This is an exception to discharge proceeding for fraud among two former business associates. I find for the plaintiff in the sum of $33,624.10.

Factual Background

         The plaintiff Mert Caswell (Caswell) is an independent heavy equipment salesman from Portland. The defendant Jerald C. Briske (Briske) is a former Anchorage contractor who is now also working as an independent heavy equipment salesman. Caswell and Briske had business dealings buying, selling and leasing equipment in Alaska during the early 1980s.

         In February of 1985 Briske became interested in a large equipment purchase from Anglo-Alaska Construction Company (Anglo). He offered to purchase the equipment package for 7.5 million     2 ABR 90  dollars. The offer was accepted on February 27, 1985, subject to certain closing requirements. Briske, acting as a middleman, planned to immediately liquidate the equipment following its purchase through private sales or public auction. He called Caswell in late February to advise him of the purchase. He gave Caswell model numbers and serial numbers for some of the equipment for re-sale. Caswell said he might have a buyer for eleven scrapers for a price in excess of $880,000.00. Caswell wanted a $22,000.00 commission. Briske refused $22,000.00 but agreed to a $20,000.00 commission if Caswell found a buyer.

         Caswell soon contacted Finning Tractor & Equipment Company (Finning) of Vancouver, B.C. regarding the purchase of equipment. He called Case DeVisser, its international sales representative, who was vacationing in Florida. DeVisser expressed an interest in the scrapers and possibly more equipment. Neither DeVisser or Finning were aware of the Anglo package prior to Caswell's call. Caswell contacted Briske and arranged for DeVisser to view the equipment in Alaska.

         DeVisser viewed the equipment in early March of 1985 and liked what he saw. Finning, through its wholly owned U.S. subsidiary, Airpro Equipment, Inc. (Airpro), formed a 50-50 joint venture with N.C. Machinery (N.C.) and agreed to purchase the scrapers and the rest of the equipment package for 8.2 million dollars cash.

         N.C. had previously offered to purchase the Anglo package from Briske, but its offer had been rejected, and N.C. did not negotiate further with Briske until Anglo suggested the joint venture. Briske had made alternative arrangements with Ritchie Brothers Auctioneers for liquidation of the equipment should a bulk sale fall through. He canceled those arrangements and timed the closings such that his purchase of the equipment from Anglo coincided with its sale to the Airpro/N.C. joint venture. When the smoke cleared, Briske had cleverly negotiated a profit on the sale of at least $472,000.00 cash as of March 28, 1985, with an additional 1.2 million in escrow payable to Briske after certain deductions, prior to May 31, 1985.⁽¹⁾

         After hearing of the closing from DeVisser, Caswell contacted Briske and asked for his commission on several occasions. Briske initially refused to acknowledge the sale or its closing. After he finally acknowledged the sale, Briske refused to pay Caswell $20,000.00, maintaining that N.C. was "his" client. According to Briske, Caswell was only entitled to half a commission if at all. Caswell, enraged by Briske's failure to pay any commission, filed suit in state court seeking a 5% commission on     2 ABR 92  the 8.2 million dollar sale together with punitive damages. That suit was pending in state court when Briske filed bankruptcy and the current dischargeability action ensued.

Analysis

         The plaintiff's inartfully drafted complaint contains a litany of state claims for relief which are irrelevant to this proceeding. Plaintiff's claims for contract, quasi-contract, bad faith breach of contract, etc. are all barred by the automatic stay. They will be dismissed without prejudice.

         Not so, however, with plaintiff's exception to discharge count for fraud. 11 U.S.C. § 523(a)(2) excepts from discharge debts for services to the extent obtained by fraud. The elements of non-dischargeable fraud endorsed by the Ninth Circuit in In re Rubin, 875 F.2d 755, 759 (9th Cir. 1989) are found in In re Pascucci, 90 B.R. 438, 444 (Bankr. C.D. Cal. 1988), which states:

        The elements of a claim for fraudulent misrepresentation under
section 523(a)(2)(A) are: (1) a representation of fact by the debtor, (2) that was material, (3) that the debtor knew at the time to be false, (4) that the debtor made with the intention of deceiving the creditor, (5) upon which the creditor relied, (6) that the creditor's reliance was reasonable, and (7) that damage proximately resulted from the misrepresentation.

         Reviewing those elements, I find Briske made a specific representation of fact: that upon a sale of eleven scrapers to a buyer procured by Caswell, Briske would pay Caswell $20,000.00. The evidence in no way sustains, however, any alleged agreement by Briske to pay Caswell 5% of the gross sales price of the entire equipment package. This alleged 5% agreement amounts to nothing more than wishful thinking on Caswell's part.

         I cannot run a brain scan on Briske to determine his precise intent on the day he represented payment of $20,000.00 to Caswell. I can only examine his actions and the other circumstances of this case to determine his intent. I conclude his intent was fraudulent for several reasons. The first reason involves the closing.

         Immediately following the closing, Briske failed to notify Caswell that the transaction had closed. He did not pay Caswell even a reduced commission. He lied to Caswell about the closing and kept him at bay. He failed to contact Caswell to explain any delay in payment. He ignored Caswell, despite having at least $472,000.00 in immediate cash with which to pay him.

         Secondly, the reasons given by Briske to avoid payment totally lack substance. Briske arbitrarily claimed a right to reduce the commission by 50% because N.C. was "his" buyer. In     2 ABR 94  fact, N.C. was a purchaser only through a joint venture. N.C. and Briske had previously terminated negotiations. Only when Caswell found Case DeVisser and Finning was the impetus for the sale to Airpro and N.C. initiated.

