6101. This division shall be known and may be cited as Uniform
Commercial Code--Bulk Sales.
6102. (a) In this division, unless the context otherwise requires:
(1) "Assets" means the inventory and equipment that is the subject
of a bulk sale and any tangible and intangible personal property
used or held for use primarily in, or arising from, the seller's
business and sold in connection with that inventory and equipment,
but the term does not include any of the following:
(i) Fixtures (paragraph (41) of subdivision (a) of Section 9102)
other than readily removable factory and office machines.
(ii) The lessee's interest in a lease of real property.
(iii) Property to the extent it is generally exempt from creditor
process under nonbankruptcy law.
(2) "Auctioneer" means a person whom the seller engages to direct,
conduct, control, or be responsible for a sale by auction.
(3) "Bulk sale" means either of the following:
(i) In the case of a sale by auction or a sale or series of sales
conducted by a liquidator on the seller's behalf, a sale or series of
sales not in the ordinary course of the seller's business of more
than half of the seller's inventory and equipment, as measured by a
value on the date of the bulk-sale agreement.
(ii) In all other cases, a sale not in the ordinary course of the
seller's business of more than half the seller's inventory and
equipment, as measured by value on the date of the bulk-sale
agreement.
(4) "Claim" means a right to payment from the seller, whether or
not the right is reduced to judgment, liquidated, fixed, matured,
disputed, secured, legal, or equitable. The term includes costs of
collection and attorney's fees only to the extent that the laws of
this state permit the holder of the claim to recover them in an
action against the obligor.
(5) "Claimant" means a person holding a claim incurred in the
seller's business other than any of the following:
(i) An unsecured and unmatured claim for employment compensation
and benefits, including commissions and vacation, severance, and
sick-leave pay.
(ii) A claim for injury to an individual or to property, or for
breach of warranty, unless all of the following are satisfied:
(A) A right of action for the claim has accrued.
(B) The claim has been asserted against the seller.
(C) The seller knows the identity of the person asserting the
claim and the basis upon which the person has asserted it.
(iii) A claim for taxes owing to a governmental unit, if both of
the following are satisfied:
(A) A statute governing the enforcement of the claim permits or
requires notice of the bulk sale to be given to the governmental unit
in a manner other than by compliance with the requirements of this
division.
(B) Notice is given in accordance with the statute.
(6) "Creditor" means a claimant or other person holding a claim.
(7) (i) "Date of the bulk sale" means either of the following:
(A) If the sale is by auction or is conducted by a liquidator on
the seller's behalf, the date on which more than 10 percent of the
net proceeds is paid to or for the benefit of the seller.
(B) In all other cases, the later of the date on which either of
the following occurs:
(I) More than 10 percent of the net contract price is paid to or
for the benefit of the seller.
(II) More than 10 percent of the assets, as measured by value, are
transferred to the buyer.
(ii) For purposes of this subdivision the following shall apply:
(A) Delivery of a negotiable instrument (subdivision (1) of
Section 3104) to or for the benefit of the seller in exchange for
assets constitutes payment of the contract price pro tanto.
(B) To the extent that the contract price is deposited in an
escrow, the contract price is paid to or for the benefit of the
seller when the seller acquires the unconditional right to receive
the deposit or when the deposit is delivered to the seller or for the
benefit of the seller, whichever is earlier.
(C) An asset is transferred when a person holding an unsecured
claim can no longer obtain through judicial proceedings rights to the
asset that are superior to those of the buyer arising as a result of
the bulk sale. A person holding an unsecured claim can obtain those
superior rights to a tangible asset at least until the buyer has an
unconditional right, under the bulk-sale agreement, to possess the
asset, and a person holding an unsecured claim can obtain those
superior rights to an intangible asset at least until the buyer has
an unconditional right, under the bulk-sale agreement, to use the
asset.
(8) "Date of the bulk-sale agreement" means either of the
following:
(i) In the case of a sale by auction or conducted by a liquidator
(subparagraph (i) of paragraph (3)), the date on which the seller
engages the auctioneer or liquidator.
(ii) In all other cases, the date on which a bulk-sale agreement
becomes enforceable between the buyer and the seller.
(9) "Debt" means liability on a claim.
(10) "Liquidator" means a person who is regularly engaged in the
business of disposing of assets for businesses contemplating
liquidation or dissolution.
(11) "Net contract price" means the new consideration the buyer is
obligated to pay for the assets less each of the following:
(i) The amount of any proceeds of the sale of an asset, to the
extent the proceeds are applied in partial or total satisfaction of a
debt secured by the asset.
(ii) The amount of any debt to the extent it is secured by a
security interest or lien that is enforceable against the asset
before and after it has been sold to a buyer. If a debt is secured by
an asset and other property of the seller, the amount of the debt
secured by a security interest or lien that is enforceable against
the asset is determined by multiplying the debt by a fraction, the
numerator of which is the value of the new consideration for the
asset on the date of the bulk sale and the denominator of which is
the value of all property securing the debt on the date of the bulk
sale.
(12) "Net proceeds" means the new consideration received for
assets sold at a sale by auction or a sale conducted by a liquidator
on the seller's behalf less each of the following:
(i) Commissions and reasonable expenses of the sale.
(ii) The amount of any proceeds of the sale of an asset, to the
extent the proceeds are applied in partial or total satisfaction of a
debt secured by the asset.
(iii) The amount of any debt to the extent it is secured by a
security interest or lien that is enforceable against the asset
before and after it has been sold to a buyer. If a debt is secured by
an asset and other property of the seller, the amount of the debt
secured by a security interest or lien that is enforceable against
the asset is determined by multiplying the debt by a fraction, the
numerator of which is the value of the new consideration for the
asset on the date of the bulk sale and the denominator of which is
the value of all property securing the debt on the date of the bulk
sale.
(13) A sale is "in the ordinary course of the seller's business"
if the sale comports with usual or customary practices in the kind of
business in which the seller is engaged or with the seller's own
usual or customary practices.
(14) "United States" includes its territories and possessions and
the Commonwealth of Puerto Rico.
(15) "Value" means fair market value.
(16) "Verified" means signed and sworn to or affirmed.
(b) The following definitions in other divisions apply to this
division:
(1) "Buyer." Paragraph (a) of subdivision (1) of Section 2103.
(2) "Equipment." Paragraph (33) of subdivision (a) of Section
9102.
(3) "Inventory." Paragraph (48) of subdivision (a) of Section
9102.
(4) "Sale." Subdivision (1) of Section 2106.
(5) "Seller." Paragraph (d) of subdivision (1) of Section 2103.
(c) In addition, Division 1 (commencing with Section 1101)
contains general definitions and principles of construction and
interpretation applicable throughout this division.
6103. (a) Except as otherwise provided in subdivision (c), this
division applies to a bulk sale if both of the following are
satisfied:
(1) The seller's principal business is the sale of inventory from
stock, including those who manufacture what they sell, or that of a
restaurant owner.
(2) On the date of the bulk-sale agreement the seller is located
in this state or, if the seller is located in a jurisdiction that is
not a part of the United States, the seller's major executive office
in the United States is in this state.
(b) A seller is deemed to be located at its place of business. If
a seller has more than one place of business, the seller is deemed
located at its chief executive office.
(c) This division does not apply to any of the following:
(1) A transfer made to secure payment or performance of an
obligation.
(2) A transfer of collateral to a secured party pursuant to
Section 9609.
(3) A disposition of collateral pursuant to Section 9610.
(4) Retention of collateral pursuant to Section 9620.
(5) A sale of an asset encumbered by a security interest or lien
if (i) all the proceeds of the sale are applied in partial or total
satisfaction of the debt secured by the security interest or lien or
(ii) the security interest or lien is enforceable against the asset
after it has been sold to the buyer and the net contract price is
zero.
(6) A general assignment for the benefit of creditors or to a
subsequent transfer by the assignee.
(7) A sale by an executor, administrator, receiver, trustee in
bankruptcy, debtor in possession, or any public officer under
judicial process.
(8) A sale made in the course of judicial or administrative
proceedings for the dissolution or reorganization of an organization.
(9) A sale to a buyer whose principal place of business is in the
United States and who satisfies each of the following:
(i) Not earlier than 21 days before the date of the bulk sale, (A)
obtains from the seller a verified and dated list of claimants of
whom the seller has notice three days before the seller sends or
delivers the list to the buyer or (B) conducts a reasonable inquiry
to discover the claimants.
(ii) Assumes in full the debts owed to claimants of whom the buyer
has knowledge on the date the buyer receives the list of claimants
from the seller or on the date the buyer completes the reasonable
inquiry, as the case may be.
(iii) Is not insolvent after the assumption.
(iv) Records and publishes notice of the assumption not later than
30 days after the date of the bulk sale in the manner provided in
Section 6105.
(10) A sale to a buyer whose principal place of business is in the
United States and who satisfies each of the following:
(i) Assumes in full the debts that were incurred in the seller's
business before the date of the bulk sale.
(ii) Is not insolvent after the assumption.
(iii) Records and publishes notice of the assumption not later
than 30 days after the date of the bulk sale in the manner provided
by Section 6105.
(11) A sale to a new organization that is organized to take over
and continue the business of the seller and that has its principal
place of business in the United States if each of the following
conditions are satisfied:
(i) The buyer assumes in full the debts that were incurred in the
seller's business before the date of the bulk sale.
(ii) The seller receives nothing from the sale except an interest
in the new organization that is subordinate to the claims against the
organization arising from the assumption.
(iii) The buyer records and publishes notice of the assumption not
later than 30 days after the date of the bulk sale in the manner
provided in Section 6105.
(12) A sale of assets having either of the following:
(i) A value, net of liens and security interests, of less than ten
thousand dollars ($10,000). If a debt is secured by assets and other
property of the seller, the net value of the assets is determined by
subtracting from their value an amount equal to the product of the
debt multiplied by a fraction, the numerator of which is the value of
the assets on the date of the bulk sale and the denominator of which
is the value of all property securing the debt on the date of the
bulk sale.
(ii) A value of more than five million dollars ($5,000,000) on the
date of the bulk-sale agreement.
(13) A sale required by, and made pursuant to, statute.
(14) A transfer of personal property, if the personal property is
leased back to the transferor immediately following the transfer and
either there has been compliance with subdivision (h) of Section
3440.1 of the Civil Code or the transfer is exempt under subdivision
(k) of Section 3440.1 of the Civil Code.
