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3952
ACT NO. 3952 (As Amended) - THE BULK SALES LAW
creditors as shown by verified statements, then, and in that case, the provisions of
this section shall not apply.
What shall be deemed to be a sale and transfer in bulk. 2 A sale and transfer in
bulk is 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 the business of the vendor, mortgagor,
transferor, or assignor, or (2) of all, or substantially all, of the business or trade
theretofore conducted by the vendor, mortgagor, transferor, or assignor, or (3) of
all, or substantially all, of the fixtures and equipment used in and about the
business of the vendor, mortgagor, transferor, or assignor. (Sec. 2, Bulk Sales
Law.)
Same; Exceptions to the rule. 3 It will not be deemed a sale and transfer in bulk
in contemplation of this Act, (1) if such vendor, mortgagor, transferor, or assignor
produces and delivers a written waiver of the provisions of this Act from his
creditors as shown by verified statements (Sec. 2, Bulk Sales Law), or (2) if such
vendor, mortgagor, transferor, or assignor is an executor, administrator, receiver
assignee in insolvency, or public officer, acting under judicial process. (Sec. 8, Bulk
Sales Law.)
Term "sellers," explained. The statutes generally do apply to retail merchants,
traders, or dealers, and generally only to persons of that class. (27 C.J. Sec. 888.)
Term "creditors," explained. The term "creditors" as descriptive of the persons in
whose favor the statute declares a bulk sale fraudulent and void is usually not
restricted to any particular class of creditors, but includes all persons who were
creditors of the seller at the time of the sale, although their claims had not been
reduced to judgment, or were not due, and although they were not creditors for
merchandise, but were merely general creditors of the seller in other transactions.
But only those who were creditors at the time of the sale complained of are entitled
to the benefits of the statute; creditors whose claims came into existence
subsequent to the sale are not protected thereby. (27 C.J. Sec. 888.)
Waiver and estoppel of creditors. Creditors may waive the right to the benefit of
the bulk sales statutes, or estop themselves to claim that the sale was invalid
because the requirements of the bulk sales statutes were not complied with. The
benefit of the statutes is for those who take the steps prescribed thereby in order
to protect their claims. There is no estoppel unless the conduct was relied on by the
other party to his prejudice, in accordance with the rule as to estoppel generally.
(27 C.J. Sec. 887.)
Term "stock, " explained. The common use of the term "stock" when applied to
the goods in a mercantile house refers to those which are kept for sale. (Albrecht v.
Cudihee, 37 Wash. 206, 208, 79 P. 628.)
Term "merchandise," explained. We think that "merchandise," as used in this
act, must be construed to mean such things as are usually bought and sold in trade
by merchants. (People's Sav. Bank v. Van Allsburg, 165 Mich. 524, 526, 131 N.W.
101.) "Merchandise" means something that is sold every day, and is constantly
going out of the store and being replaced by other goods. (Boise Credit Men's
Ass'n. v. Ellis, 26 Ida. 438, 449, 144 P. 6, L.R.A. 1915 E, 917.) Thus, "merchandise"
may include a stock of meat and other merchandise such as is usually sold in a
market (Virginia-Carolina Chemical Co. v. Bouchelle, 12 Ga. A. 611, 78 S.E. 51), or
liquors kept in a saloon for sale (Marshon v. Toohey, 38 Nev. 248, 148 P. 357); but
land and buildings are not "goods, wares, and merchandise" within the statute.
(McMillen v. Nelson, [N. D.] 181 N.W 618; National Trust Co. v. Nadon, 8 Sask. L.
41, 24 Dom. L.R. 742, 30 West L.R. 588, 7 West Wkly. 1067; Barthels v. Sloance, 7
Sask,
L.
376.)
Term "fixtures," explained. When used in statutes of this character, it refers to
such articles of merchandise usually possessed and annexed to the premises
occupied by them to enable them better to store, handle, and display their wares
and which are commonly known as trade fixtures, although removable without
material injury to the premises at or before the end of tenancy. (Brown v. Quigley,
165 Mich. 337, 130 N.W. 690, 34 L.R.A.N.S. 218 [foll. People's Sav. Bank v. Van
Allsburg, 165 Mich. 524, 131 N.W. 101.].) But a store building containing a stock of
merchandise and being used for transactions of mercantile business is not a
fixture. The statute has reference to trade fixtures connected with the business and
not to the building in which the business is carried on. (Robbins v. Fuller, [Ark.]
