UNITED STATES DISTRICT COURT FOR THE 

DISTRICT OF NEW HAMPSHIRE

Victor W. Dahar, Trustee

v. Civil No. 05-cv-186-JD

Susan W. Jackson, et al.

O R D E R

Susan W. Jackson appeals the bankruptcy court’s decision in

favor of the trustee, Victor W. Dahar, that was issued in an

adversary proceeding brought by Trustee Dahar in Stanley W.

Jackson’s Chapter 7 bankruptcy case. The bankruptcy court found

in a Memorandum Opinion (“Mem. Op.”) that certain transfers of

property by the Debtor, Stanley Jackson, to his wife, Susan

Jackson, and others were constructively fraudulent under New

Hampshire Revised Statutes Annotated (“RSA”) 545-A:4, I(b)(1) and

entered judgment in favor of Dahar in the amount of $260,130.67. 

Susan Jackson raises four issues on appeal, two of which this

court previously addressed, and resolved against her, in the

context of her motion for a stay pending appeal.

Discussion

On appeal, Jackson contends that the bankruptcy court

misinterpreted RSA 545-A:4,I(b)(1), erred in finding that the

debtor was engaged in business and that his remaining assets were

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unreasonably small, erred in using a preponderance of the

evidence standard for proving constructive fraud under RSA 545-

A:4,I(b)(1), and abused its discretion in limiting the time

period within which to apply the equitable adjustment. In

reviewing a decision of the bankruptcy court, this court “may not

set aside findings of fact unless they are clearly erroneous,

giving due regard to the opportunity of the bankruptcy court to

judge the credibility of the witnesses.” Palmacci v. Umpierrez,

121 F.3d 781, 785 (1st Cir. 1997) (internal quotation marks

omitted). Legal conclusions are reviewed de novo. Id.

I. Misinterpretation of RSA 545-A:4,I(b)(1)

Jackson argues that the bankruptcy court misinterpreted RSA

545-A:4,I(b)(1) as being limited to consideration of business

assets. That issue was addressed in both the court’s order

denying Jackson’s motion for a stay and the order in response to

Jackson’s motion for reconsideration. The court concluded as

follows:

The bankruptcy judge evaluated the Debtor’s business

assets and found that he had transferred all of his

business assets with equity to Jackson while retaining

only properties with negative equity. Contrary to

Jackson’s claim and the court’s initial impression,

however, the bankruptcy judge did not base his analysis

of the transferred properties under RSA 545-A:4,

I(b)(1), on the relative equities in the properties

without considering the value of other assets retained

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by the Debtor. Instead, the bankruptcy judge concluded

that the Debtor could no longer pay his business debts

and support his family from his business, after he

transferred the properties to Jackson, and for that

reason the transfers had left him with unreasonably

small remaining assets in relation to his business,

constituting fraudulent transfer under RSA 545-

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

Order, July 21, 2005, at 2. Jackson offers nothing in her brief

on appeal that undermines the court’s previous conclusion with

respect to the bankruptcy court’s interpretation of RSA 545-

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

II. Engaged in Business and Remaining Assets

A debtor makes a constructively fraudulent transfer under

RSA 545-A:4 if at the time of the transfer he “[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.” RSA 545-A:4,I(b)(1). 

The bankruptcy court found that the Debtor had “engaged in the

business of buying and selling, and developing real estate for

the last thirty years.” Mem. Op. at 16. That court further

found, based on the evidence presented, that the Debtor had no

means of paying his business debts and supporting himself and his

family without continuing to engage in his business. The court

concluded: “The Debtor may have intended to reduce his business

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activity, but he intended to continue to derive income, pay his

business debts, and support his family from the sale of real

estate inventory.” Mem. Op. at 17. The court further concluded,

based on Jackson’s sale of business assets that had been

transferred to her and her use of those proceeds to pay the

Debtor’s business debts and to support the family, that the

Debtor’s remaining assets were unreasonably small in relation to

his continuing business.

A. Engaged in Business

Jackson argues that the Debtor was not engaged in business

at the time the properties were transferred to her or afterwards. 

She contends that the Debtor’s medical problems precluded him

from conducting his business, which she describes as purchasing

and developing additional real estate properties. She asserts

that the Debtor was retired and was merely living off the assets

he had accumulated in the course of his business. Jackson has

not shown that the bankruptcy court’s finding that the Debtor

continued to be engaged in the business of selling real estate

after the transfer of the properties to Jackson is clearly

erroneous.