(15) A transfer which is subject to and complies with Article 5
(commencing with Section 24070) of Chapter 6 of Division 9 of the
Business and Professions Code, if the transferee records and
publishes notice of the transfer at least 12 business days before the
transfer is to be consummated in the manner provided in Section 6105
and the notice contains the information set forth in paragraphs (1)
to (4) inclusive, of subdivision (a) of Section 6105.
(16) A transfer of goods in a warehouse where a warehouse receipt
has been issued therefor by a warehouseman (Section 7102) and a copy
of the receipt is kept at the principal place of business of the
warehouseman and at the warehouse in which the goods are stored.
(d) The notice under subparagraph (iv) of paragraph (9) of
subdivision (c) shall state each of the following:
(1) That a sale that may constitute a bulk sale has been or will
be made.
(2) The date or prospective date of the bulk sale.
(3) The individual, partnership, or corporate names and the
addresses of the seller and buyer.
(4) The address to which inquiries about the sale may be made, if
different from the seller's address.
(5) That the buyer has assumed or will assume in full the debts
owed to claimants of whom the buyer has knowledge on the date the
buyer receives the list of claimants from the seller or completes a
reasonable inquiry to discover the claimants.
(e) The notice under subparagraph (iii) of paragraph (10) of
subdivision (c) and subparagraph (iii) of paragraph (11) of
subdivision (c) shall state each of the following:
(1) That a sale that may constitute a bulk sale has been or will
be made.
(2) The date or prospective date of the bulk sale.
(3) The individual, partnership, or corporate names and the
addresses of the seller and buyer.
(4) The address to which inquiries about the sale may be made, if
different from the seller's address.
(5) That the buyer has assumed or will assume the debts that were
incurred in the seller's business before the date of the bulk sale.
(f) For purposes of paragraph (12) of subdivision (c), the value
of assets is presumed to be equal to the price the buyer agrees to
pay for the assets. However, in a sale by auction or a sale conducted
by a liquidator on the seller's behalf, the value of assets is
presumed to be the amount the auctioneer or liquidator reasonably
estimates the assets will bring at auction or upon liquidation.
6104. In a bulk sale as defined in subparagraph (ii) of paragraph
(3) of subdivision (a) of Section 6102 the buyer shall do each of the
following:
(a) Obtain from the seller a list of all business names and
addresses used by the seller within three years before the date the
list is sent or delivered to the buyer.
(b) Give notice of the bulk sale in accordance with Section 6105.
(c) Comply with Section 6106.2 if the bulk sale is within the
scope of that section.
6105. In order to comply with subdivision (b) of Section 6104 each
of the following shall be satisfied:
(a) The notice shall comply with each of the following:
(1) State that a bulk sale is about to be made.
(2) State the name and business address of the seller together
with any other business name and address listed by the seller
(subdivision (a) of Section 6104) and the name and business address
of the buyer.
(3) State the location and general description of the assets.
(4) State the place and the anticipated date of the bulk sale.
(5) State whether or not the bulk sale is subject to Section
6106.2 and, if so subject, the matters required by subdivision (f) of
Section 6106.2.
(b) At least 12 business days before the date of the bulk sale,
the notice shall be:
(1) Recorded in the office of the county recorder in the county or
counties in this state in which the tangible assets are located and,
if different, in the county in which the seller is located
(paragraph (2) of subdivision (a) of Section 6103).
(2) Published at least once in a newspaper of general circulation
published in the judicial district in this state in which the
tangible assets are located and in the judicial district, if
different, in which the seller is located (paragraph (2) of
subdivision (a) of Section 6103), if in either case there is one, and
if there is none, then in a newspaper of general circulation in the
county in which the judicial district is located.
(3) Delivered or sent by registered or certified mail to the
county tax collector in the county or counties in this state in which
the tangible assets are located. If delivered during the period from
January 1 to May 7, inclusive, the notice shall be accompanied by a
completed business property statement with respect to property
involved in the bulk sale pursuant to Section 441 of the Revenue and
Taxation Code.
If the tangible assets are located in more than one judicial
district in this state, the publication required in paragraph (2)
shall be in a newspaper of general circulation published in the
judicial district in this state in which a greater portion of the
tangible assets are located, on the date the notice is published,
than in any other judicial district in this state and, if different,
in the judicial district in which the seller is located (paragraph
(2) of subdivision (a) of Section 6103). As used in this subdivision,
"business day" means any day other than a Saturday, Sunday, or day
observed as a holiday by the state government.
6106.2. (a) This section applies only to a bulk sale where the
consideration is two million dollars ($2,000,000) or less and is
substantially all cash or an obligation of the buyer to pay cash in
the future to the seller or a combination thereof.
(b) Upon every bulk sale subject to this section except one made
by sale at auction or a sale or series of sales conducted by a
liquidator on the seller's behalf, it is the duty of the buyer or, if
the transaction is handled through an escrow, the escrow agent to
apply the cash consideration in accordance with this section so far
as necessary to pay those debts of the seller for which claims are
due and payable on or before the date of the bulk sale and are
received in writing on or prior to the date specified as the last
date to file claims with the person designated in the notice to
receive claims. This duty of the buyer or escrow agent runs to each
claimant timely filing the claim.
(c) If the seller disputes whether a claim is due and payable on
the date of the bulk sale or the amount of any claim, the buyer or
escrow agent shall withhold from distribution an amount equal to (1)
125 percent of the first seven thousand five hundred dollars ($7,500)
of the claim, and (2) an amount equal to that portion of the claim
in excess of the first seven thousand five hundred dollars ($7,500),
or the pro rata amount under subdivision (b) of Section 6106.4, if
applicable, and shall send a written notice to the claimant filing
the claim on or before two business days after the distribution that
the amount will be paid to the seller, or to the other claimants in
accordance with subdivision (b) of Section 6106.4, as the case may
be, unless attached within 25 days from the mailing of the notice.
Any portion of the amount withheld which is not attached by the
claimant within that time shall be paid by the buyer or escrow agent
to the seller, or to the other claimants in accordance with
subdivision (b) of Section 6106.4 if they have not been paid in full.
An attachment of any amount so withheld shall be limited in its
effect to the amount withheld for the attaching claimant and shall
give the attaching claimant no greater priority or rights with
respect to its claim than the claimant would have had if the claim
had not been disputed. For purposes of this subdivision, a claimant
may obtain the issuance of an attachment for a claim which is less
than five hundred dollars ($500) and which otherwise meets the
requirements of Section 483.010 of the Code of Civil Procedure or
which is a secured claim or lien of the type described in Section
483.010 of the Code of Civil Procedure. The remedy in this
subdivision shall be in addition to any other remedies the claimant
may have, including any right to attach the property intended to be
transferred or any other property.
(d) If the cash consideration payable is not sufficient to pay all
of the claims received in full, where no escrow has been established
pursuant to Section 6106.4, the buyer shall follow the procedures
specified in subdivisions (a) to (c), inclusive, of Section 6106.4,
and the immunity established by paragraph (3) of subdivision (a) of
that section shall apply to the buyer.
(e) The buyer or escrow agent shall, within 45 days after the
buyer takes legal title to any of the goods, either pay to the extent
of the cash consideration the claims filed and not disputed, or the
applicable portion thereof to the extent of the cash consideration
under subdivision (b) of Section 6106.4, or institute an action in
interpleader pursuant to subdivision (b) of Section 386 of the Code
of Civil Procedure and deposit the consideration with the clerk of
the court pursuant to subdivision (c) of that section. The action
shall be brought in the appropriate court in the county where the
seller had its principal place of business in this state. Sections
386.1 and 386.6 of the Code of Civil Procedure shall apply in the
action.
(f) The notice shall state, in addition to the matters required by
Section 6105, the name and address of the person with whom claims
may be filed and the last date for filing claims, which shall be the
business day before the date stated in the notice pursuant to
paragraph (4) of subdivision (a) of Section 6105. Claims shall be
deemed timely filed only if actually received by the person
designated in the notice to receive claims before the close of
business on the day specified in the notice as the last date for
filing claims.
(g) This section shall not be construed to release any security
interest or other lien on the property which is the subject of the
bulk sale except upon a voluntary release by the secured party or
lienholder.
6106.4. In any case where the notice of a bulk sale subject to
Section 6106.2 states that claims may be filed with an escrow agent,
the intended buyer shall deposit with the escrow agent the full
amount of the purchase price or consideration. If, at the time the
bulk sale is otherwise ready to be consummated, the amount of cash
deposited or agreed to be deposited at or prior to consummation in
the escrow is insufficient to pay in full all of the claims filed
with the escrow agent, the escrow agent shall do each of the
following:
(a) (1) Delay the distribution of the consideration and the
passing of legal title for a period of not less than 25 days nor more
than 30 days from the date the notice required in paragraph (2) is
mailed.
(2) Within five business days after the time the bulk sale would
otherwise have been consummated, send a written notice to each
claimant who has filed a claim stating the total consideration
deposited or agreed to be deposited in the escrow, the name of each
claimant who filed a claim against the escrow and the amount of each
claim, the amount proposed to be paid to each claimant, the new date
scheduled for the passing of legal title pursuant to paragraph (1)
and the date on or before which distribution will be made to
claimants which shall not be more than five days after the new date
specified for the passing of legal title.
(3) If no written objection to the distribution described in the
notice required by paragraph (2) is received by the escrow agent
prior to the new date specified in the notice for the passing of
legal title, the escrow agent shall not be liable to any person to
whom the notice required by paragraph (2) was sent for any good faith
error that may have been committed in allocating and distributing
the consideration as stated in the notice.
(b) Distribute the consideration in the following order of
priorities:
(1) All obligations owing to the United States, to the extent
given priority by federal law.
(2) Secured claims, including statutory and judicial liens, to the
extent of the consideration fairly attributable to the value of the
properties securing the claims and in accordance with the priorities
provided by law. A secured creditor shall participate in the
distribution pursuant to this subdivision only if a release of lien
is deposited by the secured creditor conditioned only upon receiving
an amount equal to the distribution.
(3) Escrow and professional charges and brokers' fees attributable
directly to the sale.
(4) Wage claims given priority by Section 1205 of the Code of
Civil Procedure.
(5) All other tax claims.
(6) All other unsecured claims pro rata, including any deficiency
claims of partially secured creditors.
(c) To the extent that an obligation of the buyer to pay cash in
the future is a part of the consideration and the cash consideration
is not sufficient to pay all claims filed in full, apply all
principal and interest received on the obligation to the payment of
claims in accordance with subdivision (b) until they are paid in full
before making any payment to the seller. In that case, the notice
sent pursuant to subdivision (a) shall state the amount, terms, and
due dates of the obligation and the portion of the claims expected to
be paid thereby.
