CAVEAT EMPTOR Buyers ( Readers) of my handout) Beware.

READ AT YOUR OWN RISK

THE BULK SALES LAW (Act No. 3952, as amended) SECTION 1. This Act Shall be known as The Bulk Sales Law Purpose of the Law 1. Designed to prevent the defrauding of creditors by the secret sale in bulk of all or substantially all of the merchants stock of goods. 2. To protect and benefit the creditor under the provision of SEC 3 and SEC 5 (will be discussed later) Scheme of the Law To declare such bulk sales fraudulent and void as to creditors EXCEPTION: if specified formalities are observed such as: 1. Producing and delivering a written waiver of the provision of this Act from his creditors (Sec 2) 2. Giving a list of creditors to whom the vendor, mortgagor, transferor or assignor may be indebted together with the amount due or to become due to said creditors, to the vendee, mortgagee or its agent or representative before receiving any part of the purchase price (Sec 3) 3. Giving a full detailed inventory and notifying every creditor of the price, terms and conditions of the transfer atleast 10 days before transferring the possession thereof (Sec 5) ***The bulk sales law does not in any way affect the validity of the transfer as between the immediate parties thereto. A sale not in compliance with the bulk sales statute is valid against all persons other than creditors*** SECTION 2. When Sale or Transfer in Bulk: Any sale, transfer, mortgage, or assignment: 1. Of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the regular prosecution of business; or 2. Of all or substantially all, of the business or trade; or 3. Of all or substantially all, of the fixtures and equipment used in the business of the vendor, mortgagor, transferor or assignor

When sale or transfer in bulk not covered by Bulk Sales Law: 1. If the sale or transfer is in the ordinary course of trade and the regular prosecution of business of the vendor; 2. If it is made by one who produces and delivers a written waiver of the provisions of the Bulk Sales Act from his creditors (Sec. 2) 3. If it is made by an executor, administrator, receiver, assignee in insolvency, or public officer, acting under judicial process (Sec. 8); and 4. If it refers to properties exempt from attachment or execution (Rules of Court, Rule 39, Section 12)

DUTIES OF THE VENDOR, TRANSFEROR, MORTGAGOR OR ASSIGNOR 1. To deliver a list of creditors to whom such are indebted with the correct amount due or to become due to the vendee, mortgagee or its agents or representative before receiving any part of the purchase price from the latter (Sec 3) 2. To make a full detailed inventory thereof and to preserve the stock of goods atleast 10 days before the transfer showing the quantity and if possible thru the exercise of reasonable diligence the cost price of each article to be included in the sale transfer or mortgage (Sec 5) 3. To notify the creditors whose name and address is set forth in the verified statement under Sec 3 atleast 10 days before transferring the possession personally or by registered mail of the price, terms and condition of the sale, transfer, mortgage or assignment (Ibid) 4. To registered the sworn statement provided for in Section 3 to the Bureau of Trade Regulation and Consumer Protection (BTRCP) (Sec 9) ACTS PUNISHED BY THE BULK SALES LAW ANY VENDOR, TRANSFEROR, MORTGAGOR OR ASSIGNOR WHO SHALL : 1. Receive any part of purchase price, promissory note or any evidence on indebtedness for said purchase price without having first delivered the sworn statement provided for in Section 3 to the vendee, mortgagee or agents (Sec 4) 2. Not apply the purchase or mortgage money of said property to the pro rata payment of the bona fide claim of the sworn statement (Ibid) 3. Knowingly or willfully make or deliver a statement required by the Act which does not include the names of all the creditors of the vendor, etc. with the correct amount due or to become due or which contains any false or untrue statement (Sec 6) *** 4. Transferring title to any stock of goods, wares, merchandise, provisions or materials sold in bulk without consideration or for nominal consideration (Sec 7)

*** Effects of False Statements in the Schedule of Creditors: Without knowledge of buyer If the statement is fair upon its face and the buyer has no knowledge of its incorrectness and nothing to put him on inquiry about it, he will be protected in its purchase The remedy of the creditor is not against the goods but to prosecute the seller criminally With knowledge or imputed knowledge of buyer*** The vendee accepts it at his peril (at his risk) The sale is valid only as between the vendor and the vendee but void against the creditors With names of certain creditors without notice are omitted from the list The sale is void as to such creditors, whether the omission was fraudulent or not, With respect to an innocent purchaser for a value from the original purchaser An innocent purchaser for value from the original purchaser is protected However if the circumstances are such as to bind the subsequent purchaser with constructive notice that the sale to the vendor (original purchaser) was fraudulent, the property will be liable in his hands to creditors of the original vendor *** *** EFFECT WHEN THE PURCHASER OR SUBSEQUENT PURCHASER IS IN BAD FAITH A purchaser in violation of the law acquires no right in the property purchased as against the creditors of the seller His status is that of a trustee or receiver for the benefit of the creditors of the seller; as such, he is responsible for the disposition of the property SANCTIONS OR PUNISHMENT IMPOSED BY THE BULK SALES LAW (Sec 11) Any person violating any provision of this act shall upon conviction punished by: 1. Imprisonment for not less than 6 months nor more than 5 years 2. Fined in a sum not exceeding Php.5,000 3. By both such imprisonment and fine in the discretion of the court SECTION 10. The provisions of this Act shall be administered by the Director of the Bureau of Commerce; who is hereby empowered with the approval of the Department Head, to prescribe and adopt from time to time such rules and regulations as may be deemed necessary for the proper and efficient enforcement of the provision of the Act. SECTION 12. This Act shall take effect upon its approval. Approved: December 1, 1972

APPENDIX RULE 39 Rules of Court Sec. 13

Section 13. Property exempt from execution. Except as otherwise expressly provided by law, the following property, and no other, shall be exempt from execution: (a) The judgment obligor's family home as provided by law, or the homestead in which he resides, and land necessarily used in connection therewith; (b) Ordinary tools and implements personally used by him in his trade, employment, or livelihood; (c) Three horses, or three cows, or three carabaos, or other beasts of burden, such as the judgment obligor may select necessarily used by him in his ordinary occupation; (d) His necessary clothing and articles for ordinary personal use, excluding jewelry; (e) Household furniture and utensils necessary for housekeeping, and used for that purpose by the judgment obligor and his family, such as the judgment obligor may select, of a value not exceeding one hundred thousand pesos; (f) Provisions for individual or family use sufficient for four months; (g) The professional libraries and equipment of judges, lawyers, physicians, pharmacists, dentists, engineers, surveyors, clergymen, teachers, and other professionals, not exceeding three hundred thousand pesos in value; (h) One fishing boat and accessories not exceeding the total value of one hundred thousand pesos owned by a fisherman and by the lawful use of which he earns his livelihood; (i) So much of the salaries, wages, or earnings of the judgment obligor for his personal services within the four months preceding the levy as are necessary for the support of his family; (j) Lettered gravestones; (k) Monies, benefits, privileges, or annuities accruing or in any manner growing out of any life insurance; (l) The right to receive legal support, or money or property obtained as such support, or any pension or gratuity from the Government; (m) Properties specially exempted by law. But no article or species of property mentioned in this section shall be exempt from execution issued upon a judgment recovered for its price or upon a judgment of foreclosure of a mortgage thereon. (12a)