First American National Bank v. Carter (In Re Carter)

MEMORANDUM RUSSELL H. HIPPE, Jr., Bankruptcy Judge. In June of this year this court rendered two opinions dealing with the measure of relief available to a defrauded creditor under the discharge exceptions provided by subsections (A) and (B) of 11 U.S.C. § 523(a)(2). The court concluded that in proceedings under subsection (A) the relief available to defrauded creditors was compensatory, measured by the benefit-of-the-bargain rule. Castner Knott Co. v. Wilson, 12 B.R. 363 (Bkrtcy., M.D.Tenn.1981). By judgment entered in this proceeding on June 30, 1981, 11 B.R. 992, the court concluded that the measure of relief available to defrauded creditors under subsection (B) is punitive rather than compensatory and included the full amount of a debt the renewal of which had been fraudulently induced. In neither of these opinions did the court address the issue of whether the relief available to creditors under either subsection (A) or (B) included reasonable attorney’s fees as provided in the contract with the debtor. In an opinion being entered contemporaneously herewith, the court has concluded that the compensatory relief available under subsection (A) includes the defrauded creditor’s reasonable attorney’s fees. First American National Bank v. Crosslin, 14 B.R. 656 (Bkrtcy., M.D.Tenn., 1981). Having concluded that compensatory relief includes recovery of these fees, it follows that a creditor who is entitled to a larger measure of relief — one that is punitive in nature — should also be entitled to recover such fees. The attorney for the debtor having agreed that a twenty-percent fee would be reasonable, an appropriate order will be entered amending the judgment to include that amount.