No funds may be drawn from the escrow, prior to the actual closing
and completion of the escrow, for the payment, in whole or in part,
of any commission, fee, or other consideration as compensation for a
service that is contingent upon the performance of any act,
condition, or instruction set forth in the escrow.
6107. (a) Except as provided in subdivision (c), and subject to the
limitation in subdivision (d), a buyer who fails to comply with the
requirements of Section 6104 with respect to a claimant is liable to
the claimant for damages in the amount of the claim, reduced by any
amount that the claimant would not have realized if the buyer had
complied.
(b) In an action under subdivision (a), the claimant has the
burden of establishing the validity and amount of the claim, and the
buyer has the burden of establishing the amount that the claimant
would not have realized if the buyer had complied.
(c) A buyer who made a good faith and commercially reasonable
effort to comply with the requirements of Section 6104 or to exclude
the sale from the application of this division under subdivision (c)
of Section 6103 is not liable to creditors for failure to comply with
the requirements of Section 6104. The buyer has the burden of
establishing the good faith and commercial reasonableness of the
effort.
(d) In a single bulk sale the cumulative liability of the buyer
for failure to comply with the requirements of Section 6104 may not
exceed an amount equal to any of the following:
(1) If the assets consist only of inventory and equipment, twice
the net contract price, less the amount of any part of the net
contract price paid to or applied for the benefit of the seller or a
creditor except to the extent that the payment or application is
applied to a debt which is secured by the assets and which has been
taken into consideration in determining the net contract price.
(2) If the assets include property other than inventory and
equipment, twice the net value of the inventory and equipment less
the amount of the portion of any part of the net contract price paid
to or applied for the benefit of the seller or a creditor which is
allocable to the inventory and equipment except to the extent that
the payment or application is applied to a debt which is secured by
the assets and which has been taken into consideration in determining
the net contract price.
(e) For the purposes of paragraph (2) of subdivision (d), the "net
value" of an asset is the value of the asset less each of the
following:
(1) The amount of any proceeds of the sale of an asset, to the
extent the proceeds are applied in partial or total satisfaction of a
debt secured by the asset.
(2) The amount of any debt to the extent it is secured by a
security interest or lien that is enforceable against the asset
before and after it has been sold to a buyer. If a debt is secured by
an asset and other property of the seller, the amount of the debt
secured by a security interest or lien that is enforceable against
the asset is determined by multiplying the debt by a fraction, the
numerator of which is the value of the asset on the date of the bulk
sale and the denominator of which is the value of all property
securing the debt on the date of the bulk sale. The portion of a part
of the net contract price paid to or applied for the benefit of the
seller or a creditor that is "allocable to the inventory and
equipment" is the portion that bears the same ratio to that part of
the net contract price as the net value of the inventory and
equipment bears to the net value of all of the assets.
(f) A payment made by the buyer to a person to whom the buyer is,
or believes it is, liable under subdivision (a) reduces pro tanto the
buyer's cumulative liability under subdivision (d).
(g) No action may be brought under subdivision (a) by or on behalf
of a claimant whose claim is unliquidated or contingent.
(h) A buyer's failure to comply with the requirements of Section
6104 does not do any of the following:
(1) Impair the buyer's rights in or title to the assets.
(2) Render the sale ineffective, void, or voidable.
(3) Entitle a creditor to more than a single satisfaction of its
claim.
(4) Create liability other than as provided in this division.
(i) Payment of the buyer's liability under subdivision (a)
discharges pro tanto the seller's debt to the creditor.
(j) Unless otherwise agreed, a buyer has an immediate right of
reimbursement from the seller for any amount paid to a creditor in
partial or total satisfaction of the buyer's liability under
subdivision (a).
6108. (a) Sections 6104, 6105, and 6107 apply to a bulk sale by
auction and a bulk sale conducted by a liquidator on the seller's
behalf with the following modifications:
(1) "Buyer" refers to auctioneer or liquidator, as the case may
be.
(2) "Net contract price" refers to net proceeds of the auction or
net proceeds of the sale, as the case may be.
(3) The written notice required under subdivision (a) of Section
6105 shall be accompanied by a statement that the sale is to be by
auction or by liquidation, the name of the auctioneer or liquidator,
and the time and place of the auction or the time and place on or
after which the liquidator will begin to sell assets on the seller's
behalf.
(4) In a single bulk sale the cumulative liability of the
auctioneer or liquidator for failure to comply with the requirements
of this section may not exceed the amount of the net proceeds of the
sale allocable to inventory and equipment sold less the amount of the
portion of any part of the net proceeds paid to or applied for the
benefit of a creditor which is allocable to the inventory and
equipment.
(b) A payment made by the auctioneer or liquidator to a person to
whom the auctioneer or liquidator is, or believes it is, liable under
this section reduces pro tanto the auctioneer's or liquidator's
cumulative liability under paragraph (4) of subdivision (a).
(c) A person who buys at a bulk sale by auction or conducted by a
liquidator need not comply with the requirements of Section 6104 and
is not liable for the failure of an auctioneer or liquidator to
comply with the requirements of this section.
6110. (a) Except as provided in subdivision (b), an action under
this division against a buyer, auctioneer, or liquidator shall be
commenced within one year after the date of the bulk sale.
(b) If the buyer, auctioneer, or liquidator conceals the fact that
the sale has occurred, the limitation is tolled and an action under
this division may be commenced within the earlier of the following:
(1) One year after the person bringing the action discovers that
the sale has occurred.
(2) One year after the person bringing the action should have
discovered that the sale has occurred, but no later than two years
after the date of the bulk sale. Complete noncompliance with the
requirements of this division does not of itself constitute
concealment.
6111. (a) Except to the extent provided in subdivision (b), this
division shall apply to a bulk sale if the date of the bulk sale is
on or after January 1, 1991.
(b) If the date of a bulk sale is on or after January 1, 1991, and
the date of the bulk-sale agreement is before January 1, 1991, all
of the following shall apply:
(1) Paragraph (2) of subdivision (a) of Section 6103 and
subdivision (b) of Section 6103 shall not apply and this division
shall apply only if the goods are located in this state.
(2) Subdivision (a) of Section 6104 shall not apply.
(3) The buyer is required under subdivision (b) of Section 6104 to
give notice in accordance with Section 6107, as in effect on
December 31, 1990, rather than Section 6105.
(4) The buyer is required under subdivision (c) of Section 6104 to
comply with Section 6106, as in effect on December 31, 1990, if the
bulk sale is within the scope of that section, rather than Section
6106.2.
(5) Section 6105 shall not apply, and Section 6107, as in effect
on December 31, 1990, shall apply.
(6) Sections 6106.2 and 6106.4 shall not apply, and Sections 6106
and 6106.1, as in effect on December 31, 1990, shall apply.
(7) No action may be brought under this division, as in effect
either before or on or after January 1, 1991, if the provisions of
this division, as in effect on December 31, 1990, have been complied
with.
6101. This division shall be known and may be cited as Uniform
Commercial Code--Bulk Sales.
6102. (a) In this division, unless the context otherwise requires:
(1) "Assets" means the inventory and equipment that is the subject
of a bulk sale and any tangible and intangible personal property
used or held for use primarily in, or arising from, the seller's
business and sold in connection with that inventory and equipment,
but the term does not include any of the following:
(i) Fixtures (paragraph (41) of subdivision (a) of Section 9102)
other than readily removable factory and office machines.
(ii) The lessee's interest in a lease of real property.
(iii) Property to the extent it is generally exempt from creditor
process under nonbankruptcy law.
(2) "Auctioneer" means a person whom the seller engages to direct,
conduct, control, or be responsible for a sale by auction.
(3) "Bulk sale" means either of the following:
(i) In the case of a sale by auction or a sale or series of sales
conducted by a liquidator on the seller's behalf, a sale or series of
sales not in the ordinary course of the seller's business of more
than half of the seller's inventory and equipment, as measured by a
value on the date of the bulk-sale agreement.
(ii) In all other cases, a sale not in the ordinary course of the
seller's business of more than half the seller's inventory and
equipment, as measured by value on the date of the bulk-sale
agreement.
(4) "Claim" means a right to payment from the seller, whether or
not the right is reduced to judgment, liquidated, fixed, matured,
disputed, secured, legal, or equitable. The term includes costs of
collection and attorney's fees only to the extent that the laws of
this state permit the holder of the claim to recover them in an
action against the obligor.
(5) "Claimant" means a person holding a claim incurred in the
seller's business other than any of the following:
(i) An unsecured and unmatured claim for employment compensation
and benefits, including commissions and vacation, severance, and
sick-leave pay.
(ii) A claim for injury to an individual or to property, or for
breach of warranty, unless all of the following are satisfied:
(A) A right of action for the claim has accrued.
(B) The claim has been asserted against the seller.
(C) The seller knows the identity of the person asserting the
claim and the basis upon which the person has asserted it.
(iii) A claim for taxes owing to a governmental unit, if both of
the following are satisfied:
(A) A statute governing the enforcement of the claim permits or
requires notice of the bulk sale to be given to the governmental unit
in a manner other than by compliance with the requirements of this
division.
(B) Notice is given in accordance with the statute.
(6) "Creditor" means a claimant or other person holding a claim.
(7) (i) "Date of the bulk sale" means either of the following:
(A) If the sale is by auction or is conducted by a liquidator on
the seller's behalf, the date on which more than 10 percent of the
net proceeds is paid to or for the benefit of the seller.
(B) In all other cases, the later of the date on which either of
the following occurs:
(I) More than 10 percent of the net contract price is paid to or
for the benefit of the seller.
(II) More than 10 percent of the assets, as measured by value, are
transferred to the buyer.
(ii) For purposes of this subdivision the following shall apply:
(A) Delivery of a negotiable instrument (subdivision (1) of
Section 3104) to or for the benefit of the seller in exchange for
assets constitutes payment of the contract price pro tanto.
(B) To the extent that the contract price is deposited in an
escrow, the contract price is paid to or for the benefit of the
seller when the seller acquires the unconditional right to receive
the deposit or when the deposit is delivered to the seller or for the
benefit of the seller, whichever is earlier.
(C) An asset is transferred when a person holding an unsecured
claim can no longer obtain through judicial proceedings rights to the
asset that are superior to those of the buyer arising as a result of
the bulk sale. A person holding an unsecured claim can obtain those
superior rights to a tangible asset at least until the buyer has an
unconditional right, under the bulk-sale agreement, to possess the
asset, and a person holding an unsecured claim can obtain those
superior rights to an intangible asset at least until the buyer has
an unconditional right, under the bulk-sale agreement, to use the
asset.
