Edward Nell v.

Pacific Farms AUTHOR: Tiglao

[15 SCRA 415 (1965)] NOTES:
TOPIC: Sale of Substantially All Assets
PONENTE:
FACTS:
In March 1958, Pacific Farms (Pacific) purchased as the highest bidder from a bank auction 1,000 shares of stock of
Insular Farms for Php 285,126.00 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 Php 10,000.00 and paid for the other assets
of Insular Farms.
In October 1958, Edward Nell (Edward) in a civil case of the Municipal Court of Manila against Insular Farms
(Insular) resulted in a judgment for the sum of Php 1,853.80 unpaid balance for a pump sold with interest plus Php
125.00 attorneys fees and Php 84.00 as costs.
In August 1959, a writ of execution was issued after the judgment had become final returned unsatisfied, stating that
the Insular Farms had no leviable property.
In November 1959, Edward filed the present action against Pacific upon the theory that Pacific is the alter ego of
Insular Farms.
The Court of Appeals affirmed the decision of the Municipal Court which dismissed the case.
ISSUE(S): Is Pacific Farms an alter ego of Insular Farms? NO.

HELD:
Appeal affirmed.
General Rule: 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.
Exception to the Rule:
o Where the purchaser expressly or impliedly agreed to assume such debts no proof
o Where the transaction amounts to a consolidation or merger of the corporations not claimed
o Where the purchasing corporation is merely a continuance of the selling corporation no proof
o Where the transaction is entered into fraudulently in order to escape liability for such debts no proof;
further the price paid was fair and reasonable.
RATIO:

CASE LAW/ DOCTRINE:
DISSENTING/CONCURRING OPINION(S):