USCA1 Opinion
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