(8) "Date of the bulk-sale agreement" means either of the
following:
(i) In the case of a sale by auction or conducted by a liquidator
(subparagraph (i) of paragraph (3)), the date on which the seller
engages the auctioneer or liquidator.
(ii) In all other cases, the date on which a bulk-sale agreement
becomes enforceable between the buyer and the seller.
(9) "Debt" means liability on a claim.
(10) "Liquidator" means a person who is regularly engaged in the
business of disposing of assets for businesses contemplating
liquidation or dissolution.
(11) "Net contract price" means the new consideration the buyer is
obligated to pay for the assets less each of the following:
(i) The amount of any proceeds of the sale of an asset, to the
extent the proceeds are applied in partial or total satisfaction of a
debt secured by the asset.
(ii) The amount of any debt to the extent it is secured by a
security interest or lien that is enforceable against the asset
before and after it has been sold to a buyer. If a debt is secured by
an asset and other property of the seller, the amount of the debt
secured by a security interest or lien that is enforceable against
the asset is determined by multiplying the debt by a fraction, the
numerator of which is the value of the new consideration for the
asset on the date of the bulk sale and the denominator of which is
the value of all property securing the debt on the date of the bulk
sale.
(12) "Net proceeds" means the new consideration received for
assets sold at a sale by auction or a sale conducted by a liquidator
on the seller's behalf less each of the following:
(i) Commissions and reasonable expenses of the sale.
(ii) The amount of any proceeds of the sale of an asset, to the
extent the proceeds are applied in partial or total satisfaction of a
debt secured by the asset.
(iii) The amount of any debt to the extent it is secured by a
security interest or lien that is enforceable against the asset
before and after it has been sold to a buyer. If a debt is secured by
an asset and other property of the seller, the amount of the debt
secured by a security interest or lien that is enforceable against
the asset is determined by multiplying the debt by a fraction, the
numerator of which is the value of the new consideration for the
asset on the date of the bulk sale and the denominator of which is
the value of all property securing the debt on the date of the bulk
sale.
(13) A sale is "in the ordinary course of the seller's business"
if the sale comports with usual or customary practices in the kind of
business in which the seller is engaged or with the seller's own
usual or customary practices.
(14) "United States" includes its territories and possessions and
the Commonwealth of Puerto Rico.
(15) "Value" means fair market value.
(16) "Verified" means signed and sworn to or affirmed.
(b) The following definitions in other divisions apply to this
division:
(1) "Buyer." Paragraph (a) of subdivision (1) of Section 2103.
(2) "Equipment." Paragraph (33) of subdivision (a) of Section
9102.
(3) "Inventory." Paragraph (48) of subdivision (a) of Section
9102.
(4) "Sale." Subdivision (1) of Section 2106.
(5) "Seller." Paragraph (d) of subdivision (1) of Section 2103.
(c) In addition, Division 1 (commencing with Section 1101)
contains general definitions and principles of construction and
interpretation applicable throughout this division.
6103. (a) Except as otherwise provided in subdivision (c), this
division applies to a bulk sale if both of the following are
satisfied:
(1) The seller's principal business is the sale of inventory from
stock, including those who manufacture what they sell, or that of a
restaurant owner.
(2) On the date of the bulk-sale agreement the seller is located
in this state or, if the seller is located in a jurisdiction that is
not a part of the United States, the seller's major executive office
in the United States is in this state.
(b) A seller is deemed to be located at its place of business. If
a seller has more than one place of business, the seller is deemed
located at its chief executive office.
(c) This division does not apply to any of the following:
(1) A transfer made to secure payment or performance of an
obligation.
(2) A transfer of collateral to a secured party pursuant to
Section 9609.
(3) A disposition of collateral pursuant to Section 9610.
(4) Retention of collateral pursuant to Section 9620.
(5) A sale of an asset encumbered by a security interest or lien
if (i) all the proceeds of the sale are applied in partial or total
satisfaction of the debt secured by the security interest or lien or
(ii) the security interest or lien is enforceable against the asset
after it has been sold to the buyer and the net contract price is
zero.
(6) A general assignment for the benefit of creditors or to a
subsequent transfer by the assignee.
(7) A sale by an executor, administrator, receiver, trustee in
bankruptcy, debtor in possession, or any public officer under
judicial process.
(8) A sale made in the course of judicial or administrative
proceedings for the dissolution or reorganization of an organization.
(9) A sale to a buyer whose principal place of business is in the
United States and who satisfies each of the following:
(i) Not earlier than 21 days before the date of the bulk sale, (A)
obtains from the seller a verified and dated list of claimants of
whom the seller has notice three days before the seller sends or
delivers the list to the buyer or (B) conducts a reasonable inquiry
to discover the claimants.
(ii) Assumes in full the debts owed to claimants of whom the buyer
has knowledge on the date the buyer receives the list of claimants
from the seller or on the date the buyer completes the reasonable
inquiry, as the case may be.
(iii) Is not insolvent after the assumption.
(iv) Records and publishes notice of the assumption not later than
30 days after the date of the bulk sale in the manner provided in
Section 6105.
(10) A sale to a buyer whose principal place of business is in the
United States and who satisfies each of the following:
(i) Assumes in full the debts that were incurred in the seller's
business before the date of the bulk sale.
(ii) Is not insolvent after the assumption.
(iii) Records and publishes notice of the assumption not later
than 30 days after the date of the bulk sale in the manner provided
by Section 6105.
(11) A sale to a new organization that is organized to take over
and continue the business of the seller and that has its principal
place of business in the United States if each of the following
conditions are satisfied:
(i) The buyer assumes in full the debts that were incurred in the
seller's business before the date of the bulk sale.
(ii) The seller receives nothing from the sale except an interest
in the new organization that is subordinate to the claims against the
organization arising from the assumption.
(iii) The buyer records and publishes notice of the assumption not
later than 30 days after the date of the bulk sale in the manner
provided in Section 6105.
(12) A sale of assets having either of the following:
(i) A value, net of liens and security interests, of less than ten
thousand dollars ($10,000). If a debt is secured by assets and other
property of the seller, the net value of the assets is determined by
subtracting from their value an amount equal to the product of the
debt multiplied by a fraction, the numerator of which is the value of
the assets on the date of the bulk sale and the denominator of which
is the value of all property securing the debt on the date of the
bulk sale.
(ii) A value of more than five million dollars ($5,000,000) on the
date of the bulk-sale agreement.
(13) A sale required by, and made pursuant to, statute.
(14) A transfer of personal property, if the personal property is
leased back to the transferor immediately following the transfer and
either there has been compliance with subdivision (h) of Section
3440.1 of the Civil Code or the transfer is exempt under subdivision
(k) of Section 3440.1 of the Civil Code.
(15) A transfer which is subject to and complies with Article 5
(commencing with Section 24070) of Chapter 6 of Division 9 of the
Business and Professions Code, if the transferee records and
publishes notice of the transfer at least 12 business days before the
transfer is to be consummated in the manner provided in Section 6105
and the notice contains the information set forth in paragraphs (1)
to (4) inclusive, of subdivision (a) of Section 6105.
(16) A transfer of goods in a warehouse where a warehouse receipt
has been issued therefor by a warehouseman (Section 7102) and a copy
of the receipt is kept at the principal place of business of the
warehouseman and at the warehouse in which the goods are stored.
(d) The notice under subparagraph (iv) of paragraph (9) of
subdivision (c) shall state each of the following:
(1) That a sale that may constitute a bulk sale has been or will
be made.
(2) The date or prospective date of the bulk sale.
(3) The individual, partnership, or corporate names and the
addresses of the seller and buyer.
(4) The address to which inquiries about the sale may be made, if
different from the seller's address.
(5) That the buyer has assumed or will assume in full the debts
owed to claimants of whom the buyer has knowledge on the date the
buyer receives the list of claimants from the seller or completes a
reasonable inquiry to discover the claimants.
(e) The notice under subparagraph (iii) of paragraph (10) of
subdivision (c) and subparagraph (iii) of paragraph (11) of
subdivision (c) shall state each of the following:
(1) That a sale that may constitute a bulk sale has been or will
be made.
(2) The date or prospective date of the bulk sale.
(3) The individual, partnership, or corporate names and the
addresses of the seller and buyer.
(4) The address to which inquiries about the sale may be made, if
different from the seller's address.
(5) That the buyer has assumed or will assume the debts that were
incurred in the seller's business before the date of the bulk sale.
(f) For purposes of paragraph (12) of subdivision (c), the value
of assets is presumed to be equal to the price the buyer agrees to
pay for the assets. However, in a sale by auction or a sale conducted
by a liquidator on the seller's behalf, the value of assets is
presumed to be the amount the auctioneer or liquidator reasonably
estimates the assets will bring at auction or upon liquidation.
6104. In a bulk sale as defined in subparagraph (ii) of paragraph
(3) of subdivision (a) of Section 6102 the buyer shall do each of the
following:
(a) Obtain from the seller a list of all business names and
addresses used by the seller within three years before the date the
list is sent or delivered to the buyer.
(b) Give notice of the bulk sale in accordance with Section 6105.
(c) Comply with Section 6106.2 if the bulk sale is within the
scope of that section.
6105. In order to comply with subdivision (b) of Section 6104 each
of the following shall be satisfied:
(a) The notice shall comply with each of the following:
(1) State that a bulk sale is about to be made.
(2) State the name and business address of the seller together
with any other business name and address listed by the seller
(subdivision (a) of Section 6104) and the name and business address
of the buyer.
(3) State the location and general description of the assets.
(4) State the place and the anticipated date of the bulk sale.
(5) State whether or not the bulk sale is subject to Section
6106.2 and, if so subject, the matters required by subdivision (f) of
Section 6106.2.
(b) At least 12 business days before the date of the bulk sale,
the notice shall be:
(1) Recorded in the office of the county recorder in the county or
counties in this state in which the tangible assets are located and,
if different, in the county in which the seller is located
(paragraph (2) of subdivision (a) of Section 6103).
(2) Published at least once in a newspaper of general circulation
published in the judicial district in this state in which the
tangible assets are located and in the judicial district, if
different, in which the seller is located (paragraph (2) of
subdivision (a) of Section 6103), if in either case there is one, and
if there is none, then in a newspaper of general circulation in the
county in which the judicial district is located.
