2000 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

9-27-2000

In Re Ronald Tamecki

Precedential or Non-Precedential:

Docket 99-4061

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Recommended Citation

"In Re Ronald Tamecki" (2000). 2000 Decisions. Paper 206.

http://digitalcommons.law.villanova.edu/thirdcircuit_2000/206
Filed September 27, 2000 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

No. 99-4061 

IN RE: RONALD M. TAMECKI, SR., 

 Debtor 

RONALD M. TAMECKI, SR., 

 Appellant 

v. 

LAWRENCE G. FRANK 

ON APPEAL FROM THE 

UNITED STATES DISTRICT COURT 

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA 

(Dist. Court No. 99-cv-01240) 

District Court Judge: James F. McClure, Jr. 

Argued: May 25, 2000 

Before: ALITO, RENDELL and DUHE,* Circuit Judges. 

(Filed September 27, 2000) 

 FRANK E. GARRIGAN (Argued) 

 Garrigan & Rosini 

 112 East Independence Street 

 Shamokin, Pennsylvania 17872 

 Attorney for Appellant 

_________________________________________________________________ 

* Honorable John M. Duhe Jr., United States Circuit Judge for the 

United States Court of Appeals for the Fifth Circuit, sitting by 

designation. 
 LAWRENCE G. FRANK (Argued) 

 Law Office of Lawrence G. Frank 

 2023 North Second Street 

 Harrisburg, Pennsylvania 17102 

 Attorney for Appellee 

OPINION OF THE COURT 

DUHE, Circuit Judge: 

We AFFIRM the decision of the district court affirming the 

bankruptcy court's dismissal of Ronald M. Tamecki's

("Debtor") Chapter 7 petition. 

BACKGROUND 

Debtor filed for Chapter 7 protection seeking discharge of 

an approximately $35,000 credit card debt owed to MBNA 

America. He possesses only one substantial asset, his share 

of a tenancy by the entirety in his home, which he holds 

with his estranged wife. Debtor and his wife have accrued 

over $100,000 of equity in the home. 

The Tameckis had been separated for approximatelyfive 

years at the time Debtor filed for bankruptcy, and they 

have now been separated for more than seven years. Debtor 

and his wife live in different towns, and each lives with a 

significant other. Mrs. Tamecki filed for divorce in July 

1993 but, for unknown reasons, the action is still pending. 

The most recent trial date was continued either on joint 

motion of the parties or without objection by the Debtor. 

In his petition Debtor claimed an exemption under 

Section 522(b)(2)(B) of the Bankruptcy Code on his share of 

the home equity. See 11 U.S.C. S 522(b)(2)(B). The trustee 

in bankruptcy ("Trustee") challenged this election and 

sought dismissal of Debtor's petition for "lack of good faith" 

under Section 707(a) of the Code. See 11 U.S.C. S 707(a). 

According to Trustee, Debtor's divorce is "right around the 

corner"; and, thus, Debtor will soon be entitled to his 

unencumbered share of the dissolved tenancy by the 

entirety. The Trustee estimates that this would be 

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approximately $50,000, an amount sufficient to cover 

Debtor's obligations and still leave him with enough money 

for a "fresh start." Accordingly, the Trustee reasoned that 

Debtor acted in bad faith in filing his petition knowing that 

he would soon be in a position to repay his debts. The 

bankruptcy court found that Debtor had failed to prove his 

good faith in filing for bankruptcy and dismissed the 

Debtor's petition under Section 707(a). The district court 

affirmed. 

DISCUSSION 

Section 707(a) allows a bankruptcy court to dismiss a 

petition for cause if the petitioner fails to demonstrate his 

good faith in filing. See In re Zick, 931 F.2d 1124, 1126-27 

(6th Cir. 1991), In re Marks, 174 B.R. 37, 40 (E.D. Pa. 

1994). Although the Code does not define "good faith," 

courts in this circuit have uniformly held that"[a]t the very 

least, good faith requires a showing of honest intention." 

See Marks, 174 B.R. at 40. Courts have cautioned, 

however, that: 

 Dismissal based on lack of good faith . . . should be 

 confined carefully and is generally utilized only in 

 those egregious cases that entail concealed or 

 misrepresented assets and/or sources of income, lavish 

 lifestyles, and intention to avoid a large single debt 

 based upon conduct akin to fraud, misconduct or gross 

 negligence. 

