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.