(3) Delivered or sent by registered or certified mail to the
county tax collector in the county or counties in this state in which
the tangible assets are located. If delivered during the period from
January 1 to May 7, inclusive, the notice shall be accompanied by a
completed business property statement with respect to property
involved in the bulk sale pursuant to Section 441 of the Revenue and
Taxation Code.
If the tangible assets are located in more than one judicial
district in this state, the publication required in paragraph (2)
shall be in a newspaper of general circulation published in the
judicial district in this state in which a greater portion of the
tangible assets are located, on the date the notice is published,
than in any other judicial district in this state and, if different,
in the judicial district in which the seller is located (paragraph
(2) of subdivision (a) of Section 6103). As used in this subdivision,
"business day" means any day other than a Saturday, Sunday, or day
observed as a holiday by the state government.
6106.2. (a) This section applies only to a bulk sale where the
consideration is two million dollars ($2,000,000) or less and is
substantially all cash or an obligation of the buyer to pay cash in
the future to the seller or a combination thereof.
(b) Upon every bulk sale subject to this section except one made
by sale at auction or a sale or series of sales conducted by a
liquidator on the seller's behalf, it is the duty of the buyer or, if
the transaction is handled through an escrow, the escrow agent to
apply the cash consideration in accordance with this section so far
as necessary to pay those debts of the seller for which claims are
due and payable on or before the date of the bulk sale and are
received in writing on or prior to the date specified as the last
date to file claims with the person designated in the notice to
receive claims. This duty of the buyer or escrow agent runs to each
claimant timely filing the claim.
(c) If the seller disputes whether a claim is due and payable on
the date of the bulk sale or the amount of any claim, the buyer or
escrow agent shall withhold from distribution an amount equal to (1)
125 percent of the first seven thousand five hundred dollars ($7,500)
of the claim, and (2) an amount equal to that portion of the claim
in excess of the first seven thousand five hundred dollars ($7,500),
or the pro rata amount under subdivision (b) of Section 6106.4, if
applicable, and shall send a written notice to the claimant filing
the claim on or before two business days after the distribution that
the amount will be paid to the seller, or to the other claimants in
accordance with subdivision (b) of Section 6106.4, as the case may
be, unless attached within 25 days from the mailing of the notice.
Any portion of the amount withheld which is not attached by the
claimant within that time shall be paid by the buyer or escrow agent
to the seller, or to the other claimants in accordance with
subdivision (b) of Section 6106.4 if they have not been paid in full.
An attachment of any amount so withheld shall be limited in its
effect to the amount withheld for the attaching claimant and shall
give the attaching claimant no greater priority or rights with
respect to its claim than the claimant would have had if the claim
had not been disputed. For purposes of this subdivision, a claimant
may obtain the issuance of an attachment for a claim which is less
than five hundred dollars ($500) and which otherwise meets the
requirements of Section 483.010 of the Code of Civil Procedure or
which is a secured claim or lien of the type described in Section
483.010 of the Code of Civil Procedure. The remedy in this
subdivision shall be in addition to any other remedies the claimant
may have, including any right to attach the property intended to be
transferred or any other property.
(d) If the cash consideration payable is not sufficient to pay all
of the claims received in full, where no escrow has been established
pursuant to Section 6106.4, the buyer shall follow the procedures
specified in subdivisions (a) to (c), inclusive, of Section 6106.4,
and the immunity established by paragraph (3) of subdivision (a) of
that section shall apply to the buyer.
(e) The buyer or escrow agent shall, within 45 days after the
buyer takes legal title to any of the goods, either pay to the extent
of the cash consideration the claims filed and not disputed, or the
applicable portion thereof to the extent of the cash consideration
under subdivision (b) of Section 6106.4, or institute an action in
interpleader pursuant to subdivision (b) of Section 386 of the Code
of Civil Procedure and deposit the consideration with the clerk of
the court pursuant to subdivision (c) of that section. The action
shall be brought in the appropriate court in the county where the
seller had its principal place of business in this state. Sections
386.1 and 386.6 of the Code of Civil Procedure shall apply in the
action.
(f) The notice shall state, in addition to the matters required by
Section 6105, the name and address of the person with whom claims
may be filed and the last date for filing claims, which shall be the
business day before the date stated in the notice pursuant to
paragraph (4) of subdivision (a) of Section 6105. Claims shall be
deemed timely filed only if actually received by the person
designated in the notice to receive claims before the close of
business on the day specified in the notice as the last date for
filing claims.
(g) This section shall not be construed to release any security
interest or other lien on the property which is the subject of the
bulk sale except upon a voluntary release by the secured party or
lienholder.
6106.4. In any case where the notice of a bulk sale subject to
Section 6106.2 states that claims may be filed with an escrow agent,
the intended buyer shall deposit with the escrow agent the full
amount of the purchase price or consideration. If, at the time the
bulk sale is otherwise ready to be consummated, the amount of cash
deposited or agreed to be deposited at or prior to consummation in
the escrow is insufficient to pay in full all of the claims filed
with the escrow agent, the escrow agent shall do each of the
following:
(a) (1) Delay the distribution of the consideration and the
passing of legal title for a period of not less than 25 days nor more
than 30 days from the date the notice required in paragraph (2) is
mailed.
(2) Within five business days after the time the bulk sale would
otherwise have been consummated, send a written notice to each
claimant who has filed a claim stating the total consideration
deposited or agreed to be deposited in the escrow, the name of each
claimant who filed a claim against the escrow and the amount of each
claim, the amount proposed to be paid to each claimant, the new date
scheduled for the passing of legal title pursuant to paragraph (1)
and the date on or before which distribution will be made to
claimants which shall not be more than five days after the new date
specified for the passing of legal title.
(3) If no written objection to the distribution described in the
notice required by paragraph (2) is received by the escrow agent
prior to the new date specified in the notice for the passing of
legal title, the escrow agent shall not be liable to any person to
whom the notice required by paragraph (2) was sent for any good faith
error that may have been committed in allocating and distributing
the consideration as stated in the notice.
(b) Distribute the consideration in the following order of
priorities:
(1) All obligations owing to the United States, to the extent
given priority by federal law.
(2) Secured claims, including statutory and judicial liens, to the
extent of the consideration fairly attributable to the value of the
properties securing the claims and in accordance with the priorities
provided by law. A secured creditor shall participate in the
distribution pursuant to this subdivision only if a release of lien
is deposited by the secured creditor conditioned only upon receiving
an amount equal to the distribution.
(3) Escrow and professional charges and brokers' fees attributable
directly to the sale.
(4) Wage claims given priority by Section 1205 of the Code of
Civil Procedure.
(5) All other tax claims.
(6) All other unsecured claims pro rata, including any deficiency
claims of partially secured creditors.
(c) To the extent that an obligation of the buyer to pay cash in
the future is a part of the consideration and the cash consideration
is not sufficient to pay all claims filed in full, apply all
principal and interest received on the obligation to the payment of
claims in accordance with subdivision (b) until they are paid in full
before making any payment to the seller. In that case, the notice
sent pursuant to subdivision (a) shall state the amount, terms, and
due dates of the obligation and the portion of the claims expected to
be paid thereby.
No funds may be drawn from the escrow, prior to the actual closing
and completion of the escrow, for the payment, in whole or in part,
of any commission, fee, or other consideration as compensation for a
service that is contingent upon the performance of any act,
condition, or instruction set forth in the escrow.
6107. (a) Except as provided in subdivision (c), and subject to the
limitation in subdivision (d), a buyer who fails to comply with the
requirements of Section 6104 with respect to a claimant is liable to
the claimant for damages in the amount of the claim, reduced by any
amount that the claimant would not have realized if the buyer had
complied.
(b) In an action under subdivision (a), the claimant has the
burden of establishing the validity and amount of the claim, and the
buyer has the burden of establishing the amount that the claimant
would not have realized if the buyer had complied.
(c) A buyer who made a good faith and commercially reasonable
effort to comply with the requirements of Section 6104 or to exclude
the sale from the application of this division under subdivision (c)
of Section 6103 is not liable to creditors for failure to comply with
the requirements of Section 6104. The buyer has the burden of
establishing the good faith and commercial reasonableness of the
effort.
(d) In a single bulk sale the cumulative liability of the buyer
for failure to comply with the requirements of Section 6104 may not
exceed an amount equal to any of the following:
(1) If the assets consist only of inventory and equipment, twice
the net contract price, less the amount of any part of the net
contract price paid to or applied for the benefit of the seller or a
creditor except to the extent that the payment or application is
applied to a debt which is secured by the assets and which has been
taken into consideration in determining the net contract price.
(2) If the assets include property other than inventory and
equipment, twice the net value of the inventory and equipment less
the amount of the portion of any part of the net contract price paid
to or applied for the benefit of the seller or a creditor which is
allocable to the inventory and equipment except to the extent that
the payment or application is applied to a debt which is secured by
the assets and which has been taken into consideration in determining
the net contract price.
(e) For the purposes of paragraph (2) of subdivision (d), the "net
value" of an asset is the value of the asset less each of the
following:
(1) The amount of any proceeds of the sale of an asset, to the
extent the proceeds are applied in partial or total satisfaction of a
debt secured by the asset.
(2) The amount of any debt to the extent it is secured by a
security interest or lien that is enforceable against the asset
before and after it has been sold to a buyer. If a debt is secured by
an asset and other property of the seller, the amount of the debt
secured by a security interest or lien that is enforceable against
the asset is determined by multiplying the debt by a fraction, the
numerator of which is the value of the asset on the date of the bulk
sale and the denominator of which is the value of all property
securing the debt on the date of the bulk sale. The portion of a part
of the net contract price paid to or applied for the benefit of the
seller or a creditor that is "allocable to the inventory and
equipment" is the portion that bears the same ratio to that part of
the net contract price as the net value of the inventory and
equipment bears to the net value of all of the assets.
(f) A payment made by the buyer to a person to whom the buyer is,
or believes it is, liable under subdivision (a) reduces pro tanto the
buyer's cumulative liability under subdivision (d).
(g) No action may be brought under subdivision (a) by or on behalf
of a claimant whose claim is unliquidated or contingent.
(h) A buyer's failure to comply with the requirements of Section
6104 does not do any of the following:
(1) Impair the buyer's rights in or title to the assets.
(2) Render the sale ineffective, void, or voidable.
(3) Entitle a creditor to more than a single satisfaction of its
claim.
(4) Create liability other than as provided in this division.