Zick, 931 F.2d at 1129. Courts can determine good faith 

only on an ad hoc basis and must decide whether the

petitioner has abused the provisions, purpose, or spirit of 

bankruptcy law. See Marks, 174 B.R. at 40. The parties 

agree that the decision to dismiss a petition for lack of good 

faith rests within the sound discretion of the bankruptcy 

court. See Zick, 931 F.2d at 1126, In re Atlas Supply Corp., 

857 F.2d 1061, 1063 (5th Cir. 1988). 

Once a party calls into question a petitioner's good faith, 

the burden shifts to the petitioner to prove his good faith. 

See Marks, 174 B.R. at 40 citing In re Sky Group Int'l, Inc., 

108 B.R. 86, 90 (Bankr. W.D. Pa. 1989) ("Once the good 

faith issue is placed in question, the party bringing the 

 3 
petition has the burden of proving that the petition was 

brought in good faith."). The bankruptcy court found that 

Debtor failed to meet this burden. We agree. 

Debtor testified that he accrued over $35,000 in debt at 

a time when he was earning less than one-tenth this

amount. Debtor could point to no marked calamity or

sudden loss of income that precipitated his need to accrue 

such a comparatively large consumer debt. Moreover,

Debtor's testimony concerning the state of his marriage 

confirmed the Trustee's assertion that divorce and 

dissolution of the tenancy by the entirety were"right 

around the corner.1" The district court did not abuse its 

discretion in determining that together these facts are 

sufficient to shift the burden to Debtor to prove his good 

faith.2 

Debtor's response was three-fold: first, that the Trustee 

must prove "extreme misconduct"; second, that ability to 

repay is not, in and of itself, evidence of bad faith, see 

Marks, 174 B.R. at 41 and third; that he did no more than 

avail himself of a proper exception under the Code. While 

we agree with Debtor and the court in Zick that we should 

not lightly infer bad faith, Debtor's response is insufficient 

to carry his burden of proving good faith. Debtor proffered 

no evidence of good faith other than his testimony that he 

_________________________________________________________________ 

1. Tamecki's testimony confirms that he and his wife are estranged. They 

have been separated for seven years. They live in separate towns, each 

with a new significant other. A divorce proceeding has been pending 

since 1993. They have not sought counseling, nor is there any indication 

that either party has made overtures toward a reconciliation. No 

explanation for the delay in finalizing the divorce has been provided. 

Accordingly, we see no error in the bankruptcy court's apparent 

discounting of Tamecki's self-serving testimony that he would take his 

wife back "in a heartbeat." That may be true, but there is no evidence 

that her return is either imminent or likely. 

2. We do not suggest, as the Dissent indicates, that "consumer debtors 

[must] affirmatively demonstrate good faith absent any challenge," or 

that "dismissal is appropriate anytime the debtor fails to affirmatively 

demonstrate his good faith." We hold merely that in this case where the 

trustee has called into question debtor's good faith, and put on evidence 

sufficient to impugn that good faith, the burden then shifts to the debtor 

to prove his good faith. 

 4 
accrued his debt for subsistence purposes, intended to 

repay the debt, and that he loved his wife and would take 

her back "in a heartbeat." The bankruptcy court chose to 

discount this self-serving testimony and instead relied upon 

evidence that Debtor acquired a comparatively large

consumer debt just prior to filing for bankruptcy and 

during the pendency of his divorce. While Debtor is correct 

that ability to repay is not in and of itself sufficient proof of 

bad faith, both the reasonableness of his accrual of the 

debt and the timing of his filing, particularly in relation to 

the curious and unexplained circumstances relating to the 

divorce proceeding, were sufficiently questionable to 

warrant good faith scrutiny. Debtor's assertion that the 

Code permits him to take the entireties exemption simply 

begs the question and does not address whether he availed 

himself of that provision in good faith. Ultimately, we find 

no error in the bankruptcy court's ruling that Debtor failed 

to prove his good faith. 

AFFIRMED. 

 5 
ALITO, Circuit Judge, concurring: 

I join the opinion of the Court, but I add a few words to 

clarify the narrow point of disagreement between the 

majority and the dissent. As I understand the position of 

our dissenting colleague, she agrees (a) that a Chapter 7 

consumer case may be dismissed for "bad faith" and (b) 

that, once a debtor's good faith is appropriately put at 

issue, it is the burden of the debtor to produce evidence of 

good faith. I do not understand the dissent to argue that in 

this case the debtor produced evidence of good faith, and 

thus the only apparent point of disagreement concerns the 

question whether, on the particular facts of this case, the 

debtor's good faith was sufficiently put at issue to require 

him to demonstrate good faith. 

