2009 D e c i sion s O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit 7-13-2009 

# I n Re: P et e r R

ichmond P r e c e de n t i al or N on-P r e c e de n t i al : N on-P r e c e de n t i al D ock e t N o . 08-1888

F o l lo w thi s a nd a dd it ion al w ork s a t : h tt p://d i g it alc ommon s .l a w . v i l l a no v a . e du/thir dc ir c uit_2009

Thi s de c i sion i s br ou gh t t o y ou for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t a t e s C our t of Appe al s for the Thir d C ir c uit a t V i l l a no v a U niv e r sit y S choo l of L a

w Di g it al R e posit or y

. I t h as be e n a c c e pt e d for inclusion in 2009 D e c i sion s b y a n a uthor i z e d a dmini s tr a t or of V i l l a no v a U niv e r sit y S choo l of L a

w Di g it al R e posit or y

. F or mor e infor m a t ion, p le as e c on t a ct Be n j a min . C a rl s on@l a

w . v i l l a no v a . e du . R e c omme nde d C it a t ion
" I n R e: P e t e r R

ichmond " (2009). 2009 D e cisio n s . P ape r 1026. h tt p://d i g it alc ommon s .l a

w . v i l l a no v a . e du/thir dc ir c uit_2009/1026H onor abl e J ane A . R es t ani , C hi ef J udge, U . S. C our t of I nt er nat i onal T r ade, s i t t i ng * b y d e s ig n a tio n . NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT
N o. 08- 1888
In R e : P E T E R R IC H M O N D , D ebt or

--- --- --- --- --- --- --- --- --- --- M A R I N A D I ST R I C T D E V E L O PM E N T C O . L L C , t / a, B or gat a,

A ppel l ant APP EAL F ROM THE UNI TE D ST ATE S DI S TRI CT C OURT

FOR TH E DI STRI CT O F NEW J ERSEY ( D . C . C i vi l N o. 07- cv- 05417) Di s t r i c t J u d g e : Ho n o r a b l e Re n e e M . Bu mb Subm i t t ed U nder T hi r d C i r cui t L A R 34. 1( a)

J une 23, 2009
B efor e: B A R R Y , SM I T H , C i r cui t J udges , and R E ST A N I , J udge * ( O pi ni on Fi l ed: J ul y 13, 2009)

OP I NI ON-2-

B A R R Y , C i r cui t J udge Mar i naDi s tr i c t

De ve l opm e nt

Co. , LLC t/ a“ the Bor ga t a ” a ppe a l s the de c i s i on of the Di s tr i c t

Court a ffi r m i ng the Bankr

upt c y Court ’ s a ppr ova l of aCha

pt e r 13 pl an for d eb to r P eter R ich m o n d , a h ab itu al g am b ler w h o f

iledf o r b an k rup tcy , in larg e p art, beca use of a debt ow ed to the Borgata ca si no . The Bo rgat a argues that the Bank ruptcy C o u rt erredw h en it co n clu d edth at R ich m o n d ’s in co m e w as su f f icien t to m erit co n f irm atio n o f

h is p lan an dth at R ich m o n df iledb o th h is p lan an dp etitio n in g o o df aith . F o r s ub s t an t i a l l y

th e s a me r e a s o n s a s e x p r e s s e db y th e D i s tr i c t

C o u rt , w e w i l l a f

f i rm. I. R ich m o n dis a g am

b ler w h o h as, at tim es, in cu rredsig n if ican t d eb t to th e B o rg ata c a s i no. On Augus t

17, 2006, Ri c hm ond fi l e d avol unt ary Cha pt e r 13 bankr upt c y pe t i t i on li st ing $ 25 0,99 7.53 in un se cure d d ebt owed to h is m other, a t im es hare , and the Borgata , m ost of the debt being o wed to the Bo rgat a. Af te r the firs t c re ditor’ s m ee ti ng , Ric hard am en d edh is sch edu les to d isclo se, am o n g o th er th in g s, th at h e h adtran sf erredh is inte re st in his m ar it al re si dence t o h is wife, for $1 .00, on May 18 , 200 4. Th e dee d w as r e c or de d on Jul y

