Acequia, Inc. v. Clinton (In re Acequia, Inc.)

In this case, we consider issues arising from chapter 11 debtor Acequia, Inc.’s ten-year effort to recover certain prebankruptcy conveyances made to Vernon Clinton, founder and former controlling shareholder of the corporation. Clinton appeals the magistrate judge’s determination that he fraudulently transferred Acequia’s assets to himself. Acequia, now under the control of adverse parties, cross-appeals the magistrate judge’s calculation of Clinton’s liability for the transfers.

*804 Resolution of the multitude of issues in this ease requires consideration of the common law of restitution, Idaho’s community-property law, the equitable doctrine of setoff, and, most importantly, the fraudulent conveyance provisions of both the Bankruptcy and Idaho Codes. We scrutinize each doctrine and, ultimately, conclude the magistrate judge correctly determined that Clinton made transfers with an actual intent to hinder and delay Acequia’s creditors. We hold, however, that the magistrate judge erred by limiting Acequia’s recovery of the fraudulent transfers to the amount of unsecured claims against the bankruptcy estate. Accordingly, we affirm in part, reverse in part, and remand.

I.

In…

dissenting:

The majority finds that the bankruptcy court did not clearly err in holding that Vernon Clinton acted “with actual intent to hinder, delay, or defraud” Acequia’s creditors. See 11 U.S.C. § 548 (a)(1). I disagree. The bankruptcy court’s finding that the “transfer of Acequia funds to Clinton’s personal name ... could not help but hinder and delay payment to Acequia’s creditors[,] a fact Clinton would certainly have been aware of’ is not supported by the evidence. All of Aeequia’s creditors were paid in full, and any delay in payment was caused by the bankruptcy court proceedings initiated by Aceq-uia, at that time no longer controlled by Clinton. A finding that creditors were injured is not always necessary to a determination that a debtor acted with actual intent to hinder, delay, or defraud them. See, e.g., First Beverly Bank v. Adeeb (In re Adeeb), 787 F.2d 1339, 1343 (9th Cir.1986). However, we should not rely upon a judicial doctrine to construct an intent to defraud where no actual intent to defraud existed.

Furthermore, at all material times Acequia was, and still is, controlled by Rosemary Haley or her estate. It appears that Haley’s estate availed itself of…