The dissent apparently believes that, in order to put 

Tamecki's good faith at issue, it was incumbent upon the 

trustee to produce evidence that, among other things, there 

is no good reason for the unusual delay in the completion 

of the Tameckis' divorce proceeding. See Dissenting Opinion 

at 9 ("[T]he trustee offered no evidence that put Tamecki's 

good faith at issue. He only made bald allegations, without 

proffering any evidence about the timing of Tamecki's still 

unconsummated divorce. . . ."). But the trustee, who is 

obviously not a party to the divorce proceeding, is in a 

comparatively poor position to show the reason for the 

delay. The known facts about the divorce proceeding are 

sufficient to place upon the debtor the burden of explaining 

the reason for the delay, which has now reached seven 

years. It may be that there are entirely legitimate reasons 

for the delay. If so, it should have been easy for Tamecki to 

show what they were. But he made no effort to do so. 

Under the particular circumstances of this case-- which, 

contrary to the implication of the dissent, is not the average 

consumer bankruptcy case -- the bankruptcy judge did not 

commit an abuse of discretion is dismissing the petition. 

 6 
RENDELL, Circuit Judge, dissenting: 

Some background is necessary to understand the 

framework in which we analyze this dispute and why I 

strenuously disagree with the outcome in this case, the 

reasoning, and the rule implicitly set forth by the majority. 

The Bankruptcy Code contains no explicit good faithfiling 

requirement.1 It does, however, permit the court to dismiss 

cases, including chapter 7 consumer cases, "for cause." See 

11 U.S.C. SS 707(a), 930(a), 1112(b), 1208(c), 1307(c). We 

have not previously addressed the question of whether lack 

of good faith is grounds for dismissal of chapter 7

consumer bankruptcy cases under section 707(a), nor have 

we established how to go about determining bad faith in 

such a context.2 Only two other courts of appeals have 

squarely confronted the question of bad faith dismissal of a 

consumer bankruptcy case under section 707(a). Both have 

held that bad faith may be grounds for dismissal under 

that provision, but have narrowly construed bad faith, 

finding that cases should be dismissed under only very 

limited circumstances in which the bankruptcy court has 

made specific findings of egregious behavior or misconduct. 

See Huckfeldt v. Huckfeldt (In re Huckfeldt), 39 F.3d 829, 

832 (8th Cir. 1994); Industrial Ins. Servs., Inc. v. Zick (In re 

Zick), 931 F.2d 1124, 1129 (6th Cir. 1991). Both in and 

outside of these two circuits, bankruptcy and district courts 

_________________________________________________________________ 

1. The one exception is in chapter 9, which governs bankruptcies by 

municipalities and contains an express good faithfiling requirement. See 

11 U.S.C. S 921(c). The Bankruptcy Code does require that repayment or 

reorganization plans -- as opposed to bankruptcy cases themselves -- be 

proposed in good faith. See 11 U.S.C. SS 1129(a)(3), 1225(a)(3), 

1325(a)(3). 

2. Although we have not ruled on the use of section 707(a) to dismiss 

cases "for cause" on account of bad faith, we recently have held, in the 

context of a sophisticated corporate debtor in chapter 11, that lack of 

good faith can be grounds for dismissal "for cause" under section 1112. 

See In re SGL Carbon Corp., 200 F.3d 154, 161 (3d Cir. 1999). We also 

stated in a footnote in SGL that "once at issue, the burden falls upon the 

bankruptcy petitioner to establish that the petition has been filed in 

`good faith.' " Id. at n.10. However, even if this statement were to be 

extended to chapter 7 consumer cases, as we discuss later, and as 

distinguished from the situation in SGL, nothing in the record of this 

case puts Tamecki's good faith "at issue." 

 7 
have reserved bad faith dismissal for the truly egregious 

case, often involving individuals with substantial means 

who have flaunted their wealth, have continued their lavish 

lifestyles, and are engaging in creative, elaborate schemes 

to conceal their assets and cheat their creditors or to 

otherwise inflict harm on third parties.3 Indeed, because the 

standards for finding bad faith have been set so high by the 

federal courts, cases involving conduct that might appear 

questionable are nonetheless not dismissed due to the lack 

of actual evidence of bad faith or misconduct. See, e.g., In 

re Marks, 174 B.R. 37, 40 (E.D. Pa. 1994) (explaining, in 

upholding the bankruptcy court's decision not to dismiss 

the case, that "[t]he bankruptcy court stated that the record 

did not establish any unexplained transfer of assets, 

multiple case filings, extraordinary procedural gymnastics, 

or lack of candor and completeness in the debtor's 

statements and schedules.").4 With that background, I now 

turn to the facts of this case. 

