Edward J. Nell Company vs.

Pacific Farms
Facts:
Pacific Farms, Inc. purchased 1,000 shares of stock of Insular Farms and sold it to certain
individuals who reorganized the said corporation. BOD caused its assets, including leasehold
rights over a public land to be sold to Pacific Farms. Meanwhile, a Civil case for sum of money
was
filed by petitioner Edward Nell Company against Insular Farms for the latter’s unpaid balance of
the price of the pump sold to it. However, the writ of execution was returned unsatisfied since
Insular Farms had no leviable property. Hence, petitioner filed an action for collection against
Pacific Farms contending that it is the alter ego of Insular Farms.

Issue: Whether Pacific Farms is an alter ego of Insular Farms

Ruling:
NO. Generally 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: (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; and (4) where the transaction is entered into fraudulently
in
order to escape liability for such debts. XPNS ARE NOT PRESENT. With respect to merger and
consolidaton, the transactions did result in the consolidation or merger of the Insular Farms
and
appellee herein. On the contrary, appellant's theory to the effect that appellee is an alter ego of
the
Insular Farms negates such consolidation or merger, for a corporation cannot be its own alter
ego.

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