IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA In re ALLEN and DIANA JAMES,                                       No. 1-84-00990      Debtors. ________________________/ GRETCHEN SIEMENS,      Plaintiff,    v.                                                                              A.P. No. 1-84-0231 ALLEN JAMES,      Defendant. _________________________/ Memorandum of Decision      In 1981 debtor and defendant Allen James was a gem dealer whose normal business activities included selling gemstones to investors. Plaintiff Gretchen Siemens was at that time an unsophisticated investor seeking to invest the proceeds of a personal injury settlement.      Siemens was introduced to James by her financial planner, who advised her that due to the inflation occurring at the time a portion of her funds should be invested in hard assets such as gemstones. Siemens met James on September 17, 1981, at James' office.      At the first meeting, James and Siemens spoke generally about investments in gemstones with Siemens indicating a desire to purchase about $10,000.00 in stones; no agreement was reached. A few days later, James called Siemens' financial planner to say that he had a very unique opportunity for Siemens to make a quick profit on a gemstone if she acted quickly. The planner called Siemens, who then met with James.      James told Siemens that he had a client who was very anxious to sell a 5.77 carat ruby. He said that a partnership was being formed to syndicate the purchase of the ruby for $72,000.00, but it would not be ready to make the purchase for a few weeks to a month. James told Siemens that he would buy the ruby himself except that he had used all his cash purchasing other stones. He showed Siemens an appraisal of the stone at $225,000.00, indicating to her that this was the retail value of the stone but that it was easily worth $80,000.00 to $90,000.00 on a quick sale basis. He suggested that Siemens had a rare opportunity to pick up a real bargain by purchasing the ruby for $62,000.00, holding it for less than a month, and then selling it to the limited partnership for $72,000.00.      Several of the above representations were false. The ruby was in fact owned by James himself, who had purchased it four days after meeting with Siemens. James had negotiated his purchase price of $34,620.00 with the gem importer, and knew that this amount was the true value of the ruby. Moreover, he purchased the ruby on credit with no payment due for two months; if the limited partnership was coming together as he represented, he could have sold it the stone himself and made an extra $10,000.00 without any expenditure of funds.      Relying on the scenario painted by James, Siemens paid him $62,000.00 and took possession of the ruby on September 28, 1981. Needless to say, the limited partnership fell through, the bottom dropped out of the gemstone market, and Siemens ended up selling the stone in 1987 for $9,000.00. During the first few years after Siemens purchased the ruby, James had made unsuccessful efforts to sell it for her.      The Court has no trouble at all finding actual and affirmative fraud on the part of James. While he may not have been under a duty to tell Siemens that he was the owner of the stone, he was certainly not justified in lying to her about its ownership or making up a story about a distress sale. Siemens had no intent of making such a large investment in gemstones, and would not have done so if she had not believed the story; James himself had warned her about how rare "true bargains" were in the gem business. Moreover, it was fraud for James to show Siemens the $225,000.00 appraisal, which he knew was way out of line, and tell Siemens that the ruby was worth $80,000.00 to $90,000.00 on a quick sale basis, without disclosing to her that he had just purchased it for $34,000.00; a recent negotiated sale is always the best evidence of value. Silence regarding such a material fact itself constitutes a false representation actionable under section 523(a)(2)(A) of the Bankruptcy Code. Matter of Van Horne (8th Cir. 1987) 823 F.2d 1285, 1288.      The Court disagrees with Siemens only so far as she measures her damages. She argues that she is entitled to the difference between what she paid for the ruby and the $9,000.00 she sold it for six years later because of her "forebearance" in reliance on James' attempts to sell it for her, without commission, which proved to be unsuccessful. The Court declines to so rule for two reasons. First, the Court cannot find by clear and convincing evidence that any of the statements made to Siemens after she bought the ruby were fraudulent in character. Second, even knowingly false statements made by the debtor in order to obtain forebearance are not considered actionable under section 523(a)(2) if no additional property was obtained by the debtor as a result. In re Preston (DC .D.Va.1983) 47 B.R. 354; In re Grubbs (DC M.D.Ga.1981) 9 B.R. 499; In re Schmidt (Bkrtcy.N.D.Ind.1986) 70 B.R. 634; In re Hames (Bkrtcy.D.Minn.1985) 53 B.R. 868; In re Bacher (Bkrtcy.E.D.Pa.1985) 47 B.R. 825.      For the foregoing reasons, Siemens is entitled to a judgment in the amount of $27,380.00 plus interest at the legal rate from and after September 28, 1981. She will also recover her costs of suit. The judgment will be nondischargeable.      Counsel for Siemens shall submit an appropriate form of judgment. This memorandum constitutes findings and conclusions pursuant to FRCP 52(a) and Bankruptcy Rule 7052.
Dated: March 10, 1988                                                                              __________________________                                                                                                                      Alan Jaroslovsky                                                                                                                      U.S. Bankruptcy