Locke v. Eshghabady et al

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
FARID SHIRZADI, No. 05-11634
Debtor(s).
______________________________________/
JEFFRY LOCKE, Trustee,
Plaintiff(s),
v. A.P. No. 05-1130
REZA AMINI ESHGHABADY, et al.,
Defendant(s).
_______________________________________/
Memorandum on Motion for Summary Judgment
_________________
There are significant issues of fact as to whether defendants actually paid for the debtor’s dry
cleaning business and whether the business was transferred with the intent to hinder creditors. These
issues are not subject to summary adjudication. The sole legal issue presented by plaintiff’s motion for
summary judgment is whether the sale proceeded in violation of California’s bulk sales laws.
White & Summers has little positive to say about bulk sales laws and notes that California has
taken a middle position, adopting the revised version of Article 6 of the Uniform Commercial Code. 3
Entered on Docket
June 12, 2006
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 05-01130 Doc# 35 Filed: 06/12/06 Entered: 06/12/06 14:38:23 Page 1 of 2

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White & Summers, Uniform Commercial Code (4th Ed.), § 27-1, p. 216.
Under the current version of California Commercial Code § 6103(a)(1), bulk sales only apply
when the seller’s business “is the sale of inventory from stock . . . .” The very first comment to this
version of the law notes:
1. Subsection (1)(a) follows Section 6-102(3) of the 1987 Official Text and
makes Article 6 applicable only when the seller's principal business is the sale
of inventory from stock. This Article does not apply to a sale by a seller whose
principal business is the sale of goods other than inventory, e.g., a farmer, is the
sale of inventory not from stock, e.g., a manufacturer who produces goods to
order, or is the sale of services, e.g., a dry cleaner, barber, or operator of a
hotel, tavern, or restaurant. [Emphasis added]
It is therefore not the most difficult decision the court has ever had to make to hold that California bulk
sales laws do not apply to the sale of the debtor’s dry cleaning business to defendants.
For the foregoing reasons, plaintiff’s motion for summary judgment will be denied. Either party
may submit an appropriate form of order.
Dated: June 12, 2006
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 05-01130 Doc# 35 Filed: 06/12/06 Entered: 06/12/06 14:38:23 Page 2 of 2