Edward J. Nell Co. v. Pacific Farms Inc.

G.R. No. L-20850, November 29, 1965

: 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
and dismissed the complaint

ISSUE: Whether or not Pacific Farms is an alter ego of Insular Farms

HELD: NO. 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. Except in the following
instances:

1. where the purchaser expressly or impliedly agrees to assume such debts;

2. where the transaction amounts to a consolidation or merger of the corporations;

3. where the purchasing corporation is merely a continuation of the selling corporation;

4. the transaction is entered into fraudulently in order to escape liability for such debts.