IN RE DBH LIMITED, INC., (Bankr.W.D.Tenn. 1999)

GEORGE BOSWELL, Bankruptcy Judge

On January 29, 1999, this Court issued a Memorandum Opinion and Order denying the debtor's motion for attorney's fees. In denying this request, the Court relied upon a totality of the circumstances test and held that the debtor's delay in providing the petitioners with a list of creditors did not entitle them to an award of attorney's fees under § 303(i)(2) of the Bankruptcy Code.

Upon the debtor's appeal of that order, the District Court for the Western District of Tennessee, Eastern Division remanded the case to this Court for further findings of fact. In accordance with that order, the Court issues this "Additional Findings of Fact."

The involuntary petition against DBH Limited, Inc., ("DBH"), was originally filed on May 16, 1997, in the Bankruptcy Court for the Middle District of Tennessee. Upon the debtor's motion for a change of venue, the case was transferred to the Western District of Tennessee, Eastern Division on January 6, 1998.

During the hearing for the Motion to Transfer Venue in the Middle District of Tennessee, it was established that the debtor transferred all of its assets to DBH Attachments in order to avoid paying the judgment AZUR-US had obtained against it prior to filing the involuntary petition. When questioned by the attorney for the petitioners, Carl Ackerman, Vice-President of Sales and a shareholder for DBH Limited, testified as follows:

Q. In other words, did the Ackermanns — I mean, did the — did the Hunts state why they were making the transfer?

A. I — in a — deposition I gave to you earlier, you asked me that, and I said, yes, that the discussion was about the debt owed to Azur, and we did not — we were not going to pay that debt.

Transcript, Motion to Transfer, December 23, 1997, p. 33.

Prior to the transfer of the case from the Middle District, the petitioning creditors filed a motion to require debtor to file a list of creditors with the Middle District Court. Such motion was set for a hearing, but was not resolved before the case was transferred.

On April 16, 1998, the debtors filed a "Renewed Motion to Dismiss." At the original setting for this motion, the attorney for the petitioners told the Court that their repeated requests for a list of DBH's creditors had gone unanswered. When the debtor's representative began testifying, it became apparent that the petitioners' assertion was indeed true. As a result, the Court reset the hearing for June 24, 1998, and orally ordered DBH to turn over the list of creditors to the petitioners prior to that date.

At the June 24, 1998, hearing on DBH's motion to dismiss, the core issue in dispute was the number of creditors the debtor had at the time of the filing of the involuntary petition. It was established through the testimony at this hearing that, the debtors had seventeen creditors at the time of filing; however, the testimony also established that DBH selectively paid off several creditors during the pendency of the case, such that at the time the Court heard the motion to dismiss, there were less than twelve creditors.

At the hearing on DBH's motion for attorney's fees, the Court reviewed the entire history of the case prior to ruling on the motion. The Court considered the fact that had DBH cooperated and promptly provided an accurate list of creditors after the filing, the case probably would never have been transferred. Instead DBH chose to withhold the single most important item of evidence. The Court further considered the fact that at the time of filing, DBH was in fact insolvent and further that they were not paying their debts timely. The only dispute ever in the case was whether there needed to be one or three petitioning creditors and if three were needed, were the three who petitioned holding undisputed claims. This fact was not ascertainable until DBH finally provided the list of creditors, some thirteen (13) months after the case filing.