In nearly all respects, Tamecki fits the profile of the 

average consumer debtor. He has marital problems, health 

problems, and employment problems. He has a large credit 

card debt that he incurred for subsistence purposes by 

using unsolicited "live checks" that MBNA sent to him while 

he was experiencing a lull in income and ability to perform 

_________________________________________________________________ 

3. See, e.g., In re Lacrosse , 244 B.R. 583, 588-589 (Bankr. M.D. Pa. 

1999) (dismissing case of debtor with 58 credit cards and over $500,000 

of consumer debt, who lived a lavish lifestyle and drove luxury cars, and 

who also falsely enticed clients to give him money by saying that he 

intended to make tax-free investments); In re Brown, 88 B.R. 280, 284- 

285 (Bankr. D. Hawaii 1988) (dismissing case of successful 

ophthalmologist who engaged in prebankruptcy asset planning to remove 

more than $700,000 from the reach of creditors and who sought to avoid 

an obligation to a recipient of cataract surgery who lost all vision in 

her 

right eye). 

4. The Court in Marks continued by explaining that "[m]ost instances of 

dismissal for bad faith under S 707(a) involve concealment, 

misrepresentation, or unexplained transfers to place assets beyond the 

reach of creditors." Id. at 41. Thus, even the cases of debtors that 

appear 

not to need bankruptcy relief have not been dismissed for bad faith in 

the absence of evidence of misconduct. See, e.g., In re Josey, 169 B.R. 

138, 140 (Bankr. S.D. Ohio 1994); In re Bridges , 135 B.R. 36, 38 (Bankr. 

E.D. Ky. 1991). 

 8 
construction work due to his health and employment 

problems. He has an even lower income (under $4,000 per 

year in 1996 and 1997) than most debtors. He also has 

equity in a home held in tenancy by the entirety with his 

estranged wife that, under Pennsylvania law, cannot be 

touched by his creditors, either in or out of bankruptcy 

unless or until the tenancy is broken. However, far from the 

anecdotes of debtors who buy real estate to convert cash 

into exempt home equity in contemplation of bankruptcy, 

Tamecki and his wife have owned the house for many 

years; indeed, Tamecki built the house himself. Tamecki 

therefore has none of the obvious badges of bad faith as 

gleaned from the other cases. 

One would expect, therefore, that this case was 

dismissed for bad faith because the trustee put forth 

evidence of some type of misconduct or fraud. However, the 

trustee offered no evidence that put Tamecki's good faith at 

issue. He only made bald allegations, without proffering any 

evidence, about the timing of Tamecki's stillunconsummated divorce and his accrual of debt to MBNA, 

to which Tamecki provided responses that were not 

discredited by the Bankruptcy Court. The trustee, who is 

the primary advocate of dismissing Tamecki's case, 

conceded at oral argument that even after conducting 

considerable research, he knows of no case with an 

analogous fact pattern or remotely on point; he could not 

name one. Having canvassed the landscape, I have not 

found a case bearing any resemblance to this one in which 

bad faith was found to exist. Simply put, our ruling breaks 

new ground in the law regarding good faith filing. 

In dismissing Tamecki's case, the Bankruptcy Court 

made no specific findings of bad faith. However, in

upholding the dismissal of Tamecki's case, the majority 

focuses on Tamecki's accrual of debt to MBNA and his 

pending divorce, both of which I will discuss in turn. 

Tamecki accrued most of his debt to MBNA within the

two years prior to filing for bankruptcy. In addressing this 

accrual of debt, the Bankruptcy Court made no finding that 

Tamecki ran up his debts in contemplation of bankruptcy 

or made extravagant purchases in reckless disregard of his 

financial situation. To the contrary, the Bankruptcy Court 

 9 
credited Tamecki's testimony that he incurred this debt to 

supplement his paltry income for food and other 

necessities. It is difficult to contemplate what more Tamecki 

could have done to refute any inference of bad faith from 

his use of the unsolicited live checks for subsistence at a 

time when he had nominal income. If the existence of a 

large credit card debt, unaccompanied by any evidence that 

the debtor incurred the debt without the intent to repay,5 is 

sufficient for bad faith dismissal, the bankruptcy courts 

and the majority of debtors in our circuit should be 

prepared for an onslaught of good faith challenges.