(i) Payment of the buyer's liability under subdivision (a)
discharges pro tanto the seller's debt to the creditor.
(j) Unless otherwise agreed, a buyer has an immediate right of
reimbursement from the seller for any amount paid to a creditor in
partial or total satisfaction of the buyer's liability under
subdivision (a).
6108. (a) Sections 6104, 6105, and 6107 apply to a bulk sale by
auction and a bulk sale conducted by a liquidator on the seller's
behalf with the following modifications:
(1) "Buyer" refers to auctioneer or liquidator, as the case may
be.
(2) "Net contract price" refers to net proceeds of the auction or
net proceeds of the sale, as the case may be.
(3) The written notice required under subdivision (a) of Section
6105 shall be accompanied by a statement that the sale is to be by
auction or by liquidation, the name of the auctioneer or liquidator,
and the time and place of the auction or the time and place on or
after which the liquidator will begin to sell assets on the seller's
behalf.
(4) In a single bulk sale the cumulative liability of the
auctioneer or liquidator for failure to comply with the requirements
of this section may not exceed the amount of the net proceeds of the
sale allocable to inventory and equipment sold less the amount of the
portion of any part of the net proceeds paid to or applied for the
benefit of a creditor which is allocable to the inventory and
equipment.
(b) A payment made by the auctioneer or liquidator to a person to
whom the auctioneer or liquidator is, or believes it is, liable under
this section reduces pro tanto the auctioneer's or liquidator's
cumulative liability under paragraph (4) of subdivision (a).
(c) A person who buys at a bulk sale by auction or conducted by a
liquidator need not comply with the requirements of Section 6104 and
is not liable for the failure of an auctioneer or liquidator to
comply with the requirements of this section.
6110. (a) Except as provided in subdivision (b), an action under
this division against a buyer, auctioneer, or liquidator shall be
commenced within one year after the date of the bulk sale.
(b) If the buyer, auctioneer, or liquidator conceals the fact that
the sale has occurred, the limitation is tolled and an action under
this division may be commenced within the earlier of the following:
(1) One year after the person bringing the action discovers that
the sale has occurred.
(2) One year after the person bringing the action should have
discovered that the sale has occurred, but no later than two years
after the date of the bulk sale. Complete noncompliance with the
requirements of this division does not of itself constitute
concealment.
6111. (a) Except to the extent provided in subdivision (b), this
division shall apply to a bulk sale if the date of the bulk sale is
on or after January 1, 1991.
(b) If the date of a bulk sale is on or after January 1, 1991, and
the date of the bulk-sale agreement is before January 1, 1991, all
of the following shall apply:
(1) Paragraph (2) of subdivision (a) of Section 6103 and
subdivision (b) of Section 6103 shall not apply and this division
shall apply only if the goods are located in this state.
(2) Subdivision (a) of Section 6104 shall not apply.
(3) The buyer is required under subdivision (b) of Section 6104 to
give notice in accordance with Section 6107, as in effect on
December 31, 1990, rather than Section 6105.
(4) The buyer is required under subdivision (c) of Section 6104 to
comply with Section 6106, as in effect on December 31, 1990, if the
bulk sale is within the scope of that section, rather than Section
6106.2.
(5) Section 6105 shall not apply, and Section 6107, as in effect
on December 31, 1990, shall apply.
(6) Sections 6106.2 and 6106.4 shall not apply, and Sections 6106
and 6106.1, as in effect on December 31, 1990, shall apply.
(7) No action may be brought under this division, as in effect
either before or on or after January 1, 1991, if the provisions of
this division, as in effect on December 31, 1990, have been complied
with.
6101. This division shall be known and may be cited as Uniform
Commercial Code--Bulk Sales.
6102. (a) In this division, unless the context otherwise requires:
(1) "Assets" means the inventory and equipment that is the subject
of a bulk sale and any tangible and intangible personal property
used or held for use primarily in, or arising from, the seller's
business and sold in connection with that inventory and equipment,
but the term does not include any of the following:
(i) Fixtures (paragraph (41) of subdivision (a) of Section 9102)
other than readily removable factory and office machines.
(ii) The lessee's interest in a lease of real property.
(iii) Property to the extent it is generally exempt from creditor
process under nonbankruptcy law.
(2) "Auctioneer" means a person whom the seller engages to direct,
conduct, control, or be responsible for a sale by auction.
(3) "Bulk sale" means either of the following:
(i) In the case of a sale by auction or a sale or series of sales
conducted by a liquidator on the seller's behalf, a sale or series of
sales not in the ordinary course of the seller's business of more
than half of the seller's inventory and equipment, as measured by a
value on the date of the bulk-sale agreement.
(ii) In all other cases, a sale not in the ordinary course of the
seller's business of more than half the seller's inventory and
equipment, as measured by value on the date of the bulk-sale
agreement.
(4) "Claim" means a right to payment from the seller, whether or
not the right is reduced to judgment, liquidated, fixed, matured,
disputed, secured, legal, or equitable. The term includes costs of
collection and attorney's fees only to the extent that the laws of
this state permit the holder of the claim to recover them in an
action against the obligor.
(5) "Claimant" means a person holding a claim incurred in the
seller's business other than any of the following:
(i) An unsecured and unmatured claim for employment compensation
and benefits, including commissions and vacation, severance, and
sick-leave pay.
(ii) A claim for injury to an individual or to property, or for
breach of warranty, unless all of the following are satisfied:
(A) A right of action for the claim has accrued.
(B) The claim has been asserted against the seller.
(C) The seller knows the identity of the person asserting the
claim and the basis upon which the person has asserted it.
(iii) A claim for taxes owing to a governmental unit, if both of
the following are satisfied:
(A) A statute governing the enforcement of the claim permits or
requires notice of the bulk sale to be given to the governmental unit
in a manner other than by compliance with the requirements of this
division.
(B) Notice is given in accordance with the statute.
(6) "Creditor" means a claimant or other person holding a claim.
(7) (i) "Date of the bulk sale" means either of the following:
(A) If the sale is by auction or is conducted by a liquidator on
the seller's behalf, the date on which more than 10 percent of the
net proceeds is paid to or for the benefit of the seller.
(B) In all other cases, the later of the date on which either of
the following occurs:
(I) More than 10 percent of the net contract price is paid to or
for the benefit of the seller.
(II) More than 10 percent of the assets, as measured by value, are
transferred to the buyer.
(ii) For purposes of this subdivision the following shall apply:
(A) Delivery of a negotiable instrument (subdivision (1) of
Section 3104) to or for the benefit of the seller in exchange for
assets constitutes payment of the contract price pro tanto.
(B) To the extent that the contract price is deposited in an
escrow, the contract price is paid to or for the benefit of the
seller when the seller acquires the unconditional right to receive
the deposit or when the deposit is delivered to the seller or for the
benefit of the seller, whichever is earlier.
(C) An asset is transferred when a person holding an unsecured
claim can no longer obtain through judicial proceedings rights to the
asset that are superior to those of the buyer arising as a result of
the bulk sale. A person holding an unsecured claim can obtain those
superior rights to a tangible asset at least until the buyer has an
unconditional right, under the bulk-sale agreement, to possess the
asset, and a person holding an unsecured claim can obtain those
superior rights to an intangible asset at least until the buyer has
an unconditional right, under the bulk-sale agreement, to use the
asset.
(8) "Date of the bulk-sale agreement" means either of the
following:
(i) In the case of a sale by auction or conducted by a liquidator
(subparagraph (i) of paragraph (3)), the date on which the seller
engages the auctioneer or liquidator.
(ii) In all other cases, the date on which a bulk-sale agreement
becomes enforceable between the buyer and the seller.
(9) "Debt" means liability on a claim.
(10) "Liquidator" means a person who is regularly engaged in the
business of disposing of assets for businesses contemplating
liquidation or dissolution.
(11) "Net contract price" means the new consideration the buyer is
obligated to pay for the assets less each of the following:
(i) The amount of any proceeds of the sale of an asset, to the
extent the proceeds are applied in partial or total satisfaction of a
debt secured by the asset.
(ii) The amount of any debt to the extent it is secured by a
security interest or lien that is enforceable against the asset
before and after it has been sold to a buyer. If a debt is secured by
an asset and other property of the seller, the amount of the debt
secured by a security interest or lien that is enforceable against
the asset is determined by multiplying the debt by a fraction, the
numerator of which is the value of the new consideration for the
asset on the date of the bulk sale and the denominator of which is
the value of all property securing the debt on the date of the bulk
sale.
(12) "Net proceeds" means the new consideration received for
assets sold at a sale by auction or a sale conducted by a liquidator
on the seller's behalf less each of the following:
(i) Commissions and reasonable expenses of the sale.
(ii) The amount of any proceeds of the sale of an asset, to the
extent the proceeds are applied in partial or total satisfaction of a
debt secured by the asset.
(iii) The amount of any debt to the extent it is secured by a
security interest or lien that is enforceable against the asset
before and after it has been sold to a buyer. If a debt is secured by
an asset and other property of the seller, the amount of the debt
secured by a security interest or lien that is enforceable against
the asset is determined by multiplying the debt by a fraction, the
numerator of which is the value of the new consideration for the
asset on the date of the bulk sale and the denominator of which is
the value of all property securing the debt on the date of the bulk
sale.
(13) A sale is "in the ordinary course of the seller's business"
if the sale comports with usual or customary practices in the kind of
business in which the seller is engaged or with the seller's own
usual or customary practices.
(14) "United States" includes its territories and possessions and
the Commonwealth of Puerto Rico.
(15) "Value" means fair market value.
(16) "Verified" means signed and sworn to or affirmed.
(b) The following definitions in other divisions apply to this
division:
(1) "Buyer." Paragraph (a) of subdivision (1) of Section 2103.
(2) "Equipment." Paragraph (33) of subdivision (a) of Section
9102.
(3) "Inventory." Paragraph (48) of subdivision (a) of Section
9102.
(4) "Sale." Subdivision (1) of Section 2106.
(5) "Seller." Paragraph (d) of subdivision (1) of Section 2103.
(c) In addition, Division 1 (commencing with Section 1101)
contains general definitions and principles of construction and
interpretation applicable throughout this division.
6103. (a) Except as otherwise provided in subdivision (c), this
division applies to a bulk sale if both of the following are
satisfied:
(1) The seller's principal business is the sale of inventory from
stock, including those who manufacture what they sell, or that of a
restaurant owner.
(2) On the date of the bulk-sale agreement the seller is located
in this state or, if the seller is located in a jurisdiction that is
not a part of the United States, the seller's major executive office
in the United States is in this state.
