Corporate Law Case Digest: Edward J. Nell Co. v. Pacific Farms Inc. (1965)

G.R. No. L-20850           November 29, 1965
Lessons Applicable: Types of Acquisitions / Transfers (Corporate Law)

FACTS:
  • March 21, 1958: Pacific Farms Inc. (Pacific) purchased as highest bidder from a bank auction 1,000 shares of stock of Insular Farms for P285,126.99 and BOD of Insular as reorganized, then caused its assets, including its leasehold rights over a public land in Bolinao, Pangasinan, to be sold to Insular for P10,000.00 and paid for the other assets of Insular Farms.
  • October 9, 1958:  Edward J. Nell Co. (Edward) in Civil Case No. 58579 of the Municipal Court of Manila against Insular Farms, Inc. (Insular) a judgment for the sum of P1,853.80 unpaid balance for a pump sold with interest plus P125 attorney's fees and P84.00 as costs. 
  • August 14, 1959: A writ of execution, issued after the judgment had become final returned unsatisfied, stating that Insular Farms had no leviable property. 
  • November 13, 1959:  Edward filed the present action against Pacific upon the theory that Pacific is the alter ego of Insular Farms
  • CA affirmed Municipal Court: dismissed the complaint
ISSUE: W/N Pacific Farms is an alter ego of Insular Farms

HELD: NO.  Appeal Affirmed
  • GR: where one corporation sells or otherwise transfers all of its assets to another corporation, the latter is not liable for the debts and liabilities of the transferor
  • EX: 
  1. where the purchaser expressly or impliedly agrees to assume such debts - no proof
  2. where the transaction amounts to a consolidation or merger of the corporations - not claimed
  3. where the purchasing corporation is merely a continuation of the selling corporation; - no proof
  4. where the transaction is entered into fraudulently in order to escape liability for such debts - no proof
    • price paid was fair and reasonable