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B. Unreasonably Small

The second prong of the analysis under RSA 545-A:4,I(b)(1)

is whether the Debtor’s remaining assets were unreasonably small

in relation to his business. The bankruptcy court listed the

Debtor’s business assets, excluding the Debtor’s interest in his

home, with their values, liens, and equities, and noted which

were transferred to Jackson. The bankruptcy court also noted

that as a result of the transfers of property to Jackson, the

Debtor had negative equity in his remaining business assets while

the assets transferred to Jackson had significant positive

equity. The court further noted that within a year after the

transfers, Jackson had sold nearly all of the properties that had

been transferred to her and that the proceeds were used for the

most part to pay expenses that had previously been paid by the

Debtor from his business income. The bankruptcy court concluded

that the Debtor’s remaining assets were unreasonably small in

relation to his business because he could not pay the expenses of

his business after the transfers. 

Similar to the issue of whether the bankruptcy court

misinterpreted RSA 545-A:4,I(b)(1), Jackson argues that the court

erroneously focused on the Debtor’s business assets in the

absence of his other considerable assets in finding that his

remaining assets were unreasonably small in relation to his

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1To the extent Jackson raises a new issue in her reply,

challenging the bankruptcy court’s consideration of whether the

Debtor was able to support his family, that issue was not

properly raised and is deemed to have been waived. See Indian

Motocycle Assocs. III Ltd. P’ship v. Mass. Housing Fin. Auth., 66

F.3d 1246, 1253 n.12 (1st Cir. 1995).

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business. As the court has previously explained, Jackson would

appear to be correct if the bankruptcy court had based its

decision on the value of the Debtor’s business assets without

considering his other assets. That, however, was not the

bankruptcy court’s decision. The bankruptcy court held that the

remaining assets were unreasonably small after the transfers

because the Debtor no longer paid his business expenses and his

family’s living expenses which, instead, were being paid by

Jackson from the proceeds of selling the business properties that

were transferred to her.1 Therefore, the value of the assets the

Debtor retained was irrelevant to the bankruptcy court’s

conclusion that those assets were unreasonably small.

III. Burden of Proof

Jackson contends that the bankruptcy court erred in ruling

that Dahar could prove constructive fraudulent transfer by a

preponderance of the evidence rather than by clear and convincing

evidence. This court addressed the burden of proof issue in the

context of the court’s order denying Jackson’s motion for a stay

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pending appeal. There, the court held that the reasoning of

other courts that have decided that the preponderance standard

applies to prove constructive, as opposed to actual, fraud under

the Uniform Fraudulent Transfers Act is persuasive, particularly

in light of the New Hampshire Supreme Court’s older cases and the

preponderance standard used for fraudulent transfers under the

Bankruptcy Code. Jackson provides no basis for the court to

conclude otherwise here.

IV. Equitable Adjustment

RSA 545-A:8, III provides that a judgment for a fraudulent

transfer based on the value of the transferred assets must be

equal to that value at the time of transfer, “subject to

adjustment as the equities may require.” Because the transferred

properties had been sold, the judgment in the fraudulent

conveyance action was for an amount equal to their value at the

time of the transfers, which was $585,500. The bankruptcy court

then adjusted that amount by $325,369.33, which was the amount

the court determined Jackson had spent during the first year

after the transfers to pay the Debtor’s business debts and the

family’s living expenses. The bankruptcy court characterized the

equitable adjustment as necessary to prevent the trustee from

receiving a windfall.

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Jackson contends that the one-year limitation on the

adjustment improperly omitted the expenditures she made on the

Debtor’s behalf after the one year period. She also argues that

she is due a $30,000 credit because of transactions with the

Debtor, involving one of the subject properties, that deprived

her of the value of that property. 

The bankruptcy court chose the one-year period to reflect

the time the Debtor was winding down his business after the

properties were transferred to Jackson. Acknowledging that the

time limit was to some extent arbitrary, the court explained that

the one-year period was used because after that time the sales of

the subject properties occurred over significantly longer

intervals, which suggested that the business operations had

effectively concluded. After the business stopped operating, the

properties became Jackson’s personal assets instead of business

assets that would be subject to equitable considerations. With

respect to the issue of the $30,000 credit, the bankruptcy court

ruled that Jackson misunderstood the purpose of the equitable

adjustment, which is to prevent a windfall to the trustee but is

not intended to compensate the transferee. 

The bankruptcy court’s equitable adjustment was not based on

clearly erroneous facts or on an erroneous legal ruling.

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Conclusion

For the foregoing reasons, the judgment of the bankruptcy

court is AFFIRMED.

SO ORDERED.

Joseph A. DiClerico, Jr.

United States District Judge

October 6, 2005

cc: John R. Michels, Esquire

Thomas J. Pappas, Esquire

Richard Thorner, Esquire

USBC-NH, Clerk

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