27, 2004, two y e ar s and thr e e we e ks pr i or t o hi s bankr

upt c y fi l i ng. Ri c hm ond wa s r e t i r e d a t

the t i m e of hi s bankr

upt c y fi l i ng, and hi s s our c e s of incom e, in additi on to supp ort from his wife, were (1) m on thly pay m ents from

an investm ent i n M exic an sl ot m ac hines, wh ic h averaged about $2 50 per m on th bu t var ie d i n a m ount , r angi ng fr om

$2, 400 t o z e r o pe r

m onth, and ( 2) m onthl y

pay m e nt s of $403-3-

p er m o n th f

ro m th e rep ay m en t o f a secu redlo an m ad e to a g am b lin g acq u ain tan ce. R ich m o n d ’s p lan , as am en d ed , p ro p o sedp ay m en ts o f $ 6 5 3 p er m o n th f

o r 6 0 m o n th s to p ay atto rn ey s f

ees an du n secu redcred ito rs p ro rata. T h e B o rg ata o b

j ectedto co n f

irm atio n o f

th e p lan an dso u g h t d ism issal o f th e case as a b adf aith f ilin g , arg u in g th at th e tran sf er o f th e in terest in m arital p ro p erty w as a fr audul e nt

c onve y anc e , tha t

the pl an wa s pr opos e d i n ba d fa i th, and tha t Ri c hm ond wo uld b e unable t o m ake a ll of his pay m ents un der the plan. The Bank ruptcy Co urt he ar d t e s t i m ony

on Apr i l 10 and May

2, 2007, and r e

je c t e d the Bor ga t a ’ s ar gum e nt s by opi ni on da t e d Oc t obe r

4, 2007 and or de r

da t e d Oc t obe r

16, 2007. The Bankr

upt c y Court ove rr ul e d e a c h of Bor ga t a ’ s obje c t i ons t o c onfi rm a t i on of the pl an and de ni e d the Bor ga t a ’ s m ot i on t o di s m i s s , fi ndi ng tha t Ri c hm ond’ s pe t i t i on wa s fi l e d i n good fa i th. The Bor ga t aa ppe a l e d t o the Di s tr i c t

Court , and on Fe br

uary 29, 20 08 , the Distri ct

Co urt a ff ir m ed. The Bo rgat a now appeal s the Distri ct Co urt’ s d ecisio n , arg u in g th at th e B an k rup tcy C o u rt erredb o th in co n f irm in g th e p lan an din f ailin g to d ism iss th e p etitio n as a b adf aith f ilin g . II. Th e Dis tr ic t Cou rt

had j uris dict ion to revie w the deci si on of the Bankrup tc y

Co urt un der 28 U .S.C. § 15 8(a) , and we have ju ri sdic ti on to re view the dec is ion o f the Distri ct Co urt und er

28 U.S.C. § 1 58 (d). We exer ci se “ple nary re view ov er

the Dis tr ic t Cou rt ’s a ppe l l a t e r e vi e w of the Bankr upt c y Court ’ s de c i s i on, and e xe r c i s e the s a m e s t andar d ofB efor e t he B ankr upt cy C our t , t he B or gat a fr amed t hi s ar gum ent as one under 11 1 U . S . C . § 1 0 9 (e) (a C h ap ter 13 d eb tor m u st be an “ind ividu al w it h reg u lar i n co m e” ). -4- re view as the Dis tr ic t Cou rt in re viewing the Bank ruptcy Co urt’ s det er

m inat ions.” In re W i ns t ar Comm c ’ ns , I nc . , 554 F. 3d 382, 389 n. 3 ( 3d Ci r . 2009) . W e r e vi e w the Bank ruptcy

Co urt’ s fac tual find ings fo r c le ar er ror, bu t e xerc is e ple nary

re view ov er

that Court ’ s i nt e r

pr e t a t i on and a

ppl i c a t i on of thos e fa c t s t o the l aw. I d. a t 395. A. Confi r m at i on of t he Pl an T h e B an k rup tcy