(b) A seller is deemed to be located at its place of business. If
a seller has more than one place of business, the seller is deemed
located at its chief executive office.
(c) This division does not apply to any of the following:
(1) A transfer made to secure payment or performance of an
obligation.
(2) A transfer of collateral to a secured party pursuant to
Section 9609.
(3) A disposition of collateral pursuant to Section 9610.
(4) Retention of collateral pursuant to Section 9620.
(5) A sale of an asset encumbered by a security interest or lien
if (i) all the proceeds of the sale are applied in partial or total
satisfaction of the debt secured by the security interest or lien or
(ii) the security interest or lien is enforceable against the asset
after it has been sold to the buyer and the net contract price is
zero.
(6) A general assignment for the benefit of creditors or to a
subsequent transfer by the assignee.
(7) A sale by an executor, administrator, receiver, trustee in
bankruptcy, debtor in possession, or any public officer under
judicial process.
(8) A sale made in the course of judicial or administrative
proceedings for the dissolution or reorganization of an organization.
(9) A sale to a buyer whose principal place of business is in the
United States and who satisfies each of the following:
(i) Not earlier than 21 days before the date of the bulk sale, (A)
obtains from the seller a verified and dated list of claimants of
whom the seller has notice three days before the seller sends or
delivers the list to the buyer or (B) conducts a reasonable inquiry
to discover the claimants.
(ii) Assumes in full the debts owed to claimants of whom the buyer
has knowledge on the date the buyer receives the list of claimants
from the seller or on the date the buyer completes the reasonable
inquiry, as the case may be.
(iii) Is not insolvent after the assumption.
(iv) Records and publishes notice of the assumption not later than
30 days after the date of the bulk sale in the manner provided in
Section 6105.
(10) A sale to a buyer whose principal place of business is in the
United States and who satisfies each of the following:
(i) Assumes in full the debts that were incurred in the seller's
business before the date of the bulk sale.
(ii) Is not insolvent after the assumption.
(iii) Records and publishes notice of the assumption not later
than 30 days after the date of the bulk sale in the manner provided
by Section 6105.
(11) A sale to a new organization that is organized to take over
and continue the business of the seller and that has its principal
place of business in the United States if each of the following
conditions are satisfied:
(i) The buyer assumes in full the debts that were incurred in the
seller's business before the date of the bulk sale.
(ii) The seller receives nothing from the sale except an interest
in the new organization that is subordinate to the claims against the
organization arising from the assumption.
(iii) The buyer records and publishes notice of the assumption not
later than 30 days after the date of the bulk sale in the manner
provided in Section 6105.
(12) A sale of assets having either of the following:
(i) A value, net of liens and security interests, of less than ten
thousand dollars ($10,000). If a debt is secured by assets and other
property of the seller, the net value of the assets is determined by
subtracting from their value an amount equal to the product of the
debt multiplied by a fraction, the numerator of which is the value of
the assets on the date of the bulk sale and the denominator of which
is the value of all property securing the debt on the date of the
bulk sale.
(ii) A value of more than five million dollars ($5,000,000) on the
date of the bulk-sale agreement.
(13) A sale required by, and made pursuant to, statute.
(14) A transfer of personal property, if the personal property is
leased back to the transferor immediately following the transfer and
either there has been compliance with subdivision (h) of Section
3440.1 of the Civil Code or the transfer is exempt under subdivision
(k) of Section 3440.1 of the Civil Code.
(15) A transfer which is subject to and complies with Article 5
(commencing with Section 24070) of Chapter 6 of Division 9 of the
Business and Professions Code, if the transferee records and
publishes notice of the transfer at least 12 business days before the
transfer is to be consummated in the manner provided in Section 6105
and the notice contains the information set forth in paragraphs (1)
to (4) inclusive, of subdivision (a) of Section 6105.
(16) A transfer of goods in a warehouse where a warehouse receipt
has been issued therefor by a warehouseman (Section 7102) and a copy
of the receipt is kept at the principal place of business of the
warehouseman and at the warehouse in which the goods are stored.
(d) The notice under subparagraph (iv) of paragraph (9) of
subdivision (c) shall state each of the following:
(1) That a sale that may constitute a bulk sale has been or will
be made.
(2) The date or prospective date of the bulk sale.
(3) The individual, partnership, or corporate names and the
addresses of the seller and buyer.
(4) The address to which inquiries about the sale may be made, if
different from the seller's address.
(5) That the buyer has assumed or will assume in full the debts
owed to claimants of whom the buyer has knowledge on the date the
buyer receives the list of claimants from the seller or completes a
reasonable inquiry to discover the claimants.
(e) The notice under subparagraph (iii) of paragraph (10) of
subdivision (c) and subparagraph (iii) of paragraph (11) of
subdivision (c) shall state each of the following:
(1) That a sale that may constitute a bulk sale has been or will
be made.
(2) The date or prospective date of the bulk sale.
(3) The individual, partnership, or corporate names and the
addresses of the seller and buyer.
(4) The address to which inquiries about the sale may be made, if
different from the seller's address.
(5) That the buyer has assumed or will assume the debts that were
incurred in the seller's business before the date of the bulk sale.
(f) For purposes of paragraph (12) of subdivision (c), the value
of assets is presumed to be equal to the price the buyer agrees to
pay for the assets. However, in a sale by auction or a sale conducted
by a liquidator on the seller's behalf, the value of assets is
presumed to be the amount the auctioneer or liquidator reasonably
estimates the assets will bring at auction or upon liquidation.
6104. In a bulk sale as defined in subparagraph (ii) of paragraph
(3) of subdivision (a) of Section 6102 the buyer shall do each of the
following:
(a) Obtain from the seller a list of all business names and
addresses used by the seller within three years before the date the
list is sent or delivered to the buyer.
(b) Give notice of the bulk sale in accordance with Section 6105.
(c) Comply with Section 6106.2 if the bulk sale is within the
scope of that section.
6105. In order to comply with subdivision (b) of Section 6104 each
of the following shall be satisfied:
(a) The notice shall comply with each of the following:
(1) State that a bulk sale is about to be made.
(2) State the name and business address of the seller together
with any other business name and address listed by the seller
(subdivision (a) of Section 6104) and the name and business address
of the buyer.
(3) State the location and general description of the assets.
(4) State the place and the anticipated date of the bulk sale.
(5) State whether or not the bulk sale is subject to Section
6106.2 and, if so subject, the matters required by subdivision (f) of
Section 6106.2.
(b) At least 12 business days before the date of the bulk sale,
the notice shall be:
(1) Recorded in the office of the county recorder in the county or
counties in this state in which the tangible assets are located and,
if different, in the county in which the seller is located
(paragraph (2) of subdivision (a) of Section 6103).
(2) Published at least once in a newspaper of general circulation
published in the judicial district in this state in which the
tangible assets are located and in the judicial district, if
different, in which the seller is located (paragraph (2) of
subdivision (a) of Section 6103), if in either case there is one, and
if there is none, then in a newspaper of general circulation in the
county in which the judicial district is located.
(3) Delivered or sent by registered or certified mail to the
county tax collector in the county or counties in this state in which
the tangible assets are located. If delivered during the period from
January 1 to May 7, inclusive, the notice shall be accompanied by a
completed business property statement with respect to property
involved in the bulk sale pursuant to Section 441 of the Revenue and
Taxation Code.
If the tangible assets are located in more than one judicial
district in this state, the publication required in paragraph (2)
shall be in a newspaper of general circulation published in the
judicial district in this state in which a greater portion of the
tangible assets are located, on the date the notice is published,
than in any other judicial district in this state and, if different,
in the judicial district in which the seller is located (paragraph
(2) of subdivision (a) of Section 6103). As used in this subdivision,
"business day" means any day other than a Saturday, Sunday, or day
observed as a holiday by the state government.
6106.2. (a) This section applies only to a bulk sale where the
consideration is two million dollars ($2,000,000) or less and is
substantially all cash or an obligation of the buyer to pay cash in
the future to the seller or a combination thereof.
(b) Upon every bulk sale subject to this section except one made
by sale at auction or a sale or series of sales conducted by a
liquidator on the seller's behalf, it is the duty of the buyer or, if
the transaction is handled through an escrow, the escrow agent to
apply the cash consideration in accordance with this section so far
as necessary to pay those debts of the seller for which claims are
due and payable on or before the date of the bulk sale and are
received in writing on or prior to the date specified as the last
date to file claims with the person designated in the notice to
receive claims. This duty of the buyer or escrow agent runs to each
claimant timely filing the claim.
(c) If the seller disputes whether a claim is due and payable on
the date of the bulk sale or the amount of any claim, the buyer or
escrow agent shall withhold from distribution an amount equal to (1)
125 percent of the first seven thousand five hundred dollars ($7,500)
of the claim, and (2) an amount equal to that portion of the claim
in excess of the first seven thousand five hundred dollars ($7,500),
or the pro rata amount under subdivision (b) of Section 6106.4, if
applicable, and shall send a written notice to the claimant filing
the claim on or before two business days after the distribution that
the amount will be paid to the seller, or to the other claimants in
accordance with subdivision (b) of Section 6106.4, as the case may
be, unless attached within 25 days from the mailing of the notice.
Any portion of the amount withheld which is not attached by the
claimant within that time shall be paid by the buyer or escrow agent
to the seller, or to the other claimants in accordance with
subdivision (b) of Section 6106.4 if they have not been paid in full.
An attachment of any amount so withheld shall be limited in its
effect to the amount withheld for the attaching claimant and shall
give the attaching claimant no greater priority or rights with
respect to its claim than the claimant would have had if the claim
had not been disputed. For purposes of this subdivision, a claimant
may obtain the issuance of an attachment for a claim which is less
than five hundred dollars ($500) and which otherwise meets the
requirements of Section 483.010 of the Code of Civil Procedure or
which is a secured claim or lien of the type described in Section
483.010 of the Code of Civil Procedure. The remedy in this
subdivision shall be in addition to any other remedies the claimant
may have, including any right to attach the property intended to be
transferred or any other property.
(d) If the cash consideration payable is not sufficient to pay all
of the claims received in full, where no escrow has been established
pursuant to Section 6106.4, the buyer shall follow the procedures
specified in subdivisions (a) to (c), inclusive, of Section 6106.4,
and the immunity established by paragraph (3) of subdivision (a) of
that section shall apply to the buyer.
