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Whenever one sells all or substantially all of his assets, both the lawyer ofthe buyer and of the seller often require the seller to comply with the

requirements of the Bulk Sales Law (the Law) before the sale actuallytakes place. The Law requires certain inconvenient formalities to becomplied with before a sale of transfer in bulk of items specified in the

Law may take place, other than in the ordinary course of business. Underthe Law, if the seller is unable to obtain a written waiver from all hiscreditors of the provisions of the Law, the sale will be void as against thesellers creditors, unless the seller delivers to the purchaser a list of hiscreditors with the amount owing to each, conducts an inventory of the

assets and gives prior notice of at least 10 days to his creditors of theproposed sale and the terms of the proposed sale. However, in most

cases, the sale of all or substantially all of ones assets is not covered bythe Law, for the Law covers only the bulk sales contemplated in Section 2.

What is a Bulk Sales? Under Section 2, a sale or transfer is in bulk if it

involves any sale, transfer, mortgage or assignment of "(a) a stock ofgoods, wares, merchandise, provisions or materials otherwise than in the

ordinary course of trade and the regular prosecution of the business of thevendor, mortgagor, transferor, or (b) all or substantially all of thebusiness or trade theretofore conducted by the vendor, mortgagor,transferor, or assignor, or (c) all or substantially all of the fixtures and

equipment used in or about the business of the vendor, mortgagor,transferor or assignor."

The common meaning of the term "stocks in trade" when applied to goods

in a mercantile house refers to those which are kept for sale. The term

"merchandise", when used in bulk sales laws, means such things as areusually bought and sold by merchants. Upon the other hand, when used inbulk sales laws, the term "fixtures" refer to such articles of merchandiseusually possessed and affixed to the premises occupied by them to enablethem to better store, handle and display their wares and which are

commonly known as trade fixtures, although they can be removed withoutmaterial injury to the premises before or at the end of tenancy (1 Martin,Philippine Commercial Laws [1988] 509-510; 2 Agbayani, Commentariesand Jurisprudence on the Philippine Commercial Laws ([1992] 775-776).

Law Applies to Merchants. Bulk sales laws generally apply to retail

merchants, traders and dealers and generally only to persons of that class(1 Martin, op. cit. 509). On the basis of Section 2, the Bulk Sales Lawdoes not apply to a bulk sale by a manufacturer because of the nature ofthe latters business, i.e., it is not engaged in the business of selling

stocks in trade (2 Agbayani, op. cit. 776). The sale of an entireautomobile repair shop, together with its goodwill, credit, machineries,

tools and because this would involve the sale of a business engaged inrendering services and not the sale of goods (Gopengco, Compendium ofCommercial Law [1983] 598). In addition, the sale of a barber shop wouldnot be covered by the Law, since no stocks in trade are really involved in

the operation of a barber shop (Vitug, Pandect of Commercial Law andJurisprudence [1997] 803.

Applicable Jurisprudence. In People vs. Wong Szu Tung, CA-G.R.

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No. 9776-R, March 26, 1954, 50 0.G. 4867, the Court of Appeals held thatthe sale of a foundry shop was not covered by the Bulk Sales Law, where

what was sold was the shop itself, together with the goodwill and credits,equipment, tools and machinery, including a Dodge truck, because thisdid not constitute a sale of a stock of merchandise, goods, wares,

provisions or materials in bulk. I have been unable to find anyjurisprudence to the contrary. In People vs. Wong Szu Tung, the Courtof Appeals also reaffirmed the rule of statutory construction that should beapplied in construing the Bulk Sales Law. Because the law is penal innature, the Court declared that it must be strictly construed against the

State and liberally in favor of the accused. The law should not beextended by construction to situations not clearly intended thereby (1

Martin, op. cit. 507).

In the words of retired Supreme Court Justice Jose Vitug: "The essentialprovisions of the law, i.e., Section 3 to 7, inclusive, specifically and

repeatedly mention stock of goods, wares, merchandise, provisions ormaterials in bulk in their application, a situation which conveys that the

legislative intent is merely to govern the bulk sales of stocks in trade,and/or fixtures and equipment used in that business, by the vendor,transferor, mortgagor or assignor (Vitug, op. cit. 803)."