");

In re Cox, 356 F.3d at 82 (noting that a bankruptcy court's factual

findings are reviewed for clear error).

New Hampshire law does not specify how an equitable

adjustment in this context should be calculated. The bankruptcy

court noted that, "[i]n many cases, determining the precise amount

of . . . an adjustment may be difficult if not impossible. In such

cases, the Court must inevitably engage in an element of rough

justice." That task of determining the extent of equitable

adjustment in this case was made even more difficult by the

voluminous and disorganized materials presented by the parties.10

Nevertheless, the court carefully examined the record and

determined that a one-year period of adjustment was appropriate.

The court found that, after a one-year period,

sales of the Parcels occurred at significantly
longer intervals. This evidence indicated to
the Court that the liquidation of the business
assets was effectively completed and that the
remaining parcels had been effectively

10
In fact, in its decision, the bankruptcy court noted that "the
evidence for this case was voluminous, often redundant, and
frequently contradictory. The quantity and organization of the
evidence also confused the parties and their respective counsel.
Charts and graphs submitted by the parties . . . were found to
contain material errors or omissions. . . . [I]t was necessary for
the Court to devote considerable time and effort to verify and
correct the charts and exhibits submitted as evidence or argument
by the parties." Our review of the record confirms the accuracy of
the court's assessment.

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 converted to personal assets. Once the
remaining parcels were converted to personal
assets of the Defendant, the equitable basis
for any adjustment ceased to exist.

In other words, because the dispute in this case focused on the

diminution in value of the debtor's real estate business because of

the property transfers to the defendant, the court found that once

the business activities stopped, there was no longer any equitable

basis for adjusting the judgment. The defendant has not given us

any reason to reject either the court's rationale or its factual

findings. We therefore affirm the equitable adjustment.

III.

The bankruptcy court properly concluded that the debtor

transferred property to the defendant in violation of the New

Hampshire UFTA's constructive fraud provision, N.H. Rev. Stat. Ann.

§ 545-A:4. The bankruptcy court applied the correct burden of

proof and we discern no error in its calculation of the equitable

adjustment. The district court correctly upheld the decision.

Affirmed.

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