G.R. No. L-20850 November 29, 1965THE EDWARD J. NELL COMPANY, petitioner, vs. PACIFIC FARMS, INC., respondent.

FACTS: On October 9, 1958, appellant secured in Civil Case No. 58579 of the Municipal Court of Manila against Insular Farms, Inc. — hereinafter referred to as Insular Farms a judgment for the sum of P1,853.80 — representing the unpaid balance of the price of a pump sold by appellant to Insular Farms — with interest on said sum, plus P125.00 as attorney's fees and P84.00 as costs. 
 
A writ of execution, issued after the judgment had become final, on August 14, 1959, was, returned unsatisfied, stating that Insular Farms had no leviable property. 
 
Soon thereafter, or on November 13, 1959, appellant filed with said court the present action against Pacific Farms, Inc. — hereinafter referred to as appellee — for the collection of the judgment aforementioned, upon the theory that appellee is the alter ego of Insular Farms, which appellee has denied. 
 
In due course, the municipal court rendered judgment dismissing appellant's complaint. The record shows that, on March 21, 1958, appellee purchased 1,000 shares of stock of Insular Farms for P285,126.99; that, thereupon, appellee sold said shares of stock to certain individuals, who forthwith reorganized said corporation; and that the board of directors thereof, as reorganized, then caused its assets, including its leasehold rights over a public land in Bolinao, Pangasinan, to be sold to herein appellee for P10,000.00.
 
MTC/RTC/CA Ruling MTC, RTC, and CA dismissed the complaint. CA ruled that the facts above do not prove that Pacific Farms is an alter ego of Insular Farms. Hence this appeal on certiorari. 
 
Issue/s: Whether Pacific Farms is liable for said unpaid obligation of the Insular Farm. 
 
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.
 
There is neither proof nor allegation that appellee had expressly or impliedly agreed to assume the debt of Insular Farms in favor of appellant herein, or that the appellee is a continuation of Insular Farms, or that the sale of either the shares of stock or the assets of Insular Farms to the appellee has been entered into fraudulently, in order to escape liability for the debt of the Insular Farms in favor of appellant herein. These sales took place not only over six (6) months before the rendition of the judgment sought to be collected in the present action, but, also, over a month before the filing of the case in which said judgment was rendered. Moreover, appellee purchased the shares of stock of Insular Farms as the highest bidder at an auction sale held at the instance of a bank to which said shares had been pledged as security for an obligation of Insular Farms in favor of said bank. It has, also, been established that the appellee had paid P285,126.99 for said shares of stock, apart from the sum of P10,000.00 it, likewise, paid for the other assets of Insular Farms. Neither is it claimed that these transactions have resulted 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. DECISION APPEALED WAS AFFIRMED.