C o d e, 1 1 U .S .C . § 1 3 2 5 (a), p ro v id es, in p art, th at th e co u rt sh all co n f irm a p lan if “th e d eb to r w ill b e ab le to m ak e all p ay m en ts u n d er th e p lan an dto co m p ly w ith th e p lan ,” § 1 3 2 5 (a)(6 ), an dif “th e p lan h as b een p ro p o sedin g o o df aith and not by any m e ans for

bi dde n by l aw, ” § 1325( a ) ( 3) . The Bor ga t aar gue s tha t the B an k rup tcy

C o u rt erredin f

in d in g th at R ich m o n d ’s p lan m et th ese req u irem en ts. Fi r s t , the Bor ga t aar gue s tha t Ri c hm ond’ s i nc om e wa s both i na de qua t e and t oo s p e c u l a t i v e t o me r i t

c o n f i rma t i o n o f

th e p l an . I t

i s u n d i s p u t e dth a t

R i c h mo n d ’ s i n c o me 1 co n sists o f

m o n th ly p ay m en ts f ro m th e slo t m ach in e in v estm en t th at v ary in am o u n t, m o n th ly p ay m en ts o n th e secu redlo an th at are so m etim es p aidlate, an dsup p o rt f ro m h is wi fe . The Bankr

upt c y Court r e c ogni z e d tha t

Ri c hm ond’ s s our c e s of i nc om e ar e not alw ay s co n sisten t, b u t n o tedth at R ich m o n d ’s p rim ary so u rce o f sup p o rt is actu ally

h is wife, who re ce ives m on thly pay m ents from

a fam il y tr ust. Th e Cou rt

em ph as iz ed that Ri c hm ond m a de a l l of hi s r e gul ar pl an pay m e nt s t o the Tr

us t e e for twe l ve m onths of theT he B or gat a al s o ar gues t hat R i chmond dem ons t r at ed bad f ai t h beca us e he ha s 2 “made no eff

or t t o obt ai n empl oy m ent ” and c oul d not expl ai n t he pr epet i t i on t r ans fer and d iversion o f o v er $ 1 0 0 , 0 0 0 in joint ac co u n ts w it h h is w ife. (A p p ell an t’ s B r. at 18 . ) T h ese all eg ati o n s, n o t add resse d b y eit h er the B an k rup tcy C o u rt o r t h e D ist ri ct C o u rt , are n o t d e v e lo p e d in th e B o rg a ta ’s b ri e f , a n d w e w ill n o t c o n s id e r t h e m f u rt h e r. -5- p reco n f irm atio n p ro cess an dth at h e co n sisten tly m ad e su b stan tial p rep etitio n p ay m en ts pu rs uant to an info rm al pay m ent plan. Th e Cou rt

concluded, based on these undisputed f acts, th at R ich m o n d ’s “p lan p ay m en t h isto ry

p ro v id es a su f

f icien t b asis to d em o n strate th e d eb to r’s ab ility

to co n tin u e to m ak e h is p lan p ay m en ts.” (A p p . at 1 3 .) We ag ree w ith the Di s tr i c t

Court tha t the Bankr

upt c y Court di d not c omm i t c l e ar e rr or i n ove rr ul i ng the B o rg ata’s o b

j ectio n to co n f

irm atio n o f

th e p lan o n th is g ro u n d . S eco n d , th e B o rg ata arg u es th at R ich m o n dp ro p o sedh is p lan in b adf aith b ecau se hi s tr ans fe r

of hi s i nt e r e s t

i n the m ar i t a l hom e c ons t i t ut e d afr audul e nt

c onve y anc e and dem on strate d b ad faith w hen cou pled with the t im ing o f h is bank ruptcy fili ng (two y ears and three weeks a fter

the transfer) . 2 Th e Borgata ’s concern about Richm on d’s transfer of h is inte re st in the m ar it al ho m e has been centra l t o its ar gu m ent throu gh ou t t his c as e. Befo re the Bankrup tc y Court , the Bor ga t afr a m e d i t s ar gum e nt a s t o the m ar i t a l hom e tr ans fe r a s one unde r