229 S.W. 8; McMillen v. Nelson, [N. D.] 181 N.W. 618.)
"Exempt properties," not within the law. Bulk sales statutes are intended to
operate only on property to which creditors may look for satisfaction of their claims
and consequently have no application to property which is exempt. (27 C.J. Sec.
889.) See "Property exempt from execution," Sec. 12, Rule 39, Rules of Court. See
also Sec. 35, Act No. 3428, as amended; Arts. 223 et seq., and 1708, new Civil
Code; and Sec. 17, Rep. Act No. 1161 (refer to annotations placed above Sec. 48,
Insolvency Law, in Volume 2.)
Sec. 3. It shall be the duty of every person who shall sell, mortgage, transfer, or
assign any stock of goods, wares, merchandise, provisions or materials in bulk, for
cash or on credit, before receiving from the vendee, mortgagee, or his, or its agent
or representative any part of the purchase price thereof, or any promissory note,
memorandum, or other evidence therefor, to deliver to such vendee, mortgagee, or
agent, or if the vendee, mortgagee, or agent be a corporation, then to the
president, vice-president, treasurer, secretary or manager of said corporation, or, if
such vendee or mortgagee be a partnership firm, then to a member thereof, a
written statement sworn to substantially as hereinafter provided, of the names and
addresses of all creditors to whom said vendor or mortgagor may be indebted,
together with the amount of indebtedness due or owing, or to become due or owing
by said vendor or mortgagor to each of said creditors, which statement shall be
verified by an oath to the following effect:
PHILIPPINE ISLANDS
) S.S.
PROVINCE OR CITY OF )
Before me, the undersigned authority, personally appeared _________ (vendor,
mortgagor, agent or representative, as the case may be), bearing Res. Cert. No.
_____________ issued at _________ on the __________ day of ___________,
who, by me being first duly sworn, upon his oath, deposes and states that the
foregoing statement contains the names of all the creditors of ______________
(vendor, mortgagor) together with their addresses, and that the amount set
opposite each of said respective names, is the amount now due and owing, and
which shall become due and owing by _____________ (vendor or mortgagor) to
such creditors, and that there are no creditors holding claims due or which shall
become due, for, or on account of goods, wares, merchandise, provisions or
materials purchased upon credit or on account of money borrowed, to carry on the
business of which said goods, wares, merchandise, provisions of materials are a
part, other than as set forth in said statement.
_______________________
(Signature of vendor, etc.)
Subscribed and sworn to before me this ___________ day of __________, 19____,
at ____________
Sufficiency of statement. Substantial compliance with the statute is essential to
validity of the sale or transfer. (In re Calvi, 185 Fed. 642; Peck v. Hibben, 185 Ind.
623, 114 N.E. 216; Interstate Shirt, etc. Co. v. Windham, 165 Mich. 648, 131 N.W.
102.) A verbal statement that the seller had no creditors is not sufficient
compliance with a statute requiring the statement to be in writing and under oath.
(Peck v. Hibben, supra.) If the seller has no creditors, an unequivocal statement of
this fact is necessary in the statement. (Interstate Shirt, etc. Co. v. Windham,
supra; Fitzhugh v. Munnell, 92 Or. 47, 179 P. 679.) An affidavit stating that a stock
sold is "entirely free from debt and that there is no encumbrance thereon, except a
certain chattel mortgage given to" a specified person is insufficient as against
existing creditors of the seller. (Interstate Shirt, etc. Co. v. Windham, supra.) The
statute contemplates not only creditors whose claims are due but those whose
claims are not due and the statement must state the facts as to both class of
creditors if both exist and if there are none such, the latter fact must be stated. The
statement is ineffectual if it fails to give the addresses of the creditors. If the
statement is defective on its face, the buyer accepts it at his peril. (Fitzhugh v.
Munnell, supra.)
Effect of false statement. 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 his purchase. (International Silver Co. v. Hull, 140 Ga. 10, 78
S.E. 609, 45 L.R.A.N.S. 492; Fitzhugh v. Munnell, 92 Or. 47, 179, P. 679; Coach v.
Gage, 70 Or. 182, 138 P. 847.) If the seller misrepresents the amount of his
indebtedness, the creditor has no remedy against the goods sold, but he can
prosecute the seller criminally. (Seltzer v. Peddi, 24 Pa. Dist. 456, 41 Pa. Co. 677.)
The statute declares the sale void only on the failure of the purchaser to do what is
required of him. It does not declare the sale void if the list of creditors furnished by
a vendor under oath is not in fact "full, accurate and complete." It does not in any
way make the purchaser responsible for any incorrectness in the list. We think it
would be unreasonable to so construe it. (Glantz v. Gardiner, 40 R.I. 397, 100 A.