The majority ruling also relies on Tamecki's stillunconsummated divorce proceedings. Tamecki's wifefiled 

for divorce more than five years prior to the bankruptcy 

filing, but the proceedings have been dormant for much of 

that time. Tamecki claims he would never divorce his wife 

of his own accord; he testified that he wants to remain 

married to her. The trustee opined, with no evidence, that 

Tamecki's divorce is "right around the corner," in which 

event he could be forced to sell his home, break the 

tenancy by the entirety protected by Pennsylvania law, and 

pay MBNA what he owes. I might find this contention

persuasive if the trustee had offered any specific evidence, 

and the Bankruptcy Court had specifically found, that 

Tamecki had timed his bankruptcy and divorce to defraud 

his creditors. However, the Bankruptcy Court made no 

such finding, nor did it indicate that the possibility of 

Tamecki's divorce played any role in its ruling. In fact, the 

Court never shared its view on this issue; it did not 

explicitly accept the trustee's argument in this regard, nor 

did it discredit Tamecki's assertion that he did not want to 

be divorced from his wife (and therefore had no intention to 

break the tenancy by the entirety on his own accord).6 The 

majority takes a quantum and unprecedented leap by 

_________________________________________________________________ 

5. The Bankruptcy Code contains a provision, section 523(a), under 

which creditors can challenge the dischargeability of specific debts. If 

there was any question that Tamecki incurred the debt without the 

intent to pay it, MBNA could have pursued its rights under that 

provision. 

6. The majority's reference to the Bankruptcy Court's assessment of the 

testimony regarding the marital status as "apparent discounting of 

Tamecki's self-serving testimony" is curious in light of the Bankruptcy 

Court's lack of any reference whatsoever to any concern regarding the 

marital situation. As noted above, the Bankruptcy Court does not even 

refer to the timing of the divorce as having any bearing on its decision 

or the outcome. 

 10 
crediting the trustee's argument and using it as a basis for 

upholding the dismissal of Tamecki's case. 

A closer look at the trustee's argument reveals its

slippery slope. Failing to put forth any evidence that 

Tamecki has schemed with his wife to postpone the divorce 

for their mutual benefit, the trustee's position on the 

divorce issue, as clarified in oral argument, is that Tamecki 

had an obligation "to move his divorce along" before filing 

for bankruptcy so that the state-law-protected tenancy by 

the entirety would be broken to make his home equity 

available for creditors, regardless of whether Tamecki 

actually wants to save his marriage.7 In addition to being 

concerned about the result in the case before us, I am 

concerned that by endorsing this argument, the majority is 

announcing an unprecedented rule that insolvent 

individuals must refrain from filing for bankruptcy if they 

may have more assets in the future, such that filing before 

realization of such assets, even absent proof of bad intent, 

is grounds for dismissal of one's bankruptcy case. For 

example, is an insolvent individual barred fromfiling for 

bankruptcy if his wealthy parent is ill, absent any evidence 

that he is timing his filing so as to deprive creditors of his 

potential inheritance? I submit that there is no such 

restriction in the Bankruptcy Code, and the courts should 

not create one. 

I will refrain from refuting a variety of specific statements 

made by the majority, with one exception, namely, its 

assertion that a court may dismiss a chapter 7 case for 

cause if the debtor fails to demonstrate good faith in filing, 

citing the Zick decision. Zick does not require consumer 

debtors to affirmatively demonstrate good faith absent any 

challenge. Zick says that lack of good faith may be a valid 

basis for dismissing a bankruptcy case for cause under 

section 707(a), see Zick, 931 F.2d at 1126, not that 

dismissal is appropriate anytime the debtor fails to 

_________________________________________________________________ 

7. The trustee's alternative position at oral argument was that if Tamecki 

and his wife get back together, they should be required to take a second 

mortgage on their home to pay the MBNA debt. Regardless of the relative 

merits of this argument as a policy matter, it has no foundation in 

current bankruptcy law. 

 11 
affirmatively demonstrate his good faith.8 Even if the 

burden shifts to a consumer chapter 7 debtor to defend his 

good faith after good faith has been put "at issue," I would 

submit that placing good faith at issue requires more than 

an unsupported hypothesis about the state of Tamecki's 

relationship with his estranged wife and pointing to a 

specific credit card debt in the bankruptcy schedules. I 

frankly find it untenable that an entirely unsupported 

assertion can trigger an obligation on the part of a debtor 

to affirmatively prove his good faith or lose all entitlement 

to bankruptcy relief. Such a procedure would be contrary to 

that employed by our sister courts of appeals, and 

constitutes an unwarranted departure from existing law. 

I respectfully dissent. 

A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

_________________________________________________________________ 

8. The Huckfeldt decision from the Court of Appeals for the Eighth 

Circuit also makes no mention of placing the burden of proving good 

faith on the debtor, taking only the cautious step that a specific finding 

of bad faith may be grounds for section 707(a) dismissal. 

 12