11 U.S.C. § 1 32 5(a) (4), wh ic h p rovides that the value of the prop erty to be distri bu te d u nd er a debtor’ s Chapter

13 plan m ay

no t be l es s than w ou ld be re ce ived if the debtor’ s prop erty were li qu idat ed un der Chapter 7. Th e Cou rt

concluded that a

Ch apte r 7 tr

uste e w o u ldb e u n lik ely

to su cceedin av o id in g th e tran sf er eith er p u rsu an t to 1 1 U .S .C . §-6-

5 4 8 (a) o r p u rsu an t to th e N ew Jersey U n if o rm F rau du len t T ran sf

er A ct b ecau se th e f

acts d idn o t sh o w actu al in ten t to h in d er, d elay , o r d ef rau d . T h e B o rg ata d o es n o t ren ew its ar gum e nt a s t o § 1325( a ) ( 4) be for e us , i ns t e a d ar gui ng, m or e ge ne r a l l y , tha t the c i r c um s t anc e s of the tr ans fe r de m ons tr a t e tha t

Ri c hm ond fi l e d hi s pl an i n ba d fa i th. Th e fact s s urroun ding the transfer of the inte re st in the m ar it al ho m e are u n d isp u ted . O n M ay

1 8 , 2 0 0 4 , R ich m o n dtran sf erredh is in terest to h is w if e f o r $ 1 .0 0 . F o llo w in g th e tran sf

er, h is w if

e g av e a m o rtg ag e o n th e h o m e f o r $ 2 0 0 ,0 0 0 to h er f

am ily tru st, th e tru st d ep o sitedth e $ 2 0 0 ,0 0 0 in to a j o in t acco u n t h eldb y R ich m o n dan dh is
w if e, an dth e m o n ey

w as u sedb y

R ich m o n dto p ay

o f f a p rio r d eb t o w edto th e B o rg ata. E f f ectiv ely , th is allo w edR ich m o n dto co n v ey h is in terest in th e h o m e to h is w if e in r e t urn for $200, 000 ( a

ppr oxi m a t e l y

ha l f the fa i r

m arke t va l ue of the hom e ) , whi c h he imm ed iately

u sedto p ay

an ex istin g d eb t. T h e B an k rup tcy C o u rt co n clu d edth at th ese fact s s urroun ding the transfer, coup le d w it h the fact that the transfer did no t r ender R ich m o n din so lv en t, d idn o t ev id en ce an in ten t to d ef rau d , d elay , o r h in d er cred ito rs, de s pi t e the “ i nfe r e nc e of [ba d] i nt e nt ” tha t woul d or di nar i l y

ar i s e fr om

atr ans a c t i on betwee n spo uses fo r nom inal consider at ion. Th is find ing, supp orte d b y the e vidence d escrib edab o v e, w as n o t clearly erro n eo u s. Base d o n these un disputed fact s and exam ining the re cord as a who le , the Distri ct Court c orr e c t l y c onc l ude d tha t , othe r

than the i ns i nua t i on of i m pr opr i e ty by vi rt ue of the t i m i ng of Ri c hm ond’ s ba nkr upt c y fi l i ng, “ the r e c or d i s de voi d of a ny e vi de nc e tha t

the-7-

Pl an wa s pr opos e d i n ba d fa i th. ” ( App. a t 42. ) As both the Bankr

upt c y Court and the Distri ct Co urt e m

ph as iz ed, the un disputed fact s dem on strate d that ( 1) the plan w as fu nd ed prim ar il y

by Richm on d’s wife’ s m on thly incom e, (2) Ric hm on d’s a ll eged g am b lin g ad d ictio n h adn o t im p actedh is ab ility

to m ak e p reco n f

irm atio n p lan p ay

m en ts for the pr e c e di ng 12 m onths , and ( 3) Ri c hm ond di d a m e nd hi s s c he dul e s t o r e fl e c t the prepet it ion transfer of h is inte re st in the m ar it al ho m e, despit e the fact that that disc losure
w as n o t ex p licitly