         Briske's 50% argument exalted form over substance. Caswell produced a buyer who not only bought the scrapers but formed a joint venture purchasing 8.2 million dollars of equipment. Caswell's buyer alone put 4.1 million dollars cash into Briske's pocket. Essentially Briske's reduction argument seeks to penalize Caswell for over-performing. Rather than seeking to cut Caswell's commission, a bonus was in order.

         Briske also sought to avoid commission because Airpro, Finning's wholly owned subsidiary, purchased the equipment and not Finning itself. Again, his argument demonstrates fraudulent intent. Finning simply used Airpro as its U.S. arm. It was a wholly owned subsidiary of Finning. Caswell produced Airpro just as he had produced Finning. The fact that either Airpro or a joint venture with Airpro ultimately purchased the property was not a legitimate ground for denying the commission.

         Finally, Briske's response to questions in this case have been highly inconsistent. During his direct testimony Briske stated that he would have sold the scrapers as a separate package independent of the total equipment package. However, in answers to interrogatories, Briske stated that he would never have considered     2 ABR 95  selling the scrapers separately. In his direct testimony Briske admits that he had a deal with Caswell for sale of eleven scrapers for $20,000.00. However, in his answers to interrogatories, Briske states that Caswell requested "an unspecified commission on the scrapers." Briske now states that his response regarding a "unspecified commission" is incorrect and that in fact Caswell did demand $20,000.00. Briske's responses, like his willingness to pay commissions, vary from day to day.

         For these reasons, I find that Jerald Briske made a material false representation with the intent of deceiving Mert Caswell. Elements one through four of the elements of a claim for fraud have been met.

         Mert Caswell relied upon Briske's representations. He gave Briske Case DeVisser's name and arranged for DeVisser's visit. His reliance upon Briske's representation was reasonable and consistent with their prior dealings. Damages resulted from the misrepresentations. Caswell was unpaid for his services. He is entitled to $20,000.00 as damages proximately caused by the misrepresentation: the commission which he was promised.

         I am not overlooking the fact that Finning, pleased with its 4.1 million dollar purchase, gratuitously tossed a "bone" to Caswell for $17,000.00 in April of 1985. I find that Caswell would have received this sum whether Briske paid or not. Finning was under no obligation to Briske or Caswell to pay any commission.     2 ABR 96  Its payment was not in lieu of Briske's commission obligation but in addition to it. Regardless of this third party payment, Caswell suffered a $20,000.00 loss.

         I further find that Caswell is entitled to interest from March 28, 1985 at the rate of 10.5% per annum. March 28, 1985 is the date Briske received $6,992,215.00 through an escrow account from the joint venture and effectively closed his sale with the joint venture and Anglo. Although Briske retained a right to an additional 1.2 million dollars, less certain payments, this sum was not payable immediately but came due by May 31, 1985.

         It would be fundamentally unfair to deprive Caswell of interest on his 1985 damages. He would not be adequately compensated for his loss. Pre-judgment interest is therefore appropriate. In re Der, 113 B.R. 218, 232 (Bankr. D. Md. 1989); Norte and Co. v. Huffines, 416 F.2d 1189, 1191 (2nd Cir. 1969); American Timber & Trading Co. v. First National Bank of Or., 690 F.2d 781, 784 (9th Cir. 1982); American National Watermattress Corp. v. Manville, 642 P.2d 1330, 1342 (Alaska 1982); Brinkerhoff v. Swearingen Aviation Corp., 663 P.2d 937 (Alaska 1983); Ehredt v. DeHavilland Aircraft Co., 705 P.2d 446 (Alaska 1985); State Farm Fire and Casualty Co. v. Nicholson, 777 P.2d 1152, 1158 (Alaska 1989)

         I look to state law to determine the rate of pre-judgment interest. Post-judgment interest will be at the federal rate. In     2 ABR 97  re Johnson, 120 B.R. 461, 474 (Bankr. N.D. Ind. 1990). In 1985, when Caswell's claim arose, interest was allowable under A.S. 45.45.010(a) at 10.5% from the date payment was due, March 28, 1985. Guin v. Ha, 591 P.2d 1281, 1284 (Alaska 1979). Interest from March 28, 1985 to September 12, 1991 is the sum of $13,624.10.

         The plaintiff has also requested punitive damages and attorney's fees. Punitive damages are not recoverable in dischargeability actions based on fraud. In re Ellwanger, 105 B.R. 551 (9th Cir. B.A.P. 1989). Attorney's fees are not recoverable in dischargeability actions based on fraud. In re Itule, 114 B.R. 206 (9th Cir. B.A.P. 1990); In re Levinson, 58 B.R. 831, 838 (Bankr. N.D. Ill. 1986).

Conclusion

         Mert Caswell's $20,000.00 commission together with interest is entitled to be excepted from discharge under 11 U.S.C. § 523(a) (2) (A) as it was incurred through actual fraud on Jerald Briske's part.

         Therefore, IT IS HEREBY ORDERED:

         Plaintiff's first, second, third, fifth, and sixth causes of action are dismissed without prejudice;

         2. Plaintiff shall recover from the defendant Jerald C. Briske the sum of $33,624.10, with interest thereon as provided by federal law, which sum is excepted from discharge in accordance with 12. U.S.C. § 523(a) (2) (A);

         3. Plaintiff is awarded his costs for this action; and

         4. Each party shall pay their own attorney's fees.

         Judgment shall be entered and docketed accordingly.

         DATED: September 12, 1991.

BY THE COURT


DONALD MacDONALD IV
United States Bankruptcy Judge

    2 ABR 91  1. Neither the sale documents nor the testimony reflect the exact amount earned by Briske. The gross sales prices were subject to adjustments at closing. The parties failed to submit the final escrow instructions relating to the May 31, 1985 payment. It is thus impossible to determine the exact amount of Briske's gross profit.