913, 916, L.R.A. 1917 L. 226.)
Sec. 4. Whenever any person shall sell, mortgage, transfer, or assign any stock of
exchanged for merchandise, without complying with the statutes, that there is a
partial failure of consideration by reason of the fact that creditors assert rights to a
part of the merchandise, but damages to the extent to which the buyer was injured
will be awarded. (27 C.J. Sec. 893.)
Same; Between creditors and subsequent purchasers. 6 The statute does not
confer on the creditors of the vendor who fail to comply with its requirements the
right to pursue the property in whosoever hands it may fall. To authorize the giving
of relief to creditors it must be shown that the holder of the property transferred is
the fraudulent vendee himself or some person who took the property from him with
knowledge that the transfer was fraudulent. The statutes do not render an innocent
purchaser for value from the original purchaser liable to creditors of the original
seller nor affect his title to the property. But if the circumstances are such as to
bind the subsequent purchaser with constructive notice that the sale to his vendor
was fraudulent, the property will be liable in his hands to creditors of the original
vendor. (27 C.J., Sec. 894.)
Remedies available to creditors. Under the general prevailing rule that mere noncompliance with the statute does not render the purchaser personally liable to
creditors, an ordinary action against the purchaser by creditors to obtain a money
judgment will not lie, unless the purchaser has sold or otherwise disposed of, or
dealt with, the property, so as to become personally liable to creditors for the value
of it. The proper remedy is one against the goods to subject them to the payment of
the debt, such as execution, attachment, garnishment, or by a proceeding in equity.
(27 C.J. Sec. 895.)
Same; Replevin. A creditor of the seller cannot maintain replevin against the
purchaser to recover property sold in contravention of the Bulk Sales Act. But the
purchaser may maintain replevin to recover property seized on attachment or
execution against the seller, and in such action the validity of the sale may be
determined. (27 C.J. Sec. 900.)
Sec. 5. It shall be the duty of every vendor, transferor, mortgagor, or assignor, at
least ten days before the sale, transfer or execution of a mortgage upon any stock
of goods, wares, merchandise, provisions or materials, in bulk, to make a full
detailed inventory thereof and to preserve the same showing the quantity and, so
far as is possible with the exercise of reasonable diligence, the cost price to the
vendor, transferor, mortgagor or assignor of each article to be included in the sale,
transfer, mortgage, or assignment, and notify every creditor whose name and
address is set forth in the verified statement of the vendor, transferor, mortgagor,
or assignor, at least ten days before transferring possession thereof, personally or
by registered mail, of the price, terms and conditions of the sale, transfer,
mortgage, or assignment.
Sufficiency of notice. No notice other than the one prescribed by the statute will
be sufficient (In re Thompson, 242 Fed. 602; Maultrie Grocery Co. v. HolmesHartsfield Co., 22 Ga. A. 512, 96 S.E. 346) and a substantial compliance with the
requirements as to notice is essential (Stuart v. Elk Horn Bank, etc. Co., 123 Ark.
265, 185 S.W. 263, Ann. Cas. 1918A 268.) Thus, if the list furnished is not verified
as required by statute, and omits to name certain creditors who are not notified,
the sale is void as to such creditors, whether their omission was fraudulent or
otherwise. (Williams v. J.W. Crowdus Drug Co. [Tex. Civ. A.] 167 S.W. 187.)
Same; Time of notice. Where the statute requires the vendor, transferor,
exempt securities
2. b.
1. 2.
Exempt Securities
1. a.
2. b.
issued by foreign government which the Philippines has diplomatic
relations
3. c.
4. d.
5. e.
6. f.
policy of insurance issued by insurance corporation supervised by the
insurance commission
7. g.
security/right/interest in real property including subdivision
lot/condominium supervised by the Ministry of Human Settlements
8. h.
1. 3.
Exempt Transactions
1. a.
2. b.
3. c.
4. d.
5. e.
pre-incorporation subscription
6. f.
1. 4.
2. b.
issuer/registrant insolvent, violated code/ SEC rules, engages in fraudulent
transactions
1. 5.
1. 6.
3. c.
4. d.
5. e.
issuer insolvent
2. b.
3. c.
fraudulent transaction
4. d.
5. e.
Acts Prohibited
1. a.
2. b.
3. c.
4. d.
fraudulent transactions
5. e.
insider trading
6. f.