(e) The buyer or escrow agent shall, within 45 days after the
buyer takes legal title to any of the goods, either pay to the extent
of the cash consideration the claims filed and not disputed, or the
applicable portion thereof to the extent of the cash consideration
under subdivision (b) of Section 6106.4, or institute an action in
interpleader pursuant to subdivision (b) of Section 386 of the Code
of Civil Procedure and deposit the consideration with the clerk of
the court pursuant to subdivision (c) of that section. The action
shall be brought in the appropriate court in the county where the
seller had its principal place of business in this state. Sections
386.1 and 386.6 of the Code of Civil Procedure shall apply in the
action.
(f) The notice shall state, in addition to the matters required by
Section 6105, the name and address of the person with whom claims
may be filed and the last date for filing claims, which shall be the
business day before the date stated in the notice pursuant to
paragraph (4) of subdivision (a) of Section 6105. Claims shall be
deemed timely filed only if actually received by the person
designated in the notice to receive claims before the close of
business on the day specified in the notice as the last date for
filing claims.
(g) This section shall not be construed to release any security
interest or other lien on the property which is the subject of the
bulk sale except upon a voluntary release by the secured party or
lienholder.
6106.4. In any case where the notice of a bulk sale subject to
Section 6106.2 states that claims may be filed with an escrow agent,
the intended buyer shall deposit with the escrow agent the full
amount of the purchase price or consideration. If, at the time the
bulk sale is otherwise ready to be consummated, the amount of cash
deposited or agreed to be deposited at or prior to consummation in
the escrow is insufficient to pay in full all of the claims filed
with the escrow agent, the escrow agent shall do each of the
following:
(a) (1) Delay the distribution of the consideration and the
passing of legal title for a period of not less than 25 days nor more
than 30 days from the date the notice required in paragraph (2) is
mailed.
(2) Within five business days after the time the bulk sale would
otherwise have been consummated, send a written notice to each
claimant who has filed a claim stating the total consideration
deposited or agreed to be deposited in the escrow, the name of each
claimant who filed a claim against the escrow and the amount of each
claim, the amount proposed to be paid to each claimant, the new date
scheduled for the passing of legal title pursuant to paragraph (1)
and the date on or before which distribution will be made to
claimants which shall not be more than five days after the new date
specified for the passing of legal title.
(3) If no written objection to the distribution described in the
notice required by paragraph (2) is received by the escrow agent
prior to the new date specified in the notice for the passing of
legal title, the escrow agent shall not be liable to any person to
whom the notice required by paragraph (2) was sent for any good faith
error that may have been committed in allocating and distributing
the consideration as stated in the notice.
(b) Distribute the consideration in the following order of
priorities:
(1) All obligations owing to the United States, to the extent
given priority by federal law.
(2) Secured claims, including statutory and judicial liens, to the
extent of the consideration fairly attributable to the value of the
properties securing the claims and in accordance with the priorities
provided by law. A secured creditor shall participate in the
distribution pursuant to this subdivision only if a release of lien
is deposited by the secured creditor conditioned only upon receiving
an amount equal to the distribution.
(3) Escrow and professional charges and brokers' fees attributable
directly to the sale.
(4) Wage claims given priority by Section 1205 of the Code of
Civil Procedure.
(5) All other tax claims.
(6) All other unsecured claims pro rata, including any deficiency
claims of partially secured creditors.
(c) To the extent that an obligation of the buyer to pay cash in
the future is a part of the consideration and the cash consideration
is not sufficient to pay all claims filed in full, apply all
principal and interest received on the obligation to the payment of
claims in accordance with subdivision (b) until they are paid in full
before making any payment to the seller. In that case, the notice
sent pursuant to subdivision (a) shall state the amount, terms, and
due dates of the obligation and the portion of the claims expected to
be paid thereby.
No funds may be drawn from the escrow, prior to the actual closing
and completion of the escrow, for the payment, in whole or in part,
of any commission, fee, or other consideration as compensation for a
service that is contingent upon the performance of any act,
condition, or instruction set forth in the escrow.
6107. (a) Except as provided in subdivision (c), and subject to the
limitation in subdivision (d), a buyer who fails to comply with the
requirements of Section 6104 with respect to a claimant is liable to
the claimant for damages in the amount of the claim, reduced by any
amount that the claimant would not have realized if the buyer had
complied.
(b) In an action under subdivision (a), the claimant has the
burden of establishing the validity and amount of the claim, and the
buyer has the burden of establishing the amount that the claimant
would not have realized if the buyer had complied.
(c) A buyer who made a good faith and commercially reasonable
effort to comply with the requirements of Section 6104 or to exclude
the sale from the application of this division under subdivision (c)
of Section 6103 is not liable to creditors for failure to comply with
the requirements of Section 6104. The buyer has the burden of
establishing the good faith and commercial reasonableness of the
effort.
(d) In a single bulk sale the cumulative liability of the buyer
for failure to comply with the requirements of Section 6104 may not
exceed an amount equal to any of the following:
(1) If the assets consist only of inventory and equipment, twice
the net contract price, less the amount of any part of the net
contract price paid to or applied for the benefit of the seller or a
creditor except to the extent that the payment or application is
applied to a debt which is secured by the assets and which has been
taken into consideration in determining the net contract price.
(2) If the assets include property other than inventory and
equipment, twice the net value of the inventory and equipment less
the amount of the portion of any part of the net contract price paid
to or applied for the benefit of the seller or a creditor which is
allocable to the inventory and equipment except to the extent that
the payment or application is applied to a debt which is secured by
the assets and which has been taken into consideration in determining
the net contract price.
(e) For the purposes of paragraph (2) of subdivision (d), the "net
value" of an asset is the value of the asset less each of the
following:
(1) The amount of any proceeds of the sale of an asset, to the
extent the proceeds are applied in partial or total satisfaction of a
debt secured by the asset.
(2) The amount of any debt to the extent it is secured by a
security interest or lien that is enforceable against the asset
before and after it has been sold to a buyer. If a debt is secured by
an asset and other property of the seller, the amount of the debt
secured by a security interest or lien that is enforceable against
the asset is determined by multiplying the debt by a fraction, the
numerator of which is the value of the asset on the date of the bulk
sale and the denominator of which is the value of all property
securing the debt on the date of the bulk sale. The portion of a part
of the net contract price paid to or applied for the benefit of the
seller or a creditor that is "allocable to the inventory and
equipment" is the portion that bears the same ratio to that part of
the net contract price as the net value of the inventory and
equipment bears to the net value of all of the assets.
(f) A payment made by the buyer to a person to whom the buyer is,
or believes it is, liable under subdivision (a) reduces pro tanto the
buyer's cumulative liability under subdivision (d).
(g) No action may be brought under subdivision (a) by or on behalf
of a claimant whose claim is unliquidated or contingent.
(h) A buyer's failure to comply with the requirements of Section
6104 does not do any of the following:
(1) Impair the buyer's rights in or title to the assets.
(2) Render the sale ineffective, void, or voidable.
(3) Entitle a creditor to more than a single satisfaction of its
claim.
(4) Create liability other than as provided in this division.
(i) Payment of the buyer's liability under subdivision (a)
discharges pro tanto the seller's debt to the creditor.
(j) Unless otherwise agreed, a buyer has an immediate right of
reimbursement from the seller for any amount paid to a creditor in
partial or total satisfaction of the buyer's liability under
subdivision (a).
6108. (a) Sections 6104, 6105, and 6107 apply to a bulk sale by
auction and a bulk sale conducted by a liquidator on the seller's
behalf with the following modifications:
(1) "Buyer" refers to auctioneer or liquidator, as the case may
be.
(2) "Net contract price" refers to net proceeds of the auction or
net proceeds of the sale, as the case may be.
(3) The written notice required under subdivision (a) of Section
6105 shall be accompanied by a statement that the sale is to be by
auction or by liquidation, the name of the auctioneer or liquidator,
and the time and place of the auction or the time and place on or
after which the liquidator will begin to sell assets on the seller's
behalf.
(4) In a single bulk sale the cumulative liability of the
auctioneer or liquidator for failure to comply with the requirements
of this section may not exceed the amount of the net proceeds of the
sale allocable to inventory and equipment sold less the amount of the
portion of any part of the net proceeds paid to or applied for the
benefit of a creditor which is allocable to the inventory and
equipment.
(b) A payment made by the auctioneer or liquidator to a person to
whom the auctioneer or liquidator is, or believes it is, liable under
this section reduces pro tanto the auctioneer's or liquidator's
cumulative liability under paragraph (4) of subdivision (a).
(c) A person who buys at a bulk sale by auction or conducted by a
liquidator need not comply with the requirements of Section 6104 and
is not liable for the failure of an auctioneer or liquidator to
comply with the requirements of this section.
6110. (a) Except as provided in subdivision (b), an action under
this division against a buyer, auctioneer, or liquidator shall be
commenced within one year after the date of the bulk sale.
(b) If the buyer, auctioneer, or liquidator conceals the fact that
the sale has occurred, the limitation is tolled and an action under
this division may be commenced within the earlier of the following:
(1) One year after the person bringing the action discovers that
the sale has occurred.
(2) One year after the person bringing the action should have
discovered that the sale has occurred, but no later than two years
after the date of the bulk sale. Complete noncompliance with the
requirements of this division does not of itself constitute
concealment.
6111. (a) Except to the extent provided in subdivision (b), this
division shall apply to a bulk sale if the date of the bulk sale is
on or after January 1, 1991.
(b) If the date of a bulk sale is on or after January 1, 1991, and
the date of the bulk-sale agreement is before January 1, 1991, all
of the following shall apply:
(1) Paragraph (2) of subdivision (a) of Section 6103 and
subdivision (b) of Section 6103 shall not apply and this division
shall apply only if the goods are located in this state.
(2) Subdivision (a) of Section 6104 shall not apply.
(3) The buyer is required under subdivision (b) of Section 6104 to
give notice in accordance with Section 6107, as in effect on
December 31, 1990, rather than Section 6105.
(4) The buyer is required under subdivision (c) of Section 6104 to
comply with Section 6106, as in effect on December 31, 1990, if the
bulk sale is within the scope of that section, rather than Section
6106.2.
(5) Section 6105 shall not apply, and Section 6107, as in effect
on December 31, 1990, shall apply.
(6) Sections 6106.2 and 6106.4 shall not apply, and Sections 6106
and 6106.1, as in effect on December 31, 1990, shall apply.
(7) No action may be brought under this division, as in effect
either before or on or after January 1, 1991, if the provisions of
this division, as in effect on December 31, 1990, have been complied
with.