req u iredb ecau se it o ccu rredm o re th an tw o y ears p rep etitio n . Ac c or di ngl y , we c onc l ude tha t the Bankr

upt c y Court di d not e rr i n c onfi rm i ng Ri c hm ond’ s pl an. B. Fai l ur e t o Di s m i s s t he Pe t i t i on T h e B o rg ata also co n ten d s th at th e B an k rup tcy C o u rt erredw h en it d eclin edto d ism iss th e p etitio n du e to R ich m o n d ’s p rep etitio n b adf aith . T h e C o d e p ro v id es th at a Ch apte r 13 cas e m ay

be dism is se d “fo r c ause .” 11 U.S.C. § 1 30 7(c) . The st at ute does no t define “ ca

use, ” but the Sup re m e Cou rt has hel d that “ fo r c ause ” i m plic it ly authoriz es c ourt s t o di s m i s s aCha

pt e r 13 c a s e for

pr e pe t i t i on ba d fa i th c onduc t . Marr a m av. Citi ze ns Bankof

Mass ., 54 9 U .S. 365 , 373 -74 (20 07 ). T h e B o rg ata arg u es th at R ich m o n dactedin b adf aith b ecau se th e tran sf

er o f h is in terest in h is m arital h o m e co n stitu teda f rau du len t co n v ey an ce, th e d eb t to th e B o rg ata wa s i nc urr e d by

m e ans of de c e pt i on and fr aud, and Ri c hm ond’ s m ot i ve i n fi l i ng the pe t i t i on wa s t o a voi d payi ng hi s de bt t o the Bor ga t a . The Bankr upt c y Court , e xa m i ni ng-8-

the uncon te st ed fact s, ho wever, fo un d: “Her e, I am conv ince d that the debtor has fil ed thi s c a s e i n a n hone s t

e ffort t o r e pay thi s c r e di t , tha t

the c a s e wa s fi l e d i n good fa i th, and shou ld no t be dis m is se d.” ( Ap p. at 31 .) F o r th e reaso n s d iscu ssedab o v e, th e B an k rup tcy C o u rt d idn o t clearly

err w h en it concluded that the tr ansfer of inte re st in the m ar it al ho m e was no t a tr ansa ct ion intended to defraud credit ors. As to the c ir cum st ance s by wh ic h the debt to the Borgata was i nc urr e d, the Court

found tha t

the Bor ga t ac oul d not

a s s e rt tha t i t r e a s onabl y

r e l i e d on the coun te rc hecks ( al so ca ll ed “m ar kers ”) si gn ed by

Richm on d to b el ie ve that Richm on d h ad the fun ds on hand to im

m ediate ly sati sfy the debt. Th e Cou rt

fo un d that the Bo rgat a had pe rm i t t e d Ri c hm ond m or e than 45 day s t o s a t i s fy pr i or out s t andi ng m arke r s , and, i n the c a s e of the m arke r s i nvoke d he r e , t ook no a c t i on for s e ve r a l m onths unt i l Ri c hm ond i ni t i a t e d c ont a c t

and pr opos e d apa y

m e nt pl an, whi c h he the n fol l owe d. Fi na l l y , the Court e m pha s i z e d the fa c t

tha t Ri c hm ond c ons i s t e nt l y

m a de m onthl y

pr e pe t i t i on pay m e nt s i n a n e ffort

t o r e duc e hi s de bt , whi c h de m ons tr a t e d t o the Court tha t he di d not seekto av o idth e d eb t. T h e C o u rt’s f in d in g th at R ich m o n df

iledh is p etitio n in g o o df aith is supp orte d b y

thes e und is pu te d f

ac ts , and the Cou rt

did n ot er

r i n d enying the Bo rgat a’ s m o tio n to d ism iss th e p etitio n “f o r cau se.” III. W e wi l l a ffi rm

the or de r of the Di s tr i c t

Court a ffi rm i ng the or de r

of the B an k rup tcy

C o u rt.