Memorandum of Decision Re: Security Interest in Vehicles

IN THE UNTIED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re DENNIS and JENNIE BRAZER, dba STAGECOACH AUTO WHOLESALE,                                       No. 1-87-01023      Debtors. _______________________________/ REDWOOD CHEVROLET,      Plaintiff,    v.                                                                                                        A.P. No. 1-87-0152 DENNIS and JENNIE BRAZER, dba STAGECOACH AUTO WHOLESALE,      Defendants. ______________________________/
Memorandum of Decision
     The facts or this matter are undisputed. Plaintiff Redwood Chevrolet is a new and used car dealership. Between May 5, 1987, and June 5, 1987, it delivered twelve used cars to debtor and defendant Dennis Brazer, who operated a used car dealership. Brazer agreed to give Redwood a security interest in the vehicles, and that title would not pass until the vehicles were paid for. Redwood retained the pink slip and registration documents, but did not file a financing statement with the Secretary of State. The debtors filed their bankruptcy petition on June 12, 1987.      California Vehicle Code section 5907 provides that the validity and perfection of a security interest in a vehicle held in a dealer's inventory is governed exclusively by the Uniform Commercial Code. Section 9302(3)(b) of the Commercial Code requires that a financing statement be filed to perfect a security interest in a vehicle during any period in which it is inventory. Redwood's security interest is therefore unperfected and avoidable pursuant to section 544 of the Bankruptcy Code. The result is the same if Redwood argues that it retained ownership and only consigned the vehicles to Brazer. Cal.Com.Code sec. 9114(2).      Even though the instant motion for summary judgment was brought by Redwood, the Court may grant summary judgment in favor of the debtors. Portsmouth Square v. Stockholders Protective Comm. (9th Cir.1985) 770 F.2d 866. Accordingly, this action will be dismissed and Redwood take nothing by its complaint. Counsel for the debtors shall submit an appropriate form of judgment.
Dated: February 12, 1988                                                                              _____________________                                                                                                                      Alan Jaroslovsky                                                                                                                      U.S. Bankruptcy